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TMCNet:  Digimarc Reports Fourth Quarter and Full Year 2012 Financial Results

[February 21, 2013]

Digimarc Reports Fourth Quarter and Full Year 2012 Financial Results

BEAVERTON, Ore. --(Business Wire)--

Digimarc Corporation (NASDAQ:DMRC) reported financial results for the fourth quarter and fiscal year ended December 31, 2012.

Fourth Quarter 2012 Results

Revenues for the fourth quarter 2012 increased 4% to $9.3 million from $8.9 million in the same quarter a year ago. The increase was primarily attributable to higher licensing revenues from Verance and Intellectual Ventures ("IV") as well as initial revenues for one month from Attributor Corporation, partially offset by the elimination of revenues from the suspension of operations of the Nielsen joint ventures in Q1 2012.

Operating income for the fourth quarter 2012 increased 60% to $1.9 million from $1.2 million in the same year-ago quarter. The increase reflects higher revenues and lower operating expenses.

Net income for the fourth quarter 2012 was $1.1 million or $0.14 per diluted share compared to $0.5 million or $0.06 per diluted share in the fourth quarter of 2011. The improvement in net income reflects increased revenues.

Full Year 2012 Results

Revenues in 2012 increased 23% to a record $44.4 million from $36.0 million in 2011. The improvement was driven primarily by the $8 million past due royalties payment from Verance received in Q1 2012 and from increased license payments from IV and Verance, partially offset by lower revenues from the suspension of the company's joint ventures with Nielsen.

Operating income in 2012 increased 128% to $14.6 million from $6.4 million in 2011. The improvement reflects increased revenues, partially offset by slightly higher operating expenses as a result of the company's recent acquisition of Attributor Corporation in December 2012.

Net income in 2012 increased 46% to $8.3 million or $1.12 per diluted share from $5.7 million or $0.76 per diluted share in 2011. The improvement primarily reflects increased revenues. Net income for 2011 includes losses from the suspended joint ventures as well as the reversal of the valuation allowance against deferred tax assets.

At December 31, 2012, cash, cash equivalents and marketable securities totaled $39.1 million, up from $33.4 million at December 31, 2011. This increase is net of the $5.4 million paid in connection with the Attributor acquisition.

On February 20, 2013, Digimarc declared a quarterly dividend of $0.11 per share on the outstanding common shares, payable on March 11, 2013 to shareholders of record at the close of business on March 4, 2013. The aggregate amount of the quarterly dividend payment is expected to be approximately $800,000.

An updated investor presentation is available on Digimarc's website at: http://www.digimarc.com/investors/presentations.

Conference Call

Digimarc will hold a conference call later today (Thursday, February 21, 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 until March 7, 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#: 10340926
 

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 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
Income Statement Information
(in thousands, except per share amounts)
(Unaudited)
 
Three-Month Information Twelve-Month Information
December 31, December 31, December 31, December 31,
  2012     2011     2012     2011  
Revenue:
Service $ 2,519 $ 3,053 $ 10,792 $ 12,395
License & subscription   6,795     5,872     33,583     23,644  
Total revenue 9,314 8,925 44,375 36,039
 
Cost of revenue:
Service 1,373 1,775 5,917 6,638
License & subscription   275     81     591     299  
Total cost of revenue 1,648 1,856 6,508 6,937
 
Gross profit:
Service 1,146 1,278 4,875 5,757
License & subscription   6,520     5,791     32,992     23,345  
Total gross profit 7,666 7,069 37,867 29,102
 
Gross margin:
Service 45 % 42 % 45 % 46 %
License & subscription 96 % 99 % 98 % 99 %
Total revenue 82 % 79 % 85 % 81 %
 
Operating expenses:
Sales and marketing 913 1,051 3,827 4,336
Research, development and engineering 2,277 1,710 8,741 7,327
General and administrative 2,226 2,839 9,457 9,956
Intellectual property   329     268     1,248     1,094  
Total operating expenses 5,745 5,868 23,273 22,713
 
Operating income 1,921 1,201 14,594 6,389
 
Net loss from joint ventures - (784 ) (1,107 ) (2,714 )
Interest income, net   40     46     179     195  
 
Income before income taxes 1,961 463 13,666 3,870
 
(Provision) benefit for income taxes   (907 )   (10 )   (5,394 )   1,786  
Net income $ 1,054   $ 453   $ 8,272   $ 5,656  
 
