|Wal-Mart deal a big deal|
Beaverton-based Digimarc saw shares pop more than 40 percent in Thursday trading, a day after its first quarter earnings report and news of a potentially blockbuster deal with the world’s largest retailer.
Digimarc reported first-quarter revenue of $5.7 million, up slightly from $5.6 million in the year-ago quarter. Reported revenue topped Wall Street’s expectations. However, the company widened its net loss in the quarter slightly to $8.5 million, or 74 cents per share, compared to a loss of $8.1 million, or 72 cents per share, last year.
Though the company reported losses, news of the revenue beat and a major ongoing contract with Walmart boosted Wall Street’s appetite for shares.
Digimarc has been transforming for the last 10 years and its methodical strategy appears to now be paying off. Starting in 2008, when it sold off a major business unit, the company focused on an emerging new market to supply the next generation of product and media identification.
The company developed what it calls an Intuitive Computing Platform and features the Digimarc Barcode.
The Digimarc Barcode allows brands and retailers to print identifying barcodes all over a product packaging in way that is imperceptible to the human eye. This means that at checkouts an item can be scanned without thought to product orientation over the scanner, which speeds up the process. Because of the way the Digimarc Barcode is incorporated into packaging it also means the code can be more reliable when it is part of thermal labels used on fresh items. It also allows dynamic pricing on products — a first for brick-and-mortar stores but something that is easy for online retailers.
The newly announced deal with Walmart will see Digimarc’s technology used in all of the retailer's 4,700 U.S. stores to manage packaged fresh foods. Additionally, the company has two other programs running with the retailer, one that has the Digimarc Barcode in private label products and one that works with leading Walmart suppliers, CEO Bruce Davis told analysts on a conference call Wednesday.
“Students of our strategy will recognize (Walmart’s) announcement as a monumental accomplishment on our path to globalization of the Intuitive Computing Platform,” Davis said. “It’s the tipping point we have been waiting for.”
The Walmart deal is effective immediately and has an unlimited duration. Digimarc will receive $3 million per year from Walmart, booked in $750,000 quarterly payments.
Davis also noted the company has similar pilots for thermal labeling with retailers Wegmans and New Seasons, plus an unnamed third retailer. Additionally, he said one of the pilots is transitioning to full production.
Aside from the progress being made on the retail and consumer packaged goods front, Davis hinted that the technology is finding use in plastics recycling.
“The Digimarc Barcode offers the potential to more accurately identify plastics and other recyclables by enhancing the substrates, labels and shrink sleeves of plastic packaging to contain multi-application unique identifiers,” Davis said.
This means, it could be easier to create a unique identity in the texture of plastics that can be scanned and managed better than current labeling and make recycling easier and more effective. To work on this, the company is part of the Ellen MacArthur Foundation’s New Plastics Economy and an initiative called The Holy Grail.