dmrc-ex991

Beaverton, Ore. — February 22, 2017 — Digimarc Corporation (NASDAQ: DMRC) reported financial results for the fourth quarter and full year ended December 31, 2016.

Revenue for the fourth quarter of 2016 totaled $5.2 million compared to $5.0 million in the same quarter a year-ago. The increase was primarily due to higher service revenue.

Operating expenses for the fourth quarter of 2016 totaled $9.0 million compared to $8.3 million in the fourth quarter of 2015. The increase was primarily due to higher investments in sales, marketing and engineering as the company continues to address important opportunities in market development and delivery for Digimarc Discover and Digimarc Barcode.

Operating loss for the fourth quarter of 2016 totaled $5.9 million compared to an operating loss of $5.3 million in the same quarter a year ago. The higher operating loss was primarily due to higher operating expenses.

Net loss for the fourth quarter of 2016 totaled $5.8 million or $(0.57) per diluted share, compared to a net loss of $5.3 million or $(0.62) per diluted share in the fourth quarter of 2015.

At quarter-end, cash, cash equivalents and marketable securities totaled $60.5 million, compared to $66.3 million at September 30, 2016.

Revenue for the full year 2016 totaled $21.8 million compared to $22.2 million in 2015. The decrease was primarily the result of lower subscription revenue.

Operating expenses for the full year 2016 totaled $35.2 million compared to $31.2 million in 2015. The increase was primarily due to higher investments in sales, marketing and engineering as the company continues to address important opportunities in market development and delivery for Digimarc Discover and Digimarc Barcode.

Operating loss for the full year 2016 totaled $21.9 million compared to an operating loss of $18.0 million a year ago. The higher operating loss was primarily due to higher operating expenses.

Net loss for the full year 2016 totaled $21.7 million or $(2.36) per diluted share, compared to a net loss of $17.9 million or $(2.19) per diluted share in 2015.

Digimarc will hold a conference call later today (Wednesday, February 22, 2017) to discuss these results, as well as provide an update on market conditions and execution of strategy. Chairman and CEO Bruce Davis and CFO Charles Beck will host the call starting at 5:00 p.m. Eastern time (2:00 p.m. Pacific time). A question and answer session will follow management’s presentation.

The conference call will be broadcast live and available for replay via the investor section of the company's website.

For those who wish to listen to the call via telephone, please dial the number below at least five minutes prior to the scheduled start time:

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

Digimarc Corporation (NASDAQ: DMRC), based in Beaverton, Oregon, is the inventor of Digimarc Discover® software and the imperceptible Digimarc Barcode for automatically identifying and interacting with virtually any media. Digimarc Discover software enables industrial scanners, smartphones, tablets and other computer interfaces to reliably, efficiently and economically identify traditional barcoded items, along with many other media objects. Digimarc Barcodes are imperceptible to people and do all that visible barcodes do, but perform better. They can be applied to virtually all forms of media. These remarkable capabilities have allowed Digimarc and its business partners to supply a wide range of patented consumer engagement, media management and security solutions across multiple consumer and government industry sectors. Digimarc owns an extensive intellectual property portfolio, with patents in digital watermarking, content identification and management, media object discovery, and intuitive computing more generally. For more information and the latest news, please visit www.digimarc.com and follow on Twitter at @Digimarc.

With the exception of historical information contained in this release, the matters described in this release contain various “forward-looking statements.” These forward-looking statements include statements and any related inferences regarding market opportunities for Digimarc Discover and Digimarc Barcode, and other statements identified by terminology such as “will,” “should,” “expects,” “estimates,” “predicts” and “continue” or other derivations of these or other comparable terms. These forward-looking statements are statements of management's opinion and are subject to various assumptions, risks, uncertainties and changes in circumstances. Actual results may vary materially from those expressed or implied from the statements in this release as a result of changes in economic, business and/or regulatory factors. More detailed information about risk factors that may affect actual results are set forth in the company's Form 10-K for the year ended December 31, 2015 and in subsequent periodic reports filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date of this release. Except as required by law, Digimarc undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this release.

