Immersion (IMMR) 10 May 182018 Q1 Earnings call transcript

Good day, and welcome to the Immersion Corporation First Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jennifer Jarman. Please go ahead, ma'am.

Thank you, Celestina. you Conference us Call. thank First on and XXXX Quarter afternoon, for today joining Immersion's Good Investor the This over can the the is web, section call also and be being accessed www.immersion.com. website at company's broadcast live Relations of from call Erba, With Nancy Interim CEO Board; Carl and me are Schlachte, of Chairman on the today's CFO. and

and litigations, Accordingly, include other uncertainties demand or operating results this we make may financial statements market These call, topics. and could anticipated forward-looking business forward-looking projected materially. anticipated strategies, are During or risks, products, opportunities statements, actual which may to differ future metrics, subject results assumptions.

identified For a we issued the after see filed please Form press market listing this, today XX-K close. the factors of with the could well in cause most as recent that release our SEC risks the as

Additionally, during please financial may measures. discuss we non-GAAP call, note this that

between measure discussed press GAAP GAAP financial is today's reconciliation release. of For Carl. directly and most each available go turn said, to financial a With differences ahead comparable non-GAAP the non-GAAP call presentation directly the I'll and in comparable a the of most over the measure financial financial measure discussed, that the and measure

this and you afternoon. Thanks, joining speaking very for thanks, be Jennifer, this pleased to everyone, I'm us with afternoon.

possible influential gaming automotive the these are beginning varied customers among are to we the in heart revenue for every employee the markets, yet $XX.X At touches of are million pleased As haptics is the of company some Immersion markets. first XXth announce across record of This see mobile, day. count and permeates that and Immersion about each the leaders our to XXXX. of innovation. we this are tenet of that fitting our anniversary for recognize most we the innovative of month, it work implementations our core today, we seems breadth of just and quarter passion Today, to our

the restructuring the markets. we December, strategy and a on refocused we our investments As of wearables, announced and have in and automotive the in reminder, mobile, competencies gaming company, core our

in all Within technology. mobile steadfast with remain the mobile OEMs market, commitment cutting-edge we our major haptic to our reach

recent that trend mobile leading news and in According more As excellent headquartered use with stems almost as cases integral This an is technology of from sophisticated down. the will them year, Apple adopted by smartwatches the has And in increasing the wearables We're OEMs and in provide performance enabled technology slow to component trends are market head actuators Asia. adoption capability. see market, is have with several the with having haptic haptics global driving we most and work today. highlighted importance semiconductor importantly, being to remain industry optimistic optimism and and not an largest customers In opportunities health to customer, with leading to customers their in high-definition-capable important is about the haptic those -- now Chinese OEMs. emerging actuators become experience. IDTechEx, haptics are bands. discussions our The ability fitness by expected and our of this value double of of ecosystem

partnerships value very in we to technology confident market customers be to tended of forward new are XXXX. disparate with opportunities for this many look Although with has the and players, our in

market. automotive the to Turning

Tier to earlier market adopter cost X both a automotive are the both customer reductions also terms seeing, suppliers We existing automotive terms and to means the reduce new as gaming Continental, our distraction. leading we licensees. in of be Immersion's of is signing implementation and today, technology. the very historically growth customers, pleased in the Today, have cars most we driver in continue as of Marquardt, to market been manufacturers haptic The with recently, including Bosch and traction the Panasonic. of ALPS, an for Haptic compelling but has

upon The of We haptics positioning front to innovate our and this continues next we that have we market discussions VR from work which of to at of with will the customers Today, in future augmented value ahead in platform controller is our life. industrial, customers demonstrated in Logitech, PDP. imaginations, is technology of like the with gaming the leaders market, controller platform this be use history VR, generation in having doing Immersion's virtual and reality, haptics us moving like and is technological team built innovative or In cases. the they to for our bringing are one our BDA, also be know meaningful Guillemot lever, Nintendo; benefit both us today core to games lies implementations competencies. live the reality. is and ability whether of haptic and

opportunity you the our roster to expand outlook Nancy XXXX. now and revenue continue our our to recent accounting shareholder meaningful to can our all financials, upon build of the As add and for value. we I'll across to discuss tell, to update customers, turn see changes base over core of call markets, an

Carl. Thanks,

revenue you First, for as noncash in historically by included operating market with shared refer press this verbally, I I tables invite to release to charges as information afternoon's have expenses. including well

