Digimarc says going-concern doubt conditions ended
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Digimarc Corporation (DMRC) reported third-quarter revenue of $6.446 million, down 15% from a year earlier. Subscription revenue fell to $3.187 million from $4.567 million, primarily reflecting a commercial contract expiration and another contract’s step-down; service revenue rose to $3.259 million from $3.060 million. For the first nine months, revenue was $21.412 million, down 14%, and annual recurring revenue was $10.822 million at September 30, 2026, down 32% from $15.813 million a year earlier.
Nine-month net cash used in operating activities was $6.833 million, compared with $12.770 million in 2025; net loss attributable to Digimarc was $27.169 million versus $28.102 million. Financing included $18.265 million from common stock issuance, net of issuance costs. After completing a registered direct offering, Digimarc had $22.1 million in cash, cash equivalents and short-term marketable securities at September 30, 2026. It believes these resources will provide sufficient liquidity to meet obligations for at least the next 12 months from issuance of the statements and concluded the conditions that had raised substantial doubt about its ability to continue as a going concern no longer existed.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Hollow bars mark forward-looking points. How the balance works
Positive
- Moderate pointNet cash used in operations fell to $6.833 million from $12.770 million.
- Moderate point. Forward-looking: it has not happened yet and may not happen.Digimarc cites $22.1 million of resources for at least 12 months.
Negative
- Moderate pointRevenue fell 15% in the third quarter and 14% over nine months.
- Moderate pointAnnual recurring revenue declined 32% to $10.822 million year over year.
Filing Explained
In
Key Figures
Key Terms
Annual Recurring Revenue (ARR) financial
registered direct offering financial
valuation allowance financial
performance obligations financial
variable interest entity technical
non-controlling interest financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much revenue did DMRC report for the third quarter of 2026?
Why did DMRC's annual recurring revenue decline in 2026?
What did DMRC say about its liquidity at September 30, 2026?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
DIGIMARC CORPORATION
(Exact name of registrant as specified in its charter)
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
| | | The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| | ☒ | Smaller reporting company | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes
As of November 6, 2026, there were
Table of Contents
| PART I. FINANCIAL INFORMATION |
||
| Item 1. |
Financial Statements (Unaudited): |
3 |
| Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025 |
3 |
|
| Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2026 and 2025 |
4 |
|
| Consolidated Statements of Shareholders' Equity for the three and nine months ended September 30, 2026 and 2025 |
5 |
|
| Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025 |
6 |
|
| Notes to Consolidated Financial Statements |
7 |
|
| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
23 |
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
35 |
| Item 4. |
Controls and Procedures |
35 |
| PART II. OTHER INFORMATION |
||
| Item 1. |
Legal Proceedings |
36 |
| Item 1A. |
Risk Factors |
36 |
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
36 |
| Item 5. | Other Information | 37 |
| Item 6. |
Exhibits |
37 |
| SIGNATURES |
38 |
|
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
DIGIMARC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(UNAUDITED)
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities | ||||||||
| Trade accounts receivable, net | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangibles, net | ||||||||
| Goodwill | ||||||||
| Lease right of use assets | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and other accrued liabilities | $ | $ | ||||||
| Deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Long-term lease liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 16) | ||||||||
| Shareholders' equity: | ||||||||
| Preferred stock (par value $0.001 per share, 2,500 authorized, 10 shares issued and outstanding at September 30, 2026 and December 31, 2025) | ||||||||
| Common stock (par value $0.001 per share, 50,000 authorized, 27,052 and 21,901 shares issued and outstanding at September 30, 2026 and December 31, 2025, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders' equity - Digimarc Corporation | ||||||||
| Non-controlling interest | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
DIGIMARC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share data)
(UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue: | ||||||||||||||||
| Subscription | $ | $ | $ | $ | ||||||||||||
| Service | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of revenue: | ||||||||||||||||
| Subscription (1) | ||||||||||||||||
| Service (1) | ||||||||||||||||
| Amortization expense on acquired intangible assets | ||||||||||||||||
| Total cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Research, development and engineering | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Amortization expense on acquired intangible assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income, net | ||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income attributable to non-controlling interest | ||||||||||||||||
| Net loss attributable to Digimarc Corporation | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share: | ||||||||||||||||
| Net loss per share attributable to Digimarc Corporation common shareholders — basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share attributable to Digimarc Corporation common shareholders — diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding — basic | ||||||||||||||||
| Weighted average shares outstanding — diluted | ||||||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Unrealized gain (loss) on marketable securities, net of tax of $0 | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Foreign currency translation adjustment, net of tax of $0 | ( | ) | ( | ) | ||||||||||||
| Other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income attributable to non-controlling interest | ||||||||||||||||
| Comprehensive loss attributable to Digimarc Corporation | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| (1) |
Cost of revenue for Subscription and Service excludes amortization expense on acquired intangible assets. |
The accompanying notes are an integral part of these consolidated financial statements.
DIGIMARC CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
(UNAUDITED)
| Accumulated | Total | |||||||||||||||||||||||||||||||||||
| Additional | Other | Shareholders' Equity | ||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Non-controlling | Digimarc | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Interest | Corporation | ||||||||||||||||||||||||||||
| Three Months Ended September 30, 2026 | ||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Vesting of performance restricted stock units | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Purchase of common stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Change in non-controlling interest ownership | — | — | ( | ) | ||||||||||||||||||||||||||||||||
| Unrealized gain (loss) on marketable securities | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | ||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Three Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Issuance of restricted common stock | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Purchase of common stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Unrealized gain (loss) on marketable securities | — | — | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Accumulated | Total | |||||||||||||||||||||||||||||||||||
| Additional | Other | Shareholders' Equity | ||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Non-controlling | Digimarc | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Interest | Corporation | ||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2026 | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||||||||||||||||||
| Issuance of restricted common stock | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Partnership capital contributions | — | — | ||||||||||||||||||||||||||||||||||
| Exercise of partnership equity options | — | — | ||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Vesting of performance restricted stock units | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Forfeiture of restricted common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Purchase of common stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Change in non-controlling interest ownership | — | — | ( | ) | ||||||||||||||||||||||||||||||||
| Unrealized gain (loss) on marketable securities | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Issuance of restricted common stock | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Vesting of restricted stock units | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Vesting of performance restricted stock units | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Purchase of common stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Unrealized gain (loss) on marketable securities | — | — | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | ||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
DIGIMARC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and write-off of property and equipment | ||||||||
| Amortization of acquired intangible assets | ||||||||
| Amortization and write-off of other intangible assets | ||||||||
| Amortization of lease right of use assets under operating leases | ||||||||
| Stock-based compensation | ||||||||
| Increase (decrease) in allowance for doubtful accounts | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Trade accounts receivable | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable and other accrued liabilities | ||||||||
| Deferred revenue | ( | ) | ||||||
| Lease liability and other long-term liabilities | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Capitalized patent costs | ( | ) | ( | ) | ||||
| Proceeds from maturities of marketable securities | ||||||||
| Purchases of marketable securities | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Issuance of common stock, net of issuance costs | ||||||||
| Non-controlling interest capital contributions | ||||||||
| Purchase of common stock | ( | ) | ( | ) | ||||
| Repayment of loans | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate on cash | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash received (paid) for income taxes, net | $ | ( | ) | $ | ( | ) | ||
| Cash paid for stock compensation | $ | ( | ) | $ | ||||
| Supplemental schedule of non-cash investing activities: | ||||||||
| Property and equipment and patent costs in accounts payable | $ | $ | ||||||
| Stock-based compensation capitalized to software and patent costs | $ | $ | ||||||
| Supplemental schedule of non-cash financing activities: | ||||||||
| Accrued financing costs in connection with issuance of common stock | $ | $ | ||||||
| Issuance of shares pursuant to Employee Stock Purchase Plan | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(UNAUDITED)
1. Description of Business and Significant Accounting Policies
Description of Business
Digimarc Corporation ("Digimarc" or "the Company"), an Oregon corporation, is building the trust layer for the modern world. As artificial intelligence ("AI") accelerates how people produce, share, and interact with the world, the risks of fraud, counterfeiting, and misinformation are growing exponentially.
Digimarc's innovative, highly scalable, and ultra-secure solutions make it possible for consumers, businesses, and intelligent systems to instantly verify what's real, protect what matters, and transact with confidence. Digimarc's solutions for retail loss prevention, product authentication, and digital trust and integrity are built to counter the speed and sophistication of today's AI-enabled threats. Trusted by a consortium of the world's central banks (the "Central Banks") to deter the counterfeiting of global currency, Digimarc exists to protect the truth in every interaction, spanning both the physical and digital worlds.
| Physical Digimarc Solutions | Digital Digimarc Solutions |
| Anti-Counterfeiting: Restore trust with counterfeit resistant packaging and product verification. | Internal Compliance: Ensure policy compliance and prevent misuse of digital assets. |
| Counterfeiting Deterrence: Deter digital counterfeiting of global currencies. | Leak Detection: Identify leaked information and its source instantly. |
| Product Swap Prevention: Reduce weight-based shrink at grocery checkouts. | Piracy Prevention: Gain insight into - and control of - digital asset use. |
| Recycling: Boost product sustainability while revealing never-before-seen data. | Provenance & Authenticity: Restore trust and ensure fair use of digital assets. |
| Secure Gift Cards: Fight gift card fraud with automated tamper detection. | Royalty Monitoring: Ensure content creators and owners receive proper payment. |
Corporate Reorganization
On April 30, 2026, the shareholders of DMRC LLC (f/k/a Digimarc Corporation), the predecessor entity ("Predecessor"), approved, and, on May 15, 2026, the Predecessor completed, a corporate reorganization pursuant to an Agreement and Plan of Reorganization dated March 12, 2026 (the "corporate reorganization"). Under the corporate reorganization, Digimarc Corporation (f/k/a Deschutes Parent, Inc.) ("Holdings"), a newly formed Oregon corporation, became the parent holding company of the Predecessor. To effect the corporate reorganization, Deschutes Merger Sub, Inc. ("Merger Sub"), a wholly owned subsidiary of Holdings, merged with and into the Predecessor, with the Predecessor surviving the merger and becoming a wholly owned subsidiary of Holdings. As part of the corporate reorganization each outstanding share of common stock of the Predecessor was converted into the right to receive one share of Holdings common stock; each outstanding share of preferred stock of the Predecessor was converted into the right to receive one corresponding share of Holdings preferred stock; each outstanding option to purchase shares of common stock of the Predecessor was assumed by Holdings and became exercisable for an equivalent number of shares of Holdings common stock; and each outstanding restricted stock award, restricted stock unit award, and other equity-based award of the Predecessor was assumed by Holdings and remained subject to substantially the same terms and conditions that applied immediately prior to the corporate reorganization.
Following the merger, the Predecessor was converted into an Oregon limited liability company and renamed "DMRC LLC", and Holdings filed Articles of Amendment to its Amended Articles of Incorporation with the Secretary of State of the State of Oregon to change its name to "Digimarc Corporation." Digimarc Corporation succeeds as the U.S. Securities and Exchange Commission ("SEC") reporting entity and its common stock continues to trade on Nasdaq under the symbol "DMRC."
The corporate reorganization was accounted for as a transaction among entities under common control. Accordingly, the historical carrying values of the assets and liabilities and the historical consolidated financial statements were carried forward.
Interim Consolidated Financial Statements
Our significant accounting policies are detailed in "Note 1: Description of Business and Summary of Significant Accounting Policies" of our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 11, 2026 (the "2025 Annual Report").
The accompanying interim consolidated financial statements have been prepared from the Company's records without audit and, in management's opinion, include all adjustments (consisting of only normal recurring adjustments) necessary to fairly reflect the financial condition and the results of operations for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles in the United States ("U.S. GAAP") have been condensed or omitted in accordance with the rules and regulations of the SEC.
These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the 2025 Annual Report. The results of operations for the interim periods presented in these consolidated financial statements are not necessarily indicative of the results for the full year.
