Digimarc Reports Second Quarter 2021 Financial Results

Rhea-AI Summary

Digimarc Corporation (NASDAQ: DMRC) reported a net loss of $15.4 million for Q2 2021, a 107% increase from Q2 2020, primarily due to a significant rise in operating expenses, which surged 65% to $19.7 million. The revenue for the quarter fell by 3% year-over-year to $6.3 million, driven by lower revenues from government services and commercial subscriptions. As of June 30, 2021, the company's liquidity position stood at $61.1 million.

Positive

• Higher Commercial services revenue partially offset revenue decline
• Non-recurring costs of $7.5 million highlighted, excluding which operating loss increased only 5%

Negative

• Revenue decreased by 3% to $6.3 million compared to $6.5 million in Q2 2020
• Operating expenses increased 65% to $19.7 million mainly due to non-recurring costs
• Operating loss rose by 105% to $15.4 million
• Net loss increased 107% to $15.4 million or $(0.94) per diluted share

BEAVERTON, Ore., Aug. 5, 2021 /PRNewswire/ -- Digimarc Corporation (NASDAQ: DMRC) reported financial results for the second quarter ended June 30, 2021.

Second Quarter 2021 Financial Results
Revenue for the second quarter of 2021 decreased three percent to $6.3 million compared to $6.5 million in the second quarter of 2020, reflecting lower revenue from Government services and Commercial subscriptions, partially offset by higher Commercial services revenue.

Operating expenses for the second quarter of 2021 increased 65% to $19.7 million compared to $11.9 million in the same quarter a year ago, reflecting non-recurring costs of $7.5 million incurred during the three month period ended June 30, 2021. These costs were associated with the Separation Agreement and General Release we entered into on April 12, 2021 with our former chief executive officer, as well as severance costs incurred for organizational changes we made in June 2021. Excluding the $7.5 million of non-recurring costs, operating expenses increased 2% to $12.2 million, reflecting higher consulting and legal costs, partially offset by lower recurring compensation costs.

Operating loss for the second quarter of 2021 increased 105% to $15.4 million compared to $7.5 million in the second quarter of 2020, due primarily to higher operating expenses. Excluding the $7.5 million of non-recurring costs noted above, operating loss increased 5% to $7.9 million.

Net loss for the second quarter of 2021 increased 107% to $15.4 million or $(0.94) per diluted share compared to net loss of $7.5 million or $(0.62) per diluted share in the same quarter a year ago. Excluding the $7.5 million of non-recurring costs noted above, net loss increased 6% to $7.9 million, or $(0.48) per diluted share.

At quarter-end, cash, cash equivalents, short- and long-term marketable securities totaled $61.1 million compared to $77.7 million at December 31, 2020.

Conference call
Digimarc will hold a conference call today (Thursday, August 5, 2021) to discuss these results and provide an update on market conditions and execution of strategy. CEO Riley McCormack, CFO Charles Beck, CLO Robert Chamness and CRO Tim Price 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 here and in the investor section of the company's website. The conference call script will also be posted to the company's website shortly before the call.

For those who wish to call in via telephone to ask a question, please dial the number below at least five minutes before the scheduled start time:

Toll-Free Number: 866-562-9934
International Number: 706-679-0638
Conference ID: 2188966

If you have any difficulty connecting with the conference call, please contact Digimarc investor relations team at +1 503-469-4826.

About Digimarc
Digimarc Corporation (NASDAQ: DMRC) is a pioneer and leader in digital watermarking solutions and the automatic identification of media, including packaging, commercial print, digital images, audio and video. Digimarc helps customers drive efficiency, accuracy and security across physical and digital supply chains. Visit us at digimarc.com on LinkedIn and follow us on Twitter @digimarc to learn more.

Forward-looking statements
Except for historical information contained in this release, the matters described in this release contain various "forward-looking statements." These forward-looking statements include 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 regulatory factors. More detailed information about risk factors that may affect actual results are outlined in the company's Form 10-K for the year ended December 31, 2020, 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				Six Month Information
		June 30,		June 30,		June 30,		June 30,
		2021		2020		2021		2020
Revenue:
Service		$    3,791		$  3,892		$    7,575		$    7,630
Subscription		2,487		2,605		5,403		5,056
Total revenue		6,278		6,497		12,978		12,686
Cost of revenue:
Service		1,515		1,601		3,085		3,285
Subscription		534		512		1,325		1,026
Total cost of revenue		2,049		2,113		4,410		4,311
Gross profit:
Service		2,276		2,291		4,490		4,345
Subscription		1,953		2,093		4,078		4,030
Total gross profit		4,229		4,384		8,568		8,375
Gross margin:
Service		60%		59%		59%		57%
Subscription		79%		80%		75%		80%
Percentage of gross profit to total revenue		67%		67%		66%		66%
Operating expenses:
Sales and marketing		6,277		4,633		11,218		9,879
Research, development and engineering		4,213		4,208		8,344		8,641
General and administrative		9,175		3,081		12,668		6,448
Total operating expenses		19,665		11,922		32,230		24,968
Operating loss		(15,436)		(7,538)		(23,662)		(16,593)
Other income, net		18		79		28		221
Loss before income taxes		(15,418)		(7,459)		(23,634)		(16,372)
Benefit (provision) for income taxes		(4)		(2)		(10)		3
Net loss		$ (15,422)		$ (7,461)		$ (23,644)		$ (16,369)
Earnings (loss) per common share:
Loss per common share - basic		$     (0.94)		$   (0.62)		$     (1.44)		$     (1.36)
Loss per common share - diluted		$     (0.94)		$   (0.62)		$     (1.44)		$     (1.36)
Weighted average common shares outstanding - basic		16,430		12,108		16,382		12,073
Weighted average common shares outstanding - diluted		16,430		12,108		16,382		12,073

