Company: DMRC
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001437749-25-034816
Chunk: 37

Company: Digimarc CORP
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 8
Chunk 37
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 30, 

      September 30, 

      Increase 

      Increase 

      2025 

      2024 

      (Decrease) 

      (Decrease) 

      ARR 
      
     $
     15,813

     $
     18,674

     $
     (2,861
     )

     (15
     )%

ARR decreased $2.9 million from September 30, 2024 to September 30, 2025, reflecting the expiration of a commercial contract in April 2025 that accounted for $3.5 million of ARR, partially offset by increases to ARR from new and existing commercial contracts. ARR will be negatively impacted by $3.1 million in the fourth quarter of fiscal 2025, reflecting the conclusion of a contract renegotiation with a domestic customer.

       23

We provide an ARR performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources has increased in recent years. 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:

      • 
      internet 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; 

      • 
      depreciation 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