Principles of Consolidation
The consolidated financial statements include the accounts of Digimarc Corporation and DMRC LLC and its subsidiaries. Digimarc Corporation holds a controlling financial interest in DMRC LLC and its subsidiaries through its ownership and governance rights and has concluded that DMRC LLC and its subsidiaries constitute a variable interest entity ("VIE") for the purposes of consolidation under Accounting Standards Codification ("ASC") Topic 810 "Consolidation". Ownership interests in DMRC LLC and its subsidiaries held by other members are reflected as non-controlling interest ("NCI"), as applicable. All intercompany transactions and balances have been eliminated.
NCI reflects the portion of income or loss and the corresponding equity attributable to other members' equity interests in DMRC LLC and its subsidiaries, measured using the Hypothetical Liquidation at Book Value method. NCI is presented as a separate component of Shareholders' Equity on the Company's Consolidated Balance Sheets to clearly distinguish between the Company's equity interests and the economic interests of other members. Net loss and comprehensive loss attributable to Digimarc, as reported in the Consolidated Statements of Operations and Comprehensive Loss, is presented net of the portion of net income (loss) and comprehensive income (loss) attributable to other members.
Liquidity
Under the rules of ASC Subtopic 205-40 "Presentation of Financial Statements-Going Concern" ("ASC 205-40"), companies are required to evaluate whether conditions and/or events raise substantial doubt about their ability to meet their future financial obligations as they become due within one year after the date that the financial statements are issued. This evaluation takes into account a company’s current available cash and projected cash needs over the one year evaluation period but may not consider things beyond its control, such as increasing revenue or the future exercise of outstanding financial assets.
The Company previously disclosed in its interim consolidated financial statements for the period ended June 30, 2026 that substantial doubt existed about its ability to continue as a going concern. Following the completion of a registered direct offering, the Company had $
Accounting Pronouncements Issued But Not Yet Adopted
In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2024-03, "Income Statement (Subtopic 220-40) - Reporting Comprehensive Income - Expense Disaggregation Disclosures." The ASU requires disaggregated disclosure of income statement expenses, primarily on disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This authoritative guidance will be effective for the Company for annual reporting periods beginning in the fiscal year ending December 31, 2027 and interim reporting periods within those annual reporting periods, at which time the Company will make the necessary updates to disaggregate material expense captions in the notes to the financial statements. Aside from the disclosure changes, the Company does not expect the amendments to have a material effect on its financial statements.
In September 2025, the FASB issued ASU No. 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software," which includes amendments intended to modernize the accounting for software costs by removing references to software development stages and clarifying the capitalization threshold. The amendments are effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. The amendments may be applied prospectively, retrospectively, or through a modified transition approach. The Company does not expect these amendments to have a material effect on its financial statements.
In December 2025, the FASB issued ASU No. 2025‑11, "Interim Reporting (Topic 270): Narrow‑Scope Improvements," which provides amendments intended to clarify interim disclosure requirements and improve the usability and consistency of interim financial reporting. This authoritative guidance will be effective for the Company for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods. The Company does not expect the amendments to have a material effect on its financial statements.
In December 2025, the FASB issued ASU No. 2025‑12, "Codification Improvements," which includes amendments designed to clarify, correct, or enhance various areas of the FASB Accounting Standards Codification. These amendments do not introduce new accounting requirements but are intended to improve the clarity and consistency of the existing guidance. This authoritative guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company does not expect the amendments to have a material effect on its financial statements.
2. Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments, which include cash equivalents, accounts receivable, accounts payable and other accrued liabilities, approximate their carrying values due to the short-term nature of these instruments. The Company's marketable securities are classified as available-for-sale and are reported at fair value. Unrealized holding gains and losses are excluded from earnings and are reported net of tax in "accumulated other comprehensive loss" in the Consolidated Balance Sheets until realized. Realized gains and losses are included in "other income, net" in the Consolidated Statements of Operations and Comprehensive Loss and are derived using the specific identification method for determining the cost of marketable securities sold.
In accordance with ASC Topic 820 "Fair Value Measurements and Disclosures," the Company defines its fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, in the following:
| • | Level 1 Pricing inputs are quoted prices available in active markets for identical investments as of the reporting date. |
| • | Level 2 Pricing inputs are quoted for similar investments, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes investments valued at quoted prices adjusted for legal or contractual restrictions specific to these investments. |
| • | Level 3 Pricing inputs are unobservable for the investment; that is, the inputs reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability. |
The Company's fair value hierarchy for its cash equivalents and marketable securities was as follows:
| September 30, 2026 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Money market securities | $ | $ | $ | $ | ||||||||||||
| Corporate notes | ||||||||||||||||
| Federal agency notes | ||||||||||||||||
| Commercial paper | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December 31, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Money market securities | $ | $ | $ | $ | ||||||||||||
| Corporate notes | ||||||||||||||||
| Federal agency notes | ||||||||||||||||
| Commercial paper | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The fair value maturities of the Company's cash equivalents and marketable securities as of September 30, 2026, were as follows:
| Maturities by Period | ||||||||||||||||||||
| Less than | 1-5 | 5-10 | More than | |||||||||||||||||
| Total | 1 year | years | years | 10 years | ||||||||||||||||
| Cash equivalents and marketable securities | $ | $ | $ | $ | $ | |||||||||||||||
The Company considers all highly liquid marketable securities with original maturities of 90 days or less at the date of acquisition to be cash equivalents. Cash equivalents include money market securities, federal agency notes, and commercial paper totaling $
3. Revenue Recognition
The Company derives its revenue primarily from software subscriptions and software development services. Applicable revenue recognition criteria are considered separately for each performance obligation as follows:
| • | Subscription revenue consists primarily of revenue earned from subscription fees for access to the Company's SaaS platform and products and, to a lesser extent, licensing fees for software products and intellectual property. The majority of subscription contracts are recurring, paid in advance and recognized over the term of the subscription, which is typically one to three years. |
| • | Service revenue consists primarily of revenue earned from the performance of software development services and, to a lesser extent, professional services. The majority of software development contracts are structured as time and materials agreements. Revenue for services is generally recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided. |
Customer arrangements may contain multiple deliverables such as software platform subscriptions, software product subscriptions, and professional services. Subscriptions and services offered are usually distinct performance obligations. When they are not capable of being distinct, they are combined with other subscriptions or services until a distinct performance obligation is identified. To determine the transaction price, management considers the terms of the contract and the Company's customary business practices. Some contracts may contain variable consideration. In those cases, management estimates the amount of variable consideration based on the sum of probability-weighted amounts in a range of possible consideration amounts. As part of this assessment, management evaluates whether any of the variable consideration is constrained and if it is, it is not included in the transaction price. The consideration is allocated between distinct performance obligations based on their stand-alone selling prices. When the standalone selling prices are not directly observable, management makes estimates based on reasonably available information, including market conditions, specific factors affecting the Company, and information about the customer. The Company recognizes the revenue associated with each performance obligation as the obligation is fulfilled, which for subscriptions is typically recognized ratably over time, and for services is typically recognized when they are performed.
All revenue recognized in the Consolidated Statements of Operations and Comprehensive Loss is considered to be revenue from contracts with customers.
The following table provides information about disaggregated revenue by major target market in the Company's single reporting segment:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Commercial: | ||||||||||||||||
| Subscription | $ | $ | $ | $ | ||||||||||||
| Service | ||||||||||||||||
| Total Commercial | ||||||||||||||||
| Government: | ||||||||||||||||
| Subscription | $ | $ | $ | $ | ||||||||||||
| Service | ||||||||||||||||
| Total Government | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The Company has contract assets from contracts with customers that are classified as "trade accounts receivable" in the Consolidated Balance Sheets. See Note 8 for more information about trade accounts receivable.
The Company has contract assets from capitalized contract acquisition costs that are classified as "other current assets" and "other assets" in the Consolidated Balance Sheets. Contract acquisition costs are recognized in proportion to the revenue recognized from the contract they are associated with.
The following table provides information about contract assets:
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Contract acquisition costs in other current assets | $ | $ | ||||||
| Contract acquisition costs in other assets | ||||||||
| Total | $ | $ | ||||||
The Company has contract liabilities from contracts with customers that are classified as "deferred revenue" and "other long-term liabilities" in the Consolidated Balance Sheets. Contract liabilities consist of billings in advance for subscriptions and services for which the performance obligation has not been satisfied.
The following table provides information about contract liabilities:
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Contract liabilities in deferred revenue | $ | $ | ||||||
| Contract liabilities in other long-term liabilities | | | ||||||
| Total | $ | $ | ||||||
The Company recognized $
The aggregate amount of the transaction prices from contractual obligations that are unsatisfied or partially unsatisfied was $
4. Segment Information
Significant Segment Expenses
The Company derives its revenue from a single reporting segment: identification and authentication solutions. Revenue is generated in this segment primarily through software subscriptions and software development services. The Company manages its business activities on a consolidated basis. In addition, the Chief Executive Officer of the Company, as the chief operating decision-maker ("CODM"), reviews the Company's operating results and makes decisions to allocate resources based on consolidated financial information. As such, the Company has one single reportable segment. The CODM uses consolidated net income (loss) as a performance measure and total consolidated assets as an asset measure, to assess performance of the Company, to allocate working capital, and to monitor budget versus actual results.
The following table illustrates reported segment revenue, segment profit and loss, and significant segment expenses.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue: | ||||||||||||||||
| Subscription | $ | $ | $ | $ | ||||||||||||
| Service | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of revenue: | ||||||||||||||||
| Subscription (1) | ||||||||||||||||
| Service (1) | ||||||||||||||||
| Amortization expense on acquired intangible assets | ||||||||||||||||
| Total cost of revenue | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Cash compensation | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| Professional services and consultants | ||||||||||||||||
| Software and hardware | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Other segment items (2) | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income, net | ||||||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| (1) | Cost of revenue for Subscription and Service excludes amortization expense on acquired intangible assets. |
| (2) | Other segment items include training and travel expenses, recruiting expenses, rent and facility expenses, bad debt expenses and other miscellaneous costs. |
Geographic Information
The Company markets its products in the U.S. and in non-U.S. countries through its sales personnel and partners. Revenue by geographic area, based upon the "bill-to" location, was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Domestic | $ | $ | $ | $ | ||||||||||||
| International (1) | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| (1) | Revenue from the Central Banks, consisting of a consortium of central banks around the world, is classified as international revenue. Reporting revenue by country for this customer is not practicable. |
Major Customers
The following customers accounted for 10% or more of revenue:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Customer A | % | % | % | % | ||||||||||||
| Customer B | * | * | * | % | ||||||||||||
| Customer C | * | % | * | % | ||||||||||||
| * | Less than 10% |
5. Stock-Based Compensation
Stock-based compensation includes expense charges for all stock-based awards to employees, members and directors. These awards include restricted stock awards ("RSA"), restricted stock units ("RSU"), performance restricted stock units ("PRSU"), time-vested long-term incentive plan units ("TVU"), performance-vested long-term incentive plan units ("PVU"), and shares offered for purchase under the Company's Employee Stock Purchase Plan ("ESPP").
Stock-based compensation expense related to internal labor is capitalized to software and patent costs based on direct labor hours charged to capitalized software and patent costs.
Determining Fair Value
Restricted Stock Awards
The fair value of RSAs that vest upon meeting a service condition is based on the fair market value of the Company's common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally three to four years for employee grants and one to three years for director grants.
Restricted Stock Units
The fair value of RSU awards that vest upon meeting a service condition is based on the fair market value of the Company's common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally three to four years for employee grants.
Performance Restricted Stock Units
The fair value of PRSU awards that vest upon meeting a service condition and a performance condition, such as the Company exceeding a future annual recurring revenue target, is determined based on the fair market value of the Company's common stock on the date of the grant (measurement date), adjusted for probability of achievement of the performance criteria as of each reporting date, and is recognized on a straight-line basis over the service period of the award, which is generally one to three years for employee grants. The probability of achievement is subject to judgment, and could change from period to period, impacting the amount of expense to be recognized.
