Exhibit 99.1
Digimarc Reports Third Quarter 2017 Financial Results
Beaverton, Ore. — October 26, 2017 — Digimarc Corporation (NASDAQ: DMRC), the inventor of the Digimarc Discover® platform featuring the Digimarc Barcode for automatically identifying and interacting with virtually any media, reported financial results for the third quarter ended September 30, 2017.
Third Quarter 2017 Financial Results
Revenue for the third quarter of 2017 totaled $8.7 million compared to $5.6 million in the same quarter a year-ago. The increase in revenue was the result of higher license revenue driven by a $3.5 million license fee from an existing licensee. In exchange for the upfront license fee, Digimarc waived any future royalty obligations from this licensee in one of the licensed fields of use.
Operating expenses for the third quarter of 2017 totaled $11.0 million compared to $8.7 million in the third quarter of 2016. The increase in operating expenses was primarily due to higher investment in sales, marketing, and engineering as the company continues to address important opportunities in market development and delivery of Digimarc Discover and Digimarc Barcode.
Operating loss for the third quarter of 2017 totaled $4.4 million compared to an operating loss of $5.3 million in the same quarter a year-ago. The lower operating loss was due to higher license revenue offset by higher operating expenses.
Net loss for the third quarter of 2017 totaled $4.2 million or $(0.39) per diluted share, compared to a net loss of $5.2 million or $(0.55) per diluted share in the third quarter of 2016.
At quarter-end, cash, cash equivalents and marketable securities totaled $60.9 million, compared to $67.8 million at June 30, 2017.
Conference Call
Digimarc will hold a conference call later today (Thursday, October 26, 2017) 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.
For those who wish to listen to the call via telephone, please dial the number below at least five minutes prior to the scheduled start time:
Toll-Free Number: 866-562-9934
International Number: 706-679-0638
Conference ID: 8340851
If you have any difficulty connecting with the conference call, please contact Liolios Group at 949-574-3860.
About Digimarc
Digimarc Corporation (NASDAQ: DMRC) is a pioneer in the automatic identification of everyday objects such as product packaging and virtually any media, including print, images, and audio. Based on the patented Intuitive Computing Platform (ICP™), Digimarc provides innovative and comprehensive automatic recognition technologies to simplify search, and transform information discovery through unparalleled reliability, efficiency and security. Digimarc has a global patent portfolio, which includes over 1,100 granted and pending patents. These innovations include state-of-the-art identification technology, Digimarc Barcode, as well as Digimarc Discover® software for barcode scanning, and more. Digimarc technology is deployed by major retailers and consumer brands, central banks, U.S. states, film and technology companies, among others. Visit digimarc.com and follow us @digimarc to learn more about The Barcode of Everything™.
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 higher license revenue and market opportunities for Digimarc Discover and Digimarc Barcode, 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 are set forth in the company's Form 10-K for the year ended December 31, 2016 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.
Company Contacts:
Charles Beck
Chief Financial Officer
503-469-4721
Charles.Beck@digimarc.com
Matt Glover
Liolios Group, Inc.
Investor Relations for Digimarc
949-574-3860
DMRC@liolios.com
Consolidated Income Statement Information
(in thousands, except per share amounts)
(Unaudited)
|
| Three Month Information |
|
| Nine Month Information |
| ||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
| $ | 2,986 |
|
| $ | 3,252 |
|
| $ | 9,935 |
|
| $ | 9,650 |
|
Subscription |
|
| 1,306 |
|
|
| 1,417 |
|
|
| 4,171 |
|
|
| 4,374 |
|
License |
|
| 4,385 |
|
|
| 907 |
|
|
| 6,249 |
|
|
| 2,589 |
|
Total revenue |
|
| 8,677 |
|
|
| 5,576 |
|
|
| 20,355 |
|
|
| 16,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
|
| 1,332 |
|
|
| 1,455 |
|
|
| 4,431 |
|
|
| 4,288 |
|
Subscription |
|
| 611 |
|
|
| 600 |
|
|
| 1,701 |
|
|
| 1,856 |
|
License |
|
| 129 |
|
|
| 107 |
|
|
| 369 |
|
|
| 302 |
|
Total cost of revenue |
|
| 2,072 |
|
|
| 2,162 |
|
|
| 6,501 |
|
|
| 6,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
|
| 1,654 |
|
|
| 1,797 |
|
|
| 5,504 |
|
|
| 5,362 |
|
Subscription |
|
| 695 |
|
|
| 817 |
|
|
| 2,470 |
|
|
| 2,518 |
|
License |
|
| 4,256 |
|
|
| 800 |
|
|
| 5,880 |
|
|
| 2,287 |
|
Total gross profit |
|
| 6,605 |
|
|
| 3,414 |
|
|
| 13,854 |
|
|
| 10,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
|
| 55 | % |
|
| 55 | % |
|
| 55 | % |
|
| 56 | % |
Subscription |
|
| 53 | % |
|
| 58 | % |
|
| 59 | % |
|
| 58 | % |
License |
|
| 97 | % |
|
| 88 | % |
|