XXX, an of my will impact said, the of adoption be our reform update tax to the XXXX. update for ASC the brief outlook on act today focus a As on Carl and

the business ASC was of for performance significant recognized growth automotive, impact of the January a adoption as of shows XXX. to included XXXX, a in QX the meaningful. revenue ASC statement quarter impact same I is executed X, refer current ago new modified not comparison line a record our to had basis customer income our We in year reflects for you release, as adopted The of on ASC on our these a contracts. in retrospective strong stemming $XX.X quarter XXX primarily from mobile of comparison XXX, so Our press the way the million as of well of during revenue quarter. adoption results particularly today's which agreements table

term the of over ASC agreement anticipated impact on a we discussed fixed the on term patents to delivered would we an we ratably or is The these must license delivered arrangements. to be determine year-end basis. to recognize to The arrangements the fee fee a revenue of our period the agreement. standard, recognized technology revenue will the fees obligation will on In fee cases, Under over fee of new allocated patents As is whether arrangement. most ongoing fixed XXX the have of typically technology delivered fixed to whether fee have the our revenue to the our to call, significant will the fixed the allocated obligation term execution be upon for recognized adoption patents fee we relates in arrangement license Prior fair license to value adoption, allocate recognition executed. element upfront or have and/or the ratably of a be the or fee each the also related technology both, and as will arrangement. of over the we

arrangements, to timing Despite lumpiness see plan we we change revenue reported we of treatment could this of fee fee expectation as QX. result expect in that accounting the revenue, to dramatically saw our fixed license fixed our license a drive upon depending do decisions. execution fluctuate let recognition, in may our of continue not business our new revenue in As we

that be will the in structure and case-by-case approach best agreements be Our -- right to new our to makes will approach continue for way a the made decisions continue sense make to a commercial on the business basis.

to Turning expenses. operating

the activity December decreased last of seeing we our as to in restructuring are same quarter the impact XX% operating compared undertook expenses We the year.

of reduction combined litigation agreement initiatives, expense reached, key with now that operate markets expense. operating effectively has enable have at the us We focus in our with sharpened Apple reduced on this to been and which the level

act. on the tax reform Moving to

We impacts the related various provisions. income, FDII, or tax and of foreign-derived global to act, the continue intangible to GILTI; or low the including income, impacts components intangible assess of

QX. have estimate the effects We a for the reasonable act made of of

all on quarter our our expenses tax current However, these not we due provision a substantially to significant assets. have full have fact the against of estimates did that allowance a valuation deferred impact

as of impacts In related an assess we updates evaluation continues. adjustment the parallel, valuation will to to throughout We year our our factors deferred act's or our appropriate. realizability is when assets determine tax provide will of to the continue if allowance the to

for to million the net As quarter ability share. including a income $XX.X reminder, impact carryforwards. the valuation allowance utilize does not assets, was our tax per net GAAP income diluted $X.XX or loss our deferred in

sheet. to our Now address balance

of with very pleased are We the our balance sheet. strength

million cash portfolio, as short-term including March was investments, cash of XXXX. XX, $XXX Our and

balance. cash closely to in in a position expenses our healthy preserve liquidity plan We order are confident manage to operating and

and we to the our cash strategic of continue any be buybacks of we As stock. to cash, carefully factors look our nonoperational and well consider to we conditions as balance provide for an stock forward future like price update our I'd now uses and XXXX, monitor guidance as as to remainder of XXXX. including will market pragmatic

market between million. the treatment customers As upwardly as the of certain see licensing and our today, XXX, and our be mentioned have in fee revised our revenue range agreements, new of XXXX in automotive QX pipeline $XXX million expected strength we ASC I earlier, with to in revenue it success the fixed the of we under $XXX

outcome. litigation a is outlook of possible any As this reminder, independent

continue to approximately stock-based to million $XX expense are $XX forward expenses, expense to and we full between $XX operating estimate the year. for year. $X million million going the excluding of to valuation litigation for litigation; and compensation million, Due of For cash allowance, GAAP million $X we million $X be $XXX,XXX between forecasting the expenses tax for XXXX; and

GAAP define XXXX. business anticipate net and contract to turn that to compensation. any long-term less now net some cash resolutions like cash I believe call income excluding allows the and litigation, to adjusted back be would to of to the resolution will non-GAAP Carl. As for That for upon ongoing We is non-GAAP million our structure the back to the and we in additional expect sustained flow. fluctuate We reflect one net color depending reminder, $XX a tax, be agreements. now a business share current stock-based generation, expect positive we said, between cash post-litigation demonstrate new $XX as time position of around over million model. our income model to to half year, we I'd income

any the Immersion healthier has Nancy. these X pleased closing, we In very year. it Thanks, nearly progress year last past months. are than with By is was metric, business our made this

