SOURCE: Digimarc Corporation

Digimarc Corporation

April 23, 2014 16:05 ET

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.