PR Newswire | Aug 5, 2021 04:06PM EDT

08/05 15:05 CDT

Digimarc Reports Second Quarter 2021 Financial Results BEAVERTON, Ore., Aug. 5, 2021

BEAVERTON, Ore., Aug. 5, 2021 /PRNewswire/ -- Digimarc Corporation (NASDAQ: DMRC) reported financial results for the second quarter ended June 30, 2021.

Second Quarter 2021 Financial ResultsRevenue for the second quarter of 2021 decreased three percent to $6.3 million compared to $6.5 million in the second quarter of 2020, reflecting lower revenue from Government services and Commercial subscriptions, partially offset by higher Commercial services revenue.

Operating expenses for the second quarter of 2021 increased 65% to $19.7 million compared to $11.9 million in the same quarter a year ago, reflecting non-recurring costs of $7.5 million incurred during the three month period ended June 30, 2021. These costs were associated with the Separation Agreement and General Release we entered into on April 12, 2021 with our former chief executive officer, as well as severance costs incurred for organizational changes we made in June 2021. Excluding the $7.5 million of non-recurring costs, operating expenses increased 2% to $12.2 million, reflecting higher consulting and legal costs, partially offset by lower recurring compensation costs.

Operating loss for the second quarter of 2021 increased 105% to $15.4 million compared to $7.5 million in the second quarter of 2020, due primarily to higher operating expenses. Excluding the $7.5 million of non-recurring costs noted above, operating loss increased 5% to $7.9 million.

Net loss for the second quarter of 2021 increased 107% to $15.4 million or $(0.94) per diluted share compared to net loss of $7.5 million or $(0.62) per diluted share in the same quarter a year ago. Excluding the $7.5 million of non-recurring costs noted above, net loss increased 6% to $7.9 million, or $(0.48) per diluted share.

At quarter-end, cash, cash equivalents, short- and long-term marketable securities totaled $61.1 million compared to $77.7 million at December 31, 2020.

Conference callDigimarc will hold a conference call today (Thursday, August 5, 2021) to discuss these results and provide an update on market conditions and execution of strategy. CEO Riley McCormack, CFO Charles Beck, CLO Robert Chamness and CRO Tim Price 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 here and in the investor section of the company's website. The conference call script will also be posted to the company's website shortly before the call.

For those who wish to call in via telephone to ask a question, please dial the number below at least five minutes before the scheduled start time:

Toll-Free Number: 866-562-9934International Number: 706-679-0638Conference ID: 2188966

If you have any difficulty connecting with the conference call, please contact Digimarc investor relations team at +1 503-469-4826.

About DigimarcDigimarc Corporation (NASDAQ: DMRC) is a pioneer and leader in digital watermarking solutions and the automatic identification of media, including packaging, commercial print, digital images, audio and video. Digimarc helps customers drive efficiency, accuracy and security across physical and digital supply chains. Visit us at digimarc.com on LinkedIn and follow us on Twitter @digimarc to learn more.

Forward-looking statementsExcept for historical information contained in this release, the matters described in this release contain various "forward-looking statements." These forward-looking statements include 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 regulatory factors. More detailed information about risk factors that may affect actual results are outlined in the company's Form 10-K for the year ended December 31, 2020, 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 Six Month Information

June 30, June 30, June 30, June 30,

2021 2020 2021 2020

Revenue:

Service $ 3,791 $ 3,892 $ 7,575 $ 7,630

Subscription 2,487 2,605 5,403 5,056

Total revenue 6,278 6,497 12,978 12,686

Cost of revenue:

Service 1,515 1,601 3,085 3,285

Subscription 534 512 1,325 1,026

Total cost of revenue 2,049 2,113 4,410 4,311

Gross profit:

Service 2,276 2,291 4,490 4,345

Subscription 1,953 2,093 4,078 4,030

Total gross profit 4,229 4,384 8,568 8,375

Gross margin:

Service 60% 59% 59% 57%

Subscription 79% 80% 75% 80%

Percentage of gross profit to total revenue 67% 67% 66% 66%

Operating expenses:

