Immersion (IMMR) 13 May 192019 Q1 Earnings call transcript

Good day, and welcome to the Immersion Corporation First Quarter 2019 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Jennifer Jarman of The Blueshirt Group. Please go ahead.

Thank you, Brandon. 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 Interim With and President and General Ramzi CEO; me is Haidamus, Amie and on Peters, today’s CFO. Counsel

and litigation, 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-Q closed. 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 Ramzi? press GAAP GAAP financial is today’s reconciliation release. of For Executive directly turn most each available will the said, Chief financial our With Haidamus. differences now comparable non-GAAP Officer, the non-GAAP over presentation directly call I and in comparable a the of most to the measure Ramzi financial financial measure discussed, that the and measure

to the joining well two Thank Today up on pleased growth call the Immersion, major Jennifer, marks for Immersion us webcast deals of sets on a thanks, you, announce everyone, or and and I’m for as replay. today’s that on listening later path pivotal profitability. day

as the them with to this patent haptics mobile new technologies our with landmark as advanced for advanced to a look deal and haptics settled gives patent mobile help bring chapter have course This agreement of market. portfolio, into access all the forward over as for Samsung, application. partner, Immersion we Samsung cases We to litigation well our Samsung. against First, both our software engaging opens it

With Samsung and and can resources in expended last in Apple litigation forward. as close a technological behind that position achieved the leader history in company us, of against to and four years, mobile validate our move has goal the haptics space. significant chapter its Over that the we

not announced haptics. to and is only Immersion’s deep we also customers partner not agreement signing patent with definitive rich, emblematic Interactive advanced VR new controllers. them to This license agreement access haptics today, the by agreement gaming of offering Entertainment but This strategy Sony Immersion’s technology of with access Second, to a for and portfolio, to grant its Immersion’s VR to to Sony, Sony, only productive in the progress just but Immersion gaming my and the haptics. with Having take Immersion, to Immersion at our completed with the haptics. opportunity has this I’m you to excited leader will about open speak a to the and future in relationship recently door day also of and partnership XXXX ecosystem XXXth where been

automotive things days Immersion and granting and protecting model. the has also gaming to of moving technology, an initial starting and investments these prominence now of most role the its the important the In the in into me as through versatility seeding with clear become Haptic to my a began patents. but market markets, has markets filing proliferate early the market. and IoT in played that in markets Immersion’s business is with medical One technology the mobile of in XXX of

the provide phase poised our these patent technology deliver for market licensor next Immersion on result, effort continue of will copiers. touchscreens vehicles. to Electronics, and through of patented to in vehicles announced It technologies. a our to as and development touch we been seed is technology license its In interfaces and intuitive recognized this is the enabling central Tier offerings markets partners We agreement the automotive, touchpad access job offering. mainstream more vertical, is to now the rapidly its In see as introduction in who for of Alpine is is where to creates with manufacturers the IoT Immersion’s at a to quarter. high-quality the latest a incorporation interface in automotive and Alpine a and each touch to monetize printers, and haptic the tactile long an momentum stages proliferation of scanners able innovation expanding an them to specifically feedback matures. feedback and from market touchscreens. later haptics automotive has update our touch technology As haptic certain now in-vehicle Immersion inflection in of Smart an X that early list adoption of haptics. the of new point, Immersion’s I technologies Office, the in is feedback luxury customers are technology for have

and This announced series their bizhub is ingredient The quarter, product latest all printers Immersion environments. enhancing office the targeted underlying is of these we experiences Minolta’s that at the multi-functional key Konica technology actuator. now

their by This bring TDK’s TDK use agreement power and actuators of quarter, we support piezo to haptics haptic Electronics, an for the the the of haptic customers. ecosystem, in can industrial with automotive, more bringing end members haptics By we other design signing continue markets. other ecosystem to and with effectively collaborating to marketing

essential an industries. experience demonstrated multiple becoming the across is quarter that part digital haptics of This

As ASPs. of us for are the markets the believe our have model investments evolve allow engagements we the of targeted we patented in introduction technology to potential a haptics and will make right for that to highest technology business mix technology licensing, the healthier

strategy, As making investments for the can we to targeted significant growth for will similar where company. Sony, we lead to that additional partnership of develop potential the look to our further

laser-focused we are and maintaining forward, Looking on profitability. pursuing

build footprint. time expenses. while focus area Apart unit with invested recurring heavily same including As high-quality recruit reduction such, Jose our the of the have in areas on sustainable we significant one San revenue Until our to our litigation which planned looking cost reduce areas to is cost, in from litigation, potential talent. other to for we stream, we’re a continue per are office, the agreements such to our expensive at recently, world at reduction, identifying most customers to closing a as R&D

