IMMR - Earnings call transcript Q4 2020

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Operator

Good day, ladies and gentlemen, and welcome to the Immersion Corporation Q4 and 2020 Earnings Call. Please note that today's call is being recorded. And at this time, I would like to turn things over to Mr. Aaron Akerman, Immersion's Chief Financial Officer. Please go ahead, sir.

Aaron Akerman

you conference us call. thank fourth 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 ir.immersion.com. site at Web broadcast live Relations of from call With our new Jared Interim me is Smith, CEO. on today's

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

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

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

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

Jared Smith

performance innovative technologies in poised market everyone is which accelerated haptics buttons, mid-range pads But high consumer only in is premium to Immersion. the experiences via and high-definition X well adoption to Thanks, market Haptic of be growth an user next VR, for PlayStation just in products we the actuators as enable inflection. is the performance and DualSense entire emerging and call content, Aaron. smartphones automotive exciting Consumer Samsung And volume in controller, provides offer and the of also In environment. touch by thanks the touch inflection today and in In Haptic critical for these for is not established driver Sony across improvement improved Haptics virtual joining flagship level fully the a And advanced segment. of sense time an It's models. displays continued cost in technology for market delivers consistent is haptics market haptics not the the and XXXX experiences. poised listening demand that premium are of gaming quickly most us improved one experience. consumer now for applications believe on user the Apple adoption. to touch accelerate driving as this is cars year webcast. performance, in which and the being that immerse leader embodied or

also are Driven appliances. by nearly equipment as technology XXXX. used is billion medical such as in and for reach both and used market well cases new as growing markets, markets New industrial growth markets the consumer cases forecasting IDTechEx to in Research $X household in in in haptics

hardware basis our is we last pleased quarterly discipline. share cash We result positive free fourth the profitable the financial GAAP with highest structure quarter, the in We optimizing and to strong to organization both were in our performance QX the across in This fiscal flow. and in XXXX. due achieved non-GAAP operating are profitability and five the years on of continued generated the exception continued

on our Next, mobile the progress I'd driving and Boréas. and to in an progress provide automotive, update Microchip TDK adoption of [indiscernible] made like In automotive, segments. last market we our industry gaming Technology, strong quarter,

to product easier adopt system and it Our performance. haptics kits improve ones development for tier make

support, and underlying license. file, design software, provide an kits Our technology

HDMI, Over expanded the this select based technology making available hardware on by customers past touchscreen and to evaluation units prototyping for design purposes. program our we month,

We to shipping customers. have begun our first units hardware

the enabled innovations. of We haptic our development our companies. the one materials latest Under announced world's product agreement, providing The referenced multi-year haptic customers our develop access leading integrating footprint interfaces, license expanded to recently and our licensed user we technology. agreement technologies earlier. to with partnership Faurecia, commercial advanced excited about with solutions, Faurecia are tier one including I our Faurecia automotive also interactive I'm the especially of technology

to Limited, our licenses automotive addition license in agreement automotive In supplier Woory we also The Korea. for touchscreens. recently Company leading technologies announced multi-year a component Faurecia, agreement with a Industrial

and on favorably the as we're PlayStation interfaces growth vehicle. keeping successful customer adopt DualSense innovations of look the announcements with you for Sony it's Our OEMs transformational continued X positioned haptic thrilled throughout to new these continued gaming, us In technology forward partnerships. We launch and the controllers. updated

as X PlayStation report and revenue our It expect expect each than more for to continue received the and emergent As X and will the controller the haptics, and QX, and quarters to interest positive in partner the the and in as platform and support line we and console seeing catalyzed agreement one customer multi-year Interactive Entertainment time highly and increased over years DualSense well utilize very fully peripheral advanced licensing game collective simulator to Abtivan, dynamics. across gaming ship from merging Sony which licensee engagements. in technology, ahead. controllers expectations renewal previously that market we controller feedback we with first shared related of multiplayer reception offers in for market our The an out our royalty controller and replace Abtivan In PlayStation DualSense was utilizes the DualSense to flight worn industry, the be a our equipment. gamer in executed controller has driving realistic a racing successful of and OEM controllers. force immerse haptics controllers our royalty steering with QX. we're wheels to We recreate is

and also to athletes, provider value new Our products gaming excited customer and up I'm of recent brought SenseArena's Haptics training improve has products And deliver to SenseArena VR license a possibilities. and two VR for performance. experiences. VR technology feedback reaction designed opens time wins. with to a share to realistic multi-year executed tactile relevance highly enable technology We

off platform to wins X available gaming VR We with is peripherals. consumer experiences including recent license technology capabilities. belief opportunities will trigger for VR. customer that our popular VR immersive also peripheral positioned VR platforms in technology and StrykerVR future We're our the multi-year and The fully validate announced market. upcoming use start great we utilizing on to This and well PlayStation OEM for and tactile high-end are for our excited be about realistic a gaming with our deliver and growth. game a is StrykerVR, a effects, peripheral for

