Immersion (IMMR) 8 Aug 202020 Q2 Earnings call transcript

Good day, and welcome to the Immersion Corporation Q2 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Aaron Akerman, Chief Financial Officer. Please go ahead, sir.

Good afternoon, and thank you for joining us today on Immersion's Second Quarter 2020 Conference Call. being from over of the at also can web our is ir.immersion.com. accessed be Investor call broadcast the live and website This Relations section Ramzi on President call me is With and today's CEO. Haidamus,

expectations, the statements include or our may business tax we on subject and and on well uncertainties in future especially statements, anticipated expenses, include of characterizations litigation our call, this COVID-XX to future customers in anticipated the demand and assumptions, as also the projections circumstances and ongoing impact Many control as pandemic. make light other market and the expense During or these These or of our or are of of opportunities, reductions, risks other and regarding general litigation, which suppliers adverse the forward-looking projected operating uncertainties are economy of may Immersion. business any statements anticipated the results financial global events and metrics, COVID-XX effects of of strategies, business operating include risks, products, absence model of future topics. beyond forward-looking or

law, detailed U.S. the more a file the its that of quarterly update cause report law. mentioned except recent intend statements, interested in results these today required issued update with information by developments financial, most as those results on or statements this in and annual from anticipated result factors Immersion's if these after discussion actual and and differ The call which could this any and listed materially, by even the as forward-looking XX-K other on available beliefs the report Immersion's these today. are not reasons Except to parties press XX-Q, as XXXX close, date on Exchange forward-looking future, predictions to forward-looking could materially on for Form or to new factors the vary release of risk Form as occurring review becomes business Commission. we Securities release other of of actual statements does should factors a the For in after market reflect Immersion required

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

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

joining new of development webcast. lower made today Thanks, strategy and on and about industry achieve thanks, our to profitability. the and standards listening call product for us or the sustained via operating expenses, technology, we've everyone, Aaron, I'm deliver excited executing progress lead

implemented fixed fee $X.X with relatively primarily model has quarter revenue as in impacted been further our we to revenue, down year-over-year. in was which I'm the and objective by in we current XX% $X.X revenue. year. last of stable same revenue which like business million This Immersion, environment. operating the negatively reductions of by for resulting quarter, improved align to quarter, COVID-XX significantly cost most companies, This total was a grow, recurring was the from strategic pleased driven that to million note decline a the have COVID-XX,

the are recovers. economy I'll as As positioned growth further, discuss we this for well

to We've year over current the toward and our remain reducing We Jose services. and such million achieve very second with the half management lower in expenses. reducing year. personnel facility; have past additional we to $XX operational San portfolio; this this environment exiting are where reductions share continued improving our future, We expense Montreal, make spent strong confident disciplined our our by expect our and also We of objectives by as patent working progress through to efficiently resources year. shifting these costs of expenses; the in repurchases other more efficiency operating litigation towards managing as expenses; professional demonstrated economic reducing

of investment and opportunity driving of the aligning with goal our to decisions As all part resources to initiative, evaluate the continue efficiencies this functions. we best in

Our progress these the in objectives. results second demonstrate quarter against

non-GAAP we the reduction During same operating expenses. a an period last the million to compared quarter, improvement improvement total an income, in $X.X million non-GAAP $XX.X in of year, $X.X million achieved operating and in income

with in strategic few change concert of to towards thank generating her Directors years. maximizing of expenses for the This cash brings Board to would free Chairman, direct Holt, will our We goal to making appointed our continue free Immersion's initiatives I value, Chairman. serve on our are role. focus Executive Singer shareholder profit, Board, can generating In the annualized many cash to on we our our like over and past total significant meaningful representation flow. Eric believe Sharon and continue reduce sustained line and shareholder as progress our and operating with leadership and has profitability contributions previous recently her flow

our is market, to the reduced vehicle in resulting and the update gaming automotive, and shipments impacting mobile progress near Next, in market automotive of like an I'd term. activity provide in the segments. COVID-XX

current and engagement supplier. the the haptics Last of X with stronger on automotive. is strategy Immersion We in as remain building Alpine, our however, quarter, awareness of design we the vehicle. and the the will adoption Despite as technology lead highlighted We're emerging customer leading decisions software Alps teams product value interfaces recover throughout expect, Tier and solutions. well automotive greater example, our by for a market confident product gradually environment, new who in technology XXXX with resulting after investment of

OEMs also haptic their importance systems that demand inspire our X generate highlighted for of licensee. design, engagement the We our with from Tier

