Digimarc (DMRC) Q4 2010 earnings summary

Executive summary

• FY 2010 revenue rose 63% YoY to $31.15M; net income was $4.174M versus a $2.757M loss in 2009, primarily reflecting Arbitron and IV licensing arrangements.

• Results remained uneven, with major licensing receipts concentrated in Q1 and Q4; four customers accounted for 82% of FY revenue.

Financial highlights

• Revenue was $31.15M, including $12.324M service revenue, up 14%, and $18.826M license and subscription revenue, up 129% YoY.

• Gross profit increased 91% to $24.45M; gross margin was 78%, up from 67% in 2009.

• Operating income was $6.151M versus an operating loss of $2.565M; net income was $4.174M and diluted EPS was $0.55.

• Q4 revenue was $10.473M, operating income $3.149M, net income $2.754M and diluted EPS $0.35.

Outlook and guidance

• Backlog commitments at Dec. 31, 2010 were expected to generate at least $63M through early 2015, including approximately $29M expected in 2011.

• 2011 license revenue was expected to grow from existing and new customers; service and license growth depended on new programs and expanded IP monetization.

• Current cash, cash equivalents and short-term securities were expected to cover working capital and capital spending for at least 12 months.

• Planned investment included mobile platform R&D, visual search, product initiatives and IP enforcement; R&D expense was expected to remain at higher levels.