Immersion (IMMR) 5 Mar 202019 Q4 Earnings call transcript

Good day and welcome to the Immersion Corporation Q4 2019 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Jennifer Jarman. Please go ahead.

Thank you, Todd. you Conference us Call. thank Fourth 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 CFO. Ramzi CEO; me are Haidamus, Aaron and on Akerman, today's

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

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

to I'm we've significant listening and for again speak our or demonstrates in success line Thank the us positive realign a joining on call milestone reflect and to the value creation. on profitability note, is the webcast. one important you, Jennifer, for by ended on changes today year and short-and the to commitment in undergone shareholder thanks pleased by accomplishments in Company with and Immersion everyone very QX. for to XXXX an creating long-term. that achieving value the our This both shareholder you GAAP We

progress moving on we continue I'm operating also to forward. we based basis our pleased to on strong an in expect annual note profitability non-GAAP improve profile, that optimizing the made to

value during and our over for operations. In growth to in achieved of and increased shareholders. past strengthen recurring addition, year-over-year. steps the reshape our strong management in areas expense Company I'll and focused our execution revenue the to to to we we've near-term transformative on the taken goals XX% the We Today, year create period, profitability highlight corporate drive remained strategy, direction governance and which

last build-up team financial our month. team an I'm our a on with understanding touch based addition the growth our his welcome Aaron CFO as provide me and QX our He's his as have depth strategic of completing the our expertise, Montreal hit to businesses. here of breadth outlook. XXXX initiatives based overview pleased ground running. today and I'll Akerman and we key Aaron results already leadership, of and the to achieved, of to software one First, operational the in its on has leadership and technology-driven executive new office recently of is him tremendous

the year. new his and Following continue annual our remarks, with recap I for will vision

over Aaron. it And with that, to turn I'll

coming excited welcome, and many look you Immersion forward to over warm for Ramzi. the you I'm of be meeting of the to extremely Thank part months.

press release for afternoon's full Let full to me fourth comparison to the you our financial regarding year the including quarter where begin our same illustrates of QX year the revenue tables and information a ago. this year and performance, by referring period

gaming, was in with compared or Revenue quarter, reported of from royalty X% license fixed commercial fee million to primarily declines renewals, down in royalty-bearing and X%, medical per unit Revenue a quarter shipments revenue offset an license of prior $XX.X increase licensees up in reflecting XXXX XXXX. from Our bearing-shipments up by basis, part revenue the mobile royalty year industrials, year on arrangements licensees. ago. million was, of QX fees $XXX,XXX in due from arrangements $XX.X automotive the and XX% comparable by by for approximately from was reported fourth recognized a customer

For ended fixed to compared as decreased decrease $XX million attribute decrease XXXX, The XX%, $XX fixed million to revenues total XX, the or large fee fee December a the million revenue of primarily year of quarter XXXX. of a year. the in signed was first license result in prior $XX agreement

some fixed to contributed in results fee ASC reduces under results. of with treatment year the XXX calls, previous and in arrangements discussed lumpiness prior comparatively our As has

XXXX we on and fiscal our said, arrangements. to of most time revenues of in fourth these goal one progress revenues That recurring stated XX of revenues XX% in XX% XXXX. are the revenues quarter represented XXXX last Recurring are versus in XX% in our of transitioning instead of revenues versus XX% fiscal towards making year, QX of relying

and operating year for year. last expenses operating quarter and for The of reduction were the the full year comparable fourth and expenses, expenses to Turning period the quarter patent expenses. impact from and respectively in X%, lower down litigation GAAP reflects the XXXX XX% maintenance

many Montreal program relocation function plant continue expenses operating of relocation in our administrative We and functions our in reduction will we research of with have our cost in of also the the Montreal to XXXX, reduced XXXX. completing by

costs QX, our continue QX patent patents Specifically, production cut approximately the have as and from XXX to We over QX. OpEx by costs trained portfolio, it now by and on maintenance fees XXX of XX% track XX%. key to XX% relates our and to maintenance numbers our patents prosecution from in in where optimization annual the another pool, applications reduction and resulting we we patent in issued remain prosecution our

from services QX professional to operating to eventual prior and XX% quarter. XX%, an reduction decreased and we expenses from non-recurring some target this Consulting were continue levels. There QX, in

