Digimarc Reports Fourth Quarter and Full Year 2016 Financial Results

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Feb 22, 2017, 15:05 ET

BEAVERTON, Ore., Feb. 22, 2017 /PRNewswire/ -- Digimarc Corporation (NASDAQ: DMRC) reported financial results for the fourth quarter and full year ended December 31, 2016.

Fourth Quarter 2016 Financial Results
Revenue for the fourth quarter of 2016 totaled $5.2 million compared to $5.0 million in the same quarter a year-ago. The increase was primarily due to higher service revenue.

Operating expenses for the fourth quarter of 2016 totaled $9.0 million compared to $8.3 million in the fourth quarter of 2015. The increase was primarily due to higher investments in sales, marketing and engineering as the company continues to address important opportunities in market development and delivery for Digimarc Discover and Digimarc Barcode.

Operating loss for the fourth quarter of 2016 totaled $5.9 million compared to an operating loss of $5.3 million in the same quarter a year ago. The higher operating loss was primarily due to higher operating expenses.

Net loss for the fourth quarter of 2016 totaled $5.8 million or $(0.57) per diluted share, compared to a net loss of $5.3 million or $(0.62) per diluted share in the fourth quarter of 2015.

At quarter-end, cash, cash equivalents and marketable securities totaled $60.5 million, compared to $66.3 million at September 30, 2016.

Full Year 2016 Financial Results
Revenue for the full year 2016 totaled $21.8 million compared to $22.2 million in 2015. The decrease was primarily the result of lower subscription revenue.

Operating expenses for the full year 2016 totaled $35.2 million compared to $31.2 million in 2015. The increase was primarily due to higher investments in sales, marketing and engineering as the company continues to address important opportunities in market development and delivery for Digimarc Discover and Digimarc Barcode.

Operating loss for the full year 2016 totaled $21.9 million compared to an operating loss of $18.0 million a year ago. The higher operating loss was primarily due to higher operating expenses.

Net loss for the full year 2016 totaled $21.7 million or $(2.36) per diluted share, compared to a net loss of $17.9 million or $(2.19) per diluted share in 2015.

Conference Call
Digimarc will hold a conference call later today (Wednesday, February 22, 2017) 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 here.

For those who wish to listen to the call via telephone, please dial the number below at least five minutes prior to the scheduled start time:

Toll-Free Number: 866-562-9934
International Number: 706-679-0638
Conference ID: 8340848

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 the inventor of Digimarc Discover® software and the imperceptible Digimarc Barcode for automatically identifying and interacting with virtually any media. Digimarc Discover software enables industrial scanners, smartphones, tablets and other computer interfaces to reliably, efficiently and economically identify traditional barcoded items, along with many other media objects. Digimarc Barcodes are imperceptible to people and do all that visible barcodes do, but perform better. They can be applied to virtually all forms of media. These remarkable capabilities have allowed Digimarc and its business partners to supply a wide range of patented consumer engagement, media management and security solutions across multiple consumer and government industry sectors. Digimarc owns an extensive intellectual property portfolio, with patents in digital watermarking, content identification and management, media object discovery, and intuitive computing more generally. For more information and the latest news, please visit www.digimarc.com and follow on Twitter at @Digimarc.

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 market opportunities for Digimarc Discover and Digimarc Barcode, 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 are set forth in the company's Form 10-K for the year ended December 31, 2015 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,
	2016	2015	2016	2015
Revenue:
Service	$ 3,017	$ 2,709	$ 12,667	$ 12,517
Subscription	1,434	1,430	5,808	6,377
License	729	877	3,318	3,295
Total revenue	5,180	5,016	21,793	22,189

Cost of revenue:
Service	1,385	1,209	5,673	5,488
Subscription	554	685	2,410	3,113
License	112	90	414	346
Total cost of revenue	2,051	1,984	8,497	8,947

Gross profit:
Service	1,632	1,500	6,994	7,029
Subscription	880	745	3,398	3,264
License	617	787	2,904	2,949
Total gross profit	3,129	3,032	13,296	13,242