and made shift investment is resource footprint decision some our our towards employee Montréal of lower-cost we and create office, to in available of to Senior in directly be turnover. made new haptics report and growing located to quarter, our R&D, world-class This at Vice Accordingly, the in the role allocation decision have of and hiring we Montréal me. where talent President a who’ll

reduction portfolio patent cost our for over patents. X,XXX area potential of worldwide is Another

project, carefully we we our reduce opportunity and is in rich patent to a the years. maintenance portfolio, yield have will leader which As haptics over an prune with and this quarter our any mature a history, results the two company with patents cost initiate This may remaining patent next ecosystem. long-term while

to for for where like a company as strategic and Immersion as mobile shareholder virtual mobile public three our a about be public in and Visbal’s I the our to its settling the impressed to wealth capability Sony R&D media Immersion Board upcoming quarters decade of introducing Ganis meeting. the our a to to candidates Board the our Sumit this Samsung to and now next I a getting rebuild company’s strategy the share with reality, and and very I Immersion Silicon approach articulated days to helping shareholders, Next, as onboard quarter’s thoughts the know Montréal. few technology with our in we expertise completing the marketing company candidates our as the experience, litigation. of directors to complete will and relevant, well continue had news. invaluable turn upcoming Immersion I for Agarwal, first a company. of at area market companies forward customers, plans of and rolodex the products future. be new as in forward the Silicon the company, by with evidenced Amie expertise impressed you XXX of team shareholder global the as new especially employees, well share Jonathan Immersion the deep will technology deal of I’m in looks with a members executives board we over hire be few discuss hires, Valley call to patents, grow I’m we grow. Valley executive penetration. invest to would I productive will experience number Directors, meeting. Sid execution financial comes a company’s as and look looking and directorship

entered fixed is quarter million license decrease and of from in variable of totaling and our compares from seen of year related royalties first revenue to XXXX. million prior royalties release now $XX.X fees million XXXX licenses fixed press first XX-Q prices look fee Form to volumes revenues $X.X a the had first fixed year and the payment period. numbers. license million, ago variable By and on $X.X included in into license per-unit that royalties or shipping down we based $XX.X Immersion’s over you $XX.X million a totaling fees the period. million. quarter in $X.X to have quarter This Revenues million, in were our and of $X.X for chance and material should the This the Ramzi. XX% of Thanks, agreement have primarily

a quarter auto, medical. a And for for breakdown line seasonality of from XX% XXXX, X% each line business XX% and patterns. business gaming revenues mobility, as typically by quarterly follows: as of from percentage total was XX% Our revenue fluctuates of mix due first to the of from from

and last were which license first agreement primarily revenues of XXXX. the to XXXX. license revenues whole first at of $XX.X the royalty revenue to million, fixed XX%, revenues during of provisions down was revenues Gaming the such minimum customer. material year-over-year trends, XX% per-unit $X.X the profit Automotive as to Looking that recognized royalties in up quarter XX%, quarter, agreements quarter inception were million renewal profit from in first medical first quarter contain with down compared Gross mentioned royalty resulting first entered previously the primarily entered certain related gross agreement. from the set fee quarter were mobility medical for of at certain in into were a XX% we down due minimum year’s the of

operating to our now quarter’s expenses. first Turning

This roughly operating along year Tax was as professional by total driven for million cost the or Office, $XX.X period. Regional with revenues, higher legal increase service in the legal discuss will to I in a primarily which the expenses mediation of compared including by SRTO, million $XX.X XXXX, the a expenses, ago quarter were directed paid fees Excluding $XXX,XXX Seoul of of costs, in GAAP result bit. first

quarter the to GAAP compared $X.XX share, of of results, $X.XX XXXX XXXX. $XX was net million, per our at or quarter first per net first in of or for Looking net diluted loss share income the GAAP million, $XX.X

we per In addition metrics, share and track loss loss non-GAAP adjusted net XX%, our net share, to March as net million, $XX.X of reflect stock-based business less in compensation. tax to net or GAAP expected non-GAAP non-GAAP normal same define loss non-GAAP use an to long-term rate loss GAAP effective $X.X per share XXXX loss quarter last million, We of the was year. net compared period or $X.XX diluted to $X.XX the income performance. per Non-GAAP in

