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Digimarc Reports First Quarter 2015 Financial Results

April 27, 2015 4:05 PM EDT

BEAVERTON, OR -- (Marketwired) -- 04/27/15 -- Digimarc Corporation (NASDAQ: DMRC) reported financial results for the first quarter ended March 31, 2015.

Revenue for the first quarter of 2015 totaled $6.0 million compared to $7.2 million in the same quarter a year-ago. The decrease was due to lower license revenue, reflecting the end of the quarterly license fee payments from The Nielsen Company in the first quarter of 2014 and the end of the quarterly royalty payments from Verance Corporation in the fourth quarter of 2014. The decline in license revenue was partially offset by higher service and subscription revenue.

Operating expenses for the first quarter of 2015 decreased 8% to $7.7 million from $8.4 million the same quarter a year-ago. The decrease was due to lower investment in research and development, partially offset by higher investment in sales and marketing as the company continues its transition from research and product development to market development and delivery of Digimarc Discover and Barcode. Legal and third-party consulting costs were also lower during the first quarter of 2015.

Operating loss for the first quarter of 2015 totaled $4.2 million compared to an operating loss of $3.3 million in the same quarter a year-ago. The higher operating loss is largely due to lower license revenue, partially offset by lower operating expenses.

Net loss for the first quarter of 2015 totaled $4.2 million or $(0.52) per diluted share, compared to a net loss of $2.0 million or $(0.29) per diluted share in the first quarter of 2014.

Cash, cash equivalents and marketable securities totaled $37.1 million at March 31, 2015, compared to $39.1 million at December 31, 2014.

Conference Call Digimarc will hold a conference call later today (Monday, April 27, 2015) 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 at www.digimarc.com/investors/investor-events-and-webcasts.

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

Number: 866-562-9934 Conference ID: 27179681

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 consumer engagement, media management, and security solutions that create digital identities for all forms of media and many everyday objects. Digimarc's digital IDs are imperceptible to humans and enable computers, networks and devices like mobile phones to better "see, hear and understand" brand impressions and other objects of interest. 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 and the latest news, visit www.digimarc.com or follow us on Twitter @DigimarcCorp.

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 service and subscription revenue, decreased investment in research and development, increased investments in market development and delivery initiatives, 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, 2014 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,
                                                    2015           2014
                                                ------------   ------------
Revenue:
  Service                                       $      3,501   $      2,988
  Subscription                                         1,716          1,412
  License                                                772          2,805
                                                ------------   ------------
    Total revenue                                      5,989          7,205

Cost of revenue:
  Service                                              1,578          1,414
  Subscription                                           754            649
  License                                                 84             83
                                                ------------   ------------
    Total cost of revenue                              2,416          2,146

Gross profit:
  Service                                              1,923          1,574
  Subscription                                           962            763
  License                                                688          2,722
                                                ------------   ------------
    Total gross profit                                 3,573          5,059

Gross margin:
  Service                                                 55%            53%
  Subscription                                            56%            54%
  License                                                 89%            97%
    Percentage of gross profit to total
     revenue                                              60%            70%

Operating expenses:
  Sales and marketing                                  2,090          1,879
  Research, development and engineering                3,084          3,546
  General and administrative                           2,206          2,421
  Intellectual property                                  367            534
                                                ------------   ------------
    Total operating expenses                           7,747          8,380

Operating loss                                        (4,174)        (3,321)

Other income, net                                         23             27
                                                ------------   ------------

Loss before income taxes                              (4,151)        (3,294)

Benefit for income taxes                                   1          1,308
                                                ------------   ------------
Net loss                                        $     (4,150)  $     (1,986)
                                                ============   ============

Earnings (loss) per common share:
Loss per common share - basic                   $      (0.52)  $      (0.29)
Loss per common share - diluted                 $      (0.52)  $      (0.29)
  Weighted average common shares outstanding -
   basic                                               7,960          7,000
  Weighted average common shares outstanding -
   diluted                                             7,960          7,000