Gross margin:
Service	54%	55%	55%	56%
Subscription	61%	52%	59%	51%
License	85%	90%	88%	89%
Percentage of gross profit to total revenue	60%	60%	61%	60%

Operating expenses:
Sales and marketing	3,132	2,778	11,888	9,275
Research, development and engineering	3,419	3,120	13,394	12,465
General and administrative	2,113	1,921	8,298	7,954
Intellectual property	346	500	1,636	1,525
Total operating expenses	9,010	8,319	35,216	31,219

Operating loss	(5,881)	(5,287)	(21,920)	(17,977)

Other income, net	101	25	258	109

Loss before income taxes	(5,780)	(5,262)	(21,662)	(17,868)

Benefit (provision) for income taxes	24	(41)	(10)	(66)
Net loss	$ (5,756)	$ (5,303)	$ (21,672)	$ (17,934)

Earnings (loss) per common share:
Loss per common share - basic	$ (0.57)	$ (0.62)	$ (2.36)	$ (2.19)
Loss per common share - diluted	$ (0.57)	$ (0.62)	$ (2.36)	$ (2.19)
Weighted average common shares outstanding - basic	10,111	8,485	9,188	8,198
Weighted average common shares outstanding - diluted	10,111	8,485	9,188	8,198

Digimarc Corporation
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)


	December 31,	December 31,
	2016	2015
Assets
Current assets:
Cash and cash equivalents ⁽¹⁾	$ 11,638	$ 3,160
Marketable securities ⁽¹⁾	44,496	33,027
Trade accounts receivable, net	5,078	4,616
Other current assets	1,695	1,487
Total current assets	62,907	42,290
Marketable securities ⁽¹⁾	4,392	2,999
Property and equipment, net	3,570	3,010
Intangibles, net	6,422	6,613
Goodwill	1,114	1,114
Other assets	331	338
Total assets	$ 78,736	$ 56,364

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities	$ 1,523	$ 1,657
Deferred revenue	2,923	3,023
Total current liabilities	4,446	4,680
Deferred rent and other long-term liabilities	956	226
Total liabilities	5,402	4,906

Commitments and contingencies

Shareholders' equity:
Preferred stock	50	50
Common stock	11	9
Additional paid-in capital	120,985	77,439
Accumulated deficit	(47,712)	(26,040)
Total shareholders' equity	73,334	51,458

Total liabilities and shareholders' equity	$ 78,736	$ 56,364


(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $60,526 and $39,186
at December 31, 2016 and December 31, 2015, respectively.

Digimarc Corporation
Consolidated Cash Flow Information
(in thousands)
(Unaudited)

	Twelve-Month Information
	December 31,	December 31,
	2016	2015
Cash flows from operating activities:
Net loss	$ (21,672)	$ (17,934)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and write-off of property and equipment	1,336	1,237
Amortization and write-off of intangibles	1,121	1,196
Change in allowance for doubtful accounts	-	(7)
Stock-based compensation	5,553	5,077
Changes in operating assets and liabilities:
Trade accounts receivable	(462)	(64)
Other current assets	(208)	1,124
Other assets	7	40
Accounts payable and other accrued liabilities	637	125
Deferred revenue	(176)	(534)
Net cash used in operating activities	(13,864)	(9,740)

Cash flows from investing activities:
Purchase of property and equipment	(1,837)	(1,218)
Capitalized patent costs	(790)	(895)
Maturity of marketable securities	41,052	42,264
Purchase of marketable securities	(53,914)	(45,340)
Net cash used in investing activities	(15,489)	(5,189)

Cash flows from financing activities:
Issuance of common stock, net of issuance costs	39,700	12,896
Exercise of stock options	668	1,514
Purchase of common stock	(2,537)	(2,443)
Net cash provided by financing activities	37,831	11,967

Net increase (decrease) in cash and cash equivalents ⁽²⁾	$ 8,478	$ (2,962)


Cash, cash equivalents and marketable securities at beginning of period	39,186	39,072
Cash, cash equivalents and marketable securities at end of period	60,526	39,186
(2) Net increase in cash, cash equivalents and marketable securities	$ 21,340	$ 114