Digimarc Corp (DMRC) 2023 Q2 法說會逐字稿

Ladies and gentlemen, greetings, and welcome to the Digimarc Corporation Second Quarter 2023 Earnings Conference Call. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joel Meyer, Chief Legal Officer. Please go ahead.

女士們、先生們，大家好，歡迎參加 Digimarc 公司 2023 年第二季財報電話會議。 （操作員說明）。提醒一下，本次會議正在錄製中。現在我很高興向您介紹主持人，首席法務官喬爾·邁耶 (Joel Meyer)。請繼續。

Thank you. Welcome to our Q2 conference call. Riley McCormack, our CEO; and Charles Beck, our CFO, are with me on the call. On the call today, we will provide a business update and discuss Q2 2023 financial results. This will be followed by a question-and-answer forum. We have posted our prepared remarks in the Investor Relations section of our website and we'll archive this webcast there.

謝謝。歡迎參加我們的第二季電話會議。萊利·麥科馬克，我們的執行長；我們的財務長查爾斯貝克 (Charles Beck) 與我一起參加了電話會議。在今天的電話會議上，我們將提供業務更新並討論 2023 年第二季的財務表現。隨後將舉行問答論壇。我們已在網站的投資者關係部分發布了準備好的評論，我們將在那裡存檔此網路廣播。

Before we begin, let me remind everyone that today's discussion contains forward-looking statements that have risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause our actual results to differ materially. Riley will now provide a business update.

在開始之前，我要提醒大家，今天的討論包含前瞻性陳述，有風險和不確定性。請參閱我們的新聞稿，以了解有關可能導致我們的實際結果出現重大差異的特定風險因素的更多資​​訊。萊利現在將提供業務更新。

Thank you, Joel, and hello, everyone. Q2 was a strong quarter on many fronts, a testament to our maniacal focus on being easy to begin doing business with and excellent at guiding customers along their product digitization journey.

謝謝你，喬爾，大家好。第二季度在許多方面都是強勁的季度，這證明了我們對輕鬆開展業務以及出色地指導客戶完成產品數位化之旅的瘋狂關注。

Starting with the "easy to begin doing business with" portion of our mantra, I want to highlight a few wins on the direct side of our business. We added 2 large, new customers in the pharmaceutical vertical, and are hard at work expanding this flywheel to help this industry combat the massive and massively important issue of counterfeit products.

從我們口號中的「輕鬆開展業務」部分開始，我想強調我們業務直接方面的一些勝利。我們在製藥業增加了 2 個大型新客戶，並正在努力擴展這個飛輪，以幫助該行業應對大規模且極其重要的假冒產品問題。

We also closed deals with 2 separate divisions of a top 25 global CPG for a sandboxed version of our platform involving factory automation and are working to pull together the ecosystem partners necessary to provide a quickly scalable and low-touch solution to the hundreds, if not thousands, of other companies that would benefit from the same. Based not just on these 2 initial wins nor just on our internal research, but very importantly, also on our growing pipeline of opportunities as the word gets out, we are confident we have a truly differentiated and high-value factory automation solution that we can't wait to provide to many others.

我們還與全球 25 強 CPG 的兩個獨立部門就涉及工廠自動化的平台沙盒版本達成了協議，並正在努力召集必要的生態系統合作夥伴，為數百人提供快速可擴展且低接觸的解決方案。成千上萬的其他公司也將從中受益。不僅基於這兩個最初的勝利，也不僅僅基於我們的內部研究，而且非常重要的是，隨著消息的傳出，我們不斷增加的機會渠道，我們相信我們擁有一個真正差異化和高價值的工廠自動化解決方案，我們可以迫不及待地向其他許多人提供。

On the channel side, we added 2 new VARs, including the large $32 million plus contract we announced a few months ago. We have high expectations that both relationships will grow as we prove Digimarc Illuminate's value in allowing our VARs to provide unique and differentiated solutions to their end customers.

在通路方面，我們增加了 2 個新的 VAR，其中包括我們幾個月前宣布的 3,200 萬美元以上的大合約。我們對這兩種關係寄予厚望，因為我們證明了 Digimarc Illuminate 的價值，讓我們的 VAR 能夠為其最終客戶提供獨特且差異化的解決方案。

In addition, the public announcement of our large VAR deal has put us squarely on the security printing industry's radar. We are in early conversations with 2 new prospects, each of which represent a sizable opportunity. This further validates the unique position we enjoy in this space based not just on Illuminate's capabilities as the world's best product digitization hyperscaler, but also Digimarc's hard-earned and well-deserved reputation with this industry, gained by over 2 decades of delivering value to the world's central banks.

此外，我們大規模 VAR 交易的公開宣布也讓我們受到了安全印刷產業的關注。我們正在與兩位新的潛在客戶進行早期對話，每一位都代表著巨大的機會。這進一步證實了我們在這一領域享有的獨特地位，這不僅基於Illuminate 作為世界上最好的產品數位化超大規模提供商的能力，還基於Digimarc 在該行業中來之不易且當之無愧的聲譽，而這種聲譽是透過2 多年為產業提供價值而獲得的。世界各國中央銀行。

In addition to the opportunities opening to us in the security printing space, the day after we issued that press release, we received an invite to a full-day planning session for a proposed deposit return system program in a major country. We are focused on expanding our opportunities in the DRS market as we believe our Illuminate platform provides our VARs and the ability to offer a DRS solution that is easier, more comprehensive and more cost effective in the status quo.

除了安全印刷領域向我們開放的機會之外，在我們發布新聞稿的第二天，我們還收到了參加全天規劃會議的邀請，該會議的主題是在一個主要國家提議的存款返還系統計劃。我們專注於擴大我們在 DRS 市場的機會，因為我們相信我們的 Illuminate 平台可以為我們提供 VAR，並能夠提供在現狀下更簡單、更全面且更具成本效益的 DRS 解決方案。

As part of the "excellent at guiding customers along their product digitization journey" portion of our mantra, we signed multiyear extensions with 6 important customers in Q2, 5 of which resulted in a meaningful increase in annual recurring revenue, a testament to the power of our technology and our team. Four of these renewals were with direct customers and the other 2 with VARs.

