Digimarc Corporation (NASDAQ:DMRC) Q3 2022 Earnings Conference Call November 3, 2022 5:00 PM ET

Company Participants

Joel Meyer – Chief Legal Officer

Charles Beck – Chief Financial Officer

Riley McCormack – Chief Executive Officer

Conference Call Participants

Matt Collard – PCB Advisory

Jeff Bernstein – Cowen

Jeff Van Rhee – Craig-Hallum Capital Group

Operator

Good day, and welcome to the Digimarc Q3 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I’d now like to turn the conference over to Mr. Joel Meyer, the Chief Legal Officer. Please proceed, sir.

Joel Meyer

Thank you. Welcome to our Q3 conference call. Riley McCormack, our CEO, and Charles Beck, our CFO, are with me on the call. On the call today, we will discuss Q3 financial results and provide a business update. This will be followed by a question-and-answer forum. We have posted our prepared remarks in the Investor Relations section of our website and will archive this webcast there.

Before we begin, let me remind everyone that today’s discussion contains forward-looking statements that have risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially.

Charles will now comment on our Q3 financial results.

Charles Beck

Thank you Joel, and hello everyone. First year commercial bookings were $3.2 million during the third quarter compared to $2.9 million in Q3 last year. Bookings in Q3 last year included $600,000 from our Piracy Intelligence product that we are nearly complete in winding down. There will be no future bookings from this product category.

Excluding Piracy Intelligence, our first year commercial bookings increased $800,000 or 35%. Bookings for the quarter included $1.2 million from a new multi-year agreement we signed in Q3 with Walmart. The new agreement provides for a minimum payment of $2.7 million in year one, and more than doubles to $5.8 million in year two.

These minimum payments are incremental to the $3 million annual payments we receive under the existing agreement. We expect the remaining contract value of $7.3 million to be booked in the fourth quarter upon receiving customer acceptance. Riley will have more to say about this exciting new development later in the call.

Revenue for the third quarter was $7.8 million, up 22% from $6.4 million in Q3 last year. Subscription revenue grew 64% in the quarter from $2.5 million to $4.1 million. The new Walmart contract provided for $1.1 million of subscription revenue during the quarter. We expect a similar quarterly revenue run rate for this contract over the next seven quarters with potential upside above the minimum payments.