Immersion (IMMR) 6 Nov 192019 Q3 Earnings call transcript

Good day and welcome to the Immersion Corporation Q3 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. Ma'am, please begin.

Thank you, Corey. you Conference us Call. thank Third 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, With President and Interim Ramzi CEO; me are Haidamus, Len and on Wood, today's CFO.

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

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

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

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

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

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

Haidamus. CEO, that to will Ramzi? the I Ramzi now call With the said, turn over

to excited webcast. listening Thank on us provide the new the you, or very everyone thanks and of We're call a Immersion. today Jennifer via glimpse for joining

of As last that cost you starting a of of materialize. establishing transitioned base pleased to quarter, recurring revenue focused already burn initiated highly and visible we has cash into the mode very Immersion a new I'm been know as is that have with we've QX, of on out reduction efforts sustained growing era and Combined profitability.

management plan. Our strategic been and strong work our experienced team formulating at has hard

we our focused, today, inform excite highlights And success. our the provide for share of that vision growth platform and will will future

outlined across an will results. operating goals QX overview we before First, initiatives highlighting key of moving I elements the our Len last financial our forward. Then, review of strategic quarter progress provide will our

we strategy addition as deeper a held and on XX In Investor the in to November to New forward go York. into dive Day our be Analyst of an provide morning plan

to over turn I it that, will With Len.

were by decreases agreements lump third during Thank in X.X in X.X Immersion's offset from you, and third ago quarter increases shipping up revenues in the reflects Ramzi. related or XXXX, of revenues of the variable volumes. million XX.X due into million, period. million revenues quarters royalties for that second lower increase the new we XX% primarily This fees, to royalty to sum stemming partially year entered from

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

revenues of follows, automotive, XX% percentage business gaming. quarterly a of typically was line seasonality from from of mobility, a business down XX% And the as each fluctuates for due mix for total to break patterns. XXXX, third line X% quarter revenue Our of by from as

primarily year, up variable revenue were revenues quarter and to by contain second last agreements entered sum to royalties and lump due third lower in due components, Looking at mobility offset which of in trends, both quarter year-over-year shipping volume. from XXXX, license partially XX% the into same decreases the variable

were royalty related annual unit agreements revenue to up in quarter per which of excess the recognized of primarily revenues X% revenues with provisions, we during third certain minimum Automotive this XXXX. royalty

down the quarter profit were Gross revenues of million, Gaming the third million due third XX% was quarter with of shipping primarily XXXX, lower gross X.X XX.X profit in volume. during to XXXX. compared

XX.X total GAAP XX.X Turning to to in XXXX, cost excluding year quarter ago expenses, in now were period. million third the operating operating revenues, compared million of expenses of the

of third and both were for X.X expenses million the marketing XXXX quarters XXXX. of and each Sales

X.X of quarter Development our the million and year. driven to primarily as X.X same decreased cost a compensation was of X%, decrease last third of Research quarter lower expenses XXXX million or result This in efforts. by cost compared reduction the

a XX%, administrative or million X.X General legal reduction expenses, following and and litigation primarily expenses with the and of was This decrease third decreased of settlements compared XXXX. by second quarter X.X last million in during driven same quarters legal year. the

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

performance. loss business loss track In to and to normal metrics, our use addition per GAAP non-GAAP we net non-GAAP share

restructuring as expense, As compensation stock GAAP to cash reflect net we less non-GAAP tax loss define loss a reminder, expenses. and based net adjusted

net loss or year. period share same Non-GAAP third or in income per the compared million $X.XX quarter $X.XX per of with X.X last in net the non-GAAP XX,XXX share, was

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

and down third XX million portfolio second $X.X included was the from the in the paid quarter, a million cash latter of during to which used X Samsung. billion of reimbursement quarter in total Our higher compared was decrease quarter legal litigation sequential third cash decreases the legal collections as expenses, The quarter. primarily following in settlements second due the XXXX to to and

be a directed reimburse we roughly Samsung from received year, plus March million in for withholding noted X.X the fees Samsung had court we We council sheet X.X that term the Immersion's of as We where Court this accounts and the International second quarter. determination the and reimbursed payable. during behalf. As Korean to paid asset long to balance liability amount paid last tax were recorded reimbursement million the taxes a of a both current in our Arbitration, quarter, on authorities on to

approach year our between XX loss we million expected As revenue million. net to our XXXX and XX XX non-GAAP million XX have million bottom to and end, we and line revised between anticipated range