Cash dividends declared per common share:       $          -   $       0.11



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


                                                  March 31,    December 31,
                                                    2015           2014
                                                ------------   ------------
Assets
  Current assets:
    Cash and cash equivalents (1)               $      5,064   $      6,122
    Marketable securities (1)                         32,031         32,201
    Trade accounts receivable, net                     3,620          4,545
    Other current assets                               2,518          2,611
                                                ------------   ------------
      Total current assets                            43,233         45,479
  Marketable securities (1)                                -            749
  Property and equipment, net                          2,895          2,976
  Intangibles, net                                     6,692          6,720
  Goodwill                                             1,114          1,114
  Other assets                                           337            378
                                                ------------   ------------
      Total assets                              $     54,271   $     57,416
                                                ============   ============

Liabilities and Shareholders' Equity
  Current liabilities:
    Accounts payable and other accrued
     liabilities                                $      1,473   $      1,379
    Deferred revenue                                   2,984          3,660
                                                ------------   ------------
      Total current liabilities                        4,457          5,039
  Deferred rent and other long-term
   liabilities                                           158            203
                                                ------------   ------------
      Total liabilities                                4,615          5,242

  Commitments and contingencies

  Shareholders' equity:
    Preferred stock                                       50             50
    Common stock                                           9              8
    Additional paid-in capital                        61,853         60,222
    Accumulated deficit                              (12,256)        (8,106)
                                                ------------   ------------
      Total shareholders' equity                      49,656         52,174

                                                ------------   ------------
      Total liabilities and shareholders'
       equity                                   $     54,271   $     57,416
                                                ============   ============

(1) Aggregate cash, cash equivalents, short- and long-term marketable
 securities was $37,095 and $39,072 at March 31, 2015 and December 31,
 2014, respectively.



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

                                                  Three-Month Information
                                                ---------------------------
                                                  March 31,      March 31,
                                                    2015           2014
                                                ------------   ------------
Cash flows from operating activities:
  Net loss                                      $     (4,150)  $     (1,986)
  Adjustments to reconcile net loss to net
   cash used in operating activities:
    Depreciation, amortization and write-off
     of property and equipment                           328            231
    Amortization and write-off of intangibles            277            308
    Changes in allowance for doubtful accounts            10             (7)
    Stock-based compensation                           1,217          1,259
    Deferred income taxes                                  -           (509)
    Excess tax benefit from stock-based awards             -            (72)
  Changes in operating assets and liabilities:
    Trade accounts receivable                            915          1,809
    Other current assets                                  93           (699)
    Other assets                                          41             84
    Accounts payable and other accrued
     liabilities                                         (99)          (314)
    Deferred revenue                                    (668)        (1,484)
                                                ------------   ------------
      Net cash used in operating activities           (2,036)        (1,380)

Cash flows from investing activities:
  Purchase of property and equipment                    (125)          (117)
  Capitalized patent costs                              (194)          (295)
  Maturity of marketable securities                   21,976         11,192
  Purchase of marketable securities                  (21,057)        (9,266)
                                                ------------   ------------
      Net cash provided by investing
       activities                                        600          1,514

Cash flows from financing activities:
  Exercise of stock options                              874            712
  Purchase of common stock                              (496)          (850)
  Cash dividends paid                                      -           (824)
  Excess tax benefit from stock-based awards               -             72
                                                ------------   ------------
      Net cash provided by (used in) financing
       activities                                        378           (890)

                                                ------------   ------------
      Net decrease in cash and cash
       equivalents (2)                          $     (1,058)  $       (756)
                                                ============   ============


    Cash, cash equivalents and marketable
     securities at beginning of period                39,072         34,964
    Cash, cash equivalents and marketable
     securities at end of period                      37,095         32,282
                                                ------------   ------------
(2) Net decrease in cash, cash equivalents and
 marketable securities                          $     (1,977)  $     (2,682)
                                                ============   ============

Company Contacts:
Charles Beck
Chief Financial Officer
503-469-4721
Email Contact

Matt Glover
Liolios Group, Inc.
Investor Relations for Digimarc
949-574-3860
Email Contact

Source: Digimarc



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