作為我們口號中「出色地引導客戶完成產品數位化之旅」的一部分，我們在第二季度與6 個重要客戶簽署了多年續約協議，其中5 個客戶實現了年度經常性收入的顯著增長，這證明了我們的技術和我們的團隊。其中 4 次續約是針對直接客戶，另外 2 次是針對 VAR。

In addition to these contract renewals, we also had 2 customers whose contracts were structured under the legacy pay-as-you-go model, significantly ramp up their usage in Q2, including a top 5 global CPG that is also a key supplier to Walmart.

除了這些合約續約之外，我們還有2 個客戶的合約是在傳統的現收現付模式下構建的，在第二季度顯著增加了他們的使用量，其中包括全球排名前5 的CPG，也是沃爾瑪的主要供應商。

All of the above helped contribute to strong results in the 2 key financial metrics by which we have to obsess. While Charles will elaborate more in a moment, I want to highlight subscription revenue was up 44% year-over-year and 59% when adjusting for the end-of-life of Piracy Intelligence. In addition to strong subscription revenue growth, subscription gross margin expanded 400 basis points sequentially to a near best-in-class 84% with further expansion ahead as we continue to remove costs from our platform and add high incremental margin subscription revenue.

上述所有因素都有助於我們在必須關注的兩個關鍵財務指標上取得強勁成果。雖然 Charles 稍後會詳細闡述，但我想強調的是，訂閱收入同比增長了 44%，根據盜版情報的生命週期結束進行調整後，訂閱收入增長了 59%。除了強勁的訂閱收入成長之外，訂閱毛利率也連續成長了400 個基點，達到接近同類最佳的84%，並且隨著我們繼續消除平台成本並增加高增量利潤的訂閱收入，未來還會進一步擴張。

Before I turn the call over to Charles, I want to take this opportunity to answer a question I know is front of mind for many of our investors. Yes, our technology does have a significant role to play as the world grapples with both the opportunities and the dangers of generative AI. And as we've been busy preparing our soon-to-launch offering, informed by all the learnings and knowledge that comes from being the pioneer and widely recognized vanguard of digital watermarking, it has been wonderful to see some of the world's largest companies and governments conclude the same.

在我把電話轉給查爾斯之前，我想藉此機會回答一個我知道是我們許多投資者首先想到的問題。是的，當世界努力應對生成人工智慧的機會和危險時，我們的技術確實可以發揮重要作用。由於我們一直忙於準備即將推出的產品，並透過作為數位浮水印先驅和廣泛認可的先鋒所獲得的所有經驗和知識，很高興看到一些世界上最大的公司和各國政府也得出同樣的結論。

We also applaud the various governments and GenAI companies who are moving to act on this conclusion, including most recently, the 7 leading AI companies who convened at the request of the White House and voluntarily committed to take specific steps.

我們也讚揚各國政府和 GenAI 公司根據這一結論採取行動，包括 7 家最近應白宮要求召開會議並自願承諾採取具體步驟的領先人工智慧公司。

The world seems to be coalescing around the view that safely and securely unlocking the transformational power of GenAI will require addressing its biggest dangers head on, a view we not only share, but one we are uniquely positioned and excited to help achieve.

全世界似乎都一致認為，安全可靠地釋放 GenAI 的變革力量需要直面解決其最大的危險，我們不僅認同這一觀點，而且我們擁有獨特的地位並很高興能夠幫助實現這一觀點。

And no bigger problems need solving in the world of GenAI and how to ensure the authenticity of digital media, and how to provide for the safety and fairness of input to the models themselves. We believe there's an obvious need for a single robust, secure and easy to adopt solution that can accomplish both while also adding additional value to stakeholders in the world of GenAI and beyond and are anxious to begin telling that story more broadly. But today, I want to focus more specifically on each of these 2 potentially showstopping problems in turn.

在 GenAI 的世界裡，沒有什麼更大的問題需要解決，如何確保數位媒體的真實性，以及如何為模型本身提供輸入的安全性和公平性。我們相信，顯然需要一個強大、安全且易於採用的解決方案，既能實現這兩個目標，又能為 GenAI 及其他領域的利益相關者增加額外價值，並渴望開始更廣泛地講述這個故事。但今天，我想依次更具體地關注這兩個潛在的引人注目的問題。

Regarding the need to ensure the authenticity of digital media in a world where digital asset creation is easy, fast and cheap, while the current proposal of tagging all GenAI-created output is a solid first step, if for no other reason that it shows that the GenAI companies are serious about taking action, it won't solve the problem of how to ensure the authenticity of digital media for the following 4 reasons: First, unless every GenAI company applies digital watermarks to its output, which is an impossibility for many reasons, simply tagging the GenAI-created content of some will do as little to prove authenticities if it were done by none. Intuitively, no one would suggest the system we have built alongside the world's central banks to help protect the authenticity of currency should rely on every potential counterfeiter, current and future, putting the word fake on their counterfeit currency. The same logic applies here.

在數位資產創建簡單、快速且廉價的世界中，需要確保數位媒體的真實性，而目前對所有 GenAI 創建的輸出進行標記的提議是堅實的第一步，如果沒有其他原因，它表明： GenAI公司認真地採取行動，但並不能解決如何確保數位媒體真實性的問題，原因如下：首先，除非每個GenAI公司都在其輸出中應用數位水印，這對許多人來說是不可能的出於原因，如果GenAI 創建的內容不是由任何人創建的，那麼簡單地標記某些內容並不能證明其真實性。直覺上，沒有人會建議我們與世界各國央行一起建立的、旨在幫助保護貨幣真實性的系統應該依賴於當前和未來的每一個潛在的造假者，在他們的假幣上貼上「假」的字樣。同樣的邏輯也適用於此。

Second, a solution that rests solely on digital watermarking GenAI output assumes there are only nefarious or frivolous uses of GenAI, an assumption with which we, along with many others disagree, an incredible amount of legitimate content is already being produced with the help of GenAI and the value creation potential of GenAI is still in its infancy. Similar to how the output of copy editors improved with the advent of spellcheck, the work of professional creatives will improve by incorporating GenAI. GenAI is a generational productivity tool that should and will be used by legitimate creators of digital assets and what truly matters is whether a digital asset was created by the source one believes it was, not the method or tools used in its creation.

