Immersion (IMMR) 1 Aug 192019 Q2 Earnings call transcript

Good day, and welcome to the Immersion Corporation Q2 2019 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Jennifer Jarman of The Blueshirt Group. Please go ahead, ma'am.

Thank you, Dan. you Conference us Call. thank Second 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 Finnerty, With Ellen President and CFO; VP of Finance. Ramzi CEO; me are Haidamus, Wood, Len on Interim today's Interim and

future During projected future operating product, or strategies, anticipated reduction, financial litigation anticipated this absence expense metrics, opportunities, call, litigation, model and we may expenses, demand make Forward-Looking other fact results Statements, which forward-looking may of or anticipated topics. include anticipated or operating business future market our

are subject statements the Many are and assumptions. beyond of these control of These risks, and uncertainties to risks Immersion. uncertainties

today factors parties cause materially Form press file after For to and Commission. annual vary recent review XXXX results should Immersion and Securities most release quarterly on that which for XX-K could listed discussion a Exchange we and more XX-Q detailed report in interested Form market actual risk the of U.S. the close. factors report these the are issued other on factors its with on

new actual if could materially even from differ any disclaim other except in becomes developments update call required forward-looking forward-looking of occurring or after business mentioned as belief by the these today, the future. statements, date statements to obligation results The to and result statements the law predictions those Immersion’s reflect of financial, update of this this on available Immersion release reasons or forward-looking these in any anticipated a as as information

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

and financial of the is available measure GAAP of a each measure the press directly today's differences financial discussed financial GAAP and presentation non-GAAP the directly release. most comparable discussed the comparable financial For non-GAAP in measure reconciliation between measure most our

to call Executive Ramzi. Haidamus. I that the said, turn now the With over Chief will Ramzi Officer

webcast. via or ongoing litigation almost major for us IP for a Today Immersion on for milestones today's enter time Thank as no listening and joining first everyone thanks with Jennifer we in marks the you, call and period decades. two new

constant management our Immersion For cases, to unpredictable been XX covering value and distracting which mired mostly infringement provided been have litigation, costly, to years, patent shareholders. has in

protect While enforce reduced anticipate of fact IP, its we leaders will tested Immersion are IP licensed. rights and litigation the to proven and period litigation has its the of through a that been our value by many so now industry as

lawsuit us, launching value team shareholders. new sustainable With settled focus growth, drive our behind on profitability to a new Immersion's and strategy and executive Motorola management long-term will and our for

On have today's like two revenue is development progress of operating our some share which reflect with we quarters. call, will underway. achieved the finally, future for the the forward underlying will I in model go well detail and to I of on touch I and then on back you strategy, in the last fundamentals our would the

we and look focus our give strategic next strategy and on reaching as providing and sustained regarding and our details will Our operating profitability efforts you forward new guidelines of model sense the direction Company's we growth quarter. a to more framework beginning

completing search. has to us you as we confident who our CFO this Meanwhile, interim this by interim CFO. been on Len period for Board. are consultants As to we interim Wood our relied I’m during role. we our worked with to a continue I’m appointed has know, while have support search pleased fill that will permanent our needs announce controller Len

to the I will now call turn for review results. of a Len our financial over QX

entered of new or increase $X.X $X.X period. the into from of lump to XXXX. primarily that fees second up revenues million in Thanks XX% million Ramzi. the revenues sum This reflects we year second related the were for in Immersion’s million quarter quarter $X.X license ago agreements

Revenues unit the prior $X.X variable from This million and fixed license totaling royalties included million fees on based $X.X of and second year in $X.X of of shipping variable per and royalties and volumes million. licenses totaling period. royalties prices, compares $X.X million in quarter fixed XXXX the license fees the

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

contain were and primarily which Looking to same up revenues the components. quarter last quarter lump of the at a second due XX% from revenue agreement sum variable into in year-over-year trends, year, both license XXXX, mobility entered

Gaming due XXXX, sum which revenues lump of the primarily license also were in quarter renewed a entered and up XX% quarter, both components. to revenue second variable during agreement contains the into second

minimum of million were inception quarter contain the per whole down royalty Gross of revenues XX%, $X.X profit with related to year's in the quarter XXXX. royalty that for was minimum compared Automotive unit royalties at for second revenue entered as such of second $X.X profit primarily in certain last million the which we the agreements set agreements. recognize gross provisions