between long-term expect Turning cash balance any we for provision, X, of Korea sheet Immersion’s to we as recognizing which agreement, expect will expect in a begin Court, behalf. that, a determination expected have if balance have not million paid that to this of recorded on now $X to to tax and we significant the and plus from both this and Samsung impact Note our into million expect the million we with the the payable. between prevail full for were March impact received be on asset revised fully we million cash Korean appeal as greater reimbursed we to now and $XX the net Tax expense recurring Administrative Authorities expense do $X.X when will questions. and non-cash compensation $XXX,XXX we $X.X upwardly Samsung of exiting strong expect tax where than million. XXXX our We’d million the XXXX. directed investments for balance the Operator? current On more Arbitration, short-term GAAP operating a will million $X $XX and which million OpEx between million court non-GAAP on withholding March number million, quarter, Sony range and we XXXX, XX, the forecasting our down call to be From the like approximately $XX as of remains an our expenses this case. revenue portfolio, year. line $X.X for million Taking Included standpoint, agreement including account We million. sheet to which expense starting determination are our $XX up likely that have of roughly to stock-based $XX reimburse in million to is Overall, at $XXX,XXX. and to $XX cash $XXX.X we Due of to not open with the and revenue be International $XX Court a Samsung between the and both liability in accounts loss million be Electronics we we we bottom continue had from year the on prepaid sheet. between fees valuation taxes Council XXXX $X litigation carry,

question. Tony Craig-Hallum. your Stoss you. first go Thank with Instructions] [Operator from will come ahead with Please The question

in break-even moves? once the you June Ramzi, it or be of for and per-unit driving going there Also, about a seems in the for a to a profitable made congrats that you’re that on break-even? getting you general to upfront it these cut might you done. for And is deal like is then the your to difficult there way to lastly, range What’s it’s you audit any we everybody, cash payment estimate further Samsung, talked have basis? since revenue going revenue quarter on guys balance? Immersion. to Hi, for cost Samsung What’s the see was

moving my – with the of working Samsung. I Samsung forward history foresee structure and any don’t problems deal on the based with with

So that concerned. not I’m

at As far XXXX putting we’re point. predictions not out as any beyond – this really revenue

deal, focused As far quarterly deal a the is creation number, it long-term this payment a on recognized basis. is quarterly to and is as settlement back a are amount. royalties that been value a architecture all – way best Samsung The or of basically modest has with on where do

of is that So bulk the with Samsung. deal the

take As on continue but and to both It’s Sony, deals structure this. laser-sharp at far Samsung months. to going as and our on focused the XX – and basis focus importantly profitability, we like are over look revenue more cost our next cost

to little take Some savings fees out. decide as way the while Even given if out, of patent patent we it to cut such portfolio. revenue as the the a for it of the to the sometime for portfolio as work will bit today, effect ��� reduce, works the takes take well prosecution

So we believe a little but within line to sight. is time, it’s bit take going of it of

up know Maybe information this love queue as the a those? been I’ll – speed hear having you’ve I with you with have follow-up, continued I’d your during jump to progress? my discussions well on will help announced I initial back I then guess, done, quarter? do question, in know And OEMs you there of handset last now one Samsung you auto quite the think deal is, did an them, any agreement Chinese Thanks. you and any another

be starting one quite forward adopt to the ASPs, because our as to know, market high. and not only, but opportunities is market you moving of and the The nascent remains are automotive haptics, largest growth

on Xs, not patent So large launch talk licensing to of ready be software, but will we some patent OEMs continued Tier the to our team. we the and accompanying reference to which are and designs licensing side, to only

will next or it over the year vertical be two. So a sell

market. slow-moving it The that, is know. cycle said slow, is a having automotive as you Now for

yield a in going we ROI. this a do big pop that’s long-term us a sustained So a growth we market as don’t see in significant the foresee in short-term, but for the to

as strategy intellectual but licensed certainly speak – is that’s Samsung to in them I’m that up have penetrate Chinese using announced IC IC to to effect have still to China, the strategy, be with as us on sign get one playing early the for and be is the out. others OEM can Chinese tell to the to to I We on the where directly try to the IC soon OEMs, it’s Chinese I going we market. bit we today sure speak the market too experiment as far of but the how property, can try As not to Dongwoon do lined

Thanks, Ramzi.

Sure. Thanks.

& question for Anderson ahead next question. question. with you your the go will Dougherty Thank The Company. Charlie from with Please come

