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Digimarc Corp (DMRC)
Q3 2010 Earnings Call
October 20, 2010 8:30 a.m. ET
Bruce Davis – CEO
Mike McConnell - CFO
Bill Gibson – Anderson Strudwick
Andy Hargreaves – Pacific Crest
Paul Sonz – Sonz Partners
Walter Schenker – MAZ Partners
Kevin Hanrahan – KMH Capital Advisors
Andrew Weinger – Burnham Asset Management
Good morning, and thank you for participating in today’s conference call to discuss Digimarc’s Third Quarter Financial Results.
Now, I would now like to turn today’s call over to Chairman and CEO of Digimarc, Mr. Bruce Davis, Sir, please proceed.
Previous Statements by DMRC
» Digimarc Corp. Q2 2010 Earnings Call Transcript
» Digimarc Corporation Q1 2010 Earnings Call Transcript
» Digimarc Corporation Q4 2009 Earnings Call Transcript
The objectives of this call are to summarize and comment on these results, review significant business developments and market conditions and provide an update on strategy and operations.
This webcast will be archived in the Investor Relations section of our website. We expect to file our 10-Q with the SEC soon to provide more details on our financial results.
Please note that during the course of this call, we’ll be making certain forward-looking statements. These statements are subject to many assumptions, risks, uncertainties and changes in circumstances. Any assumptions we offer about future performance represent a point-in-time estimate and actual results may vary materially from those expressed or implied by such statements.
We express disclaim any obligation to revise or update any assumptions, projections or other forward-looking statements to reflect events or circumstances that may arise after the date of this conference call.
For more detailed information about risk factors that may cause actual results to differ from expectations, please see the company’s filings with the SEC, including our latest Form 10-Q and our earnings release posted on our website this morning.
Mike will summarize and comment on the financial results for the quarter. Following Mike’s presentation, I’ll return to discuss some of the important events and achievements during the quarter and provide an update on strategy execution. Then we’ll open our call to questions. Mike.
Thanks, Bruce, and good morning, everyone. Thanks for joining us for discussing our third quarter operating results.
Our revenues in the quarter increased 10% to 5.2 million from 4.8 million for the same quarter a year ago, and this increase reflects 27% higher royalties from our licensee, and the consistent turn of revenues from our service customer build in accordance with contractual schedules.
More specifically, the quarter reflects record revenues from Civolution, a leading supplier of digital watermarking-base security for digital cinemas and other technology and solutions for identifying, managing, and monetizing media content. Also, deferral of some federal services revenues that we anticipate will be reflected in our Q4 results, and failure to pay quarterly revenues by one of our larger licensee due to a contractual dispute.
Our gross margins grew to 72% from 68% in Q3 of ‘09. This reflects a higher mix of license revenue to the total, as well as benefits realized from improving operating leverage in providing our services.
Operating expenses increased 23% to $4.6 million from 3.7 million in the third quarter of 2009. And the increase primarily reflects increased investment in marketing and R&D personnel and consulting for our mobile product initiatives. And professional’s fee associated with the company’s recently completed transaction, with intellectual ventures.
Our operating loss totaled $800,000 compared to 500,000 in Q3 of 2009, and reflect the impact of the higher revenues offset by the investments we’ve discussed to grow our business. Our net loss was 1.5 million or $0.21 per diluted share compared with a net loss of 700,000 or $0.10 per diluted share in Q3 of 2009.
$600,000 of current loss reflects our share of operating results from our joint venture investments with The Nielsen Company, as compared to $300,000 in the prior year. And the net loss also reflects a tax revision of $150,000 for AMT based upon evaluation of our tax reserves and minimum taxes due to government.
Operating cash flow was about break even, an improvement of approximately $300,000 over the 2009 quarter. And we ended the quarter with more than $45 million in cash and marketable securities, up about $2.7 million from year end.
Our results, reflect a prudent investment in our growth, including $700,000 investment in our early stage joint ventures with Nielsen, and that’s expensed as it’s incurred.
Increase spending on marketing and R&D initiatives in the mobile area, and incremental spending in IV marketing activities to expand our licensing program which has produced numerous new licensees so far this year including intellectual adventures, Arbitron, Catalent, and AlpVision.
Further discussion of our results and our businesses financial models and risk and prospect for our business, will be included in our third quarter form 10-Q that we expect to file later this month.
And now, Bruce will provide his comments on our outlook and execution of our strategy. Bruce.
Thanks, Mike. It’s been quite a year for strategic and financial progress so far. With the Arbitron license in Q1, strong growth by current licensee, the new partnerships Mike referred to a moment ago, the first glimpse of the fruits of our joint ventures with Nielsen, and most recently, announced over the long-term collaboration with Intellectual Ventures.