其次，僅依賴數位浮水印 GenAI 輸出的解決方案假設 GenAI 僅存在惡意或輕率的使用，我們和許多其他人不同意這一假設，在 GenAI 的幫助下已經產生了數量驚人的合法內容GenAI 的價值創造潛力仍處於起步階段。與隨著拼字檢查的出現而改進文案編輯的產出類似，專業創意人員的工作也將透過結合 GenAI 得到改善。 GenAI 是一種世代生產力工具，應該並且將會被數位資產的合法創建者使用，真正重要的是數位資產是否是由人們認為的來源創建的，而不是創建過程中使用的方法或工具。

Third, authentic content used in an inauthentic context is often worse than just lacking certainty by the digital asset's native authenticity because this scenario provides a false sense of comfort. Context about when and why authentic content was created and used matters, and it matters a great deal. To wit, an authentic image of a medicine that appears in an inauthentic place such as the website of an unauthorized or otherwise illegitimate reseller, but without a doubt increase the odds a consumer mistakenly purchases a potentially dangerous item. Content and context are 2 sides of its same authenticity coin.

第三，在不真實的環境中使用真實的內容通常比數位資產本身的真實性缺乏確定性更糟糕，因為這種情況提供了一種錯誤的舒適感。有關創建和使用真實內容的時間和原因的背景很重要，而且非常重要。也就是說，藥品的真實圖像出現在不真實的地方，例如未經授權或非法經銷商的網站，但無疑會增加消費者錯誤購買潛在危險物品的可能性。內容和上下文是同一個真實性硬幣的兩面。

And finally, many GenAI engines rely on open source technology, which essentially gives anyone the keys to inspect, understand and potentially even edit lines of codes, including those lines involving security. There's a reason why network security companies don't build their business around open source technology, and the same logic applies when it comes to a system tasked with ensuring the authenticity of digital assets.

最後，許多 GenAI 引擎依賴開源技術，這本質上為任何人提供了檢查、理解甚至可能編輯程式碼行的鑰匙，包括那些涉及安全的程式碼行。網路安全公司不圍繞開源技術建立業務是有原因的，同樣的邏輯也適用於負責確保數位資產真實性的系統。

For these reasons, simply watermarking GenAI-created output will not adequately ensure the authenticity of digital content. Moreover, there's another crucial issue that must be addressed. The world also needs safe and fair filtering of the content that trains these engines. Several groups have an immediate need for these safeguards.

由於這些原因，簡單地對 GenAI 創建的輸出添加浮水印並不能充分確保數位內容的真實性。此外，還有另一個必須解決的關鍵問題。世界也需要對訓練這些引擎的內容進行安全和公平的過濾。有些團體迫切需要這些保障措施。

First, are companies and creatives who have spent an incredible amount of talent, time, money and effort to create their digital assets. This is exactly why copyright law exists in countries around the world. Without an automated safe and fair input filter, these assets have simply become free input to the trading of GenAI engines without the copyright owners having a say. That isn't fair and in many cases, it isn't legal.

首先，是花費了大量人才、時間、金錢和精力來創造數位資產的公司和創意人員。這正是世界各國存在版權法的原因。如果沒有自動化、安全、公平的輸入過濾器，這些資產就只是成為 GenAI 引擎交易的免費輸入，版權所有者沒有發言權。這是不公平的，而且在很多情況下也是不合法的。

Second are the GenAI companies themselves. They need a solution that allows them to comply with copyright law or they risk the exponentially growing avalanche of lawsuits overwhelming their legal teams as well as their balance sheets and the only alternative being considered, unilaterally restricting the input needed to train their engines, will deprive the world of the productivity gains their useful and powerful technology will bring. In addition, the GenAI companies also face a second "still in its infancy" avalanche of existential risk, namely model collapse, because without an automated way to filter the quality of input along multiple different vectors, the models will suffer ever-decreasing quality of output until they asymptote to worthless. The universal law of GIGO, garbage in, garbage out, applies in the world of GenAI, too.

其次是 GenAI 公司本身。他們需要一個能夠遵守版權法的解決方案，否則他們將冒著指數級增長的雪崩式訴訟的風險，壓垮他們的法律團隊以及他們的資產負債表，而正在考慮的唯一替代方案，即單方面限制訓練引擎所需的輸入，將剝奪他們的權利。他們有用且強大的技術將帶來生產力的提升。此外，GenAI 公司還面臨第二次「仍處於起步階段」的雪崩風險，即模型崩潰，因為如果沒有自動方法來過濾多個不同向量的輸入質量，模型將遭受質量不斷下降的影響。輸出直到它們逐漸變得毫無價值。 GIGO 的普遍法則，垃圾進，垃圾出，也適用於 GenAI 的世界。

And finally, beyond these 2 game over risks, the current processes being applied to GenAI model training could be made much more efficient in multiple ways, if a robust automated input filter that also allowed for identification were applied.

最後，除了這兩個遊戲結束風險之外，如果應用還允許識別的強大的自動輸入過濾器，當前應用於 GenAI 模型訓練的流程可以透過多種方式變得更有效率。

And third is a group much larger than the first 2 combined, a group comprised of 8 billion people. We're all stakeholders in stopping our memories, such as the pictures of our children from being used and monetized without our knowledge, let alone our permission. One of the statements coming out of the White House on this topic a few weeks ago was "The highest standards must be upheld to ensure that GenAI innovation doesn't come at the expense of Americans rights and safety." Extend that statement to all countries' citizens, and we wholeheartedly agree. A system that allows for an extensible and adaptable opt-in and/or opt-out filter benefits all, and we are excited to soon offer the world a single system that will allow for that, instilling confidence in content authenticity and a whole lot more.