X XX non-GAAP between operating expected From based includes and XX expense million XX resulting expenses non-cash an our which million. compensation stock between X million, GAAP million in operating of OpEx remain standpoint, and million and between million, XX expenses of

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

from revenue approximately was the current QX Our XX%. in mix

in continue we establishing recurring as revenue streams, to mix focus to XX% this in And on predictable QX. expect we increase more over to

mentioned on corporate we in non-GAAP to our Ramzi implementing expect a in date based as further success transition, our the basis QX. Additionally, earlier, of profitability expansion on

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

Len. Thanks

see line XX we be with drive details levers financial As profile. regarding you revised a from quarter, down expenses structure desired our including a effect Last shared litigation sequential commentary, in can a to down already in ramp our expenses, to also to started we've and company of expenses. see decrease the

outlined areas the initial during in following we last made progress. Specifically, our the call, we have

a QX. resulting One, our applications in management issued portfolio, from regarding have prosecution of maintenance XXX pool, patent we efficient trained XXX the the patents to in fees and more XX% QX over patent over already from and reduction

to by our continue eliminate to on review as in patent and emergence We is expected to focus spending result aim cut is patent maintenance additional the most continue costs will XX%. savings our long valuable IP by costs not and prosecution resources that we to XX%. process tied our success. This annual And term to

including through professional the consulting sequential and resource conforming reduced as office as structure. of XX% migration Montreal. plans employee from has three, achieved Silicon G&A our and in eventual prior realignment footprint, services level. QX an facility in favor target operating also on accommodations Two, board And our the continue to Valley reduction we to and cost approved engineering QX practicable we X% reduction targeted to of from our to exit order of The to XX% soon decreased

our eclipse This we lower front While reducing charges, OpEx do to this expected below to restructuring effectively for our facility. initiatives believe progress run and That is that savings strategy upon our underway us, can toward to key for the already being demonstrates we non-GAAP opportunities our the costs cutting of flow we're to cost in cash a ongoing with million in in XXXX, of responsible the business growth more we which monthly and to and additional result to on goal profitability. capitalize smaller subleasing footprint sustained well with drive continue we a is underpinning will intend not said, $XX the diligently of invest manner. ability a

compelling component we patent the key haptics growth. those as recurring licensing, enable and while technology a investing remains roadmap patent compelling is a to business fees. our and current The of growing are such, that to of licensing the experiences transition our license underlying strategy combination technology new promotion product and a business from patent in accelerating technologies revenue generate worldwide support and technologies next both Immersion's Essentially, to and our to of optimizing licensing from

sharing potential new an adoption Currently continues to scale haptic facto. experiences. more believe are with We to of adopt standards haptics there wide no Investor to in by haptics Day. forward standards may or deployment industry whether be industry implementation challenge ecosystem look in of to regulating adoption. insight at mandatory early haptics upcoming stage has as our easier and enable strong resulted on facilitating wide de ahead. We the This accelerate high approach and Immersion an growth the this quality

plan the segments; efforts and mobile we forward market following to VR, automotive, product gaming, adult. focus on PC, our Moving

our continue IP several refine A, to our technology work licensing markets, towards which licensing core will licensing and across helps strengthen component the For to as B, program successful adoption. mandate and renewals solutions at patent to to drive markets, of an essential an making continue is, portfolio, Immersion's well opportunities new and be as our including contract these our patents

of as refer touch span to for facilitate to are easy cost and inform touch will address inform interfaces Both initiatives program for designed fidelity will verticals. technologies adoption everyday The interfaces, platform efficiently next machine two will multiple cases. based to to effective deliver multiple tier use execute horizontal strategy? compelling verticals. we we our down the and into do frame touch on break of deliver growth solutions target designed market initiatives We these to areas order how two that experiences focus on our We categories product these in high So across and excite. market haptics human product