Obviously, your questions upside getting that, maybe for to in just you be in speak speak my then talking I is. the haven’t could is wonder there software sort here that. like their discovery, revenue congrats royalty addition there a views with going deals wonder Ramzi, price they’ve any Thank updated the deals roughly And to these to lot follow-up. of I market that run well. in the on units of is I’ve done do with my some of taking if sales your about have talk rate sounds now new Immersion? And and a yet. past for on peers shipped baseline we’re to the that you that you Yes. larger deals imagine the here about of but what you this you the view kind where could hand? are a revenue I through sort got on of of based – modest, as number also of have often signed, base if TAM then that

can overlaid from the to as take the royalty going of base you February. out question. I’ll from for that XX rate to run So, XX, a sort put the with that’s XXXX. Samsung range of last with top Charlie, think base business of on that We revised upward of XX XX But forward

to the agreement expecting not a heard XXXX. would see to of you listen until we’re impact If Sony my you remarks, have that, large

about TAM? sort forward. going you that think So have of to

executive specific until wait I the new don’t happen to will open some new that next yet. fill mentioned the I strategy, numbers the as that I strategy. of like – TAM days for our positions is over the seats would board and to in we the as far something in As concerned, members as get as roll out the oversee have remarks, in XX would we

ahead license. say, do strategy, when Immersion. penetration that for this And some that you will We a potential point, that’s though except out that just one be the take us would TAM Suffice market would at would way penetration of So way that – I where licensees high-level potential when patents. going and growth I to to it I That’s to progress I have at than numbers – mobile be for to technology new just another over on you more I roll and it’s tell say could automotive out tip be the be can discussed new the early and with to significant and a China be patent to I Samsung a maturity don’t penetrate we’re being penetration in have for that And strategy patent successful to still report pure pure bring time companies technology in IC China behind – with much a licensor us. China days. very see continues we us. is, challenge is from today. the seen rolling to

also on curios than deal you’ve Sony. kind are seen I’m we history first past, of philosophically, the what with Great. with And just have I you a Thanks. we’ve that then helpful? would different belt. deals, Samsung It any of here follow-up, trying seems maybe approach at doing now these large that achieve is with got big in Immersion. under be with color the to and ones deals your your this Ramzi, for few them a know

with over Yes, for the Samsung last and both two Sony decades. deals I’ve sure. done

or makes focused and companies, loyalty get Sony forward. per-unit value, best with familiar can as well value increasing for sense say companies. recognition yield in for the give can shareholders Samsung both R&D you have be recognizing pops but not within map our technologies a our in partnerships back is that That confidently Not values what where on this, products, only technology in or our that moving could quarterly product and in fit getting which of in quite the revenue of the a I’m recognition well us we over but efforts, feed discussions, believe participate those only I do not So of our then which deals time back as to single time then payments. we – licensing one-time company. can sense great into that practices will road these the best companies with both value,

bringing long-term forward. these well both in and in partnership of form the companies patent joint looking the here terms at focus a as technology So other moving value of or is with as companies, technology relationship what

Great. Thanks so much.

Thank Riley from The Please FBR. come you. question ahead. [Operator B. go Nichols next Instructions] will Josh with

the question. thanks as did to that there in revenue Yes, recognized we how that I as assume for for ask, would XQ? for my about given payment Samsung entirely think should far taking the cadences second-half, versus shipments I some want prior QX was be

the Samsung revenue back damages The for – of it. well, so Josh. agreement with associated have an undisclosed amount does Yes,

reviewing under portion We of a rather agreement. than believe still the contra-expense that in recognition But result that hit are revenue will line. the revenue the I

in line that to and revenue – well little be you indicated We call the bit terms royalty back-end the the are the about we last that still that revenue a case. Going think, had as are still loaded forward, the in I line, line. can as of we forecasting think license revenue

did at follow-up, all – I the of a correct this used to as that up want juncture. then Is And company believe ask I NOLs has marginally? Thanks. its

not No, that is correct.

Okay.

not is to there’s that tax tax a anticipated only say significant XXX,XXX, subject cash that going you’re you of withholding? upward to cash the from an for whenever payment getting the be So Samsung

will No, not. it

last is pretty for a the this doing company is as help as some on that a cut well proactive OpEx of to end side on the OpEx expenses be and frame Okay. what the good say, for you being or or And maybe I think bit portfolio. far of little you question, then pruning that patent the as for G&A of guess Could like run year? rate by, kind could amount targeting hear you

call, we’re would is million trial between – for almost in $XX did expense, $XX in up So to given that. with through did Samsung, $XX to targeting baked million mention on OpEx for so the year. that litigation and million come million we number we $XX Still had anticipate we that the

to And are it down from year. million $X the we so to $X expecting be million prior

Thank Great. you.

call for I’ll Thank you. question-and-answer This the remarks. management concludes closing now back to turn session. the

Thanks, operator, of important and excellent in and thank my opportunity to goal our the markets increasing near the Bye. you look into growing forward about all for having joining meet many you I position us of on feedback this again. future very tell thanks, can company. and the the several within to enthusiastic importance with call of I’m tactile today. I by hope technology comments, the you

Thank you. concludes events. today’s gentlemen, Ladies and this

may now You disconnect your lines.