第三個群體比前兩個群體的總和還要大得多，由 80 億人組成。我們都是阻止我們的記憶的利益相關者，例如我們孩子的照片在我們不知情的情況下被使用和貨幣化，更不用說我們的許可了。幾週前，白宮就這一話題發表的聲明之一是“必須堅持最高標準，以確保 GenAI 創新不會以犧牲美國人的權利和安全為代價。”將這項聲明延伸至所有國家的公民，我們完全同意。一個允許可擴展和適應性強的選擇加入和/或選擇退出過濾器的系統對所有人都有好處，我們很高興很快為世界提供一個單一的系統，可以實現這一點，灌輸對內容真實性的信心以及更多。

In sum, some of the brightest minds in the world, spanning both the public and private sectors, have instinctually understood that, yes, our technology has a role to play in what will likely prove to be the most powerful technology advancements since the Internet itself. And importantly, they've shown a willingness to act to address the problems that must be addressed to unleash this power. We applaud them and are excited to build upon the foundation they have set due to our legacy, experience and unrivaled expertise in digital watermarking, we have a meaningful role to play in solving the problems at hand. Digimarc will deliver a solution that provides for authenticity, security, safety and protection of rights, a system that benefits all.

總之，世界上一些最聰明的人，無論是公共部門還是私營部門，都本能地認識到，是的，我們的技術可以在自互聯網本身以來最強大的技術進步中發揮作用。 。重要的是，他們已經表現出採取行動解決釋放這種力量所必須解決的問題的意願。我們對他們表示讚賞，並很高興能夠在他們所奠定的基礎上再接再厲，因為我們在數位浮水印方面的遺產、經驗和無與倫比的專業知識，我們在解決當前問題方面可以發揮有意義的作用。 Digimarc 將提供一個解決方案，提供真實性、安全性、安全性和權利保護，這是一個惠及所有人的系統。

As we finish up the work we have been doing ahead of the launch, we are thankful for the positive reception we are already receiving with some incredibly important stakeholders and are excited to unveil more soon. I will now turn the call over to Charles to discuss our financial results.

當我們完成發布前所做的工作時，我們感謝一些非常重要的利害關係人已經給予我們的正面回應，並很高興盡快推出更多內容。我現在將把電話轉給查爾斯，討論我們的財務表現。

Thank you, Riley, and hello, everyone. Before I dive deeper into our Q2 financial results, there are some financial highlights that are important to emphasize. We closed $8.8 million in first year commercial bookings, up more than 300% year-over-year. We delivered 59% year-over-year subscription revenue growth from current products. We achieved 84% subscription and gross profit margin, and we significantly reduced our operating expenses and cash burn from last year. I highlight these areas as they are critical drivers as we work hard to get the business to profitability.

謝謝你，萊利，大家好。在深入研究第二季財務表現之前，有一些重要的財務亮點需要強調。我們第一年的商業預訂收入為 880 萬美元，年增超過 300%。我們目前產品的訂閱收入年增了 59%。我們的認購率和毛利率達到了 84%，與去年相比，我們的營運費用和現金消耗大幅減少。我強調這些領域，因為它們是我們努力使業務獲利的關鍵驅動因素。

Now on to the details. First year commercial bookings were $8.8 million during the second quarter, a 4x increase when compared to the $2.2 million booked in Q2 last year.

現在詳細介紹。第二季首年商業預訂量為 880 萬美元，比去年第二季的 220 萬美元成長了 4 倍。

As Riley mentioned, one source of this growth was upsells to existing customers. These upsells are important to mention as we have some very large customers and in most cases, we are in the earlier stages of account penetration, meaning we have a lot of runway to materially grow the revenue from these existing customers. These opportunities for revenue growth can come from adding new products and/or expanding usage of existing products. While not unexpected, it was an encouraging sign to see these customers not only renew their contracts, but to do so at higher levels of commitment.

正如萊利所提到的，這種成長的一個來源是向現有客戶進行追加銷售。這些追加銷售很重要，因為我們有一些非常大的客戶，而且在大多數情況下，我們處於帳戶滲透的早期階段，這意味著我們有很多跑道可以大幅增加這些現有客戶的收入。這些收入成長的機會可以來自於添加新產品和/或擴大現有產品的使用。雖然並不出人意料，但看到這些客戶不僅續簽了合同，而且做出了更高水平的承諾，這是一個令人鼓舞的跡象。

It's also important to highlight that many of these deals contributing to bookings this quarter were multiyear commitments. Because we only report first year bookings, the true impact of a multiyear contract is not captured. To further this point, if we signed a 3-year committed contract, for instance, only the first year's annual fees would ever be reflected in our reporting bookings number. Years 2 and 3 would never show up. The impact of that contract, however, is committed revenue for the next 3 years. I share this context because bookings would have been much higher this quarter if we included the total contract value for multiyear deals.

同樣重要的是要強調，本季促成預訂的許多交易都是多年承諾。由於我們只報告第一年的預訂情況，因此無法捕捉到多年合約的真正影響。為了進一步說明這一點，例如，如果我們簽署了一份為期 3 年的承諾合同，則只有第一年的年費才會反映在我們的報告預訂數量中。二年級和三年級永遠不會出現。然而，該合約的影響是未來 3 年的承諾收入。我分享這個背景是因為，如果我們將多年交易的總合約價值計算在內，本季的預訂量將會高得多。

Total revenue for the quarter was $8.7 million, an increase of $1 million or 13% from $7.7 million in Q2 last year. Excluding revenue from our end-of-life Piracy Intelligence product, revenue increased $1.3 million or 17% year-over-year. As a reminder, Q2 last year was the last quarter of meaningful Piracy Intelligence revenue, and so this optical headwind to year-over-year growth is now gone.

該季度總收入為 870 萬美元，比去年第二季的 770 萬美元增加了 100 萬美元，即 13%。不包括我們報廢的盜版情報產品的收入，收入年增 130 萬美元，即 17%。提醒一下，去年第二季度是盜版情報收入有意義的最後一個季度，因此這種同比增長的視覺阻力現在已經消失。

Subscription revenue, which accounted for 54% of total revenue for the quarter grew 44% from $3.2 million to $4.7 million. Our subscription revenue growth rate was 59% or $1.7 million when excluding Piracy Intelligence. Again, this headwind goes away -- this headwind goes away starting in Q3.

