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Why Digimarc Stock Skyrocketed Today

Evan Niu, CFA, The Motley Fool

What happened

Shares of Digimarc (NASDAQ: DMRC) have utterly skyrocketed today, up by 50% as of 10:45 a.m. EDT, after the company reported first-quarter earnings results. The move comes after the stock had already doubled year to date.

So what

Revenue in the first quarter was $5.7 million, ahead of the consensus estimate of $5.4 million in sales. The company attributed revenue growth to higher service and Digimarc Barcode revenue, offset somewhat by lower Digimarc Guardian revenue. The barcode and digital label specialist posted a net loss of $8.5 million, or $0.74 per share, slightly worse than the net loss of $0.72 per share that analysts were expecting.

Produce section in a Walmart

Digimarc recently announced a major partnership with Walmart. Image source: Walmart.

On the conference call, CFO Charles Beck said Discover and Barcode bookings increased 60% compared to a year ago, and quarter-to-date bookings in Q2 have already exceeded $800,000, more than the $200,000 in bookings Digimarc recorded in the entire second quarter of last year.

Now what

Ahead of the report, Digimarc had announced a major new partnership with retail giant Walmart, in which Digimarc would help improve the management of packaged fresh foods in an effort to reduce food waste, increase efficiency, and cut costs in order to preserve low prices.

Beck provided more financial details around the agreement on the earnings call, noting that the deal only covers Walmart stores in the U.S., is effective immediately, and has unlimited duration unless Walmart were to terminate it. Digimarc will receive an annual fixed fee of $3 million per year, recognizing $750,000 in revenue per quarter. The first quarterly payment is included in the aforementioned second-quarter bookings figure.

"The Walmart contract signals achievement of one of the key milestones of our strategy," CEO Bruce Davis added. "It is a multimillion-dollar annuity with the world's largest retailer that has unlimited duration yet limited geographic and product scope."

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.