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As an investor, you have a unique opportunity to get behind a technology that is just beginning to reach its full potential. Just as touch input changed the way that billions of devices receive input from humans, touch feedback will change the way devices convey information back to us.  From mobile phones to wearables, game consoles to automobiles, haptic feedback is enriching the way that people interact with digital technology.  And the best is yet to come as content on mobile, video, games and social networks, become richer, more realistic and more personal with haptics.  At Immersion, we’re changing the digital world.

Nov 03, 2011

Immersion Corporation Reports Third Quarter 2011 Results

SAN JOSE, Calif.--(BUSINESS WIRE)-- Immersion Corporation (NASDAQ:IMMR), the leader in developing and licensing touch feedback technology (http://www.immersion.com/corporate/), today reported financial results for the third quarter and nine months ended September 30, 2011.

Total revenues for the third quarter of 2011 were $6.5 million, unchanged from the third quarter of 2010. Royalty and license revenues totaled $5.9 million for the third quarter of 2011, an increase of 14% as compared to $5.1 million for the same period last year.

Net loss for the third quarter of 2011 was $(1.4) million, or $(0.05) per share. This compares to net loss of $(1.1) million or $(0.04) per share, for the third quarter of 2010. Adjusted EBITDA for the third quarter of 2011 was $454,000, as compared to $428,000 in the third quarter of 2010.

"Third quarter revenues were weaker than anticipated due to softness in the medical and automotive lines of business," said Immersion CEO Victor Viegas. "Licensing revenue during the quarter reflected double digit growth over the prior year. We added several new licensees and ecosystem partners and made continued progress in our engagements with the Android developer community, as well as mobile and tablet OEMs. This included achieving an important milestone with the launch of the first handset and tablet devices based on the MOTIV Development platform from a new customer."

"We are also excited about our growing patent portfolio, which is opening up new opportunities for us," continued Mr. Viegas. "Since the end of the second quarter, we have had thirty new patents issue, four of which are fundamental to the implementation of haptics on touchscreens. The issuance of these patents coincides with the continued proliferation of unlicensed haptic solutions, marking a yet untapped opportunity for Immersion. We look forward to updating our investors in future quarters on our efforts to monetize these patents."

Revenues for the nine months ended September 30, 2011 were $22.9 million, as compared to $24.7 million for the nine month period ended September 30, 2010. Revenues for the nine months ended September 30, 2010 included product revenues of approximately $3 million in the medical line of business primarily related to product lines that were transferred to CAE, one of the company's medical licensees, as well as revenue of $1 million primarily from the Gaming line of business related to true ups of royalty reports from prior periods. Net loss for the nine months ended September 30, 2011 was $(1.3) million, or $(0.05) per share, as compared to net loss of $(3.6) million, or $(0.13) per share, in the same period last year. Adjusted EBITDA for the first nine months of 2011 was $4.2 million, as compared to $2.8 million for the same period last year.

"Taking our results into account for the first nine months of the year, combined with current data from our customers, we are revising our outlook for fiscal 2011 and expect revenues to be in the range of $29.5 to $30.5 million. This is expected to result in a net loss of $(1.0) to $(2.0) million. Despite this near-term softness, we remain optimistic that the accelerating adoption of haptics by mobile OEMs and content providers, combined with the strengthening of our IP in fundamental haptic technologies, positions us well for future growth. Further underlying our confidence, we intend to more aggressively repurchase shares in the fourth quarter under our existing Stock Repurchase Program," concluded Mr. Viegas.

As of September 30, 2011, Immersion's cash, cash equivalents, and short-term investments were $63.5 million, compared to $61.2 million as of December 31, 2010.