	Three Month Information						Twelve Month Information
	December 31,			December 31,			December 31,			December 31,
	2016			2015			2016			2015
Revenue:
Service	$	3,017		$	2,709		$	12,667		$	12,517
Subscription		1,434			1,430			5,808			6,377
License		729			877			3,318			3,295
Total revenue		5,180			5,016			21,793			22,189

Cost of revenue:
Service		1,385			1,209			5,673			5,488
Subscription		554			685			2,410			3,113
License		112			90			414			346
Total cost of revenue		2,051			1,984			8,497			8,947

Gross profit:
Service		1,632			1,500			6,994			7,029
Subscription		880			745			3,398			3,264
License		617			787			2,904			2,949
Total gross profit		3,129			3,032			13,296			13,242

Gross margin:
Service		54	%		55	%		55	%		56	%
Subscription		61	%		52	%		59	%		51	%
License		85	%		90	%		88	%		89	%
Percentage of gross profit to total revenue		60	%		60	%		61	%		60	%

Operating expenses:
Sales and marketing		3,132			2,778			11,888			9,275
Research, development and engineering		3,419			3,120			13,394			12,465
General and administrative		2,113			1,921			8,298			7,954
Intellectual property		346			500			1,636			1,525
Total operating expenses		9,010			8,319			35,216			31,219

Operating loss		(5,881	)		(5,287	)		(21,920	)		(17,977	)

Other income, net		101			25			258			109

Loss before income taxes		(5,780	)		(5,262	)		(21,662	)		(17,868	)

Benefit (provision) for income taxes		24			(41	)		(10	)		(66	)
Net loss	$	(5,756	)	$	(5,303	)	$	(21,672	)	$	(17,934	)

Earnings (loss) per common share:
Loss per common share - basic	$	(0.57	)	$	(0.62	)	$	(2.36	)	$	(2.19	)
Loss per common share - diluted	$	(0.57	)	$	(0.62	)	$	(2.36	)	$	(2.19	)
Weighted average common shares outstanding - basic		10,111			8,485			9,188			8,198
Weighted average common shares outstanding - diluted		10,111			8,485			9,188			8,198

	December 31,			December 31,
	2016			2015
Assets
Current assets:
Cash and cash equivalents (1)	$	11,638		$	3,160
Marketable securities (1)		44,496			33,027
Trade accounts receivable, net		5,078			4,616
Other current assets		1,695			1,487
Total current assets		62,907			42,290
Marketable securities ⁽¹⁾		4,392			2,999
Property and equipment, net		3,570			3,010
Intangibles, net		6,422			6,613
Goodwill		1,114			1,114
Other assets		331			338
Total assets	$	78,736		$	56,364

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities	$	1,523		$	1,657
Deferred revenue		2,923			3,023
Total current liabilities		4,446			4,680
Deferred rent and other long-term liabilities		956			226
Total liabilities		5,402			4,906

Commitments and contingencies

Shareholders' equity:
Preferred stock		50			50
Common stock		11			9
Additional paid-in capital		120,985			77,439
Accumulated deficit		(47,712	)		(26,040	)
Total shareholders' equity		73,334			51,458

Total liabilities and shareholders' equity	$	78,736		$	56,364


(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $60,526 and $39,186 at December 31, 2016 and December 31, 2015, respectively.

	Twelve Month Information
	December 31,			December 31,
	2016			2015
Cash flows from operating activities:
Net loss	$	(21,672	)	$	(17,934	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and write-off of property and equipment		1,336			1,237
Amortization and write-off of intangibles		1,121			1,196
Changes in allowance for doubtful accounts		-			(7	)
Stock-based compensation		5,553			5,077
Changes in operating assets and liabilities:
Trade accounts receivable		(462	)		(64	)
Other current assets		(208	)		1,124
Other assets		7			40
Accounts payable and other accrued liabilities		637			125
Deferred revenue		(176	)		(534	)
Net cash used in operating activities		(13,864	)		(9,740	)

Cash flows from investing activities:
Purchase of property and equipment		(1,837	)		(1,218	)
Capitalized patent costs		(790	)		(895	)
Maturity of marketable securities		41,052			42,264
Purchase of marketable securities		(53,914	)		(45,340	)
Net cash used in investing activities		(15,489	)		(5,189	)

Cash flows from financing activities:
Issuance of common stock, net of issuance costs		39,700			12,896
Exercise of stock options		668			1,514
Purchase of common stock		(2,537	)		(2,443	)
Net cash provided by financing activities		37,831			11,967

Net increase (decrease) in cash and cash equivalents ⁽²⁾	$	8,478		$	(2,962	)


Cash, cash equivalents and marketable securities at beginning of period		39,186			39,072
Cash, cash equivalents and marketable securities at end of period		60,526			39,186
(2) Net increase in cash, cash equivalents and marketable securities	$	21,340		$	114