 

Digimarc Corporation
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
		June 30,		December 31,
		2021		2020
Assets
Current assets:
Cash and cash equivalents(1)		$         21,358		$         19,696
Marketable securities(1)		39,592		58,032
Trade accounts receivable, net		4,590		3,907
Other current assets		1,805		2,197
Total current assets		67,345		83,832
Marketable securities(1)		157		—
Property and equipment, net		3,082		3,272
Intangibles, net		6,606		6,612
Goodwill		1,114		1,114
Other assets		2,244		2,198
Total assets		$         80,548		$         97,028
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities		$           4,428		$           2,827
Note payable, current		5,091		3,947
Deferred revenue		2,659		3,002
Total current liabilities		12,178		9,776
Lease liability and other long-term liabilities		3,128		2,295
Note payable, long-term		—		1,118
Total liabilities		15,306		13,189
Commitments and contingencies
Shareholders' equity:
Preferred stock		50		50
Common stock		17		17
Additional paid-in capital		260,071		255,024
Accumulated deficit		(194,896)		(171,252)
Total shareholders' equity		65,242		83,839
Total liabilities and shareholders' equity		$         80,548		$         97,028

(1) Aggregate cash, cash equivalents, short- and long-term marketable securities was $61,107 and $77,728 at June 30, 2021 and December 31, 2020, respectively.

 

Digimarc Corporation
Consolidated Cash Flow Information
(in thousands)
(Unaudited)
		Six Month Information
		June 30,		June 30,
		2021		2020
Cash flows from operating activities:
Net loss		$ (23,644)		$ (16,369)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and write-off of property and equipment		717		745
Amortization and write-off of intangibles		345		431
Amortization of right of use assets under operating leases		240		233
Amortization of net premiums and (discounts) on marketable securities		(498)		96
Stock-based compensation		8,747		4,522
Changes in operating assets and liabilities:
Trade accounts receivable		(950)		445
Other current assets		392		361
Other assets		(19)		85
Accounts payable and other accrued liabilities		1,859		(155)
Deferred revenue		(331)		(500)
Lease liability and other long-term liabilities		656		24
Net cash used in operating activities		(12,486)		(10,082)
Cash flows from investing activities:
Purchase of property and equipment		(569)		(456)
Capitalized patent costs		(290)		(311)
Maturity of marketable securities		49,722		26,439
Purchase of marketable securities		(30,941)		(19,490)
Net cash provided by investing activities		17,922		6,182
Cash flows from financing activities:
Proceeds from note payable		—		5,032
Issuance of preferred stock, net of issuance costs		—		574
Exercise of stock options		—		135
Purchase of common stock		(3,774)		(1,120)
Net cash provided by (used in) financing activities		(3,774)		4,621
Net increase in cash and cash equivalents(2)		$    1,662		$       721
Cash, cash equivalents and marketable securities at beginning of period		77,728		36,817
Cash, cash equivalents and marketable securities at end of period		61,107		30,493
(2) Net decrease in cash, cash equivalents and marketable securities		$ (16,621)		$   (6,324)

 

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SOURCE Digimarc Corporation

FAQ

What were Digimarc's Q2 2021 revenue results?

Digimarc reported revenue of $6.3 million for Q2 2021, a 3% decrease from $6.5 million in Q2 2020.

How much did Digimarc's net loss increase in Q2 2021?

The net loss for Q2 2021 increased 107% to $15.4 million, or $(0.94) per diluted share.

What were the main factors affecting Digimarc's operating expenses in Q2 2021?

Operating expenses increased 65% to $19.7 million, primarily due to non-recurring costs of $7.5 million related to the Separation Agreement and organizational changes.

What was the cash position of Digimarc at the end of Q2 2021?

As of June 30, 2021, Digimarc had cash, cash equivalents, and marketable securities totaling $61.1 million.