During our Jose to vacate by our March as board plan to the possible the approved XX, San fourth quarter, facility and facility soon as the thereafter. sublet XXXX

as the also asset, to impacted recognized, Consequently, we the of we XXX,XXX amortization to began an as operating the accelerating which were impairment quarter. well expenses in the contributed of over that expenses improvements which use Jose period, San quarter, lease operating in $XXX,XXX of right leasehold the

tax. reflects $XXX,XXX withholding foreign year an our allowance taxes taxes primarily the Income expenses, and for valuation the against estimated of foreign taxes. income to foreign on Moving tax and of in spend certain deferred increase

XXXX, the valuation deferred factors of routinely to As if allowances realizability allowance against federal, our related a we substantially determine deferred of XX, valuation when is of our assess all state to to and December tax carry assets. appropriate. We tax or foreign assets our adjustment an

valuation per quarter GAAP $X.XX As to net net the per fourth share. operating deferred year was for does allowance or utilize share last the share. our year fourth ability net the diluted million $XX.X $X.XX quarter million per per $X.X our forwards. $X.XX $X net income loss was for not a tax million million or the loss diluted or GAAP $X.XX diluted income impact was share. reminder, Non-GAAP for $XX the carry assets, including or for share. Non-GAAP per was net

balance the to sheet. Turning

as Our position strong the balance sheet very year. remains we exit

the million million used year the cash at reimbursement stock down well million $X.X $XX.X paid Our end the of cash and quarter to tax operation, cash due repurchases. for withholding as at short-term cash from to end, used including in portfolio, of second $XXX.X investments Samsung XXXX. Primarily million was as $X.X in

to focus ensuring a key spend reduction efforts, on initiatives. continue in keep line will strong We cost strategic that our with our while

guidance update for their monitoring like industry, and on now in the Like on our volumes anticipate impact XXXX. impact and the to the some shipment provide in we're negative I'd virus activities others XXXX. an COVIT-XX our of customers on

to variable at impact arrears, Immersion that assess quarter Given time. one this its receives the specific is reports, in difficult royalty

it’s for believe year. to our our prudent total and $XX revenue account of in for variability the currently projecting million million $XX we However, broader outlook to

account as will be revenue due product our several seasonality This of markets, toward to release in expect and into loaded mobile fluctuations occur and such gaming QX outlook and that that we XXXX. typically takes backend and end cycles also QX such, as of

annual in shifting unit majority on our will This make a of revisit revenue on as outlook becomes quarterly recurring payment We be structured one-time mix customers. year, The by which progress to data further our royalty volumes it fixed expect based from as will per we fees, available. revenue. our shipped more to basis

mix, revenue revenues recurring XX% represent in expect up XX% to our in XXXX. XXXX from of over We

million $X million. $XX in operating this XXXX, ahead million Included million $XX our $XX.X expenses is expect Regarding down GAAP $X our of original XXXX. operating expect for and between and $XX million, $XX basis, be down $XX.X to expenses from expense expense million we outlook a compensation in we $XX million, On and from million XXXX non-GAAP million and of in of stock-based between XXXX. between non-cash target number

income continue of million the OpEx allowance fourth expense for tax fiscal exit Due we're be our with to the ongoing beginning to programs, rate $XX forecasting XXXX the Further, a result carry, of in to reduction valuation non-GAAP approximately cash as to approximately now cost expect we a run year quarter. we $XXX,XXX. full

we net As restructuring adjusted stock-based cash income compensation to expenses. and a reflect GAAP non-GAAP income and reminder, less define net taxes,

between and share. diluted We per $X.XX income expect $X million $X.XX XXXX $X to net be million non-GAAP or and