Sales and marketing 6,277 4,633 11,218 9,879

Research, development and engineering 4,213 4,208 8,344 8,641

General and administrative 9,175 3,081 12,668 6,448

Total operating expenses 19,665 11,922 32,230 24,968

Operating loss (15,436) (7,538) (23,662) (16,593)

Other income, net 18 79 28 221

Loss before income taxes (15,418) (7,459) (23,634) (16,372)

Benefit (provision) for income taxes (4) (2) (10) 3

Net loss $ (15,422) $ (7,461) $ (23,644) $ (16,369)

Earnings (loss) per common share:

Loss per common share - basic $ (0.94) $ (0.62) $ (1.44) $ (1.36)

Loss per common share - diluted $ (0.94) $ (0.62) $ (1.44) $ (1.36)

Weighted average common shares outstanding - basic 16,430 12,108 16,382 12,073

Weighted average common shares outstanding - diluted 16,430 12,108 16,382 12,073

Digimarc Corporation

Consolidated Balance Sheet Information

(in thousands)

(Unaudited)

June 30, December 31,

2021 2020

Assets

Current assets:

Cash and cash equivalents^(1) $ 21,358 $ 19,696

Marketable securities^(1) 39,592 58,032

Trade accounts receivable, net 4,590 3,907

Other current assets 1,805 2,197

Total current assets 67,345 83,832

Marketable securities^(1) 157 -

Property and equipment, net 3,082 3,272

Intangibles, net 6,606 6,612

Goodwill 1,114 1,114

Other assets 2,244 2,198

Total assets $ 80,548 $ 97,028

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable and other accrued liabilities $ 4,428 $ 2,827

Note payable, current 5,091 3,947

Deferred revenue 2,659 3,002

Total current liabilities 12,178 9,776

Lease liability and other long-term liabilities 3,128 2,295

Note payable, long-term - 1,118

Total liabilities 15,306 13,189

Commitments and contingencies

Shareholders' equity:

Preferred stock 50 50

Common stock 17 17

Additional paid-in capital 260,071 255,024

Accumulated deficit (194,896) (171,252)

Total shareholders' equity 65,242 83,839

Total liabilities and shareholders' equity $ 80,548 $ 97,028

(1) Aggregate cash, cash equivalents, short- and long-term marketablesecurities was $61,107 and $77,728 at June 30, 2021 and December 31, 2020,respectively.

Digimarc Corporation

Consolidated Cash Flow Information

(in thousands)

(Unaudited)

Six Month Information

June 30, June 30,

2021 2020

Cash flows from operating activities:

Net loss $ (23,644) $ (16,369)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation, amortization and write-off of property and equipment 717 745

Amortization and write-off of intangibles 345 431

Amortization of right of use assets under operating leases 240 233

Amortization of net premiums and (discounts) on marketable securities (498) 96

Stock-based compensation 8,747 4,522

Changes in operating assets and liabilities:

Trade accounts receivable (950) 445

Other current assets 392 361

Other assets (19) 85

Accounts payable and other accrued liabilities 1,859 (155)

Deferred revenue (331) (500)

Lease liability and other long-term liabilities 656 24

Net cash used in operating activities (12,486) (10,082)

Cash flows from investing activities:

Purchase of property and equipment (569) (456)

Capitalized patent costs (290) (311)

Maturity of marketable securities 49,722 26,439

Purchase of marketable securities (30,941) (19,490)

Net cash provided by investing activities 17,922 6,182

Cash flows from financing activities:

Proceeds from note payable - 5,032

Issuance of preferred stock, net of issuance costs - 574

Exercise of stock options - 135

Purchase of common stock (3,774) (1,120)

Net cash provided by (used in) financing activities (3,774) 4,621

Net increase in cash and cash equivalents^(2) $ 1,662 $ 721

Cash, cash equivalents and marketable securities at beginning of period 77,728 36,817

Cash, cash equivalents and marketable securities at end of period 61,107 30,493

(2) Net decrease in cash, cash equivalents and marketable securities $ (16,621) $ (6,324)

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SOURCE Digimarc Corporation