EV that I'm quarter, integrated crossover Nissan announced This Ariya controls. vehicle recently pleased with its haptic to new share

as to future One from from the providing the the negatively though license This opportunity COVID-XX, beyond in licensees systems and the in is proliferation has we brands. Nissan of X quarters will haptics grow believe will and haptic of into it our as revenue receive mid-tier recovery the Tier by systems vehicle, well tier also from Ariya. – automotive The royalty existing impacted the vehicles the suppliers undergo ahead. market illustrates our a Immersion mobile luxury therefore, existing been for

recent it stated in of half gradual the expects in its devices second Samsung earnings recovery a for announcement, As demand the in mobile XXXX.

with of Our this line half was revenue in the quarter second expect growth year. we expectations, in our the and

to up We gaming. stable this stay-at-home the to quarter-over-quarter. for continue more China flexibility providing partners address and COVID-XX market, market has time games as and from our our resilience been with program is to the revenue work channel more effect opens The

unit to the holiday PlayStation COVID-XX of will continue release materially the impact X shipment. believe do anticipate upcoming not We negative a with Sony season on and have

it Interactive time reviews multiplayer replace had more gaming as Creative the the will X, hitting belief recently developers advanced and the access. over in value will and products. Entertainment DualSense's time, worn for sensations each a an console PlayStation reinforces than and enables pursue from getting that deliver to first Sony VR and Director utilize PlayStation called DualSense haptics controller we announced, the previously are and to other that collects DualSense others games validates haptics support the upcoming other noted on particularly gaming advanced has license to, the one This materials. our controllers surface of and controller, capabilities to exciting in feature X game technology PlayStation X catalyze out who Immersion of our expect technology. The a rave ship As new royalty from Godfall, and controller a out companies controllers. haptic and Immersion the capabilities weapons per more early of The weapons

new effect space dependent XD and continued generation was such XXX systems content, Our innovation recognized rendering offering content, effects in patent haptic titled which in also covers for VR and VR video. as issuance degree, for of and in video haptic the a methods

our electronics to of and licensing this software that known and as group, sector for ecosystem. improve proposals that in products. lead haptic can field. gaming as technology the as Systems the Standards our submitted continues QX, and ATSC Advanced believe Committee, standards. development expanded growth picture devices, haptic across Television creation patents creation, between Both playback proud haptic on through Immersion Immersion our enabling grows touch organizations are support markets, the We leading want standards to known delivery multiple are in innovation content MPEG experts I mobile, In team proliferation of moving interoperability standards our broader MPEG. also implementations to well consumer as ATSC, to the and across and We progress will VR. format including define continued opportunities in exciting and influential media

including devices, haptics incorporate online protocols range procedures and Our of smartphones a proposals to the distributed and and specify into to broadcast tablets. needed

type optimal We're proposals generated device to passed and phases and the personal the towards and initial the interface have ATSC have excited preferences. proposals MPEG. viewer's both designed based on Our first are user that support in an standardization deliver our content,

that, addition, newly companies. seen haptic industry participants Immersion, technology our includes and we've across our call of we've efforts. The demand challenges questions. our improve to validates to about the now and made financial of review an XX encouraged up dozens interest opportunity COVID-XX, In like ecosystem, industry progress In technology And to QX standard your support the formed summary, bring opening together designed navigating our before due the and a for with face forum, through excited to haptic over I'll results now to in these leading leaders representing execute call lead overwhelming Aaron turn while QX and environment I'm uncertain others, by performance. our strategy to for the

Thanks, Ramzi.

fee second Recurring two of XX.X% in onetime license represented XX% in quarter. quarter customers the regarding arrangements $X.X by unit X% release in total revenue the basis, Let mobility of quarter last prior this XXXX. compared revenue revenues year. $X.X from was versus primarily quarter QX $X.X million million press were fixed with the in a second license down last the the million gaming of information from Total performance. year. million revenues fees year afternoon's down $X the comparable per second revenues recognized XXXX Revenue you of royalty from of to or to down referring our me XX% arrangements financial approximately begin due from and Revenue second quarter for in of for was XX% quarter on

mobility, X% Gross compared gross of of quarter XX% quarterly revenue business fluctuates million a breakdown each of profit was mix typically and as XX% by gaming, patterns. quarter, second for $X.X XXXX. same for follows: automotive, $X.X from X% the line And profit as revenues of to million seasonality percentage the total business in was to Our from from a line due of from others.

million comparable lower quarters. benefits and the period million managing further of operating were costs; year. continued quarter million cost our in professional of quarter litigation operating Turning the reductions $X.X down service focus GAAP various in expenses With disciplined from The well second costs to OpEx report reduction XX% last for the passenger-related for costs; our and we which difficult from $X.X resulted our reduction quarter. expenses. this lower in structure expect on reflected quarterly the for focus salaries $XX.X cost or $X.X level expenses as to on in lower expenses through million initiatives, our coming as $X.X times, in these the million

