PR Newswire | Oct 28, 2020 04:06PM EDT

10/28 15:05 CDT

Digimarc Reports Third Quarter 2020 Financial Results BEAVERTON, Ore., Oct. 28, 2020

BEAVERTON, Ore., Oct. 28, 2020 /PRNewswire/ -- Digimarc Corporation (NASDAQ: DMRC), creator of the Digimarc Platform for digital identification and detection, reported financial results for the third quarter ended September 30, 2020.

Third quarter 2020 financial resultsRevenue for the third quarter of 2020 was $5.8 million, even with the third quarter of 2019. Service revenue increased six percent, reflecting growth in services to Government customers. Subscription revenue decreased ten percent, reflecting the impact of a renegotiated contract with a Retail supplier partner in the first quarter of 2020.

Operating expenses for the third quarter of 2020 increased two percent to $12.2 million compared to $11.9 million in the same quarter a year ago. The increased costs resulted from $0.8 million of non-recurring severance costs related to our restructuring plan implemented in July 2020, partially offset by lower travel, consulting and other costs. Excluding the severance costs, operating expenses would have been down five percent.

Operating loss for the third quarter of 2020 increased four percent to $8.4 million compared to $8.0 million in the third quarter of 2019, due to the non-recurring severance costs noted above.

Net loss for the third quarter of 2020 increased eight percent to $8.4 million or $(0.68) per diluted share compared to a net loss of $7.8 million or $(0.65) per diluted share in the same quarter a year ago. The non-recurring severance costs of $0.8 million incurred during the third quarter of 2020 accounted for $(0.07) per diluted share of the net loss.

TCM|Strategic Partners entered into an agreement in September to invest $53.5 million in Digimarc. $36.5 million of cash proceeds were received prior to quarter end from the issuance and sale of common stock pursuant to the investment. At quarter-end, cash, cash equivalents and marketable securities totaled $62.7 million compared to $36.8 million at December 31, 2019. The remaining $17.0 million of cash proceeds was received on October 1, 2020, when the convertible preferred stock was issued. For more details regarding the investment, see https://www.digimarc.com/about/news-events/press-releases/2020/09/29/tcm-strategic-partners-invests-$53.5-million-in-digimarc

Conference callDigimarc will hold a conference call today (Wednesday, October 28, 2020) to discuss these results and provide an update on market conditions and execution of strategy. Chairman and CEO Bruce Davis, CFO Charles Beck and EVP Bob Chamness 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, 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: 4997586

If you have any difficulty connecting with the conference call, please contact Digimarc investor relations at +1 503-469-4762.

About DigimarcDigimarc Corporation (NASDAQ: DMRC) is a pioneer in the automatic identification of media, including packaging, other commercial print, digital images, audio and video. The Digimarc Platform provides innovative and comprehensive automatic identification software and services to simplify search and transform information discovery through unparalleled reliability, efficiency and security. The Digimarc Platform enables applications that benefit retailers and consumer brands, national and state government agencies, media and entertainment industries, and others. Digimarc is based in Beaverton, Oregon, with a growing supplier network around the world. Visit digimarc.com and follow us @digimarc to learn more about The Barcode of Everything(r).

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, 2019, 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 Nine Month Information

September 30, September 30, September 30, September 30,

2020 2019 2020 2019

Revenue:

Service $ 3,352 $ 3,160 $ 10,982 $ 10,549

Subscription 2,399 2,668 7,455 7,119

Total revenue 5,751 5,828 18,437 17,668

Cost of revenue:

Service 1,406 1,409 4,691 4,730

Subscription 522 509 1,548 1,507

Total cost of revenue 1,928 1,918 6,239 6,237

Gross profit:

Service 1,946 1,751 6,291 5,819

Subscription 1,877 2,159 5,907 5,612

Total gross profit 3,823 3,910 12,198 11,431

Gross margin:

Service 58% 55% 57% 55%

Subscription 78% 81% 79% 79%

Percentage of gross profit to total revenue 66% 67% 66% 65%

Operating expenses:

