Company: DMRC
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0001437749-25-005471
Chunk: 13

Company: Digimarc CORP
Filing Date: 2025-02-27
Form: 10-K
Item: Item 7A
Chunk 13
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 communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

      F-2

Revenue recognition for new contracts

As discussed in Note 3 to the consolidated financial statements, the Company recorded $38,418 thousand of total revenue for the year ended December 31, 2024, of which $22,418 thousand was subscription revenue and $16,000 thousand was service revenue. Customer arrangements may contain multiple performance obligations such as software subscriptions, software products, software development services, and/or maintenance and support fees. The Company accounts for individual products and services separately if they are distinct. The Company derives its revenue primarily from software subscriptions and software development services with a wide range of software and service offerings.

We identified the evaluation of the Company’s revenue recognition related to new contracts entered during the year as a critical audit matter. Challenging auditor judgment was required to evaluate the potential impact of specific contract terms on revenue recognition due to the unique nature of new revenue contracts within each software and service offering.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls related to the Company’s revenue recognition process, including a control over the Company’s assessment of the contract terms and applicable revenue recognition requirements for new contracts. For a selection of new contracts, we read the contract and evaluated the Company’s assessment of the contract terms and revenue recognition. For certain contracts, we confirmed the relevant contract terms directly with the Company’s customers and compared them to the terms utilized by the Company to record revenue. We assessed the recorded revenue by selecting a sample of transactions and comparing the revenue recognized for consistency with the terms of the underlying documentation, including contracts with customers. For a selection of revenue contracts entered during the year, we interviewed personnel outside of the accounting function to consider any other relevant facts and circumstances and their impact on revenue recognition.                                                                                                                                                                                

/s/ KPMG LLP