will program patent we strong of its Continental high markets foundation customers reproduction The as of existing a buttons Tier-X PC Preh as renewed license. help and licensees mobile. In mechanical across markets and controls such and who just fidelity automotive, our deliver Electronics, Alpine automotive, as such such have

more provide capture and designs, design initiative and path a value deliver product through inform reference Our to tools. firmware haptic

industry In addition, with partnering are to bringing the innovations market. on we new

develop for a entered interface into with example, collaboration cars. machine new human for quarter technologies we This jointly agreement Alpine to

Turning designed experiences. the a spectacular markets it for as category adult mobile and a to pursue in will to enables enable VR, touch for of experiences. to our it creative excite experiences excite audio. of objective the role experiences the types initiative alongside program, market and Think seen central The is including video within digital proof gaming, lifelike that new already content immersive touch which market. play points control extensive haptics and these to of enable We're with

that product our plan and inform fidelity Entertainment, our announced Interactive at initiatives recently our include market upcoming view the features. including of excite will to higher one share details Sony haptic and regarding five Day. of potential example, We the more licensees Investor controllers For PlayStation advanced our approach,

future there the inorganic of component Lastly, our growth. is

are all ensure to As and shareholder I our last value. long-term fully resources allocated communicated that quarter, is to planning our of the create optimized strategic of goal

taking in determining and best generation being a on allocation profitable Our while approach revenue resolutely to goals. these board OpEx, more policy supporting predictable is for our prudent management aligned with focused capital direction the

as it efforts We capital are buybacks sheet, also and pursuing tuck-in allocation balance maintain while stock healthy a our and acquisition an ownership mentality our when appropriate. therefore to relates to taking

or scale our explore highly acquisitions to look we to expand may we plan asset us As accelerate strategic that initiative. growth, our help

geographic perspective, fit. accelerating taking pursuing a from as responsible nature as and and well opportunities are Revenue any for new technology very here. of deal baseline more from the our and action a to shift taking from By market, a carry Immersion and management relates as have possible it We the realignment approach expenses, accretive the and any and a expand crossed to sustain Predictable to vision our to fit profitability it decisive towards we has product mix, of size the established which timely with and out success. the threshold for ability

So fresh our of from in lots capitalize a and front target of market. exciting grow which and to analyzed us on opportunities place in approach well profitability

licensing success the not seeing to Importantly, today. go our you November to the plans by require art of on meet executing touch haptics. regarding by will our of our our just only experiencing We've underlying XX leverage the possible digital support. products, in IP, we the market. also wheel. be some strategy advancing forward accomplished XX path of strategic compelling many through the This science team, look and innovation our our but plus ecosystem of and to product will innovations experiences does New us learn company's demonstrations to Rather, recreate for technology just in York new making regarding We years more not scratched forward and breakthrough surface across

now would for open like call the questions. With up to that Operator?

We'll take Thank [Operator Company. Instructions] Charlie you. with Anderson & from first our question Dougherty

Analyst the million in three up. as you look then follow for the year, a just Ramzi, And the taking maybe could to maybe Day to to down months looks couple and forward next for the the revision first if you and my of how address a weeks. to then on what revenue thanks ago? maybe dollars, a that, few take Yeah, just pipeline to changed I terms taking looking the midpoint relative licensing the questions I've in year, just got opportunities, at wonder

and QX don't QX. in going but occur XXXX. we did be QX revenue XXXX. provide but And guidance, – In of QX and letdown we some and see forecast of deals going to forecasted automotive timing mobility, a while We see over certain those Charlie, customer are quarterly in. we pushed overall had Sure, we the differences out or in revenue a customer the in executing QX, strategy in in trajectory, a we delay somewhat are some or deals coming don't did to see into deals

the you second asked? me, but Charlie, was Forgive what question

look licensing The health of into at the pipeline you as next year.

