SOURCE: Digimarc Corporation

Digimarc Corporation

October 30, 2013 16:05 ET

Digimarc Reports Third Quarter 2013 Financial Results

BEAVERTON, OR--(Marketwired - Oct 30, 2013) - Digimarc Corporation (NASDAQ: DMRC) reported financial results for the third quarter ended September 30, 2013.

Third Quarter 2013 Financial Results
Revenue for the third quarter of 2013 was $7.4 million compared to $8.9 million in the third quarter of 2012. The decrease was primarily due to the end of the fixed quarterly license payments from Intellectual Ventures in May 2013, partially offset by increased subscription revenue from the company's acquisition of Attributor Corporation in December 2012, and increased revenue from the Central Banks.

Operating loss for the third quarter of 2013 was $2.0 million compared to operating income of $1.6 million in the same quarter a year ago. The operating results for the third quarter of 2013 reflect the reduced revenue and the addition of Attributor's operations as well as increased investments in sales and marketing, and research and development initiatives.

Net loss for the third quarter of 2013 totaled $0.8 million or $(0.12) per diluted share compared to net income of $1.0 million or $0.14 per diluted share in the third quarter of 2012. The decrease was due to lower operating income, partially offset by a benefit for income taxes in the third quarter of 2013.

At September 30, 2013, cash, cash equivalents and marketable securities totaled $38.1 million compared to $39.1 million at December 31, 2012. 

Conference Call
Digimarc will hold a conference call later today (Wednesday, October 30, 2013) to discuss these results. Chairman and CEO Bruce Davis and CFO Mike McConnell 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 www.earnings.com, and will be available for replay through November 6, 2013. 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 5-10 minutes prior to the scheduled start time:

Number: 866-562-9934
Conference ID: 87531956

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 digital 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 subscription revenue from the company's acquisition of Attributor, increased investments in sales and marketing and research and development 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, 2012 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     Nine-Month Information  
    September 30,     September 30,     September 30,     September 30,  
    2013     2012     2013     2012  
Revenue:                                
  Service   $ 3,030     $ 2,616     $ 8,981     $ 8,273  
  Subscription     1,424       327       4,241       922  
  License     2,971       5,960       14,916       25,866  
    Total revenue     7,425       8,903       28,138       35,061  
                                 
Cost of revenue:                                
  Service     1,232       1,362       4,067       4,544  
  Subscription     625       46       1,848       138  
  License     98       59       294       178  
    Total cost of revenue     1,955       1,467       6,209       4,860  
                                 
Gross profit:                                
  Service     1,798       1,254       4,914       3,729  
  Subscription     799       281       2,393       784  
  License     2,873       5,901       14,622       25,688  
    Total gross profit     5,470       7,436       21,929       30,201  
                                 
Gross margin:                                
  Service     59 %     48 %     55 %     45 %
  Subscription     56 %     86 %     56 %     85 %
  License     97 %     99 %     98 %     99 %
    Percentage of gross profit to total revenue     74 %     84 %     78 %     86 %
                                 
Operating expenses:                                
  Sales and marketing     1,482       937       4,322       2,914  
  Research, development and engineering     3,277       2,320       8,824       6,464  
  General and administrative     2,456       2,282       6,990       7,231  
  Intellectual property     278       309       816       919  
    Total operating expenses     7,493       5,848       20,952       17,528  
                                 
Operating income (loss)     (2,023 )     1,588       977       12,673  
                                 
Net loss from joint ventures     -       -       -       (1,107 )
Other income, net     33       48       81       139  
                                 
Income (loss) before income taxes     (1,990 )     1,636       1,058       11,705  
                                 
(Provision) benefit for income taxes     1,195       (633 )     (280 )     (4,487 )
Net income (loss)   $ (795 )   $ 1,003     $ 778     $ 7,218  
                                 
Earnings (loss) per common share:                                
Earnings (loss) per common share - basic   $ (0.12 )   $ 0.14     $ 0.09     $ 1.02  
Earnings (loss) per common share - diluted   $ (0.12 )   $ 0.14     $ 0.09     $ 0.98  
  Weighted average common shares outstanding - basic     6,860       6,761       6,850       6,745  
  Weighted average common shares outstanding - diluted     6,860       6,984       7,080       6,997  
                                 
Cash dividends declared per common share:   $ 0.11     $ 0.11     $ 0.33     $ 0.22  
                                 
                                 
   
   
Digimarc Corporation  
Consolidated Cash Flow Information  
(in thousands)  
(Unaudited)  
                         
