company overview - digimarc

Company OverviewApril 2015

©2015 Digimarc Corporation

— Slide 2 — ©2015 Digimarc Corporation

Safe Harbor Statement

Before we proceed, please note that during the course of this presentation we will 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. Actual results may vary materially from those expressed or implied by such statements. We expressly 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 presentation.

For more detailed information about risk factors that may cause actual results to differ from expectations, please see the company’s filings with the Securities and Exchange Commission, including our most recent Form 10-Q or 10-K.


Overview

Twenty Years of R&D• R&D: digital watermarking; automatic ID of media; patent licensing• Security: currency; government-issued IDs; movies, digital images, e-books• Marketing: audience measurement for television and radio• Building and demonstrating elements of comprehensive platform for automatic

identification of media

Core Strengths/Competitive Advantage• Signal processing experts; best known for digital watermarking• Large scale embedded systems• Large, high quality patent portfolio: 820 issued; 406 pending

Core Business• Licensing: IP development and monetization• Subscriptions and Services: anti-piracy and anti-counterfeiting solutions and

development services• Building new revenue stream in retail and consumer products markets

Growth Initiative: Digimarc® Discover and High Performance Barcode

• Clear strategy with sustainable competitive advantage targeting large markets• Automatic mobile device ID of all brand impressions in Shopper’s Journey• High performance barcodes for packaging delivers game-changing performance• Targeting leading retailers and global consumer brands Cash and Mobile Payments

Media Management

Mobile Discovery & Engagement


Evolution of Computer-Assisted Shopping

1973 – UPC (barcode)1992 – Digimarc1994 – Denso QR Code

Amazon1998 – Google

MediaBridge2005 – ScanLife2007 – Apple iPhone2008 – Digimarc ICP

KooabaRedLaserShazam

2009 – LayarAmazon Flow

2010 – Digimarc® Discover2011 – Blippar

Vuforia

Andrew Appel, president and chief executive officer of IRI. “By 2020, 90% of digital access will be mobile and the average person who saw 500 ads per day years ago will see 5,000 ads.”


Digimarc and the Evolution of Auto ID

• Barcode was a transformative technology• Digimarc ID is natural successor to barcode• It applies to audio as well as images• Digimarc ID is reliable, efficient, economical,

and scalable• System architecture: Identify, Discover,

Engage• Digimarc focuses on Identify and Discover• Business model: annual fee per ID• Many applications (Engagement) enabled• Engagement mostly supplied by Channel

Partners


Billions of Mobile Sensors Seeking Discovery


Digimarc® Discover Empowers Mobile-centric Shopper’s Journey

• Pervasive, intuitive virtual interface between brands and mobile-centric consumers

• Effortless discovery across all touchpoints of Shopper’s Journey

• Capture impressions for increased engagement

• Impulse purchase or save for later

• Digimarc® Barcodes provide superior performance and versatility


Recognize and Engage with the World via Digimarc SDK

• Shazam mobile app recognizes music, TV, movies in theaters, and in-store audio• Over 100 million monthly active users• More than 12 billion identifications• Platform soon to be enhanced via collaboration with Digimarc• Adding visual identification first• Expanding benefits and reach of audio identification


Digimarc® Barcode: Billions in Efficiency Gains for Retailers

• Much faster and more reliable scanning at POS

• Massive potential labor costs savings• Preliminary savings estimate: every additional item/minute in checkout

throughput could save top 120 global retailers up to $500 million per year

• GS1 manages global barcode system to identify physical things in standardized taxonomy

• Nonprofit trade association with $400 million annual revenues• Two million companies in 150 countries• 6 billion scans per day• Digimarc joined Solution Partner Program

• Digimarc® Barcode has larger addressable market• Faster checkout; massive improvements in scanning speed• Better in-store engagement• Mobile discovery and engagement throughout Shopper's Journey• Barcode of everything – all media, not just physical goods

• World’s largest retailers as demand drivers• Retail market enabled by industry move to imaging scanners • Potential to deliver billions in labor cost savings• Market power to influence national brands• First customer: Wegmans


Recent Developments

• Customers• Wegmans is our first retail customer• Smithfield Foods is our first global consumer products customer• Walmart is conducting market tests

• Industry infrastructure• Datalogic is moving rapidly to full line support for Digimarc Barcode. • Other leading retail scanner vendors are expected to join in broad industry support. • SGS supplies design and pre-press services to many leading brands; first certified service provider• HP collaborating on role of digital presses

• Consumers• Shazam brings global mobile app footprint and client services


Business Model

Subscriptions and Services• Counterfeit deterrence system• Guardian for images, e-books, other media• Integration and customization

