10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-34108

DIGIMARC CORPORATION

(Exact name of registrant as specified in its charter)

Oregon	26-2828185
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9405 SW Gemini Drive, Beaverton, Oregon 97008

(Address of principal executive offices) (Zip Code)

(503) 469-4800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of July 16, 2015, there were 8,558,107 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

Table of Contents

PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):	3
	Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	3
	Consolidated Statements of Operations for the three- and six-months ended June 30, 2015 and 2014	4
	Consolidated Statements of Shareholders’ Equity for the six-months ended June 30, 2015 and 2014	5
	Consolidated Statements of Cash Flows for the six-months ended June 30, 2015 and 2014	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 6.	Exhibits	31
SIGNATURES		32

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

DIGIMARC CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(UNAUDITED)

	June 30,      2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	4,047		$	6,122
Marketable securities		29,999			32,201
Trade accounts receivable, net		3,020			4,545
Other current assets		2,575			2,611
Total current assets		39,641			45,479
Marketable securities		—			749
Property and equipment, net		2,786			2,976
Intangibles, net		6,728			6,720
Goodwill		1,114			1,114
Other assets		304			378
Total assets	$	50,573		$	57,416
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	1,387		$	1,379
Deferred revenue		2,290			3,660
Total current liabilities		3,677			5,039
Deferred rent and other long-term liabilities		219			203
Total liabilities		3,896			5,242
Commitments and contingencies (Note 12)
Shareholders’ equity:
Preferred stock (par value $0.001 per share, 2,500 authorized, 10 shares issued and outstanding at June 30, 2015 and December 31, 2014)		50			50
Common stock (par value $0.001 per share, 50,000 authorized, 8,553 and 8,427 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively)		9			8
Additional paid-in capital		62,886			60,222
Accumulated deficit		(16,268	)		(8,106	)
Total shareholders’ equity		46,677			52,174
Total liabilities and shareholders’ equity	$	50,573		$	57,416

The accompanying notes are an integral part of these consolidated financial statements.

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DIGIMARC CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(UNAUDITED)

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Revenue:
Service	$	3,235		$	2,716		$	6,736		$	5,704
Subscription		1,670			1,496			3,386			2,908
License		893			1,451			1,665			4,256
Total revenue		5,798			5,663			11,787			12,868
Cost of revenue:
Service		1,497			1,169			3,075			2,583
Subscription		866			699			1,620			1,348
License		86			84			170			167
Total cost of revenue		2,449			1,952			4,865			4,098
Gross profit		3,349			3,711			6,922			8,770
Operating expenses:
Sales and marketing		2,098			2,052			4,188			3,931
Research, development and engineering		3,025			3,404			6,109			6,950
General and administrative		1,980			2,326			4,186			4,747
Intellectual property		291			387			658			921
Total operating expenses		7,394			8,169			15,141			16,549
Operating loss		(4,045	)		(4,458	)		(8,219	)		(7,779	)
Other income, net		32			21			55			48
Loss before income taxes		(4,013	)		(4,437	)		(8,164	)		(7,731	)
Benefit for income taxes		1			1,757			2			3,065
Net loss	$	(4,012	)	$	(2,680	)	$	(8,162	)	$	(4,666	)
Earnings (loss) per common share:
Loss per common share—basic	$	(0.50	)	$	(0.38	)	$	(1.02	)	$	(0.68	)
Loss per common share—diluted	$	(0.50	)	$	(0.38	)	$	(1.02	)	$	(0.68	)
Weighted average common shares outstanding—basic		8,029			7,113			7,995			7,057
Weighted average common shares outstanding—diluted		8,029			7,113			7,995			7,057
Cash dividends declared per common share	$	—		$	0.11		$	—		$	0.22

The accompanying notes are an integral part of these consolidated financial statements.

4

DIGIMARC CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(UNAUDITED)

	Preferred Stock				Common Stock					Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Total Shareholders’ Equity
	Shares		Amount		Shares			Amount
BALANCE AT DECEMBER 31, 2013		10	$	50		7,401		$	7	$	41,498		$	9,368		$	50,923
Exercise of stock options		—		—		170			1		1,175			—			1,176
Issuance of restricted common stock		—		—		82			—		—			—			—
Forfeiture of restricted common stock		—		—		(13	)		—		—			—			—
Purchase and retirement of common stock		—		—		(68	)		—		(1,440	)		—			(1,440	)
Stock-based compensation		—		—		—			—		2,718			—			2,718
Tax impact from stock-based awards		—		—		—			—		(609	)		—			(609	)
Net loss		—		—		—			—		—			(4,666	)		(4,666	)
Cash dividends declared		—		—		—			—		—			(1,654	)		(1,654	)
BALANCE AT JUNE 30, 2014		10	$	50		7,572		$	8	$	43,342		$	3,048		$	46,448
BALANCE AT DECEMBER 31, 2014		10	$	50		8,427		$	8	$	60,222		$	(8,106	)	$	52,174
Exercise of stock options		—		—		71			1		1,128			—			1,129
Issuance of restricted common stock		—		—		119			—		—			—			—
Forfeiture of restricted common stock		—		—		(28	)		—		—			—			—
Purchase and retirement of common stock		—		—		(36	)		—		(1,035	)		—			(1,035	)
Stock-based compensation		—		—		—			—		2,571			—			2,571
Net loss		—		—		—			—		—			(8,162	)		(8,162	)
BALANCE AT JUNE 30, 2015		10	$	50		8,553		$	9	$	62,886		$	(16,268	)	$	46,677

The accompanying notes are an integral part of these consolidated financial statements.

5

DIGIMARC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(UNAUDITED)

	Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Cash flows from operating activities:
Net loss	$	(8,162	)	$	(4,666	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and write-off of property and equipment		604			459
Amortization and write-off of intangibles		520			606
Changes in allowance for doubtful accounts		16			(17	)
Stock-based compensation		2,480			2,631
Deferred income taxes		—			(1,621	)
Changes in operating assets and liabilities:
Trade accounts receivable		1,509			2,164
Other current assets		36			(1,412	)
Other assets		74			84
Accounts payable and other accrued liabilities		(160	)		(291	)
Deferred revenue		(1,285	)		(1,984	)
Net cash used in operating activities		(4,368	)		(4,047	)
Cash flows from investing activities:
Purchase of property and equipment		(324	)		(579	)
Capitalized patent costs		(428	)		(561	)
Maturity of marketable securities		39,144			32,376
Purchase of marketable securities		(36,193	)		(25,810	)
Net cash provided by investing activities		2,199			5,426
Cash flows from financing activities:
Exercise of stock options		1,129			1,176
Purchase of common stock		(1,035	)		(1,440	)
Cash dividends paid		—			(1,654	)
Net cash provided by (used in) financing activities		94			(1,918	)
Net decrease in cash and cash equivalents		(2,075	)		(539	)
Cash and cash equivalents at beginning of period		6,122			3,811
Cash and cash equivalents at end of period	$	4,047		$	3,272
Supplemental disclosure of cash flow information:
Cash received for income taxes, net	$	2		$	12
Supplemental schedule of non-cash investing activities:
Stock-based compensation capitalized to patent costs and software	$	91		$	87

The accompanying notes are an integral part of these consolidated financial statements.

6

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data)

(UNAUDITED)

1. Description of Business and Significant Accounting Policies

Description of Business

Digimarc Corporation (“Digimarc” or the “Company”), an Oregon corporation, enables governments and enterprises around the world to give digital identities to media and objects that computers can sense and recognize and to which they can react. The Company has developed the Digimarc Barcode and Intuitive Computing Platform that are designed to optimize the identification of all consumer brand impressions, wherever and whenever they may appear, facilitating modern mobile-centric shopping. The platform includes means to embed “Digimarc Barcodes,” invisible and inaudible barcode-like information that is recognizable by smartphones, industrial scanners, and other computer interfaces into virtually all forms of media content, including consumer products packaging. Digimarc Barcodes have many applications, including facilitating remarkably faster scanning of products at retail checkout as well as improved engagement with smartphone-equipped consumers. The Digimarc Barcode is robust yet imperceptible by people in ordinary use, allowing for reliable, efficient, economical, globally scalable automatic identification of media without visible computer codes like traditional barcodes.

Interim Consolidated Financial Statements

The Company has adhered to the accounting policies set forth in its Annual Report on Form 10-K for the year ended December 31, 2014 in preparing the accompanying interim consolidated financial statements.

The accompanying interim consolidated financial statements have been prepared from the Company’s records without audit and, in management’s opinion, include all adjustments (consisting of only normal recurring adjustments) necessary to fairly reflect the financial condition and the results of operations for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”).

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on February 20, 2015. The results of operations for the interim periods presented in these consolidated financial statements are not necessarily indicative of the results for the full year.

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to current period presentation. These reclassifications had no material effect on the results of operations or financial position for any period presented.

Goodwill

The Company tests goodwill for impairment annually in June and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Such reviews assess the fair value of the Company’s assets compared to their carrying value. The Company operates as a single reporting unit. The Company estimated the fair value of its single reporting unit using a market approach, which takes into account the Company’s market capitalization plus an estimated control premium.

In connection with the Company’s annual impairment test of goodwill as of June 30, 2015 and 2014, it was concluded that there was no impairment as the estimated fair value of the Company’s reporting unit substantially exceeded the carrying value.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU No. 2014-09 provides specific guidance to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The amendments in this update permit the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method and is currently assessing the potential future impact of this standard on the financial condition or results of operations of the Company.

7

On July 9, 2015, the FASB affirmed its proposal to defer the effective date of the new revenue standard for public entities by one year to annual reporting periods beginning after December 31, 2017, and interim periods beginning in the first interim period within the year of adoption. Early application would be permitted, but not before the original effective date for public entities, annual reporting periods after December 15, 2016, and interim periods beginning in the first interim period within the year of adoption.

2. Fair Value of Financial Instruments

The estimated fair values of the Company’s financial instruments, which include cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate their carrying values due to the short-term nature of these instruments. The Company records marketable securities at amortized cost, which approximates fair value.

The Company’s fair value hierarchy for its cash equivalents and marketable securities as of June 30, 2015 and December 31, 2014, respectively, was as follows:

June 30, 2015	Level 1		Level 2		Level 3		Total
Money market securities	$	1,447	$	—	$	—	$	1,447
Corporate notes		—		19,141		—		19,141
Pre-refunded municipal bonds (1)		—		9,203		—		9,203
Commercial paper		—		2,149		—		2,149
Certificates of deposits		—		845		—		845
Total	$	1,447	$	31,338	$	—	$	32,785
December 31, 2014	Level 1		Level 2		Level 3		Total
Money market securities	$	3,556	$	—	$	—	$	3,556
Corporate notes		—		19,245		—		19,245
Pre-refunded municipal bonds (1)		—		13,317		—		13,317
Certificates of deposits		—		2,176		—		2,176
Total	$	3,556	$	34,738	$	—	$	38,294

(1) Pre-refunded municipal bonds are collateralized by U.S. treasuries.

The fair value maturities of the Company’s cash equivalents and marketable securities as of June 30, 2015 are as follows:

	Maturities by Period
	Total		Less than 1 year		1-5 years		5-10 years		More than 10 years
Cash equivalents and marketable securities	$	32,785	$	32,785	$	—	$	—	$	—

The Company considers all highly liquid marketable securities with original maturities of 90 days or less at the date of acquisition to be cash equivalents. Cash equivalents include money market funds and certificates of deposit totaling $2,786 and $5,344 at June 30, 2015 and December 31, 2014, respectively. Cash equivalents are carried at cost or amortized cost, which approximates fair value.

3. Revenue Recognition

The Company derives its revenue primarily from development services, subscriptions and licensing of its intellectual property:

• Service revenue consists primarily of software development and consulting services. The majority of service revenue arrangements are structured as time and materials consulting agreements.

• Subscription revenue includes Digimarc Discover, Barcode and Guardian products and services, is generally recurring, paid in advance and recognized over the term of the subscription.

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• License revenue originates primarily from licensing the Company’s intellectual property where the Company receives license fees and/or royalties as its income stream.

Revenue is recognized in accordance with ASC 605 “Revenue Recognition” and ASC 985 “Software” when the following four criteria are met:

(i) persuasive evidence of an arrangement exists,

(ii) delivery has occurred,

(iii) the fee is fixed or determinable, and

(iv) collection is reasonably assured.

Some customer arrangements encompass multiple deliverables, such as patent licenses, professional services, software licenses, and maintenance and support fees. For arrangements that include multiple deliverables, the Company identifies separate units of accounting at inception based on the consensus reached under ASC 605-25 “Multiple-Element Arrangements,” which provides that revenue arrangements with multiple deliverables should be divided into separate units of accounting if certain criteria are met. The Company applies ASC 985 to software deliverables when relevant. The consideration for the arrangement under ASC 605-25 is allocated to the separate units of accounting using the relative selling price method.

The relative selling price method allocates the consideration based on the Company’s specific assumptions rather than assumptions of a marketplace participant, and any discount in the arrangement proportionally to each deliverable on the basis of each deliverable’s selling price.

Applicable revenue recognition criteria is considered separately for each separate unit of accounting as follows:

• Service revenue is generally determined based on time and materials. Revenue for development and consulting services is recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided.

• Subscription revenue, which includes Digimarc Discover, Barcode and Guardian products and services, is generally paid in advance and recognized over the term of the subscription, which is generally one to three years.

• License revenue is recognized when amounts owed to the Company have been earned, are fixed or determinable (within the Company’s normal 30 to 60 day payment terms), and collection is reasonably assured. If the payment terms extend beyond the normal 30 to 60 days, the fee may not be considered to be fixed or determinable, and the revenue would then be recognized when installments are due.