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

a a little by It's shareholder joined Dan. to create for and I period Company following executing developing new since year a strategy. of the a and uncertainty a value transition prolonged long-term with Thanks, and over been mandate Immersion,

Soon of underwent afterwards, transformation major Board. Immersion our a

through outstanding added advisors our new, This in group of direct largest from resulted representation shareholder. we which

carefully and strategy a committed the firmly Board able input and to listening While formulating generating maximizing of process to on the Company. shareholder value, the shareholder were begin new for we focused to

strengthening direct to corporate and and path executive revenue for a with In corporate our model, buybacks creating included, transformation our laser our a on dramatically policies a underlying addition establishing putting shareholder Board, a to to stock reducing focus nature new growth, business proactively in allocation representation our governance. shifting team of elements include capital OpEx the core place profitability, adding

in Zeroing each progress on these areas. of our

cost First, laser-focused We Day and OpEx on shareholders. been a maniacal on structure X, drive to cost return the transform of to paramount. business value And is and immediate reductions believe from profitability. more to reductions we've focus profitability the

footprint estate in litigation, G&A our and engineering the patents, related our California, progress half in in of second and right-size $X.X the in $X.X million Canada million there. million operation to planned in our reductions $X million do migration not in $X.X in consulting, reduction of XXXX to Our real and efforts included stop and resource

As a Aaron lower goal success QX. to by the further, beyond. of reaching opportunities in and run to non-GAAP level indicated, our profitability million $XX and we OpEx rate significantly greater expansion our will see This Immersion continued position even XXXX with of

transparent will shift Second, and predictable to more model the business growth. a deliver more that sustainable

recurring basis share revenue to products. quickly its became of nature and Immersion's being brings us We the in be was short-term, to apparent to measure that clear sum a It its grow technology impeded success to payments to a customers' recognized revenue Company's and orientation from our outlined quarterly can deals revenue shift on success to the model. ability our one-time path that by lump allow

revenue Recurring the on during make a of report fixed two a basis, quarterly the licensees payments or received per-unit main or of consists quarter, two. who forms, or combination royalty

revenue come toward to pleased of XXXX reaching We is as are goal XX% transition from projected our in Aaron more indicated. the with recurring that revenue, than

creating technology grow. with rich recurring and the we revenue continue reposition the we leveraging recognizing a assets, Third, the Immersion to to in a business for to in our that path while play growth. haptics thrive shift still needed have model, growth, Along ensuring for role pivotal will Company's usage

provides points and November. at by value approved encourage new We plan those focal This the long-term strategy are the webcast, Investor Day highlighted patent creation. the presentation inform of our which encompassing well-attended Board and resulted site. and available optimal of licensing. who We this both approach missed towards on Investor the it the in technology review Relations our This strategy excite and the a was development in to

are focused and QX, months, In new business additional we Tier well few the as existing began In of strategy. expanding with our we winning execution our our licensees, as over automotive, past on customers. X

and We're have a with these the We Tier to haptics XX customers. value with expand foundation X strong role around licensees. of working

we range whom two accelerator Las Continental, is Japan. strategy, Automotive our user highlighted interfaces, experiences Vegas, in to with example last new integrate In pedals. well we such quarter, into as of an broader One product Tokyo, executed license line including as at and haptics expanded a automotive they World as CES introduced

a The based partner large featuring based first design on solution on actuators. advanced new builds sensing design, TDK, active our actuators from touchscreen technology piezo and electronics resident our and This is component expands in linear reference previous Japan. software an

how haptics solutions designs technology with fidelity in different system These paired software deliver the our automotive experiences high demonstrate HMI environment. can

through We automotive access an know-how, are software portfolio licensees integrated design program. automotive providing our licensing and to patent

encouraged at CES by our are We and engagement World. customer Automotive

and Immersion software haptic develop manufacturer our showcase Alpine, collaborated technology, a an power global leading and on experience. provide touch the systems with effects. interior design advanced components the Alps We to also sensing electronic backlit to with of integrated consulted jointly active and panel

