Digimarc Reports Third Quarter 2021 Financial Results

Digimarc Corporation

Consolidated Income Statement Information

(in thousands, except per share amounts)

(Unaudited)

Three Month Information

Nine Month Information

September 30,

September 30,

September 30,

September 30,

2021

2020

2021

2020

Revenue:

Service

$

3,932

$

3,352

$

11,507

$

10,982

Subscription

2,485

2,399

7,888

7,455

Total revenue

6,417

5,751

19,395

18,437

Cost of revenue:

Service

1,630

1,406

4,715

4,691

Subscription

567

522

1,892

1,548

Total cost of revenue

2,197

1,928

6,607

6,239

Gross profit:

Service

2,302

1,946

6,792

6,291

Subscription

1,918

1,877

5,996

5,907

Total gross profit

4,220

3,823

12,788

12,198

Gross profit margin:

Service

59

%

58

%

59

%

57

%

Subscription

77

%

78

%

76

%

79

%

Total gross profit margin

66

%

66

%

66

%

66

%

Operating expenses:

Sales and marketing

4,647

4,538

15,865

14,417

Research, development and engineering

4,586

4,662

12,930

13,303

General and administrative

2,943

3,009

15,611

9,457

Total operating expenses

12,176

12,209

44,406

37,177

Operating loss

(7,956)

(8,386)

(31,618)

(24,979)

Other income:

Gain on extinguishment of note payable

5,094

—

5,094

—

Other income (loss)

(2)

36

26

257

Other income, net

5,092

36

5,120

257

Loss before income taxes

(2,864)

(8,350)

(26,498)

(24,722)

Benefit (provision) for income taxes

(7)

(2)

(17)

1

Net loss

$

(2,871)

$

(8,352)

$

(26,515)

$

(24,721)

Earnings (loss) per common share:

Loss per common share - basic

$

(0.17)

$

(0.68)

$

(1.61)

$

(2.04)

Loss per common share - diluted

$

(0.17)

$

(0.68)

$

(1.61)

$

(2.04)

Weighted average common shares outstanding - basic

16,520

12,241

16,428

12,129

Weighted average common shares outstanding - diluted

16,520

12,241

16,428

12,129

Digimarc Corporation

Consolidated Balance Sheet Information

(in thousands)

(Unaudited)

September 30,

December 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents ⁽¹⁾

$

25,155

$

19,696

Marketable securities ⁽¹⁾

19,037

58,032

Trade accounts receivable, net

4,110

3,907

Other current assets

2,550

2,197

Total current assets

50,852

83,832

Marketable securities ⁽¹⁾

8,298

—

Property and equipment, net

2,962

3,272

Intangibles, net

6,614

6,612

Goodwill

1,114

1,114

Other assets

2,112

2,198

Total assets

$

71,952

$

97,028

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable and other accrued liabilities

$

4,236

$

2,827

Deferred revenue

2,146

3,002

Note payable, current

—

3,947

Total current liabilities

6,382

9,776

Lease liability and other long-term liabilities

2,685

2,295

Note payable, long-term

—

1,118

Total liabilities

9,067

13,189

Commitments and contingencies

Shareholders' equity:

Preferred stock

50

50

Common stock

17

17

Additional paid-in capital

260,585

255,024

Accumulated deficit

(197,767)

(171,252)

Total shareholders' equity

62,885

83,839

Total liabilities and shareholders' equity

$

71,952

$

97,028

(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $52,490 and $77,728 at September 30, 2021 and December 31, 2020, respectively.

Digimarc Corporation

Consolidated Cash Flow Information

(in thousands)

(Unaudited)

Nine Month Information

September 30,

September 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(26,515)

$

(24,721)

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

Depreciation, amortization and write-off of property and equipment

1,051

1,112

Amortization and write-off of intangibles

525

612

Amortization of right of use assets under operating leases

364

352

Amortization of net premiums and (discounts) on marketable securities

605

(39)

Gain on extinguishment of note payable

(5,032)

—

Stock-based compensation

10,348

7,149

Changes in operating assets and liabilities:

Trade accounts receivable

(427)

999

Other current assets

(353)

60

Other assets

(54)

(45)

Accounts payable and other accrued liabilities

1,630

146

Deferred revenue

(847)

(1,092)

Lease liability and other long-term liabilities

242

236

Net cash used in operating activities

(18,463)

(15,231)

Cash flows from investing activities:

Purchase of property and equipment

(797)

(694)

Capitalized patent costs

(475)

(478)

Maturities of marketable securities

72,141

30,598

Purchases of marketable securities

(42,049)

(22,149)

Net cash provided by investing activities

28,820

7,277

Cash flows from financing activities:

Issuance of common stock, net of issuance costs

—

38,603

Proceeds from note payable

—

5,032

Exercise of stock options

—

135

Purchase of common stock

(4,898)

(1,568)

Net cash provided by (used in) financing activities

(4,898)

42,202

Net increase in cash and cash equivalents ⁽²⁾

$

5,459

$

34,248

Cash, cash equivalents and marketable securities at beginning of period

77,728

36,817

Cash, cash equivalents and marketable securities at end of period

52,490

62,655

(2) Net increase (decrease) in cash, cash equivalents and marketable securities

$

(25,238)

$

25,838