• The Company records revenue from certain license agreements upon cash receipt as a result of collectability not being reasonably assured.

• The Company’s standard payment terms for license arrangements are 30 to 60 days. Extended payment terms on patent license arrangements are not considered to be fixed or determinable if payments are due beyond the Company’s standard payment terms, primarily because of the risk of substantial modification present in the Company’s patent licensing business. As such, revenue on license arrangements with extended payment terms are recognized as fees become fixed or determinable.

Deferred revenue consists of billings in advance for service, subscription and license contracts for which revenue has not been earned.

4. Segment Information

Geographic Information

The Company derives its revenue from a single reporting segment: media management solutions. Revenue is generated in this segment through development services, subscriptions and licensing of intellectual property. The Company markets its products in the U.S. and in non-U.S. countries through its sales and licensing personnel.

Revenue by geographic area, based upon the “bill-to” location, was as follows:

9

	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Domestic	$	1,758	$	1,782	$	3,445	$	4,899
International (1)		4,040		3,881		8,342		7,969
Total	$	5,798	$	5,663	$	11,787	$	12,868

(1) Revenue from the Central Banks, consisting of a consortium of central banks around the world, is classified as international revenue. Reporting revenue by country for this customer is not practicable.

Major Customers

Customers who accounted for 10% or more of the Company’s revenue are as follows:

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Central Banks		54	%		51	%		57	%		47	%

5. Stock-Based Compensation

Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include stock option grants and restricted stock awards.

Stock-based compensation expense related to internal labor is capitalized to patent costs and software based on direct labor hours charged to capitalized patent costs and software.

Determining Fair Value

Stock Options

Valuation and Amortization Method. The Company estimates the fair value of stock options granted using the Black-Scholes option valuation model. The Company amortizes the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods.

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and pre-vesting and post-vesting forfeitures. Stock options granted generally vest over three to four years for employee grants and one to two years for director grants, and have contractual terms of ten years.

Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the expected life of the award.

Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the expected life of the award.

Expected Dividend Yield. The expected dividend yield is derived by the Company’s expected annual dividend rate over the expected term divided by the fair value of the Company’s common stock at the grant date.

There were no stock options granted during the three- and six-month periods ended June 30, 2015 and 2014.

The Company records stock-based compensation expense for stock option awards only for those awards that are expected to vest.

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Restricted Stock

The fair value of restricted stock awarded is based on the fair market value of the Company’s common stock on the date of the grant, and is recognized over the vesting period using the straight-line method.

The Company records stock-based compensation expense for restricted stock awards only for those awards that are expected to vest.

Stock-based Compensation

	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Stock-based compensation:
Cost of revenue	$	213	$	129	$	398	$	270
Sales and marketing		175		175		334		318
Research, development and engineering		328		364		615		720
General and administrative		484		607		1,002		1,156
Intellectual property		63		97		131		167
Stock-based compensation expense		1,263		1,372		2,480		2,631
Capitalized to patent costs and software		54		42		91		87
Total stock-based compensation expense	$	1,317	$	1,414	$	2,571	$	2,718

The following table sets forth total unrecognized compensation cost related to non-vested stock-based awards granted under all equity compensation plans, including stock options and restricted stock:

	As of June 30, 2015		As of December 31, 2014
Total unrecognized compensation costs	$	11,339	$	11,206

Total unrecognized compensation costs will be adjusted for any future changes in estimated forfeitures.

The Company expects to recognize the unrecognized compensation costs as of June 30, 2015 for stock options and restricted stock over weighted average periods through June 2019 as follows:

	Stock Options		Restricted Stock
Weighted average period		0.0 years		1.5 years

Stock Option Activity

As of June 30, 2015, under all of the Company’s stock-based compensation plans, equity awards to purchase an additional 1,425 shares were authorized for future grants under the plans. The Company issues new shares upon option exercises.

The following table reconciles the outstanding balance of stock options:

Three-months ended June 30, 2015:	Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at March 31, 2015		556		$	16.76	$	8.40
Options granted		—			—		—
Options exercised		(26	)		9.64		6.30
Options forfeited or expired		—			—		—
Outstanding at June 30, 2015		530		$	17.12	$	8.51	$	14,849

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Six-months ended June 30, 2015:	Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at December 31, 2014		601		$	16.97	$	8.42
Options granted		—			—		—
Options exercised		(71	)		15.83		7.79
Options forfeited or expired		—			—		—
Outstanding at June 30, 2015		530		$	17.12	$	8.51	$	14,849
Exercisable at June 30, 2015		530		$	17.12			$	14,849

The aggregate intrinsic value is based on the closing price of $45.14 per share of Digimarc common stock on June 30, 2015, which would have been received by the optionees had all of the options with exercise prices less than $45.14 per share been exercised on that date.

Restricted Stock Activity

The following table reconciles the unvested balance of restricted stock:

Three-months ended June 30, 2015:	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance, March 31, 2015		545		$	23.97
Granted		29		$	27.94
Vested		(62	)	$	26.17
Forfeited		(23	)	$	23.07
Unvested balance, June 30, 2015		489		$	23.98

Six-months ended June 30, 2015:	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance, December 31, 2014		502		$	23.09
Granted		119		$	28.48
Vested		(104	)	$	24.94
Forfeited		(28	)	$	23.65
Unvested balance, June 30, 2015		489		$	23.98

The following table indicates the fair value of all restricted stock awards that vested during the three- and six-months ended June 30, 2015 and 2014:

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	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Fair value of vested restricted stock awards	$	1,666	$	1,844	$	2,879	$	3,211

6. Earnings (Loss) Per Common Share

The Company calculates basic and diluted earnings per common share in accordance with ASC 260 “Earnings Per Share,” using the two-class method because the Company’s unvested restricted stock is a participating security since these awards contain non-forfeitable rights to receive dividends. Under the two-class method, earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed.

Basic earnings per common share excludes dilution and is calculated by dividing earnings to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing earnings to common shares by the weighted-average number of common shares, as adjusted for the potentially dilutive effect of stock options. The following table reconciles earnings (loss) per common share for the three- and six-month periods ended June 30, 2015 and 2014:

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Basic Earnings (Loss) per Common Share:
Numerator:
Net loss	$	(4,012	)	$	(2,680	)	$	(8,162	)	$	(4,666	)
Distributed earnings to common shares		—			780			—			1,553
Distributed earnings to participating securities		—			50			—			101
Total distributed earnings		—			830			—			1,654
Undistributed loss allocable to common shares		(4,012	)		(3,510	)		(8,162	)		(6,320	)
Undistributed earnings allocable to participating securities		—			—			—			—
Total undistributed loss		(4,012	)		(3,510	)		(8,162	)		(6,320	)
Loss to common shares—basic	$	(4,012	)	$	(2,730	)	$	(8,162	)	$	(4,767	)
Denominator
Weighted average common shares outstanding—basic		8,029			7,113			7,995			7,057
Basic earnings (loss) per common share	$	(0.50	)	$	(0.38	)	$	(1.02	)	$	(0.68	)

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Diluted Earnings (Loss) per Common Share:
Numerator:
Loss to common shares—basic	$	(4,012	)	$	(2,730	)	$	(8,162	)	$	(4,767	)
Undistributed earnings allocated to participating securities		—			—			—			—
Undistributed earnings reallocated to participating securities		—			—			—			—
Loss to common shares—diluted	$	(4,012	)	$	(2,730	)	$	(8,162	)	$	(4,767	)
Denominator
Weighted average common shares outstanding—basic		8,029			7,113			7,995			7,057
Dilutive effect of stock options		—			—			—			—
Weighted average common shares outstanding—dilutive		8,029			7,113			7,995			7,057
Diluted earnings (loss) per common share	$	(0.50	)	$	(0.38	)	$	(1.02	)	$	(0.68	)

There were 216 and 214 common stock equivalents related to stock options that were anti-dilutive and excluded from diluted earnings per common share for the three- and six-month periods ended June 30, 2015, respectively, as the Company incurred a net loss during the periods.

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There were 241 and 219 common stock equivalents related to stock options that were anti-dilutive and excluded from diluted earnings per common share calculations for the three- and six-month periods ended June 30, 2014, respectively, as the Company incurred a net loss during the periods.

7. Trade Accounts Receivable

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount.

	June 30,      2015			December 31,  2014
Trade accounts receivable	$	3,058		$	4,567
Allowance for doubtful accounts		(38	)		(22	)
Trade accounts receivable, net	$	3,020		$	4,545
Unpaid deferred revenue included in trade accounts receivable	$	386		$	1,974

Allowance for doubtful accounts

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing trade accounts receivable. The Company determines the allowance based on historical write-off experience and current information. The Company reviews its allowance for doubtful accounts each reporting period. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Unpaid deferred revenue

The unpaid deferred revenue that is included in trade accounts receivable is billed in accordance with the provisions of the contracts with the Company’s customers. Unpaid deferred revenue from the Company’s cash-basis customers is not included in trade accounts receivable nor deferred revenue.

Major customers

Customers who accounted for 10% or more of trade accounts receivable, net are as follows:

	June 30, 2015			December 31, 2014
Central Banks		58	%		61	%
Civolution		*			13	%

* Less than 10%

8. Property and Equipment

Property and equipment are stated at cost. Repairs and maintenance are charged to expense when incurred.

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, generally two to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the lease term.

	June 30,      2015			December 31,  2014
Office furniture and fixtures	$	913		$	845
Software		1,456			1,312
Equipment		3,126			3,072
Leasehold improvements		1,229			1,198
Gross property and equipment		6,724			6,427
Less accumulated depreciation and amortization		(3,938	)		(3,451	)
Property and equipment, net	$	2,786		$	2,976

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9. Intangibles

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Amortization of capitalized patent costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at the award date, which varies depending on the pendency period of the application, generally approximating seventeen years.

Amortization of intangible assets acquired is calculated using the straight-line method over the estimated useful lives of the assets.

	June 30,      2015			December 31, 2014
Capitalized patent costs	$	6,551		$	6,183
Intangible assets acquired:
Purchased patents and intellectual property		250			250
Existing technology		1,560			1,560
Customer relationships		290			290
Backlog		760			760
Tradenames		290			290
Non-solicitation agreements		120			120
Gross intangible assets		9,821			9,453
Accumulated amortization		(3,093	)		(2,733	)
Intangibles, net	$	6,728		$	6,720

10. Joint Ventures and Related Party Transactions

In March 2012, Digimarc and Nielsen decided to reduce the investments in their two joint ventures, TVaura LLC (in which Digimarc holds a 51% ownership interest) and TVaura Mobile LLC (in which Digimarc holds a 49% ownership interest), to minimal levels while assessing alternative approaches to achieving each of their goals in the emerging market opportunity of synchronized second screen television. Payment of all expenses incurred after the suspension of operations of each joint venture is unconditionally the responsibility of the majority owner, which expenses for TVaura LLC, if any, will be paid by Digimarc. As of June 30, 2015, both Digimarc and Nielsen continued to assess the market opportunities of each of the joint ventures.

Summarized financial information for the joint ventures has not been provided as the disclosures are immaterial to the Company’s filing given the operations of the joint ventures have been suspended. The joint ventures had no revenue or expenses for the three- and six-month periods ended June 30, 2015 and 2014. The Company’s investment in each joint venture was $0 as of June 30, 2015 and December 31, 2014.

11. Income Taxes

The benefit for income taxes reflects current taxes, deferred taxes, and withholding taxes in certain foreign jurisdictions. The effective tax rate for the six-months ended June 30, 2015 and 2014 was 0% and 40%, respectively. The valuation allowance against net deferred tax assets as of June 30, 2015 was $10,406, an increase of $3,118 from $7,288 as of December 31, 2014.

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12. Commitments and Contingencies

Certain of the Company’s product license and services agreements include an indemnification provision for claims from third parties relating to the Company’s intellectual property. Such indemnification provisions are accounted for in accordance with ASC 450 “Contingencies.” To date, there have been no claims made under such indemnification provisions.

The Company is subject from time to time to other legal proceedings and claims arising in the ordinary course of business.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements relating to future events or the future financial performance of Digimarc, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. Please see the discussion regarding forward-looking statements included in this Quarterly Report on Form 10-Q under the caption “Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.”

The following discussion should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. Readers are also urged to carefully review and consider the disclosures made in Part II, Item 1A (Risk Factors) of this Quarterly Report on Form 10-Q and in the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2014 filed on February 20, 2015 (our “2014 Annual Report”), and other reports and filings made with the Securities and Exchange Commission (“SEC”).

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “Digimarc,” “we,” “our” and “us” refer to Digimarc Corporation.

All dollar amounts are in thousands except per share amounts or unless otherwise noted. Percentages within the following tables may not foot due to rounding.

Digimarc Discover, Digimarc Barcode and Digimarc Guardian are registered trademarks of Digimarc Corporation. This Quarterly Report on Form 10-Q also includes trademarks and trade names owned by other parties, and all other such trademarks and trade names mentioned in this Quarterly Report on Form 10-Q are the property of their respective owners.

Overview

Digimarc Corporation enables governments and enterprises around the world to give digital identities to media and objects that computers can sense and recognize and to which they can react. We have developed the Digimarc Barcode and Intuitive Computing Platform that are designed to optimize the identification of all consumer brand impressions, wherever and whenever they may appear, facilitating modern mobile-centric shopping. The platform includes means to embed “Digimarc Barcodes,” invisible and inaudible barcode-like information that is recognizable by smartphones, industrial scanners, and other computer interfaces into virtually all forms of media content, including consumer products packaging. Digimarc Barcodes have many applications, including facilitating remarkably faster scanning of products at retail checkout as well as improved engagement with smartphone-equipped consumers. The Digimarc Barcode is robust yet imperceptible by people in ordinary use, allowing for reliable, efficient, economical, globally scalable automatic identification of media without visible computer codes like traditional barcodes.

