Digimarc Reports Fourth Quarter and Fiscal Year 2021 Financial Results
BEAVERTON, Ore., March 2, 2022 /PRNewswire/ -- Digimarc Corporation (NASDAQ: DMRC) reported financial results for the fourth quarter and fiscal year ended December 31, 2021.
Fourth Quarter 2021 Financial Results
Revenue for the fourth quarter of 2021 increased 28% to $7.1 million compared to $5.6 million in the fourth quarter of 2020, reflecting higher subscription revenue, primarily related to the sale of 10 non-core patents from our patent portfolio, and higher service revenue, primarily related to increased HolyGrail 2.0 activities.
Operating expenses for the fourth quarter of 2021 increased 13% to $13.2 million compared to $11.7 million in the fourth quarter of 2020, reflecting $1.0 million of non-recurring legal and accounting costs incurred for the acquisition of EVRYTHNG Limited. Excluding these non-recurring costs, operating expenses increased $0.4 million, or 4%, to $12.1 million, reflecting higher consulting, travel and marketing costs.
Operating loss for the fourth quarter of 2021 increased 5% to $8.2 million compared to $7.8 million in the fourth quarter of 2020, due to higher operating expenses partially offset by higher revenue.
Net loss for the fourth quarter of 2021 increased 5% to $8.2 million or $(0.50) loss per common share compared to $7.8 million or $(1.27) loss per common share in the fourth quarter of 2020. The loss per common share in the fourth quarter of 2020 was impacted by an $11.4 million adjustment representing the intrinsic value of the Series B Convertible Preferred Stock issued to TCM|Strategic Partners LLP that converted to common stock in December 2020.
Fiscal Year 2021 Financial Results
Revenue for fiscal year 2021 increased 11% to $26.5 million compared to $24.0 million in fiscal year 2020, reflecting higher subscription revenue, primarily related to the sale of 10 non-core patents from our patent portfolio and from contracts with new customers, and higher service revenue, primarily related to increased HolyGrail 2.0 activities.
Operating expenses for fiscal year 2021 increased 18% to $57.6 million compared to $48.9 million in fiscal year 2020, reflecting $6.2 million of non-recurring cost incurred under the Separation Agreement and General Release we entered into with our former chief executive officer in April 2021 upon his retirement and $1.1 million of non-recurring legal and accounting costs incurred for the acquisition of EVRYTHNG Limited. Excluding these non-recurring costs, operating expenses increased $1.4 million, or 3%, to $50.3 million, reflecting higher consulting and recruiting costs, partially offset by lower compensation costs.
Operating loss for fiscal year 2021 increased 21% to $39.9 million compared to $32.8 million in fiscal year 2020, due to higher operating expenses partially offset by higher revenue.
Other income, net for fiscal year 2021 was $5.1 million, reflecting a $5.1 million gain realized on the forgiveness of our Paycheck Protection Program loan in September 2021.
Net loss for fiscal year 2021 increased 7% to $34.8 million or $(2.11) loss per common share compared to a net loss of $32.5 million or $(3.41) loss per common share in fiscal year 2020. The loss per common share in fiscal year 2020 was impacted by the same $11.4 million adjustment noted above.
At December 31, 2021, cash, cash equivalents, short- and long-term marketable securities totaled $41.6 million compared to $77.7 million at December 31, 2020.
Conference call
Digimarc will hold a conference call today (Wednesday, March 2, 2022) to discuss these results and provide an update on market conditions and execution of strategy. CEO Riley McCormack, CFO Charles Beck and CLO Robert Chamness 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 here and in the investor section of the company's website. The conference call script will also be posted to the company's website shortly before the call.
For those who wish to call in via telephone to ask a question, please dial the number below at least five minutes before the scheduled start time:
Toll-Free Number: 866-562-9934
International Number: 706-679-0638
Conference ID: 8569889
If you have any difficulty connecting with the conference call, please contact Lara Burhenn at +1 503-469-4704.
