Immersion (IMMR) 5 Nov 202020 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Immersion Corporation Q3 2020 Earnings Call. This conference is being recorded.

At this time, I would like to hand the conference over to Mr. Aaron Akerman. Please go ahead, sir.

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

model as of During include future on this of absence include and operating strategies, and opportunities, business tax statements, the as and and of economy statements the impact in make may on operating market reductions, suppliers which or expectations, expense our any projected the circumstances metrics, include other general call, events customers also anticipated forward-looking litigation other products, or financial or or or we COVID-XX expenses, results topics. well business projections characterizations future forward-looking and may anticipated our of litigation, future anticipated demand business our regarding

and ongoing global in of the subject statements especially uncertainties are Immersion. light risks, control COVID-XX the assumptions, of beyond of the uncertainties of pandemic. risks effects and These to these are Many adverse

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

a business information differ anticipated other or update these Immersion date today. results becomes not of to The reflect statements beliefs by by available the Except future, from as as the forward-looking new statements, Immersion's required of this projections law. as in those after materially and mentioned update except even actual to if required forward-looking result the in developments does or occurring release reasons these could statements as law, call financial, on intend any of forward-looking this

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

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

to turn I'll the said, call over that Jared. With

joining listening Thanks, webcast. thanks, the call today for Aaron, us everyone, on and via or

announced we has As important role, left and to take CEO. Ramzi this transition excited appointed earlier have as their company. Immersion, today, during and Board been the Haidamus I support this I'm I for confidence Directors and thank for on of Interim the

of in our Sales XXXX President to Immersion's set technologies because of central markets. in of Worldwide these interaction becoming digital years. is is diverse and and the haptic with essential its recognize to the I adoption joined world, Vice as in strongly the adoption of across June feedback I coming role Immersion grow the Haptic development technologies

our such and sensing the to PlayStation demonstrate controller, dual like markets. innovations, technology Innovations our which trigger this the enhance experience. we here, in haptic to sense Immersion's as X growing target discuss Immersion continues our adaptive in how essential the revenue are active will Sony

new of as our a driving while its customers in We growth done operational on be Immersion to adoption operating the year revenue increased have partners innovations hard the in lot will our maintaining discipline and my term this and work coming forward ecosystem. and going as optimizing focus of quarters longer through structure, well attracting

and and our non-GAAP to both in basis a quarter, strong share generated profitable GAAP are cash the which We pleased flow. third free positive were we performance during on financial

quarters. flow With and in the the operating we in profitability improvements grow our to model, cash our coming expect free

designs, our licensees to share an forthcoming strong Wagoneer, the throughout additional from of our from OEM automotive, seeing on quarter. signs recovery vehicle reflected opportunities In COVID-XX. we customer automotive, on and the and royalty Tier that provide interfaces. market We're like progress feature in new mobile pleased to of segments. haptic an I'd market in the increased X Next, This reports are including and level gaming engagements Jeep will is update

last haptic increased highlighted automotive quarter, and OEM in we both licensee our systems As existing from revenue the delivers of adoption near long term. the base, growth

partners, continue and QX, utilizing Technology, solution, technology DataModul, technology an automotive-grade and Boreas. innovation TDK with invest to In sensing components We touchscreen developed in in automotives. product firmware active reference for and our we collaboration updated our Microchip

solutions easier are Xs it to advanced improve designed for Tier Our performance. to adopt and system make haptics

and the recovery in on now mobile COVID of this of impact the market believe is signs seeing worst also us. market We're behind

our track a our Electronics In mobile we technology of haptic for to TouchSense and software continued renewal continues revenue LG use its QX, multiyear executed Our in expectations. with devices.

to China see also continue China market address to growth through quarter. program partner We this continue the our revenue and

excited PlayStation the XX. we on In remain games, about X launch November

X As a worn-out utilize license a each retail Immersion to X controller royalty PlayStation sense collects and dual will announced, sense of ship controllers. Interactive has Immersion gaming ahead more controllers support to controller, we per PlayStation expect previously console controllers Sony technology. and the over the from than X launch. console are dual replace The already multiplayer time Entertainment and available at

its creative with up These possibilities. the experience immersive new and triggers. highlighting deliver dual gameplay feedback Sony more adaptive features is sense dynamic haptic a open that prominently capabilities

few the able made capabilities Consumers possible triggers. their Spider-Man signal adaptive increasing XKXX, simulator, players experience These accelerator a many pedal feel and on X, are will with will fingertips webs a racing new Marvel's resistance but in new experiences dynamics weight in titles. variety of of PlayStation through advanced players player In Turismo the their triggers. the Gran a fatigues. let haptics. adaptive on basketball the these break triggers and as to feel be will X NBA will

away reinforces "I haptic the the gaming in receiving media from stated and that haptic for dual blown PlayStation by triggers." popular from and feedback and developer X at industry The belief seek innovative VR to Positive will continue website, controllers reception adaptive are the Tom was large the a our technology. consumer haptic excitement Warren The reviews capability news outlets. the great sense Verge, technology he,