Our media identification and discovery innovations enable our business partners to create numerous applications across a wide range of media content, including solutions that:

• Improve the speed of retail checkout;

• Provide simple and intuitive mobile customer engagement experiences in stores;

• Quickly and reliably identify and effectively manage music, movies, television programming, digital images, e-books, documents and other printed materials, especially in light of non-linear distribution over the Internet;

• Deter counterfeiting of money, media and goods, and piracy of e-books, movies and music;

• Support new digital media distribution models and methods to monetize media content;

• Leverage the power of ubiquitous computing to instantly link consumers to a wealth of information and/or interactive experiences related to the media and objects they encounter each day;

• Provide consumers with more choice and access to media content when, where and how they want it;

• Enhance imagery and video by associating metadata or authenticating media content for government and commercial uses; and

• Better secure identity documents to enhance national security and combat identity theft and fraud.

At the core of our intellectual property is a signal processing innovation known as “digital watermarking,” which allows imperceptible digital information to be embedded in all forms of digitally designed, produced or distributed media content and many

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physical objects, including photographs, movies, music, television, personal identification documents, financial instruments, industrial parts and product packages. The digital information can be detected and read by a wide range of computers, smartphones and other digital devices.

Our inventions allow our business partners and customers to provide persistent digital identities for any media content that is digitally processed at some point during its lifecycle. The technology can be applied to printed materials, video, audio, and images. The inclusion of these digital signals enables a wide range of improvements in security and media management, and new business models for distribution and consumption of media content. Over the years our enabling software and business processes, and associated intellectual property portfolio, have grown to encompass many related technologies.

We provide solutions directly and through business partners. Our proprietary technology has proven to be a powerful element of document security, giving rise to our long-term relationship with a consortium of central banks (“Central Banks”), and many leading companies in the information technology industry. We and our business partners have successfully propagated the use of our technology in music, movies, television broadcasts, digital images, e-books and printed materials. Digimarc Barcodes have been used in these applications to improve media rights and asset management, reduce piracy and counterfeiting losses, improve marketing programs, permit more efficient and effective distribution of valuable media content and enhance consumer entertainment and commercial experiences.

Digimarc Barcodes are easily embedded into all forms of media and are imperceptible to human senses, but quickly detected by computers, networks or other digital devices like smartphones. Unlike traditional barcodes and tags, our solution does not require publishers to give up valuable visual space in magazines and newspapers; nor does it impact the overall layout or aesthetics of the publication. Our Digimarc Discover™ platform delivers a range of rich media experiences to its readers on their smartphones across multiple media including print, audio, video and packaging. Unique to the Digimarc Discover platform is its ability to use various content identification technologies as needed, including our patented technology.

We introduced Digimarc Barcodes for use in consumer product packaging in 2014. Digimarc Barcodes can contain the same information found in traditional universal product codes (“UPC”). The UPC information is invisibly repeated multiple times over the entire package surface. We partnered with Datalogic, a global leader in Automatic Data Capture and Industrial Automation markets and producer of barcode readers, in bringing the Digimarc Barcode to the consumer product packaging market. The first retail scanner enabled was Datalogic’s Magellan^TM 9800i multi-plane imaging scanner. Digimarc Barcodes can also connect mobile-enabled consumers directly from packaging to engaging mobile experiences such as additional product information, special offers, recommendations, reviews, social networks and more.

Our patent portfolio contains many innovations in digital watermarking, pattern recognition (sometimes referred to as “fingerprinting”), digital rights management and related fields. To protect our inventions, we have implemented an extensive intellectual property protection program that relies on a combination of patent, copyright, trademark and trade secret laws, and nondisclosure agreements and other contracts. As a result, we believe we have one of the world’s most extensive patent portfolios in digital watermarking and related fields, with more than 1,200 U.S. and foreign patents and pending patent applications as of June 30, 2015. We continue to develop and broaden our portfolio in the fields of media identification and management technology and related applications and systems. We devote significant resources to developing and protecting our inventions and continuously seek to identify and evaluate potential licensees for our patents. The patents in our portfolio have a life of approximately 20 years from the effective filing date, and up to 17 years after the patent has been granted.

Our primary objective is to foster adoption of our inventions by building long-term relationships with potential customers and business partners and to:

• make progress toward the realization of our vision to enrich everyday living via pervasive, intuitive computing;

• expand the scope of use of our inventions;

• improve our financial performance; and

• lay a foundation for continuing innovation.

For a discussion of activities and costs related to our research and development, see “Results of Operations –Summary – Research, development and engineering.”

Critical Accounting Policies and Estimates

Detailed information on our critical accounting policies and estimates are set forth in our 2014 Annual Report in Part II, Item 7 thereof (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”), under the caption “Critical Accounting Policies and Estimates,” which is incorporated by reference into this Quarterly Report on Form 10-Q.

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Results of Operations

The following table presents statements of operations data for the periods indicated as a percentage of total revenue. Unless otherwise indicated, all references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to the three- and six-month periods relate to the three- and six-month periods ended June 30, 2015 and all changes discussed with respect to such periods reflect changes compared to the three- and six-month periods ended June 30, 2014.

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Revenue:
Service		56	%		48	%		57	%		44	%
Subscription		29			26			29			23
License		15			26			14			33
Total revenue		100			100			100			100
Cost of revenue:
Service		26			21			26			20
Subscription		15			12			14			10
License		1			1			1			1
Total cost of revenue		42			34			41			32
Gross profit		58			66			59			68
Operating expenses:
Sales and marketing		36			36			36			31
Research, development and engineering		52			60			52			54
General and administrative		34			41			36			37
Intellectual property		5			7			6			7
Total operating expenses		128			144			128			129
Operating loss		(70	)		(79	)		(70	)		(60	)
Other income, net		1			—			—			—
Loss before income taxes		(69	)		(79	)		(69	)		(60	)
Benefit for income taxes		—			31			—			24
Net loss		(69	)%		(47	)%		(69	)%		(36	)%

Summary

Total revenue for the three-month period ended June 30, 2015, compared to the corresponding three-month period ended June 30, 2014, increased 2% to $5.8 million, reflecting growth in service and subscription revenue, partially offset by lower license revenue due to the end of the quarterly royalty payments from Verance Corporation (“Verance”) in the fourth quarter of 2014.

Total revenue for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, decreased 8% to $11.8 million, reflecting lower license revenue due to the end of the quarterly license fee payments from The Nieslen Company (“Nielsen”) in the first quarter of 2014 and the end of the quarterly royalty payments from Verance, partially offset by growth in service and subscription revenue.

Total operating expenses for the three- and six-month periods ended June 30, 2015, compared to the corresponding three- and six-month periods ended June 30, 2014, decreased 9% to $7.4 million and 9% to $15.1 million, respectively, reflecting lower spending in research and development, partially offset by higher investment in sales and marketing as we focus on market development and delivery for Digimarc Discover and Barcode. Legal and third-party consulting costs were also lower for the three- and six-month periods ended June 30, 2015.

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Revenue

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Dollar Increase (Decrease)			Percent Increase (Decrease)			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014			Dollar Increase (Decrease)			Percent Increase (Decrease)
Revenue:
Service	$	3,235		$	2,716		$	519			19	%	$	6,736		$	5,704		$	1,032			18	%
Subscription		1,670			1,496			174			12	%		3,386			2,908			478			16	%
License		893			1,451			(558	)		(38	)%		1,665			4,256			(2,591	)		(61	)%
Total	$	5,798		$	5,663		$	135			2	%	$	11,787		$	12,868		$	(1,081	)		(8	)%
Revenue (as % of total revenue):
Service		56	%		48	%								57	%		44	%
Subscription		29	%		26	%								29	%		23	%
License		15	%		26	%								14	%		33	%
Total		100	%		100	%								100	%		100	%

Service. Service revenue consists primarily of software development and consulting services. The majority of service revenue arrangements are structured as time and materials consulting agreements. Most of our service revenue is derived from contracts with the Central Banks and government agency contractors. The agreements range from several months to several years in length, and our longer term contracts are subject to work plans that are reviewed and agreed upon at least annually. These contracts generally provide for billing hours worked at predetermined rates and, to a lesser extent, reimbursement for third party costs and services. Increases or decreases in the services provided under these contracts are generally subject to both volume and price changes. The volume of work is generally negotiated at least annually and can be modified as the customer’s needs change. We also have provisions in our longer term contracts that allow for specific hourly rate price increases on an annual basis to account for cost of living variables. Contracts with government agency contractors are generally shorter term in nature, less linear in billings and less predictable than our longer term contracts because the contracts with government agency contractors are subject to government budgets and funding.

The increase in service revenue for the three- and six-month periods ended June 30, 2015, compared to the corresponding three- and six-month periods ended June 30, 2014, was primarily due to timing of program work and higher billable rates under our agreement with the Central Banks and increased program work with a government agency contractor.

Subscription. Subscription revenue includes Digimarc Discover, Barcode and Guardian products and services, and is generally recurring in nature, paid in advance and recognized over the term of the subscription.

The increase in subscription revenue for the three- and six-month periods ended June 30, 2015, compared to the corresponding three- and six-month periods ended June 30, 2014, was primarily from software license fees, recognized over the associated 12-month support period, and growth in Digimarc Barcode revenue, partially offset by lower Digimarc Guardian revenue.

License. License revenue originates primarily from licensing our intellectual property where we receive license fees and/or royalties as our income stream.

The decrease in license revenue for the three-month period ended June 30, 2015, compared to the corresponding three-month period ended June 30, 2014, was primarily due to the end of the quarterly royalty payments from Verance in the fourth quarter of 2014.

The decrease in license revenue for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, was primarily due to the end of the quarterly license fee payments from Nielsen in the first quarter of 2014 and the end of the quarterly royalty payments from Verance in the fourth quarter of 2014.

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Revenue by Geography

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Dollar Increase (Decrease)			Percent Increase (Decrease)			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014			Dollar Increase (Decrease)			Percent Increase (Decrease)
Revenue by geography:
Domestic	$	1,758		$	1,782		$	(24	)		(1	)%	$	3,445		$	4,899		$	(1,454	)		(30	)%
International		4,040			3,881			159			4	%		8,342			7,969			373			5	%
Total	$	5,798		$	5,663		$	135			2	%	$	11,787		$	12,868		$	(1,081	)		(8	)%
Revenue (as % of total revenue):
Domestic		30	%		31	%								29	%		38	%
International		70	%		69	%								71	%		62	%
Total		100	%		100	%								100	%		100	%

The decrease in domestic revenue for the three-month period ended June 30, 2015, compared to the corresponding three-month period ended June 30, 2014, was primarily due to the end of the quarterly royalty payments from Verance in the fourth quarter of 2014, partially offset by higher service and subscription revenue.

The decrease in domestic revenue for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, was primarily due to the end of the quarterly license fee payments from Nielsen in the first quarter of 2014 and the end of the quarterly royalty payments from Verance in the fourth quarter of 2014, partially offset by higher service and subscription revenue.

The increase in international revenue for the three- and six-month periods ended June 30, 2015, compared to the corresponding three- and six-month periods ended June 30, 2014, was primarily due to higher service revenue from the Central Banks.

We anticipate revenue in 2015 will be lower when compared with 2014, reflecting the end of license fee payments from Nielsen and royalty payments from Verance, partially offset by growth in service and subscription revenue.

Cost of Revenue

Service. Cost of service revenue primarily includes costs that are allocated from research, development and engineering, sales and marketing and intellectual property that relate directly to performing services under our customer contracts and direct costs of program delivery for both personnel and operating expenses. Costs include:

• compensation, benefits, incentive compensation in the form of stock-based compensation and related costs of our software developers, quality assurance personnel, product managers, business development managers and other personnel where we bill our customers for time and materials costs;

• payments to outside contractors that are billed to customers;

• charges for equipment directly used by customers;

• depreciation and other charges for machinery, equipment and software directly used by customers;

• travel costs directly attributable to service and development contracts; and

• charges for infrastructure and centralized costs of facilities and information technology.

Subscription. Cost of subscription revenue primarily includes:

• compensation, benefits, incentive compensation in the form of stock-based compensation and related costs of operations personnel;

• cost of outside contractors to support our Digimarc Guardian anti-piracy service;

• amortization of existing technology acquired in the acquisition of Attributor Corporation (“Attributor”);

• Internet service provider connectivity charges and image search data fees to support the services offered to our subscription customers; and

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• charges for infrastructure and centralized costs of facilities and information technology.

License. Cost of license revenue primarily includes:

• amortization of capitalized patent costs and patent maintenance fees;

• license costs from third parties; and

• charges for infrastructure and centralized costs of facilities and information technology.

Gross Profit

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Dollar Increase (Decrease)			Percent Increase (Decrease)			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014			Dollar Increase (Decrease)			Percent Increase (Decrease)
Gross Profit:
Service	$	1,738		$	1,547		$	191			12	%	$	3,661		$	3,121		$	540			17	%
Subscription		804			797			7			1	%		1,766			1,560			206			13	%
License		807			1,367			(560	)		(41	)%		1,495			4,089			(2,594	)		(63	)%
Total	$	3,349		$	3,711		$	(362	)		(10	)%	$	6,922		$	8,770		$	(1,848	)		(21	)%
Gross Profit (as % of related revenue components):
Service		54	%		57	%								54	%		55	%
Subscription		48	%		53	%								52	%		54	%
License		90	%		94	%								90	%		96	%
Total		58	%		66	%								59	%		68	%

The decrease in total gross profit and total gross profit as a percentage of total revenue for the three- and six-month periods ended June 30, 2015, compared to the corresponding three- and six-month periods ended June 30, 2014, was due primarily to lower license revenue, partially offset by higher service and subscription revenue.

