Digimarc CORP. - DMRC
Exhibit A in why you should never let a former hedge fund honcho run your company
Even though DMRC is no longer on my interest list, but after reading through their earnings release and 10Q, I just had to make a few comments.
If any free subscribers are interested, I removed the paywall from my original story back in January when the stock was north or $43.
A Negotiation Gone Awry
Ever since the CEO decided to try playing hardball with lead retailer WalMart back in June 2024 during a contract re-negotiation, this company has jumped from one hot mess to another. Yes, WMT may still technically be a customer of theirs with some lower value products, but their attempt at forcing WMT to adopt their barcodes system-wide appears to be incredibly ill-conceived.
Between the loss of WMT and the continuing drip of other customers heading for the exits, why shareholders allow him to continue running the company is just beyond me. Yes, he does have a bunch of his own money sunk into the company, but still, that’s hardly a qualification to run much of anything.
On my personal list of things to look for in a potential short idea? A former banker or hedge fund type who thinks they’re an operator.
Divorced from reality
Just read the opening statement from their earnings release and you’re filled with the hope that the AI revolution is going to start knocking on DMRC’s doors. Then you happen to look a bit lower and glance at the bullet points, and that hope begins to fade.
Here’s a particularly good one.
“Annual recurring revenue (ARR1) as of June 30, 2025 was $15.9 million compared to $23.9 million as of June 30, 2024. The $8.0 million decrease primarily reflects the expiration of two commercial contracts that accounted for a total of $9.3 million of ARR, partially offset by increases to ARR from new and existing commercial contracts.”
Part of that is likely WMT which stopped being a major 10%+ customer in Q2 2024, but they are continuing to hemorrhage customers.
“Our commercial subscription revenue in fiscal 2025 will be negatively impacted by the termination of a commercial contract that ended in April 2025 with an international customer. The contract contributed $0.8 million and $1.6 million of subscription revenue during the three and six months ended June 30, 2024 compared to $0.2 million and $1.1 million of subscription revenue during the three and six months ended June 30, 2025. Our commercial subscription revenue in fiscal 2025 will also be negatively impacted by the expiration of a commercial contract that ended in June 2024 with a domestic customer. The contract contributed $1.1 million and $2.1 million of subscription revenue during the three and six months ended June 30, 2024.”
Another Contract in Jeopardy?
One tidbit they didn’t mention in the press release but which they disclosed in the 10Q?
“Our commercial subscription revenue in fiscal 2025 may also be negatively impacted by the renegotiation currently underway of a $3.1 million contract, which will most likely result in a reduction of up to $3.0 million in annual revenue.”
For those keeping score, take ARR down an additional $3M.
How about their Central Bank revenues?
This has always been the crown jewel of the company and stretches back around 30 years. If they lose this, the stock goes to the pennies.
“Our government service revenue in fiscal 2025 will be negatively impacted by a smaller approved budget by the Central Banks for program work in 2025. We expect government service revenue in fiscal 2025 to be $1.7 million to $1.9 million lower than in fiscal 2024.”
Central banks were 45% of revenues in Q2 2025 vs. 39% of revenues in Q2 2024. Even though their actual dollar amount declined by $1.1M year over year, their percentage stayed the same as their year to date decline matched the rest of the company.
Customer A is the Central Banks.
Final Thoughts
As I have mentioned elsewhere, I have been following around the exploits of DMRC for close to 20 years. They have had their brief, shining moments when things finally appeared to be going their way, only to be dashed when reality never quite seemed to match expectations.
Their ticker was one I always kept on my screens in hopes that they would be able to find a new round of suckers, err, investors, to believe in the story and drive the share price higher.
Call me pessimistic, but unless this management team can find a way to pull the proverbial rabbit out of the hat, this time it just may be terminal.