Digimarc (DMRC) 8-K Results of Operations and Financial Condition

Exhibit 99.1

Michael McConnell

Chief Financial Officer and Treasurer

503-469-4652

mmcconnell@digimarc.com

Delisa Reavis

RH Strategic Communications for Digimarc

202-585-0210

dreavis@rhstrategic.com

FOR IMMEDIATE RELEASE

Digimarc Reports Fourth Quarter and Full Year 2008 Financial Results

Beaverton, Ore. — February 26, 2009 — Digimarc Corporation (NASDAQ: DMRC) today announced its fourth quarter financial results since being spun-off on August 1, 2008 from the former Digimarc Corporation (“Old Digimarc”; “predecessor” refers to the digital watermarking business of Old Digimarc).  Revenues for the fourth quarter were $4.7 million, 37% higher than revenues of $3.4 million in the comparable period of 2007. Fourth quarter net loss of $(0.3) million, or $(0.05) per fully diluted share, included a full quarter of operating expenses as a stand-alone public company.  This compares to predecessor’s net income of $0.1 million, or pro-forma $0.02 per fully diluted share, for the fourth quarter of 2007, where operating expenses included proportional allocations of various shared-services common costs of Old Digimarc.

Total revenues for the combined Digimarc and predecessor operations for the year ended December 31, 2008 were $19.8 million, 52% higher than in 2007. Net income for the combined Digimarc and predecessor operations for the year ended December 31, 2008 was $1.5 million, or pro-forma $0.21 per fully diluted share, compared to net income of $0.1 million, or pro-forma $0.01 per fully diluted share, for 2007.

Cash flow from operations for the combined Digimarc and predecessor operations for the year ended December 31, 2008 totaled $3.9 million, a $2.9 million improvement over $1.0 million in cash flow for 2007.

The company generated Adjusted EBITDA in the fourth quarter of $0.1 million, or 2% of revenues, compared to $0.3 million, or 8% of revenues in the comparable three-month period of 2007.  Adjusted EBITDA for the combined Digimarc and predecessor operations for the year ended December 31, 2008 totaled $2.7 million, or 14% of revenues, compared to $0.5 million, or 4% of revenues for 2007. Digimarc calculates Adjusted EBITDA by adjusting net income (loss) for the effects of interest, taxes, depreciation, amortization and non-cash expenditures for stock compensation. The reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP measure, is included at the end of this release.

Digimarc reported backlog at year-end of approximately $60 million.  The company also reported that its cash, cash equivalents and short and long-term marketable securities were approximately $46 million on December 31, 2008.

Conference Call

Digimarc will hold its fourth quarter earnings conference call on Thursday, February 26, 2009 at 7:30 a.m. PT / 10:30 a.m. ET. The call will be open to the general public and the media, and will be broadcast live by webcast at www.digimarc.com and www.earnings.com. The webcast may be accessed at the company’s website, www.digimarc.com, by clicking on the “Q4 2008 Digimarc Earnings Conference Call” webcast link on the “Events and Webcasts” page within the “Investors” section. This webcast will be available for later listening at both sites for two weeks following the live call.  Thereafter, the webcast will be archived and available at https://www.digimarc.com/investors/events.asp.

About Digimarc

Digimarc Corporation (NASDAQ:DMRC), based in Beaverton, Oregon, is a leading innovator and technology provider, enabling businesses and governments worldwide to enrich everyday living by giving persistent digital identities to all forms of media and many other objects. The company’s technology enables a wide range of solutions for deterring fraud, counterfeiting and piracy, enhancing national security, and enabling new digital media distribution and monetization models that provide consumers with more choice and access to content when, where and how they want it.  Digimarc has an extensive intellectual property portfolio, with more than 490 U.S. and foreign patents, and more than 400 patents pending in digital watermarking, media identification and management, and related technologies. Digimarc develops solutions, licenses its intellectual property,

and provides development services to business partners across a range of industries.  Please go to www.digimarc.com for more company information.

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 can be identified, in some cases, by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “illustrate,” “example” 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 is set forth in the company’s registration statement on Form 10 under “Risk Factors.” 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.

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Explanation of Financial Information Presented

The financial information presented combines the periods through August 1, 2008, referred to as “carve-out” financial information from Old Digimarc’s digital watermarking business, or predecessor, with the periods after that date, for Digimarc, or successor, to arrive at quarterly and year-to-date totals for comparative purposes.  It is important to note that the financial information in the carve-out financial statements does not include all of the expenses that would have been incurred had the predecessor been a separate, stand-alone public entity. As such, the predecessor financial information does not reflect the financial position, results of operations and cash flows of Digimarc’s current business, had the predecessor operated as a separate, stand-alone public entity during the periods presented in the carve-out financial statements. Additionally, the carve-out financial statements include proportional allocations of various shared-services common costs of Old Digimarc because specific identification of these expenses was not practicable. It is expected that the initial operating costs of Digimarc on a stand-alone basis will be higher than those allocated to the predecessor operations under the shared services methodology applied in the carve-out financial statements. Consequently, the financial position, results of operations and cash flows reflected in the carve-out financial statements may not be indicative of those that would have been achieved had the predecessor operated as a separate, stand-alone entity for the periods reflected in the carve-out financial statements.