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

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

share expense. As loss less non-GAAP income expense compensation, basis, year. to a tax loss last net we same second or On million $X.XX the positive reflect compared net non-GAAP depreciation stock-based share as of net $X.X to adjusted income million $X.XX net quarter income a of cash loss we or define per restructuring per reminder, non-GAAP $X.X in and in had the GAAP period

our expect continued to see the coming in We on a in profitability improvement quarters. non-GAAP basis

X.X driver One was in a strong reduction December the $XX.X repurchase as million key of XX. ended and to with the of shares Overall, XXXX. the we months share equivalents million remains reduction balance $XX.X million buyback program June total from June of to million XX, under as six our $XX.X XX, $XX.X the cash completion of cash of Let's cash sheet. the sheet which balance our move used million

approximately on $X mentioned call, April deposit withholding tax on quarter's taxes pay as to Immersion's of to provisional X, we the authorities a made of Korean Secondly, on to had LGE last earnings million behalf. LGE

the by Korean issued Samsung to valid noted borne tax and in appealing filings, July to costs in the ruled claims the which As That ruling our its in said, ruling XX, that LGE on we in to tax tax are high Korea were these believe the both canceled court. penalties, taxes raised August On their authorities the of previous formally administrative abilities. Korean withholding there court Samsung such it in the which and our some be the and we are that court. Korean the Korean by defenses authorities with the by imposed case to Korea appeal entirely Korean litigation should indicated be X, have authorities intention the tax cases,

we to total the the and uncertainty positive already impact we the tough our committed the business and the the practice advancing predict generated operating growth structural flow free provisional to basis. a the remain second decided for providing Excluding to efficiencies. us to continue flow deposit, the improve quarter made to business operational our program we decreases changes positive position of the initiatives in significant quarterly current from our suspend and XXXX cash in for and the inability expenses operations despite to full to environment guidance. in the Due of stock The advance LG in of coming have to buyback continue our course generate environment. have on pandemic, profitable expect goals We quarters cash to of efforts year-over-year in

model. expect In continue to progress quarter in to on long-term as our addition, profitability operating we make we third the maintain

the in year prior period. down Our $X.X non-GAAP million, million quarter was $XX.X comparable OpEx from for the

to exit million non-GAAP OpEx $XX the of a with expect run and between $XX annual million. We year rate

the all questions, in team the Before call for the locations. and we support that circumstances, open separate note to up I'd like and are given Ramzi I

in So will time call us Q&A. deliver your I please you start questions bear appreciate We patience. Operator? a the that, real to little turn process answers time. with that your to over extra to With and operator the take

Instructions] [Operator We'll Capital. question Thank from Craig-Hallum you. take Stoss with first Anthony our

is this guys, Hey Mason for Tony. on

impressive couple work First, just stuff there. production. of great say to Really me. wanted on the questions for A

Sony you just is to full-on PSX the are got on one big PSX of follow-up reception you've And and customers features, deposits, features. interest compete the to remind curious on as then your positive seen Immersion? about you First, with controller overall Dualshock the that, gaming looking haptic And thoughts if for after. how that can opportunity us any from then talked I've with other more the a

for haptics up. – devices from third-party are we controllers that do high-definition and those the haptic Sure. based second do – in that at will solutions follow. will higher guidance customer in shipments will We the to – don't also a the interesting COVID-XX – to believe lines, know break contribute we forward-looking expect in as controllers. into competing revive out meaning will question, stated we individual And on revenue said, to types it meaningful well become more beyond. experience script, the see materially have We we're the forecast and entire for of believe QX of X impact that expect don't PlayStation potentially X have it providing controller and and the and year we this provide from haptic much We time. becomes it's their PlayStation your on experience, COVID-XX. negative coming providers to those know But And this time. handheld positioned market we And as on interest market revive – along not their yes, a our higher, devices to bar book

can you forward? the on incremental side your of you without then And with from Thanks. you've here me. leverage revenues grow you that expense for do Thanks. the costs much it any model, the all going about How just talk That's expenses? taken Great. out can adding think

patent reductions of concert to So growth G&A our and management cost of to moving technologies in to the more positions committed have The been areas some products with litigation, deliver we Montreal. remain the continued support efficient in strategy patent portfolio, to new and licensing.

the which same research our back one development, that And for scaled not and efforts. of sales have delivering the is We goes strategy. of cornerstone

engage sales We impact have customers. to team with an that continues

we wins believe pay starting off, the quarter as to be and this overall, highlighted of and our continues in in you anything last by some So question? strategy to did Aaron, add intact design to quarter. to that want

No, you said it exactly.