佔本季總收入 54% 的訂閱收入成長了 44%，從 320 萬美元增至 470 萬美元。如果不包括盜版情報，我們的訂閱收入成長率為 59%，即 170 萬美元。同樣，這種逆風消失了──這種逆風從第三季開始消失。

Service revenue declined 10% from $4.5 million to $4.1 million, reflecting the impact of HolyGrail recycling project work in Q2 last year of $700,000. Excluding this nonrecurring project work, service revenue increased $300,000 or 8%, reflecting the impact of the larger annual budget from the central banks for project work this year. We still expect our currency business to deliver double-digit growth this year.

服務收入從 450 萬美元下降 10% 至 410 萬美元，反映出去年第二季 HolyGrail 回收專案工作帶來的 70 萬美元的影響。不包括這項非經常性項目工作，服務收入增加了 30 萬美元，即 8%，反映了今年中央銀行增加項目工作年度預算的影響。我們仍然預計今年我們的貨幣業務將實現兩位數的成長。

Subscription gross profit margin improved from 73% in Q2 last year to 84% in Q2 this year. The large increase in margins year-over-year reflects 2 positive trends we foreshadowed on our Q4 earnings call that would start to occur this year and continue into next year and beyond. First, a more favorable mix of subscription revenue to our newer products, which carry higher gross profit margins on average than our legacy products. Second, our product infrastructure costs are declining even with increased usage by customers on our platform. We expect these trends to continue, resulting in further expansion over time to our subscription gross profit margins. This is an important development to note given our focus as a company on growing subscription revenue.

訂閱毛利率從去年第二季的73%提高到今年第二季的84%。利潤率同比大幅增長反映了我們在第四季度財報電話會議上預示的兩個積極趨勢，這些趨勢將從今年開始出現，並持續到明年及以後。首先，我們的新產品的訂閱收入組合更加有利，這些產品的平均毛利率比我們的傳統產品更高。其次，即使客戶在我們平台上的使用量增加，我們的產品基礎設施成本仍在下降。我們預計這些趨勢將持續下去，隨著時間的推移，我們的訂閱毛利率將進一步擴大。鑑於我們作為一家公司專注於增加訂閱收入，這是一個值得注意的重要發展。

Service gross profit margin decreased from 61% in Q2 last year to 51% in Q2 this year. The decrease reflects the impact of project work we realized from HolyGrail recycling projects in Q2 last year and some higher costs in Q2 this year, which are not expected to repeat. We anticipate service gross profit margin to be in the mid-50s on average going forward with some fluctuation quarter-to-quarter depending on labor mix.

服務毛利率從去年第二季的61%下降至今年第二季的51%。這一下降反映了我們去年第二季度從 HolyGrail 回收項目中實現的項目工作的影響，以及今年第二季度成本的上升，預計這種情況不會重複。我們預計服務毛利率平均將在 50 多歲左右，根據勞動力結構，每個季度都會有一些波動。

Operating expenses for the quarter were $16.1 million compared to $18.9 million in Q2 last year. The large decrease in operating expenses reflects the impact of the reduction in force this past February, along with other cost-saving initiatives implemented in Q1 this year. Non-GAAP operating expenses for the quarter were $12.9 million compared to $15 million in Q2 last year.

本季的營運費用為 1,610 萬美元，而去年第二季的營運費用為 1,890 萬美元。營運費用的大幅下降反映了今年二月裁員以及今年第一季實施的其他成本節約措施的影響。本季非 GAAP 營運費用為 1,290 萬美元，去年第二季為 1,500 萬美元。

Net loss per share for the quarter was $0.53 versus $0.75 in Q2 last year. Non-GAAP net loss per share, which excludes noncash and nonrecurring items, was $0.29 versus $0.47 in Q2 last year. We ended the quarter with $34.5 million in cash and investments.

本季每股淨虧損為 0.53 美元，而去年第二季為 0.75 美元。非 GAAP 每股淨虧損（不含非現金和非經常性項目）為 0.29 美元，去年第二季為 0.47 美元。本季結束時，我們擁有 3,450 萬美元的現金和投資。

We used $8.5 million of cash and investments during the quarter compared to $14.7 million in Q2 last year. Our cash usage for the quarter, while much lower than last year, reflecting higher revenues and lower costs, was negatively impacted by unfavorable timing of customer receipts. It was also much higher than we anticipate our quarterly results going forward.

我們在本季使用了 850 萬美元的現金和投資，而去年第二季為 1,470 萬美元。我們本季的現金使用雖然遠低於去年，反映出營收增加和成本降低，但受到客戶收貨時間不利的負面影響。它也遠高於我們對未來季度業績的預期。

For the second half of 2023, we expect our total cash usage for the 6-month period to be noticeably less than the amount of cash we used in the last 3 months alone. As we have stated before, we continue to be focused on building a sustainable business capable of extremely high cash flow generation. For further discussion of our financial results and risks and prospects for our business, please see our Form 10-Q that will be filed with the SEC.

對於 2023 年下半年，我們預計這 6 個月期間的現金使用總量將明顯少於過去 3 個月的現金使用量。正如我們之前所說，我們繼續專注於建立能夠產生極高現金流的永續業務。有關我們的財務業績、風險和業務前景的進​​一步討論，請參閱我們將向 SEC 提交的 10-Q 表格。

I'll now turn the call back over to Riley for final remarks.

我現在將把電話轉回給萊利，讓其作最後發言。

Thanks, Charles. Q2 was a strong quarter. On both the direct and channel front, we were successful in not just being easy to begin doing business with, but also excellent at guiding customers along their product digitization journey. As promised at the end of last quarter's call and continues today, we are seeing momentum across all areas of our business, and that strength is showing up in our income statement and the 2 key financial metrics by which we obsess with 59% year-over-year subscription revenue growth from current products and the sequential addition of another 400 basis points of subscription gross margin to a near best-in-class 84%.

