DMRC

Newly appointed CEO Paul Carrero frames Digimart as a company with strong, differentiated proprietary technology (digital/physical watermarking, Illuminate stack) held back by fixable commercial execution gaps, and is executing a four-priority organizational transformation to drive disciplined growth:

• Leadership & Organizational Restructuring

  • Hired a new Chief Revenue Officer (CRO) to unify global sales, partnerships, and customer success under single accountable ownership, closing prior diffuse accountability gaps
  • Hired a dedicated VP of Retail Solutions for the company's largest high-growth vertical, replacing the historical part-time coverage model
  • Restructured the C-suite to add clear functional ownership: a COO oversees cross-functional execution and operating strategy, a CPO owns the value-based product roadmap, and a new VP of Partner & Ecosystem will manage the global partner network; existing CTO and CFO functions are retained
  • Senior leadership team build-out is on track to complete by the end of Q3 2026, with account executive capacity to be added through Q3 and Q4

• Strategic Focus Prioritization

  • Narrowed commercial sales focus to two high-value verticals with the strongest product differentiation and existing proof points: Retail (centered on the secure gift card anti-fraud solution) and CPG (anchored by digital link product compliance solutions)
  • Other verticals (pharma, life sciences, media/tech, government, excluding central bank counterfeit deterrence work) will continue to be served horizontally via the partner ecosystem rather than dedicated vertical sales capacity, a capital-efficient prioritization choice not an exit from these markets
  • Content provenance, C2PA compliance, and AI agent authentication (positioned for the EU AI Act enforcement) is identified as a high-potential underappreciated opportunity that Digimart is already positioned for, but will not receive dedicated vertical resourcing at this time to maintain discipline

• Commercial & Customer Engagement Improvements

  • Refined go-to-market messaging to clearly outline target industries, solved problems, and customer value, all enabled by Digimart's common platform
  • Implemented a formal 360-degree customer engagement model to turn account management into a repeatable discipline, to accelerate upsell/cross-sell and improve retention
  • Built an end-to-end integrated partner ecosystem for scaling the secure gift card solution: BlackRock Network and Incom for card issuance/distribution, Zeeper Technologies, Datalogic, and Honeywell for point-of-sale scanning, Graphtec USA STL for secure label serialization, and Westrock for packaging integration

• Business Development Highlights

  • The retail secure gift card solution is already live in 115 Schnucks stores, demonstrating production-level success; two additional retailers have committed to deployments starting in late August 2026 and October 2026
  • A large retailer that previously postponed its pilot due to software constraints will now launch a smaller-scale pilot in September 2026, targeting full deployment in Q1 2027; multiple other retailers plan rollouts in H1 2027
  • The retail gift card pipeline has grown 30x since the start of 2026, with over 31 large and mid-sized retailers in varying stages of engagement
  • A global CPG manufacturer is already running a live global rollout of Digimart's digital link platform across 45,000 SKUs, positioned to meet upcoming mandatory compliance requirements for GS1 Sunrise 2027 and the EU Digital Product Passport

• Financial Operational Highlights

  • GAAP operating expenses were $16.7 million (including $5.4 million in stock-based compensation and $700,000 in severance for the former CEO); excluding one-time costs, operating expenses fell 19% ($2.5 million) YoY to $10.6 million
  • Non-GAAP operating expenses were $8.1 million, down 9% ($800,000) YoY on lower cash compensation and operating costs
  • Ended Q2 with $8.8 million in cash and short-term investments, no debt outstanding

• Management withdrew the original 2026 full-year target of significant ARR growth, due to the $2.6 million government customer contract reduction and deferred timing of ARR growth from the secure gift card initiative (growth has shifted a few quarters to 2027, after partner alignment work completed)
• Management continues to expect meaningful ARR growth from the secure gift card business as deployments accelerate, with meaningful demand build expected through H2 2026, and ramp to start in late Q4 2026 / early Q1 2027
• Management is working to restructure the reduced government customer contract, recertify legacy projects, and certify new projects; successful efforts could restore a meaningful portion of lost ARR and potentially grow ARR further, though timing and outcome remain uncertain

Digimart does not break out formal product segment financials in this call, but discloses overall and revenue category performance: Ending Q2 2026 ARR was $11.6 million, down from $15.9 million year-over-year (YoY), driven by a $3.1 million expired contract and a $2.6 million government customer contract reduction, partially offset by $1.5 million in net new ARR growth. Total Q2 revenue was $7.4 million, compared to $8 million YoY. Subscription revenue accounted for 51% of total Q2 revenue, reaching $3.7 million (down $900,000 YoY, with the 2025 expired contract responsible for nearly all the decline). Service revenue reached $3.6 million, up $300,000 YoY, with growth from both commercial and government segments. Subscription gross margin was 89% (up 4pp YoY on lower platform costs), and service gross margin was 60% (up 1pp YoY on favorable service mix).

• The timing and outcome of efforts to restore lost ARR from the reduced government customer contract are uncertain, with no committed upsell in place as of Q2 end
• Commercial execution of the new go-to-market and organizational restructuring has not yet been proven, and near-term revenue growth from the retail gift card business is deferred to 2027
• The company has limited cash on hand ($8.8 million at end-Q2) and relies on its ATM program for incremental capital to fund go-to-market build-out
• Most historical churn has been driven by two large customers, and while customer concentration has decreased, unforeseen customer contract changes or cancellations could continue to impact ARR

Q: Why focus specifically on retail and CPG, and what is the timeline to complete the new senior leadership team and go-to-market organization? / A: Retail and CPG have the most developed existing solutions, the greatest current product differentiation, and offer the best opportunity to build a durable competitive moat, especially for the already proven retail secure gift card program. Key senior hires (CRO, VP of Retail Solutions) are already complete; full senior team build-out will finish by the end of Q3 2026, with account executive capacity added through Q3 and Q4.

Q: Will pricing and packaging need to evolve alongside the new go-to-market strategy, and is there any upside for 2026 holiday season revenue from the gift card business? / A: Pricing and packaging is already fully defined and working well for the retail gift card program, so no changes are needed there; minor repackaging for other solutions aligned to customer problem statements will happen quickly in the short term. No meaningful upside is expected for the 2026 holiday season, as partner and pipeline build-out will continue through H2 2026, with meaningful ramping starting in late Q4 2026 or early Q1 2027.

Q: What is the approach to capital allocation after the shift to incremental capital raising? / A: Nearly all new capital will go toward building out the new go-to-market organization and teams, with the goal of completing the build-out in as cost-neutral a manner as possible, balancing growth investment with cost discipline.

Q: Why is the GS1 digital link opportunity for CPG uniquely compelling for near-term adoption? / A: The GS1 Sunrise 2027 mandate and EU Digital Product Passport requirement are external regulatory forcing functions that create mandatory, time-bound demand for compliance solutions, rather than discretionary customer purchases. The solution is already proven via a live 45,000-SKU rollout with a major global CPG manufacturer, creating a referenceable case to duplicate across the industry.