Sales and marketing 4,538 4,839 14,417 14,876

Research, development and engineering 4,662 4,105 13,303 12,124

General and administrative 3,009 2,998 9,457 9,287

Total operating expenses 12,209 11,942 37,177 36,287

Operating loss (8,386) (8,032) (24,979) (24,856)

Other income, net 36 259 257 727

Loss before income taxes (8,350) (7,773) (24,722) (24,129)

Benefit (provision) for income taxes (2) 12 1 (28)

Net loss $ (8,352) $ (7,761) $ (24,721) $ (24,157)

Earnings (loss) per common share:

Loss per common share - basic $ (0.68) $ (0.65) $ (2.04) $ (2.07)

Loss per common share - diluted $ (0.68) $ (0.65) $ (2.04) $ (2.07)

Weighted average common shares outstanding - basic 12,241 11,924 12,129 11,693

Weighted average common shares outstanding - diluted 12,241 11,924 12,129 11,693

Digimarc Corporation

Consolidated Balance Sheet Information

(in thousands)

(Unaudited)

September 30, December 31,

2020 2019

Assets

Current assets:

Cash and cash equivalents^(1) $ 45,461 $ 11,213

Marketable securities^(1) 17,194 25,604

Trade accounts receivable, net 3,022 4,021

Other current assets 2,396 2,456

Total current assets 68,073 43,294

Property and equipment, net 3,361 3,650

Intangibles, net 6,604 6,670

Goodwill 1,114 1,114

Other assets 2,353 2,660

Total assets $ 81,505 $ 57,388

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable and other accrued liabilities $ 2,469 $ 2,272

Note payable, current 3,096 -

Deferred revenue 2,098 3,172

Total current liabilities 7,663 5,444

Lease liability and other long-term liabilities 2,712 2,494

Note payable, long-term 1,957 -

Total liabilities 12,332 7,938

Commitments and contingencies

Shareholders' equity:

Preferred stock 50 50

Common stock 15 12

Additional paid-in capital 232,544 188,103

Accumulated deficit (163,436) (138,715)

Total shareholders' equity 69,173 49,450

Total liabilities and shareholders' equity $ 81,505 $ 57,388

(1) Aggregate cash, cash equivalents and marketable securities was $62,655 and$36,817 atSeptember 30, 2020 and December 31, 2019, respectively.

Digimarc Corporation

Consolidated Cash Flow Information

(in thousands)

(Unaudited)

Nine Month Information

September 30, September 30,

2020 2019

Cash flows from operating activities:

Net loss (24,721) $ (24,157)

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

Depreciation, amortization and write-off of property and equipment 1,112 1,098

Amortization and write-off of intangibles 612 533

Stock-based compensation 7,149 6,094

Changes in operating assets and liabilities:

Trade accounts receivable 999 318

Other current assets 60 (782)

Other assets 307 263

Accounts payable and other accrued liabilities 146 1,086

Deferred revenue (1,092) (735)

Lease liability and other long-term liabilities 236 (481)

Net cash used in operating activities (15,192) (16,763)

Cash flows from investing activities:

Purchase of property and equipment (694) (692)

Capitalized patent costs (478) (524)

Maturity of marketable securities 30,598 27,997

Purchase of marketable securities (22,188) (38,037)

Net cash provided by (used in) investing activities 7,238 (11,256)

Cash flows from financing activities:

Issuance of common stock, net of issuance costs 38,603 19,615

Proceeds from note payable 5,032 -

Exercise of stock options 135 293

Purchase of common stock (1,568) (2,753)

Net cash provided by financing activities 42,202 17,155

Net increase (decrease) in cash and cash equivalents^(2) $ 34,248 $ (10,864)

Cash, cash equivalents and marketable securities at beginning of period 36,817 43,656

Cash, cash equivalents and marketable securities at end of period 62,655 42,832

(2) Net increase (decrease) in cash, cash equivalents and marketable securities $ 25,838 $ (824)

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SOURCE Digimarc Corporation