SOURCE: Digimarc Corp.

Digimarc Corp.

February 19, 2015 16:05 ET

Digimarc Reports Fourth Quarter and Full Year 2014 Financial Results

BEAVERTON, OR--(Marketwired - Feb 19, 2015) - Digimarc Corporation (NASDAQ: DMRC) reported financial results for the fourth quarter and fiscal year ended December 31, 2014.

Fourth Quarter 2014 Operational Highlights

  • Partnered with Shazam to enable comprehensive content discovery everywhere. The collaboration will add Digimarc print and audio identification to Shazam's mobile app, which has more than 500 million downloads and 100 million mobile monthly active users. 

  • Partnered with SGS International, a global leader in the digital imaging industry that serves top retailers and large consumer packaged goods companies, which became a certified service provider for the Digimarc© Barcode.

  • Joined the GS1 US Solution Partner Program, which marked an important milestone in the market adoption of the Digimarc Barcode. 

  • Demonstrated new mobile payment software development kit at Money 20/20 for securely exchanging payment information between retailers and shoppers.

Fourth Quarter 2014 Financial Results

Revenue for the fourth quarter of 2014 totaled $5.9 million compared to $6.8 million in the same quarter a year-ago. The decrease was due to lower license revenue reflecting the scheduled completion of quarterly license fee payments from The Nielsen Company in the first quarter of 2014 and lower reported royalties from another licensee, partially offset by increases in subscription and service revenue.

Operating loss for the fourth quarter of 2014 totaled $4.2 million compared to an operating loss of $3.4 million in the same quarter a year-ago. The higher operating loss is largely due to lower license revenue, partially offset by lower operating expenses due to the completion of the licensing audit with Intellectual Ventures in January 2014. 

Net loss for the fourth quarter of 2014 totaled $9.2 million or $(1.23) per diluted share compared to a net loss of $1.3 million or $(0.19) per diluted share in the fourth quarter of 2013. Net loss for the fourth quarter of 2014 included a $6.8 million noncash income tax charge to record a full valuation allowance against deferred tax assets as of December 31, 2014. Excluding this charge, net loss would have been $2.4 million or $(0.32) per diluted share.

Cash, cash equivalents and marketable securities increased by $14.4 million, from $24.7 million at September 30, 2014 to $39.1 million at December 31, 2014. The increase reflects the sale of 684,215 shares of common stock during the quarter, which generated cash proceeds of $16.3 million, less cash used in operations of $0.8 million.

Full Year 2014 Results
Revenue for 2014 was $25.7 million compared to $35.0 million in 2013. The decrease was due to lower license revenue reflecting the scheduled completion of the quarterly license fee payments from Intellectual Ventures in the second quarter of 2013 and from The Nielsen Company in the first quarter of 2014. Outside of licensing, revenue for 2014 was up $0.7 million compared to 2013, reflecting higher subscription revenue from Digimarc Discover and Digimarc Guardian products.

Operating loss for 2014 totaled $15.2 million compared to an operating loss of $2.4 million in 2013. The higher operating loss is largely due to lower license revenue. Operating expenses were higher in 2014 reflecting continued investment in the company's product development and sales growth initiatives, mainly focused on Digimarc Discover and Barcode.

Net loss for 2014 totaled $15.8 million or $(2.22) per diluted share compared to a net loss of $0.5 million or $(0.10) per diluted share in 2013. Net loss for 2014 included a $6.8 million noncash income tax charge to record a full valuation allowance against deferred tax assets as of December 31, 2014. Excluding this charge, the net loss for 2014 would have been $9.1 million or $(1.27) per diluted share.

Conference Call
Digimarc will hold a conference call later today (Thursday, February 19, 2015) to discuss these results, as well as 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 conference call will be broadcast live and available for replay via the investor section of the company'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: 27179680

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 consumer engagement, media management, and security solutions that create digital identities for all forms of media and many everyday objects. Digimarc's digital IDs are imperceptible to humans and enable computers, networks and devices like mobile phones to better "see, hear and understand" brand impressions and other objects of interest. 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 and the latest news, visit www.digimarc.com or follow us on Twitter @DigimarcCorp.

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 increases in subscription revenue, 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, 2014 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     Twelve-Month Information  
    December 31,     December 31,     December 31,     December 31,  
    2014     2013     2014     2013  
Revenue:                                
  Service   $ 2,868     $ 2,650     $ 11,727     $ 11,631  
  Subscription     1,843       1,350       6,203       5,591  
  License     1,152       2,826       7,728       17,742  
    Total revenue     5,863       6,826       25,658       34,964  
                                 
Cost of revenue:                                
  Service     1,270       1,260       5,077       5,327  
  Subscription     860       643       3,020       2,491  
  License     83       93       334       387  
    Total cost of revenue     2,213       1,996       8,431       8,205  
                                 
Gross profit:                                
  Service     1,598       1,390       6,650       6,304  
  Subscription     983       707       3,183       3,100  
  License     1,069       2,733       7,394       17,355  
    Total gross profit     3,650       4,830       17,227       26,759  
                                 
Gross margin:                                
  Service     56 %     52 %     57 %     54 %
  Subscription     53 %     52 %     51 %     55 %
  License     93 %     97 %     96 %     98 %
    Percentage of gross profit to total revenue     62 %     71 %     67 %     77 %
                                 
