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Digimarc Reports First Quarter 2014 Financial Results

BEAVERTON, OR--(Marketwired - Apr 23, 2014) - Digimarc Corporation (NASDAQ: DMRC) reported financial results for the first quarter ended March 31, 2014.

First Quarter 2014 Results
Revenue for the first quarter of 2014 totaled $7.2 million compared to $10.2 million in the first quarter of 2013. The decrease was primarily due to the end of the scheduled minimum quarterly license fee payments from Intellectual Ventures (IV) in the second quarter of 2013. The comparative decline was partially offset by increased royalty revenue from other licensees.

Operating loss for the first quarter of 2014 totaled $3.3 million compared to operating income of $1.6 million in the same quarter a year-ago. The operating loss was primarily due to lower revenue and increased investment in the company's ongoing product development and sales growth initiatives, mainly focused around Digimarc Discover and Barcode.

Net loss for the first quarter of 2014 totaled $2.0 million or $(0.29) per diluted share compared to net income of $1.0 million or $0.13 per diluted share in the first quarter of 2013.

At March 31, 2014, cash, cash equivalents and marketable securities totaled $32.3 million compared to $35.0 million at December 31, 2013. 

Conference Call
Digimarc will hold a conference call later today (Wednesday, April 23, 2014) to discuss these results. Management will also provide an update on market conditions and execution of strategy. Chairman and CEO Bruce Davis and CFO Charles Beck will host the call starting at 5:00 p.m. Eastern time (2:00 p.m. Pacific time). A question and answer session will follow management's presentation.

The call will be broadcast live via webcast at www.digimarc.com/investors and available for replay through May 23, 2014. The webcast will be archived and available on Digimarc's website at www.digimarc.com/investors/investor-events-and-webcasts.

For those who wish to listen to the call via telephone, please dial the telephone number below at least five minutes prior to the scheduled start time:

Number: 866-562-9934
Conference ID: 27179676

If you have any difficulty connecting with the conference call, please contact Liolios Group at 949-574-3860.

About Digimarc
Digimarc Corporation (NASDAQ: DMRC), based in Beaverton, Oregon, is a leading innovator and provider of enabling technologies that create digital identities for all forms of media and many everyday objects. The embedded Digimarc IDs are imperceptible to humans, but not to computers, networks and devices like mobile phones, which can now use cameras and microphones as sensory inputs to "see, hear and understand" the world around them within the context of their environment. Digimarc has built an extensive intellectual property portfolio with patents in digital watermarking, content identification and management, media and object discovery to enable ubiquitous computing, and related technologies. Digimarc develops solutions, licenses its intellectual property, and provides development services to business partners across a range of industries. For more information, visit www.digimarc.com.

Forward-looking Statements
With the exception of historical information contained in this release, the matters described in this release contain various "forward-looking statements." These forward-looking statements include statements and any related inferences regarding increased royalty revenue from other licensees, increased investments in product development and sales growth initiatives, and other statements identified by terminology such as "will," "should," "expects," "estimates," "predicts" and "continue" or other derivations of these or other comparable terms. These forward-looking statements are statements of management's opinion and are subject to various assumptions, risks, uncertainties and changes in circumstances. Actual results may vary materially from those expressed or implied from the statements in this release as a result of changes in economic, business and/or regulatory factors. More detailed information about risk factors that may affect actual results will be set forth in the company's Form 10-K for the year ended December 31, 2013 and in subsequent periodic reports filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date of this release. Except as required by law, Digimarc undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this release.

  
Digimarc Corporation 
Consolidated Income Statement Information 
(in thousands, except per share amounts) 
(Unaudited) 
      
 Three-Month Information 
 March 31,  March 31, 
 2014  2013 
Revenue:       
 Service$2,988  $2,929 
 Subscription 1,412   1,384 
 License 2,805   5,930 
  Total revenue 7,205   10,243 
        
Cost of revenue:       
 Service 1,414   1,403 
 Subscription 649   635 
 License 83   96 
  Total cost of revenue 2,146   2,134 
        
Gross profit:       
 Service 1,574   1,526 
 Subscription 763   749 
 License 2,722   5,834 
  Total gross profit 5,059   8,109 
        
Gross margin:       
 Service 53%  52%
 Subscription 54%  54%
 License 97%  98%
  Percentage of gross profit to total revenue 70%  79%
        