This customer and and the meeting, human-machine Alpine innovative will improvements subsequent Alps and Immersion in cockpit. solution both was automotive believe showcased enable OEM interface its haptics at new, evolving CES possibilities

We to and will and jointly part continue with Alps as develop Alpine experiences of new partnership. our collaborate solutions

multi-billion we new sex FeelRobotics, have Amsterdam. to strategy, an strategic commercial to technology company am I pleased adult innovative the device part to share with market. partnership opportunity global identified we a in tech dollar of As that our executed based an just license

intimacy content software advanced adult cases. Under also enables to well the devices as portfolio. this terms that patent we of format licensing and extensive haptic advanced interactive as including We're will our remote technology use control partnership, of deliver applications access control by experiences, more and

in adult devices cases. patents use portfolio of hundreds related and believe relevant our We are to interactive

solution both in commercial partnership Our success. based FeelRobotics. available integrated technology and share from adult to so patents parties will OEMs model, an be is a The revenue device on via the share

device software-as-a-service content a -- model an services. usage with of pursuing user's OEM is on FeelRobotics end-user based the

percentage collect will We double-digit a revenue. the of

a cumulative Assuming three-year should an dollar life active be span two-year period, to device low-single-digit the of in device over per time a range. revenue

of In Sony's gaming release its holiday PlayStation anticipate per gaming, continue we to the time statements, frame. X in the public XXXX console

Interactive May, technology X gaming a haptics commence to PlayStation therefore, once the As and we of fiscal end license shipments revenue We, VR last our announced previously towards year. for controllers, controllers. Entertainment our took anticipate Sony from

and interactive to pursuing patent a catalyze haptic In We China. increased market also all revenue for continue available remains we controllers to mobile, including continue new be in to demand opportunities believe Immersion will Sony's experiences. predominantly advanced our diligent licensor in today, us, channel strategy

from beginning are of to our licensed We chips licensed IT partners. see initial shipments

where you with in with growth. patent Alps that Alpine to we FeelRobotics value to licensing support and can products long-term look our keeping IP market of provide still activity new Though feedback value continue will days forward We early well deliver can maximize the as evaluate the to it's technology strategy, addition our new we our execution this updated in market. progress. validation of to in our on as We

of guidelines, and Investor believe across is characteristics. from enhance standards performance to we expand stack decoders, the of APIs ability vibration products the our and standardization Immersion's and the at design right highlighted breadth hardware technologies technology for motor haptics our time to activities. will licensing interfaces As and Day, market Haptic

is Pursuant to strategy, standard initiatives. Immersion moving our standardization several forward new with

media MPEG-based presented content. Standardizing into for into allow meeting. the will midst For media are incorporate fidelity in in of preparing haptics next MPEG file the easily content more high experiences proposal tracks adding the at creators be to files example, a audio/video haptics to we format haptics

communications, in is standards the other for is are haptic that IEEE ATSC a such the XG Furthermore, efforts. Internet developing encoder/decoder standards X.X participation we Working haptics including in evaluating standard. as standard also Tactile Immersion active Group

execute engaging stakeholders strategy. haptics are with the relevant We ecosystem in broadly to our standard

our underlying Now, transformation, let's including which share to move shareholders facet the to involved our allocation, to desire regarding corporate the fourth implement listening capital closely buybacks.