Turning expected Total increase expenses. operating million by now second a periods. ago with million to higher the legal primarily compared GAAP quarter year than of litigation operating were expenses, was in $XX.X and in This $XX.X excluding cost expenses XXXX of revenues. driven

share second loss addition $X.XX quarter our or net per share. million performance. the $X.XX for track compared was share, net of net of loss use our to second per $X.X In normal XXXX metrics, GAAP the quarter at $X.X GAAP of loss Looking business in for XXXX, to and non-GAAP million with results, we net per non-GAAP GAAP loss

loss net of or per to in X.X we stock loss Non-GAAP as compensation adjusted million year. non-GAAP cash, same taxes, second based non-GAAP net net compared period reminder, or and with restructuring net share a quarter expenses. in share, have last GAAP $X.XX was loss reflect X.X the per $X.XX loss define the As million

million and strong portfolio sheet total as June cash our with of our Turning XX, balance XXXX. XXX.X to remains the including balance sheet at investments overall, cash short-term

noted were Samsung reimburse this March court quarter, taxes Korean we roughly determination Arbitration plus for International from to X.X year, Samsung million the in in to of received a behalf. the directed authorities tax fees Council As X.X where that on withholding million Court of Immersion's last paid we

on second expect sheet accounts be the We a a paid as to recorded that as to with have not. than the in Note our we will long-term the expect our impact we We tax reimbursed this both more reimbursed to Court, upon liability Administrative determination the payable. likely we expect we balance appeal significant prevail amount which provision do if fully asset we be reimbursement any and on during current not quarter. Korea

due item, X.X this legal in the million, our than from second in second the used cash X.X Other during measuring reaching portfolio quarter, renewed incurred Sony. total agreement primarily quarter the up license with and expenses to was Samsung million

anticipated and range net million and Our between line million. our bottom XX million remains remains XX loss between X million revenue expected XXXX non-GAAP and XX

From operating GAAP resulting between XX million - an XX non-GAAP paid OpEx remain and XX expected expenses XX million. which operating million million of million space in non expenses standpoint our and and stock-based includes million between expense seven between six compensation

we net less. XX million million in expense Due the tax to loss approximately are domestically, year for are the to forecasting the numbers or incur these we to cash expenses. be are expecting Including litigation X.X

turn will I call now Ramzi. over back to that, the With

Senior to a has President steadfast R&D, quarters of at Immersion, continues and to just creating of creation In reporting class Senior have months for directly six and the we shareholders. been transformation Vice President my Vice executive a the of General on of Reflecting Vice Head Worldwide and Len. a world and for of hired value Counsel Marketing, our today. President a Products of Immersion's a strategy already President Thanks team a its Licensing, Company is me new and two New HR new on all Sales growth Vice way

settled substantial return revenue. we cost of During Motorola. a over the make progress to efforts. Samsung cost profitability contribution in our and $XX XXXX lawsuits with to new last in and business The based these lawsuits have alone and streams months Settlements same will seen development sales of royalty Company recurring savings major two six the which million our also on period,

Entertainment May and based deal haptic on controllers. revenue next Interactive an from gaming variable technology VR is ships patent portfolio anticipate royalties and and this business, last when for license In Sony agreement its our agreement we our This gaming generating platform. announced with Sony console to we generation

such this touch our a as accelerator business, by In Alpine new interfaces, pads, feedback for access our earlier for we past base to include panel. and force and signed its license customer quarter Sion Electronics year, patented pedals. use with This we technology related touch Continental to in-vehicle haptic automotive also screens, in expanded our licensing

screen connected Konica categories. and demonstrate entertainment, being Avionic value deals In user based the addition, multifunction provide haptic in-flight device lenience we printers. Panasonic for broadly adopted the These across various further for interfaces Minolta

to The majority both expenses, scale past of profitability for the and models now recurring of sight details our executed more the sustain royalty I all that device line Immersion. with forward revenue over predictable a go six model months shipment. share are which these you of based deals you the will operating for on will operating give

fixed also with fees that initial fees. revenue component. revenue damages These categories. time fees. two revenues cover of settlements usually based royalties, our fixed into lump a back license include one release Starting recurring One, our sum model, license These fall are generally and or

unit products. based mobile and lower applicable. units and volume royalties. generally the are of and and the volume These agreed per higher rates for royalty when number are on upon during per device licensed and the Two, shipped automotive applying vary any multiplying other type, by product determined features, if discount generally products for and royalty by factors The rates quarter,

last that unit desired repeatable, with and mix sales win-win a our two high indicated revenues, quality establishing to our I grows of high scenarios. royalties and most revenues As revenue concentration is product per customers the have over ensure quarters, model predictable,