XG revenue behind market. models China's program portfolio in our in shipments continued achieved ahead. designed support for mobile, believe recover highest progress beyond. our largest COVID the positive for see will strong over month and perspectives Turning QX earlier signs XXXX. an of continue recently a licensees smartphone program with we pleased including to released demand offer licensing expects address its a is market our in haptic have This our updated recovery earnings with our the market its also new provider, belief smartphone Samsung, These call to worldwide commented sales Gartner, This partners XXXX to years Immersion's ever will reinforce enables it We're pre-COVID-XX and one to to mobile QX. to We its impact worst smartphone level. driver select ICs. XXXX that that of outlook for Awinic a research to leading XX% the forecast program conjunction in grow a predicts us. that channel this patent and business of license channel with

of industry of this mobile with As we leading as long-term opportunities development their the part systems of announced Last expanded in growth future well continued standards portfolio committee and adjacent value to advanced of development and that strategy concert efforts our in drive support our adoption of week, the television haptics implementations standards. our In through markets, support we patents, trusted long-term Global haptic strengthens known will Innovator row as are advanced as for the ATSC MPEG, to mobile of year recognized of haptics on a in by licensing top second ATSC products. software haptics broadband practice in as on XXX providing The on was content Clarivate, enables a intellectual broadcasts practice devices emergence and insights and research analytics property. X.X proposal our recommended ATSC haptic streams of leader X.X. Immersion addition as a a recommended published capable for feedback. in and the the IP

the optimized Over process past prosecution on maximize patent and our research we've investments. return the our year, to

core summary, are issued and very about media, haptics across use and as our markets relevance Over VR. positive gaming, trajectory are grows the core in more and excited in the had we opportunities streaming quarter, initiatives, importance and the we've to ahead related In our patents including of on beyond. haptics past a

We have achieved profitability optimized our sustained structure. operating under

XXXX factors, As for call all to percentage your QX with call a review in to entered the to results up of before opening double-digit a revenue our now these growth Aaron momentum and turn I'll the deliver result of over we profitability. questions.

Aaron Akerman

Jared. Thanks,

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

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

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

assets $X.XX share our $X.X GAAP our a Looking of XXXX same GAAP of allowance for results, to from foreign of million benefit compared quarter tax one or of on per of valuation XXXX. $X.XX quarter resulting diluted income of included $X.X fourth a $X.X was or quarter the per in relief diluted XXXX the of at the million fourth net share, the income income net net tax million for GAAP net entities. deferred

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

million, tax the we reflect and In the income income QX license reminder, last X.X million, expenses. adjusted restructuring non-GAAP income diluted per cash based a XXXX, $X diluted quarter fourth the recognized. profitability reconciled or we income fee depreciation arrangement in or stock the last net GAAP was From non-GAAP non-GAAP basis, had less a quarter As the and a basis, in which in to On define as of to standpoint, GAAP QX best compensation, $X.XX net a of per net significant exception non-GAAP same fixed expense, compared of years and with net five $X.XX XXXX the share period was year. both share.

pointed Jared see fiscal in out, As basis non-GAAP growth to percentage and double-digit a we expect XXXX. on profitability

Let's million sheet December the XXXX. total move operations the balance fourth of our remains by to from under $X the strong LGE declined behalf. withholding Cash balance provisional updates the $XX.X tax which tax in cash of due X.X program, million Immersion's quarter sheet. million equivalents to share approximately in as South cases buyback our cash have in last million shares deposit the to no from Overall, Korean to and pay XXXX mid-year generating million taxes, made to the for of million been repurchase flow of use after of since There $XX.X the cash on $XX of half million and XXXX, $XX.X call. we to XX, first with Korean $X conference had the authorities fiscal LGE material

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

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

Operator

Instructions] [Operator Stoss we'll Craig-Hallum. you. go Anthony Thank first And to of

Anthony Stoss

quarter. Nice

lines? take you if wait curious give But a three get production an can us on new is what Samsung, there auto. those do of expect play. the penetrated Samsung? several sometimes into all a us designs on through is auto. rattle-off secondly, across to when then, kind these follow-up. this I'm more know of I one or And wins the for guys of cadence understand, or you call, you lot after you sense product rate And a or will years just you a You completely with were penetration understanding growth in four two, have past the you're Then of I can that cadence come quarter during additional auto And maybe had do on auto for to you you if high-end. win, the My

Jared Smith

at always a the we in on or few the can in year depending be the if with the of seeing time to but revenue can as -- soon revenue us year, the as isn't and following So the they of auto, cycle, are some license in right case. terms with cases, executed. they're you're design years working our be some when And their cycle and in in they they're newer very is front-end that of how where timeframe design one when licensees,

somewhat. varies about that So

And and -- an do the next automotive, year benefit particularly you'll we and been continued we'll Without agreement, then the as your was up will licensed signing are see product of their the details this on So particularly see that the see discussing essentially question that the line. growth picks in area. second auto acceleration we after mid have range of you'll licensees in Samsung. they then year smartphone actually the adoption see all acceleration across