The increase in service gross profit for the three- and six-month periods ended June 30, 2015, compared to the corresponding three- and six-month periods ended June 30, 2014, was due primarily to higher service revenue. The decrease in service gross profit as a percentage of service revenue for the three- and six-month periods was due primarily to the mix of labor and operations costs.

The increase in subscription gross profit for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, was due primarily to higher subscription revenue, partially offset by increased professional services activity to deliver the Digimarc Barcode. The decrease in subscription gross profit as a percentage of subscription revenue for the three- and six-month periods was due primarily to the ramping up of professional services activity to deliver the Digimarc Barcode.

The decrease in license gross profit and license gross profit as a percentage of license revenue for the three- and six-month periods ended June 30, 2015, compared to the corresponding three- and six-month periods ended June 30, 2014, was due primarily to lower license revenue.

We anticipate gross total profit and total gross profit as a percentage of total revenue to be lower in 2015 than in 2014, reflecting lower projected license revenue partially offset by higher projected service and subscription revenue.

Operating Expenses

We allocate certain costs of research, development and engineering, sales and marketing, and intellectual property to cost of revenue when they relate directly to our customer contracts. We record all remaining, or “residual,” costs as sales and marketing, research, development and engineering, general and administrative, and intellectual property expenses.

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Sales and marketing

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Dollar Increase		Percent Increase			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014			Dollar Increase		Percent Increase
Sales and marketing	$	2,098		$	2,052		$	46		2	%	$	4,188		$	3,931		$	257		7	%
Sales and marketing (as % of total revenue)		36	%		36	%							36	%		31	%

Sales and marketing expenses consist primarily of:

• compensation, benefits, incentive compensation in the form of stock-based compensation and related costs of sales and marketing employees and product managers;

• travel and market research costs, and costs associated with marketing programs, such as trade shows, public relations and new product launches;

• professional services and outside contractors for product and marketing initiatives; and

• charges for infrastructure and centralized costs of facilities and information technology.

The increase in sales and marketing expenses for the three-month period ended June 30, 2015, compared to the corresponding three-month period ended June 30, 2014, was due primarily to:

• increased headcount and compensation-related expenses of $0.2 million; partially offset by

• decreased amortization expense related to the intangibles acquired in the acquisition of Attributor of $0.1 million.

The increase in sales and marketing expenses for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, was due primarily to:

• increased headcount and compensation-related expenses of $0.4 million; partially offset by

• decreased amortization expense related to the intangibles acquired in the acquisition of Attributor of $0.2 million.

We anticipate sales and marketing expenses in 2015 will be higher than in 2014 as a result of the expansion of our sales and marketing organization to accelerate market development and delivery for Digimarc Discover and Barcode.

Research, development and engineering

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Dollar Decrease			Percent Decrease			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014			Dollar Decrease			Percent Decrease
Research, development and engineering	$	3,025		$	3,404		$	(379	)		(11	)%	$	6,109		$	6,950		$	(841	)		(12	)%
Research, development and engineering (as % of total revenue)		52	%		60	%								52	%		54	%

Research, development and engineering expenses consist primarily of:

• compensation, benefits, incentive compensation in the form of stock-based compensation expense, recruiting and related costs of software and hardware developers and quality assurance personnel;

• payments to outside contractors;

• the purchase of materials and services for product development; and

• charges for infrastructure and centralized costs of facilities and information technology.

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The decrease in research, development and engineering expenses for the three-month period ended June 30, 2015, compared to the corresponding three-month period ended June 30, 2014, was due primarily to:

• decreased headcount and compensation-related expenses of $0.3 million; and

• decreased use of outside contractors and consultants of $0.1 million.

The decrease in research, development and engineering expenses for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, was due primarily to:

• decreased headcount and compensation-related expenses of $0.7 million; and

• decreased use of outside contractors and consultants of $0.1 million.

We anticipate research, development and engineering expenses in 2015 will be lower than in 2014 as we continue the transition from research and product development to market development and delivery for Digimarc Discover and Barcode.

General and administrative

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Dollar Decrease			Percent Decrease			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014			Dollar Decrease			Percent Decrease
General and administrative	$	1,980		$	2,326		$	(346	)		(15	)%	$	4,186		$	4,747		$	(561	)		(12	)%
General and administrative (as % of total revenue)		34	%		41	%								36	%		37	%

We incur general and administrative costs in the functional areas of finance, legal, human resources, executive and board of directors. Costs for facilities and information technology are also managed as part of the general and administrative processes and are allocated to this area as well as each of the areas in cost of revenue, sales and marketing, research, development and engineering and intellectual property.

General and administrative expenses consist primarily of:

• compensation, benefits and incentive compensation in the form of stock-based compensation expense and related costs of general and administrative personnel;

• third party and professional fees associated with legal, accounting and human resources;

• costs associated with being a public company; and

• charges for infrastructure and centralized costs of facilities and information technology.

The decrease in general and administrative expenses for the three-month period ended June 30, 2015, compared to the corresponding three-month period ended June 30, 2014, was due primarily to:

• decreased legal costs of $0.2 million; and

• decreased stock compensation expense of $0.1 million.

The decrease in general and administrative expenses for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, was due primarily to:

• decreased legal costs of $0.4 million; and

• decreased stock compensation expense of $0.2 million.

We anticipate general and administrative expenses will be lower in 2015 than in 2014, primarily reflecting lower legal costs and stock compensation expense. We will continue to examine means to reduce general and administrative expenses in the longer term.

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Intellectual property

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Dollar Decrease			Percent Decrease			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014			Dollar Decrease			Percent Decrease
Intellectual property	$	291		$	387		$	(96	)		(25	)%	$	658		$	921		$	(263	)		(29	)%
Intellectual property (as % of total revenue)		5	%		7	%								6	%		7	%

We incur intellectual property expenses that arise primarily from costs associated with documenting, applying for, and maintaining domestic and international patents and trademarks.

Gross expenditures for intellectual property costs, before reflecting the effect of capitalized patent costs, primarily consist of:

• compensation, benefits and incentive compensation in the form of stock-based compensation expense and related costs of attorneys and legal assistants;

• third party costs, including filing and governmental regulatory fees and fees for outside legal counsel and translation costs, each incurred in the patent process;

• consulting costs related to marketing our intellectual property portfolio;

• charges to write-off previously capitalized patent costs for patent assets we abandon; and

• charges for infrastructure and centralized costs of facilities and information technology.

Intellectual property expenses can vary from period to period based on:

• the level of capitalized patent activity, and

• prosecution costs and direct labor hours (compensation, benefits and incentive compensation) related to the patents that were exclusively licensed to Intellectual Ventures that are allocated to cost of revenue.

The decrease in intellectual property expenses for the three-month period ended June 30, 2015, compared to the corresponding three-month period ended June 30, 2014, was due primarily to decreased headcount and compensation-related expenses of $0.1 million.

The decrease in intellectual property expenses for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, was due primarily to:

• decreased consulting fees for a third party intellectual property marketing study performed in 2014 of $0.2 million; and

• decreased headcount and compensation-related expenses of $0.1 million.

We anticipate intellectual property expenses will be lower in 2015 than in 2014, primarily as a result of the third party intellectual property marketing study performed in 2014 that is not planned to reoccur in 2015 and lower headcount.

Stock-based compensation

	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Dollar Increase (Decrease)			Percent Increase (Decrease)			Six Months Ended June 30, 2015		Six Months Ended June 30, 2014		Dollar Increase (Decrease)			Percent Increase (Decrease)
Cost of revenue	$	213	$	129	$	84			65	%	$	398	$	270	$	128			47	%
Sales and marketing		175		175		—			—	%		334		318		16			5	%
Research, development and engineering		328		364		(36	)		(10	)%		615		720		(105	)		(15	)%
General and administrative		484		607		(123	)		(20	)%		1,002		1,156		(154	)		(13	)%
Intellectual property		63		97		(34	)		(35	)%		131		167		(36	)		(22	)%
Total	$	1,263	$	1,372	$	(109	)		(8	)%	$	2,480	$	2,631	$	(151	)		(6	)%

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Stock-based compensation expense decreased for the three- and six-month periods ended June 30, 2015, compared to the corresponding three- and six-month periods ended June 30, 2014, as all outstanding stock options were fully vested by January 2015. We anticipate incurring an additional $11,339 in stock-based compensation expense through June 2019 for unvested restricted stock awards as of June 30, 2015.

Other income, net

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014		Dollar Increase		Percent Increase			Six Months Ended June 30, 2015		Six Months Ended June 30, 2014		Dollar Increase		Percent Increase
Other income, net	$	32		$	21		11		52	%	$	55	$	48		7		15	%
Other income, net (as % of total revenue)		1	%		*							*		*

* Less than 1%

The increase in other income, net for the three- and six-month periods ended June 30, 2015, compared to the corresponding three- and six-month periods ended June 30, 2014, was primarily due to higher interest income as a result of higher cash balances.

Benefit for Income Taxes

The benefit for income taxes reflects current taxes, deferred taxes, and withholding taxes in certain foreign jurisdictions. The effective tax rate for the six-months ended June 30, 2015 and 2014 was 0% and 40%, respectively. The effective tax rate was 0% for the six-months ended June 30, 2015 because we have a full valuation allowance recorded against our deferred tax assets. The valuation allowance against deferred tax assets as of June 30, 2015 was $10,406, an increase of $3,118 from $7,288 as of December 31, 2014.

We continually assess the applicability of valuation allowance against our deferred tax assets. Based upon the positive and negative evidence available as of June 30, 2015, and largely due to the cumulative loss incurred by us over the last three years, which is considered a significant piece of negative evidence when assessing the realizability of deferred tax assets, a full valuation allowance is recorded against our deferred tax assets.

Liquidity and Capital Resources

	June 30,      2015		December 31, 2014
Working capital	$	35,964	$	40,440
Current ratio (1)		10.8:1		9.0:1
Cash, cash equivalents and short-term marketable securities	$	34,046	$	38,323
Long-term marketable securities	$	—	$	749
Total cash, cash equivalents and all marketable securities	$	34,046	$	39,072

(1) The current ratio is calculated by dividing total current assets by total current liabilities.

The $5.0 million decrease in cash, cash equivalents and marketable securities resulted primarily from:

• cash used in operations;

• purchases of common stock related to the vesting of restricted stock; and

• purchases of property and equipment and capitalized patent costs; partially offset by

• cash flows provided by the net maturity of marketable securities; and

• proceeds from stock option exercises.

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Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and trade accounts receivable. We place our cash and cash equivalents with major banks and financial institutions and at times deposits may exceed insured limits. Marketable securities primarily include corporate notes, pre-refunded municipal bonds and commercial paper. Our investment policy requires the portfolio to be invested to ensure that the greater of $3 million or 7% of the invested funds will be available within 30 days’ notice.

Other than cash used for operating needs, which may include short-term marketable securities, our investment policy limits our credit exposure to any one financial institution or type of financial instrument by limiting the maximum of 5% of our cash and cash equivalents and marketable securities or $1 million, whichever is greater, to be invested in any one issuer except for the U.S. government, U.S. federal agencies and U.S. backed securities, which have no limits, at the time of purchase. Our investment policy also limits our credit exposure by limiting to a maximum of 40% of our cash and cash equivalents and marketable securities, or $15 million, whichever is greater, to be invested in any one industry category (e.g., financial or energy industries) at the time of purchase. As a result, we believe our credit risk associated with cash and investments to be minimal. A decline in the market value of any security below cost that is deemed to be other-than-temporary results in a reduction in carrying amount to fair value. To determine whether an impairment is other-than-temporary, we consider whether we have the ability and intent to hold the investment until a market price recovery and evidence indicating that the cost of the investment is recoverable outweighs evidence to the contrary. There have been no other-than-temporary impairments identified or recorded by us.

Operating Cash Flow.

The components of operating cash flows were:

	Six Months Ended      June 30,     2015			Six Months Ended      June 30,     2014			Dollar Increase    (Decrease)			Percent Increase    (Decrease)
Net loss	$	(8,162	)	$	(4,666	)	$	(3,496	)		(75	)%
Non-cash items		3,620			2,058			1,562			76	%
Changes in operating assets and liabilities		174			(1,439	)		1,613			112	%
Net cash used in operating activities	$	(4,368	)	$	(4,047	)	$	(321	)		(8	)%

Cash flows from operating activities for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, decreased by $0.3 million, primarily as the result of a higher net loss, partially offset by changes in operating assets and liabilities and higher non-cash items. The impact from changes in operating assets and liabilities for the six-month period was primarily due to changes in other current assets. The increase from non-cash items primarily reflects no income tax benefits recorded during the six-months ended June 30, 2015 due to the full valuation allowance recorded on deferred tax assets.

Cash flows provided by investing activities for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, decreased by $3.2 million from $5.4 million to $2.2 million, primarily as a result of lower net maturities of marketable securities.

Cash flows from financing activities for the six-month period ended June 30, 2015, compared to the corresponding six-month period ended June 30, 2014, increased by $2.0 million from $1.9 million used to $0.1 million provided, primarily as a result of no cash dividends paid in 2015 and lower purchases of common stock.

Future Cash Expectations

We believe that our current cash, cash equivalents, and short-term marketable securities balances will satisfy our projected working capital and capital expenditure requirements for at least the next 12 months. We have a $100 million shelf registration statement in place, of which $30 million has been allocated, and $13.3 million remains available, for future sale under the Equity Distribution Agreement entered into with Wells Fargo Securities, LLC in August 2014. We did not sell any common stock under the Equity Distribution Agreement during the three- and six-month periods ended June 30, 2015, but we may resume selling some or all of the shares remaining under the Equity Distribution Agreement at any time, and, regardless of whether we sell additional shares pursuant to the Equity Distribution Agreement, we may use other financing means to raise working capital in the future, if necessary, to support continued investment in our strategic initiatives. We may also raise capital in the future to fund acquisitions and/or investments in complementary businesses, technologies or product lines. If it becomes necessary to obtain additional financing, we may not be able to do so, or if these funds are available, they may not be available on satisfactory terms.