The fair value of PRSU awards that vest upon meeting a service condition and a market condition, such as the Company exceeding shareholder returns as compared to an index of peer companies or exceeding certain share price thresholds, is determined on the date of grant (measurement date) using the Monte Carlo valuation model. The Company recognizes the fair value of the award on a straight-line basis over the service period of the award, which is generally three years for employee grants.
Long Term Incentive Plan ("LTIP") Units
The fair value of TVU awards that vest upon meeting a service condition is based on the fair market value of the Company's common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally three to four years.
The fair value of PVU awards that vest upon meeting a service condition and a market condition, such as the Company exceeding certain share price thresholds, is determined on the date of grant (measurement date) using the Monte Carlo valuation model. The Company recognizes the fair value of the award on a straight-line basis over the service period of the award, which is generally two to four years.
The following inputs are used in the Monte Carlo valuation models to estimate the fair value:
Stock Price. The stock price represents the fair market value of the Company's common stock on the date of the grant.
Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the term of the award.
Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the term of the award.
PRSU Monte Carlo Valuation Inputs:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Stock price | $ | $ | $ | $ | ||||||||||||
| Expected volatility | % | % | % | % | ||||||||||||
| Risk-free interest rate | % | % | % | % | ||||||||||||
PVU Monte Carlo Valuation Inputs:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Stock price | $ | $ | $ | $ | ||||||||||||
| Expected volatility | % | % | % | % | ||||||||||||
| Risk-free interest rate | % | % | % | % | ||||||||||||
Employee Stock Purchase Program
The fair value of shares offered for purchase under the Company's ESPP is determined at the beginning of each offering period (measurement date) using the Black-Scholes valuation model. The Company recognizes the fair value of the award on a straight-line basis over the offering period, which is eighteen months. The service period is between six months and eighteen months.
The following inputs are used in the Black-Scholes valuation model to estimate the fair value:
Stock Price. The stock price represents the fair market value of the Company's common stock on the measurement date.
Expected Volatility. The Company estimates the volatility of its common stock at the measurement date based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the term of the award.
Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with each term of the offering period.
Term. The term represents the number of months between the start of the offering period and each purchase date in the offering period.
ESPP Black-Scholes Valuation Inputs:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Stock price | $ | $ | $ | $ | ||||||||||||
| Expected volatility | % | % | % | % | ||||||||||||
| Risk-free interest rate | % | % | % | % | ||||||||||||
| Expected term | — | — | ||||||||||||||
Stock-Based Compensation
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Stock-based compensation: | ||||||||||||||||
| Cost of revenue | $ | $ | $ | $ | ||||||||||||
| Sales and marketing | ||||||||||||||||
| Research, development and engineering | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||
| Capitalized to software and patent costs | ||||||||||||||||
| Total stock-based compensation | $ | $ | $ | $ | ||||||||||||
The Company paid $
The following table sets forth total unrecognized compensation costs related to non-vested stock-based awards granted under the Company's stock incentive plans:
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Total unrecognized compensation costs | $ | $ | ||||||
Total unrecognized compensation costs will be adjusted based on updates to the estimated future achievement of performance conditions on PRSU awards as well as for any future forfeitures if and when they occur.
The Company expects to recognize the total unrecognized compensation costs as of September 30, 2026, for all non-vested stock-based awards over weighted average periods through September 30, 2030, as follows:
| RSAs | RSUs | PRSUs | TVUs | PVUs | ESPP | |||||||||||||||||||
| Weighted average period (in years) | ||||||||||||||||||||||||
As of September 30, 2026, under the Company's stock incentive plan, an additional
Restricted Stock Awards Activity
The following table presents the unvested RSA activity:
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Three Months Ended September 30, 2026: | Shares | Fair Value | ||||||
| Unvested balance at June 30, 2026 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | $ | |||||||
| Unvested balance at September 30, 2026 | $ | |||||||
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Nine Months Ended September 30, 2026: | Shares | Fair Value | ||||||
| Unvested balance at December 31, 2025 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | $ | |||||||
| Unvested balance at September 30, 2026 | $ | |||||||
The fair value of RSAs vested is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Fair value of RSAs vested | $ | $ | $ | $ | ||||||||||||
Restricted Stock Units Activity
The following table presents the unvested RSU award activity:
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Three Months Ended September 30, 2026: | Units | Fair Value | ||||||
| Unvested balance at June 30, 2026 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Unvested balance at September 30, 2026 | $ | |||||||
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Nine Months Ended September 30, 2026: | Units | Fair Value | ||||||
| Unvested balance at December 31, 2025 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Unvested balance at September 30, 2026 | $ | |||||||
The fair value of RSU awards vested is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Fair value of RSU awards vested | $ | $ | $ | $ | ||||||||||||
Performance Restricted Stock Units Activity
The following table presents the unvested PRSU award activity:
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Three Months Ended September 30, 2026: | Units | Fair Value | ||||||
| Unvested balance at June 30, 2026 | $ | |||||||
| Change in units based on performance expectations | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Unvested balance at September 30, 2026 | $ | |||||||
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Nine Months Ended September 30, 2026: | Units | Fair Value | ||||||
| Unvested balance at December 31, 2025 | $ | |||||||
| Change in units based on performance expectations | ( | ) | $ | |||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Unvested balance at September 30, 2026 | $ | |||||||
The fair value of PRSU awards vested is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Fair value of PRSU awards vested | $ | $ | $ | $ | ||||||||||||
TVU Award Activity
The following table presents the unvested TVU award activity:
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Three Months Ended September 30, 2026: | Units | Fair Value | ||||||
| Unvested balance at June 30, 2026 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | $ | |||||||
| Unvested balance at September 30, 2026 | $ | |||||||
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Nine Months Ended September 30, 2026: | Units | Fair Value | ||||||
| Unvested balance at December 31, 2025 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | $ | |||||||
| Unvested balance at September 30, 2026 | $ | |||||||
The fair value of TVU awards vested is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Fair value of TVU awards vested | $ | $ | $ | $ | ||||||||||||
PVU Award Activity
The following table presents the unvested PVU award activity:
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Three Months Ended September 30, 2026: | Units | Fair Value | ||||||
| Unvested balance at June 30, 2026 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | $ | |||||||
| Unvested balance at September 30, 2026 | $ | |||||||
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| Nine Months Ended September 30, 2026: | Units | Fair Value | ||||||
| Unvested balance at December 31, 2025 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | $ | |||||||
| Unvested balance at September 30, 2026 | $ | |||||||
The fair value of PVU awards vested is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Fair value of PVU awards vested | $ | $ | $ | $ | ||||||||||||
Employee Stock Purchase Plan Activity
ESPP Activity is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Shares Issued | ||||||||||||||||
| Weighted Average Purchase Price | $ | $ | $ | $ | ||||||||||||
| Weighted Average Fair Value of Purchase Rights | $ | $ | $ | $ | ||||||||||||
6. Shareholders' Equity
Sales Agreement
In June 2026, the Company entered into a Sales Agreement, whereby the Company may sell from time to time through Needham & Company, LLC, as its sales agent, the Company's common stock having an aggregate offering price of up to $
For the three months ended September 30, 2026, the Company sold
Registered Direct Offering
On September 29, 2026, the Company entered into purchase agreements with investors providing for the issuance and sale by the Company of
Non-controlling Interest
On April 30, 2026, shareholders approved a corporate reorganization, which allows the Digimarc Compensation & Talent Management ("C&TM") Committee of the Board of Directors to issue LTIP units of DMRC LLC, in the form of TVUs and PVUs, to certain key employees who otherwise would be issued equity incentive awards under the Digimarc Corporation 2018 Incentive Plan (the "2018 Incentive Plan"). LTIP units represent equity interests in DMRC LLC and participate in profits and losses of DMRC LLC. Upon vesting of LTIP units, to the extent that DMRC LLC generates the requisite profit and/or value appreciation, such LTIP units may, at the election of the unit holder, be redeemed for a commensurate number of shares of common stock of Digimarc. LTIP unit equity interests represent additional equity interests in DMRC LLC not controlled by Digimarc. As such, the Company has classified these equity interests as "Non-controlling interest" in the Company's Consolidated Balance Sheets.
On May 19, 2026, the C&TM Committee approved a grant of
On July 5, 2026, the C&TM Committee approved a grant of
On August 3, 2026, the C&TM Committee approved a grant of
7. Earnings Per Share
The Company calculates basic and diluted earnings (loss) per share in accordance with ASC No. 260, "Earnings Per Share."
Basic earnings (loss) per share excludes dilution and is calculated by dividing earnings (loss) attributable to Digimarc Corporation common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing earnings (loss) attributable to Digimarc Corporation common shareholders by the weighted-average number of common shares, as adjusted for the potentially dilutive effect of unvested RSUs and PRSUs, outstanding ESPP purchase rights, and vested but not redeemed LTIP units. The dilutive effect of unvested RSUs and PRSUs, outstanding ESPP purchase rights, and vested but not redeemed LTIP units is determined using the treasury stock and if-converted method, as applicable. RSAs are included in shares outstanding on the date of grant.
The following table reconciles earnings (loss) per share:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Basic Earnings (Loss) per Share: | ||||||||||||||||
| Net loss attributable to Digimarc Corporation — basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding — basic | ||||||||||||||||
| Net loss per share attributable to Digimarc Corporation common shareholders — basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted Earnings (Loss) per Share: | ||||||||||||||||
| Net loss attributable to Digimarc Corporation — diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding — diluted | ||||||||||||||||
| Net loss per share attributable to Digimarc Corporation common shareholders — diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The following table indicates the stock equivalents related to unvested RSUs and PRSUs, and vested but unredeemed TVUs and PVUs that were anti-dilutive and excluded from diluted earnings (loss) per share calculations:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Anti-dilutive shares due to net loss | ||||||||||||||||
8. Trade Accounts Receivable
Trade Accounts Receivable
Trade accounts receivables are recorded at the contractual or invoiced amount.
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Trade accounts receivable, current | $ | $ | ||||||
| Trade accounts receivable, long-term | ||||||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Trade accounts receivable, net | $ | $ | ||||||
| Unpaid deferred revenue included in trade accounts receivable | $ | $ | ||||||
Allowance for Doubtful Accounts
The Company's accounts receivables are subject to concentrations of credit risk. The Company maintains an allowance for its doubtful accounts receivable to reflect any estimated credit losses. The allowance is established in accordance with the current expected credit loss model, which requires the estimation of expected credit losses over the contractual life of financial assets. The allowance is calculated using a forward-looking probability-weighted approach based on historical loss experience, current economic conditions, and reasonable and supportable forecasts. The Company records the allowance in "general and administrative" expense in the Consolidated Statements of Operations and Comprehensive Loss, up to the amount of revenue recognized to date for each account. Any incremental allowance is recorded as an offset to "deferred revenue" in the Consolidated Balance Sheets. Accounts receivables are written off and charged against the recorded allowance when the Company has exhausted collection efforts without success.
Unpaid Deferred Revenue
The unpaid deferred revenue that is included in trade accounts receivable is billed in accordance with the provisions of the contracts with the Company's customers.
Major Customers
The following customers accounted for 10% or more of trade accounts receivable, net:
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Company A | % | % | ||||||
| Company B | * | % | ||||||
| * | Less than 10% |
9. Property and Equipment
Property and equipment are stated at cost. Repairs and maintenance are charged to expense when incurred.
Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, generally two to ten years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the lease term.
