SOURCE: Digimarc Corp.

Digimarc Corp.

October 22, 2014 16:05 ET

Digimarc Reports Third Quarter 2014 Financial Results

BEAVERTON, OR--(Marketwired - Oct 22, 2014) - Digimarc Corporation (NASDAQ: DMRC) reported financial results for the third quarter ended September 30, 2014.

Third Quarter 2014 Results
Revenue for the third quarter of 2014 totaled $6.9 million compared to $7.4 million in the same quarter a year-ago. The decrease was due to lower license revenue primarily due to the scheduled completion of the quarterly license fee payments from The Nielsen Company in the first quarter of 2014.

Operating loss for the third quarter of 2014 totaled $3.2 million compared to operating loss of $2.0 million in the same quarter a year-ago. The operating loss was primarily due to lower license revenue and continued investment in the company's product development and sales growth initiatives, mainly focused on Digimarc Discover and Barcode.

Net loss for the third quarter of 2014 totaled $2.0 million or $(0.28) per diluted share compared to a net loss of $0.8 million or $(0.12) per diluted share in the third quarter of 2013.

At September 30, 2014, cash, cash equivalents and marketable securities totaled $24.7 million compared to $27.9 million at June 30, 2014.

Conference Call
Digimarc will hold a conference call later today (Wednesday, October 22, 2014) 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 simultaneously 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: 27179679

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 and the latest news, please visit www.digimarc.com and 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 impact of continued 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 Quarterly Report on Form 10-Q for the quarterly period ended September 30, 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     Nine-Month Information  
    September 30,     September 30,     September 30,     September 30,  
    2014     2013     2014     2013  
Revenue:                                
  Service   $ 3,155     $ 3,030     $ 8,859     $ 8,981  
  Subscription     1,452       1,424       4,360       4,241  
  License     2,320       2,971       6,576       14,916  
    Total revenue     6,927       7,425       19,795       28,138  
                                 
Cost of revenue:                                
  Service     1,224       1,232       3,807       4,067  
  Subscription     812       625       2,160       1,848  
  License     84       98       250       294  
    Total cost of revenue     2,120       1,955       6,217       6,209  
                                 
Gross profit:                                
  Service     1,931       1,798       5,052       4,914  
  Subscription     640       799       2,200       2,393  
  License     2,236       2,873       6,326       14,622  
    Total gross profit     4,807       5,470       13,578       21,929  
                                 
Gross margin:                                
  Service     61 %     59 %     57 %     55 %
  Subscription     44 %     56 %     50 %     56 %
  License     96 %     97 %     96 %     98 %
    Percentage of gross profit to total revenue     69 %     74 %     69 %     78 %
                                 
Operating expenses:                                
  Sales and marketing     1,999       1,482       5,930       4,322  
  Research, development and engineering     3,499       3,277       10,449       8,824  
  General and administrative     2,183       2,456       6,929       6,990  
  Intellectual property     366       278       1,287       816  
    Total operating expenses     8,047       7,493       24,595       20,952  
                                 
Operating income (loss)     (3,240 )     (2,023 )     (11,017 )     977  
                                 
Other income, net     3       33       50       81  
                                 
Income (loss) before income taxes     (3,237 )     (1,990 )     (10,967 )     1,058  
                                 
(Provision) benefit for income taxes     1,252       1,195       4,316       (280 )
Net income (loss)   $ (1,985 )   $ (795 )   $ (6,651 )   $ 778  
                                 
Earnings (loss) per common share:                                
Earnings (loss) per common share - basic   $ (0.28 )   $ (0.12 )   $ (0.95 )   $ 0.09  
Earnings (loss) per common share - diluted   $ (0.28 )   $ (0.12 )   $ (0.95 )   $ 0.09  
  Weighted average common shares outstanding - basic     7,176       6,860       7,097       6,850  
  Weighted average common shares outstanding - diluted     7,176       6,860       7,097       7,080  
                                 
Cash dividends declared per common share:   $ -     $ 0.11     $ 0.22     $ 0.33  
                                 
                                 
   
Digimarc Corporation  
Consolidated Cash Flow Information  
(in thousands)  
(Unaudited)  
             
    Nine-Month Information  
    September 30,     September 30,  
    2014     2013  
Cash flows from operating activities:                
  Net income (loss)   $ (6,651 )   $ 778  
  Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                
    Depreciation and amortization of property and equipment     708       513  
    Amortization and write-off of intangibles     916       931  
    Change in allowance for doubtful accounts     (13 )     22  
    Gain on reversal of contingent merger consideration     -       (190 )
    Stock-based compensation     4,085       3,219  
    Deferred income taxes     (2,874 )     354  
  Changes in operating assets and liabilities:                
      Trade accounts receivable, net     2,000       (923 )
      Other current assets     (1,559 )     (577 )
      Other assets     160       (99 )
      Accounts payable and other accrued liabilities     (171 )     286  
      Income taxes payable     (169 )     88  
      Deferred revenue     (2,338 )     263  
        Net cash provided by (used in) operating activities     (5,906 )     4,665  
                 
  Cash flows from investing activities:                
    Purchase of property and equipment     (1,010 )     (1,532 )
    Capitalized patent costs     (922 )     (824 )
    Maturity of marketable securities     47,961       47,344  
    Purchase of marketable securities     (38,840 )     (48,186 )
        Net cash provided by (used in) investing activities     7,189       (3,198 )
                 
  Cash flows from financing activities:                
    Issuance of common stock     1,319       -  
    Purchase of common stock     (1,931 )     (854 )
    Cash dividends paid     (1,654 )     (2,400 )
    Common stock issuance costs     (124 )     -  
        Net cash used in financing activities     (2,390 )     (3,254 )
                         
        Net decrease in cash and cash equivalents (1)   $ (1,107 )   $ (1,787 )
                 
                 
    Cash, cash equivalents and marketable securities at beginning of period     34,964       39,056  
    Cash, cash equivalents and marketable securities at end of period     24,736       38,111  
  (1) Net decrease in cash, cash equivalents and marketable securities   $ (10,228 )   $ (945 )
                   
                   
 
Digimarc Corporation
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
         
    September 30,   December 31,
    2014   2013
Assets            
  Current assets:            
    Cash and cash equivalents (2)   $ 2,704   $ 3,811
    Marketable securities (2)     19,081     25,851
    Trade accounts receivable, net     3,851     5,838
    Other current assets     3,541     1,658
      Total current assets     29,177     37,158
  Marketable securities (2)     2,951     5,302
  Property and equipment, net     2,904     2,395
  Intangibles, net     6,836     6,709
  Goodwill     1,114     1,114
  Deferred tax assets, net     5,447     3,949
  Other assets     410     570
      Total assets   $ 48,839   $ 57,197
             
Liabilities and Shareholders' Equity            
  Current liabilities:            
    Accounts payable and other accrued liabilities   $ 1,868   $ 1,560
    Deferred revenue     1,853     4,218
      Total current liabilities     3,721     5,778
  Deferred rent and other long-term liabilities     241     496
      Total liabilities     3,962     6,274
               
  Commitments and contingencies            
               
  Shareholders' equity:            
    Preferred stock     50     50
    Common stock     8     7
    Additional paid-in capital     43,756     41,498
    Retained earnings     1,063     9,368
      Total shareholders' equity     44,877     50,923
                 
      Total liabilities and shareholders' equity   $ 48,839   $ 57,197
             
     
(2)   Aggregate cash, cash equivalents, short- and long-term marketable securities was $24,736 and $34,964 at Sepetmber 30, 2014 and December 31, 2013, respectively.