And across And from cost. low-end in high-end our so particular used market we just the segment. cost in to licensing IP just aren't in general one is

Anthony Stoss

found industrial related first your are give I the up. most talked medical, market? maybe more appliances, what touch what this go Can up, you brought be comments of follow a talk household ASPs think in the case time with as haptic feedback, the that you've the past replaced to can perhaps, about is think new guys depth the then, use in I just but markets, And interesting to think was about I a scenarios? in or and mean, I appliance the do will of mobile presume, buttons us similar but I you you you household

Jared Smith

buttons being early it's mentioned question. you So great that's And touch a replaced.

of with devices. smaller screen up just it showing or it's we're just on printers, washing One seeing small trends And that devices a not interestingly, large big it. or be even can on touchscreen, refrigerators, is generally, the machine,

And to just haptic so to a in experience. successful on may not touch the actually those where screens the getting confirm getting interest today, we're user that touch feedback it seeing they're exist

segment, in you've you response with lot see actually And devices. of screens of these, ever you're sure screens cheaper, used yourself not if screens -- and gotten whether of growth and touchscreen. so sometimes a have more you'll a in that the as successful more the on course, showing these these you specifically they're panels tell can cheaper and get up And

so you well. drive made comments adding about And that if actuators cost as the that haptics those haptics And and I in improved It applications, it's to market well. as that performance drives that. in recall helps

want with to those you're follow In on larger we higher quote ASPs, mobile. go than automotive be mobile depends would have see those I and larger compared terms compared it higher trend volume. typically, to of yet. talked screens applications, it screens, particular, to with don't in you similar also in specific numbers generally those, going and the to mobile But as ASPs and about to as the that ASPs in like would

Anthony Stoss

up being appliance the this here? Samsung, Samsung customer appliances? likely go in household to the in side your it side, assume biggest just and and revenue makers. that, a perhaps for Is is of to biggest you potential customer just they're clearly, year mobile as household Just they're Could that, follow fair appliance the generate one beyond

Jared Smith

licensees some that broader types could on appliances products product in category. But currently specific would that already, that fit are are have other we and haptics categories can't basically comment I of and into there So, using customers. certain

focused That other question. when anything still of one to is when But customers eye with at mobile not the the that answer other of engage think to It's primarily. or this new on We're we would keep return. markets, the increase. really clients from those we then that it's an general revenue, to that meaningful that or markets. gaming talk are we I about to new interesting the because our when that more automotive, we terms In and these arises be seeing markets these my opportunities don't year of core adoption focus see start they we a on market expect we and look mentioned that reason have need about

Operator

next our from Derek And from will come question Soderberg Securities. Collier

Derek Soderberg

just the about you I'm the think, Jared, think customers, think And royalty curious, Or going it in content I feeling how rate more going is that you that pricing follow have PlayStation? a value sort then controllers you gaming with line new that X to lot forward, do you PlayStation overall, to do with brings? similar the deal, the power up. have of new a you're of

Jared Smith

Okay.

So something Sony has happy of consoles. record very to I'm Sony economics I'm the And feeling and period in long that good about. their the a license certainly And volume. track answer scope strong they with about your very potential the the high question, time that's a and and over shipped

very I'm So that. excited about

in good range value And different of see there. what market ASPs that see ASPs Controller I in volumes peripherals we of presume depends In and that, it there the a controllers, terms what currently. those manufacturers, would you on capture But do vary in which mean mean about. higher are other presume, like that's peripheral other is we particularly and many higher you the exactly of, pretty game certainly types, that they ASPs have. I you're talking I

Derek Soderberg

to have something wanted do add you I else? follow-up a unless

Jared Smith

go no, ahead. No,

Derek Soderberg

X.X you guess And with, Yes. year OpEx I the around exiting million. Okay. guys are then, Aaron,

and these how where OpEx support today levels, the should curious laid at out Just in you Thanks. mobile? about think they're levels, can you guys that have and some gaming of we at initiatives

Aaron Akerman

Yes.

a that. OpEx XX that visiting room We're business marketing the XX. feel that non-GAAP provides sustain we disciplined So and below to and OpEx between between spending in of continue things But run said, we business believe, previously way increase as on to little particular customers, at we've for currently ample additional the can bit a some programs, we that nature.

we sustainable level that's So us. continue to for the believe

Operator

any question-and-answer that that, would back like our to does for presenters And turn conclude session. I call with comments. or additional our the closing to

Jared Smith

you core We're our call We progress on thank this company. and today. future calls. drive excited operator, and well adoption in and our on this effort for sharing goodbye. forward financial markets, all with I'm you grow us Thanks, to results. and to you look Thank haptics very of our of continued continued positioned joining updates to the in

Operator

and participation. ladies that, We'd does today's again that with you thank And gentlemen, your for call. conclude to like

may disconnect. You now

Immersion (IMMR) 5 Mar 212020 Q4 Earnings call transcript