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Digimarc Reports Fourth Quarter and Full Year 2016 Financial Results

BEAVERTON, Ore., Feb. 22, 2017 /PRNewswire/ -- Digimarc Corporation (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 (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

 

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