Corporate Highlights

Immersion recently:

  • Saw the first devices launch in the market based on its MOTIV Development platform with new mobile licensee Fujitsu. The F-12C mobile phone and the ARROWS tablet also incorporate Immersion's TouchSense 3000 software.
  • Secured new agreements with licensees of its technology for implementation into a wide variety of markets and applications. Licensees include Sirius XM Radio in the consumer market and MAKO Surgical in the robotic surgical market.
  • Continued to build out its network of haptics ecosystems partners, including: establishing a new partnership with Microchip; adding certified component providers including Analog Devices and Semtech; and collaborating on a reference design leveraging Texas Instrument's driver devices for high-fidelity piezo actuators.
  • Saw additional applications designed by numerous third party developers that incorporate haptic effects by using Immersion's MOTIV™ SDK.
  • Continued to strengthen and broaden its patent portfolio to include features that serve the foundation of today's haptic user interfaces, including using haptics in a multitasking environment, within a touch screen GUI user interface and with expressive alerts, which associate distinct haptic effects to device alerts, such as calendar reminders or voice mail messages.

Conference Call Information

Immersion will host a conference call with company management on Thursday, November 3, 2011 at 2:00 p.m. Pacific time (5:00 p.m. Eastern time) to discuss financial results for the third quarter ended September 30, 2011. To participate on the live call, analysts and investors should dial +1 877-941-1427 at least ten minutes prior to the start of the call. A replay of the call will be available until 11:59 p.m. Pacific time on November 10, 2011 by dialing +1 800-406-7325 and entering the passcode 4474507#. A live and archived webcast of the conference call will also be available for 90 days within the investor relations section of Immersion's corporate Web site at www.immersion.com.

About Immersion (www.immersion.com)

Founded in 1993, Immersion (NASDAQ:IMMR) is the leading innovator in haptics technology; the company's touch feedback solutions deliver a more compelling sense of the digital world. Using Immersion's high-fidelity haptic systems, partners can transform user experiences with unique and customizable touch feedback effects; excite the senses in games, videos and music; restore "mechanical" feel by providing intuitive and unmistakable confirmation; improve safety by overcoming distractions while driving or performing a medical procedure; and expand usability when audio and visual feedback are ineffective. Immersion's TouchSense technology provides haptics in mobile phone, automotive, gaming, medical and consumer electronics products from world-class companies. With over 1200 issued or pending patents in the U.S. and other countries, Immersion helps bring the digital universe to life.

Use of Non-GAAP Financial Measures

Immersion reports all financial information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult to understand if limited to reviewing only GAAP financial measures. Immersion discloses this non-GAAP information because it is useful in understanding the company's performance as it excludes non-cash and other special charges that many investors feel may obscure the company's true operating performance. Likewise, management uses these non-GAAP financial measures to manage and assess the profitability of its business. Investors are encouraged to review the related GAAP financial measures.

Forward-looking Statements

This press release contains "forward-looking statements" that involve risks and uncertainties as well as assumptions that, if they never materialize or prove incorrect, could cause the results of Immersion Corporation and its consolidated subsidiaries to differ materially from those expressed or implied by such forward-looking statements.

All statements, other than the statements of historical fact, are statements that may be deemed forward-looking statements, including, but not limited to, the statements regarding our expectations for fiscal 2011 revenues to be in the range of $29.5 to $30.5 million, the expectation as to our net income for the full year and other statements regarding future growth and our intellectual property.

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, which include, but are not limited to, continued disruption in the markets for Immersion's and its licensees' products due to the recent earthquake and tsunami in Japan; delay in or failure to achieve commercial demand for Immersion's or its licensees' products; a delay in or failure to achieve the acceptance of force feedback as a critical user experience; unexpected difficulties in transitioning to a pure IP licensing model and in monetizing the patent portfolio; the commercial success of applications or devices into which Immersion's technology is licensed; potentially lengthy sales cycles and design processes; unanticipated difficulties and challenges encountered in development efforts; potential restructuring charges; failure to retain key personnel; potential and actual claims and proceedings, including stockholder litigation; competition; the impact of global economic conditions and other factors. Many of these risks and uncertainties are beyond the control of Immersion.

For a more detailed discussion of these factors, and other factors that could cause actual results to vary materially, interested parties should review the risk factors listed in Immersion's Annual Report on Form 10-K for 2010 and its most recent Quarterly Report on Form 10-Q, which are on file with the U.S. Securities and Exchange Commission. The forward-looking statements in this press release reflect Immersion's beliefs and predictions as of the date of this release. Immersion disclaims any obligation to update these forward-looking statements as a result of financial, business, or any other developments occurring after the date of this release.