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Off-Balance Sheet Arrangements

Other than the contractual obligations disclosed in our 2014 Annual Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Words such as “may,” “should,” “could,” “expect,” “anticipate,” “believe,” “project,” “estimate,” “continue,” variations of such terms or similar expressions are intended to identify such forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us, and are subject to uncertainties and factors (including those specified below), which are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements, and investors are cautioned not to place undue reliance on such statements. Forward-looking statements include but are not limited to statements relating to:

• concentration of revenue with few customers comprising a large majority of the revenue;

• revenue trends and expectations;

• our future level of investment in our business, including investment in research, development and engineering of products and technology, development and protection of our intellectual property, sales growth initiatives and development of new market opportunities;

• our ability to improve margins;

• anticipated expenses, costs, margins, provision for income taxes and investment activities in the foreseeable future;

• anticipated revenue to be generated from current contracts and as a result of new programs;

• variability of contracted arrangements;

• our profitability in future periods;

• business opportunities that could require that we seek additional financing;

• the size and growth of our markets;

• the existence of international growth opportunities and our future investment in such opportunities;

• the sources of our future revenue;

• our expected short-term and long-term liquidity positions;

• our capital expenditure and working capital requirements and our ability to fund our capital expenditure and working capital needs through cash flow from operations;

• capital market conditions, interest rate volatility and other limitations on the availability of capital, which could have an impact on our cost of capital and our ability to access the capital markets;

• our use of cash, cash equivalents and marketable securities in upcoming quarters;

• anticipated levels of backlog in future periods;

• the success of our arrangements with Intellectual Ventures;

• the success of our acquisition of Attributor Corporation;

• the success of Digimarc Discover and Barcode;

• protection, development and monetization of our intellectual property portfolio; and

• other risks detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in Part I, Item 1A of our 2014 Annual Report.

We believe that the risk factors specified above and the risk factors identified in Part I, Item 1A of our 2014 Annual Report, among others, could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf. Investors should understand

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that it is not possible to predict or identify all risk factors and that there may be other factors that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements made by us or by persons acting on our behalf apply only as of the date of this Quarterly Report on Form 10-Q. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of the filing of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The market risk disclosures as set forth in Part II, Item 7A of our 2014 Annual Report have not changed materially.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation (pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”)), under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Controls

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the three-months ended June 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION.

Item 1. Legal Proceedings.

We are subject from time to time to legal proceedings and claims arising in the ordinary course of business.

Item 1A. Risk Factors

Our business, financial condition, results of operations and cash flows may be affected by a number of factors. Detailed information about risk factors that may affect Digimarc’s actual results are set forth in Part I, Item 1A of our 2014 Annual Report. The risks and uncertainties described in our 2014 Annual Report are those risks of which we are aware and that we consider to be material to our business. If any of the risks and uncertainties develops into actual events, our business, financial condition, results of operations, or cash flows could be materially adversely affected. In that case, the trading price of our common stock could decline. As of June 30, 2015, there have been no material changes to the risk factors set forth in our 2014 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

We withhold (repurchase) shares of common stock in connection with the vesting of restricted shares from time to time.

The following table sets forth information regarding purchases of our equity securities during the three-month period ended June 30, 2015:

Period	(a) Total number of shares purchased(1)		(b) Average price paid per share(1)		(c) Total number of shares purchased as part of publicly announced plans or programs		(d) Approximate dollar value of shares that may yet be purchased under the plans or programs
Month 1
April 1, 2015 to April 30, 2015		—	$	—		—	$	—
Month 2
May 1, 2015 to May 31, 2015		19,279	$	27.94		—	$	—
Month 3
June 1, 2015 to June 30, 2015		—	$	—		—	$	—
Total		19,279	$	27.94		—

(1) Fully vested shares of common stock withheld (purchased) by us in satisfaction of required withholding tax liability upon the vesting of restricted stock.

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Item 6. Exhibits.

Exhibit Number	Exhibit Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: July 23, 2015	DIGIMARC CORPORATION
	By:	/s/ CHARLES BECK
		CHARLES BECK
		Chief Financial Officer
		(Duly Authorized Officer and Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

DIGIMARC CORPORATION

CERTIFICATION

I, Bruce Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Digimarc Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 23, 2015

By:	/s/ BRUCE DAVIS
	Bruce Davis Chief Executive Officer

EX-31.2

Exhibit 31.2

DIGIMARC CORPORATION

CERTIFICATION

I, Charles Beck, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Digimarc Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 23, 2015

By:	/S/ CHARLES BECK
	CHARLES BECK Chief Financial Officer

EX-32.1

Exhibit 32.1

DIGIMARC CORPORATION

CERTIFICATION

In connection with the periodic report of Digimarc Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission (the “Report”), I, Bruce Davis, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the U.S. Code, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date: July 23, 2015

By:	/S/ BRUCE DAVIS
	Bruce Davis Chief Executive Officer

EX-32.2

Exhibit 32.2

DIGIMARC CORPORATION

CERTIFICATION

In connection with the periodic report of Digimarc Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission (the “Report”), I, Charles Beck, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the U.S. Code, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date: July 23, 2015

By:	/S/ CHARLES BECK
	CHARLES BECK Chief Financial Officer

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Stock-Based Compensation - Reconciliation of Outstanding Balance of Stock Options (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Outstanding at beginning	556		601
Options granted	0	0	0	0
Options exercised	(26)		(71)
Options forfeited or expired	0		0
Outstanding at ending	530		530
Exercisable at ending	530		530
Weighted Average Exercise Price at beginning	$ 16.76		$ 16.97
Weighted Average Exercise Price, Options granted	0		0
Weighted Average Exercise Price, Options exercised	9.64		15.83
Weighted Average Exercise Price, Options forfeited or expired	0		0
Weighted Average Exercise Price at ending	17.12		17.12
Weighted Average Exercise Price, Exercisable at ending	17.12		17.12
Weighted Average Grant Date Fair Value at beginning	8.40		8.42
Weighted Average Grant Date Fair Value, Options granted	0		0
Weighted Average Grant Date Fair Value, Options exercised	6.30		7.79
Weighted Average Grant Date Fair Value, Options forfeited or expired	0		0
Weighted Average Grant Date Fair Value at ending	8.51		8.51
Weighted Average Grant Date Fair Value, Exercisable at ending	$ 0		$ 0
Aggregate Intrinsic Value Outstanding at ending	$ 14,849		$ 14,849
Aggregate Intrinsic Value, Exercisable at ending	$ 14,849		$ 14,849

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Property and Equipment - Depreciation and Amortization on Property and Equipment Using the Straight-Line Method (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Property, Plant and Equipment [Abstract]
Office furniture and fixtures	$ 913	$ 845
Software	1,456	1,312
Equipment	3,126	3,072
Leasehold improvements	1,229	1,198
Gross property and equipment	6,724	6,427
Less accumulated depreciation and amortization	(3,938)	(3,451)
Property and equipment, net	$ 2,786	$ 2,976

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Trade Accounts Receivable - Customers Who Accounted for 10% or More of Trade Accounts Receivable, Net (Detail) - Accounts receivable [Member] - Credit Concentration Risk [Member]	3 Months Ended	6 Months Ended
	Dec. 31, 2014	Jun. 30, 2015
Central Banks [Member]
Concentration Risk [Line Items]
Percentage of trade accounts receivable of major customers	61.00%	58.00%
Civolution [Member]
Concentration Risk [Line Items]
Percentage of trade accounts receivable of major customers	13.00%

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Segment Information - Geographical Segment Revenue (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	$ 5,798	$ 5,663	$ 11,787	$ 12,868
Domestic [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	1,758	1,782	3,445	4,899
International [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	$ 4,040	$ 3,881	$ 8,342	$ 7,969

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2015

Property, Plant and Equipment [Abstract]

Depreciation and Amortization on Property and Equipment Using the Straight-Line Method

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, generally two to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the lease term.

	June 30, 2015			December 31, 2014
Office furniture and fixtures	$	913		$	845
Software		1,456			1,312
Equipment		3,126			3,072
Leasehold improvements		1,229			1,198
Gross property and equipment		6,724			6,427
Less accumulated depreciation and amortization		(3,938	)		(3,451	)
Property and equipment, net	$	2,786		$	2,976

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Intangibles - Amortization of Intangible Assets Acquired (Detail) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Capitalized patent costs	$ 6,551	$ 6,183
Intangible assets acquired:
Gross intangible assets	9,821	9,453
Accumulated amortization	(3,093)	(2,733)
Intangibles, net	6,728	6,720
Purchased patents and intellectual property [Member]
Intangible assets acquired:
Intangible assets amount	250	250
Existing technology [Member]
Intangible assets acquired:
Intangible assets amount	1,560	1,560
Customer relationships [Member]
Intangible assets acquired:
Intangible assets amount	290	290
Backlog [Member]
Intangible assets acquired:
Intangible assets amount	760	760
Tradenames [Member]
Intangible assets acquired:
Intangible assets amount	290	290
Non-solicitation agreements [Member]
Intangible assets acquired:
Intangible assets amount	$ 120	$ 120

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Earnings (Loss) Per Common Share - Summary of Reconciliation of Earnings (Loss) Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Basic Earnings (Loss) per Common Share:
Net loss	$ (4,012)	$ (2,680)	$ (8,162)	$ (4,666)
Distributed earnings to common shares		780		1,553
Distributed earnings to participating securities		50		101
Total distributed earnings		830		1,654
Undistributed loss allocable to common shares	(4,012)	(3,510)	(8,162)	(6,320)
Undistributed earnings allocable to participating securities	0	0	0	0
Total undistributed loss	(4,012)	(3,510)	(8,162)	(6,320)
Loss to common shares-basic	$ (4,012)	$ (2,730)	$ (8,162)	$ (4,767)
Weighted average common shares outstanding-basic	8,029	7,113	7,995	7,057
Basic earnings (loss) per common share	$ (0.50)	$ (0.38)	$ (1.02)	$ (0.68)
Diluted Earnings (Loss) per Common Share:
Loss to common shares-basic	$ (4,012)	$ (2,730)	$ (8,162)	$ (4,767)
Undistributed earnings allocated to participating securities	0	0	0	0
Undistributed earnings reallocated to participating securities	0	0	0	0
Loss to common shares-diluted	$ (4,012)	$ (2,730)	$ (8,162)	$ (4,767)
Weighted average common shares outstanding-basic	8,029	7,113	7,995	7,057
Dilutive effect of stock options	0	0	0	0
Weighted average common shares outstanding-dilutive	8,029	7,113	7,995	7,057
Diluted earnings (loss) per common share	$ (0.50)	$ (0.38)	$ (1.02)	$ (0.68)

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Stock-Based Compensation - Unrecognized Compensation Cost Related to Non-Vested Stock-Based Awards Granted (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Total unrecognized compensation costs	$ 11,339	$ 11,206

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Effective tax rate	0.00%	40.00%
Deferred tax assets, valuation allowance	$ 10,406		$ 7,288
Change in valuation allowance	$ 3,118

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Property and Equipment - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2015
Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives of the assets	2 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives of the assets	7 years

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Revenue Recognition

6 Months Ended

Jun. 30, 2015

Text Block [Abstract]

Revenue Recognition

3. Revenue Recognition

The Company derives its revenue primarily from development services, subscriptions and licensing of its intellectual property:

• Service revenue consists primarily of software development and consulting services. The majority of service revenue arrangements are structured as time and materials consulting agreements.

• Subscription revenue includes Digimarc Discover, Barcode and Guardian products and services, is generally recurring, paid in advance and recognized over the term of the subscription.

• License revenue originates primarily from licensing the Company’s intellectual property where the Company receives license fees and/or royalties as its income stream.

Revenue is recognized in accordance with ASC 605 “Revenue Recognition” and ASC 985 “Software” when the following four criteria are met:

(i) persuasive evidence of an arrangement exists,

(ii) delivery has occurred,

(iii) the fee is fixed or determinable, and

(iv) collection is reasonably assured.

Some customer arrangements encompass multiple deliverables, such as patent licenses, professional services, software licenses, and maintenance and support fees. For arrangements that include multiple deliverables, the Company identifies separate units of accounting at inception based on the consensus reached under ASC 605-25 “Multiple-Element Arrangements,” which provides that revenue arrangements with multiple deliverables should be divided into separate units of accounting if certain criteria are met. The Company applies ASC 985 to software deliverables when relevant. The consideration for the arrangement under ASC 605-25 is allocated to the separate units of accounting using the relative selling price method.

The relative selling price method allocates the consideration based on the Company’s specific assumptions rather than assumptions of a marketplace participant, and any discount in the arrangement proportionally to each deliverable on the basis of each deliverable’s selling price.

Applicable revenue recognition criteria is considered separately for each separate unit of accounting as follows:

• Service revenue is generally determined based on time and materials. Revenue for development and consulting services is recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided.

• Subscription revenue, which includes Digimarc Discover, Barcode and Guardian products and services, is generally paid in advance and recognized over the term of the subscription, which is generally one to three years.

• License revenue is recognized when amounts owed to the Company have been earned, are fixed or determinable (within the Company’s normal 30 to 60 day payment terms), and collection is reasonably assured. If the payment terms extend beyond the normal 30 to 60 days, the fee may not be considered to be fixed or determinable, and the revenue would then be recognized when installments are due.