Earnings per common share:
Net income per common share - basic $ 0.15 $ 0.07 $ 1.16 $ 0.84
Net income per common share - diluted $ 0.14 $ 0.06 $ 1.12 $ 0.76
Weighted average common shares outstanding - basic 6,791 6,699 6,757 6,741
Weighted average common shares outstanding - diluted 6,966 7,279 6,989 7,430
 
Cash dividends declared per common share: $ 0.11 $ - $ 0.33 $ -
 
       
Digimarc Corporation
Balance Sheet Information
(in thousands)
(Unaudited)
 
 
December 31, December 31,
2012 2011
Assets
Current assets:
Cash and cash equivalents (1) $ 6,866 $ 3,419
Marketable securities (1) 25,403 22,244
Trade accounts receivable, net 4,216 3,502
Other current assets   1,016   1,306
Total current assets 37,501 30,471
Marketable securities (1) 6,787 7,715
Property and equipment, net 1,453 1,395
Intangible assets, net 6,721 2,808
Goodwill 1,114 -
Investments in joint ventures - 415
Deferred tax assets, net 3,589 2,634
Other assets   166   355
Total assets $ 57,331 $ 45,793
 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities $ 1,143 $ 952
Deferred revenue   2,512   2,660
Total current liabilities 3,655 3,612
Deferred rent and other long-term liabilities   673   464
Total liabilities 4,328 4,076
 
Commitments and contingencies
 
Shareholders' equity:
Preferred stock 50 50
Common stock 7 7
Additional paid-in capital 39,869 34,511
Retained earnings   13,077   7,149
Total shareholders' equity 53,003 41,717
   
Total liabilities and shareholders' equity $ 57,331 $ 45,793
 
 

(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $39,056 and $33,378 at December 31, 2012 and 2011, respectively.

 

Digimarc Corporation
Cash Flow Information
(in thousands)
(Unaudited)
               
Three-Month Information Twelve-Month Information
December 31, December 31, December 31, December 31,
  2012     2011     2012     2011  
Cash flows from operating activities:
Net income $ 1,054 $ 453 $ 8,272 $ 5,656
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 156 139 600 613
Amortization and write-off of intangibles 172 38 385 143
Stock-based compensation 1,054 1,178 5,256 4,216
Net loss from joint ventures - 784 1,107 2,714
Deferred income taxes (207 ) (202 ) (284 ) (3,640 )
Tax benefit from stock-based awards 1,303 274 3,688 1,871
Excess tax benefit from stock-based awards (1,243 ) (274 ) (3,044 ) (1,066 )
Changes in operating assets and liabilities:
Trade accounts receivable, net (59 ) (82 ) (187 ) (21 )
Other current assets 264 109 219 240
Other assets 34 73 201 107
Accounts payable and other liabilities (934 ) (741 ) (228 ) (668 )
Deferred revenue   128     729     (384 )   88  
Net cash provided by operating activities 1,722 2,478 15,601 10,253
 
Cash flows from investing activities:
Purchase of property and equipment (194 ) (66 ) (570 ) (678 )
Capitalized patent costs and purchased intellectual property (272 ) (168 ) (1,170 ) (712 )
Investments in joint ventures, net - - (692 ) (2,100 )
Business acquisitions, net of cash acquired (5,092 ) - (5,092 ) -
Sale or maturity of marketable securities 26,534 14,385 144,214 74,689
Purchase of marketable securities   (24,312 )   (15,247 )   (146,444 )   (65,044 )
Net cash provided by (used in) investing activities (3,336 ) (1,096 ) (9,754 ) 6,155
 
Cash flows from financing activities:
Issuance of common stock 212 96 1,660 1,651
Purchase of common stock (861 ) (452 ) (4,760 ) (22,046 )
Cash dividends paid (783 ) - (2,344 ) -
Excess tax benefit from stock-based awards   1,243     274     3,044     1,066  
Net cash used in financing activities (189 ) (82 ) (2,400 ) (19,329 )
       
Net increase (decrease) in cash and cash equivalents (2) $ (1,803 ) $ 1,300   $ 3,447   $ (2,921 )
 
 
Cash equivalents and marketable securities at beginning of period 43,080 31,216 33,378 45,944
Cash equivalents and marketable securities at end of period   39,056     33,378     39,056     33,378  
(2) Net increase (decrease) in cash, cash equivalents and marketable securities $ (4,024 ) $ 2,162   $ 5,678   $ (12,566 )


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