Immersion, the Immersion logo, MOTIV and TouchSense are trademarks of Immersion Corporation in the United States and other countries. All other trademarks are the property of their respective owners.

The use of the word "partner" or "partnership" in this press release does not mean a legal partner or legal partnership.

(IMMR — C)

Immersion Corporation
Condensed Consolidated Balance Sheets
(In thousands)
     
September 30 December 31,
2011 2010
(Unaudited) (1)
ASSETS
Cash and cash equivalents $ 14,509 $ 12,243
Short-term investments 48,979 48,961
Accounts and other receivables, net 779 815
Inventories 579 406
Deferred income taxes 342 342
Prepaid expenses and other current assets   704   3,821  
Total current assets 65,892 66,588
 
Property and equipment, net 1,279 1,931
Intangibles and other assets, net   13,771   12,356  
 
TOTAL ASSETS $ 80,942 $ 80,875  
 
LIABILITIES
Accounts payable $ 550 $ 393
Accrued compensation 2,722 3,507
Other current liabilities 1,129 1,488
Deferred revenue and customer advances   4,459   4,429  
Total current liabilities 8,860 9,817
 
Long-term deferred revenue 14,010 16,494
Deferred income tax liabilities 342 342
Other long-term liabilities   455   538  
TOTAL LIABILITIES 23,667 27,191
 
STOCKHOLDERS' EQUITY   57,275   53,684  
 

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

$ 80,942 $ 80,875  
 
(1) Derived from Immersion's annual audited consolidated financial statements.
 
Immersion Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
         
Three Months Nine Months
Ended September 30, Ended September 30,
2011 2010 2011 2010
 
Revenues:
Royalty and license $ 5,875 $ 5,141 $ 20,110 $ 17,848
Product sales 345 1,217 1,892 6,035
Development contracts and other   275     189     943     848  
Total revenues   6,495     6,547     22,945     24,731  
 
Costs and expenses:
Cost of revenues 192 457 913 2,587
Sales and marketing 1,643 1,813 5,402 6,077
Research and development 2,183 2,007 6,525 6,473
General and administrative 3,195 3,008 9,367 11,808
Amortization and impairment of intangibles   324     211     1,016     650  
Total costs and expenses   7,537     7,496     23,223     27,595  
 
Operating Loss (1,042 ) (949 ) (278 ) (2,864 )
Interest and other income   58     70     172     212  
 
Loss from continuing operations before provision for income taxes (984 ) (879 ) (106 ) (2,652 )
 
Provision for income taxes   (428 )   (336 )   (1,289 )   (1,098 )
 
Loss from continuing operations (1,412 ) (1,215 ) (1,395 ) (3,750 )
 
Discontinued operations:
Gain on sales of discontinued operations - 82 61 143
       
Net Loss $ (1,412 ) $ (1,133 ) $ (1,334 ) $ (3,607 )
 
Basic and diluted net loss per share
Continuing operations $ (0.05 ) $ (0.04 ) $ (0.05 ) $ (0.13 )
Discontinued operations   -     -     -     -  
Total $ (0.05 ) $ (0.04 ) $ (0.05 ) $ (0.13 )
Shares used in calculating basic and diluted net loss per share   28,918     28,134     28,595     28,087  
 
Immersion Corporation
Reconciliation of GAAP Net Income to Adjusted EBITDA
(In thousands)
(Unaudited)
         
Three Months Nine Months
Ended September 30, Ended September 30,
2011   2010 2011   2010
 
GAAP Net Loss $ (1,412 ) $ (1,133 ) $ (1,334 ) $ (3,607 )
 
Interest and other income (58 ) (70 ) (172 ) (212 )
Provision for income taxes 428 336 1,289 1,098
Depreciation and amortization 232 260 717 842
Amortization and impairment of intangibles 324 211 1,016 650
Stock-based compensation 940 896 2,705 2,430
Restatement costs - 10 - 1,674
Restructuring costs and sale of business - - - 42
Discontinued operations   -     (82 )   (61 )   (143 )
Total adjustments 1,866 1,561 5,494 6,381
 
Adjusted EBITDA $ 454   $ 428   $ 4,160   $ 2,774  

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Source: Immersion Corporation

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