In right of team which pipeline automotive, is mobile of each now dedicated a and on, have Sure. and consisting The and new of we market, sales Tier-X, it is focused adult progress marketing some some market. of remaining about continue to existing the close is it larger there's penetration a ones market are automotive we today. some in XX% to ones, in that going have the we're

has Chinese the us. the to we going automotive Therefore, need XXXX. continued see progress the OEMs, potential which are manage an new to still in some is In for sales mainly We short-term, focusing been to brand in market pipeline. meaning that do hiring continue And address. that to force we our be adult Europe eye a one The on Android opportunity. towards opportunities, incoming non-Korean

did for Okay, up, And terms follow mentioned acquisition. capital buybacks, then in my great. in you mention script allocation, your of you also

guys? Thanks. of So criteria I on terms fit you the maybe of would some in acquisition for a for elaborate wonder be look good will front you the what of just you

to to prevent the new Yeah, into Sure. current to efforts, the whole goal get market. our a not accelerate here is to try company

take buybacks. or which So cash stock we're either leads going prudent a to on for approach reserves

IP acquisitions pursue responsible our will a also that We in want to increase way.

technology important. – strategic our The as be up acquisition be on fit's to IP as well critical. beefs that's would our an acquisition something going creating position So taking that

going So is quarters have, to to be our it. germane to that outlined I've something it's current very have I as

Perfect. much. so Thanks

Charlie. Thanks,

Stoss [Operator take from Instructions] We'll Hallum. Anthony our Craig next question with

Len, the not might to you generator. what customer also Definitely rate for it's another business? new asking sense questions, biggest you between out complete you revenue of into then on mobile sometime Ramzi any you And in growth going a do think couple your could charge What I'm be once Then is numbers, OpEx in do bring shrink when given and XXXX, for think do restructuring have the from but mobile? your standpoint? look mobile XXXX, you now take you

to restructuring specifically talk I'll the piece.

on book there's XX-Q subsequent for You'll and talked comes net improvements depending use towards fixtures possibly time the the timed that us leasehold $X.X furniture see the in here. amount that we charges the the to right of and there's what event, out the of a and of are restructuring million. facility with that be specifically QX disclosure, it asset related lease. the X.X lease QX to And takes exit and about is will associated values to a The million

as And restructuring heads shrink the you as charges Okay. facility beyond cetera.

of restructuring made body we've of that we've think accounted I already QX. for our in most adjustment that in the

on And or then XXXX new on Ramzi, for customers mobile mobile? growth bringing thoughts

think IP new continue signing currently which on. on that IP forward, we to working plus push combination partnerships strategy of I the our we're

to this definitely an exception, the is, I'm and be of if we've In addition, that companies seen in of take effort be is will the all latest the to a how seen just winds technology changed to forward. But thirdly, in licensing but out excite sure have push and try to trend there. ZTE initiative, but opposed Chinese appealing the that a significant in it bringing going this re-doubled not to China. license settlement light we're patent patent and as a – remains or licensing new advantage

three we're continue forward of China push to to going have strategy, we So our on. elements

is for or market it? run license too your Is that and not there licensing, just into? after that a you too expensive And somebody there a understand then technology to go markets help beyond can with us technology let what other else you tapping you're market licenses, you mentioned IP that

that and not are of say varied, the the going definition even varied, perspective. The we I even start. is high market fragmented so most are so to IoT market we needs is pursue to the maintenance would technology of know a IoT IoT different the from don't where

kind it IoT that way be focusing leaving speak. we're market for our going strictly on licensing of and infringing any so to patent about So old company optimistically the the both IP might

litigation for need And what my guess in you any last XXXX. of terms question, it in expense might

point. this at Not

going are some We to keep reserves.

As IP. our is you know business

continues have a pull priorities. our continue protecting mind. the we in to be not where number top we're on might to a I have So be to any one lookout reach do to opportunities and of we on. therefore, IP dead end But trigger going for the

Okay. of best you, Thank luck.

Thank you.

Thank to I turn back over will now speakers. today's you. the call

day. and you call thank Thanks, seeing Day. many this Investor our on joining soon and to We operator a today. us you good forward of Have look all at Analysts for

Ladies you. this gentlemen, today's and concludes Thank teleconference.

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