Digimarc Corporation

Income Statement Information

(in thousands, except per share amounts)

(Unaudited)

	Three Month Information						Twelve Month Information
													Year Ended December 31,
	Successor			Predecessor			Successor			Predecessor			Total *			Predecessor
	December 31, 2008			December 31, 2007			Period August 2, 2008 through December 31, 2008			Period January 1, 2008 through August 1, 2008			2008			2007
Revenue:
Service	2,419			2,115			4,064			6,456			10,520			7,806
License & subscription	2,232			1,272			3,768			5,494			9,262			5,219
Total revenue	4,651			3,387			7,832			11,950			19,782			13,025
Cost of revenue:
Service	1,358			1,087			2,248			3,519			5,767			3,815
License & subscription	70			66			114			145			259			217
Total cost of revenue	1,428			1,153			2,362			3,664			6,026			4,032
Gross profit:
Service	1,061			1,028			1,816			2,937			4,753			3,991
License & subscription	2,162			1,206			3,654			5,349			9,003			5,002
Total gross profit	3,223			2,234			5,470			8,286			13,756			8,993
Percentage of gross profit to revenues:
Service	44		%	49		%	45		%	45		%	45		%	51		%
License & subscription	97		%	95		%	97		%	97		%	97		%	96		%
Percentage of gross profit to total revenue	69		%	66		%	70		%	69		%	70		%	69		%
Operating expenses:
Sales and marketing	764			513			1,154			1,928			3,082			2,453
Research and development	992			698			1,772			2,071			3,843			2,912
General and administrative	1,945			847			2,877			2,349			5,226			3,345
Intellectual property	184			376			304			1,102			1,406			1,593
Transitional services	(84		)	—			(280		)	—			(280		)	—
Total operating expenses	3,801			2,434			5,827			7,450			13,277			10,303
Operating income (loss)	(578		)	(200		)	(357		)	836			479			(1,310		)
Other income, net	264			361			443			590			1,033			1,387
Provision for income taxes	10			13			10			11			21			22
Net income (loss)	(324		)	148			76			1,415			1,491			55
Earnings (loss) per share:
Net income (loss) per share - basic	$	(0.05	)				$	0.01
Net income (loss) per share - diluted	$	(0.05	)				$	0.01
Weighted average shares outstanding - basic	7,156						7,156
Weighted average shares outstanding - diluted	7,156						7,156
Pro-forma earnings (loss) per share:
Net income (loss) per share - basic				$	0.02					$	0.20		$	0.21		$	0.01
Net income (loss) per share - diluted				$	0.02					$	0.20		$	0.21		$	0.01
Weighted average shares outstanding - basic				7,143						7,143			7,143			7,143
Weighted average shares outstanding - diluted				7,143						7,143			7,143			7,143

* Used for comparative purposes

Digimarc Corporation

Balance Sheet Information

(in thousands)

(Unaudited)

	Successor		Predecessor		Predecessor
	December 31,		August 1,		December 31,
	2008		2008		2007
Assets
Current assets:
Cash and cash equivalents (1)	$	18,928	$	50,900	$	29,145
Short-term marketable securities (1)	21,240		3,849		3,568
Trade accounts receivable, net	3,839		3,077		3,752
Other current assets	875		4,757		387
Total current assets	44,882		62,583		36,852
Long-term marketable securities (1)	5,744		—		—
Property and equipment, net	1,212		1,341		1,227
Intangibles, net	456		—		—
Other assets, net	147		187		372
Total assets	$	52,441	$	64,111	$	38,451
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and other accrued liabilities	$	937	$	1,208	$	464
Accrued payroll and related costs	42		2,053		199
Accrued merger related liabilities	386		10,766		—
Deferred revenue	2,418		2,054		2,734
Total current liabilities	3,783		16,081		3,397
Long-term liabilities	257		237		215
Total liabilities	4,040		16,318		3,612
Commitments and contingencies
Stockholders’ equity:
Net parent’s investment	—		47,793		34,839
Preferred stock	50		—		—
Common stock	7		—		—
Additional paid-in capital	48,268		—		—
Retained earnings	76		—		—
Total stockholders’ equity	48,401		47,793		34,839
Total liabilities and stockholders’ equity	$	52,441	$	64,111	$	38,451

(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $45,912 at December 31, 2008