All guys. right, Thanks perfect. queue. in back hop the I’ll

question Securities. our take next Colliers you. Soderberg with Thank We'll Derek from

start with of sort off build on the to the I X. want PlayStation previous gaming, question

launch, positioning Immersion help relative console X And So maybe Immersion's those past. benefited you PlayStation the relates from to content as us the can it refreshes opportunity launches? in historical to has and understand

give too is what here? can without overview an you much your into license confidential I architecture certainly that getting of Is question details. the

would nice. That Yes. be

nice Just launch ones your in – this get I it the be guess, to, would thoughts on past. versus the

Sure.

So I already, you we the all related of the I say generate just going that – sale I don't to to when regards content mean we say this from just highlight, related It's we to revenue any know certainly Sony. to want hardware, gaming. think to content, with first

outstanding will pretty to significant hard words, getting where the we're same it the improved and be the that want maximized. surround experience I at graphics thing video, done and of far. other so for starting in experience all the a amazing believe device. the that aside, quite increase of to Sony much game consoles importantly, other that PSX. question so it's interesting focus mean get wonderful there the you is so know PSX But kind that and around And in quite are it do We look what controller done it next, an put focus been over with the believe more that idea this haptics. far. by the just point to the and we platform, haptics. go sound is that has I It's more has platform being to gaming the how years. increase which has a technology taking And of see an much delivering to third a messaging to experience. immersiveness previous a why has where it of immersed experience just on is Sony of was how out you amount. therefore, based to experience you haptics And But the In experience substandard clarification. is an haptic That much Sony the job an game. is on is relative extra that vibrating coming It's IP. feel we marketing immersed much on been is of kind content with gets So What incredible that

whether is brand-new the it, first actually actually So was Sony that that developers, this a believe a going you And kind or you're kind differentiated singularly for paid game have where revenue. quoted because that feel get types a if experience, excited touching, of a That you very about of but a one is can VR with worn these for believe just and a surface. And vibration, the have doing you for or these time us. buy out, as is feeling, because Sony you the but of up is be either the this, different source controllers, will different is you second believe one experience we And the we hitting forward. that will and later, you revenue we be not know, surfaces just as continued taking additional of hitting going one controller of just a standard somebody kind one your this weapon by they source are you of by – can we're because haptics. every norm playing end of off, the get the controllers is to whether be of or not

as question, well your very very it to lot the a that third-party excited So providers. monetize on we're positioned We're is through content because to emphasis answer of haptics. exciting side, well as there's

Great.

would per I safe around the be So assume to I fees, time license it would launches guess, be that controller greater? this prior relative guess, to

controller We're on discussed terms all. not under so pricing Sony, at have the that. can't with per comment I We really confidential

Okay. unit And you lows, sales can recovering vehicle geography is That's and your remind that type? sort fine. in per April us now terms in automotive, are then where exposure of of off

vehicle which type. By our nor across vehicles Xs, pricing the peers. and and does sometimes different go We that doesn't by fell into products change geography large, that create it Tier across change

pricing Xs Tier simple, we make request. to also life their straightforward, So a fairly of fairly the have and straightforward that's our on

many product, $X what considered in be, a to say, side mean it continue ad, that's product, to depending on licensed products track could how product per $X let's enjoy And the one We that's car, display, from ASPs are or a the another for by example, car. license panel. I in buttons

the and So therefore, across range to in pricing most car. car. you have you geographies royalty where pretty basic vehicles. the might and are $X Those most that its types in $X.XX somewhere how across of can be to come many a you have of these In of depending a see car display around per the standard form, tend on instances additive,

your of can with speaking, right your generally just then is And you where expand now wins? sort on exposure Okay. geographically

about Tier we currently, So of licensed XX% have X.

progress our Audi, Tier supply Mercedes, our to system. in others. has Tier Xs Lexus of a the very good OEMS, in in additional Therefore, and majority range to systems X ship That haptic are getting technologies shape as head where and haptic, we we're haptic companies of OEMs. in the a providing vast them terms position pipeline companies said, including designing So seek and more to of ends BMW,

push our license We to haptics, drives adoption so to of directly OEMs the which also suppliers. – the engaged demand

will Nissan as good making pane interface, Mercedes progress, XXXX and you in MBUX S-Class. new large are which evidenced the Ariya by We give the

between and spread this moment. evenly U.S. So we're Europe, fairly Asia

Thanks. Great. appreciate the I color.

Sure.

participation. appreciate today's concludes This you. question-and-answer your session. We Thank

disconnect. now may You