have are returns. technology our monetize on our across our do, confident restructuring underlying still early to licensing macroeconomic in is the remain is of ability fundamentals the now work we renewed happening ecosystem. We years. to trends showing many intellectual continued a of we result right now back in While and see dating span the strong focus Immersion's that property innovation haptics The Immersion's we

wave a Our QX as XXXX. use the with be foresaw can filed patent we beginning results in XX of cases haptics ago compelling our years seen first of

haptics, now Instructions]. up the [Operator Operator value We shareholders demonstrate brings are customers, take market landscape. and wider-scale We'll question our of on our Operator? first to our the to our the the open the call Dougherty Charlie of & our to And value to adoption and Anderson technology technology Company. verge from our we'll from a your questions. -- ability of technology

by start to customers? were And some if any XX% the there XX% may if had any, what wondered the customers quarter. want the of I you in percentages were with --

Sure.

you We broken portion little that that there can highlighting of made I to out bit be for are customers pretty of were a have Q. clear say of it's think couple number suffice the who we'll customers But the XX% But up that significant majority in of more representative that of a of revenue, not the and it the customers a revenue. the a quarter.

it. that of when out the And of walk course some up mean the you term what just you've as understanding looked I the of if signing, highlighted wonder measures more how done want I philosophy and for? sort then of guys you of signed you over the sign terms got you long Okay, and can deals in you you've several of are intend through your to do just to year. us you there, people here

term. I we Well, traditionally, in that negotiated think shorter were agreements have

year reach over in negotiate We people see saying longer that have would been last vocal like agreements the pretty are to agreements that term and we nature. in

has that been of achieve sides an easily automotive, been pretty markets, easy that Some ongoing that to has to want both like time. because relationship something have extended -- for period

the a sustained us view able profitability is, of years, coming provide to over to that that. helps Our objective agreements can certainly course, and demonstrate longer-term be in having

continue achieve. So that's to to something look we'll

for going we in to was see with way Carl. believe, the Yes, are, that The the it works, longer-term our agreements we especially I future. it's way and better reemphasize that. business Charlie, just working the us

So our discussions or we're of as realm many as into possibly can. contracts we moving that

upside Great. months few roughly. And just me, walk then can maybe in if I you what ago. last the wonder changed guidance the to one a from through relative us just

Sure. what pretty impacting agreement we more of revenue then and would with what over QX, what At had a year, recognized, for the months, that be signed several for past year, be recall, the time would we full gotten is the how over time. the guidance gave Apple. recently terms lot And the we've clarity in recognized portion our portion

I of came agreements we executed had at we thought. originally a that had to in us And the in to in as the for year, we about good that think $XXX level. feel than front earlier the QX that, customers to the we $XXX range In addition rest look were bit pipeline million little increase being several very of of our able million,

it. Got

put mind a in don't to just it. you point If final

what do to you relative In did QX ago? versus in going were year, were a you the the months rest terms of to thinking that few of change

from Yes. Operator next Anthony our from Craig-Hallum. question We'll Stoss take

might And Nice I'm comment cases that Apple? growing. to auto Carl, about penetrated then for What think far market. see how you business you're the if curious, can other there were into got high use China or end you the of you be talking vendors more this on you your updates about Curious, on that. calendar hopes not by ago, year. one any too landing long or smartphone really thoughts

Okay.

there we've automotive, job in the think a in job so done though. Tier is mean a good our doesn't of done yes, That So Xs. good penetrating I number

use -- cases there being end up think compelling. end be to I the up very

getting we keeping As for distraction the script, the you're and important. mentioned around road. reducing a the being up on driver eyes ends your there's in whole That thing when confirmation very

removing something guys a Xs, physical gives of with lot right activity Tier replace working whole yet activity feedback, to things on around wanting something a this buttons automotive of the now. lot that Additionally, and the car, are from that is the

bring of guys, each of that we see if any customer the not the also that with we additional on, activities So within but doing in only just licensees base that additional developments number we're opportunities terms automotive sense. makes within can of the the

Then on the China smartphone side.

can't we China with very to. On tell too can but talking we're the we're smartphone seeing activity that side, Chinese continue that to see specific good you I OEMs get -- I there the

as their folks' I certainly technology that in in of perceived a big is think bringing such that interest Apple, space. lot has renewed the way in players,

year. watch to going the tell is how So kind all through we of of I'm balance the you do

And Riley we'll take FBR. our B. Nichols next question from from Josh

between given fixed the guidance at remaining split percentage thinking be for the looking should variable ask, and quarters to range? wanted I the we XXXX, about how X revenue

I question, Good think.

