nlightn
7 years ago
Digimarc: The Revenue Begins
Jul. 6, 2017
Watermarked products are on shelves at Wal-Mart.
Virtually all major retailers have expressed interest.
Amazon's Whole Foods acquisition will speed adoption.
About two years ago, with Digimarc (DMRC) trading around $40 per share and Wal-Mart (NYSE:WMT) dropping hints about collaborating with the company, I concluded an article by writing, "a move from $40 to $200 is still good whether it happens in a matter of months or after several years."
Today, shares are trading around $40 per share again, but Wal-Mart is no longer being so coy. You can go to a store right now and scan some of their Great Value brand items using the Digimarc Discover app to observe Digimarc technology at work.
For people new to this story, what you see in the above video is the most salient application for Digimarc's patented watermarking technology. Those packages, while still carrying a traditional barcode, have been imperceptibly modified so that they are scannable in their entirety. This saves time at checkout, creates efficiencies throughout the supply chain, and creates an opportunity for effortless consumer engagement.
These time savings represent billions to retailers, and to answer a common question: No, the benefits don't accrue only after a critical mass of watermarking is achieved. Even if a cashier or warehouse worker is oblivious to the technology they are working with, the items will still scan faster as workers reorient them in search of the visible bar code.
The benefit to brands is harder to quantify, but Digimarc management has expressed surprise at the rate at which they've been approached by consumer packaged good (CPG) companies who are not waiting to feel pressured by retailers to make their move.
Solidifying the appeal of the solution is the pricing. Digimarc will be charging all but the largest companies a recurring $50 per shop keeping unit (SKU), which for the benefits gained, should create a great return on investment.
In fact, Digimarc has something of a Goldilocks solution. RFID can do something similar, but companies incur a higher cost to implement that solution since each item produced comes with an incremental expense. Wrapping a product in visible barcodes can get around the cost issue, but companies are not keen on having their brand crisscrossed with long black stripes.
Evidence for industry interest in Digimarc's technology comes directly from management who mentioned during their Q4 conference call, "We have some level of engagement with all of the top 10 retailers in the world and six of the top 10 CPGs. These relationships range from discussion of pilots to contract small volume production." These are in addition to ongoing fully operational roll outs with smaller grocers Wegman's and New Seasons.
When exactly Digimarc will begin converting talks and pilots into dollars is not totally clear, but the most recent call provided some encouraging color. Management disclosed, "This is the second master services agreement we have entered into with a top 10 retailer. The other relationship is further along and involves lots of moving parts and is taking some time to mature." In other words, talks haven't stalled with the big retailers. Signatures have been placed on the dotted line and now Digimarc just has to hit certain milestones.
Independent of this information, Digimarc has been disclosing bookings for a few quarters and finished 2016 with $1.8 million-a number that is symbolically, if not statistically significant.
If there was any doubt as to whether Wal-Mart was one of the two initial signers of the master services agreements, one need to look no further than Digimarc's jobs page:
So what are these master services agreements worth? From a few hundred thousand per year up to maybe a million? It's hard to say, but it's also not terribly important. Digimarc is not poised to succeed on have a couple of monstrous contracts but rather a bounty of small and medium sized ones. The list of supermarket chains alone, many of which have their own store brand, is enormous. This is to say nothing of CPG companies which could have one or tens of thousands of SKUs. Having the biggest names in the business on board is important mostly in terms of putting the smaller players in the industry on notice and creating a fast followers effect.
Once the reactive players begin to adopt, there is the potential for rapid acceleration. Management is fond of pointing out that the total addressable market in terms of SKUs is in the hundreds of millions. Obviously, Digimarc will never capture 100% of that, and capturing the first few percentage points will take time, but even so.... the opportunity relative to the company's current market cap of around $400 million is significant. Two million SKUs at $50 per year is $100 million of high margin and recurring revenue, and from there the potential begins to get downright preposterous.
Most recently, management estimated that the number of partners they have who have begun some sort of production using their technology to be, "probably 30 to 50." Significantly, there appear to be several heavy hitters in the bunch besides Wal-Mart with people scanning activated brand labels on grocery store shelves for Dr. Pepper, Smuckers, and Procter & Gamble. In fact, a secondary benefit to owning shares of DMRC may be that trips to the grocery store become Easter egg hunts for watermarked items.
Looping back to my quote from two years prior, things have taken awhile and they will most likely continue to creep rather than sprint (whether share price will do the same is another issue.) That being said, management has been learning as things have moved forward and are applying their new knowledge to help speed up the process.