    Three-Month Information     Nine-Month Information  
    September 30,     September 30,     September 30,     September 30,  
    2013     2012     2013     2012  
Cash flows from operating activities:                                
  Net income (loss)   $ (795 )   $ 1,003     $ 778     $ 7,218  
  Adjustments to reconcile net income (loss) to net cash provided by operating activities:                                
    Depreciation and amortization of property and equipment     193       152       513       444  
    Amortization and write-off of intangibles     329       59       931       213  
    Gain on reversal of contingent merger consideration     -       -       (190 )     -  
    Stock-based compensation     1,050       1,395       3,219       4,152  
    Net loss from joint ventures     -       -       -       1,107  
    Deferred income taxes     (1,052 )     (139 )     354       (77 )
    Tax benefit from stock-based awards     -       492       -       2,385  
    Excess tax benefit from stock-based awards     -       (263 )     -       (1,801 )
    Increase in allowance for dobutful accounts     19       -       22       -  
  Changes in operating assets and liabilities:                                
    Trade accounts receivable, net     (617 )     (1,087 )     (923 )     (128 )
    Other current assets     (306 )     (177 )     (577 )     (45 )
    Other assets     (53 )     26       (99 )     167  
    Accounts payable and other accrued liabilities     58       172       286       (119 )
    Income taxes payable     64       (139 )     88       875  
    Deferred revenue     (374 )     (185 )     263       (512 )
      Net cash provided by (used in) operating activities     (1,484 )     1,309       4,665       13,879  
                                 
Cash flows from investing activities:                                
  Purchase of property and equipment     (1,257 )     (122 )     (1,532 )     (376 )
  Capitalized patent costs and purchased intellectual property     (318 )     (241 )     (824 )     (898 )
  Investment in joint ventures, net     -       -       -       (692 )
  Sale or maturity of marketable securities     11,870       48,544       47,344       117,680  
  Purchase of marketable securities     (11,126 )     (46,908 )     (48,186 )     (122,132 )
    Net cash provided by (used in) investing activities     (831 )     1,273       (3,198 )     (6,418 )
                                 
Cash flows from financing activities:                                
  Issuance of common stock     -       845       -       1,448  
  Purchase of common stock     (112 )     (1,712 )     (854 )     (3,899 )
  Cash dividends paid     (799 )     (782 )     (2,400 )     (1,561 )
  Excess tax benefit from stock-based awards     -       263       -       1,801  
    Net cash used in financing activities     (911 )     (1,386 )     (3,254 )     (2,211 )
                                 
    Net increase (decrease) in cash and cash equivalents (1)   $ (3,226 )   $ 1,196     $ (1,787 )   $ 5,250  
                                 
                                 
  Cash equivalents and marketable securities at beginning of period     42,081       43,520       39,056       33,378  
  Cash equivalents and marketable securities at end of period     38,111       43,080       38,111       43,080  
    (1) Net increase (decrease) in cash, cash equivalents and marketable securities   $ (3,970 )   $ (440 )   $ (945 )   $ 9,702  
                                 
                                 
 
 
Digimarc Corporation
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
         
         
    September 30,   December 31,
    2013   2012
Assets            
  Current assets:            
    Cash and cash equivalents (2)   $ 5,079   $ 6,866
    Marketable securities (2)     27,935     25,403
    Trade accounts receivable, net     5,117     4,216
    Other current assets     1,507     1,016
      Total current assets     39,638     37,501
  Marketable securities (2)     5,097     6,787
  Property and equipment, net     2,472     1,453
  Intangibles, net     6,700     6,721
  Goodwill     1,114     1,114
  Deferred tax assets, net     3,217     3,589
  Other assets     265     166
      Total assets   $ 58,503   $ 57,331
             
Liabilities and Shareholders' Equity            
  Current liabilities:            
    Accounts payable and other accrued liabilities   $ 1,482   $ 1,143
    Deferred revenue     2,784     2,512
      Total current liabilities     4,266     3,655
  Deferred rent and other long-term liabilities     405     673
      Total liabilities     4,671     4,328
             
  Commitments and contingencies            
               
    Shareholders' equity:            
    Preferred stock     50     50
    Common stock     7     7
    Additional paid-in capital     42,320     39,869
    Retained earnings     11,455     13,077
      Total shareholders' equity     53,832     53,003
                 
      Total liabilities and shareholders' equity   $ 58,503   $ 57,331
             
             
(2) Aggregate cash, cash equivalents, short- and long-term marketable securities was $38,111 and $39,056 at September 30 2013 and December 31, 2012, respectively.