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Digimarc Corporation$44.17($.01)(.02%)

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 Digimarc Reports Fourth Quarter and Full Year 2017 Financial Results
   Wednesday, February 21, 2018 4:05:00 PM ET

Digimarc Corporation (DMRC ), inventor of the Intuitive Computing Platform(TM) featuring Digimarc Barcode, reported financial results for the fourth quarter and full year ended December 31, 2017.

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Fourth Quarter 2017 Financial Results Revenue for the fourth quarter of 2017 totaled $4.9 million compared to $5.2 million in the same quarter a year-ago. The decrease was primarily due to lower license revenue reflecting the impact of the $3.5 million upfront license fee we realized in the third quarter of 2017 whereby we waived any future royalty obligations from this licensee in one of the licensed fields of use.

Operating expenses for the fourth quarter of 2017 totaled $11.5 million compared to $9.0 million in the same quarter a year-ago. The increase 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 fourth quarter of 2017 totaled $8.7 million compared to an operating loss of $5.9 million in the same quarter a year-ago. The higher operating loss was primarily due to higher operating expenses.

Net loss for the fourth quarter of 2017 totaled $8.4 million or $(0.76) per diluted share, compared to net loss of $5.8 million or $(0.57) per diluted share in the same quarter a year-ago.

At quarter-end, cash, cash equivalents and marketable securities totaled $67.7 million, compared to $60.9 million at September 30, 2017. The increase was primarily due to $12.0 million of net proceeds from the sale of common stock in a registered direct offering completed during the quarter, partially offset by higher operating expenses.

Full Year 2017 Financial Results Revenue for the full year 2017 totaled $25.2 million compared to $21.8 million in 2016. The increase was primarily due to higher license revenue driven by a one-time $3.5 million license fee from an existing licensee. In exchange for the upfront license fee, we waived any future royalty obligations from this licensee in one of the licensed fields of use.

Operating expenses for the full year 2017 totaled $43.2 million compared to $35.2 million in 2016. The increase was primarily due to higher investment in sales, marketing, and engineering.

Operating loss for the full year 2017 totaled $26.6 million compared to an operating loss of $21.9 million in 2016. The higher operating loss was primarily due to higher operating expenses, partially offset by higher license revenue.

Net loss for the full year 2017 totaled $25.8 million or $(2.44) per diluted share, compared to a net loss of $21.7 million or $(2.36) per diluted share in 2016.

Conference Call Digimarc will hold a conference call later today (Wednesday, February 21, 2018) 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 here.

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: 96755398

If you have any difficulty connecting with the conference call, please contact Liolios Group at 949-574-3860.

About Digimarc Digimarc Corporation (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(TM)), 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 is based in Beaverton, Oregon, with technologies deployed by major retailers and consumer brands, central banks, U.S. states, film companies and professional sports franchises, among others. Visit digimarc.com and follow us @digimarc to learn more about The Barcode of Everything(TM).

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 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.

