Business

The significant changes that are being seen in the retail sector, including Amazon’s brick-and-mortar store initiatives and Walmart’s stepped-up e-commerce strategy, represent good news for Digimarc and its Barcode and Discover platforms, according to Digimarc CEO Bruce Davis.

“The retail industry is undergoing a major transformation,” he said July 26 on an earnings call for Digimarc’s second quarter (ended June 30). “The market was rocked during the quarter” by Amazon’s announcement that it would be buying Whole Foods, he said, adding: “The pace and scale of redefinition of the landscape appears to be accelerating. We believe these changes are positive for Digimarc” because the company’s technology “can play an important role” for retailers including Amazon, Walmart and supermarket Wegmans.

Digimarc’s technology “aims to mitigate the obvious tension between offering low prices on the one hand, and higher engagement and convenience on the other,” he said. “The goal of all retail is to provide a pleasant and efficient shopping experience at the lowest possible cost,” and “reliable efficient auto identification” such as what Digimarc provides “permeates these goals,” he told analysts.

There is an “abundance of interest in our platform now,” he said, pointing out that early adopters of Digimarc Barcode include Walmart and Wegmans. The latter retailer reported that 2,100 of its 3,000 private-brand products have been enhanced by Barcode and about 1,400 are on its shelves already, he said.

The use of Digimarc’s software in Walmart’s mobile app for smartphones, meanwhile, became known during the quarter via a disclosure in the terms and conditions section of the app, he said. Digimarc-enhanced Walmart private brand products were also discovered on the shelves of Walmart stores, he said.

Pointing to recent job postings for Walmart account management, he said specifics remained “subject to NDA,” but “we believe that opportunities with the account warrant the addition of more local resources” to that account by Digimarc.

Digimarc also became “engaged with another very large retailer” and a 
“proof of concept has been going well” with that partner, he said without identifying it.

Digimarc also continues to focus on expansion outside the U.S. “Initial interest among European prospects has been encouraging,” which led Digimarc to open a local office in Cologne, Germany in the first quarter and to start recruiting additional staff there, he said. A study group in Japan made up of industry leaders in that country, meanwhile, continues to expand its membership and activity levels, he told analysts, adding that there is a desire among the participants to start marketing Digimarc Barcode later this year instead of in 2018 as previously planned.

The company’s revenue inched up to $5.6 million in the quarter from $5.5 million a year ago. But its loss widened to $6.9 million (68 cents a share) from $5.3 million (62 cents a share), the operating loss increased to $7.1 million from $5.3 million and operating expenses grew to $10.5 million from $8.7 million, mainly due to higher investment in sales, marketing and engineering as the company continues to address opportunities in market development and delivery of Digimarc Discover and Digimarc Barcode, it said in a news release.

Digimarc shares were 0.17% lower at $30.15 in late morning trading July 27.