Digimarc Corporation (NASDAQ: DMRC) today announced financial results for the third quarter ended September 30, 2009. Revenues for the third quarter were $4.8 million, 3% lower than combined revenues for the predecessor (“Old Digimarc”) and Digimarc operations of $4.9 million in the comparable period of 2008. The lower revenues primarily reflect the impact of variations in scheduled payments in certain of the Company’s long-term contracts, and to a lesser extent lower royalties from some patent and technology licensees; offset in part by increased project work from the consortium of Central Banks.

The third quarter net loss of $(0.7)million, or $(0.10) per fully diluted share, included a full quarter of operating expenses as a stand-alone public company. This compares to combined predecessor and Digimarc's net income of $0.2 million, or pro-forma $0.03 per fully diluted share, for the third quarter of 2008, where operating expenses benefited from proportional allocations of various shared-services common costs of Old Digimarc.

Cash flow from operations for the third quarter totaled $(0.3) million, compared to the combined predecessor and Digimarc’s $4.3 million for the comparable period of 2008.

The Company’s Adjusted EBITDA in the third quarter was approximately break-even, compared to the combined predecessor and Digimarc’s $0.3 million, or 6% of revenues in the comparable three-month period of 2008. Digimarc calculates Adjusted EBITDA by adjusting net income (loss) for the effects of interest, taxes, depreciation, amortization and non-cash expenditures for stock compensation. The reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP measure, is included at the end of this release.

Digimarc reported backlog at quarter end of approximately $46 million. The Company also reported that its cash, cash equivalents and short and long-term marketable securities at approximately $44 million on September 30, 2009, a decrease of approximately $2 million from last quarter, reflecting investments in the Company’s share repurchase program ($800K), Nielsen joint ventures ($550k), and capital expenditures and capitalized patent costs ($400k).

Conference Call

Digimarc will hold its third quarter earnings conference call on October 30, 2009 at 11:00 a.m. Eastern time. The call will be open to the general public and the media, and will be broadcast live by webcast at www.digimarc.com and www.earnings.com. The webcast may be accessed at the Company's website, www.digimarc.com, by clicking on the "Q3 2009 Digimarc Earnings Conference Call" webcast link on the “Events and Webcasts” page within the “Investors” section. This webcast will be available for later listening at both sites for two weeks following the live call. Thereafter, the webcast will be archived and available at https://www.digimarc.com/investors/events.asp.

About Digimarc

Digimarc Corporation (NASDAQ:DMRC), based in Beaverton, Oregon, is a provider of enabling technologies that create digital identities for all forms of media and many everyday objects that are imperceptible to humans, but not to computers. These technologies help computers to better process sensory data as the industry evolves toward more intuitive pervasive computing. For more information, please visit us at www.digimarc.com to learn more.

Forward-Looking Statements

With the exception of 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 "may," "will," "should," "expects," "intends," "plans," "projects," "anticipates," "believes," "estimates," "predicts," "potential," "illustrate," "example" 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/or regulatory factors. More detailed information about risk factors that may affect actual results is set forth in the Company's Form 10-K for the year ended December 31, 2008 in Part I, Item 1A thereof ("Risk Factors"), Part II, Item 7 thereof (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) under the captions “Liquidity and Capital Resources” and “Forward Looking Statements,” 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.

Explanation of Financial Information Presented

The financial information presented for the three- and nine-months ended September 30, 2008 includes “carve-out” financial information from Old Digimarc's digital watermarking business, or predecessor. It is important to note that the financial information in the carve-out financial statements does not include all of the expenses that would have been incurred had the predecessor been a separate, stand-alone public entity. As such, the predecessor financial information does not reflect the financial position, results of operations and cash flows of Digimarc's current business, had the predecessor operated as a separate, stand-alone public entity during the periods presented in the carve-out financial statements. Additionally, the carve-out financial statements include proportional allocations of various shared-services common costs of Old Digimarc because specific identification of these expenses was not practicable. It is expected that the initial operating costs of Digimarc on a stand-alone basis will be higher than those allocated to the predecessor operations under the shared services methodology applied in the carve-out financial statements.

About Adjusted EBITDA

From time to time, we may refer to Adjusted EBITDA in our conference calls and discussions with analysts in connection with our historical financial results and our guidance for future periods. Adjusted EBITDA does not represent cash flows from operations as defined by generally accepted accounting principles (“GAAP”), is not a measure derived in accordance with GAAP and should not be considered by the reader as an alternative to net income (the most comparable GAAP financial measure to Adjusted EBITDA). The reconciliation of GAAP and Non-GAAP Financial Measures for the three- and nine-months ended September 30, 2009 and 2008 are included in the above table. Management of the Company believes that Adjusted EBITDA is helpful to investors as an indicator of the current financial performance of the Company and its capacity to fund capital expenditures and working capital requirements. Due to the Company’s use of stock-based employee compensation, the Company incurs significant non-cash charges for stock compensation expense that may not be indicative of our operating performance from a cash perspective. Therefore, the Company believes that providing the measure of Adjusted EBITDA will help investors better understand the Company’s underlying financial performance and ability to generate cash flow from operations.