About Digimarc
Digimarc Corporation (NASDAQ: DMRC) is a pioneer and leader in digital watermarking solutions and the automatic identification of media, including packaging, commercial print, digital images, audio and video. Digimarc helps customers drive efficiency, accuracy and security across physical and digital supply chains. Visit us at digimarc.com on LinkedIn and follow us on Twitter @digimarc to learn more.
Forward-looking statements
Except for historical information contained in this release, the matters described in this release contain various "forward-looking statements." These forward-looking statements include 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 regulatory factors. More detailed information about risk factors that may affect actual results are outlined in the company's Form 10-K for the year ended December 31, 2020, 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, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue: | ||||||||||||||||
Service | $ | 3,499 | $ | 2,899 | $ | 15,006 | $ | 13,881 | ||||||||
Subscription | 3,626 | 2,654 | 11,514 | 10,109 | ||||||||||||
Total revenue | 7,125 | 5,553 | 26,520 | 23,990 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Service | 1,584 | 1,136 | 6,299 | 5,827 | ||||||||||||
Subscription | 586 | 559 | 2,478 | 2,107 | ||||||||||||
Total cost of revenue | 2,170 | 1,695 | 8,777 | 7,934 | ||||||||||||
Gross profit: | ||||||||||||||||
Service | 1,915 | 1,763 | 8,707 | 8,054 | ||||||||||||
Subscription | 3,040 | 2,095 | 9,036 | 8,002 | ||||||||||||
Total gross profit | 4,955 | 3,858 | 17,743 | 16,056 | ||||||||||||
Gross profit margin: | ||||||||||||||||
Service | 55% | 61% | 58% | 58% | ||||||||||||
Subscription | 84% | 79% | 78% | 79% | ||||||||||||
Total gross profit margin | 70% | 69% | 67% | 67% | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 4,568 | 4,428 | 20,433 | 18,845 | ||||||||||||
Research, development and engineering | 4,612 | 4,011 | 17,542 | 17,314 | ||||||||||||
General and administrative | 4,023 | 3,253 | 19,634 | 12,710 | ||||||||||||
Total operating expenses | 13,203 | 11,692 | 57,609 | 48,869 | ||||||||||||
Operating loss | (8,248) | (7,834) | (39,866) | (32,813) | ||||||||||||
Other income: | ||||||||||||||||
Gain on extinguishment of note payable | — | — | 5,094 | — | ||||||||||||
Other income (loss) | 3 | 20 | 29 | 277 | ||||||||||||
Other income, net | 3 | 20 | 5,123 | 277 | ||||||||||||
Loss before income taxes | (8,245) | (7,814) | (34,743) | (32,536) | ||||||||||||
Benefit (provision) for income taxes | 1 | (2) | (16) | (1) | ||||||||||||
Net loss | $ | (8,244) | $ | (7,816) | $ | (34,759) | $ | (32,537) | ||||||||
Beneficial conversion feature | — | (11,443) | — | (11,443) | ||||||||||||
Net loss attributable to common shares | $ | (8,244) | $ | (19,259) | $ | (34,759) | $ | (43,980) | ||||||||
Earnings (loss) per common share: | ||||||||||||||||
Loss per common share - basic | $ | (0.50) | $ | (1.27) | $ | (2.11) | $ | (3.41) | ||||||||
Loss per common share - diluted | $ | (0.50) | $ | (1.27) | $ | (2.11) | $ | (3.41) | ||||||||
Weighted average common shares outstanding - basic | 16,565 | 15,222 | 16,463 | 12,906 | ||||||||||||
Weighted average common shares outstanding - diluted | 16,565 | 15,222 | 16,463 | 12,906 | ||||||||||||
Digimarc Corporation | ||||||||
Consolidated Balance Sheet Information | ||||||||
(in thousands) | ||||||||
(Unaudited) | ||||||||
December 31, | December 31, | |||||||
2021 | 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents (1) | $ | 13,789 | $ | 19,696 | ||||
Marketable securities (1) | 19,537 | 58,032 | ||||||
Trade accounts receivable, net | 6,368 | 3,907 | ||||||
Loan receivable from related party | 2,001 | — | ||||||