Most dramatically, Digimarc has pushed against the idea that companies all need to run their own studies. This has led to national commissions in Germany and Japan where businesses can coordinate their testing and cut down on time to market. Signs point to things going well in these regions, as if one refers back to the job postings earlier in the article, they will see that local sales staff is about to be put in place.
Additionally, during the passage of those two years, stores of all sorts have continued to upgrade their scanning technology from laser based to image based, enabling the recognition of invisible watermarking. This is in accordance with the recommendation of GS1 the independent organization that manages barcoding systems. The shift is not happening because of Digimarc specifically, but the company is a happy beneficiary.
A final catalyst that should shorten the timeline of widespread adoption of digital watermarking is Amazon (NASDAQ:AMZN) acquisition of Whole Foods (NASDAQ:WFM). The conventional wisdom is that retailers who may have been tentative about taking the plunge suddenly see themselves in a more 'adapt or die' type situation as the online retailer brings its ruthless efficiency to their doorstep. Needless to say, there should be some interesting insights regarding sentiment during the Q2 call.
Consumer packaged goods companies may not feel the pressure of Amazon, but they have their own incentive to cross over approaching as new nutritional labeling requirements eventually go into effect. If a company must update their packaging anyway, the logic goes, that's the opportune time to embrace the invisible barcode.
There are other things to like about Digimarc that extend beyond this application or even this technology. They watermark audio, prevent eBook piracy, have a legacy business that protects US currency, and own a host of patents that in the past they have licensed as a means of generating revenue. Close partnerships with HP and Shazam, among a host of others, add major names and demonstrate the breadth of their ecosystem. Finally, an examination of their balance sheet will show they carry no debt, and have a multi year runway of cash on hand.
But the invisible barcode dwarfs these in terms of opportunity and so has been the focus here.
Two years ago Digimarc was a 'not if but when' type play. Now, there are a known two million in bookings that will be hitting the top line soon, and from there the initial master services agreements along with drips and drabs from other retailers and CPGs should begin to snowball. It's no longer about the when, it's about how much. And signals from management and store shelves are indicating that the answer will be a very large number.
Disclosure: I am/we are long DMRC.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
https://seekingalpha.com/article/4086011-digimarc-wait?app=1&auth_param=f4h1u:1clsa5i:fa9480d69204518c655fa9e7cc7a24fd&uprof=54#alt2
Stockexpertpro
11 years ago
DMRC Revenues Down 30% Loss 3.3 Million Ugly Outlook Company will continue to lose money and be cash flow negative for the forseable futures Revenues of only 7.2 Million Yet the Company has a market cap of 255 Million Dollars... for a company whos revenues just declined 30% and that is losing 3.3 Million a qrt thats 13.2 Million Dollars a year Hmm This stock def looks like a Bubble Short Sell
http://finance.yahoo.com/news/digimarc-reports-first-quarter-2014-200500475.html
Digimarc Reports First Quarter 2014 Financial Results
Marketwired Digimarc Corporation
April 23, 2014 4:05 PM
BEAVERTON, OR--(Marketwired - Apr 23, 2014) - Digimarc Corporation (NASDAQ: DMRC) reported financial results for the first quarter ended March 31, 2014.
First Quarter 2014 Results
Revenue for the first quarter of 2014 totaled $7.2 million compared to $10.2 million in the first quarter of 2013. The decrease was primarily due to the end of the scheduled minimum quarterly license fee payments from Intellectual Ventures (IV) in the second quarter of 2013. The comparative decline was partially offset by increased royalty revenue from other licensees.
Operating loss for the first quarter of 2014 totaled $3.3 million compared to operating income of $1.6 million in the same quarter a year-ago. The operating loss was primarily due to lower revenue and increased investment in the company's ongoing product development and sales growth initiatives, mainly focused around Digimarc Discover and Barcode.
Net loss for the first quarter of 2014 totaled $2.0 million or $(0.29) per diluted share compared to net income of $1.0 million or $0.13 per diluted share in the first quarter of 2013.
At March 31, 2014, cash, cash equivalents and marketable securities totaled $32.3 million compared to $35.0 million at December 31, 2013.
Conference Call
Digimarc will hold a conference call later today (Wednesday, April 23, 2014) to discuss these results. Management will also provide an update on market conditions and execution of strategy. Chairman and CEO Bruce Davis and CFO Charles Beck will host the call starting at 5:00 p.m. Eastern time (2:00 p.m. Pacific time). A question and answer session will follow management's presentation.
The call will be broadcast live via webcast at www.digimarc.com/investors and available for replay through May 23, 2014. The webcast will be archived and available on Digimarc's website at www.digimarc.com/investors/investor-events-and-webcasts.