• The Company records revenue from certain license agreements upon cash receipt as a result of collectability not being reasonably assured.

• The Company’s standard payment terms for license arrangements are 30 to 60 days. Extended payment terms on patent license arrangements are not considered to be fixed or determinable if payments are due beyond the Company’s standard payment terms, primarily because of the risk of substantial modification present in the Company’s patent licensing business. As such, revenue on license arrangements with extended payment terms are recognized as fees become fixed or determinable.

Deferred revenue consists of billings in advance for service, subscription and license contracts for which revenue has not been earned.

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Earnings (Loss) Per Common Share - Additional Information (Detail) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Common stock equivalents related to stock options that were anti-dilutive and excluded from diluted net income per share	216	241	214	219

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Fair Value of Financial Instruments - Summary of Fair Value Maturities for Financial Asset (Detail) $ in Thousands	Jun. 30, 2015 USD ($)
Fair Value Disclosures [Abstract]
Maturities, Total	$ 32,785
Maturities, Less than 1 year	32,785
Maturities, 1-5 years	0
Maturities, 5-10 years	0
Maturities, More than 10 years	$ 0

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Fair Value of Financial Instruments - Summary of Fair Value Hierarchy for Financial Assets (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	$ 32,785
Fair value, measurements, recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	32,785	$ 38,294
Fair value, measurements, recurring [Member] | Pre-refunded municipal bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	9,203	13,317
Fair value, measurements, recurring [Member] | Money market securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	1,447	3,556
Fair value, measurements, recurring [Member] | Corporate notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	19,141	19,245
Fair value, measurements, recurring [Member] | Commercial paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	2,149
Fair value, measurements, recurring [Member] | Certificates of deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	845	2,176
Fair value, measurements, recurring [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	1,447	3,556
Fair value, measurements, recurring [Member] | Level 1 [Member] | Money market securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	1,447	3,556
Fair value, measurements, recurring [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	31,338	34,738
Fair value, measurements, recurring [Member] | Level 2 [Member] | Pre-refunded municipal bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	9,203	13,317
Fair value, measurements, recurring [Member] | Level 2 [Member] | Corporate notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	19,141	19,245
Fair value, measurements, recurring [Member] | Level 2 [Member] | Commercial paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	2,149
Fair value, measurements, recurring [Member] | Level 2 [Member] | Certificates of deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	$ 845	$ 2,176

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Trade Accounts Receivable - Summary of Trade Accounts Receivable (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Accounts Receivable, Net, Current [Abstract]
Trade accounts receivable	$ 3,058	$ 4,567
Allowance for doubtful accounts	(38)	(22)
Trade accounts receivable, net	3,020	4,545
Unpaid deferred revenue included in trade accounts receivable	$ 386	$ 1,974

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Fair Value of Financial Instruments - Additional Information (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Fair Value Disclosures [Abstract]
Highly liquid marketable securities with original maturities	90 days or less
Cash equivalents include money market funds and certificates of deposit	$ 2,786	$ 5,344

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Revenue Recognition - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2015
Revenue Recognition [Abstract]
Period of revenue from services	1 month
Subscription revenue term, minimum	1 year
Subscription revenue term, maximum	3 years
License revenue recognized payment terms, maximum	60 days
License revenue recognized payment terms, minimum	30 days

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

2. Fair Value of Financial Instruments

The estimated fair values of the Company’s financial instruments, which include cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate their carrying values due to the short-term nature of these instruments. The Company records marketable securities at amortized cost, which approximates fair value.

The Company’s fair value hierarchy for its cash equivalents and marketable securities as of June 30, 2015 and December 31, 2014, respectively, was as follows:

June 30, 2015	Level 1		Level 2		Level 3		Total
Money market securities	$	1,447	$	—	$	—	$	1,447
Corporate notes		—		19,141		—		19,141
Pre-refunded municipal bonds (1)		—		9,203		—		9,203
Commercial paper		—		2,149		—		2,149
Certificates of deposits		—		845		—		845
Total	$	1,447	$	31,338	$	—	$	32,785
December 31, 2014	Level 1		Level 2		Level 3		Total
Money market securities	$	3,556	$	—	$	—	$	3,556
Corporate notes		—		19,245		—		19,245
Pre-refunded municipal bonds (1)		—		13,317		—		13,317
Certificates of deposits		—		2,176		—		2,176
Total	$	3,556	$	34,738	$	—	$	38,294

(1) Pre-refunded municipal bonds are collateralized by U.S. treasuries.

The fair value maturities of the Company’s cash equivalents and marketable securities as of June 30, 2015 are as follows:

	Maturities by Period
	Total		Less than 1 year		1-5 years		5-10 years		More than 10 years
Cash equivalents and marketable securities	$	32,785	$	32,785	$	—	$	—	$	—

The Company considers all highly liquid marketable securities with original maturities of 90 days or less at the date of acquisition to be cash equivalents. Cash equivalents include money market funds and certificates of deposit totaling $2,786 and $5,344 at June 30, 2015 and December 31, 2014, respectively. Cash equivalents are carried at cost or amortized cost, which approximates fair value.

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Segment Information - Additional Information (Detail) - 6 months ended Jun. 30, 2015 - Segment	Total
Revenue, Major Customer [Line Items]
Number of reporting segment	1
Sales [Member] | Minimum [Member] | Customer Concentration Risk [Member]
Revenue, Major Customer [Line Items]
Revenue from segment	10.00%

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Stock-Based Compensation - Reconciliation of Unvested Balance of Restricted Stock (Detail) - Jun. 30, 2015 - Restricted Stock [Member] - $ / shares shares in Thousands	Total	Total
Number of Shares
Unvested, beginning balance	545	502
Granted	29	119
Vested	(62)	(104)
Forfeited	(23)	(28)
Unvested, ending balance	489	489
Weighted Average Grant Date Fair Value
Unvested, beginning balance	$ 23.97	$ 23.09
Granted	27.94	28.48
Vested	26.17	24.94
Forfeited	23.07	23.65
Unvested, ending balance	$ 23.98	$ 23.98

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Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 4,047	$ 6,122
Marketable securities	29,999	32,201
Trade accounts receivable, net	3,020	4,545
Other current assets	2,575	2,611
Total current assets	39,641	45,479
Marketable securities		749
Property and equipment, net	2,786	2,976
Intangibles, net	6,728	6,720
Goodwill	1,114	1,114
Other assets	304	378
Total assets	50,573	57,416
Current liabilities:
Accounts payable and other accrued liabilities	1,387	1,379
Deferred revenue	2,290	3,660
Total current liabilities	3,677	5,039
Deferred rent and other long-term liabilities	219	203
Total liabilities	$ 3,896	$ 5,242
Commitments and contingencies (Note 12)
Shareholders' equity:
Preferred stock (par value $0.001 per share, 2,500 authorized, 10 shares issued and outstanding at June 30, 2015 and December 31, 2014)	$ 50	$ 50
Common stock (par value $0.001 per share, 50,000 authorized, 8,553 and 8,427 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively)	9	8
Additional paid-in capital	62,886	60,222
Accumulated deficit	(16,268)	(8,106)
Total shareholders' equity	46,677	52,174
Total liabilities and shareholders' equity	$ 50,573	$ 57,416

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Trade Accounts Receivable - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2015
Accounts receivable [Member] | Minimum [Member] | Credit Concentration Risk [Member]
Concentration Risk [Line Items]
Revenue from segment	10.00%

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net loss	$ (8,162)	$ (4,666)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and write-off of property and equipment	604	459
Amortization and write-off of intangibles	520	606
Changes in allowance for doubtful accounts	16	(17)
Stock-based compensation	2,480	2,631
Deferred income taxes		(1,621)
Changes in operating assets and liabilities:
Trade accounts receivable	1,509	2,164
Other current assets	36	(1,412)
Other assets	74	84
Accounts payable and other accrued liabilities	(160)	(291)
Deferred revenue	(1,285)	(1,984)
Net cash used in operating activities	(4,368)	(4,047)
Cash flows from investing activities:
Purchase of property and equipment	(324)	(579)
Capitalized patent costs	(428)	(561)
Maturity of marketable securities	39,144	32,376
Purchase of marketable securities	(36,193)	(25,810)
Net cash provided by investing activities	2,199	5,426
Cash flows from financing activities:
Exercise of stock options	1,129	1,176
Purchase of common stock	(1,035)	(1,440)
Cash dividends paid		(1,654)
Net cash provided by (used in) financing activities	94	(1,918)
Net decrease in cash and cash equivalents	(2,075)	(539)
Cash and cash equivalents at beginning of period	6,122	3,811
Cash and cash equivalents at end of period	4,047	3,272
Supplemental disclosure of cash flow information:
Cash received for income taxes, net	2	12
Supplemental schedule of non-cash investing activities:
Stock-based compensation capitalized to patent costs and software	$ 91	$ 87

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Stock-Based Compensation - Additional Information (Detail) - $ / shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Mar. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contractual terms			10 years
Stock options granted	0	0	0	0
Options with exercise prices less than per share	$ 17.12		$ 17.12		$ 16.76	$ 16.97
Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation plans, shares authorized for future grants			1,425
Intrinsic value is based on closing price of per share of Digimarc common stock	45.14		$ 45.14
Options with exercise prices less than per share	$ 45.14		$ 45.14
Minimum [Member] | Employee [Member] | Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for stock options and restricted stock			3 years
Minimum [Member] | Director [Member] | Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for stock options and restricted stock			1 year
Maximum [Member] | Employee [Member] | Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for stock options and restricted stock			4 years
Maximum [Member] | Director [Member] | Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for stock options and restricted stock			2 years

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Allocation of Stock-Based Compensation

Stock-based Compensation

	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Stock-based compensation:
Cost of revenue	$	213	$	129	$	398	$	270
Sales and marketing		175		175		334		318
Research, development and engineering		328		364		615		720
General and administrative		484		607		1,002		1,156
Intellectual property		63		97		131		167
Stock-based compensation expense		1,263		1,372		2,480		2,631
Capitalized to patent costs and software		54		42		91		87
Total stock-based compensation expense	$	1,317	$	1,414	$	2,571	$	2,718

Unrecognized Compensation Cost Related to Non-Vested Stock-Based Awards Granted

The following table sets forth total unrecognized compensation cost related to non-vested stock-based awards granted under all equity compensation plans, including stock options and restricted stock:

	As of June 30, 2015		As of December 31, 2014
Total unrecognized compensation costs	$	11,339	$	11,206

Weighted Average Period for Recognition of Unrecognized Compensation Cost for Stock Options and Restricted Stock

The Company expects to recognize the unrecognized compensation costs as of June 30, 2015 for stock options and restricted stock over weighted average periods through June 2019 as follows:

	Stock Options		Restricted Stock
Weighted average period		0.0 years		1.5 years

Reconciliation of Outstanding Balance of Stock Options

The following table reconciles the outstanding balance of stock options:

Three-months ended June 30, 2015:	Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at March 31, 2015		556		$	16.76	$	8.40
Options granted		—			—		—
Options exercised		(26	)		9.64		6.30
Options forfeited or expired		—			—		—
Outstanding at June 30, 2015		530		$	17.12	$	8.51	$	14,849

Six-months ended June 30, 2015:	Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at December 31, 2014		601		$	16.97	$	8.42
Options granted		—			—		—
Options exercised		(71	)		15.83		7.79
Options forfeited or expired		—			—		—
Outstanding at June 30, 2015		530		$	17.12	$	8.51	$	14,849
Exercisable at June 30, 2015		530		$	17.12			$	14,849

Reconciliation of Unvested Balance of Restricted Stock

The following table reconciles the unvested balance of restricted stock:

Three-months ended June 30, 2015:	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance, March 31, 2015		545		$	23.97
Granted		29		$	27.94
Vested		(62	)	$	26.17
Forfeited		(23	)	$	23.07
Unvested balance, June 30, 2015		489		$	23.98

Six-months ended June 30, 2015:	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance, December 31, 2014		502		$	23.09
Granted		119		$	28.48
Vested		(104	)	$	24.94
Forfeited		(28	)	$	23.65
Unvested balance, June 30, 2015		489		$	23.98

Fair Value of Restricted Stock Awards Vested

The following table indicates the fair value of all restricted stock awards that vested during the three- and six-months ended June 30, 2015 and 2014:

	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Fair value of vested restricted stock awards	$	1,666	$	1,844	$	2,879	$	3,211

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Stock-Based Compensation - Allocation of Stock-Based Compensation (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 1,263	$ 1,372	$ 2,480	$ 2,631
Capitalized to patent costs and software	54	42	91	87
Total stock-based compensation expense	1,317	1,414	2,571	2,718
Cost of revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	213	129	398	270
Sales and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	175	175	334	318
Research, development and engineering [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	328	364	615	720
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	484	607	1,002	1,156
Intellectual property [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 63	$ 97	$ 131	$ 167

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Trade Accounts Receivable (Tables)

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Summary of Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount.

	June 30, 2015			December 31, 2014
Trade accounts receivable	$	3,058		$	4,567
Allowance for doubtful accounts		(38	)		(22	)
Trade accounts receivable, net	$	3,020		$	4,545
Unpaid deferred revenue included in trade accounts receivable	$	386		$	1,974

Customers Who Accounted for 10% or More of Trade Accounts Receivable, Net

Customers who accounted for 10% or more of trade accounts receivable, net are as follows:

	June 30, 2015			December 31, 2014
Central Banks		58	%		61	%
Civolution		*			13	%

* Less than 10%

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Description of Business and Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business and Significant Accounting Policies

1. Description of Business and Significant Accounting Policies

Description of Business

Digimarc Corporation (“Digimarc” or the “Company”), an Oregon corporation, enables governments and enterprises around the world to give digital identities to media and objects that computers can sense and recognize and to which they can react. The Company has developed the Digimarc Barcode and Intuitive Computing Platform that are designed to optimize the identification of all consumer brand impressions, wherever and whenever they may appear, facilitating modern mobile-centric shopping. The platform includes means to embed “Digimarc Barcodes,” invisible and inaudible barcode-like information that is recognizable by smartphones, industrial scanners, and other computer interfaces into virtually all forms of media content, including consumer products packaging. Digimarc Barcodes have many applications, including facilitating remarkably faster scanning of products at retail checkout as well as improved engagement with smartphone-equipped consumers. The Digimarc Barcode is robust yet imperceptible by people in ordinary use, allowing for reliable, efficient, economical, globally scalable automatic identification of media without visible computer codes like traditional barcodes.

