Digimarc Company Overview

©2014 Digimarc Corporation

Company Overview

September 2014

— Slide 2 — ©2014 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

• Security: currency; government-issued IDs; movies, digital images, e-books

• Marketing: audience measurement for television and radio

• Patent licensing

Core Strengths/Competitive Advantage

• Signal processing experts; best known for digital watermarking

• Large scale embedded systems

• Patents: large, high quality portfolio. 850 issued; 430 pending

Good Shareholder Returns

• Legacy of rapid growth and shareholder rewards

• 1999-2008: $1mm to $120mm

• August 2008: Sale of ID Systems for $310mm cash, distributed

to shareholders

• 2008-2013: $19mm to $35mm

• Lumpy revenues

• $28mm cash; no debt

• Clear strategy with sustainable competitive advantage targeting large markets

Core Business

• Anti-piracy and anti-counterfeiting solutions and development services

• IP development and monetization

Growth Initiative: Digimarc® Discover and High Performance Barcode

• Targeting leading retailers and brands

• Automatic mobile device ID of all brand impressions in Shopper’s Journey

• High performance barcodes for packaging delivers game-changing performance

Cash and Mobile Payments

Media Management

Mobile Discovery & Engagement


Strong Patent Position

• 1276 total patent assets

• 848 patents issued

• 428 applications pending

• Exponential patent growth since inception

• Majority of mature patents licensed to IV in 2010

• Recent significant increases in R&D and patent department staffing

• Escalating rate of patent filings

• More than 100 retained patents issued


Future of Search is Discovery in the Internet of Everything (IOE)

• Virtually everything will be connected to the

Internet

• Every object that can have a network identity

should have one

• ID is the foundation of knowledge

• Knowledge motivates and directs actions

• ID must be reliable or derived knowledge can be

misleading and wasteful

• Mobile devices and network coverage becoming

pervasive

• Device sensor configurations mimic human

senses of two eyes two ears, but limited

“seeing” and “hearing”

• Digimarc’s patented Intuitive Computing

Platform (ICP) addresses this deficiency by

enhancing recognition

• Seeing/hearing device augments reality and

expands network reach and utility


Digimarc Intuitive Computing Platform (ICP)

• Digimarc pioneered ICP in 2008, enabling the Digimarc®

Discover application and the capture of critical IP before

this trend gathered momentum

• “Seeing & Hearing” devices can engage user/wearer at

point of inspiration during daily life

• ICP mobile platform extends our senses, allowing

anyone to assign and leverage object identities,

teaching the world our vision

• Doing so requires a sensor fusion platform that

optimizes sensing activities of mobile device within

power and bandwidth constraints

• Research and IP filings have accelerated as we pursue

novel approaches to object identification (DWM,

fingerprinting), sensor fusion, and crowdsourcing.


Digimarc® Discover Platform for Retailers and Brands

• Comprehensive omni-channel solution for retailers and brands

• Major system components

• Encoding – via highly-scalable self-service web portal (SaaS) for

publications, packaging, music, radio and TV

• Decoding – free software for consumer devices and professional fixed

and handheld retail scanners

• Network services – for routing of identifying data and network services

• Ready to deliver virtual brand interface for customers and

prospects

• Broad facilitation of Shopper’s Journey

• All touchpoints enabled for easy access to network services

• Digimarc® Barcodes to deliver unprecedented performance

improvements at checkout


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


GUINNESS WORLD RECORD!

• Industry average throughput (general merchandise): ~24 items/min. (125 sec.)

• Previous world record for checking and bagging 50 items: ~40 items/min. (75 sec.)

• Digimarc’s new world record: ~62 items/min. (48 sec.)

Digimarc High Performance Barcode


Digimarc® Barcode Demonstration

To watch the video, visit http://www.digimarc.com/retail#detection

http://www.digimarc.com/retail#detection


Digimarc® Barcode: Billions in Savings to Retailers?

