DSS Company Presentation November 2015
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NYSE MKT: DSS
Company Presentation November 2015
NYSE MKT: DSS
Important Cautions Regarding Forward-Looking Statements
2
Forward-looking statements that may be contained in this presentation, including, without limitation, statements related to the Company’s plans, strategies, objectives, expectations, potential value, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act and contain words such as “believes,” “anticipates,” “expects,” “plans,” “intends” and similar words and phrases.
These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 30, 2015 and updated in the Company’s Form 10-Q filings for the first and second quarters of 2015.
Forward-looking statements that may be contained in this presentation are being made as of the date of its release, and the Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements.
NYSE MKT: DSS
Key Stats (NYSE MKT: DSS)
Stock Price (11/13/15) $0.23
52 Week Low-High $0.15-$0.74
Avg. Daily Vol. (3 mo.) 143,802
Shares Outstanding 51.8M
Float (est.) 49.4M
Insider Holdings 5%
Institutional Holdings 4%
Market Cap $11.9M
Enterprise Value $19.5M
Date Founded 1984
Employee Count 103
Total Revenue (ttm) $16.9M
Adj. EBITDA (ttm) $(2.1M)
EPS (ttm) $(0.74)
P/S (ttm) 0.7x
Cash (Sep30, 2015) $1.2M
Total Assets (Sep30, 2015) $26.4M
Total Debt (Sep30, 2015) $8.0M
Data sources: Yahoo! Finance, S&P Capital IQ, company estimates Figures in USD unless otherwise noted; (ttm) = trailing twelve months as of September. 30. 2015 1. Figures unaudited
Revenue
15.3 15.5 16.5
15.1
1.8 2.0 1.8
1.8
$17.1 $17.5 $18.3
$16.9
2012 2013 2014 TTM
$ millions
Tech Sales & Licensing Revenue
Printed Product Revenue
1
3
NYSE MKT: DSS
What We Do
We have 3 primary areas of focus:
Digital Solutions
Printed Products
Licensing and IP Monetization
Our core technologies help prevent documents from being copied or scanned.
Our technologies lie at the heart of the brand protection field- which addresses the $1 trillion global brand and product counterfeiting problem.
We continuously invest in R&D to remain leaders in our market and have a broad IP portfolio.
We seek significant returns from IP monetization investments
Security Mark
Application Database
Copy Scan
Original
NYSE MKT: DSS
Counterfeiting is a Global Epidemic
• 10% of Global GNP is counterfeit goods
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• $1 trillion losses globally ($250B in U.S.)2
• $142B anti-counterfeit packaging market
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1) U.S. Chamber of Commerce 2) GCCCP – United Nations World IP Organization 3) Allied Market Research, March 2014 4) ICE Newsroom 5) eBay, LVMH reach settlement over fake goods; CBS news, 7/17/2014
• Leading up to Super Bowl XLIX agents seized more than 326,147 items of phony sports memorabilia along with other counterfeit items worth more than $19.5 million4
• In 2014, LVMH settled litigation with eBay, in which it was disclosed that 90 percent of the designer goods sold on eBay were fakes, and eBay had removed more than two million sellers who had violated the trademarks of rights holders5
NYSE MKT: DSS
Counterfeiting is a Global Epidemic
DSS Core optical deterrent technologies help deter the most prevalent source of counterfeiting -desktop scanning and color copying by a digital scanner.
According to the U.S. Secret Service 2010 Annual Report: “The widespread use of personal computers and advancements in digital printing technology have provided more individuals the opportunity to manufacture a passable counterfeit note with relative ease. Approximately 63 percent of the counterfeit currency passed domestically in FY 2010 was produced using digital printing means, compared with less than one percent in FY 1995.” 1995
63%
1%
2010
NYSE MKT: DSS
Our Revenue Lines
Printed Products Digital Solutions IP Licensing & Monetization
Develop applications for authentication & security
• Next–generation brand protection solution
• Integrates print security, data security, and GPS tracking technologies
• SAAS licensing model
Manufacture secure printed products
• Deliver custom security printing, packaging and ID card products to end-user customers
• Supports licensing business
Develop, acquire & license technology
• Expand market reach of technologies
• Creates partners to enhance capabilities for customers
• Enter new markets
NYSE MKT: DSS
DSS Digital Solutions
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For more information: www.authentiguard.com
❸ IP Licensing and Monetization ❷ Printed Products ❶ Digital Solutions
AuthentiGuard®: Authenticates packaging and printed material through a mobile application
Target market: Brand Protection for consumer products, industrial components & pharmaceuticals
AuthentiSite: Verifies authenticity of websites
Target markets: Online retail & wholesalers
The Portal The Mark The App
The Database The Mark The App
NYSE MKT: DSS
DSS Digital Solutions
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Product development since October 2012
$2 million R&D budget (patent protected)
Targets the global brand protection market estimated to hit $3.8 billion in 2018.1
❸ IP Licensing and Monetization ❷ Printed Products ❶ Digital Solutions
• Fills a significant void in the current brand protection market- a covert tracking system that uses existing production means and authentication tools and cannot be copied or scanned.
• Customer targets include large multi-
nationals seeking brand protection solution.
• We are now often dealing with new “brand protection” departments.
• Longer sales cycles touching marketing, production and security groups.
• Sales contracts expected to be $300,000 -$3 million per customer.
• Profitability with first enterprise customer,
scales quickly.