Interim Consolidated Financial Statements

The Company has adhered to the accounting policies set forth in its Annual Report on Form 10-K for the year ended December 31, 2014 in preparing the accompanying interim consolidated financial statements.

The accompanying interim consolidated financial statements have been prepared from the Company’s records without audit and, in management’s opinion, include all adjustments (consisting of only normal recurring adjustments) necessary to fairly reflect the financial condition and the results of operations for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”).

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on February 20, 2015. The results of operations for the interim periods presented in these consolidated financial statements are not necessarily indicative of the results for the full year.

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to current period presentation. These reclassifications had no material effect on the results of operations or financial position for any period presented.

Goodwill

The Company tests goodwill for impairment annually in June and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Such reviews assess the fair value of the Company’s assets compared to their carrying value. The Company operates as a single reporting unit. The Company estimated the fair value of its single reporting unit using a market approach, which takes into account the Company’s market capitalization plus an estimated control premium.

In connection with the Company’s annual impairment test of goodwill as of June 30, 2015 and 2014, it was concluded that there was no impairment as the estimated fair value of the Company’s reporting unit substantially exceeded the carrying value.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU No. 2014-09 provides specific guidance to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The amendments in this update permit the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method and is currently assessing the potential future impact of this standard on the financial condition or results of operations of the Company.

On July 9, 2015, the FASB affirmed its proposal to defer the effective date of the new revenue standard for public entities by one year to annual reporting periods beginning after December 31, 2017, and interim periods beginning in the first interim period within the year of adoption. Early application would be permitted, but not before the original effective date for public entities, annual reporting periods after December 15, 2016, and interim periods beginning in the first interim period within the year of adoption.

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Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Jun. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	2,500	2,500
Preferred stock, shares issued	10	10
Preferred stock, shares outstanding	10	10
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000	50,000
Common stock, shares issued	8,553	8,427
Common stock, shares outstanding	8,553	8,427

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Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

The benefit for income taxes reflects current taxes, deferred taxes, and withholding taxes in certain foreign jurisdictions. The effective tax rate for the six-months ended June 30, 2015 and 2014 was 0% and 40%, respectively. The valuation allowance against net deferred tax assets as of June 30, 2015 was $10,406, an increase of $3,118 from $7,288 as of December 31, 2014.

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 16, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Trading Symbol	DMRC
Entity Registrant Name	Digimarc CORP
Entity Central Index Key	0001438231
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		8,558,107

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Certain of the Company’s product license and services agreements include an indemnification provision for claims from third parties relating to the Company’s intellectual property. Such indemnification provisions are accounted for in accordance with ASC 450 “Contingencies.” To date, there have been no claims made under such indemnification provisions.

The Company is subject from time to time to other legal proceedings and claims arising in the ordinary course of business.

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Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenue:
Service	$ 3,235	$ 2,716	$ 6,736	$ 5,704
Subscription	1,670	1,496	3,386	2,908
License	893	1,451	1,665	4,256
Total revenue	5,798	5,663	11,787	12,868
Cost of revenue:
Service	1,497	1,169	3,075	2,583
Subscription	866	699	1,620	1,348
License	86	84	170	167
Total cost of revenue	2,449	1,952	4,865	4,098
Gross profit	3,349	3,711	6,922	8,770
Operating expenses:
Sales and marketing	2,098	2,052	4,188	3,931
Research, development and engineering	3,025	3,404	6,109	6,950
General and administrative	1,980	2,326	4,186	4,747
Intellectual property	291	387	658	921
Total operating expenses	7,394	8,169	15,141	16,549
Operating loss	(4,045)	(4,458)	(8,219)	(7,779)
Other income, net	32	21	55	48
Loss before income taxes	(4,013)	(4,437)	(8,164)	(7,731)
Benefit for income taxes	1	1,757	2	3,065
Net loss	$ (4,012)	$ (2,680)	$ (8,162)	$ (4,666)
Earnings (loss) per common share:
Loss per common share-basic	$ (0.50)	$ (0.38)	$ (1.02)	$ (0.68)
Loss per common share-diluted	$ (0.50)	$ (0.38)	$ (1.02)	$ (0.68)
Weighted average common shares outstanding-basic	8,029	7,113	7,995	7,057
Weighted average common shares outstanding-diluted	8,029	7,113	7,995	7,057
Cash dividends declared per common share		$ 0.11		$ 0.22

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Earnings (Loss) Per Common Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings (Loss) Per Common Share

6. Earnings (Loss) Per Common Share

The Company calculates basic and diluted earnings per common share in accordance with ASC 260 “Earnings Per Share,” using the two-class method because the Company’s unvested restricted stock is a participating security since these awards contain non-forfeitable rights to receive dividends. Under the two-class method, earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed.

Basic earnings per common share excludes dilution and is calculated by dividing earnings to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing earnings to common shares by the weighted-average number of common shares, as adjusted for the potentially dilutive effect of stock options. The following table reconciles earnings (loss) per common share for the three- and six-month periods ended June 30, 2015 and 2014:

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Basic Earnings (Loss) per Common Share:
Numerator:
Net loss	$	(4,012	)	$	(2,680	)	$	(8,162	)	$	(4,666	)
Distributed earnings to common shares		—			780			—			1,553
Distributed earnings to participating securities		—			50			—			101
Total distributed earnings		—			830			—			1,654
Undistributed loss allocable to common shares		(4,012	)		(3,510	)		(8,162	)		(6,320	)
Undistributed earnings allocable to participating securities		—			—			—			—
Total undistributed loss		(4,012	)		(3,510	)		(8,162	)		(6,320	)
Loss to common shares—basic	$	(4,012	)	$	(2,730	)	$	(8,162	)	$	(4,767	)
Denominator
Weighted average common shares outstanding—basic		8,029			7,113			7,995			7,057
Basic earnings (loss) per common share	$	(0.50	)	$	(0.38	)	$	(1.02	)	$	(0.68	)

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Diluted Earnings (Loss) per Common Share:
Numerator:
Loss to common shares—basic	$	(4,012	)	$	(2,730	)	$	(8,162	)	$	(4,767	)
Undistributed earnings allocated to participating securities		—			—			—			—
Undistributed earnings reallocated to participating securities		—			—			—			—
Loss to common shares—diluted	$	(4,012	)	$	(2,730	)	$	(8,162	)	$	(4,767	)
Denominator
Weighted average common shares outstanding—basic		8,029			7,113			7,995			7,057
Dilutive effect of stock options		—			—			—			—
Weighted average common shares outstanding—dilutive		8,029			7,113			7,995			7,057
Diluted earnings (loss) per common share	$	(0.50	)	$	(0.38	)	$	(1.02	)	$	(0.68	)

There were 216 and 214 common stock equivalents related to stock options that were anti-dilutive and excluded from diluted earnings per common share for the three- and six-month periods ended June 30, 2015, respectively, as the Company incurred a net loss during the periods.

There were 241 and 219 common stock equivalents related to stock options that were anti-dilutive and excluded from diluted earnings per common share calculations for the three- and six-month periods ended June 30, 2014, respectively, as the Company incurred a net loss during the periods.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

5. Stock-Based Compensation

Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include stock option grants and restricted stock awards.

Stock-based compensation expense related to internal labor is capitalized to patent costs and software based on direct labor hours charged to capitalized patent costs and software.

Determining Fair Value

Stock Options

Valuation and Amortization Method. The Company estimates the fair value of stock options granted using the Black-Scholes option valuation model. The Company amortizes the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods.

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and pre-vesting and post-vesting forfeitures. Stock options granted generally vest over three to four years for employee grants and one to two years for director grants, and have contractual terms of ten years.

Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the expected life of the award.

Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the expected life of the award.

Expected Dividend Yield. The expected dividend yield is derived by the Company’s expected annual dividend rate over the expected term divided by the fair value of the Company’s common stock at the grant date.

There were no stock options granted during the three- and six-month periods ended June 30, 2015 and 2014.

The Company records stock-based compensation expense for stock option awards only for those awards that are expected to vest.

Restricted Stock

The fair value of restricted stock awarded is based on the fair market value of the Company’s common stock on the date of the grant, and is recognized over the vesting period using the straight-line method.

The Company records stock-based compensation expense for restricted stock awards only for those awards that are expected to vest.

Stock-based Compensation

	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Stock-based compensation:
Cost of revenue	$	213	$	129	$	398	$	270
Sales and marketing		175		175		334		318
Research, development and engineering		328		364		615		720
General and administrative		484		607		1,002		1,156
Intellectual property		63		97		131		167
Stock-based compensation expense		1,263		1,372		2,480		2,631
Capitalized to patent costs and software		54		42		91		87
Total stock-based compensation expense	$	1,317	$	1,414	$	2,571	$	2,718

The following table sets forth total unrecognized compensation cost related to non-vested stock-based awards granted under all equity compensation plans, including stock options and restricted stock:

	As of June 30, 2015		As of December 31, 2014
Total unrecognized compensation costs	$	11,339	$	11,206

Total unrecognized compensation costs will be adjusted for any future changes in estimated forfeitures.

The Company expects to recognize the unrecognized compensation costs as of June 30, 2015 for stock options and restricted stock over weighted average periods through June 2019 as follows:

	Stock Options		Restricted Stock
Weighted average period		0.0 years		1.5 years

Stock Option Activity

As of June 30, 2015, under all of the Company’s stock-based compensation plans, equity awards to purchase an additional 1,425 shares were authorized for future grants under the plans. The Company issues new shares upon option exercises.

The following table reconciles the outstanding balance of stock options:

Three-months ended June 30, 2015:	Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at March 31, 2015		556		$	16.76	$	8.40
Options granted		—			—		—
Options exercised		(26	)		9.64		6.30
Options forfeited or expired		—			—		—
Outstanding at June 30, 2015		530		$	17.12	$	8.51	$	14,849

Six-months ended June 30, 2015:	Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at December 31, 2014		601		$	16.97	$	8.42
Options granted		—			—		—
Options exercised		(71	)		15.83		7.79
Options forfeited or expired		—			—		—
Outstanding at June 30, 2015		530		$	17.12	$	8.51	$	14,849
Exercisable at June 30, 2015		530		$	17.12			$	14,849

The aggregate intrinsic value is based on the closing price of $45.14 per share of Digimarc common stock on June 30, 2015, which would have been received by the optionees had all of the options with exercise prices less than $45.14 per share been exercised on that date.

Restricted Stock Activity

The following table reconciles the unvested balance of restricted stock:

Three-months ended June 30, 2015:	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance, March 31, 2015		545		$	23.97
Granted		29		$	27.94
Vested		(62	)	$	26.17
Forfeited		(23	)	$	23.07
Unvested balance, June 30, 2015		489		$	23.98

Six-months ended June 30, 2015:	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance, December 31, 2014		502		$	23.09
Granted		119		$	28.48
Vested		(104	)	$	24.94
Forfeited		(28	)	$	23.65
Unvested balance, June 30, 2015		489		$	23.98

The following table indicates the fair value of all restricted stock awards that vested during the three- and six-months ended June 30, 2015 and 2014:

	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Fair value of vested restricted stock awards	$	1,666	$	1,844	$	2,879	$	3,211

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Earnings (Loss) Per Common Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Summary of Reconciliation of Earnings (Loss) Per Common Share

The following table reconciles earnings (loss) per common share for the three- and six-month periods ended June 30, 2015 and 2014:

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Basic Earnings (Loss) per Common Share:
Numerator:
Net loss	$	(4,012	)	$	(2,680	)	$	(8,162	)	$	(4,666	)
Distributed earnings to common shares		—			780			—			1,553
Distributed earnings to participating securities		—			50			—			101
Total distributed earnings		—			830			—			1,654
Undistributed loss allocable to common shares		(4,012	)		(3,510	)		(8,162	)		(6,320	)
Undistributed earnings allocable to participating securities		—			—			—			—
Total undistributed loss		(4,012	)		(3,510	)		(8,162	)		(6,320	)
Loss to common shares—basic	$	(4,012	)	$	(2,730	)	$	(8,162	)	$	(4,767	)
Denominator
Weighted average common shares outstanding—basic		8,029			7,113			7,995			7,057
Basic earnings (loss) per common share	$	(0.50	)	$	(0.38	)	$	(1.02	)	$	(0.68	)

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Diluted Earnings (Loss) per Common Share:
Numerator:
Loss to common shares—basic	$	(4,012	)	$	(2,730	)	$	(8,162	)	$	(4,767	)
Undistributed earnings allocated to participating securities		—			—			—			—
Undistributed earnings reallocated to participating securities		—			—			—			—
Loss to common shares—diluted	$	(4,012	)	$	(2,730	)	$	(8,162	)	$	(4,767	)
Denominator
Weighted average common shares outstanding—basic		8,029			7,113			7,995			7,057
Dilutive effect of stock options		—			—			—			—
Weighted average common shares outstanding—dilutive		8,029			7,113			7,995			7,057
Diluted earnings (loss) per common share	$	(0.50	)	$	(0.38	)	$	(1.02	)	$	(0.68	)

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Description of Business and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Description of Business

Description of Business

Digimarc Corporation (“Digimarc” or the “Company”), an Oregon corporation, enables governments and enterprises around the world to give digital identities to media and objects that computers can sense and recognize and to which they can react. The Company has developed the Digimarc Barcode and Intuitive Computing Platform that are designed to optimize the identification of all consumer brand impressions, wherever and whenever they may appear, facilitating modern mobile-centric shopping. The platform includes means to embed “Digimarc Barcodes,” invisible and inaudible barcode-like information that is recognizable by smartphones, industrial scanners, and other computer interfaces into virtually all forms of media content, including consumer products packaging. Digimarc Barcodes have many applications, including facilitating remarkably faster scanning of products at retail checkout as well as improved engagement with smartphone-equipped consumers. The Digimarc Barcode is robust yet imperceptible by people in ordinary use, allowing for reliable, efficient, economical, globally scalable automatic identification of media without visible computer codes like traditional barcodes.