For those who wish to listen to the call via telephone, please dial the telephone number below at least five minutes prior to the scheduled start time:
Number: 866-562-9934
Conference ID: 27179676
If you have any difficulty connecting with the conference call, please contact Liolios Group at 949-574-3860.
About Digimarc
Digimarc Corporation (NASDAQ: DMRC), based in Beaverton, Oregon, is a leading innovator and provider of enabling technologies that create digital identities for all forms of media and many everyday objects. The embedded Digimarc IDs are imperceptible to humans, but not to computers, networks and devices like mobile phones, which can now use cameras and microphones as sensory inputs to "see, hear and understand" the world around them within the context of their environment. Digimarc has built an extensive intellectual property portfolio with patents in digital watermarking, content identification and management, media and object discovery to enable ubiquitous computing, and related technologies. Digimarc develops solutions, licenses its intellectual property, and provides development services to business partners across a range of industries. For more information, visit www.digimarc.com.
Forward-looking Statements
With the exception of historical information contained in this release, the matters described in this release contain various "forward-looking statements." These forward-looking statements include statements and any related inferences regarding increased royalty revenue from other licensees, increased investments in product development and sales growth initiatives, and other statements identified by terminology such as "will," "should," "expects," "estimates," "predicts" and "continue" or other derivations of these or other comparable terms. These forward-looking statements are statements of management's opinion and are subject to various assumptions, risks, uncertainties and changes in circumstances. Actual results may vary materially from those expressed or implied from the statements in this release as a result of changes in economic, business and/or regulatory factors. More detailed information about risk factors that may affect actual results will be set forth in the company's Form 10-K for the year ended December 31, 2013 and in subsequent periodic reports filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date of this release. Except as required by law, Digimarc undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this release.
Digimarc Corporation
Consolidated Income Statement Information
(in thousands, except per share amounts)
(Unaudited)
Three-Month Information
March 31, March 31,
2014 2013
Revenue:
Service $ 2,988 $ 2,929
Subscription 1,412 1,384
License 2,805 5,930
Total revenue 7,205 10,243
Cost of revenue:
Service 1,414 1,403
Subscription 649 635
License 83 96
Total cost of revenue 2,146 2,134
Gross profit:
Service 1,574 1,526
Subscription 763 749
License 2,722 5,834
Total gross profit 5,059 8,109
Gross margin:
Service 53 % 52 %
Subscription 54 % 54 %
License 97 % 98 %
Percentage of gross profit to total revenue 70 % 79 %
Operating expenses:
Sales and marketing 1,879 1,277
Research, development and engineering 3,546 2,725
General and administrative 2,421 2,186
Intellectual property 534 277
Total operating expenses 8,380 6,465
Operating income (loss) (3,321 ) 1,644
Other income, net 27 29
Income (loss) before income taxes (3,294 ) 1,673
(Provision) benefit for income taxes 1,308 (702 )
Net income (loss) $ (1,986 ) $ 971
Earnings (loss) per common share:
Earnings (loss) per common share - basic $ (0.29 ) $ 0.13
Earnings (loss) per common share - diluted $ (0.29 ) $ 0.13
Weighted average common shares outstanding - basic 7,000 6,838
Weighted average common shares outstanding - diluted 7,000 7,058
Cash dividends declared per common share: $ 0.11 $ 0.11
Digimarc Corporation
Consolidated Cash Flow Information
(in thousands)
(Unaudited)
Three-Month Information
March 31, March 31,
2014 2013
Cash flows from operating activities:
Net income (loss) $ (1,986 ) $ 971
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment 231 158
Amortization and write-off of intangibles 308 299
Change in allowance for doubtful accounts (7 ) -
Gain on reversal of contingent merger consideration - (190 )
Stock-based compensation 1,259 1,092
Deferred income taxes (509 ) (112 )
Excess tax benefit from stock-based awards (72 ) -
Changes in operating assets and liabilities:
Trade accounts receivable, net 1,809 (228 )
Other current assets (699 ) (44 )
Other assets 84 1
Accounts payable and other accrued liabilities (317 ) (213 )
Income taxes payable 3 778
Deferred revenue (1,484 ) 832
Net cash provided by (used in) operating activities (1,380 ) 3,344
Cash flows from investing activities:
Purchase of property and equipment (117 ) (86 )
Capitalized patent costs (295 ) (228 )
Maturity of marketable securities 11,192 23,116
Purchase of marketable securities (9,266 ) (21,933 )
Net cash provided by investing activities 1,514 869
Cash flows from financing activities:
Issuance of common stock 712 -