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Software | $ | $ | ||||||
| Equipment | ||||||||
| Leasehold improvements | ||||||||
| Office furniture and fixtures | ||||||||
| Gross property and equipment | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
10. Goodwill
The Company performs its annual goodwill impairment test during the second quarter of each fiscal year or whenever events or changes in circumstances indicate that the carrying value may exceed the fair value. If the carrying value exceeds the estimated fair value, an impairment is recorded. The Company operates as a single reporting unit. The Company estimates the fair value of its single reporting unit using a market approach, which takes into account the Company's market capitalization plus an estimated control premium.
| Balance at December 31, 2025 | $ | |||
| Currency translation adjustments | ( | ) | ||
| Balance at September 30, 2026 | $ |
11. Intangibles
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Patent costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at the award date, which varies depending on the pendency period of the application, but generally approximates seventeen years.
Amortization of intangible assets acquired is calculated using the straight-line method over the estimated useful lives of the assets.
| Estimated Life | September 30, | December 31, | ||||||||||
| (years) | 2026 | 2025 | ||||||||||
| Capitalized patent costs | ~17 | $ | $ | |||||||||
| Intangible assets acquired: | ||||||||||||
| Developed technology | ||||||||||||
| Customer relationships | ||||||||||||
| Purchased intellectual property | ||||||||||||
| Gross intangible assets | | | ||||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||||||
| Intangibles, net | $ | $ | ||||||||||
The amortization of capitalized patent costs, developed technology, and purchased intellectual property is recorded in "cost of revenue" and the amortization of customer relationships is recorded in "operating expenses" in the Consolidated Statements of Operations and Comprehensive Loss.
Amortization expense on intangible assets was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Amortization expense | $ | $ | $ | $ | ||||||||||||
For intangible assets recorded at September 30, 2026, the estimated future aggregate amortization expense for the years ending December 31, 2026, through December 31, 2030 is as follows:
| Amortization | ||||
| Expense | ||||
| Remainder of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
12. Leases
The Company accounts for leases in accordance with ASC No. 842, "Leases."
In February 2022, the Company entered into a sublease agreement and lease extension agreement for office space in Beaverton, Oregon to move the Company's corporate headquarters. The term of the sublease and lease extension runs through September 2030, with remaining rent payments as of September 30, 2026, totaling $
All of the Company's leases are operating leases. The following table provides additional details of leases presented in the Consolidated Balance Sheets:
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Lease right of use assets | $ | $ | ||||||
| Lease liabilities, current | $ | $ | ||||||
| Lease liabilities, long-term | $ | $ | ||||||
| Weighted-average remaining life (in years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
The current lease liabilities are included in "accounts payable and other accrued liabilities" in the Consolidated Balance Sheets.
The carrying value of the lease right of use assets is evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
Operating lease expense is included in "operating expenses" in the Consolidated Statements of Operations and Comprehensive Loss and in "cash flows from operating activities" in the Consolidated Statements of Cash Flows. The operating leases include variable lease payments, which are included in operating lease expense. Additional details of the Company's operating leases are presented in the following table:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Operating lease expense | $ | $ | $ | $ | ||||||||||||
| Cash paid for operating leases | $ | $ | $ | $ | ||||||||||||
The table below reconciles the aggregate cash payment obligations for the next five years and total of the remaining years for the operating lease liability recorded in the Consolidated Balance Sheets as of September 30, 2026:
| Cash | ||||
| Payment | ||||
| Obligations | ||||
| Remainder of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Imputed interest | ( | ) | ||
| Total minimum lease payments | $ | |||
In December 2025, the Company entered into a sub-sublease agreement for the Company's corporate headquarters in Beaverton, Oregon, whereby the Company agreed to sub-sublease
13. Accounts Payable and Accrued Liabilities
The components of accounts payable and accrued liabilities are summarized below:
| September 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Accrued liabilities | $ | $ | ||||||
| Accounts payable | ||||||||
| Lease liabilities, current | ||||||||
| Accounts payable and other accrued liabilities | $ | $ | ||||||
14. Other Income
The following table provides activity in other income, net:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Interest income | $ | $ | $ | $ | ||||||||||||
| Refundable tax credit | ||||||||||||||||
| Foreign currency gains (losses) | ( | ) | ||||||||||||||
| Other income (loss) | ||||||||||||||||
| Other income, net | $ | $ | $ | $ | ||||||||||||
15. Income Taxes
The benefit (provision) for income taxes reflects current taxes and deferred taxes. The effective tax rate for each of the three and nine months ended September 30, 2026 and 2025 was
The valuation allowance against net deferred tax assets as of September 30, 2026, was $
Excess tax deficiencies of $
DIGIMARC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)
(UNAUDITED)
16. Commitments and Contingencies
Certain of the Company's product and services agreements include an indemnification provision for claims from third parties relating to the Company's intellectual property. Such indemnification provisions are accounted for in accordance with ASC No. 450 "Contingencies." To date, there have been no claims made under such indemnification provisions.
The Company is subject to certain legal proceedings, including ongoing securities and derivative matters, as previously disclosed in the Company's Annual Report on Form 10-K for the Year Ended December 31, 2025. On February 9, 2026, the Predecessor and the now former Chief Executive Officer and current Chief Financial Officer of the Company moved to dismiss the class action lawsuit captioned Ullom v. Digimarc Corp., et al., No. 3:25-cv-00779-JR (the "Ullom Action"). On February 11, 2026, the two derivative lawsuits filed in the Circuit Court of the State of Oregon for the County of Multnomah, Johnson v. McCormack et al., No. 25-cv-56998 (the "Johnson Action") and Sperry v. McCormack et al., No. 26-cv-00621 (the "Sperry Action"), were consolidated and remain stayed pending resolution of the defendants' motion to dismiss in the Ullom Action. On June 23, 2026, the magistrate judge issued findings and a recommendation that the motion to dismiss filed by the Predecessor and the now former Chief Executive Officer and current Chief Financial Officer of the Company in the Ullom Action be granted and that judgment be entered dismissing the Ullom Action. The findings and recommendation are subject to review by the district judge and do not constitute a final order or judgment. On July 17, 2026, the plaintiffs in the Ullom Action filed objections to the findings and recommendation, and on August 10, 2026, the defendants filed their response to those objections. The consolidated federal derivative actions, which were filed nominally on behalf of the Predecessor, remain stayed pending resolution of the Ullom Action. In addition, the derivative lawsuits filed in the Circuit Court of the State of Oregon for the County of Multnomah, the Johnson and the Sperry Actions, which were also filed nominally on behalf of the Predecessor, remain consolidated and stayed. The defendants, including the Company, believe they have defenses to the claims and are responding accordingly.
17. Subsequent Events
LTIP Equity Unit Redemption
In October 2026,
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements relating to future events or the future financial performance of Digimarc that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. See the discussion regarding forward-looking statements included in this Quarterly Report on Form 10-Q under the caption "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995."
The following discussion should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. Readers are also urged to carefully review and consider the disclosures made in Part II, Item 1A ("Risk Factors") of this Quarterly Report on Form 10-Q and in the audited consolidated financial statements and related notes included in our 2025 Annual Report, and other reports and filings we have made with the SEC.
Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to "Company," "Digimarc," "we," "our," and "us" refer to Digimarc Corporation.
All dollar amounts within the tables below are in thousands. The percentages within the tables may not sum to 100% due to rounding.
Digimarc, Illuminate, and the circle-d logo are registered trademarks of Digimarc. EVRYTHNG and EVRYTHNG PRODUCT CLOUD are registered trademarks of EVRYTHNG Limited ("EVRYTHNG"), a subsidiary of Digimarc.
Overview
Digimarc, an Oregon corporation, is building the trust layer for the modern world. As artificial intelligence ("AI") accelerates how people produce, share, and interact with the world, the risks of fraud, counterfeiting, and misinformation are growing exponentially. The impacts of these threats are evidenced by:
| • |
Consumers demanding more transparency into how, where, and by whom products are made. |
| • |
Brands and creators facing rampant counterfeiting and intellectual property theft. |
| • |
Retailers losing hundreds of billions of dollars annually to shrink and theft. |
| • |
Enterprises experiencing an increase in information leaks and digital manipulation. |
| • |
AI-generated content blurring reality, sowing confusion and mistrust. |
| • |
Regulators increasing pressure on companies to prove product authenticity and data integrity. |
Our innovative, highly scalable, and ultra-secure solutions make it possible for consumers, businesses, and intelligent systems to instantly verify what's real, protect what matters, and transact with confidence. Our solutions for retail loss prevention, product authentication, and digital trust and integrity are built to counter the speed and sophistication of today's AI-enabled threats. Trusted by a consortium of the world's central banks (the "Central Banks") to deter the counterfeiting of global currency, we exist to protect the truth in every interaction, spanning both the physical and digital worlds.
| Physical Digimarc Solutions | Digital Digimarc Solutions |
| Anti-Counterfeiting: Restore trust with counterfeit resistant packaging and product verification. | Internal Compliance: Ensure policy compliance and prevent misuse of digital assets. |
| Counterfeiting Deterrence: Deter digital counterfeiting of global currencies. | Leak Detection: Identify leaked information and its source instantly. |
| Product Swap Prevention: Reduce weight-based shrink at grocery checkouts. | Piracy Prevention: Gain insight into - and control of - digital asset use. |
| Recycling: Boost product sustainability while revealing never-before-seen data. | Provenance & Authenticity: Restore trust and ensure fair use of digital assets. |
| Secure Gift Cards: Fight gift card fraud with automated tamper detection. | Royalty Monitoring: Ensure content creators and owners receive proper payment. |
Our commercial solutions run on the Illuminate® platform—a high-performance, hyper-scalable, and ultra-secure software as a service ("SaaS") cloud-based platform for digital connectivity. Tested and trusted by some of the most highly demanding and mission-critical ecosystems in the world, the Illuminate platform provides the tools for the application of advanced digital watermarks and dynamic Quick Response ("QR") codes, Application Programming Interfaces ("APIs") that allow for direct integration into other mission critical systems, AI-assisted authentication workflows, and a centralized repository for capturing insights about digital interactions as well as automating activities based on that information.
The foundational digital watermarking technology used in our commercial solutions is backed by decades of innovation and inventions. It is also the same technology we use to deter digital counterfeiting of global currencies as part of our almost 30-year relationship with the Central Banks. This relationship was the first commercially successful large-scale use of our technologies and today protects hundreds of billions of banknotes in circulation around the world.
Our intellectual property contains many innovations in digital watermarking, content and object recognition, product authentication, and related fields. To protect our inventions, we have implemented an extensive intellectual property protection program that relies on a combination of patent, copyright, trademark and trade secret laws, and nondisclosure agreements and other contracts. As a result, we believe we have one of the world's most extensive patent portfolios in digital watermarking and related fields, with approximately 650 U.S. and foreign patents granted and applications pending as of September 30, 2026. The patents in our portfolio each have a life of approximately 20 years from the patent's effective filing date.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with Generally Accepted Accounting Principles in the United States ("GAAP") requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. There have been no significant changes in our significant accounting policies described in Part II, Item 7 of our 2025 Annual Report.
Results of Operations
The following table presents Consolidated Statements of Operations data for the periods indicated as a percentage of total revenue. Unless stated otherwise, all references in this Management's Discussion and Analysis of Financial Condition and Results of Operations relate to the three and nine months ended September 30, 2026, and all changes discussed with respect to such period reflect changes compared to the three and nine months ended September 30, 2025.