to was this signed on again, what year. you think it should see depend going I -- gets

if going agreements revenue. ratable terms probably are you're the depending per-unit the in But that's additive, in the the So fee remainder coming the where that in be I majority royalty. in balance to to have expect will the year, of of of the additional obviously, fixed contracts see upon And to how come agreed in, months, sitting be would those too. we

into -- to looking then to the of adoption couple we the next consideration and -- of quarters? of ratable, seasonality Okay, since any, ASC expected fees, are XXX most any variable in two payments have license with the guess, I be that going take

given that of quarter revenue. they we we some frame recognition that with estimating and the particular for to in mobile, the gaming QX QX, -- quarter be heavier. of extent, time that shipments our and into revenue to arrears X in -- little Traditionally, see bit which portion in pulled just the we'll the saw a expect Yes. QX I have because occur that for would

be to heavier. I look So a would little to QX bit

company last are levels far mentioned that, and call. are the in war you're monitoring a this And stock executed this that as I the chest at what and pretty that you mean, call buyback? And potential you about thinking The -- this, then the board's be I mentioned how has executing you the might point, thoughts on think, price. impressive as at?

that completed Yes. around the get completed our our used whole just is revenue I into that. first or to would getting restructuring, into standard forward. thinking accounting just business that also say we're quarter, But want and how don't We're of specifics how the going flowing we looking to levels under I operates activities we new really around at series things about like a basis. the

look That I around we to at when and guess, we bit couple understand little that, that point cautious So the go possible as year. during management being of into uses of to at pragmatic question that course be be cautious we think team, the the the a look as it's cash. be as we're a appropriate forthcoming trying all a a the there's we as of cash quarters. of we my said, board as would and use as

And in the and hop question me, I'll then then last queue. back for

should the the we ASC cash are no obviously, there's fixed assuming quarters, adoption remaining first signed? quarter. XXX, for outsized generation the about cash flow of large earnings think relationship between that with But So in contracts the how and

we have mirror pretty does CapEx, EBITDA. We our I historically. have don't to large think closely you it flow consider tend would as cash so

Sterling [Operator Instructions]. to the So the how And think restructured similar that's we'll in fair Senvest. Operator a has company do, Eric take to from I past. analysis been

CEO And where that I CEO of question. follow-up have Robert This the search. the have is Katz. -- about today? status a a I is question And

Okay.

this Robert, Carl. on as look ongoing have CEO them. we this speak. So last and at we candidates. I committee call We've and undertaking that's process a that a the mentioned is looking -- think the process is to that nomination at been we search interviewed governance them, We've

that. VR Okay, AR updates on of yet? great. IPs question focused any to you forward you further the any that's that Immersion's your licensed A I customers or look Have on directly of about have. to IP

not No. we yet have announced. mean, I

that any We some we of yet the announced are But and have innovators leading in with in certainly, in not VR agreements discussions, new AR. space.

How would the company? you that opportunity size for

comment. I'll then and give Carl mine, can

do kind analysts, the be the of think they around now, on VR, you others, if or just right primarily to search Gartner focused I entertainment. different whether be seems

So certainly, that traditional gaming, there along would a think say new But and as us about traditional front. the market as VR there. market size. that it are gaming And will would grow for in be transitions -- I that

retail, much probably just AR a whether larger think I et manufacturing, industrial or industries, it because that has cetera. many so different opportunity be crosses

in important. the Carl serve that's bit And little us So we're is focused all will future. well innovation The out. But a that so market into us. front think that mentioned, of why probably that's in doing further area it's I that today as

based the the year? development of to Probably in looks this is activities us third for this and being little more we discussions and types the -- Yes, from I timing The said, I be a it to Yes, of I see think us parties. question, like it first our things Robert, size the you we of agree is Is we with your might really -- that we're internal everything to see engaged behind size Nancy was on us VR we going where going then the if something this said. analogous active That market, standpoint revenue we to of saw standpoint the stacking we around from was caveat, that for a gaming, very be in bit kinds AR it. more think kind it. of year. when for probably that as put of that -- with going no

supply plans the of any well? to these do market mobile And as

say, mobile an the into a a handset specifics many deep to AR trend of sense. in think getting in I use there's market interacting Without the too way as, here, I'll

using at So looking other reality you're -- as screen, and words, an screen, in you're mobile augmented you're and handset the at using that looking you're your device.

management. careful intellectual no that it from front. to about And Instructions]. I Operator that way that space. like further the to that's developed property want we've [Operator So in standpoint, And are about there turn that we've say all questions. on to been think I'd that I over

you your for concludes quarter. look call the you you today. conference. to That forward participation. Thank us today's updating Thank next Operator? again on for Operator We joining

You disconnect. now may