a the marketplace. are per which at a technologies revenue in on reflects recognition as value and royalties our basis in allow profile that same intellectual property they true sold are Additionally, quarter unit commercial recognized they quarterly of the

variable our to sales and royalties, a strive fixed highest year focus long-term of revenue we growing support mix and base, while QX ongoing maximizing the the this proportion term shift license thereby of will we to contains maximize revenue long shareholder value. will higher team predictable expect our fees on mix maximizing quality While toward overall growth

metrics will you Next, I our desired expenses Company be OpEx drive would and detail in-line our with to be our down with to using share structure to in like the we profile.

As earlier, XXXX expenses $XX which our non a include on $XX fees. for $XX litigation million, million approximately Len million are forecasted of GAAP referenced basis, to

profitability on achieving near for the OpEx By in XXXX. for of offsetting basis non-GAAP and future, an Today, maintain we the reach are we setting will target target a $XX long-term. approximately and million this

progress We our will metrics. quarterly measure targets focusing basis towards on four key by a on this

of One, an file, efficient efficient. reduce We significantly expenses management patent opportunity incur portfolio, selective patent maintain prosecute and strong ongoing to see portfolio. but to and by a more being costs patents. We maintain

a $X careful prosecution million in $XX markets. After we around from our XX% target our still annual consideration, while cut our ensuring cost success we patent can believe by to million

We also $XXX,XXX. to we and believe from our million annuities maintenance patent by reduce can XX% around $X.X

world-class costs patent their team and our are a patent directing on the target number ensure we efforts can strategy, by our viable Additionally, in-line commercially with of focus markets to new reduce in-line with expenses. research applications

office. and estate investments far top to already bolster more high-quality from footprint. model efficient We believe area can which in operate have at Two, presence place. abundance Montréal growing a and by cost our in offers the an we our team of talent employee our The real

credit. in combination would competition a lower is XX% expensive less talent, operating believe and We in and our This reduced based of Montréal about to real benefit R&D turnover, cost tax Canadian lower Valley. structure, estate on Silicon lower-cost comparison employee compensation for be

to While matter move Montréal to will be subject needed real we accordingly workers. estate we footprint do not locally contemplate due a optimizing expertise, our diligent in wholesale

our stabilizes management the related direction, Three new and new will joins our as employee in consulting CFO drop fees new and executive strategic and to professional Immersion. and partly year high base turnover services these our this were unusually a significantly

is opportunities And expenses million across and to $X.X professional further million reduce we will organization. Our savings expense potential addition to from target goal. our services additional our by with CFO to operating review consulting the the achieve XX% our for reduction to four, $X.X yearly of future overall

operating model forward business million $XX an second We as the a in excluding down notably million, future. that believe of target non-GAAP ramp of anticipate the rate of anticipated half in its a carried lower put and estimated will OpEx expenses trajectory reach significantly can and $XX We run down to be on in from expenses develops non-GAAP our litigation XXXX, of XXXX run our our litigation this rate XXXX. OpEx savings

Finally, begun the create optimized you I under all is strategic has goal our that are long-term would quarter our with executive planning fully ensure that like value. this to team. planning strategic share shareholder of of resources and The process new allocated to our to

Our executive Laboratories industry XXX over companies Arm licensing. brings focused licensing value and are (Ph) technology leading Holding overall team experience [Dolby] of as from years and and and both patents and technology such on delivering we

compelling a business target the from On in communicate and $XX following capital policy growth support line with and to recurring strategic roadmap Immersion's a new drive licensees strategy market strategy. product the growing profitability. three, to Immersion's revenue path million non-GAAP our our allocation the XXXX, licensing to technology our while to patent sustained and Reduce create we use to current new optimizing guidelines OpEx worldwide and generate One. will two, for

launching always to to these be Along we a strategy round These next place. investment pleased adding new in that Directors in on with to with strategic appreciate basis. of our have imperatives is the further the to will like now quarter. saying with instrumental and more by goal we forward long-term to which shareholders continue opportunity our the and communicate are close representations. with you enhance We community very would look out our in board we direct our regular Board lines, I sharing engage

open call to the to Operator. now like up questions. would we that, With

& Thank you, Dougherty first Instructions] Please Charles And ahead. question sir. comes Anderson, [Operator Company. our go from

strategy. taking the afternoon, thanks Yes, my the for for detail Ramzi thanks and good and questions OpEx all on and

million the the to rest start more are maybe in for of at I outlook bit little sort than midpoint, the revenue. year the guidance in guys quarter a So a implying $XX wanted of that the just you

first you nature versus That is obviously of I how to is half, sum maybe of we kind where episodic step-up nature. wonder a from recurring if or in able roughly were that of a articulate the much were some lump of this

run just the of of we kind is what establish business? of sort the rate So the

such year. target $X million by OpEx, next Does a do quarter number? that you And so achieve at happen XXXX are that'd be then lower on this the a over QX actually Any that run wonder, year? I you that Thanks. rate gradually color helpful.

