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Press Release

Jul 30, 2001

Immersion Corporation Reports Record Second Quarter Net Revenues of $4.2 Million, an Increase of 43% Over Q2 2000

Immersion Corporation Reports Record Second Quarter Net Revenues of $4.2 Million, an Increase of 43% Over Q2 2000 SAN JOSE, Calif. July 30, 2001--Immersion Corporation, (Nasdaq:IMMR), the pioneering developer of sensory interaction technology, announced today that second quarter 2001 total revenues were $4.2 million, as compared with $3.0 million in the second quarter of 2000, an increase of 43%. The second quarter 2001 revenue was comprised of $2.7 million in product revenue, which was $1.5 million or 115% higher than the second quarter of 2000; $633,000 in royalty revenue, which was $342,000 or 35% less than the second quarter of 2000; and $864,000 in development contract revenue, which was $154,000 or 22% higher than the second quarter of 2000. The royalty revenue decrease resulted primarily from the inclusion in the second quarter of 2000, of a $588,000 lump-sum royalty fee. Excluding the lump-sum fee, royalty revenue in the second quarter of 2001 increased by 64% as compared to the second quarter of 2000. The pro forma net loss, excluding amortization of intangibles and deferred stock compensation and acquisition related and other charges, was $3.6 million for the second quarter of 2001 or $0.19 per diluted share compared to $3.7 million for the second quarter of 2000 or $0.21 per diluted share.

Total revenues for the six months ended June 30, 2001 increased to $9.6 million from $6.2 million for the six months ended June 30, 2000, an increase of 54%. Revenue for the six months ended June 30, 2001 was comprised of $5.7 million in product sales, which was $2.7 million or 90% higher than the product sales for the six months ended June 30, 2000; royalty revenue for the six months ended June 30, 2001 was $2.1 million, which was $272,000 or 15% higher than the royalty revenue for the six months ended June 30, 2000 and development contract revenue for the six months ended June 30, 2001 was $1.7 million, which was $357,000 or 26% higher than the development contract revenue for the six months ended June 30, 2000. The pro forma net loss, excluding amortization of intangibles and deferred stock compensation and acquisition related and other charges, for the six months ended June 30, 2001 was $7.0 million compared to a net loss of $5.7 million for the six months ended June 30, 2000. Pro forma net loss per share, for the six months ended June 30, 2001 was $0.38, compared to pro forma basic and diluted net loss per share of $0.33 for the six months ended June 30, 2000.

"We're very pleased with our second quarter financial results and the progress we made during the quarter in our various business groups," said Bob O'Malley, Chairman and CEO at Immersion. "I'm pleased with the Company's revenue increase of 43% in spite of the difficult economic conditions in the marketplace, as well as our ability to continue to manage our costs down as we move closer to profitability. Our second quarter was important to us for a number of reasons including, the announcement of plans to produce TouchSense enabled mice by multiple mouse manufacturers, including Saitek and RCA, the product launch and success of Logitech's GT Force product, the first full-featured TouchSense gaming device for the Playstation II platform and the launch of Immersion Medical's new Endoscopy platform."

About Immersion Corporation (www.immersion.com)

Founded in 1993, Immersion Corp. develops and licenses advanced hardware and software technologies that let people use their sense of touch to better interact with the digital world around them. Immersion's haptic technology can be applied to virtually every digital experience including personal computing, entertainment, medical training, automotive interfaces, and three-dimensional simulation. Immersion's patented TouchSense(TM) technologies can dramatically improve computer users' performance and productivity by unlocking their sense of touch and allowing them to feel what they see and do on the computer screen. Immersion and its wholly owned subsidiaries hold over 100 issued patents worldwide.

Statements made in this press release other than statements of historical fact are forward-looking statements, including those that reflect management's current forecast of certain aspects of Immersion's future. Forward-looking statements made in this press release are based on current information, which we have assessed but which by its nature is dynamic and subject to rapid and even abrupt changes. Immersion's actual results might differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with Immersion's business.

Risks and uncertainties related to Immersion's business are further outlined in Immersion's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. These reports and the registration statement are filed with the Securities and Exchange Commission. These factors may not constitute all factors that could cause actual results to differ materially from those discussed in any forward-looking statement. Immersion does not undertake a duty to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

Immersion will host a conference call with live Internet broadcast on Monday, July 30, 2001, at 5:00 p.m. EDT. Immersion is scheduled to discuss operating results for the second quarter ended June 30, 2001 and the full year 2001 outlook. A question and answer session will follow. To listen to the call, dial (212) 346-6392, reservation number 16836331. To listen to the webcast, log on to the Internet at http://www.immersion.com. The call will be archived and available for replay until August 3, 2001, by dialing (800) 633-8284, reservation number 16836331.

Note to Editors: Additional background information on Immersion Corporation is available through our Web Site at http://www.immersion.com.

                         Immersion Corporation
            Condensed Consolidated Statements of Operations
               (In thousands, except per share amounts)
                              (Unaudited)

                                Three Months            Six Months
                                Ended June 30,         Ended June 30,
                             2001        2000        2001        2000
Revenues:
 Royalty revenue         $    633    $    975    $  2,122    $  1,850
 Product sales              2,739       1,275       5,746       3,026
 Development contracts
  and other                   864         710       1,729       1,372
   Total revenues           4,236       2,960       9,597       6,248

Costs and expenses:
 Cost of product sales      1,596         821       3,380       1,657
 Sales and marketing        2,568       2,910       5,626       4,798
 Research and development   2,076       1,685       4,129       3,095
 General and administrative 1,741       1,730       3,801       3,446
 Amortization of 
  intangibles and 
  deferred stock
  compensation              1,400       1,161       2,652       1,870
 Acquisition related
  and other charges           100        --           125         887

    Total costs 
     and expenses           9,481       8,307      19,713      15,753

Operating loss             (5,245)     (5,347)    (10,116)     (9,505)
Interest and
 other income, net            165         481         376       1,067

Net loss                 $ (5,080)   $ (4,866)   $ (9,740)   $ (8,438)

Basic and diluted
 net loss per share      $  (0.27)   $  (0.28)   $  (0.53)   $  (0.49)

Shares used in calculating 
 basic and diluted
 net loss per share        18,611      17,533      18,530      17,283


                         Immersion Corporation
                 Condensed Consolidated Balance Sheets
                            (In thousands)

                                                      June    December
                                                       30,       31,
                                                      2001     2000(1)
                                                  (Unaudited)(Audited)

ASSETS
  Cash and cash equivalents                          $17,772   $23,474
  Short-term investments                                --       2,360
  Accounts receivable, net                             4,367     3,675
  Inventories                                          1,891     1,709
  Prepaid expenses and other current assets              839     1,306

         Total current assets                         24,869    32,524

  Property and equipment, net                          3,465     3,606
  Purchased intangibles and other assets, net         13,208    14,864
  Other investments                                    6,500     6,500

         TOTAL ASSETS                                $48,042   $57,494

LIABILITIES
  Accounts payable                                   $ 1,049   $ 1,720
  Accrued compensation                                 1,017     1,042
  Other accrued liabilities                              912     1,145
  Deferred revenue and customer advances                 925       932
  Current portion of long-term debt                      126       120

         Total current liabilities                     4,029     4,959

  Long-term debt                                       4,368     4,192

         Total liabilities                             8,397     9,151

STOCKHOLDERS'TM EQUITY                                  39,645    48,343

TOTAL LIABILITIES & STOCKHOLDERS'TM EQUITY             $48,042   $57,494

(1) Derived from the Company'TMs annual audited financial statements.