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Percentages are percent of total revenue |
||||||||||||||||
| Revenue: |
||||||||||||||||
| Subscription |
49 | % | 60 | % | 53 | % | 58 | % | ||||||||
| Service |
51 | % | 40 | % | 47 | % | 42 | % | ||||||||
| Total revenue |
100 | % | 100 | % | 100 | % | 100 | % | ||||||||
| Cost of revenue: |
||||||||||||||||
| Subscription (1) |
6 | % | 8 | % | 6 | % | 8 | % | ||||||||
| Service (1) |
20 | % | 17 | % | 19 | % | 16 | % | ||||||||
| Amortization expense on acquired intangible assets |
19 | % | 16 | % | 17 | % | 14 | % | ||||||||
| Total cost of revenue |
45 | % | 42 | % | 42 | % | 39 | % | ||||||||
| Gross profit |
55 | % | 58 | % | 58 | % | 61 | % | ||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
41 | % | 37 | % | 33 | % | 45 | % | ||||||||
| Research, development and engineering |
58 | % | 57 | % | 52 | % | 66 | % | ||||||||
| General and administrative |
76 | % | 70 | % | 97 | % | 62 | % | ||||||||
| Amortization expense on acquired intangible assets |
4 | % | 4 | % | 4 | % | 3 | % | ||||||||
| Total operating expenses |
179 | % | 168 | % | 186 | % | 176 | % | ||||||||
| Operating loss |
(124 | )% | (110 | )% | (129 | )% | (115 | )% | ||||||||
| Other income, net |
2 | % | 3 | % | 2 | % | 3 | % | ||||||||
| Loss before income taxes |
(123 | )% | (107 | )% | (126 | )% | (112 | )% | ||||||||
| Provision for income taxes |
(1 | )% | (— | )% | (— | )% | (— | )% | ||||||||
| Net loss |
(123 | )% | (107 | )% | (126 | )% | (112 | )% | ||||||||
| (1) |
Cost of revenue for Subscription and Service excludes amortization expense on acquired intangible assets. |
Summary
Total revenue for the three months ended September 30, 2026, decreased $1.2 million, or 15%, to $6.4 million, compared to $7.6 million for the three months ended September 30, 2025. Subscription revenue decreased $1.4 million, primarily reflecting a decrease of $0.8 million from the expiration of a commercial contract in October 2025 and a decrease of $0.6 million from the step-down of a commercial contract in June 2026. Service revenue increased $0.2 million, primarily reflecting higher service revenue from a commercial customer.
Total revenue for the nine months ended September 30, 2026, decreased $3.6 million, or 14%, to $21.4 million, compared to $25.0 million for the nine months ended September 30, 2025. Subscription revenue decreased $3.2 million, primarily reflecting a decrease of $3.6 million from the expiration of two commercial contracts in 2025, partially offset by higher subscription revenue from new and existing commercial contracts. Service revenue decreased $0.4 million, primarily reflecting a $0.5 million decrease in commercial service revenue from HolyGrail 2.0 recycling projects, as that work was previously completed.
Total operating expenses for the three months ended September 30, 2026, decreased $1.3 million, or 10%, to $11.5 million, compared to $12.8 million for the three months ended September 30, 2025. The decrease primarily reflects decreases in stock-based compensation expense of $0.7 million, bad debt expense of $0.5 million, and other costs of $0.3 million, partially offset by a $0.4 million increase in cash severance costs. The $0.7 million decrease in stock-based compensation expense includes $1.2 million of lower stock-based compensation expense largely due to a lower number of employee stock grants, partially offset by $0.5 million of one-time expense related to the acceleration of unvested equity awards held by our former CEO.
Total operating expenses for the nine months ended September 30, 2026, decreased $4.2 million, or 10%, to $39.9 million, compared to $44.1 million for the nine months ended September 30, 2025. The decrease primarily reflects decreases in cash compensation costs of $7.4 million, bad debt expense of $0.8 million, software and hardware costs of $0.5 million, and other costs of $0.4 million, partially offset by increases in stock-based compensation expense of $3.8 million and professional services costs of $1.0 million. The $7.4 million decrease in cash compensation costs includes $6.4 million of lower costs largely due to lower headcount and $1.7 million of lower cash severance costs, partially offset by $0.7 million lower allocation out of operating expenses to cost of revenue primarily due to lower billable service hours. The $3.8 million increase in stock-based compensation expense includes $5.9 million of one-time expense related to the acceleration of unvested equity awards held by our former CEO, partially offset by $2.1 million of lower stock-based compensation expense largely due to a lower number of employee stock grants. The $1.0 million increase in professional services costs includes $1.7 million of one-time costs associated with the recent corporate reorganization, partially offset by $0.7 million of lower other professional services costs.
Revenue
| Three Months Ended September 30, |
Dollar |
Percent |
Nine Months Ended September 30, |
Dollar |
Percent |
|||||||||||||||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||
| Revenue: |
||||||||||||||||||||||||||||||||
| Subscription |
$ | 3,187 | $ | 4,567 | $ | (1,380 | ) | (30 | )% | $ | 11,297 | $ | 14,505 | $ | (3,208 | ) | (22 | )% | ||||||||||||||
| Service |
3,259 | 3,060 | 199 | 7 | % | 10,115 | 10,500 | (385 | ) | (4 | )% | |||||||||||||||||||||
| Total |
$ | 6,446 | $ | 7,627 | $ | (1,181 | ) | (15 | )% | $ | 21,412 | $ | 25,005 | $ | (3,593 | ) | (14 | )% | ||||||||||||||
| Revenue (as % of total revenue): |
||||||||||||||||||||||||||||||||
| Subscription |
49 | % | 60 | % | 53 | % | 58 | % | ||||||||||||||||||||||||
| Service |
51 | % | 40 | % | 47 | % | 42 | % | ||||||||||||||||||||||||
| Total |
100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||||||||
Subscription
Subscription revenue consists primarily of revenue earned from subscription fees for access to our SaaS platform and products and, to a lesser extent, licensing fees for our software products and intellectual property. The majority of subscription contracts are recurring, paid in advance and recognized over the term of the subscription, which is typically one to three years.
The $1.4 million decrease in subscription revenue for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects a decrease of $0.8 million from the expiration of a commercial contract in October 2025 and a decrease of $0.6 million from the step-down of a commercial contract in June 2026.
The $3.2 million decrease in subscription revenue for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects a decrease of $3.6 million from the expiration of two commercial contracts in 2025, partially offset by an increase from new and existing commercial customers.
Service
Service revenue consists primarily of revenue earned from the performance of software development services and, to a lesser extent, professional services. The majority of software development contracts are structured as time and materials agreements. Revenue for services is generally recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided. Service contracts can range from days to several years in length. Our contract with the Central Banks, which accounts for the majority of our service revenue, has a contract term through December 31, 2029. The contract is subject to work plans that are reviewed and agreed upon quarterly. The contract provides for predetermined billing rates, which are adjusted annually to account for cost of living variables, and provides for the reimbursement of third party costs incurred to support the work plans.
The $0.2 million increase in service revenue for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects higher service revenue from a commercial customer.
The $0.4 million decrease in service revenue for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects $0.5 million of lower commercial service revenue from HolyGrail 2.0 recycling projects.
Revenue by geography
| Three Months Ended September 30, |
Dollar |
Percent |
Nine Months Ended September 30, |
Dollar |
Percent |
|||||||||||||||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||
| Revenue by geography: |
||||||||||||||||||||||||||||||||
| Domestic |
$ | 1,502 | $ | 2,308 | $ | (806 | ) | (35 | )% | $ | 4,740 | $ | 6,781 | $ | (2,041 | ) | (30 | )% | ||||||||||||||
| International |
4,944 | 5,319 | (375 | ) | (7 | )% | 16,672 | 18,224 | (1,552 | ) | (9 | )% | ||||||||||||||||||||
| Total |
$ | 6,446 | $ | 7,627 | $ | (1,181 | ) | (15 | )% | $ | 21,412 | $ | 25,005 | $ | (3,593 | ) | (14 | )% | ||||||||||||||
| Revenue (as % of total revenue): |
||||||||||||||||||||||||||||||||
| Domestic |
23 | % | 30 | % | 22 | % | 27 | % | ||||||||||||||||||||||||
| International |
77 | % | 70 | % | 78 | % | 73 | % | ||||||||||||||||||||||||
| Total |
100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||||||||
Domestic
The $0.8 million decrease in domestic revenue for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects a decrease of $0.8 million from the expiration of a commercial subscription contract with a domestic customer in October 2025.
The $2.0 million decrease in domestic revenue for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects a decrease of $2.4 million from the expiration of a commercial subscription contract with a domestic customer in October 2025, partially offset by higher commercial subscription revenue from new and existing contracts with domestic customers.
International
The $0.4 million decrease in international revenue for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects a decrease of $0.6 million from the step-down of a commercial subscription contract with an international customer in June 2026, partially offset by higher commercial service revenue from an international customer.
The $1.6 million decrease in international revenue for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects a decrease of $1.2 million from the expiration of a commercial subscription contract with an international customer in April 2025 and $0.5 million of lower commercial service revenue from HolyGrail 2.0 recycling projects.
Revenue by market
| Three Months Ended September 30, |
Dollar |
Percent |
Nine Months Ended September 30, |
Dollar |
Percent |
|||||||||||||||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||
| Commercial: |
||||||||||||||||||||||||||||||||
| Subscription |
$ | 2,887 | $ | 4,267 | $ | (1,380 | ) | (32 | )% | $ | 10,397 | $ | 13,605 | $ | (3,208 | ) | (24 | )% | ||||||||||||||
| Service |
271 | 41 | 230 | 561 | % | 532 | 876 | (344 | ) | (39 | )% | |||||||||||||||||||||
| Total Commercial |
$ | 3,158 | $ | 4,308 | $ | (1,150 | ) | (27 | )% | $ | 10,929 | $ | 14,481 | $ | (3,552 | ) | (25 | )% | ||||||||||||||
| Government: |
||||||||||||||||||||||||||||||||
| Subscription |
$ | 300 | $ | 300 | $ | — | — | % | $ | 900 | $ | 900 | $ | — | — | % | ||||||||||||||||
| Service |
2,988 | 3,019 | (31 | ) | (1 | )% | 9,583 | 9,624 | (41 | ) | — | % | ||||||||||||||||||||
| Total Government |
$ | 3,288 | $ | 3,319 | $ | (31 | ) | (1 | )% | $ | 10,483 | $ | 10,524 | $ | (41 | ) | — | % | ||||||||||||||
| Total |
$ | 6,446 | $ | 7,627 | $ | (1,181 | ) | (15 | )% | $ | 21,412 | $ | 25,005 | $ | (3,593 | ) | (14 | )% | ||||||||||||||
| Revenue (as % of total revenue): |
||||||||||||||||||||||||||||||||
| Commercial |
49 | % | 56 | % | 51 | % | 58 | % | ||||||||||||||||||||||||
| Government |
51 | % | 44 | % | 49 | % | 42 | % | ||||||||||||||||||||||||
| Total |
100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||||||||
Commercial
The $1.2 million decrease in commercial revenue for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects a decrease of $0.8 million from the expiration of a commercial contract in October 2025 and a decrease of $0.6 million from the step-down of a commercial contract in June 2026, partially offset by higher service revenue from a commercial customer.
The $3.6 million decrease in commercial revenue for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects a decrease of $3.6 million from the expiration of two commercial contracts in 2025, and $0.5 million of lower commercial service revenue from HolyGrail 2.0 recycling projects, partially offset by higher commercial subscription revenue from new and existing customers.
Government
Government revenue for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, did not change significantly.
Government revenue for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, did not change significantly.
Annual Recurring Revenue ("ARR")
| As of |
As of |
|||||||||||||||
| September 30, |
September 30, |
Dollar |
Percent |
|||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||
| ARR |
$ | 10,822 | $ | 15,813 | $ | (4,991 | ) | (32 | )% | |||||||
Ending ARR decreased $5.0 million from $15.8 million as of September 30, 2025, to $10.8 million as of September 30, 2026, reflecting the expiration of a commercial contract in October 2025 that accounted for $3.1 million of ARR and the step-down in another commercial contract in June 2026 that accounted for $2.6 million of ARR, partially offset by $0.7 million of net increases to ARR from new and existing commercial contracts.
We provide an ARR performance metric to help investors better understand and assess the performance of our business. ARR is calculated as the aggregation of annualized subscription fees from all of our commercial contracts as of the measurement date. ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with, or to replace, either of those items. ARR is not a forecast and the contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.