ongoing the conforming need model, litigation, factored toward new dynamics considerations relative share settlement Several prudent our profitability, operating to the price for timing this of to of cash and use shift including the of this into capital. the reserves clarity regarding initiative,

fourth aligned update aggregate for elements purchase am repurchased close that we with of XXX,XXX during to these initiatives, the an that report Xth, you in December through March of strategic and to quarter and happy and I cost-cutting our and shares combined common confidence to million. pleased new efforts our approximately $X.X We're report stock

under We expect buyback to continue we our program. right share activity approximately conditions, to be active million with repurchase regard remaining under to $XX.X the and have authorized

on on improving This and our regarding executing process and shareholder to best we communicating direct declassify adding on executing be allocation policy, focused the engagement, acting Board. to capital practices, which been governance. includes continue received representation, through have such proactive we corporate feedback Fifth, on as shareholder the

we improve the addition, In Board Directors. of on of to continue composition Immersion's

Stephen to number welcome this VIEX announced would along Immersion's Capital Franz an afternoon, just seats Domenik Board Maxwell has Freescale with Eric in Systems venture of Board Corporation, of eight Technologies, been Mobile company, energy of we CEO capital and Fink, Gennum to the of former Sevin storage total Funds Semiconductor. Wireless Directors Rosen As of and of and firm expanded and like Group Advisors to Singer a

strategic of one is and largest Board. bring Franz Eric, the and shareholders will VIEX insight deep into Stephen our

and for to down, opportunity As step past and like the these over Ganis Sid the them Jonathan take part appointments, I'd of both will valuable to this year. Visbal contributions thank

about to like a to for our moment and vision XXXX. take talk goals I'd Now

in total being profitability our year lead on cost non-GAAP reductions a As annual transition highlighted, to an will for Aaron basis this XXXX, impact revenue. a the positive expanded of despite

measure term. gauges revenue. have to contribute establish favorable to The be with recurring made recurring success, tangible been strategy, should to and the revenue mix the our toward over progress our initial monitor year agreements new progress our and any over and to past new to by long metrics the will regards With goal revenue customer our which increasing OpEx

that we relative or to markets. customer look to feedback will allow market our indicators share short-term Next, to us in our introduce traction

the of next model average months, will our ASP XX with generating transparency within to all how the per aim business. goal clarity provide more regard Additionally, we our regarding to with to market, greater

In Immersion. in tremendous growth we path year's profitable carving creation little made a time, value a headway for short, over and have long-term to a

a strengthening We continuing are are initiatives and our extremely plans, focused organization our and as our in on to executing strategic excited across confident now while whole.

On behalf around your our I We over the that employees appreciate the easy thank want resolve hard-working and of Board is world. truly and recognize year. the to applaud dedicated and myself, change commitment not past and

also of like for power together We'd and technology. potential We to see of are we as our continue who to maximize haptics-based express haptics our benefits work to that solutions on partners greater gratitude customers for and the experiences, the embracing greater valued consumers. only Immersion's

And open call up with that, now Operator? to we'd to like questions. the

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

with and my Aaron. guidance. for Thanks Yes. taking full-year wanted welcome, just I questions, the to start

the think was XX% up I if modestly, I XX%. just out per-unit you've XX% you Day. midpoint, consider know I the laid at that goal versus royalties And got the Analyst at

it's of a of for there? follow-up. portion expectations within And I but of takes sort wasn't that if maybe this your known just -- and reconcile I kind got So, us the transition could guys puts versus of goal a Any that for year, year? kind you XX%

in revenues recurring be over be that fiscal XX% will anticipating there So, over revenues in we're XXXX 'XX. an increase would recurring and the not

I that. get

Is things about an literally that the impact but have are that -- call Day. causes talked know put you the being dynamic? that other out? guys to Analyst goal the at there there So, impact. I Or the XX% was COVID-XX out

we not we XXXX. forecast That's COVID-XX revenue additional taken for our recurring -- the growth have situation, main the XX% we impact. account had adjusted in would an -- into seen this not Had in

whether have this just Fair as whether I now pipeline, verticals, where it. be of the it'd highlight etc. enough. speak strategy you it'd Ramzi, just maybe licensing got if auto, wonder IP I be And of adult wonder both whether are then, Okay, as Great. products. going, well as embarked guys you could could mobility, you've on maybe it'd how discussions Across the if market key those you some PC, be some to

seeing time. on us give little more Thank color a real bit you're you. what in Just