Digimarc Corporation

Cash Flow Information

(in thousands)

(Unaudited)

	Three Month Information				Twelve Month Information
									Year Ended December 31,
	Successor		Predecessor		Successor		Predecessor		Total *		Predecessor
	December 31, 2008		December 31, 2007		Period August 2, 2008 through December 31, 2008		Period January 1, 2008 through August 1, 2008		2008		2007
Cash flows from operating activities:
Net income (loss)	(324	)	148		76		1,415		1,491		55
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	129		154		198		568		766		612
Stock-based compensation expense	532		310		532		913		1,445		1,209
Increase (decrease) in allowance for doubtful accounts	—		—		—		(43	)	(43	)	—
Other non-cash charges	—		—		—		405		405		—
Changes in operating assets and liabilities:
Trade accounts receivable, net	(260	)	(1,918	)	(762	)	718		(44	)	(1,311	)
Other current assets	(300	)	(19	)	3,882		(4,370	)	(488	)	(78	)
Other assets, net	20		2		40		(103	)	(63	)	(9	)
Accounts payable and other accrued liabilities	111		144		(272	)	744		472		23
Accrued payroll and related costs	(1,612	)	5		(2,011	)	1,854		(157	)	(574	)
Accrued merger related liabilities	(1,520	)	—		(10,380	)	10,766		386		—
Deferred revenue	23		1,310		366		(677	)	(311	)	1,098
Other liabilities	(26	)	(18	)	24		20		44		—
Net cash provided by (used in) operating activities	(3,227	)	118		(8,307	)	12,210		3,903		1,025
Cash flows from investing activities:
Purchase of property and equipment	(52	)	(73	)	(76	)	(799	)	(875	)	(367	)
Capitalized patent costs	(261	)	—		(448	)	—		(448	)	—
Sale or maturity of marketable securities	25,879		45,491		95,553		136,767		232,320		150,775
Purchase of marketable securities	(47,943	)	(45,301	)	(118,688	)	(137,048	)	(255,736	)	(154,343	)
Net cash provided by (used in) investing activities	(22,377	)	117		(23,659	)	(1,080	)	(24,739	)	(3,935	)
Cash flows from financing activities:
Cash from Parent stock activity	—		265		—		23,862		23,862		2,187
Net activity with Parent	—		(151	)	—		(13,237	)	(13,237	)	(3,205	)
Principal payments under capital lease obligations	(6	)	—		(6	)	—		(6	)
Net cash provided by (used in) financing activities	(6	)	114		(6	)	10,625		10,619		(1,018	)
Net increase (decrease) in cash and cash equivalents	(25,610	)	349		(31,972	)	21,755		(10,217	)	(3,928	)

* Used for comparative purposes

Digimarc Corporation

Reconciliation of GAAP and Non-GAAP Financial Measures

Adjusted EBITDA

(in thousands)

(Unaudited)

	Three Month Information				Twelve Month Information
									Year Ended December 31,
	Successor		Predecessor		Successor		Predecessor		Total *		Predecessor
	December 31, 2008		December 31, 2007		Period August 2, 2008 through December 31, 2008		Period January 1, 2008 through August 1, 2008		2008		2007
Net income (loss)	(324	)	148		76		1,415		1,491		55
Adjustments:
Provision for income taxes	10		13		10		11		21		22
Interest income, net	(266	)	(361	)	(462	)	(590	)	(1,052	)	(1,387	)
Depreciation and amortization	129		154		198		568		766		612
Stock compensation	532		310		532		913		1,445		1,209
Adjusted EBITDA	81		264		354		2,317		2,671		511

* Used for comparative purposes

About Adjusted EBIDTA

From time to time, we may refer to Adjusted EBITDA in our conference calls and discussions with analysts in connection with our historical financial results and our guidance for future periods. Adjusted EBITDA does not represent cash flows from operations as defined by generally accepted accounting principles (“GAAP”), is not a measure derived in accordance with GAAP and should not be considered by the reader as an alternative to net income (the most comparable GAAP financial measure to Adjusted EBITDA). The reconciliation of GAAP and Non-GAAP Financial Measures for the three-month periods ended December 31, 2008 and 2007, the period August 2, 2008 through December 31, 2008, the period January 1, 2008 through August 1, 2008 and the years ended December 31, 2007 and 2006 are included in the above table. Management of the Company believes that Adjusted EBITDA is helpful to investors as an indicator of the current financial performance of the Company and its capacity to fund capital expenditures and working capital requirements. Due to the Company’s use of stock-based employee compensation, the Company incurs significant non-cash charges for stock compensation expense that may not be indicative of our operating performance from a cash perspective. Therefore, the Company believes that providing the measure of Adjusted EBITDA will help investors better understand the Company’s underlying financial performance and ability to generate cash flow from operations.