Cost of revenue
Subscription. Cost of subscription revenue primarily includes:
| • |
cloud hosting costs and image search data fees to support our subscription products; and |
| • |
amortization of capitalized patent costs and patent maintenance fees. |
Service. Cost of service revenue primarily includes:
| • |
compensation, benefits, incentive compensation in the form of cash and stock-based compensation and related costs of our software developers, quality assurance personnel, professional services team and other personnel where we bill our customers for time and materials costs; |
| • |
payments to outside contractors that are billed to customers; |
| • |
charges for equipment and software directly used by customers; and |
| • |
travel costs that are billed to customers. |
Amortization expense on acquired intangible assets includes:
| • |
amortization expense recognized on the developed technology intangible asset acquired in the EVRYTHNG acquisition. |
Gross profit
| Three Months Ended September 30, |
Dollar |
Percent |
Nine Months Ended September 30, |
Dollar |
Percent |
|||||||||||||||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||
| Gross Profit: |
||||||||||||||||||||||||||||||||
| Subscription (1) |
$ | 2,783 | $ | 3,925 | $ | (1,142 | ) | (29 | )% | $ | 10,021 | $ | 12,404 | $ | (2,383 | ) | (19 | )% | ||||||||||||||
| Service (1) |
1,946 | 1,730 | 216 | 12 | % | 5,954 | 6,380 | (426 | ) | (7 | )% | |||||||||||||||||||||
| Amortization expense on acquired intangible assets |
(1,204 | ) | (1,209 | ) | 5 | — | % | (3,613 | ) | (3,546 | ) | (67 | ) | (2 | )% | |||||||||||||||||
| Total |
$ | 3,525 | $ | 4,446 | $ | (921 | ) | (21 | )% | $ | 12,362 | $ | 15,238 | $ | (2,876 | ) | (19 | )% | ||||||||||||||
| Gross Profit Margin: |
||||||||||||||||||||||||||||||||
| Subscription (1) |
87 | % | 86 | % | 89 | % | 86 | % | ||||||||||||||||||||||||
| Service (1) |
60 | % | 57 | % | 59 | % | 61 | % | ||||||||||||||||||||||||
| Total |
55 | % | 58 | % | 58 | % | 61 | % | ||||||||||||||||||||||||
| (1) |
Gross Profit and Gross Profit Margin for Subscription and Service excludes amortization expense on acquired intangible assets. |
The $0.9 million decrease in total gross profit for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects $1.2 million of lower revenue, partially offset by $0.3 million of lower cost of revenue primarily due to lower cloud hosting costs.
The $2.9 million decrease in total gross profit for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects $3.6 million of lower revenue, partially offset by $0.7 million of lower cost of revenue primarily due to lower cloud hosting costs.
The increase in subscription gross profit margin, excluding amortization expense on acquired intangible assets, for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects $0.2 million of lower cost of subscription revenue, partially offset by $1.4 million of lower subscription revenue.
The increase in subscription gross profit margin, excluding amortization expense on acquired intangible assets, for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects $0.8 million of lower cost of subscription revenue, partially offset by $3.2 million of lower subscription revenue.
The increase in service gross profit margin, excluding amortization expense on acquired intangible assets, for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects a more favorable mix of service revenue.
The decrease in service gross profit margin, excluding amortization expense on acquired intangible assets, for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects a less favorable mix of service revenue.
Operating expenses
Sales and marketing
| Three Months Ended September 30, |
Dollar |
Percent |
Nine Months Ended September 30, |
Dollar |
Percent |
|||||||||||||||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||
| Sales and marketing |
$ | 2,622 | $ | 2,852 | $ | (230 | ) | (8 | )% | $ | 7,118 | $ | 11,161 | $ | (4,043 | ) | (36 | )% | ||||||||||||||
| Sales and marketing (as % of total revenue) |
41 | % | 37 | % | 33 | % | 45 | % | ||||||||||||||||||||||||
Sales and marketing expenses consist primarily of:
| • |
compensation, benefits, incentive compensation in the form of cash and stock-based compensation and related costs of our sales, marketing, product, professional services and customer support personnel; |
| • |
travel and market research costs, and costs associated with marketing programs, such as trade shows, public relations and new product launches; |
| • |
consulting costs for sales and marketing and product initiatives; and |
| • |
the allocation of facilities and information technology costs. |
The $0.2 million decrease in sales and marketing expenses for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects:
| • |
lower stock-based compensation expense of $0.4 million; and |
| • |
lower professional services costs of $0.2 million; partially offset by |
| • |
higher cash severance costs of $0.4 million. |
The $4.0 million decrease in sales and marketing expenses for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects:
| • |
lower cash compensation costs of $2.5 million largely due to lower headcount; |
| • |
lower stock-based compensation expense of $1.1 million; |
| • |
lower cash severance costs of $0.2 million; and |
| • |
lower other costs of $0.2 million. |
Research, development and engineering
| Three Months Ended September 30, |
Dollar |
Percent |
Nine Months Ended September 30, |
Dollar |
Percent |
|||||||||||||||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||
| Research, development and engineering |
$ | 3,755 | $ | 4,315 | $ | (560 | ) | (13 | )% | $ | 11,154 | $ | 16,485 | $ | (5,331 | ) | (32 | )% | ||||||||||||||
| Research, development and engineering (as % of total revenue) |
58 | % | 57 | % | 52 | % | 66 | % | ||||||||||||||||||||||||
Research, development and engineering expenses consist primarily of:
| • |
compensation, benefits, incentive compensation in the form of cash and stock-based compensation and related costs of our software and hardware developers and quality assurance personnel; |
| • |
payments to outside contractors for software development services; |
| • |
the purchase of materials and services for platform and product development; and |
| • |
the allocation of facilities and information technology costs. |
The $0.6 million decrease in research, development and engineering expenses for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects:
| • |
lower stock-based compensation expense of $0.7 million. |
The $5.3 million decrease in research, development and engineering expenses for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects:
| • |
lower cash compensation costs of $2.4 million largely due to lower headcount; |
| • |
lower cash severance costs of $1.6 million; |
| • |
lower stock-based compensation expense of $0.9 million; |
| • |
lower software and hardware costs of $0.4 million; and |
| • |
lower professional services costs of $0.4 million; partially offset by, |
| • |
lower allocation out of operating expenses to cost of revenue primarily due to lower billable service hours of $0.5 million. |
General and administrative
| Three Months Ended September 30, |
Dollar |
Percent |
Nine Months Ended September 30, |
Dollar |
Percent |
|||||||||||||||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||
| General and administrative |
$ | 4,882 | $ | 5,355 | $ | (473 | ) | (9 | )% | $ | 20,748 | $ | 15,614 | $ | 5,134 | 33 | % | |||||||||||||||
| General and administrative (as % of total revenue) |
76 | % | 70 | % | 97 | % | 62 | % | ||||||||||||||||||||||||
We incur general and administrative costs in the functional areas of finance, legal, human resources, intellectual property, executive and board of directors. Costs for facilities and information technology are also managed as part of the general and administrative processes. These costs are allocated to sales and marketing, research, development and engineering, and general and administrative based on relative headcount.
General and administrative expenses consist primarily of:
| • |
compensation, benefits and incentive compensation in the form of cash and stock-based compensation and related costs of our general and administrative personnel; |
| • |
third party and professional fees associated with legal, accounting and human resources functions; |
| • |
costs associated with being a public company; |
| • |
third party costs, including filing and governmental regulatory fees and outside legal fees and translation costs, related to the filing and maintenance of our intellectual property; and |
| • |
the allocation of facilities and information technology costs. |
| • |
lower bad debt expense of $0.5 million; |
| • |
lower cash compensation costs of $0.4 million; and |
| • |
lower other stock-based compensation expense of $0.2 million; partially offset by |
| • |
higher one-time stock-based compensation expense of $0.5 million related to the acceleration of unvested equity awards held by our former CEO; and |
| • |
higher other professional services costs of $0.2 million. |
The $5.1 million increase in general and administrative expenses for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects:
| • |
higher one-time stock-based compensation expense of $5.9 million related to the acceleration of unvested equity awards held by our former CEO; |
| • |
higher one-time professional services costs of $1.7 million associated with the recent corporate reorganization; and |
| • |
lower allocation out for facilities and information technology costs of $0.5 million primarily due to lower allocable costs; partially offset by |
| • |
lower cash compensation costs of $1.5 million, largely due to lower headcount; |
| • |
lower bad debt expense of $0.8 million; |
| • |
lower other professional services costs of $0.4 million; and |
| • |
lower other costs of $0.2 million. |
Amortization expense on acquired intangible assets
| Three Months Ended September 30, |
Dollar |
Percent |
Nine Months Ended September 30, |
Dollar |
Percent |
|||||||||||||||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||
| Amortization expense on acquired intangible assets |
$ | 287 | $ | 288 | $ | (1 | ) | (— | )% | $ | 863 | $ | 847 | $ | 16 | 2 | % | |||||||||||||||
| Amortization expense on acquired intangible assets (as % of total revenue) |
4 | % | 4 | % | 4 | % | 3 | % | ||||||||||||||||||||||||
Amortization expense on acquired intangible assets relates to amortization expense recognized on the customer relationships intangible asset acquired in the EVRYTHNG acquisition.
The insignificant change in amortization expense on acquired intangible assets for both the three and nine-month periods reflects the impact of changes in foreign currency exchange rates.
Stock-based compensation
| Three Months Ended September 30, |
Dollar |
Percent |
Nine Months Ended September 30, |
Dollar |
Percent |
|||||||||||||||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||
| Cost of revenue |
$ | 368 | $ | 336 | $ | 32 | 10 | % | $ | 1,116 | $ | 726 | $ | 390 | 54 | % | ||||||||||||||||
| Sales and marketing |
167 | 577 | (410 | ) | (71 | )% | 585 | 1,727 | (1,142 | ) | (66 | )% | ||||||||||||||||||||
| Research, development and engineering |
628 | 1,244 | (616 | ) | (50 | )% | 1,948 | 2,872 | (924 | ) | (32 | )% | ||||||||||||||||||||
| General and administrative |
2,017 | 1,708 | 309 | 18 | % | 9,465 | 3,571 | 5,894 | 165 | % | ||||||||||||||||||||||
| Total |
$ | 3,180 | $ | 3,865 | $ | (685 | ) | (18 | )% | $ | 13,114 | $ | 8,896 | $ | 4,218 | 47 | % | |||||||||||||||
The $0.7 million decrease in stock-based compensation expense for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects $1.2 million of lower expense largely due to a lower number of employee stock grants, partially offset by $0.5 million of one-time expense due to the acceleration of unvested equity awards held by our former CEO.
The $4.2 million increase in stock-based compensation expense for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects $5.9 million of one-time expense due to the acceleration of unvested equity awards held by our former CEO, partially offset by $1.7 million of lower expense largely due to a lower number of employee stock grants.
We anticipate incurring an additional $19.6 million in stock-based compensation expense through September 30, 2030, for stock awards outstanding as of September 30, 2026.
Other income, net
| Three Months Ended September 30, |
Dollar |
Percent |
Nine Months Ended September 30, |
Dollar |
Percent |
|||||||||||||||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||||||||||||||
| Other income, net |
$ | 121 | $ | 217 | (96 | ) | (44 | )% | $ | 521 | $ | 796 | $ | (275 | ) | (35 | )% | |||||||||||||||
| Other income, net (as % of total revenue) |
2 | % | 3 | % | 2 | % | 3 | % | ||||||||||||||||||||||||
The $0.1 million decrease in other income, net for the three months ended September 30, 2026, compared to the corresponding three months ended September 30, 2025, primarily reflects lower interest income due to lower marketable securities balances and interest rates.
The $0.3 million decrease in other income, net for the nine months ended September 30, 2026, compared to the corresponding nine months ended September 30, 2025, primarily reflects lower interest income due to lower marketable securities balances and interest rates.
Income Taxes
The benefit (provision) for income taxes reflects current taxes and deferred taxes. The effective tax rate for each of the nine months ended September 30, 2026 and 2025 was 0%. Our effective tax rate is significantly lower than our statutory tax rate because we have a valuation allowance recorded against our deferred tax assets.