Other current assets | 2,316 | 2,197 | ||||||
Total current assets | 44,011 | 83,832 | ||||||
Marketable securities (1) | 8,292 | — | ||||||
Property and equipment, net | 2,875 | 3,272 | ||||||
Intangibles, net | 6,611 | 6,612 | ||||||
Goodwill | 1,114 | 1,114 | ||||||
Other assets | 1,973 | 2,198 | ||||||
Total assets | $ | 64,876 | $ | 97,028 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and other accrued liabilities | $ | 4,727 | $ | 2,827 | ||||
Deferred revenue | 2,989 | 3,002 | ||||||
Note payable, current | — | 3,947 | ||||||
Total current liabilities | 7,716 | 9,776 | ||||||
Lease liability and other long-term liabilities | 1,780 | 2,295 | ||||||
Note payable, long-term | — | 1,118 | ||||||
Total liabilities | 9,496 | 13,189 | ||||||
Commitments and contingencies | ||||||||
Shareholders' equity: | ||||||||
Preferred stock | 50 | 50 | ||||||
Common stock | 17 | 17 | ||||||
Additional paid-in capital | 261,324 | 255,024 | ||||||
Accumulated deficit | (206,011) | (171,252) | ||||||
Total shareholders' equity | 55,380 | 83,839 | ||||||
Total liabilities and shareholders' equity | $ | 64,876 | $ | 97,028 | ||||
(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $41,618 and $77,728 at December 30, 2021 | ||||||||
Digimarc Corporation | ||||||||
Consolidated Cash Flow Information | ||||||||
(in thousands) | ||||||||
(Unaudited) | ||||||||
Twelve Month Information | ||||||||
December 31, | December 31, | |||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (34,759) | $ | (32,537) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation, amortization and write-off of property and equipment | 1,370 | 1,531 | ||||||
Amortization and write-off of intangibles | 678 | 771 | ||||||
Amortization of right of use assets under operating leases | 493 | 470 | ||||||
Amortization of net premiums (discounts) on marketable securities | 650 | 204 | ||||||
Gain on extinguishment of note payable | (5,032) | — | ||||||
Stock-based compensation | 11,936 | 9,115 | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade accounts receivable | (2,647) | 114 | ||||||
Other current assets | (119) | 259 | ||||||
Other assets | (83) | (8) | ||||||
Accounts payable and other accrued liabilities | 2,078 | 512 | ||||||
Deferred revenue | (10) | (199) | ||||||
Lease liability and other long-term liabilities | (671) | (170) | ||||||
Net cash used in operating activities | (26,116) | (19,938) | ||||||
Cash flows from investing activities: | ||||||||
Loan to related party | (2,000) | — | ||||||
Purchase of property and equipment | (966) | (1,020) | ||||||
Capitalized patent costs | (606) | (612) | ||||||
Maturities of marketable securities | 82,076 | 42,951 | ||||||
Purchases of marketable securities | (52,523) | (75,583) | ||||||
Net cash provided by (used in) investing activities | 25,981 | (34,264) | ||||||
Cash flows from financing activities: | ||||||||
Issuance of common stock, net of issuance costs | — | 38,603 | ||||||
Issuance of preferred stock, net of issuance costs | — | 16,888 | ||||||
Exercise of stock options | — | 5,922 | ||||||
Proceeds from note payable | — | 5,032 | ||||||
Purchase of common stock | (5,772) | (3,760) | ||||||
Net cash provided by (used in) financing activities | (5,772) | 62,685 | ||||||
Net increase (decrease) in cash and cash equivalents (2) | $ | (5,907) | $ | 8,483 | ||||
Cash, cash equivalents and marketable securities at beginning of period | 77,728 | 36,817 | ||||||
Cash, cash equivalents and marketable securities at end of period | 41,618 | 77,728 | ||||||
(2) Net increase (decrease) in cash, cash equivalents and marketable securities | $ | (36,110) | $ | 40,911 | ||||
SOURCE Digimarc Corporation
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