Digimarc (DMRC) Q4 2013 earnings summary

Executive summary

• FY13 revenue fell 21% to $34.964m; operating results shifted to a $2.412m loss and net loss of $0.507m, from FY12 income of $14.594m and $8.272m, respectively.

• Results reflected the end of IV quarterly license fees in Q2 2013 and a one-time $8.0m Verance royalty payment in Q1 2012; higher subscriptions and Central Banks service revenue partly offset the decline.

• Investment increased in product development, R&D and sales initiatives, including Digimarc Discover, Digimarc Barcode and Digimarc Guardian.

Financial highlights

• Revenue was $34.964m, down from $44.375m; gross profit was $26.759m versus $37.867m.

• Operating expenses rose to $29.171m from $23.273m, led by R&D and engineering at $12.274m, up 40%, and sales and marketing at $6.144m, up 61%.

• Operating loss was $2.412m; net loss was $0.507m versus FY12 net income of $8.272m.

• Operating cash flow was $3.473m, down from $15.601m; cash, cash equivalents and marketable securities totaled $34.964m at year-end.

Outlook and guidance

• FY14 revenue expected to decrease, primarily from the ended IV fees and Nielsen quarterly license payments ending in Q1 2014; growth from existing and new customers expected to partly offset the decline.

• FY14 operating expenses expected to exceed FY13, with higher R&D and sales and marketing investment supporting product development and sales growth.

• Contracts at Dec. 31, 2013 represented at least $31m in anticipated revenue, including ~$18m expected in 2014; backlog may be modified, canceled or delayed.

• Current cash and short-term investments expected to cover projected working capital and capital expenditures for at least 12 months.