Digimarc (DMRC) Q1 2026 earnings summary

Executive summary

• Achieved a 9% sequential increase in ending ARR, with significant progress in Secure Gift Card rollout among 15 North American retailers, including 8 of the top 20 by sales, and secured the first commercial order covering six brands.

• Secured upsells with three existing anti-counterfeiting customers and a six-figure upsell in digital trust and integrity with a global technology company.

• Added key talent in go-to-market functions, including two experienced sales leaders, and continued product innovation in digital trust and agentic AI.

• Significant progress made in building a trust layer for digital and physical interactions, leveraging AI trends.

Financial highlights

• Ending ARR for Q1 2026 was $15.0 million, down from $20.0 million last year due to the loss of two contracts; excluding these, ARR grew $1.8 million year-over-year.

• Sequential ARR growth was 9%; $500,000 of ARR from gift cards in Q1.

• Total revenue was $7.6 million, down $1.8 million year-over-year, with subscription revenue at $4.4 million and service revenue at $3.2 million.

• Subscription gross margin rose to 90%, up 4 points year-over-year; service gross margin was 57% (down 8 points year-over-year).

• Operating expenses dropped 36% to $11.7 million; non-GAAP operating expenses fell 51% to $8.1 million.

• Net loss per diluted share improved to $0.32 from $0.55; non-GAAP net loss per share improved to $0.07 from $0.40.

• Ended quarter with $10 million in cash and no debt; free cash flow usage improved by $3.7 million year-over-year.

Outlook and guidance

• Advancing Secure Gift Card rollout with 15 North American retailers, up from 8 two months ago; Schnucks chain-wide rollout underway, with another major retailer’s rollout delayed to January 2027 due to scanner firmware.

• Positioned for additional ARR from upcoming Belgium and German recycling market demonstrations.

• Expecting further upsell and cross-sell revenue from large, well-known customers.

• Ongoing investment in business to support future growth and benefit from AI-driven demand.