Digimarc Reports Fourth Quarter and Full Year 2012 Financial Results

Digimarc Reports Fourth Quarter and Full Year 2012 Financial Results

2012 Operating Income Improved 128% Over 2011 on 23% Higher Revenues; Company Declares Quarterly Dividend of $0.11 per Share

BEAVERTON, Ore.--(BUSINESS WIRE)-- Digimarc Corporation (NAS: 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 (NAS: 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