Digimarc Reports Fourth Quarter and Full Year 2008 Financial Results

Digimarc Corporation (NASDAQ: DMRC) today announced its fourth quarter financial results since being spun-off on August 1, 2008 from the former Digimarc Corporation ("Old Digimarc"; "predecessor" refers to the digital watermarking business of Old Digimarc). Revenues for the fourth quarter were $4.7 million, 37% higher than revenues of $3.4 million in the comparable period of 2007. Fourth quarter net loss of $(0.3) million, or $(0.05) per fully diluted share, included a full quarter of operating expenses as a stand-alone public company. This compares to predecessor's net income of $0.1 million, or pro-forma $0.02 per fully diluted share, for the fourth quarter of 2007, where operating expenses included proportional allocations of various shared-services common costs of Old Digimarc.

Total revenues for the combined Digimarc and predecessor operations for the year ended December 31, 2008 were $19.8 million, 52% higher than in 2007. Net income for the combined Digimarc and predecessor operations for the year ended December 31, 2008 was $1.5 million, or pro-forma $0.21 per fully diluted share, compared to net income of $0.1 million, or pro-forma $0.01 per fully diluted share, for 2007.

Cash flow from operations for the combined Digimarc and predecessor operations for the year ended December 31, 2008 totaled $3.9 million, a $2.9 million improvement over $1.0 million in cash flow for 2007.

The company generated Adjusted EBITDA in the fourth quarter of $0.1 million, or 2% of revenues, compared to $0.3 million, or 8% of revenues in the comparable three-month period of 2007. Adjusted EBITDA for the combined Digimarc and predecessor operations for the year ended December 31, 2008 totaled $2.7 million, or 14% of revenues, compared to $0.5 million, or 4% of revenues for 2007. 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 year-end of approximately $60 million. The company also reported that its cash, cash equivalents and short and long-term marketable securities were approximately $46 million on December 31, 2008.

Conference Call

Digimarc will hold its fourth quarter earnings conference call on Thursday, February 26, 2009 at 7:30 a.m. PT / 10:30 a.m. ET. 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 "Q4 2008 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 leading innovator and technology provider, enabling businesses and governments worldwide to enrich everyday living by giving persistent digital identities to all forms of media and many other objects. The company’s technology enables a wide range of solutions for deterring fraud, counterfeiting and piracy, enhancing national security, and enabling new digital media distribution and monetization models that provide consumers with more choice and access to content when, where and how they want it. Digimarc has an extensive intellectual property portfolio, with more than 490 U.S. and foreign patents, and more than 400 patents pending in digital watermarking, media identification and management, and related technologies. Digimarc develops solutions, licenses its intellectual property, and provides development services to business partners across a range of industries. Please go to www.digimarc.com for more company information.

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 can be identified, in some cases, 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 registration statement on Form 10 under "Risk Factors." 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 combines the periods through August 1, 2008, referred to as "carve-out” financial information from Old Digimarc's digital watermarking business, or predecessor, with the periods after that date, for Digimarc, or successor, to arrive at quarterly and year-to-date totals for comparative purposes. 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. Consequently, the financial position, results of operations and cash flows reflected in the carve-out financial statements may not be indicative of those that would have been achieved had the predecessor operated as a separate, stand-alone entity for the periods reflected in the carve-out financial statements.