SYS-CON MEDIA Authors: Elizabeth White, Ed Featherston, Kevin Benedict, Adrian Bridgwater, Carmen Gonzalez

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Digimarc Reports First Quarter 2014 Financial Results

BEAVERTON, OR -- (Marketwired) -- 04/23/14 -- Digimarc Corporation (NASDAQ: DMRC) reported financial results for the first quarter ended March 31, 2014.

First Quarter 2014 Results
Revenue for the first quarter of 2014 totaled $7.2 million compared to $10.2 million in the first quarter of 2013. The decrease was primarily due to the end of the scheduled minimum quarterly license fee payments from Intellectual Ventures (IV) in the second quarter of 2013. The comparative decline was partially offset by increased royalty revenue from other licensees.

Operating loss for the first quarter of 2014 totaled $3.3 million compared to operating income of $1.6 million in the same quarter a year-ago. The operating loss was primarily due to lower revenue and increased investment in the company's ongoing product development and sales growth initiatives, mainly focused around Digimarc Discover and Barcode.

Net loss for the first quarter of 2014 totaled $2.0 million or $(0.29) per diluted share compared to net income of $1.0 million or $0.13 per diluted share in the first quarter of 2013.

At March 31, 2014, cash, cash equivalents and marketable securities totaled $32.3 million compared to $35.0 million at December 31, 2013.

Conference Call
Digimarc will hold a conference call later today (Wednesday, April 23, 2014) to discuss these results. Management will also 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 call will be broadcast live via webcast at www.digimarc.com/investors and available for replay through May 23, 2014. The webcast will be archived and available on Digimarc's website at www.digimarc.com/investors/investor-events-and-webcasts.

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

Number: 866-562-9934
Conference ID: 27179676

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

About Digimarc
Digimarc Corporation (NASDAQ: DMRC), based in Beaverton, Oregon, is a leading innovator and provider of enabling technologies that create digital identities for all forms of media and many everyday objects. The embedded Digimarc IDs are imperceptible to humans, but not to computers, networks and devices like mobile phones, which can now use cameras and microphones as sensory inputs to "see, hear and understand" the world around them within the context of their environment. Digimarc has built an extensive intellectual property portfolio with patents in digital watermarking, content identification and management, media and object discovery to enable ubiquitous computing, and related technologies. Digimarc develops solutions, licenses its intellectual property, and provides development services to business partners across a range of industries. For more information, visit www.digimarc.com.

Forward-looking Statements
With the exception of historical information contained in this release, the matters described in this release contain various "forward-looking statements." These forward-looking statements include statements and any related inferences regarding increased royalty revenue from other licensees, increased investments in product development and sales growth initiatives, 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 will be set forth in the company's Form 10-K for the year ended December 31, 2013 and in subsequent periodic reports filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date of this release. Except as required by law, Digimarc undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this release.


                            Digimarc Corporation
                 Consolidated Income Statement Information
                  (in thousands, except per share amounts)
                                (Unaudited)

                                                  Three-Month Information
                                               ----------------------------
                                                 March 31,      March 31,
                                                    2014           2013
                                               -------------  -------------
Revenue:
  Service                                      $       2,988  $       2,929
  Subscription                                         1,412          1,384
  License                                              2,805          5,930
                                               -------------  -------------
    Total revenue                                      7,205         10,243

Cost of revenue:
  Service                                              1,414          1,403
  Subscription                                           649            635
  License                                                 83             96
                                               -------------  -------------
    Total cost of revenue                              2,146          2,134

Gross profit:
  Service                                              1,574          1,526
  Subscription                                           763            749
  License                                              2,722          5,834
                                               -------------  -------------
    Total gross profit                                 5,059          8,109

Gross margin:
  Service                                                 53%            52%
  Subscription                                            54%            54%
  License                                                 97%            98%
    Percentage of gross profit to total revenue           70%            79%

Operating expenses:
  Sales and marketing                                  1,879          1,277
  Research, development and engineering                3,546          2,725
  General and administrative                           2,421          2,186
  Intellectual property                                  534            277
                                               -------------  -------------
    Total operating expenses                           8,380          6,465

Operating income (loss)                               (3,321)         1,644

Other income, net                                         27             29
                                               -------------  -------------

Income (loss) before income taxes                     (3,294)         1,673

(Provision) benefit for income taxes                   1,308           (702)
                                               -------------  -------------
Net income (loss)                              $      (1,986) $         971
                                               =============  =============