Interim Consolidated Financial Statements

Interim Consolidated Financial Statements

The Company has adhered to the accounting policies set forth in its Annual Report on Form 10-K for the year ended December 31, 2014 in preparing the accompanying interim consolidated financial statements.

The accompanying interim consolidated financial statements have been prepared from the Company’s records without audit and, in management’s opinion, include all adjustments (consisting of only normal recurring adjustments) necessary to fairly reflect the financial condition and the results of operations for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”).

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on February 20, 2015. The results of operations for the interim periods presented in these consolidated financial statements are not necessarily indicative of the results for the full year.

Reclassifications

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to current period presentation. These reclassifications had no material effect on the results of operations or financial position for any period presented.

Goodwill

Goodwill

The Company tests goodwill for impairment annually in June and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Such reviews assess the fair value of the Company’s assets compared to their carrying value. The Company operates as a single reporting unit. The Company estimated the fair value of its single reporting unit using a market approach, which takes into account the Company’s market capitalization plus an estimated control premium.

In connection with the Company’s annual impairment test of goodwill as of June 30, 2015 and 2014, it was concluded that there was no impairment as the estimated fair value of the Company’s reporting unit substantially exceeded the carrying value.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU No. 2014-09 provides specific guidance to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The amendments in this update permit the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method and is currently assessing the potential future impact of this standard on the financial condition or results of operations of the Company.

On July 9, 2015, the FASB affirmed its proposal to defer the effective date of the new revenue standard for public entities by one year to annual reporting periods beginning after December 31, 2017, and interim periods beginning in the first interim period within the year of adoption. Early application would be permitted, but not before the original effective date for public entities, annual reporting periods after December 15, 2016, and interim periods beginning in the first interim period within the year of adoption.

Earnings Per Share

The Company calculates basic and diluted earnings per common share in accordance with ASC 260 “Earnings Per Share,” using the two-class method because the Company’s unvested restricted stock is a participating security since these awards contain non-forfeitable rights to receive dividends. Under the two-class method, earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed.

Contingencies

Certain of the Company’s product license and services agreements include an indemnification provision for claims from third parties relating to the Company’s intellectual property. Such indemnification provisions are accounted for in accordance with ASC 450 “Contingencies.” To date, there have been no claims made under such indemnification provisions.

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Intangibles

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Intangibles

9. Intangibles

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Amortization of capitalized patent costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at the award date, which varies depending on the pendency period of the application, generally approximating seventeen years.

Amortization of intangible assets acquired is calculated using the straight-line method over the estimated useful lives of the assets.

	June 30, 2015			December 31, 2014
Capitalized patent costs	$	6,551		$	6,183
Intangible assets acquired:
Purchased patents and intellectual property		250			250
Existing technology		1,560			1,560
Customer relationships		290			290
Backlog		760			760
Tradenames		290			290
Non-solicitation agreements		120			120
Gross intangible assets		9,821			9,453
Accumulated amortization		(3,093	)		(2,733	)
Intangibles, net	$	6,728		$	6,720

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Trade Accounts Receivable

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Trade Accounts Receivable

7. Trade Accounts Receivable

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount.

	June 30, 2015			December 31, 2014
Trade accounts receivable	$	3,058		$	4,567
Allowance for doubtful accounts		(38	)		(22	)
Trade accounts receivable, net	$	3,020		$	4,545
Unpaid deferred revenue included in trade accounts receivable	$	386		$	1,974

Allowance for doubtful accounts

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing trade accounts receivable. The Company determines the allowance based on historical write-off experience and current information. The Company reviews its allowance for doubtful accounts each reporting period. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Unpaid deferred revenue

The unpaid deferred revenue that is included in trade accounts receivable is billed in accordance with the provisions of the contracts with the Company’s customers. Unpaid deferred revenue from the Company’s cash-basis customers is not included in trade accounts receivable nor deferred revenue.

Major customers

Customers who accounted for 10% or more of trade accounts receivable, net are as follows:

	June 30, 2015			December 31, 2014
Central Banks		58	%		61	%
Civolution		*			13	%

* Less than 10%

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Property and Equipment

6 Months Ended

Jun. 30, 2015

Property, Plant and Equipment [Abstract]

Property and Equipment

8. Property and Equipment

Property and equipment are stated at cost. Repairs and maintenance are charged to expense when incurred.

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, generally two to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the lease term.

	June 30, 2015			December 31, 2014
Office furniture and fixtures	$	913		$	845
Software		1,456			1,312
Equipment		3,126			3,072
Leasehold improvements		1,229			1,198
Gross property and equipment		6,724			6,427
Less accumulated depreciation and amortization		(3,938	)		(3,451	)
Property and equipment, net	$	2,786		$	2,976

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Joint Ventures and Related Party Transactions

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

Joint Ventures and Related Party Transactions

10. Joint Ventures and Related Party Transactions

In March 2012, Digimarc and Nielsen decided to reduce the investments in their two joint ventures, TVaura LLC (in which Digimarc holds a 51% ownership interest) and TVaura Mobile LLC (in which Digimarc holds a 49% ownership interest), to minimal levels while assessing alternative approaches to achieving each of their goals in the emerging market opportunity of synchronized second screen television. Payment of all expenses incurred after the suspension of operations of each joint venture is unconditionally the responsibility of the majority owner, which expenses for TVaura LLC, if any, will be paid by Digimarc. As of June 30, 2015, both Digimarc and Nielsen continued to assess the market opportunities of each of the joint ventures.

Summarized financial information for the joint ventures has not been provided as the disclosures are immaterial to the Company’s filing given the operations of the joint ventures have been suspended. The joint ventures had no revenue or expenses for the three- and six-month periods ended June 30, 2015 and 2014. The Company’s investment in each joint venture was $0 as of June 30, 2015 and December 31, 2014.

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Segment Information - Customers Who Accounted for 10% or More of Company's Revenue (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Customer Concentration Risk [Member] | Sales [Member] | Central Banks [Member]
Revenue, Major Customer [Line Items]
Entity wide revenue major customers percentage	54.00%	51.00%	57.00%	47.00%

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Joint Ventures and Related Party Transactions - Additional Information (Detail) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Mar. 31, 2012	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Related Party Transaction [Line Items]
Joint ventures revenue or expenses		$ 0	$ 0	$ 0	$ 0
TVaura LLC [Member]
Related Party Transaction [Line Items]
Equity method investment, ownership percentage	51.00%
Investment in joint venture		0		0		$ 0
TVaura Mobile LLC [Member]
Related Party Transaction [Line Items]
Equity method investment, ownership percentage	49.00%
Investment in joint venture		$ 0		$ 0		$ 0

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Geographical Segment Revenue

Revenue by geographic area, based upon the “bill-to” location, was as follows:

	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Domestic	$	1,758	$	1,782	$	3,445	$	4,899
International (1)		4,040		3,881		8,342		7,969
Total	$	5,798	$	5,663	$	11,787	$	12,868

(1) Revenue from the Central Banks, consisting of a consortium of central banks around the world, is classified as international revenue. Reporting revenue by country for this customer is not practicable.

Customers Who Accounted for 10% or More of Company's Revenue

Customers who accounted for 10% or more of the Company’s revenue are as follows:

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Central Banks		54	%		51	%		57	%		47	%

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Intangibles (Tables)

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Amortization of Intangible Assets Acquired

Amortization of intangible assets acquired is calculated using the straight-line method over the estimated useful lives of the assets.

	June 30, 2015			December 31, 2014
Capitalized patent costs	$	6,551		$	6,183
Intangible assets acquired:
Purchased patents and intellectual property		250			250
Existing technology		1,560			1,560
Customer relationships		290			290
Backlog		760			760
Tradenames		290			290
Non-solicitation agreements		120			120
Gross intangible assets		9,821			9,453
Accumulated amortization		(3,093	)		(2,733	)
Intangibles, net	$	6,728		$	6,720

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Intangibles - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2015
Capitalized patent costs [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	17 years

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Stock-Based Compensation - Fair Value of Restricted Stock Awards Vested (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of vested restricted stock awards	$ 1,666	$ 1,844	$ 2,879	$ 3,211

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Consolidated Statements of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings (Accumulated Deficit) [Member]
Balance at Dec. 31, 2013	$ 50,923	$ 50	$ 7	$ 41,498	$ 9,368
Balance, shares at Dec. 31, 2013		10	7,401
Exercise of stock options	1,176		$ 1	1,175
Exercise of stock options, shares			170
Issuance of restricted common stock	0	$ 0	$ 0	0	0
Issuance of restricted common stock, shares			82
Forfeiture of restricted common stock	0	0	$ 0	0	0
Forfeiture of restricted common stock, shares			(13)
Purchase and retirement of common stock	(1,440)			(1,440)
Purchase and retirement of common stock, shares			(68)
Stock-based compensation	2,718			2,718
Tax impact from stock-based awards	(609)			(609)
Net loss	(4,666)				(4,666)
Cash dividends declared	(1,654)				(1,654)
Balance at Jun. 30, 2014	46,448	$ 50	$ 8	43,342	3,048
Balance, shares at Jun. 30, 2014		10	7,572
Balance at Dec. 31, 2014	52,174	$ 50	$ 8	60,222	(8,106)
Balance, shares at Dec. 31, 2014		10	8,427
Exercise of stock options	$ 1,129		$ 1	1,128
Exercise of stock options, shares	71		71
Issuance of restricted common stock	$ 0	$ 0	$ 0	0	0
Issuance of restricted common stock, shares			119
Forfeiture of restricted common stock	0	0	$ 0	0	0
Forfeiture of restricted common stock, shares			(28)
Purchase and retirement of common stock	(1,035)			(1,035)
Purchase and retirement of common stock, shares			(36)
Stock-based compensation	2,571			2,571
Net loss	(8,162)				(8,162)
Balance at Jun. 30, 2015	$ 46,677	$ 50	$ 9	$ 62,886	$ (16,268)
Balance, shares at Jun. 30, 2015		10	8,553

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Segment Information

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Information

4. Segment Information

Geographic Information

The Company derives its revenue from a single reporting segment: media management solutions. Revenue is generated in this segment through development services, subscriptions and licensing of intellectual property. The Company markets its products in the U.S. and in non-U.S. countries through its sales and licensing personnel.

Revenue by geographic area, based upon the “bill-to” location, was as follows:

	Three Months Ended June 30, 2015		Three Months Ended June 30, 2014		Six Months Ended June 30, 2015		Six Months Ended June 30, 2014
Domestic	$	1,758	$	1,782	$	3,445	$	4,899
International (1)		4,040		3,881		8,342		7,969
Total	$	5,798	$	5,663	$	11,787	$	12,868

(1) Revenue from the Central Banks, consisting of a consortium of central banks around the world, is classified as international revenue. Reporting revenue by country for this customer is not practicable.

Major Customers

Customers who accounted for 10% or more of the Company’s revenue are as follows:

	Three Months Ended June 30, 2015			Three Months Ended June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014
Central Banks		54	%		51	%		57	%		47	%

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Description of Business and Significant Accounting Policies - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Accounting Policies [Abstract]
Impairment of goodwill	$ 0	$ 0

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Stock-Based Compensation - Weighted Average Period for Recognition of Unrecognized Compensation Cost for Stock Options and Restricted Stock (Detail)	6 Months Ended
	Jun. 30, 2015
Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average period
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average period	1 year 6 months

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Summary of Fair Value Hierarchy for Financial Assets

The Company’s fair value hierarchy for its cash equivalents and marketable securities as of June 30, 2015 and December 31, 2014, respectively, was as follows:

June 30, 2015	Level 1		Level 2		Level 3		Total
Money market securities	$	1,447	$	—	$	—	$	1,447
Corporate notes		—		19,141		—		19,141
Pre-refunded municipal bonds (1)		—		9,203		—		9,203
Commercial paper		—		2,149		—		2,149
Certificates of deposits		—		845		—		845
Total	$	1,447	$	31,338	$	—	$	32,785
December 31, 2014	Level 1		Level 2		Level 3		Total
Money market securities	$	3,556	$	—	$	—	$	3,556
Corporate notes		—		19,245		—		19,245
Pre-refunded municipal bonds (1)		—		13,317		—		13,317
Certificates of deposits		—		2,176		—		2,176
Total	$	3,556	$	34,738	$	—	$	38,294

(1) Pre-refunded municipal bonds are collateralized by U.S. treasuries.

Summary of Fair Value Maturities for Financial Asset

The fair value maturities of the Company’s cash equivalents and marketable securities as of June 30, 2015 are as follows:

	Maturities by Period
	Total		Less than 1 year		1-5 years		5-10 years		More than 10 years
Cash equivalents and marketable securities	$	32,785	$	32,785	$	—	$	—	$	—