In QX, hardware in with the technology entertainment Guimo its Immersion brand. gaming accessories, haptic products and a subs for designer master license peripherals renewed under of its use and interactive of Corporation,

license is innovator terms Immersion are it of is royalty multiyear the typical controllers, steering rates. specialized While which gamepads force is wheels. a unit the per an and on confidential, term Guimo and is feedback based in

commercial forward partnership We're excited to in haptic to collaboration our gaming market. look to continued bringing and products renew

development efforts and process expanded Anders stage of patents, first to opportunities growth the continued I'd Immersion to as a through October. Finally, like update the order XXX establish the to well of standards. as We media implementation recently meeting support in move at to our our next of for progress in licensing MPEG in additional our proposals the software We industry haptics type. on information you presented as products. will

In summary, seeing that I'm pleased our from business. we're to recovery signs already of share COVID across

about opportunities and our standards. We industry mobile, automotive, of are development gaming in excited

We profitability and in third to quarter are have quarters. cash profitability continued the proud and the coming achieved to in look growth flow forward and

the Aaron opening up your of over turn before QX now call I'll questions. to review that, the to a results for With call our

Jared. Thanks,

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

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

gross compared the quarter $XX.X million $X.X million of was profit XXXX. of profit Gross to same in

million the general various focus cost through $X.X resulted costs; XX% as Turning expenses; to cost-reduction $X.X and our in benefits lower reflected in expenses year. reduction quarter and The initiatives, for service operating lower third legal quarter. GAAP million were of from which the on last or $X disciplined our period salaries $X.X down the patent-related professional for the expenses. million comparable lower million million expenses in operating quarter costs as litigation, $X.X well

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

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

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

a $X.XX On net non-GAAP last the compared in income net of income $X.XX the of share per $X.X we million or same basis, $X.X to per million year. share had non-GAAP third quarter in period or

in and As Jared expectations fourth recovery From pointed to our COVID-XX had we for our of quarter the pandemic. signs the out, we across surpassed prior current on that see quarterly are years, standpoint, all the expectations last of GAAP seeing markets, the in to a expect best was non-GAAP our in basis profitability a the the coming both quarters. profitability X.X and performance we our this and improvement continued

and remains to $X.X in XX, our quarter, Let's cash positive million move Overall, our to balance balance $XX of cash which as cash We -- the million generated the of strong. equivalents September third of balance XXXX. sheet. flow increased sheet

by as For share used quarter cash shares behalf. declined buyback the our for and X.X under XXXX. provisional million in LGE due million first XX, million completion repurchase to well ended we taxes, LGE the program as had pay the to primarily months which to equivalents to of Permian $X taxabilities second million, Immersion's of X withholding in $XX.X half on the the But cash September dispersed the of approximately deposit XXXX of $XX.X

hearings cases scheduled and both LGE for Samsung The mid-November. are next for

see generation We coming positive increasing flow the quarters. expect to cash in

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

little your questions and time. deliver bear we as to a process time patience. in take answers please your appreciate We So extra us real with

start to over that, operator Q&A. call the Operator? With to will turn I the

from [Operator today Instructions] first question We'll our Charlie Securities. Anderson, Colliers take

markets. a It's great some to these share on of bit of a rebound see end

First question is on OpEx.

run QX, about think, in I the rate outperformed, year. the you was year then talking you intended but still the you're here So ending

was QX And it a to going OpEx how just lower? sort follow-up. I've to anything And sort forward. drive of relates unique got curious So that of to

Okay.

be QX, a in lower number was So OpEx I our things. drove versus think I really QX understood that your what of question to and