Digimarc Corporation
Consolidated Income Statement Information
(in thousands, except per share amounts)
(Unaudited)
                                                     Three-Month Information                         Twelve-Month Information
                                                     December 31,            December 31,            December 31,            December 31,
                                                     2017                    2016                    2017                    2016
Revenue:
Service                                              $              3,001    $              3,017    $            12,936     $            12,667
Subscription                                         1,348                   1,434                   5,519                   5,808
License                                              509                     729                     6,758                   3,318
Total revenue                                        4,858                   5,180                   25,213                  21,793
Cost of revenue:
Service                                              1,361                   1,385                   5,792                   5,673
Subscription                                         563                     554                     2,264                   2,410
License                                              133                     112                     502                     414
Total cost of revenue                                2,057                   2,051                   8,558                   8,497
Gross profit:
Service                                              1,640                   1,632                   7,144                   6,994
Subscription                                         785                     880                     3,255                   3,398
License                                              376                     617                     6,256                   2,904
Total gross profit                                   2,801                   3,129                   16,655                  13,296
Gross margin:
Service                                              55%                     54%                     55%                     55%
Subscription                                         58%                     61%                     59%                     59%
License                                              74%                     85%                     93%                     88%
Percentage of gross profit to total revenue          58%                     60%                     66%                     61%
Operating expenses:
Sales and marketing                                  4,572                   3,132                   16,636                  11,888
Research, development and engineering                3,932                   3,419                   15,435                  13,394
General and administrative                           2,614                   2,113                   9,680                   8,298
Intellectual property                                345                     346                     1,469                   1,636
Total operating expenses                             11,463                  9,010                   43,220                  35,216
Operating loss                                       (8,662)                 (5,881)                 (26,565)                (21,920)
Other income, net                                    180                     101                     588                     258
Loss before income taxes                             (8,482)                 (5,780)                 (25,977)                (21,662)
Benefit (provision) for income taxes                 112                     24                      206                     (10)
Net loss                                             $             (8,370)   $             (5,756)   $           (25,771)    $           (21,672)
Earnings (loss) per common share:
Loss per common share - basic                        $               (0.76)  $               (0.57)  $               (2.44)  $               (2.36)
Loss per common share - diluted                      $               (0.76)  $               (0.57)  $               (2.44)  $               (2.36)
Weighted average common shares outstanding - basic   11,046                  10,111                  10,571                  9,188
Weighted average common shares outstanding - diluted 11,046                  10,111                  10,571                  9,188
Digimarc Corporation
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
                                               December 31,          December 31,
                                               2017                  2016
Assets
Current assets:
Cash and cash equivalents (1)                  $            40,823   $            11,638
Marketable securities (1)                      26,915                44,496
Trade accounts receivable, net                 6,404                 5,078
Other current assets                           2,171                 1,695
Total current assets                           76,313                62,907
Marketable securities (1)                      -                     4,392
Property and equipment, net                    4,236                 3,570
Intangibles, net                               6,381                 6,422
Goodwill                                       1,114                 1,114
Other assets                                   326                   331
Total assets                                   $            88,370   $            78,736
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and other accrued liabilities $              1,914  $              1,523
Deferred revenue                               3,124                 2,923
Total current liabilities                      5,038                 4,446
Deferred rent and other long-term liabilities  985                   956
Total liabilities                              6,023                 5,402
Commitments and contingencies
Shareholders’ equity:
Preferred stock                                50                    50
Common stock                                   12                    11
Additional paid-in capital                     155,793               120,985
Accumulated deficit                            (73,508)              (47,712)
Total shareholders’ equity                     82,347                73,334
Total liabilities and shareholders’ equity     $            88,370   $            78,736
(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $67,738 and $60,526 at December 31, 2017 and December 31, 2016, respectively.
Digimarc Corporation
Consolidated Cash Flow Information
(in thousands)
(Unaudited)
                                                                            Twelve-Month Information
                                                                            December 31,          December 31,
                                                                            2017                  2016
Cash flows from operating activities:
Net loss                                                                    $           (25,771)  $           (21,672)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and write-off of property and equipment          1,430                 1,336
Amortization and write-off of intangibles                                   996                   1,121
Stock-based compensation                                                    6,757                 5,553
Changes in operating assets and liabilities:
Trade accounts receivable                                                   (1,326)               (462)
Other current assets                                                        (476)                 (208)
Other assets                                                                5                     7
Accounts payable and other accrued liabilities                              585                   637
Deferred revenue                                                            189                   (176)
Net cash used in operating activities                                       (17,611)              (13,864)
Cash flows from investing activities:
Purchase of property and equipment                                          (2,188)               (1,837)
Capitalized patent costs                                                    (819)                 (790)
Maturity of marketable securities                                           60,360                41,052
Purchase of marketable securities                                           (38,387)              (53,914)
Net cash provided by (used in) investing activities                         18,966                (15,489)
Cash flows from financing activities:
Issuance of common stock, net of issuance costs                             29,677                39,700
Exercise of stock options                                                   1,183                 668
Purchase of common stock                                                    (3,030)               (2,537)
Net cash provided by financing activities                                   27,830                37,831
Net increase in cash and cash equivalents (2)                               $            29,185   $              8,478
Cash, cash equivalents and marketable securities at beginning of period     60,526                39,186
Cash, cash equivalents and marketable securities at end of period           67,738                60,526
(2)    Net increase in cash, cash equivalents and marketable securities     $              7,212  $            21,340

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SOURCE Digimarc Corporation

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