Operating expenses:                                
  Sales and marketing     2,044       1,822       7,974       6,144  
  Research, development and engineering     3,262       3,450       13,711       12,274  
  General and administrative     2,042       2,635       8,972       9,624  
  Intellectual property     506       313       1,793       1,129  
    Total operating expenses     7,854       8,220       32,450       29,171  
                                 
Operating loss     (4,204 )     (3,390 )     (15,223 )     (2,412 )
                                 
Other income, net     4       28       55       109  
                                 
Loss before income taxes     (4,200 )     (3,362 )     (15,168 )     (2,303 )
                                 
(Provision) benefit for income taxes     (4,969 )     2,077       (652 )     1,796  
Net loss   $ (9,169 )   $ (1,285 )   $ (15,820 )   $ (507 )
                                 
Earnings (loss) per common share:                                
Earnings (loss) per common share - basic   $ (1.23 )   $ (0.19 )   $ (2.22 )   $ (0.10 )
Earnings (loss) per common share - diluted   $ (1.23 )   $ (0.19 )   $ (2.22 )   $ (0.10 )
  Weighted average common shares outstanding - basic     7,453       6,913       7,187       6,866  
  Weighted average common shares outstanding - diluted     7,453       6,913       7,187       6,866  
                                 
Cash dividends declared per common share:   $ -     $ 0.11     $ 0.22     $ 0.44  
   
   
   
Digimarc Corporation  
Consolidated Cash Flow Information  
(in thousands)  
(Unaudited)  
           
  Twelve-Month Information  
  December 31,     December 31,  
  2014     2013  
Cash flows from operating activities:              
  Net loss $ (15,820 )   $ (507 )
  Adjustments to reconcile net loss to net cash provided by (used in) operating activities:              
    Depreciation and amortization of property and equipment   974       742  
    Amortization and write-off of intangibles   1,340       1,247  
    Change in allowance for doubtful accounts   (23 )     45  
    Gain on reversal of contingent merger consideration   -       (190 )
    Stock-based compensation   5,403       4,502  
    Deferred income taxes   2,085       (715 )
    Tax benefit (expense) from stock-based awards   -       (855 )
    Excess tax benefit from stock-based awards   -       (201 )
  Changes in operating assets and liabilities:              
      Trade accounts receivable, net   1,316       (1,667 )
      Other current assets   (1,028 )     (342 )
      Other assets   192       (404 )
      Accounts payable and other accrued liabilities   (635 )     124  
      Deferred revenue   (537 )     1,694  
        Net cash provided by (used in) operating activities   (6,733 )     3,473  
               
Cash flows from investing activities:              
    Purchase of property and equipment   (1,399 )     (1,644 )
    Capitalized patent costs and purchased intellectual property   (1,190 )     (1,098 )
    Sale or maturity of marketable securities   78,174       55,627  
    Purchase of marketable securities   (79,971 )     (54,590 )
        Net cash used in investing activities   (4,386 )     (1,705 )
               
Cash flows from financing activities:              
    Issuance of common stock, net of issuance costs   15,989       -  
    Exercise of stock options   1,487       -  
    Purchase of common stock   (2,392 )     (1,822 )
    Cash dividends paid   (1,654 )     (3,202 )
    Excess tax benefit from stock-based awards   -       201  
      Net cash provided by (used in) financing activities   13,430       (4,823 )
               
      Net increase (decrease) in cash and cash equivalents (1) $ 2,311     $ (3,055 )
               
               
    Cash, cash equivalents and marketable securities at beginning of period   34,964       39,056  
    Cash, cash equivalents and marketable securities at end of period   39,072       34,964  
(1)   Net increase (decrease) in cash, cash equivalents and marketable securities $ 4,108     $ (4,092 )
 
 
 
Digimarc Corporation
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
           
           
    December 31,     December 31,
    2014     2013
Assets              
  Current assets:              
    Cash and cash equivalents (2)   $ 6,122     $ 3,811
    Marketable securities (2)     32,201       25,851
    Trade accounts receivable, net     4,545       5,838
    Other current assets     2,611       1,658
      Total current assets     45,479       37,158
    Marketable securities (2)     749       5,302
    Property and equipment, net     2,976       2,395
    Intangibles, net     6,720       6,709
    Goodwill     1,114       1,114
    Deferred tax assets, net     -       3,949
    Other assets     378       570
      Total assets   $ 57,416     $ 57,197
               
Liabilities and Shareholders' Equity              
  Current liabilities:              
    Accounts payable and other accrued liabilities   $ 1,379     $ 1,560
    Deferred revenue     3,660       4,218
      Total current liabilities     5,039       5,778
  Deferred rent and other long-term liabilities     203       496
      Total liabilities     5,242       6,274
               
  Commitments and contingencies              
               
  Shareholders' equity:              
    Preferred stock     50       50
    Common stock     8       7
    Additional paid-in capital     60,222       41,498
    Retained earnings (accumulated deficit)     (8,106 )     9,368
      Total shareholders' equity     52,174       50,923
               
      Total liabilities and shareholders' equity   $ 57,416     $ 57,197
               
   
(2) Aggregate cash, cash equivalents, short- and long-term marketable securities was $39,072 and $34,964 at December 31, 2014 and December 31, 2013, respectively.
   

Contact Information

  • Company Contacts:
    Charles Beck
    Chief Financial Officer
    503-469-4721
    Email Contact

    Matt Glover
    Liolios Group, Inc.
    Investor Relations for Digimarc
    949-574-3860
    Email Contact