Earnings (loss) per common share:
Earnings (loss) per common share - basic       $       (0.29) $        0.13
Earnings (loss) per common share - diluted     $       (0.29) $        0.13
  Weighted average common shares outstanding -
   basic                                               7,000          6,838
  Weighted average common shares outstanding -
   diluted                                             7,000          7,058

Cash dividends declared per common share:      $        0.11  $        0.11



                            Digimarc Corporation
                     Consolidated Cash Flow Information
                               (in thousands)
                                (Unaudited)

                                                  Three-Month Information
                                               ----------------------------
                                                 March 31,      March 31,
                                                    2014           2013
                                               -------------  -------------
Cash flows from operating activities:
  Net income (loss)                            $      (1,986) $         971
  Adjustments to reconcile net income (loss)
   to net cash provided by (used in) operating
   activities:
    Depreciation and amortization of property
     and equipment                                       231            158
    Amortization and write-off of intangibles            308            299
    Change in allowance for doubtful accounts             (7)             -
    Gain on reversal of contingent merger
     consideration                                         -           (190)
    Stock-based compensation                           1,259          1,092
    Deferred income taxes                               (509)          (112)
    Excess tax benefit from stock-based awards           (72)             -
  Changes in operating assets and liabilities:
      Trade accounts receivable, net                   1,809           (228)
      Other current assets                              (699)           (44)
      Other assets                                        84              1
      Accounts payable and other accrued
       liabilities                                      (317)          (213)
      Income taxes payable                                 3            778
      Deferred revenue                                (1,484)           832
                                               -------------  -------------
        Net cash provided by (used in)
         operating activities                         (1,380)         3,344

Cash flows from investing activities:
    Purchase of property and equipment                  (117)           (86)
    Capitalized patent costs                            (295)          (228)
    Maturity of marketable securities                 11,192         23,116
    Purchase of marketable securities                 (9,266)       (21,933)
                                               -------------  -------------
        Net cash provided by investing
         activities                                    1,514            869

Cash flows from financing activities:
    Issuance of common stock                             712              -
    Purchase of common stock                            (850)          (648)
    Cash dividends paid                                 (824)          (801)
    Excess tax benefit from stock-based awards            72              -
                                               -------------  -------------
        Net cash used in financing activities           (890)        (1,449)

                                               -------------  -------------
        Net increase (decrease) in cash and
         cash equivalents (1)                  $        (756) $       2,764
                                               =============  =============


      Cash, cash equivalents and marketable
       securities at beginning of period              34,964         39,056
      Cash, cash equivalents and marketable
       securities at end of period                    32,282         40,637
                                               -------------  -------------
  (1) Net increase (decrease) in cash, cash
   equivalents and marketable securities       $      (2,682) $       1,581
                                               =============  =============



                            Digimarc Corporation
                   Consolidated Balance Sheet Information
                               (in thousands)
                                 (Unaudited)


                                                  March 31,     December 31,
                                                     2014           2013
                                                -------------  -------------
Assets
  Current assets:
    Cash and cash equivalents (2)               $       3,055  $       3,811
    Marketable securities (2)                          28,120         25,851
    Trade accounts receivable, net                      4,036          5,838
    Other current assets                                2,368          1,658
                                                -------------  -------------
      Total current assets                             37,579         37,158
  Marketable securities (2)                             1,107          5,302
  Property and equipment, net                           2,326          2,395
  Intangibles, net                                      6,740          6,709
  Goodwill                                              1,114          1,114
  Deferred tax assets, net                              4,519          3,949
  Other assets                                            486            570
                                                -------------  -------------
      Total assets                              $      53,871  $      57,197
                                                =============  =============

Liabilities and Shareholders' Equity
  Current liabilities:
    Accounts payable and other accrued
     liabilities                                $       1,325  $       1,560
    Deferred revenue                                    2,690          4,218
                                                -------------  -------------
      Total current liabilities                         4,015          5,778
  Deferred rent and other long-term liabilities           505            496
                                                -------------  -------------
      Total liabilities                                 4,520          6,274

  Commitments and contingencies

  Shareholders' equity:
    Preferred stock                                        50             50
    Common stock                                            8              7
    Additional paid-in capital                         42,735         41,498
    Retained earnings                                   6,558          9,368
                                                -------------  -------------
      Total shareholders' equity                       49,351         50,923

                                                -------------  -------------
      Total liabilities and shareholders'
       equity                                   $      53,871  $      57,197
                                                =============  =============

(2) Aggregate cash, cash equivalents, short- and long-term marketable
    securities was $32,282 and $34,964 at March 31, 2014 and December 31,
    2013, respectively.

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