The valuation allowance against deferred tax assets as of September 30, 2026, was $116.5 million, an increase of $3.7 million from $112.7 million as of December 31, 2025.
We continually assess the applicability of a valuation allowance against our deferred tax assets. Based upon the positive and negative evidence available as of September 30, 2026, and largely due to the cumulative loss incurred by us over the last several years, which is considered a significant piece of negative evidence when assessing the realizability of deferred tax assets, a valuation allowance is recorded against our deferred tax assets. We will not record tax benefits on any future losses until it is determined that those tax benefits will be realized. Future reversals of the valuation allowance would result in a tax benefit in the period recognized.
Non-GAAP Financial Measures
The following discussion and analysis includes both financial measures in accordance with GAAP as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that excludes amounts that are not normally excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to, GAAP financial measures. Non-GAAP financial measures may not be indicative of the historical operating results of the Company nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP. Our management uses and relies on Non-GAAP gross profit, Non-GAAP gross profit margin, Non-GAAP operating expenses, Non-GAAP net loss, and Non-GAAP net loss per diluted share, which are all non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods.
Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.
We define Non-GAAP gross profit, Non-GAAP gross profit margin, Non-GAAP operating expenses, Non-GAAP net loss, and Non-GAAP net loss per diluted share excluding the adjustments in the table below. These non-GAAP financial measures are an important measure of our operating performance because they allow management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing non-cash and non-recurring activities that can affect comparability.
We have included a reconciliation of the non-GAAP financial measures we use to their most directly comparable GAAP financial measures. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between us and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definitions being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules.
The following table presents a reconciliation of Non-GAAP gross profit, Non-GAAP gross profit margin, Non-GAAP operating expenses, Non-GAAP net loss, and Non-GAAP net loss per diluted share for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| GAAP gross profit |
$ | 3,525 | $ | 4,446 | $ | 12,362 | $ | 15,238 | ||||||||
| Amortization of acquired intangible assets |
1,204 | 1,209 | 3,613 | 3,546 | ||||||||||||
| Amortization and write-off of other intangible assets |
209 | 222 | 622 | 660 | ||||||||||||
| Stock-based compensation |
368 | 336 | 1,116 | 726 | ||||||||||||
| Non-GAAP gross profit |
$ | 5,306 | $ | 6,213 | $ | 17,713 | $ | 20,170 | ||||||||
| Non-GAAP gross profit margin |
82 | % | 81 | % | 83 | % | 81 | % | ||||||||
| GAAP operating expenses |
$ | 11,546 | $ | 12,810 | $ | 39,883 | $ | 44,107 | ||||||||
| Depreciation and write-off of property and equipment |
(124 | ) | (146 | ) | (428 | ) | (430 | ) | ||||||||
| Amortization of acquired intangible assets |
(287 | ) | (288 | ) | (863 | ) | (847 | ) | ||||||||
| Amortization and write-off of other intangible assets |
(114 | ) | (128 | ) | (335 | ) | (329 | ) | ||||||||
| Amortization of lease right of use assets under operating leases |
(128 | ) | (108 | ) | (367 | ) | (309 | ) | ||||||||
| Stock-based compensation |
(2,812 | ) | (3,529 | ) | (11,998 | ) | (8,170 | ) | ||||||||
| Corporate reorganization expenses |
(56 | ) | — | (1,713 | ) | — | ||||||||||
| Non-GAAP operating expenses |
$ | 8,025 | $ | 8,611 | $ | 24,179 | $ | 34,022 | ||||||||
| GAAP net loss |
$ | (7,937 | ) | $ | (8,152 | ) | $ | (27,034 | ) | $ | (28,102 | ) | ||||
| Total adjustments to gross profit |
1,781 | 1,767 | 5,351 | 4,932 | ||||||||||||
| Total adjustments to operating expenses |
3,521 | 4,199 | 15,704 | 10,085 | ||||||||||||
| Non-GAAP net loss |
$ | (2,635 | ) | $ | (2,186 | ) | $ | (5,979 | ) | $ | (13,085 | ) | ||||
| Non-GAAP net income attributable to non-controlling interest |
292 | — | 337 | — | ||||||||||||
| Non-GAAP net loss attributable to Digimarc Corporation |
$ | (2,927 | ) | $ | (2,186 | ) | $ | (6,316 | ) | $ | (13,085 | ) | ||||
| GAAP net loss per diluted share |
$ | (0.36 | ) | $ | (0.38 | ) | $ | (1.22 | ) | $ | (1.30 | ) | ||||
| Non-GAAP net loss attributable to Digimarc Corporation |
$ | (2,927 | ) | $ | (2,186 | ) | $ | (6,316 | ) | $ | (13,085 | ) | ||||
| Non-GAAP net loss per diluted share attributable to Digimarc Corporation common shareholders |
$ | (0.13 | ) | $ | (0.10 | ) | $ | (0.28 | ) | $ | (0.61 | ) | ||||
Non-GAAP gross profit for the three months ended September 30, 2026, decreased by $0.9 million compared to the three months ended September 30, 2025. The decrease primarily reflects $1.2 million of lower revenue, partially offset by $0.3 million of lower cost of revenue, primarily due to lower cloud hosting costs.
Non-GAAP gross profit for the nine months ended September 30, 2026, decreased by $2.5 million compared to the nine months ended September 30, 2025. The decrease primarily reflects $3.6 million of lower revenue, partially offset by $1.1 million of lower cost of revenue, primarily due to lower cloud hosting costs.
Non-GAAP gross profit margin for the three months ended September 30, 2026, increased to 82% compared to 81% for the three months ended September 30, 2025. The increase primarily reflects lower cost of revenue, partially offset by lower revenue.
Non-GAAP gross profit margin for the nine months ended September 30, 2026, increased to 83% compared to 81% for the nine months ended September 30, 2025. The increase primarily reflects lower cost of revenue, partially offset by lower revenue.
Non-GAAP operating expenses for the three months ended September 30, 2026, decreased by $0.6 million compared to the three months ended September 30, 2025. The decrease primarily reflects a decrease of $0.5 million of bad debt expense and $0.3 million of other costs, partially offset by an increase of $0.4 million in cash severance costs.
Non-GAAP operating expenses for the nine months ended September 30, 2026, decreased by $9.8 million compared to the nine months ended September 30, 2025. The decrease primarily reflects decreases in cash compensation costs of $7.4 million, bad debt expense of $0.8 million, software and hardware costs of $0.5 million, and other costs of $0.4 million, partially offset by increases in professional services costs of $0.7 million. The $7.4 million decrease in cash compensation costs includes $6.4 million of lower costs largely due to lower headcount and $1.7 million of lower cash severance costs, partially offset by $0.7 million lower allocation out of operating expenses to cost of revenue primarily due to lower billable service hours.
Liquidity and Capital Resources
| September 30, |
December 31, |
|||||||
| 2026 |
2025 |
|||||||
| Working capital |
$ | 18,661 | $ | 12,988 | ||||
| Current ratio (1) |
2.7:1 | 2.6:1 | ||||||
| Cash, cash equivalents and short-term marketable securities |
$ | 22,053 | $ | 12,866 | ||||
| (1) |
The current ratio is calculated by dividing total current assets by total current liabilities. |
The $9.2 million increase in cash, cash equivalents and marketable securities at September 30, 2026, from December 31, 2025, resulted primarily from:
| • |
$18.3 million of cash provided by the issuance of common stock, net of issuance costs paid in the period, partially offset by |
| • |
$6.8 million of cash used in operations; and |
| • |
$1.8 million of cash used for purchases of common stock related to tax withholding in connection with the vesting of restricted stock, restricted stock units, and performance restricted stock units. |
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and trade accounts receivable. We place our cash and cash equivalents with major banks and financial institutions and at times deposits may exceed insured limits. Marketable securities include corporate notes, federal agency notes, and commercial paper. Our investment policy requires our portfolio to be invested to ensure that the greater of $2.0 million or 20% of the invested funds will be available within 30 days' notice.
Other than cash used for operating needs, which may include short-term marketable securities, our investment policy limits our credit exposure to any one financial institution or type of financial instrument by limiting the maximum of 5% of our cash and cash equivalents and marketable securities or $1.0 million, whichever is greater, to be invested in any one issuer except for the U.S. government, U.S. federal agencies and U.S.-backed securities, which have no limits, at the time of purchase. Our investment policy also limits our credit exposure by limiting to a maximum of 25% of our cash and cash equivalents and marketable securities, or $1.5 million, whichever is lesser, to be invested in any one industry category (e.g., financial, energy, etc.) at the time of purchase. As a result, we believe our credit risk associated with cash and investments to be minimal.
A decline in the market value of any security that is deemed to be other-than-temporary is charged to earnings. To determine whether an impairment is other-than-temporary, we consider whether we have the ability and intent to hold the investment until a market price recovery and evidence indicating that the cost of the investment is recoverable outweighs evidence to the contrary. There have been no other-than-temporary impairments identified or recorded by us for the three and nine months ended September 30, 2026 and 2025.
Cash flows from operating activities
The components of cash flows used in operating activities were:
| Nine Months Ended September 30, |
Dollar |
Percent |
||||||||||||||
| 2026 |
2025 |
Increase (Decrease) |
Increase (Decrease) |
|||||||||||||
| Net loss |
$ | (27,034 | ) | $ | (28,102 | ) | $ | (1,068 | ) | (4 | )% | |||||
| Non-cash items included in net loss |
18,863 | 15,698 | (3,165 | ) | (20 | )% | ||||||||||
| Changes in operating assets and liabilities |
1,338 | (366 | ) | (1,704 | ) | (466 | )% | |||||||||
| Net cash used in operating activities |
$ | (6,833 | ) | $ | (12,770 | ) | $ | (5,937 | ) | (46 | )% | |||||
Cash used in operating activities for the nine months ended September 30, 2026, decreased by $5.9 million, compared to the corresponding nine months ended September 30, 2025. The decrease reflects $3.2 million of higher non-cash items included in net loss, a $1.7 million favorable change in operating assets and liabilities, and a $1.1 million lower net loss. The increase in non-cash items included in net loss primarily reflects $3.7 million of higher non-cash stock-based compensation expense, partially offset by a $0.7 million decrease in allowance for doubtful accounts. The favorable change in operating assets and liabilities primarily reflects the timing and amount of customer receipts and vendor payments.
Cash flows from investing activities
Cash flows provided by investing activities for the nine months ended September 30, 2026, decreased by $10.7 million, compared to the corresponding nine months ended September 30, 2025. The decrease reflects $12.5 million of lower proceeds from maturities of marketable securities, partially offset by $1.3 million of lower purchases of marketable securities and $0.4 million of lower purchases of property and equipment.
Cash flows from financing activities
Cash flows provided by financing activities for the nine months ended September 30, 2026, increased by $19.0 million, compared to the corresponding nine months ended September 30, 2025. The increase primarily reflects $18.3 million of proceeds from the issuance of common stock, net of issuance costs paid in the period, and $0.6 million lower purchases of common stock.
Future Cash Expectations
We believe that our current cash, cash equivalents, and marketable securities balances will satisfy our projected working capital and capital expenditure requirements for at least the next 12 months.
Future Revenue Trends
Our commercial subscription revenue for the remainder of fiscal 2026 as compared to the remainder of fiscal 2025 may be negatively impacted by the step-down in one commercial contract in June 2026 that accounted for $2.6 million of ARR.
Shelf Registration
On July 7, 2026, we filed a new shelf registration statement on Form S-3. The new shelf registration statement became effective on July 13, 2026, and expires on July 13, 2029. Under the new shelf registration statement, we may sell securities in one or more offerings up to $50.0 million. As of September 30, 2026, we had $31.8 million available under the new shelf registration.
On July 13, 2026, upon our new shelf registration becoming effective, our prior shelf registration statement expired with $67.2 million unused.