Operating expenses:       
 Sales and marketing 1,879   1,277 
 Research, development and engineering 3,546   2,725 
 General and administrative 2,421   2,186 
 Intellectual property 534   277 
  Total operating expenses 8,380   6,465 
        
Operating income (loss) (3,321)  1,644 
        
Other income, net 27   29 
        
Income (loss) before income taxes (3,294)  1,673 
        
(Provision) benefit for income taxes 1,308   (702)
Net income (loss)$(1,986) $971 
        
Earnings (loss) per common share:       
Earnings (loss) per common share - basic$(0.29) $0.13 
Earnings (loss) per common share - diluted$(0.29) $0.13 
 Weighted average common shares outstanding - basic 7,000   6,838 
 Weighted average common shares outstanding - diluted 7,000   7,058 
        
Cash dividends declared per common share:$0.11  $0.11 
        
        
  
Digimarc Corporation 
Consolidated Cash Flow Information 
(in thousands) 
(Unaudited) 
       
  Three-Month Information 
  March 31,  March 31, 
  2014  2013 
Cash flows from operating activities:        
 Net income (loss) $(1,986) $971 
 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:        
  Depreciation and amortization of property and equipment  231   158 
  Amortization and write-off of intangibles  308   299 
  Change in allowance for doubtful accounts  (7)  - 
  Gain on reversal of contingent merger consideration  -   (190)
  Stock-based compensation  1,259   1,092 
  Deferred income taxes  (509)  (112)
  Excess tax benefit from stock-based awards  (72)  - 
 Changes in operating assets and liabilities:        
   Trade accounts receivable, net  1,809   (228)
   Other current assets  (699)  (44)
   Other assets  84   1 
   Accounts payable and other accrued liabilities  (317)  (213)
   Income taxes payable  3   778 
   Deferred revenue  (1,484)  832 
    Net cash provided by (used in) operating activities  (1,380)  3,344 
         
Cash flows from investing activities:        
  Purchase of property and equipment  (117)  (86)
  Capitalized patent costs  (295)  (228)
  Maturity of marketable securities  11,192   23,116 
  Purchase of marketable securities  (9,266)  (21,933)
    Net cash provided by investing activities  1,514   869 
         
Cash flows from financing activities:        
  Issuance of common stock  712   - 
  Purchase of common stock  (850)  (648)
  Cash dividends paid  (824)  (801)
  Excess tax benefit from stock-based awards  72   - 
    Net cash used in financing activities  (890)  (1,449)
         
    Net increase (decrease) in cash and cash equivalents (1) $(756) $2,764 
         
         
   Cash, cash equivalents and marketable securities at beginning of period  34,964   39,056 
   Cash, cash equivalents and marketable securities at end of period  32,282   40,637 
 (1) Net increase (decrease) in cash, cash equivalents and marketable securities $(2,682) $1,581 
         
 
 
Digimarc Corporation
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
     
     
  March 31, December 31,
  2014 2013
Assets      
 Current assets:      
  Cash and cash equivalents (2) $3,055 $3,811
  Marketable securities (2)  28,120  25,851
  Trade accounts receivable, net  4,036  5,838
  Other current assets  2,368  1,658
   Total current assets  37,579  37,158
 Marketable securities (2)  1,107  5,302
 Property and equipment, net  2,326  2,395
 Intangibles, net  6,740  6,709
 Goodwill  1,114  1,114
 Deferred tax assets, net  4,519  3,949
 Other assets  486  570
   Total assets $53,871 $57,197
       
Liabilities and Shareholders' Equity      
 Current liabilities:      
  Accounts payable and other accrued liabilities $1,325 $1,560
  Deferred revenue  2,690  4,218
   Total current liabilities  4,015  5,778
 Deferred rent and other long-term liabilities  505  496
   Total liabilities  4,520  6,274
       
 Commitments and contingencies      
       
 Shareholders' equity:      
  Preferred stock  50  50
  Common stock  8  7
  Additional paid-in capital  42,735  41,498
  Retained earnings  6,558  9,368
   Total shareholders' equity  49,351  50,923
       
   Total liabilities and shareholders' equity $53,871 $57,197
       
(2)Aggregate cash, cash equivalents, short- and long-term marketable securities was $32,282 and $34,964 at March 31, 2014 and December 31, 2013, respectively.
  
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