謝謝，查爾斯。第二季度是一個強勁的季度。在直接和通路方面，我們的成功不僅在於易於開展業務，而且還擅長引導客戶完成產品數位化之旅。正如上季度電話會議結束時所承諾的以及今天仍在繼續的那樣，我們看到了我們所有業務領域的發展勢頭，這種優勢體現在我們的損益表和我們所關注的2 個關鍵財務指標中，年比成長59%當前產品的訂閱收入實現了年度成長，訂閱毛利率又增加了 400 個基點，達到接近同類最佳的 84%。

But however strong Q2 was, what continues to excite us most is where we are going, because as we are beginning to show the results of our transformation to unlock the unparalleled hour of our world-leading product digitization hyperscaler, we are also on the cusp of extending that opportunity more fully to the digital world, a domain in which the combination of our past and present, will add to our delivery of a generational future.

但無論第二季度表現如何，最讓我們興奮的是我們的發展方向，因為當我們開始展示我們的轉型成果，以釋放我們世界​​領先的產品數位化超大規模的無與倫比的時刻時，我們也正處於風口浪尖將這一機會更充分地擴展到數位世界，在這個領域，我們的過去和現在相結合，將有助於我們創造一代人的未來。

Ryan will now open the call for questions.

瑞安現在將開始提問。

(Operator Instructions) Our first question comes from the line of Jim Ricchiuti with Needham & Company.

（操作員說明）我們的第一個問題來自 Needham & Company 的 Jim Ricchiuti。

This is actually Chris Grenga on for Jim. You mentioned that you expect cash usage to be lower in the back half than in Q2. Could you frame for us some of the factors that you expect to drive that result? And maybe speak to the weights of those factors in driving that result and your visibility there?

這實際上是克里斯·格倫加 (Chris Grenga) 替吉姆 (Jim) 配音的。您提到您預計下半年的現金使用量將低於第二季。您能為我們列出一些您期望推動這項結果的因素嗎？也許可以談談這些因素在推動這一結果方面的權重以及您在那裡的知名度？

Yes. It's a combination of timing of customer receipts. We have some large customer receipts coming on, but also growing revenues. As we talked about on the last call, the $32 million contract has 3 projects to it and they start in different phases. As that continues to ramp, that will both drive revenue as well as additional cash but some of it is also just related to the timing of cash payments, including the large contract we have with Walmart that we signed last year.

是的。這是顧客收貨時間的組合。我們收到了一些大客戶的收入，而且收入也不斷成長。正如我們在上次電話會議中談到的，這份價值 3200 萬美元的合約包含 3 個項目，並且它們開始於不同的階段。隨著這一數字的持續增長，這將推動收入和額外現金，但其中一些也僅與現金支付的時間有關，包括我們去年與沃爾瑪簽署的大型合約。

Yes. And Chris, we grew revenue 59 -- we grew substantially 59% year-over-year in Q2. We expanded gross margin by 1,100 basis points. That's an incredibly strong tailwind for cash flow -- for a reduction in cash burn. Those 2 big trends growing our top line and expanding the gross margin.

是的。克里斯，我們的收入成長了 59——第二季度同比大幅增長了 59%。我們將毛利率提高了 1,100 個基點。這對現金流來說是一個令人難以置信的強勁推動力——減少現金消耗。這兩大趨勢增加了我們的收入並擴大了毛利率。

Got it. And could you -- could you elaborate a bit on the sandboxed version of the factory automation? What -- I guess, what that entails for those customers and what they were doing before in the absence of a program like that? And yes, just elaborate on the nature of that product.

知道了。能否詳細說明一下工廠自動化的沙盒版本？我想，這對這些客戶意味​​著什麼，以及他們之前在沒有這樣的計劃的情況下做了什麼？是的，只需詳細說明該產品的性質即可。

Yes, I would love to. And Chris, if you wait about 5 weeks or so, there will be a lot more out publicly about this. This is really, really exciting stuff. I just want to front run really strong joint comms plan that is being put together. But -- on the specific use case and who the customer is, stay tuned. One of the important things, and I referenced, it's a sandboxed version of our platform, right? So historically, we've gone to market with products and then we've gone to market with our full platform. And what we're finding is, and we're exploring and we're constantly learning. We're constantly opening up new opportunities. We're constantly learning new things. There's a market also for a sandboxed version of our platform.

是的，我很樂意（做某事。克里斯，如果你等待大約 5 週左右，將會有更多關於此事的公開資訊。這真的是非常非常令人興奮的事情。我只是想搶先推進正在製定的真正強大的聯合通訊計劃。但是，關於具體的用例和客戶是誰，請繼續關注。我提到過，重要的事情之一是我們平台的沙盒版本，對吧？從歷史上看，我們先將產品推向市場，然後再將完整的平台推向市場。我們正在探索並不斷學習。我們不斷開闢新的機會。我們不斷學習新事物。我們平台的沙盒版本也有市場。

So Illuminate for X, in this case, Illuminate for factory automation. And so what the buyer enables as they get some flexibility from buying the platform components itself, but not paying the cost or for a lot of components of the platform they don't need. So it's a really exciting go-to-market development that seems to have real legs here. So without getting specifically into what this customer is doing and where they see the value and who the customer is, that will all be out publicly in about 5 or 6 weeks. But more importantly, I think the idea here is we potentially could be opening up a third avenue to go to market. We got our products. We got our platform, and then we have Illuminate for X. And X being in this case, factory automation, but there's a couple of other Illuminate for X we're exploring as well.