• GS1 manages global barcode system to reliably and uniquely

identify physical things in well-articulated standardized taxonomy

• Two million companies in 150 countries are registered users

• 6 billion scans per day

• Nonprofit trade association with $400 million annual revenues

• Digimarc® Barcode has same business model with 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

• Targeting 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

• Massive labor costs savings

• Datalogic: 33% market share fixed retail scanners

• Private brands: 15-85% of inventory; greater share of sales

• Preliminary savings estimate: every additional item/minute in checkout

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


POS Scanners

• Retailers beginning process of transitioning stores from laser to imaging

scanners

• World leader, Datalogic, launch platform

• Other manufacturers to follow as delivery of imaging scanners expands

Retailers

• Start with Digimarc-enabling retailer private label products, then encourage

national brand participation

• Digimarc® Barcodes are imperceptible so packaging can be enabled now

with the “operational switch” flipped when critical number of SKUs enabled

and scanners in place

• Enhance consumer mobile engagement across every marketing touchpoint

– print ads, television and radio spots, catalogs, direct mail, retail signage,

product packaging, digital displays, etc.

Process

• Product launch at January 2014 National Retail Federation Show

• Met with most of the world’s largest retailers

• Labor Cost Savings Model published May 2014

• Evaluation and adoption underway

Time to Rollout

• Three stages: proof of concept, in-store trials, rollout

• Project planning with initial customers

• At least months long, varies by retailer

Digimarc® Barcode Rollout


USER

GENERATED

KEYWORDS

UNAIDED SEARCH

Digimarc ICP Anticipated Evolution of Search to Mobile

PREFERRED PATH

TO PURCHASE

(Accurate & Easy)

ACCURACY

OF SEARCH

EASE OF

SEARCH

Amazon Keyword

(37M 1 day peak)

1D Barcode (2B/day)

QR Code (1M/day)

Music Recognition (500K/day)

OCR

Image Rec: Blippar/Layar/Vuforia

(300K/day)

Google, MSFT, Yahoo

Am

azo

n F

ire

fly

eBay/Red Laser

USER

GENERATED

KEYWORDS

ICP State Machine

WM

Re

co

gn

ition

Ag

en

t AP

I

Con

ten

t

En

gin

e

RA

Sta

te

Ma

ch

ine

Netw

ork

Se

rvic

es

(Ava

ils)

Se

nso

r

Ma

na

ge

me

nt

• mCommerce

• Fulfillment

• Ad Auction

• Metrics

• ...

Microphones

Cameras

GPS

…ICP :: 8,121,618,….

TIMELINE:

1973 Universal Product

Code (barcode)

1992 Digimarc

1994 Denso QR Code

Amazon

1998 Google

2007 Apple iPhone

2008 Digimarc Discover

Shazam

Scanbuy

2014 Amazon Firefly


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


Opportunities and Risk Management

Opportunities

• Engagement with Tier 1 retailers and brands

• Partnerships with leading infrastructure owners

• POS scanners – Datalogic: #1

• Packaging – Amcor: #1

• Printing – HP: #1

• Mobile devices – Qualcomm: 50% smartphone app processor

market

• Banking and payments – US Bank: 5th largest in US

• Patent licensing

• Entity level deals

Risk Management

• Organizational inertia

• Delays

• Our work

• Our partners’ work

• Negotiations

• Market developments

• Resource management

• Business model

• Competition


Investment Highlights

Solid financial position

• 2013: Revenues: $35mm / EBITDAS: $4mm / R&D: $12mm

• Strong balance sheet (6/30/14): $28mm cash and investments / no debt /

current ratio: 8:1

• $100mm shelf registration; $30mm at-the-market offering managed by

Wells Fargo

History of delivering value to shareholders

• Over $300 million cash returned to shareholders

• 7.6 million shares outstanding

• 1.4 million shares repurchased in last four years

• All employees are shareholders; insider ownership > 15%

Delivering fruits of Investments in growth

• Consolidating R&D into licensable platform specification

• Major “Shopper's Journey” product launch in January

• Introduced Digimarc® Barcode to retailers and CPG brands

• Digimarc® Barcode projected to save retailers billions of dollars

• Beginning marketing of “second wave” patents

Ground-breaking R&D

• ~1300 patents issued and pending

Potential inflection points

• Comprehensive mobile discovery platform

• Invisible high performance barcode

• Large high quality patent portfolio

Cash and Mobile Payments

Media Management

Mobile Discovery & Engagement

Digimarc Company Overview

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