Equity Sales Agreement
On June 8, 2026, we entered into a Sales Agreement, whereby we may sell from time to time through Needham & Company, LLC, as our sales agent, our common stock having an aggregate offering price of up to $17.5 million. Needham & Company, LLC, will receive a commission of 3.0% of the gross sales price per share of common stock sold. For the three months ended September 30, 2026, we sold no shares under the Sales Agreement. For the nine months ended September 30, 2026, we sold 24 thousand shares at an average price of $12.59 per share under the Sales Agreement totaling $0.3 million of net cash proceeds. As of September 30, 2026, there is $17.2 million available for future issuance under the Sales Agreement. Prior to making any future sales under the Sales Agreement, we would need to, among other things, file a prospectus supplement with respect to the program.
Registered Direct Offering
On September 29, 2026, we entered into purchase agreements with investors providing for the issuance and sale by us of 4.5 million common shares, in the aggregate, in a registered direct offering, which closed on September 30, 2026. The shares were offered at a price of $4.04 per share, totaling $18.2 million of gross cash proceeds, less $1.3 million of commissions and fees.
We may sell shares under the shelf registration and/or use similar or other financing means to raise working capital in the future, if necessary, to support continued investment in our growth initiatives. We may also raise capital in the future to fund acquisitions and/or investments in complementary businesses, technologies or product lines. If it becomes necessary to obtain additional financing, we may not be able to do so, or if these funds are available, they may not be available on satisfactory terms. These factors, as well as restrictions contained in our purchase agreements for the September 2026 registered direct offering, may inhibit our near-term ability to obtain financing.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended. Words such as "may," "might," "plan," "should," "could," "expect," "anticipate," "intend," "believe," "project," "forecast," "estimate," "continue," and variations of such terms or similar expressions are intended to identify such forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us, and are subject to uncertainties and factors (including those specified below), which are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements, and investors are cautioned not to place undue reliance on such statements. We believe that the following factors, among others (including those described in Item 1A. "Risk Factors" of our 2025 Annual Report), could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us. Forward-looking statements include but are not limited to statements relating to:
| • |
trends and sources of future revenue; |
| • |
anticipated revenue to be generated from current contracts; |
| • |
anticipated expenses, costs, margins, provision for income taxes and investment activities; |
| • |
our assumptions and expectations related to stock awards, including future stock-based compensation expense; |
| • |
our belief that we have one of the world's most extensive patent portfolios in digital watermarking and related fields; |
| • |
our beliefs regarding our critical accounting policies; |
| • |
business opportunities that could require that we seek additional financing and our ability to do so; |
| • |
our expected short-term and long-term liquidity positions; |
| • |
our capital expenditure and working capital requirements and our ability to fund our capital expenditure and working capital needs through cash flow from operations or financing; |
| • |
our expectations regarding our ability to meet future financial obligations as they become due within the coming fiscal year; |
| • |
our use of cash, cash equivalents and marketable securities in upcoming quarters and the possibility that our deposits of cash and cash equivalents with major banks and financial institutions may exceed insured limits; |
| • |
protection, development and monetization of our intellectual property portfolio; and |
| • |
our beliefs related to legal proceedings and claims arising in the ordinary course of business. |
We believe that the risk factors specified above and the risk factors contained in Part I, Item 1A. "Risk Factors" of our 2025 Annual Report, among others, could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf. Investors should understand that it is not possible to predict or identify all risk factors and that there may be other factors that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements made by us or by persons acting on our behalf apply only as of the date of this Quarterly Report on Form 10-Q. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of the filing of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation (pursuant to Rule 13a-15(b) of the Exchange Act), under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. These disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective.
Changes in Controls
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the three months ended September 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
On May 8, 2025, a class action lawsuit captioned Ullom v. Digimarc Corp., et al., No. 3:25-cv-00779-JR (the "Ullom Action") was filed against the Company in the United States District Court for the District of Oregon. An amended complaint was filed on November 26, 2025. The amended complaint purports to assert claims against the Company and its now former Chief Executive Officer and current Chief Financial Officer pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder, on behalf of a putative class of investors who purchased or otherwise acquired the Company's shares between August 14, 2024 and February 26, 2025 (the "class period"). The Ullom Action seeks to recover damages allegedly caused by purported misstatements and omissions regarding the renewal status of a commercial contract, claiming that these alleged misstatements and omissions artificially inflated the price paid for our common stock during the class period.
Subsequently, five derivative lawsuits were filed nominally on the Company's behalf, including three in the United States District Court for the District of Oregon: (i) Franchi v. McCormack et al., No. 3:25-cv-01543-AN, filed August 29, 2025 (as amended September 2, 2025) (the "Franchi Action"); (ii) Chadwick v. McCormack et al., No. 3:25-cv-01838-JR, filed October 7, 2025 (the "Chadwick action"); and (iii) Jensen v. McCormack et al., No. 3:25-cv-01891-SB, filed October 14, 2025 (the "Jensen action"); and two in the Circuit Court of the State of Oregon for the County of Multnomah: (i) Johnson v. McCormack et al., No. 25-cv-56998, filed October 23, 2025 (the "Johnson action"); and (ii) Sperry v. McCormack et al., No. 26-cv-00621, filed January 6, 2026. These derivative actions are based on the same alleged facts and circumstances as the Ullom Action and are against the Company's now former Chief Executive Officer and current Chief Financial Officer and directors. The derivative actions collectively assert claims pursuant to Sections 10(b), 14(a), and 20(a) of the Exchange Act, as well as for breaches of fiduciary duties, aiding and abetting breaches of fiduciary duties, unjust enrichment, and waste of corporate assets. Each of the five derivative lawsuits seeks to recover damages on the Company's behalf and alleges that a legally required pre-suit demand on the Board of Directors would be futile and should be excused.
On November 4, 2025, the Chadwick, Jensen and Franchi Actions were consolidated and stayed pending resolution of the Company's anticipated motion to dismiss in the Ullom Action. On January 5, 2026, the Johnson Action was stayed pending the same event. On February 9, 2026, the Company and its now former Chief Executive Officer and current Chief Financial Officer moved to dismiss the Ullom Action. On February 11, 2026, the Johnson and the Sperry Actions were consolidated and remain stayed pending resolution of the defendants' motion to dismiss in the Ullom Action.
On June 23, 2026, the magistrate judge issued findings and a recommendation that the motion to dismiss filed by Digimarc Corporation, the Company's predecessor registrant ("predecessor registrant") and now known as DMRC LLC, and its now former Chief Executive Officer and current Chief Financial Officer in the Ullom Action be granted and that judgment be entered dismissing the Ullom Action. The findings and recommendation are subject to review by the district judge and do not constitute a final order or judgment. On July 17, 2026, the plaintiffs in the Ullom Action filed objections to the findings and recommendation, and on August 10, 2026, the defendants filed their response to those objections. The consolidated federal derivative actions, which were filed nominally on behalf of the predecessor registrant, remain stayed pending resolution of the Ullom Action. In addition, the derivative lawsuits filed in the Circuit Court of the State of Oregon for the County of Multnomah, the Johnson and the Sperry Actions, which were also filed nominally on behalf of the predecessor registrant, remain consolidated and stayed. The defendants, including the Company, believe they have defenses to the claims and are responding accordingly.
Item 1A. Risk Factors
Our business, financial condition, results of operations and cash flows may be affected by a number of factors. Detailed information about risk factors that may affect Digimarc's actual results are set forth in Part I, Item 1A: "Risk Factors" of our 2025 Annual Report. The risks and uncertainties described in our 2025 Annual Report are those risks of which we are aware and that we consider to be material to our business, and such risk factors have not changed materially. If any of these risks and uncertainties develop into actual events, our business, financial condition, results of operations or cash flows could be materially adversely affected. In that case, the trading price of our common stock could decline.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We repurchase shares of common stock in satisfaction of required withholding of income tax liability in connection with the vesting of restricted stock, restricted stock units and performance restricted stock units.
The following table sets forth information regarding purchases of our equity securities during the three months ended September 30, 2026:
| (d) |
||||||||||||||||
| (c) |
Approximate |
|||||||||||||||
| Total number |
dollar value |
|||||||||||||||
| of shares |
of shares that |
|||||||||||||||
| (a) |
(b) |
purchased as |
may yet be |
|||||||||||||
| Total number |
Average price |
part of publicly |
purchased |
|||||||||||||
| of shares |
paid per |
announced plans |
under the plans |
|||||||||||||
| Period |
purchased (1) |
share (1) |
or programs |
or programs |
||||||||||||
| Month 1 |
||||||||||||||||
| July 1, 2026 to July 31, 2026 |
— | $ | — | — | $ | — | ||||||||||
| Month 2 |
||||||||||||||||
| August 1, 2026 to August 31, 2026 |
50,592 | $ | 7.53 | — | $ | — | ||||||||||
| Month 3 |
||||||||||||||||
| September 1, 2026 to September 30, 2026 |
— | $ | — | — | $ | — | ||||||||||
| Total |
50,592 | $ | 7.53 | — | $ | — | ||||||||||
| (1) |
Shares of common stock withheld (purchased) by us in satisfaction of required withholding of income tax liability upon vesting of restricted stock, restricted stock units and performance restricted stock units. |
Item 5. Other Information
None of our officers or directors adopted, modified, or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as defined in Item 408 of Regulation S-K, during the three months ended September 30, 2026.
Item 6. Exhibits.
| Exhibit Number |
Exhibit Description |
|
| 3.1 | Articles of Incorporation of Digimarc Corporation (f/k/a Digimarc Parent, Inc) (incorporated by reference to Exhibit 3.1 to Digimarc Corporation's Current Report on Form 8-K, filed with the SEC on May 18, 2026 (File No. 001-43301)) | |
| 3.2 | Articles of Amendment to Articles of Incorporation of Digimarc Corporation (f/k/a Digimarc Parent, Inc) (incorporated by reference to Exhibit 3.2 to Digimarc Corporation's Current Report on Form 8-K, filed with the SEC on May 18, 2026 (File No. 001-43301)) | |
| 3.3 | Articles of Amendment to Articles of Incorporation of Digimarc Corporation (f/k/a Digimarc Parent, Inc) (incorporated by reference to Exhibit 3.1 to Digimarc Corporation's Current Report on Form 8-K, filed with the SEC on May 21, 2026 (File No. 001-43301)) | |
| 3.4 | Bylaws of Digimarc Corporation (f/k/a Digimarc Parent, Inc) (incorporated by reference to Exhibit 3.3 to Digimarc Corporation's Current Report on Form 8-K, filed with the SEC on May 18, 2026 (File No. 001-43301)) | |
| 10.1 | Inducement LTIP Unit Award Agreement, dated July 6, 2026, by and between DMRC LLC and Paul Carreiro (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the Commission on July 6, 2026 (File No. 001-43301)) | |
| 10.2 | Executive Retention Agreement, dated July 6, 2026, by and between DMRC LLC and Paul Carreiro (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the Commission on July 6, 2026 (File No. 001-43301)) | |
| 10.3 | Form of Common Stock Purchase Agreement, dated September 29, 2026 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the Commission on September 30, 2026 (File No. 001-43301)) | |
| 10.4 | Form of Registration Rights Agreement, dated September 29, 2026 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the Commission on September 30, 2026 (File No. 001-43301)) | |
| 31.1* |
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
|
| 31.2* |
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
|
| 32.1+ |
Section 1350 Certification of Chief Executive Officer |
|
| 32.2+ |
Section 1350 Certification of Chief Financial Officer |
|
| 101.INS |
Inline XBRL Instance Document |
|
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
|
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
| 104 |
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
| * | Filed herewith. |
| + | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: November 13, 2026 |
DIGIMARC CORPORATION |
||
| By: |
/s/ Charles Beck |
||
| CHARLES BECK |
|||
| Chief Financial Officer |
|||
| (Duly Authorized Officer and Principal Financial and Accounting Officer) |
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