QX. in team We Montréal transition completed our to our

drove We patent optimize and and lower. that had legal Jose QX, so benefit late and expenses patent that. our of the facility salaries well. as our both portfolio quarter consulting QX, our So continued in full fees in natural And San down and OpEx in we sublet to the we

million With the we $XX outlook, leaves And to discipline customer maintain respect financial our add to continued our customers, activities, we room of bottom and maintain of some $XX although to the to to some million. focus to travel engagement nature, marketing will guidance continue line. have on strict some things keep and that that

me Okay. two-part for And the Great. on a markets. end question then

luxury. interesting to the on quarters, design have mid-range last you it's more wins the in some been X guys first, automotive, seemingly the than highlighted So see

do of pipeline? behind about curious X sort feel momentum you talked what's the that like there. in And Just first on there's going these you more

as quarter. relates the of the And in to was interesting it you to the result had gaming, ending it see

you of half was had think in higher the I the last back than quarters either it year. of

mostly potential a and curious you're just there. there. dual And conversations other cases So of halo of was effect going what on in kind out down use coming sense I'm terms from curious customer if having

are better to years OEMs of providing that good even tiers selling first So haptics to because your Jared. for are we tiers. the regards I well, we're the solid being getting -- seeing OEMS, high-performance that, them. this of And there's to the shipping what in licensees seeing we're mean, -- some for have now more selling there's it is that are to it the our at But from standpoint on In yes, Xs that we're though automotive implementations solutions. automotive, high-performance promoting and driven Tier since adoption at question is been all, some of

do they So to a like this lot auto, more can haptics see the they in as telling down they push used OEM, something the push us consumers that drives is down that get that's and tier. that of what into they are the fit features,

expect of that continue to And see so type to we adoption. we -- continue

gaming, as of we're we of effects, growth the just seeing but it's it's as pull interactive also yes, some there's mix COVID, -- year recovers lot so In a a from effect. economy generally there,

go we'll Anthony Next, to Stoss, Craig-Hallum.

things. of curious, I'm was year release. something Ramzi expectations full know on had be tricky of PSX can a the December to royalties you There not Anything to share couple the that the your be guide. on curious in would put in A I forth the going a it's on your number I'm quarter? press to you December guesstimate having quarter. just thoughts guide. owed for

no on or different you're end you're terms going the change after can your going prior go ones plan then, you longer you from what strategy, thoughts different of and are upon to And that Jared, in new maybe that team go expand markets how if management after. either the it's to of your think

the make I'll comment first QX. So on

explicit we're both as said growth issuing any in we expect non-GAAP in have as positive and in revenues a basis, growth our earlier So flow. we in GAAP guidance, not profitability today, on line, growth cash although bottom well do and comments

to earlier, said as to So we are hit. expecting we also we're than I before looking better QX pandemic to QX. forward be And expected the be it

Okay, and your... on I'll follow-up

Go ahead.

a honored going direction the again, management of am basis. so I I proud very strategically, part so in different driving to company on and company. CEO. team, already particularly come from appointed as an strategy, the Interim be have Regarding -- interim not come I to be And the

management We have the -- works a professional together. really that really team and well

continue So to to that going the have. we're execute strategy on we

to automotive and be And development our gaming regards -- And of markets. on gaming. to then things continue to mobile. on our at we're that focus core in to in mobile, automotive core beyond We're we're technology we markets. end basis, markets X those looking and look we'll Other focus continue markets, most going and in opportunistic at doing but do more we're going an then from potentially that, of to will

Yes.

way after philosophically, Just to partners apt same guys if you think you're out go verticals where on distributors in do that's can other are market? that will? an to go you the and have the really are I untapped do mean that's go you route the approaching guys China China think more trying that there cheap, other you that you mobile you after in same

strategy. something So in if I've we sales it. But we currently, is our very approach been to obviously, ways quarter to every there's close this, that to that from my -- role. see other it's evaluate And can continue

I strategy in the under that we review said, want our revenue can serving growth, of as open far always to options to dynamic, take we keep be and that market. other continued China we is, but saw So so terms paths terms but of in consider always we

to look And we'll continue that, so right China focusing that. we're at I but it's now, said, something on as

no any Jared or At hand remarks. conference additional I'll for the Mr. this Smith questions. time, further back there to closing are

you, operator, joining to for us thank the call and all today. Thank on you

in CEO. future earlier, updates Immersion's company. to As drive noted that forward opportunity of position to markets in continue for effort on and adoption calls. believe very I be I I'm haptics look this a the you, sharing excited grow in the and great core goodbye. to Thank our We we're to interim

Thank your today's participation conclude everyone, And for that today. conference. does you all