Purchase of common stock (850 ) (648 )
Cash dividends paid (824 ) (801 )
Excess tax benefit from stock-based awards 72 -
Net cash used in financing activities (890 ) (1,449 )
Net increase (decrease) in cash and cash equivalents (1) $ (756 ) $ 2,764
Cash, cash equivalents and marketable securities at beginning of period 34,964 39,056
Cash, cash equivalents and marketable securities at end of period 32,282 40,637
(1) Net increase (decrease) in cash, cash equivalents and marketable securities $ (2,682 ) $ 1,581
Digimarc Corporation
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
March 31, December 31,
2014 2013
Assets
Current assets:
Cash and cash equivalents (2) $ 3,055 $ 3,811
Marketable securities (2) 28,120 25,851
Trade accounts receivable, net 4,036 5,838
Other current assets 2,368 1,658
Total current assets 37,579 37,158
Marketable securities (2) 1,107 5,302
Property and equipment, net 2,326 2,395
Intangibles, net 6,740 6,709
Goodwill 1,114 1,114
Deferred tax assets, net 4,519 3,949
Other assets 486 570
Total assets $ 53,871 $ 57,197
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities $ 1,325 $ 1,560
Deferred revenue 2,690 4,218
Total current liabilities 4,015 5,778
Deferred rent and other long-term liabilities 505 496
Total liabilities 4,520 6,274
Commitments and contingencies
Shareholders' equity:
Preferred stock 50 50
Common stock 8 7
Additional paid-in capital 42,735 41,498
Retained earnings 6,558 9,368
Total shareholders' equity 49,351 50,923
Total liabilities and shareholders' equity $ 53,871 $ 57,197
(2) Aggregate cash, cash equivalents, short- and long-term marketable securities was $32,282 and $34,964 at March 31, 2014 and December 31, 2013, respectively.
midastouch017
11 years ago
News Corp.’s (NASDAQ:NWS) (NASDAQ:NWSA) HarperCollins,
one of the world’s largest publishing companies, recently requested that
HarperCollins Accuses Apple of Copyright Infringement.
JANUARY 27, 2014
Google (NASDAQ:GOOG) remove search engine links to some of its own books on Apple’s (NASDAQ:AAPL) iTunes in what appears to be a poorly executed attempt to fight online piracy, reports TorrentFreak. HarperCollins made the takedown requests through Digimarc (NASDAQ:DMRC), a company that provides anti-piracy protection for publishers and authors.
As seen in the screenshot above, Digimarc’s takedown requests included eight links to HarperCollins e-books offered through Apple’s iTunes Store. The eight targeted books are all mystery novels written by Agatha Christie, including Motive v. Opportunity: A Miss Marple Short Story, Death on the Nile, The Mysterious Affair at Styles, Poirot Investigates, Poirot and the Regatta Mystery, Postern of Fate (Tommy & Tuppence), and Problem at Pollensa Bay. As noted by TorrentFreak, HarperCollins acquired the rights to eighty of Christie’s works in 2010.
Digimarc’s website claims that it “is the global leader in protecting books, publications and documents from the threat of digital piracy. Our service finds and removes pirated content across the web to protect publisher revenues and author rights through an integration takedown process that delivers high removal rates across various website types.”
Besides serving HarperCollins, Digimarc also provides its anti-piracy service for Simon & Schuster, Random House, and Scholastic (NASDAQ:SCHL). Although Digimarc noted that its anti-piracy service is “Highly automated,” it also claimed that it uses two levels of human validation before proceeding with a takedown request. However, Digimarc’s repeated takedown requests that target officially-licensed content on Apple’s iTunes seem to suggest that the company’s overall process may need to be reevaluated.
HarperCollins may be familiar to some Apple watchers as one of the five publishers that were involved in the e-book price-fixing conspiracy that Apple was found guilty of orchestrating. Apple filed a notice of appeal against the verdict and is also currently trying to get the antitrust compliance monitor removed from his position. HarperCollins settled its antitrust case with the government without going to trial.
Unfortunately, this wasn’t the only set of misguided takedown requests that Digimarc submitted on HarperCollins’ behalf. TorrentFreak discovered several other takedown notices from Digimarc that also requested the removal of HarperCollins’ own Agatha Christie books from iTunes. Not surprisingly, Google has rejected the majority of Digimarc’s poorly researched takedown requests, including the links to Apple’s iTunes. Out of the 1,000 takedown requests in the first notice, Google refused to comply with 914 requests. From another set of 1,000 takedown requests,
Google rejected 917.
Oddly enough, Digimarc even targeted iTunes links to Agatha Christie books that haven’t been released yet. In other words, HarperCollins was accusing itself by proxy of pirating its own books before they had even been released.
http://wallstcheatsheet.com/stocks/harpercollins-accuses-apple-of-copyright-infringement.html/2/
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