因此，Illuminate for X，在本例中是 Illuminate for Factory Automation。因此，買家可以透過購買平台組件本身來獲得一定的靈活性，而不需要支付成本或購買他們不需要的平台的許多組件。因此，這是一個非常令人興奮的市場開發，似乎在這裡有真正的立足點。因此，無需具體了解該客戶在做什麼、他們在哪裡看到價值以及客戶是誰，這些都將在大約 5 或 6 週內公開。但更重要的是，我認為這裡的想法是我們有可能開闢第三條進入市場的途徑。我們得到了我們的產品。我們有了自己的平台，然後有了 Illuminate for X。在本例中，X 是工廠自動化，但我們也在探索其他一些 Illuminate for X。

Got it. That's very helpful. And one more, if I may. I appreciate all the color on the Generative AI vision. Do you anticipate targeting customers that are -- existing customers that are moving into using Generative AI more in their operations? Or would you anticipate that this would be targeting a new set of customers for the business?

知道了。這非常有幫助。如果可以的話，再來一張。我很欣賞生成式人工智慧願景中的所有色彩。您是否預期目標客戶是在營運中更多地使用生成式人工智慧的現有客戶？或者您預計這將為企業瞄準一群新客戶？

Well, first of all, I would say I don't know if not now in 6 months, everybody is going to be using Generative AI. So I don't know if there's a difference of customers who are not. I would say, again, here, we're going to be out and we have a very detailed comms plan and launch for upcoming product that we will be talking about more. But if you listen to what we're saying, there's benefits to all, right? So watermarking digital assets to provide authenticity and at the same time there's so much value in GenAI itself solving the 2 problems of authenticity of digital assets as well as safe and fair input for the training models.

嗯，首先，我想說，我不知道 6 個月後，每個人都會使用生成式人工智慧。所以我不知道不這樣做的客戶是否有差別。我想說，在這裡，我們將出去，我們有一個非常詳細的通訊計劃和即將推出的產品，我們將討論更多。但如果你聽聽我們所說的話，這對所有人都有好處，對嗎？因此，對數位資產進行浮水印以提供真實性，同時 GenAI 本身也具有很大的價值，可以解決數位資產的真實性以及訓練模型的安全和公平輸入的兩個問題。

But it's beyond solving those 2 problems in the GenAI world, and it's beyond even the GenAI world. So stay tuned for more on that. But huge opportunity. And we're again, one that we're uniquely positioned to provide simply because of our background in digital watermark and our relationships, our expertise. It's pretty exciting stuff.

但這超出了 GenAI 世界中解決這兩個問題的範圍，甚至超出了 GenAI 世界的範圍。因此，請繼續關注更多相關內容。但機會巨大。我們再次成為一家擁有獨特優勢的公司，這僅僅是因為我們在數位浮水印方面的背景、我們的關係以及我們的專業知識。這是非常令人興奮的事情。

Our next question comes from the line of Jeff Bernstein with Silverberg Bernstein Capital.

我們的下一個問題來自傑夫·伯恩斯坦（Jeff Bernstein）和西爾弗伯格·伯恩斯坦資本（Silverberg Bernstein Capital）的對話。

Just a couple of questions for you today. Just back on the factory automation side, is this related to -- this is going back quite a while, I think you guys had done some work with Cognex, with machine vision and you had very high relates on machine vision. Is that what we're talking about here?

今天只想問你幾個問題。回到工廠自動化方面，這是否與——這可以追溯到很長一段時間以來，我認為你們已經與康耐視做了一些機器視覺方面的工作，並且你們在機器視覺方面有非常高的相關性。這就是我們在這裡討論的嗎？

Yes, absolutely. So there is -- without mentioning the vendors, too, it's more than just 1 camera vendor that has market share and multiple -- we talk about developing an ecosystem, right? There is multiple wonderful vendors out there. Cognex itself obviously is a wonderful vendor. And as you mentioned, the historic partner, Digimarc, they're wonderful. But there is a -- a lot can be automated in a factory. There's a lot of providing identification and intelligence to items in their factory. So yes, you're absolutely on the right track. You've mentioned one of our wonderful partners and stay tuned.

是的，一點沒錯。因此，不提供應商，不僅僅是一個擁有市場份額和多個市場份額的相機供應商，我們談論的是開發一個生態系統，對吧？那裡有很多很棒的供應商。康耐視本身顯然是一家出色的供應商。正如您所提到的，歷史悠久的合作夥伴 Digimarc，他們非常棒。但工廠裡很多事情都可以自動化。他們為工廠中的物品提供了大量的識別和情報。所以是的，你絕對走在正確的道路上。您提到了我們的一位出色的合作夥伴，請繼續關注。

Got you. Okay. And then I just want to make sure I understood. When you talk about sandboxed, that's not a cybersecurity term as in not connected to the cloud?

明白你了。好的。然後我只是想確保我理解了。當您談論沙盒時，這不是網路安全術語，即未連接到雲端嗎？

No, I'm sorry.

不，我很抱歉。

Got you. Okay. Okay. I just wanted to make sure...

明白你了。好的。好的。我只是想確定一下...

And I know it's a lot easier to see a word than hear it. Illuminate for X, meaning Illuminate for a bunch of different things. It's just taking our -- whatever functionality, again, to give a step back. Our Illuminate platform is what we build our own products upon, right? And so we're taking some of the capabilities of Illuminate in our currently 4 products and say we want a little bit of this capability, a little bit of that capability. We're calling that a product.

我知道看到一個詞比聽到它容易得多。 Illuminate for X，意思是為許多不同的事物照亮。這只是讓我們的——無論什麼功能，再次退一步。我們的 Illuminate 平台是我們建立自己產品的基礎，對嗎？因此，我們在目前的 4 個產品中採用了 Illuminate 的一些功能，並表示我們想要一點這種功能，一點那種功能。我們稱之為產品。

Sometimes customers want, especially [of ours] want our full platform. They want every lever and bell and whistle and all the wonderful capabilities within Illuminate. And then sometimes people want to solve for a problem not using one of our predefined products, but using just some of our capabilities. And so that's what we're talking about sandboxed version is Illuminate for factory automation in this case or Illuminate for -- there's a couple of other ones that potentially could be coming.

有時客戶想要，尤其是[我們的]想要我們的完整平台。他們想要 Illuminate 中的每一個槓桿、附加功能以及所有出色的功能。有時，人們想要解決的問題不是使用我們預先定義的產品之一，而是只使用我們的一些功能。因此，這就是我們談論的沙盒版本，在本例中是用於工廠自動化的 Illuminate，或用於其他一些版本的 Illuminate。

Understand. Okay. That's great. And then you mentioned a deposit return program. So is this a second one in addition to -- I think you talked about one on the prior quarter.