| 94 | % |
|
| 88 | % |
Percentage of gross profit to total revenue |
|
| 76 | % |
|
| 61 | % |
|
| 68 | % |
|
| 61 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
| 4,075 |
|
|
| 2,945 |
|
|
| 12,064 |
|
|
| 8,756 |
|
Research, development and engineering |
|
| 4,108 |
|
|
| 3,291 |
|
|
| 11,503 |
|
|
| 9,975 |
|
General and administrative |
|
| 2,442 |
|
|
| 2,039 |
|
|
| 7,066 |
|
|
| 6,185 |
|
Intellectual property |
|
| 387 |
|
|
| 394 |
|
|
| 1,124 |
|
|
| 1,290 |
|
Total operating expenses |
|
| 11,012 |
|
|
| 8,669 |
|
|
| 31,757 |
|
|
| 26,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (4,407 | ) |
|
| (5,255 | ) |
|
| (17,903 | ) |
|
| (16,039 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
| 174 |
|
|
| 69 |
|
|
| 408 |
|
|
| 157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
| (4,233 | ) |
|
| (5,186 | ) |
|
| (17,495 | ) |
|
| (15,882 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit (provision) for income taxes |
|
| (7 | ) |
|
| (12 | ) |
|
| 94 |
|
|
| (34 | ) |
Net loss |
| $ | (4,240 | ) |
| $ | (5,198 | ) |
| $ | (17,401 | ) |
| $ | (15,916 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share - basic |
| $ | (0.39 | ) |
| $ | (0.55 | ) |
| $ | (1.67 | ) |
| $ | (1.79 | ) |
Loss per common share - diluted |
| $ | (0.39 | ) |
| $ | (0.55 | ) |
| $ | (1.67 | ) |
| $ | (1.79 | ) |
Weighted average common shares outstanding - basic |
|
| 10,797 |
|
|
| 9,506 |
|
|
| 10,410 |
|
|
| 8,878 |
|
Weighted average common shares outstanding - diluted |
|
| 10,797 |
|
|
| 9,506 |
|
|
| 10,410 |
|
|
| 8,878 |
|
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents (1) |
| $ | 25,599 |
|
| $ | 11,638 |
|
Marketable securities (1) |
|
| 35,288 |
|
|
| 44,496 |
|
Trade accounts receivable, net |
|
| 7,030 |
|
|
| 5,078 |
|
Other current assets |
|
| 2,177 |
|
|
| 1,695 |
|
Total current assets |
|
| 70,094 |
|
|
| 62,907 |
|
Marketable securities (1) |
|
| — |
|
|
| 4,392 |
|
Property and equipment, net |
|
| 4,273 |
|
|
| 3,570 |
|
Intangibles, net |
|
| 6,369 |
|
|
| 6,422 |
|
Goodwill |
|
| 1,114 |
|
|
| 1,114 |
|
Other assets |
|
| 311 |
|
|
| 331 |
|
Total assets |
| $ | 82,161 |
|
| $ | 78,736 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and other accrued liabilities |
| $ | 2,071 |
|
| $ | 1,523 |
|
Deferred revenue |
|
| 1,717 |
|
|
| 2,923 |
|
Total current liabilities |
|
| 3,788 |
|
|
| 4,446 |
|
Deferred rent and other long-term liabilities |
|
| 989 |
|
|
| 956 |
|
Total liabilities |
|
| 4,777 |
|
|
| 5,402 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
|
|
|
Preferred stock |
|
| 50 |
|
|
| 50 |
|
Common stock |
|
| 11 |
|
|
| 11 |
|
Additional paid-in capital |
|
| 142,461 |
|
|
| 120,985 |
|
Accumulated deficit |
|
| (65,138 | ) |
|
| (47,712 | ) |
Total shareholders' equity |
|
| 77,384 |
|
|
| 73,334 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ | 82,161 |
|
| $ | 78,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $60,887 and $60,526 at September 30, 2017 and December 31, 2016, respectively. |
| |||||||
Consolidated Cash Flow Information
(in thousands)
(Unaudited)
|
| Nine Month Information |
| |||||
|
| September 30, |
|
| September 30, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (17,401 | ) |
| $ | (15,916 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation, amortization and write-off of property and equipment |
|
| 1,024 |
|
|
| 1,016 |
|
Amortization and write-off of intangibles |
|
| 775 |
|
|
| 876 |
|
Stock-based compensation |
|
| 4,872 |
|
|
| 4,162 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Trade accounts receivable |
|
| (1,952 | ) |
|
| 2,095 |
|
Other current assets |
|
| (482 | ) |
|
| (437 | ) |
Other assets |
|
| 20 |
|
|
| (56 | ) |
Accounts payable and other accrued liabilities |
|
| 373 |
|
|
| 680 |
|
Deferred revenue |
|
| (1,247 | ) |
|
| (1,407 | ) |
Net cash used in operating activities |
|
| (14,018 | ) |
|
| (8,987 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (1,424 | ) |
|
| (1,565 | ) |
Capitalized patent costs |
|
| (625 | ) |
|
| (623 | ) |
Maturity of marketable securities |
|
| 41,231 |
|
|
| 35,182 |
|
Purchase of marketable securities |
|
| (27,631 | ) |
|
| (40,817 | ) |
Net cash provided by (used in) investing activities |
|
| 11,551 |
|
|
| (7,823 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Issuance of common stock, net of issuance costs |
|
| 17,698 |
|
|
| 39,700 |
|
Exercise of stock options |
|
| 793 |
|
|
| 476 |
|
Purchase of common stock |
|
| (2,063 | ) |
|
| (1,879 | ) |
Net cash provided by financing activities |
|
| 16,428 |
|
|
| 38,297 |
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents (2) |
| $ | 13,961 |
|
| $ | 21,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities at beginning of period |
|
| 60,526 |
|
|
| 39,186 |
|
Cash, cash equivalents and marketable securities at end of period |
|
| 60,887 |
|
|
| 66,308 |
|
(2) Net increase in cash, cash equivalents and marketable securities |
| $ | 361 |
|
| $ | 27,122 |
|
###