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Digimarc Reports First Quarter 2013 Financial Results

BEAVERTON, OR--(Marketwired - May 2, 2013) -  Digimarc Corporation ( NASDAQ : DMRC ) reported financial results for the first quarter ended March 31, 2013.

First Quarter 2013 Results
Revenues for the first quarter of 2013 totaled $10.2 million, compared to $17.0 million in the first quarter of 2012 which included $8.0 million of revenue from Verance Corporation for the payment of past due royalties. Excluding the $8.0 million payment for past due royalties, revenues increased 13% or $1.2 million over the year-ago quarter. The majority of the increase was due to the inclusion of the company's acquisition of Attributor Corporation which was completed in December 2012.

Operating income for the first quarter of 2013 was $1.6 million compared to $9.2 million in the same quarter a year-ago. Net of the Verance past due royalties received and related litigation costs, operating income for the first quarter of 2012 was $1.6 million. The first quarter of 2013 operating results reflect the addition of Attributor's operations and related acquisition costs, plus increased investments in research and development initiatives. 

Net income for the first quarter of 2013 was $1.0 million or $0.13 per diluted share compared to $5.0 million or $0.70 per diluted share in the first quarter of 2012. The decrease was due to lower operating income, partially offset by lower income taxes and no activity in the joint ventures which generated losses in the first quarter of 2012.

At March 31, 2013, cash, cash equivalents and marketable securities increased $1.5 million to $40.6 million from $39.1 million at December 31, 2012. 

Conference Call
Digimarc will hold a conference call later today (Thursday, May 2, 2013) to discuss these results. The company's 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 May 16, 2013. Thereafter, 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 listen-only telephone number below at least 5-10 minutes prior to the scheduled start time:

Listen-Only Number: 866-562-9934
Conference ID#: 36103818

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 increases in services and license and subscription revenues, 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  
    March 31,     March 31,  
    2013     2012  
Revenue:                
  Service   $ 2,929     $ 3,048  
  Subscription     1,384       278  
  License     5,930       13,720  
    Total revenue     10,243       17,046  
                 
Cost of revenue:                
  Service     1,403       1,697  
  Subscription     635       47  
  License     96       66  
    Total cost of revenue     2,134       1,810  
                 
Gross profit:                
  Service     1,526       1,351  
  Subscription     749       231  
  License     5,834       13,654  
    Total gross profit     8,109       15,236  
                 
Gross margin:                
  Service     52 %     44 %
  Subscription     54 %     83 %
  License     98 %     100 %
    Percentage of gross profit to total revenue     79 %     89 %
                 
Operating expenses:                
  Sales and marketing     1,277       1,007  
  Research, development and engineering     2,725       1,998  
  General and administrative     2,186       2,758  
  Intellectual property     277       319  
    Total operating expenses     6,465       6,082  
                 
Operating income     1,644       9,154  
                 
Net loss from joint ventures     -       (1,107 )
Other income, net     29       58  
                 
Income before income taxes     1,673       8,105  
                 
Provision for income taxes     (702 )     (3,106 )
Net income   $ 971     $ 4,999  
                 
Earnings per common share:                
Earnings per common share - basic   $ 0.13     $ 0.74  
Earnings per common share - diluted   $ 0.13     $ 0.70  
  Weighted average common shares outstanding - basic     6,838       6,738  
  Weighted average common shares outstanding - diluted     7,058       7,140  
                 
Cash dividends declared per common share:   $ 0.11     $ -  
                 
 
Digimarc Corporation 
Consolidated Cash Flow Information 
(in thousands) 
(Unaudited) 
             
    Three-Month Information  
    March 31,     March 31,  
    2013     2012  
Cash flows from operating activities:                
  Net income   $ 971     $ 4,999  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation and amortization of property and equipment     158       143  
    Amortization and write-off of intangibles     299       85  
    Gain on reversal of contingent merger consideration     (190 )     -  
    Stock-based compensation     1,092       1,356  
    Net loss from joint ventures     -       1,107  
    Deferred income taxes     (112 )     603  
    Tax benefit from stock-based awards     -       1,443  
    Excess tax benefit from stock-based awards     -       (1,335 )
  Changes in operating assets and liabilities:                
    Trade accounts receivable, net     (228 )     1,032  
    Other current assets     (44 )     166  
    Other assets     1       83  
    Accounts payable and other accrued liabilities     (213 )     (27 )
    Income taxes payable     778       1,060  
    Deferred revenue     832       (83 )
      Net cash provided by operating activities     3,344       10,632  
                 
Cash flows from investing activities:                
  Purchase of property and equipment     (86 )     (148 )
  Capitalized patent costs and purchased intellectual property     (228 )     (465 )
  Sale or maturity of marketable securities     23,116       22,993  
  Purchase of marketable securities     (21,933 )     (28,492 )
    Net cash provided by (used in) investing activities     869       (6,112 )
                 
Cash flows from financing activities:                
  Issuance of common stock     -       72  
  Purchase of common stock     (648 )     (799 )
  Cash dividends paid     (801 )     -  
  Excess tax benefit from stock-based awards     -       1,335  
    Net cash provided by (used in) financing activities     (1,449 )     608  
                 
    Net increase in cash and cash equivalents (2)   $ 2,764     $ 5,128  
                 
                 
    Cash equivalents and marketable securities at beginning of period     39,056       33,378  
    Cash equivalents and marketable securities at end of period     40,637       44,005  
(2) Net increase in cash, cash equivalents and marketable securities   $ 1,581     $ 10,627  
                 
 
Digimarc Corporation
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
         
         
    March 31,   December 31,
    2013   2012
Assets            
  Current assets:            
    Cash and cash equivalents (1)   $ 9,630   $ 6,866
    Marketable securities (1)     23,620     25,403
    Trade accounts receivable, net     4,444     4,216
    Other current assets     1,088     1,016
      Total current assets     38,782     37,501
  Marketable securities (1)     7,387     6,787
  Property and equipment, net     1,381     1,453
  Intangibles, net     6,683     6,721
  Goodwill     1,114     1,114
  Deferred tax assets, net     3,673     3,589
  Other assets     165     166
      Total assets   $ 59,185   $ 57,331
             
Liabilities and Shareholders' Equity            
  Current liabilities:            
    Accounts payable and other accrued liabilities   $ 937   $ 1,143
    Income taxes payable     744     -
    Deferred revenue     3,347     2,512
      Total current liabilities     5,028     3,655
  Deferred rent and other long-term liabilities     507     673
      Total liabilities     5,535     4,328
             
  Commitments and contingencies            
             
  Shareholders' equity:            
    Preferred stock     50     50
    Common stock     7     7
    Additional paid-in capital     40,346     39,869
    Retained earnings     13,247     13,077
      Total shareholders' equity     53,650     53,003
             
      Total liabilities and shareholders' equity   $ 59,185   $ 57,331
             
(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $40,637 and $39,056 at March 31, 2013 and December 31, 2012, respectively.