理解。好的。那太棒了。然後你提到了押金返還計畫。那麼，這是除了上一季的一個之外的第二個嗎？我想您在上一季談到了一個。

Yes. So our wonderful VAR that we announced that we signed in Q2, and we announced a couple of months ago. As Charles just mentioned, they're building 3 products currently on top of Illuminate. One of them is to provide for the authenticity of a DRS system in a specific country. What I referenced on the earnings call is as soon as that press release came out, I think it was literally the next day, we got an invitation to a meeting for a very large country who is working on their own DRS scheme and wanted our insights and to talk to us about the value we could have because we believe there's a huge opportunity here in terms of coverage, in terms of cost effectiveness, in terms of ease of implementation. There was -- and it's important stuff. There was an article actually that somebody sent me about a week ago, 1.5 weeks ago about somebody family making $6 million or something by bringing cans from Arizona and getting the deposit back from California.

是的。所以我們宣布我們在第二季度簽署了精彩的VAR，我們在幾個月前宣布了這一消息。正如 Charles 剛才提到的，他們目前正在 Illuminate 的基礎上建立 3 種產品。其中之一是在特定國家/地區提供 DRS 系統的真實性。我在財報電話會議上提到的是，新聞稿一發布，我認為實際上是第二天，我們就收到了參加一個非常大的國家會議的邀請，該國家正在製定自己的DRS 計劃，並希望獲得我們的見解並與我們討論我們可以擁有的價值，因為我們相信在覆蓋範圍、成本效益和易於實施方面存在巨大的機會。有——而且是重要的事情。事實上，大約一周前，也就是1.5 週前，有人發給我一篇文章，內容是關於某人的家庭通過從亞利桑那州帶罐頭並從加利福尼亞州拿回押金賺了600 萬美元之類的東西。

This is a big problem. And there's ways to solve it. There's ways that existing DRS systems are using to solve it. We got a solution that can extend coverage and do it in a lot more cost-effective way. But that's -- and that's the one we're going to go through of our -- we have one VAR that we announced earlier in Q2 as part of the $32 million deal, and we're looking to expand that network and also to help that VAR be more successful in other countries.

這是個大問題。並且有辦法解決它。現有 DRS 系統正在使用多種方法來解決這個問題。我們找到了一個可以擴大覆蓋範圍並以更具成本效益的方式實現的解決方案。但這就是——這就是我們要經歷的——我們在第二季度早些時候宣布了一項 VAR，作為 3200 萬美元交易的一部分，我們希望擴大該網絡並提供幫助VAR 在其他國家更加成功。

Got you. And then you mentioned adding one more VAR. Any color on kind of the general area that VAR is in?

明白你了。然後你提到再增加一名VAR。 VAR 所在的一般區域有什麼顏色嗎？

Yes, and they're using Illuminate. So you mean what -- so not what the use case are they going after? What end market they -- they're packaging and label company.

是的，他們正在使用 Illuminate。所以你的意思是——而不是他們追求的用例是什麼？他們的終端市場是什麼——他們是包裝和標籤公司。

Got you. Okay. All right. And lastly, there was a mention about the product infrastructure costs coming down as customers actually utilized your product more. And it sounds a little counterintuitive to me. Could you sort of just walk us through how that is?

明白你了。好的。好的。最後，有人提到，隨著客戶實際更多地使用您的產品，產品基礎設施成本會下降。這對我來說聽起來有點違反直覺。可以向我們介紹一下這是怎麼回事嗎？

Yes. I mean we're updating the platform capabilities that we have that it will provide for more efficiency from a cost perspective and be able to scale out. So we're taking some on legacy technology and updating that to a newer platform, which is the Illuminate platform. So as we transition customers off of our legacy platform onto that, we expect that we'll continue to be able to drive the average price down.

是的。我的意思是，我們正在更新我們擁有的平台功能，它將從成本角度提供更高的效率，並且能夠橫向擴展。因此，我們正在採用一些遺留技術並將其更新到更新的平台，即 Illuminate 平台。因此，當我們將客戶從舊平台轉移到該平台時，我們預計我們將繼續能夠降低平均價格。

(Operator Instructions) Our next question comes from the line of Robin Knipp with Janney Montgomery Scott.

（操作員說明）我們的下一個問題來自 Robin Knipp 和 Janney Montgomery Scott 的路線。

I appreciate it, gentlemen. And congrats on a really good quarter. I suspect I know the answer to this question, but I'll ask it anyway. Riley, are you able to share with us the collective total of the different contracts that were multiyear deals that we were only reporting on the first year?

我很感激，先生們。並祝賀一個非常好的季度。我懷疑我知道這個問題的答案，但我還是會問。萊利，您能否與我們分享我們僅在第一年報告的多年期交易的不同合約的總數？

Yes. We intentionally aren't trying to throw out other metrics, but it's into the 7 figures. But I don't want to get into -- there was a reason why we went away from reporting both total and first because it was confusing, but it was sizable.

是的。我們故意不想放棄其他指標，但它是 7 位數。但我不想談及——我們不報告總數和首次報告是有原因的，因為它令人困惑，但它的規模相當大。

Okay. Very good. Appreciate it. Nice quarter.

好的。非常好。欣賞它。不錯的季度。

(Operator Instructions) As there are no further questions, I would now hand the conference over to Riley McCormack for closing comments.

（操作員指示）由於沒有其他問題，我現在將會議交給 Riley McCormack 進行總結評論。

Thanks, Ryan, and thanks, everyone. We hope you have a wonderful rest of your day. Take care.

謝謝瑞安，謝謝大家。我們希望您度過愉快的一天。小心。

Thank you. The conference of Digimarc Corporation has now concluded. Thank you for your participation. You may now disconnect your lines.

謝謝。 Digimarc 公司的會議現已結束。感謝您的參與。現在您可以斷開線路。