AuthentiGuard™
The Mark
The Application
The Database
For more information: www.authentiguard.com
1- Smithers Pira The Future of Anticounterfeiting, Brand Protection and Security Packaging VII
NYSE MKT: DSS
Printed Products
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Secure and commercial packaging solutions
Intelligent cards that authenticate identity & resist counterfeiting
Printing services that leverage DSS’ fraud protection technology
❸ IP Licensing and Monetization ❷ Printed Products ❶ Digital Solutions
Core competency: Delivery of patented “optical deterrence” security technologies across multiple products.
Supports continuous R&D efforts to stay ahead of new counterfeiting risks.
Profitable division with strong customer base.
Products
NYSE MKT: DSS
Printed Products
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Packaging:
multi-year contracts with largest customers provides stable, predictable revenue
Platform for integration with Authentiguard™ roll-out
ID Cards:
RFID focus offers significant upsell to core customer group
Strong presence in event badges (Super Bowl, World Series, etc.)
Printing:
Security printing relationships with Fortune 500 consumer brands.
❸ IP Licensing and Monetization ❷ Printed Products ❶ Digital Solutions
$11.2
$3.5
$1.8
2014 Revenue Mix $ Millions
Packaging ID Cards Printing
88%
28%
-51% -100%
0%
100%
Packaging ID Cards Printing
% Change since 2011
Note: Figures unaudited
NYSE MKT: DSS
Printed Products
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❸ IP Licensing and Monetization ❷ Printed Products ❶ Digital Solutions
52%
22%
0%
20%
40%
60%
1st half 2015 vs. 1st half 2014 2014 vs. 2013
Technology Card Trends Targeted growth in technology
card sales and security printing products offset loss of commercial printing revenue.
Approximately $1 million in press equipment installed in 2015 to enhance variable-printing capabilities.
18%
8%
0%
10%
20%
1st half 2015 vs. 1st half 2014 2014 vs. 2013
Security Printing Trends
Note: Figures unaudited
NYSE MKT: DSS
IP Licensing and Monetization
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Follow the “technology roadmap” of our business lines to create new solutions and identify IP with significant commercial & licensing potential
Opportunistic IP acquisition - highly selective (acquired <1% of IP portfolios evaluated)
License IP/patents to commercial partners
Enforce IP where commercialization is blocked by competitors
Utilize co-investor and contingent legal to support IP enforcement efforts
❶ Digital Solutions
Long-standing licenses with top security printers in the U.S.
RR Donnelly
Banknote Corp. of America
Our licensees use DSS technology for wide–range of secure documents:
Checks, government documents,
coupons, and vital records.
Licensing provides high-margin returns and expanded production network
$750,000 annual run rate
IP Monetization
❷ Printed Products ❸ IP Licensing and Monetization
Licensing
NYSE MKT: DSS
Active IP Litigation
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Technology Status Current Defendants
Use of wireless peripheral devices in
“Personal Data Network”
Case pending in the Northern District of California
IPR pending
Case stayed pending IPR
Semiconductor Fabrication
(Double Patterning)
Cases pending in the Eastern District of Texas
IPR pending
DSS appealed the Court’s Markman ruling.
Semiconductor Fabrication
Cases pending in the Eastern District of Texas
❷ Printed Products ❶ Digital Solutions ❸ IP Licensing and Monetization
NYSE MKT: DSS
Costs and Expenses (Excluding stock based compensation and IP
Amortization)
$18.3 $18.2
$20.0
$19.5
2012 2013 2014 TTM
Revenue
Income Statement Highlights
$15.3 $15.5 $16.5
$15.1
$1.8 $2.0 $1.8
$1.8
$17.1 $17.5 $18.3
$16.9
2012 2013 2014 TTM
$ millions
Tech Sales & Licensing Revenue
Printed Product Revenue
1
$ millions
15 1- Figures unaudited
1
NYSE MKT: DSS
Income Statement Highlights
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Costs and Expenses (Excluding stock based compensation and IP Amortization and impairment costs)
Nine Months
Ended September
30, 2015
Nine Months
Ended September
30, 2014 % change
Costs and expenses
Cost of goods sold, exclusive of
depreciation and amortization 7,206,000$ 8,506,000$ -15%
Sales, general and administrative
compensation 3,021,000 3,613,000 -16%
Professional fees 1,534,000 1,430,000 7%
Sales and marketing 250,000 425,000 -41%
Rent and utilities 510,000 567,000 -10%
Other operating expenses 564,000 665,000 -15%
Research and development 350,000 344,000 2%
Total costs and expenses 13,435,000$ 15,550,000$ -14%
NYSE MKT: DSS
($1.3)
($2.0)
($2.8)
($2.1) ($2.1)
($1.3)
2012 2013 2014 TTM1st 9 months
of 20141st 9 months
of 2015
Income Statement Highlights
$ millions
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Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization,
stock based compensation and other non-recurring items)
1- Figures unaudited
1
NYSE MKT: DSS
Balance Sheet Summary
$800,000 available under a revolving credit line.
IP monetization investments partially funded by co-investors $4.1 million of debt which is secured by the underlying IP assets.
Select Balance Sheet Items
$Millions September 30, 2015
Cash & restricted cash $1.5
Net working capital $0.4
Total assets $26.4
Total debt $8.0
Total liabilities $12.3
Total stockholders’ equity $14.0
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NYSE MKT: DSS
Key Takeaways
Differentiated business model — focused on high growth commercialization and licensing opportunities
Valuable near-term growth opportunities with AuthentiGuard & other technology products
Significant upside potential with IP licensing
Catalysts include potential product successes and litigation milestones
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NYSE MKT: DSS
Contact Us
DSS Investor Relations Tel (585) 325-3610 IR@dsssecure.com
Document Security Systems, Inc. 28 Main Street East, 15th Floor Rochester, NY 14614 www.dsssecure.com
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