Digimarc (DMRC) Q4 2012 earnings summary

Executive summary

• FY12 revenue rose 23% to $44.375 million; operating income increased to $14.594 million and net income to $8.272 million, with results boosted by Verance royalties and IV license payments.

• Growth priorities included expanding e-book anti-piracy services through Attributor and investing in a commercial mobile platform and Digimarc Discover.

Financial highlights

• Revenue was $44.375 million, up 23% YoY; license and subscription revenue grew 42% to $33.583 million, while service revenue fell 13% to $10.792 million.

• Gross profit increased to $37.867 million from $29.102 million; gross margin rose to 85% from 81%, reflecting a higher share of high-margin license revenue.

• Operating income was $14.594 million versus $6.389 million; net income was $8.272 million versus $5.656 million; diluted EPS was $1.12 versus $0.76.

• Adjusted for one-time items, revenue growth reflected an $8.0 million past-due Verance royalty settlement; operating expenses rose slightly to $23.273 million as R&D investment increased.

• Operating cash flow rose 52% to $15.601 million; cash, cash equivalents and marketable securities totaled $39.056 million at year-end.

Outlook and guidance

• FY13 revenue was expected to decline YoY, primarily due to the nonrecurrence of the $8.0 million Verance payment and the end of quarterly IV license issue-fee installments after Q2 2013.

• Current contracts represented a minimum $44 million of revenue through early 2015, with approximately $27 million expected to be recognized in 2013; backlog remains subject to changes or cancellation.

• Growth from Attributor, existing customers and new customers was expected to partly offset the anticipated revenue decline; higher R&D and sales and marketing investment was planned through 2013.

• Cash and short-term securities were expected to cover working capital and capital expenditure needs for at least the next 12 months.