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, such as non-GAAP net income and non-GAAP net income per diluted share, because it is useful in understanding the company’s performance as it more closely reflects its expected long-term effective tax rates and excludes certain non-cash expenses 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 the momentum of Immersion’s business, the strength of our intellectual property portfolio and our expectation that revenues for 2016 will be in the range of $55 to $65 million generating bottom line results between a net loss of $11 million and $800,000, and between a non-GAAP net loss of $6 million and non-GAAP net income of $4 million.

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, potential and actual claims and proceedings, including litigation involving Immersion’s intellectual property; 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 monetizing the patent portfolio; the commercial success of applications or devices into which Immersion’s technology is licensed; ability to track and retain partners, the continued popularity of mobile games, mobile advertisements and wearables; potentially lengthy sales cycles and design processes; unanticipated difficulties and challenges encountered in development efforts; unexpected costs; the fact that certain target markets are still relatively nascent; risks associated with doing business internationally; litigation costs in any current or future litigation; failure to retain key personnel; ability to retain personnel; competition; the inherently uncertain nature of litigation which makes future outcomes and timing difficult to predict; the impact of global economic conditions and foreign currency exchange rates 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 2015 and on Immersion’s 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 and TouchSense are trademarks or registered 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, 2016 (Unaudited)			December 31, 2015 (1)
ASSETS
Cash and cash equivalents		$	61,974		$	25,013
Short-term investments			32,931			39,918
Accounts receivable, net			3,248			1,213
Prepaid expenses and other current assets			2,995			2,790
Total current assets			101,148			68,934
Property and equipment, net			4,068			4,589
Deferred income tax assets			25,510			24,633
Prepaid income taxes			6,502			6,995
Intangibles and other assets, net			395			264
TOTAL ASSETS		$	137,623		$	105,415
LIABILITIES
Accounts payable		$	2,418		$	650
Accrued compensation			3,242			4,840
Other current liabilities			4,242			2,999
Deferred revenue			7,622			6,696
Total current liabilities			17,524			15,185
Long-term deferred revenue			27,489			2,516
Other long-term liabilities			926			1,099
TOTAL LIABILITIES			45,939			18,800
STOCKHOLDERS’ EQUITY			91,684			86,615
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY		$	137,623		$	105,415
(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 Ended September 30,								Nine Months Ended September 30,
		2016				2015				2016				2015
Revenues:
Royalty and license		$	26,049			$	13,944			$	47,112			$	45,895
Development, services, and other			257				369				681				928
Total revenues			26,306				14,313				47,793				46,823
Costs and expenses:
Cost of revenues			51				117				133				347
Sales and marketing			3,535				3,198				10,735				11,078
Research and development			2,951				3,471				10,229				10,697
General and administrative			9,654				6,241				30,745				21,253
Amortization of intangibles			1				3				6				18
Total costs and expenses			16,192				13,030				51,848				43,393
Operating Income (loss)			10,114				1,283				(4,055	)			3,430
Interest and other income (expense)			664				(84	)			909				(63	)
Income (loss) from continuing operations before benefit (provision) for income taxes			10,778				1,199				(3,146	)			3,367
Benefit (provision) for income taxes			(3,760	)			(1,015	)			1,264				(1,647	)
Income (loss) from continuing operations			7,018				184				(1,882	)			1,720
Income from discontinued operations			-				-				649				-
Net Income (loss)		$	7,018			$	184			$	(1,233	)		$	1,720
Basic net income (loss) per share
Continuing operations		$	0.24			$	0.01			$	(0.07	)		$	0.06
Discontinued operations		$	0.00			$	0.00			$	0.02			$	0.00
Total		$	0.24			$	0.01			$	(0.05	)		$	0.06
Shares used in calculating basic net income (loss) per share			28,849				28,190				28,726				28,027
Diluted net income (loss) per share
Continuing operations		$	0.24			$	0.01			$	(0.07	)		$	0.06
Discontinued operations		$	0.00			$	0.00			$	0.02			$	0.00
Total		$	0.24			$	0.01			$	(0.05	)		$	0.06
Shares used in calculating diluted net income (loss) per share			29,298				29,134				28,726				28,893

Immersion Corporation Reconciliation of GAAP Net Income (loss) to Non-GAAP Net Income (In thousands, except per share amounts) (Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2016				2015				2016				2015
GAAP net income (loss)		$	7,018			$	184			$	(1,233	)		$	1,720
Add: Stock-based compensation			1,214				1,276				4,803				4,245
Add: Provision (benefit) for income taxes			3,760				1,015				(1,264	)			1,647
Less: Non-GAAP benefit (provision) for income taxes on continuing operatons (at 19%)			(2,048	)			(228	)			598				(640	)
Non-GAAP net income		$	9,944			$	2,247			$	2,904			$	6,972
Non-GAAP earnings per share		$	0.34			$	0.08			$	0.10			$	0.24
Shares used in calculating Non-GAAP earnings per share			29,298				29,134				28,726				28,893

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