Charle. for thanks Sure,

drop, to Let hitting XXXX. I that the will me We I the because of Len the question. foresee turn bulk take And will started. piece. that the patent the pertains as prosecution, until for applications. foresee work We XX it the revenue to over run OpEx that the already work, OpEx started, But be a linear work stopping already don't rate said has

by things the taking at our side, XXXX anybody all And just takes visit already effort that patents. to team work patent on is to patents

that over savings time and that the and pens that putting be that their down with basically continue will period. firms we over as So path, will we down work law materialize

has towards already work towards started. shifting The Montreal

several pertain now located positions so And a we our open Montreal, have been our locator firms. is mostly open the there. have to professional that fees has do way that lot that on of to in search our are with that consulting We

As CFO. going only we a have a team in as search already we have on you the place, know,

behind step us will of our a One that way. it. chunk So is on big be

is the So next quarters as going full XXXX. you I of don't foresee over to see but two until most XX it can be a linear

over As the turn revenue, far it will to as I Len.

expected for be Motorola with quarterly part loaded question. is QX, your last towards and Samsung of for maintaining which revised back are upwardly and Charlie, guys basis majority modeling QX now to Thanks, Ramzi. on heavily revenue end of revenue structured the On you, we a revenue, quarter. Thank provided

lump more the As have Motorola then be highly revenue, the the the on further Thank far be in QX, in towards the a payment you. sum mix are don't will per information the half we mix year. unit as but of that. weighted we in revenue first going to of

of for that, Research And from you thanks. see today did market any after to my to see the make comments if guys follow-up, a great. XX-D filed close want just the Okay, then I on want Corporation Acasia we

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Okay, guys. much thanks so

Instructions] Hallum. [Operator from next And ahead. go our comes question Craig Tony Strauss, Please

questions. thanks you taking Hey my guys, for

seeing year-over-year is you what curious you the you on number different models far curious the material I'm are that as just penetration models haptic First say. can just haptics traction that or would automotive into front OEMs featuring say what of automotive as flat and

Sure, out are a digit penetration. about low in on haptic trend cars right automotive into mid-single been penetration and the inclusion has that single-digit increasing million where share about the shipping in there is of now reflect XXX dollars there's market, we market that revenue

are so of the we pretty good. in in feeling we that of automotive So have a all haptics are companies tax installed rate steady terms pretty

in good our we much that add pretty so that So to is the that pads working R&D single-digit are higher we pretty and team on now haptic market like into providing and on growth technology of displays, feeling and growth so would position enabled I to along majority companies that the good and providing of for our with also position. we and to are top about that of are riding a that we find out grow observing the

kind still started the down majority market they type mid of more of models? trickle to high-end Would the you that say or into part have the are that of tier haptics in the

the seeing tier mid higher foresee provided have are penetration price, units the but the components demo end in been high we in the on the dropping well as tiers. and in are a later still so in lower do as units say that would I we

in in years, I’m to potential or next watches and of to any the well. majority and just others. do up anticipate as contributing then you few from gaming Great, be new magnitude growth what curious the And do growth related Sony the possibly of console gaming expect growth you other coming gaming Sony expect do the Nintendo you customers

is revenue near have be far the short-term launch since know, accessories that attach from the already that some or as XXX% ride a potential to all rate as of going growth so place controllers, the as is will majority be that additional along Sony we term of The you growth in that console. could to

addition course of of licensed to ahead In to to patent some have both in working large terms and long-term this up we mid and forward we and is VR still are companies on that with them still look licensing. technology not

that guys. it great, is me from thanks Alright

And you. Thank in it back questions no to the turn remarks. I now closing queue. will now more management over there're for

I Thanks, joining again on updating for forward thank look quarter. all operator today. this to and Goodbye. you call you us next

concludes gentlemen. teleconference. ladies you, Thank and today's This

You may disconnect. now