Digimarc — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue for Q3 2026 was $6.4 million, a decrease from $7.6 million in Q3 2025.
• Subscription revenue was $3.2 million in Q3 2026 compared to $4.6 million in Q3 2025, driven by a $0.8 million decrease from an expired contract and a $0.6 million decrease from a contract step-down.
• Service revenue was $3.3 million in Q3 2026 compared to $3.1 million in Q3 2025, primarily due to higher revenue from a commercial customer.
• Annual Recurring Revenue (ARR) ended at $10.8 million as of September 30, 2026, down from $15.8 million in Q3 2025, reflecting a $3.1 million contract expiration and a $2.6 million contract step-down, partially offset by $0.7 million in net increases from new and existing contracts.
• Gross profit margin was 55% in Q3 2026 compared to 58% in Q3 2025; subscription gross profit margin increased to 87% from 86%, and service gross profit margin increased to 60% from 57%.
• Non-GAAP gross profit margin was 82% in Q3 2026 compared to 81% in Q3 2025.
• Operating expenses were $11.5 million in Q3 2026 compared to $12.8 million in Q3 2025, driven by decreases in stock-based compensation ($0.7 million), bad debt expense ($0.5 million), and other costs ($0.3 million), partially offset by a $0.4 million increase in cash severance costs.
• Non-GAAP operating expenses were $8.0 million in Q3 2026 compared to $8.6 million in Q3 2025.
• Net loss attributable to Digimarc Corporation was $8.1 million ($0.36 per diluted share) in Q3 2026 compared to $8.2 million ($0.38 per diluted share) in Q3 2025.
• Non-GAAP net loss attributable to Digimarc Corporation was $2.9 million ($0.13 per diluted share) in Q3 2026 compared to $2.2 million ($0.10 per diluted share) in Q3 2025.
• Cash, cash equivalents, and marketable securities totaled $22.1 million at September 30, 2026, compared to $12.9 million at December 31, 2025.
• Free cash flow usage was $4.3 million in Q3 2026 compared to $3.1 million in Q3 2025.
• Deferred revenue was $3.5 million at September 30, 2026, compared to $4.0 million at December 31, 2025.

Guidance and Future Outlook:

• Management aims to turn current momentum into recurring and predictable revenue growth in 2027.
• Commercial leadership is mostly in place with a clear focus on execution.

Business Segments and Product Lines:

• New customers have committed to Digimarc solutions across retail and CPG sectors.
• Results previously in the pipeline have moved to signed business earlier than expected.

Other Key Points:

• Digimarc will host a conference call on November 12, 2026, at 5:00 p.m. Eastern time with CEO Paul Carreiro and CFO Charles Beck.
• The company helps organizations protect against fraud and verify authenticity through persistent digital identity embedded in products, packaging, and content.
• The press release includes forward-looking statements subject to risks and uncertainties detailed in the Form 10-K for the year ended December 31, 2025.