Patent Licensing• IV patent license profit participation• 2nd wave monetization

Registration and Encoding• Price/Digimarc® ID annual subscriptions• Similar to GS1 model of annual

subscriptions with range of IDs/company• Packaging includes setup charge


2015 Priorities

• Grow revenues, optimize investments, prove the business model• Build direct sales force and expand Channel Partners program• Expand distribution

• Retailers and brands• POS scanners• Encoding• Discovery and engagement• Globalization

• Expedite adoption and publicize associated evidence of momentum for Digimarc® Discover and Barcode

• Make efficient use of capital• Avoid nonessential spending• Focus on selling what have, both in legacy and new areas of the business

• Increase investor confidence that we will deliver on the amazing potential of our innovations


Investment Highlights

Investing in growth• TTM Revenues: $24mm / R&D: $13mm / EBITDAS: ($9mm)• Working capital: $37mm cash and investments / no debt / current ratio: 10:1

Delivering fruits of Investments in growth• Consolidated R&D into licensable platform specification• Major “Shopper's Journey” product launch in January 2014• Digimarc® Barcode rollout among retailers and CPG brands underway• Digimarc® Barcode projected to save retailers billions of dollars• Beginning marketing of “second wave” patents

History of delivering value to shareholders• Over $300 million cash returned to shareholders• $44 million in dividends and share repurchases• All employees are shareholders; insider ownership ~15%

Ground-breaking R&D• Proven signal process expertise• Digital watermarking pioneer• Over 1200 patents issued and pending

Potential inflection points• Invisible and inaudible high performance barcode• Comprehensive mobile discovery platform• Large high quality patent portfolio

Cash and Mobile Payments

Media Management

Mobile Discovery & Engagement

//August 2008 • Bruce Davis

©2010 Digimarc Corporation | Company Confidential


Digimarc® Discover for TV

• Robust – works in all media distribution paths (TV, AM, FM, YouTube, etc.)• Can identify campaign, channel, source, etc.• Support metrics by device and campaign• “Modeless” discovery, no need to switch between camera and microphone

CLICK TO WATCH VIDEO

http://player.vimeo.com/external/116378335.hd.mp4?s=172001641e051716711c6230338cea23&profile_id=119




Print to Mobile in Magazines

• In January 2013, Cooking Light became the first magazine to make every recipe scannable in a single issue – 79 in total.

• Every issue since has leveraged Digimarc® Discover to connect readers to ingredient shopping lists, menu tips, videos, etc.

• November 2014 issue included 123 Digimarc IDs


Weekly Sales Circulars in Newspapers and Catalogs

• Walmart has begun market trials in Sunday circulars and catalogs


Digimarc® Discover for Outdoor Advertising

Shinjuku Station Tokyo – CLICK TO PLAY AUDIO

Brand experience enabled with heavy ambient street noise

Digital Outdoor Ads (Digimarc Audio ID)Outdoor Advertising (Digimarc Image ID)

Bus-Shelters & Other Signage

Bogota Columbia

http://player.vimeo.com/external/116379478.hd.mp4?s=1944fe979af540b14d3491030a927c34&profile_id=113




Coming Soon: Digimarc® Discover for Live Events

Engage Fans During the Match with Audio IDs


http://player.vimeo.com/external/116378336.hd.mp4?s=8da3fc47d101f9feedcf5ce47e481846&profile_id=119




• Cooking Light – enabling packaged goods based on success in magazine

• First retailer – Wegmans private brand products in stores

• First global CPG – Smithfield Foods products to reach stores soon

Shopper Engagement with Packaging, Labels and Tags


Signs and Posters

• JCDecaux – number one outdoor advertising company in the world, testing Digimarc for outdoor advertising in South America


Digimarc® Discover for Indoor Location Services

• Use existing audio infrastructure to deliver location specific services to mobile shoppers

• Nationwide testing underway


http://player.vimeo.com/external/116378334.hd.mp4?s=2d4d68608558fcdf71aebefd66aaeb64&profile_id=119




Faster Scanning at Point of Sale


http://player.vimeo.com/external/84964700.hd.mp4?s=6afc57eb87ed83a2a49424ec2b98e461&profile_id=119




Age Restricted Sales – Digital Driver Licenses

• Retail checkout is the end of the Shopper’s Journey for most shoppers

• Shoppers frequently complain about slow process and long lines

• Age verification for age-controlled products is a slow manual process

• Digimarc is working with MorphoTrust to improve reliability and speed

• MorphoTrust – formerly Digimarc ID Systems, produces driver licenses for 42 states

• Most driver licenses today use Digimarc technology for security

• Iowa has announced it will issue the first digital driver license in 2016

• Digital DLs will employ Digimarc technology


Mobile Payments

• Retail checkout has three phases: scan, bag, and tender [payment]

• Digimarc Mobile Payment SDK intended to provide cost effective payment presentment

• Beta phase

company overview - digimarc

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