Sure.

for So while general reinforced it's haptics just thank both needed you, World Automotive increasing, CES automotive, design that, customer haptics software support the becoming for the in expertise -- and the to quite very and the marketplace. that need apparent is Japan our in bringing help building from Charlie. and is fact technology feedback reference needed With the that for still is

are needed, around the is our and with our to points can our of more just that forward valuable Continental relationships and proof not our companies patents. is in couple signing quarters So, announcements Alpine and Alps next you technology look up technology more

So, that automotive very the encouraged received feedback we from by shows. the

we Tier have customers about right our i.e., XX% of of license. X of the now, XX% So, TAM

have still just XX% existing talking XX%. about taking on We not existing about to we're technology, XX% go. to also the But the remaining

just the So and to level, the opportunities going at finding not at level. just patent the not -- back patent technology engage

So that's automotive.

I'm the FeelRobotics. with adult, very In pleased

I of several the this our are and after quarter requests the design into well bringing receiving you. as software, Day, patent and As form Shareholder what in have opportunity and wasn't into because help go market as in inbound for in we reason to sophisticated support licensing, the mentioned to last assistance the the technology, just get this haptics at

that FeelRobotics several not is the form leading technology they a news of adult technology of is is customer, to FeelRobotics customers toys integrated provider good technology The which get it in have the single this about in you. space. and deliverables, what just then platform provide in

covers this And a with share customer with guarantee our existing marketplace. it this with whether as this So of and reputation, revenue in market or to our we'll their as sales, able therefore, entry And together accelerate multi-year history their be outreach, and business revenue, our grows. to to reach partnership market. customers or dozens model, this will devices FeelRobotics subscription

company exception continue we a as Electronics. with the far LG to be of licensing mobile, today, patent As

in Android the As a the focus be describe, the to done China. have of the on brings would portfolio. our more past been deals lot that I continues patent licensing. about Haptics side licensing core the This, know, it's covered ecosystem basic have in so you more patent therefore, on

China, of world then Since the technology licensed, this eyes IT discussion the opens has which license patent around and our hobbit up been rest strategy. and the

So strategy therefore, our to this pay closely. and we in strategy to China if see Chinese to outside if China. what IT going is companies the do is continue opportunity. about selling not, very We off, believe there do We're monitoring this that

from believe of don't lot patent a collecting there's market, successful market licensing history China We and companies in outside this specifically within China.

carefully, devices our I than provide resources, but China main that, licensee Android be patent. well and say, remains the as well outside be being them continue we're China. going would our focus technology is So, we our Other given sold technology on as with to LG as as proceeding of our in to limited to

given we approach, and as business. resources a side, holding imminent. of our taking wait-and-see We're that PC limited frugality the of now, are the right nothing kind On off

So, well most resources we're are in our are given is more of where automotive, seeing to continue we much cautiously, traction going but our -- going. that engage, adult which engineering as to as

investment, in off opening are holding to PC. third a so We -- up speak

the housekeeping XX% customers quick for XX-K, potentially. I the wonder just certainly can all the for Excellent. wait We the have year could if for color. for Aaron. Thank note but Thanks. you one you question I

for the Samsung. only XX% is year The customer

want share that now? you Okay. you to amount the have Do

XX%.

how many... Sorry,

Great. so XX%. Thank you much.

back this I'd queue. time, Thank we [Operator have management you. for it further At questions closing no remarks. to turn like to Instructions] in

upcoming today. joining Thanks, in Investor call you, you of New and seeing nice Thank later look to month. York Conference on the Sidoti operator, a for some and thank this Spring you forward this us all at We have day.

call. your today’s participation. Thank for you concludes This

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