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Digimarc Reports Third Quarter 2012 Financial Results

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BEAVERTON, Ore.--(BUSINESS WIRE)--

Digimarc Corporation (NASDAQ: DMRC) reported financial results for the third quarter ended September 30, 2012.

Third Quarter 2012 Results

Revenues for the third quarter of 2012 increased 4% to $8.9 million from $8.6 million in the same quarter a year ago. The improvement was primarily due to increased license revenues from Intellectual Ventures and Verance, offset by lower service revenues from joint ventures with The Nielsen Company ("Nielsen") as a result of the previously announced suspension of operations of the joint ventures in Q1 2012.

Operating income for the third quarter of 2012 increased 11% to $1.6 million from $1.4 million in the same year-ago quarter. The improvement reflects the increase in revenues, partially offset by higher operating expenses, primarily for investments in research and development.

Net income for the third quarter of 2012 increased 57% to $1.0 million or $0.14 per diluted share. This compared to net income of $639,000 or $0.09 per diluted share in the third quarter of 2011.

At September 30, 2012, cash and cash equivalents, and marketable securities totaled $43.1 million, up 29% from $33.4 million at December 31, 2011. The improvement was primarily due to higher license revenues leading to increased profitability.

On October 23, 2012, Digimarc declared a quarterly dividend of $0.11 per share on the outstanding common shares, payable on November 20, 2012 to shareholders of record at the close of business on November 6, 2012. The aggregate amount of the quarterly dividend payment is expected to be approximately $785,000.

Conference Call

Digimarc will hold a conference call later today (Thursday, October 25, 2012) to discuss third quarter 2012 results and the company's execution of strategy. 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 until November 8, 2012. 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#: 38887815
 

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, please 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 about dividend payments, any inferences regarding increases in license 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, 2011 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
Income Statement Information
(in thousands, except per share amounts)
(Unaudited)
                 
Three-Month Information Nine-Month Information
September 30, September 30, September 30, September 30,
2012 2011 2012 2011
Revenue:
Service $ 2,616 $ 3,108 $ 8,273 $ 9,342
License & subscription   6,287     5,442     26,788     17,772  
Total revenue 8,903 8,550 35,061 27,114
 
Cost of revenue:
Service 1,362 1,665 4,544 4,863
License & subscription   105     77     316     218  
Total cost of revenue 1,467 1,742 4,860 5,081
 
Gross profit:
Service 1,254 1,443 3,729 4,479
License & subscription   6,182     5,365     26,472     17,554  
Total gross profit 7,436 6,808 30,201 22,033
 
Gross margin:
Service 48 % 46 % 45 % 48 %
License & subscription 98 % 99 % 99 % 99 %
Total revenue 84 % 80 % 86 % 81 %
 
Operating expenses:
Sales and marketing 937 1,166 2,914 3,285
Research, development and engineering 2,320 1,958 6,464 5,617
General and administrative 2,282 2,000 7,231 7,117
Intellectual property   309     259     919     826  
Total operating expenses 5,848 5,383 17,528 16,845
 
Operating income 1,588 1,425 12,673 5,188
 
Net loss from joint ventures - (695 ) (1,107 ) (1,930 )
Interest income, net   48     43     139     149  
 
Income before provision for income taxes 1,636 773 11,705 3,407
 
(Provision) benefit for income taxes   (633 )   (134 )   (4,487 )   1,796  
Net income $ 1,003   $ 639   $ 7,218   $ 5,203  
 
Earnings per common share:
Net income per common share - basic $ 0.14 $ 0.10 $ 1.02 $ 0.77
Net income per common share - diluted $ 0.14 $ 0.09 $ 0.98 $ 0.71
Weighted average common shares outstanding - basic 6,761 6,706 6,745 6,755
Weighted average common shares outstanding - diluted 6,984 7,344 6,980 7,366
 
 
Cash dividends declared per common share: $ 0.11 $ - $ 0.22 $ -
 
Digimarc Corporation
Balance Sheet Information
(in thousands)
(Unaudited)
         
 
September 30, December 31,
2012 2011
Assets
Current assets:
Cash and cash equivalents (1) $ 8,669 $ 3,419
Marketable securities (1) 21,759 22,244
Trade accounts receivable, net 3,630 3,502
Other current assets   1,333   1,306
Total current assets 35,391 30,471
Marketable securities (1) 12,652 7,715
Property and equipment, net 1,327 1,395
Intangible assets, net 3,570 2,808
Investments in joint ventures - 415
Deferred tax assets 2,145 2,634
Other assets, net   188   355
Total assets $ 55,273 $ 45,793
 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities $ 842 $ 952
Income taxes payable 875 -
Deferred revenue   2,156   2,660
Total current liabilities 3,873 3,612
Deferred rent and other long-term liabilities   397   464
Total liabilities 4,270 4,076
 
Commitments and contingencies
 
Shareholders' equity:
Preferred stock 50 50
Common stock 7 7
Additional paid-in capital 38,140 34,511
Retained earnings   12,806   7,149
Total shareholders' equity 51,003 41,717
   
Total liabilities and shareholders' equity $ 55,273 $ 45,793
 
 

(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $43,080 and $33,378 at September 30, 2012 and December 31, 2011.

 
Digimarc Corporation
Cash Flow Information
(in thousands)
(Unaudited)
                 
Three-Month Information Nine-Month Information
September 30, September 30, September 30, September 30,
2012 2011 2012 2011
Cash flows from operating activities:
Net income $ 1,003 $ 639 $ 7,218 $ 5,203
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 152 165 444 474
Amortization and write-off of intangibles 59 36 213 94
Stock-based compensation 1,395 1,057 4,202 3,038
Net loss from joint ventures - 695 1,107 1,930
Deferred income taxes (139 ) (309 ) (77 ) (3,163 )
Tax benefit from stock-based awards 492 400 2,385 1,322
Excess tax benefit from stock-based awards (263 ) (291 ) (1,801 ) (792 )
Changes in operating assets and liabilities:
Trade accounts receivable, net (1,087 ) (574 ) (128 ) 61
Other current assets (177 ) (165 ) (45 ) 131
Other assets, net 26 30 167 34
Accounts payable and other accrued liabilities 172 118 (169 ) 73
Income taxes payable (139 ) - 875 -
Deferred revenue   (185 )   (229 )   (512 )   (641 )
Net cash provided by operating activities 1,309 1,572 13,879 7,764
 
Cash flows from investing activities:
Purchase of property and equipment (122 ) (255 ) (376 ) (612 )
Capitalized patent costs (241 ) (236 ) (898 ) (533 )
Investments in joint ventures, net - (700 ) (692 ) (2,100 )
Sale or maturity of marketable securities 48,544 6,536 117,680 60,304
Purchase of marketable securities   (46,908 )   (6,674 )   (122,132 )   (49,797 )
Net cash provided by (used in) investing activities 1,273 (1,329 ) (6,418 ) 7,262
 
Cash flows from financing activities:
Issuance of common stock 845 822 1,448 1,555
Purchase of common stock (1,712 ) (3,947 ) (3,899 ) (21,594 )
Cash dividends paid (782 ) - (1,561 ) -
Excess tax benefit from stock-based awards   263     291     1,801     792  
Net cash used in financing activities (1,386 ) (2,834 ) (2,211 ) (19,247 )
       
Net increase (decrease) in cash and cash equivalents (2) $ 1,196   $ (2,591 ) $ 5,250   $ (4,221 )
 
 
Cash equivalents and marketable securities at beginning of period 43,520 33,669 33,378 45,944
Cash equivalents and marketable securities at end of period   43,080     31,216     43,080     31,216  
(2) Net (decrease) increase in cash, cash equivalents and marketable securities $ (440 ) $ (2,453 ) $ 9,702   $ (14,728 )

Digimarc Corporation
Chief Financial Officer
Michael McConnell, 503-469-4652
mmcconnell@digimarc.com
or
Liolios Group, Inc.
Investor Relations for Digimarc
Scott Liolios or Matt Glover, 949-574-3860
DMRC@liolios.com

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