Immersion Corporation Reports Results for First Quarter 2018

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 loss and Non-GAAP net loss per share, because it is useful in understanding the company’s performance as it more closely reflects its cash tax rate and excludes certain non-cash expenses and other special charges, such as deferred tax assets valuation allowance and restructuring costs, 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, our expectation that revenues for 2018 will be in the range of $108 million to $118 million and non-GAAP net income for 2018 ranging from $59 million to $67 million and statements regarding litigation outcomes.

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; the impact of litigation developments on existing and potential customers; delay in or failure to achieve commercial demand for Immersion’s or its licensees’ products; the impact of new accounting standards that will affect key items such as revenue recognition and sales commissions; unexpected difficulties in monetizing the patent portfolio; the commercial success of applications or devices into which Immersion’s technology is licensed; the continued popularity of mobile games 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 2017, which is 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)
 
 
March 31, 2018 December 31, 2017
(Unaudited) (1)
ASSETS
Cash and cash equivalents $ 119,128 $ 24,622
Short-term investments 19,842 21,916
Accounts and other receivables 2,667 806
Prepaid expenses and other current assets   5,616   736  
Total current assets 147,253 48,080
Property and equipment, net 2,903 3,150
Deferred income tax assets 371 401
Other assets   4,808   344  
TOTAL ASSETS $ 155,335 $ 51,975  
LIABILITIES
Accounts payable $ 4,256 $ 6,647
Accrued compensation 2,552 4,133
Other current liabilities 3,296 3,896
Deferred revenue   4,920   4,424  
Total current liabilities 15,024 19,100
Long-term deferred revenue 33,665 22,303
Other long-term liabilities   1,374   915  
TOTAL LIABILITIES 50,063 42,318
STOCKHOLDERS’ EQUITY   105,272   9,657  
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY $ 155,335 $ 51,975  
 
(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 March, 31
2018 2017
Revenues:
Royalty and license $ 85,335 $ 9,006
Development, services, and other   81     218  
Total revenues   85,416     9,224  
Costs and expenses:
Cost of revenues 35 43
Sales and marketing 1,220 3,305
Research and development 2,820 3,196
General and administrative   11,236     15,532  
Total costs and expenses   15,311     22,076  
Operating income (loss) 70,105 (12,852 )
Interest and other income   231     139  
Income (loss) before provision for income taxes 70,336 (12,713 )
Provision for income taxes   (453 )   (152 )
Net income (loss) $ 69,883   $ (12,865 )
Basic net income (loss) per share $ 2.35   $ (0.44 )
Shares used in calculating basic net income (loss) per share   29,700     29,024  
Diluted net income (loss) per share $ 2.29   $ (0.44 )
Shares used in calculating diluted net income (loss) per share   30,566     29,024  
 
       
Immersion Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended March 31,
2018   2017

As Reported
(ASC 606)

  Adjustments*   ASC 605*

As Reported
(ASC 605)

Revenues:
Fixed fee license revenue $ 75,756 $ (72,341 ) $ 3,415 $ 2,510
Per-unit royalty revenue   9,579     (4,351 )   5,228     6,496  
Total royalty and license revenue 85,335 (76,692 ) 8,643 9,006
Development, services, and other revenue   81     -     81     218  
Total revenues $ 85,416 $ (76,692 ) $ 8,724 $ 9,224
Operating expenses   15,311     -     15,311     22,076  
Operating income (loss) 70,105 (76,692 ) (6,587 ) (12,852 )
Interest and other income   231     -     231     139  
Income (loss) before provision for income taxes 70,336 (76,692 ) (6,356 ) (12,713 )
Income tax provision   (453 )   -     (453 )   (152 )
Net income (loss) $ 69,883 $ (76,692 ) $ (6,809 ) $ (12,865 )
Basic net income (loss) per share $ 2.35 $ (2.58 ) $ (0.23 ) $ (0.44 )
Diluted net income (loss) per share $ 2.29 $ (2.51 ) $ (0.22 ) $ (0.44 )
 

*The Company is presenting the ASC 606 results together with the adjustments made to reconcile the ASC 606 presentation to the results that would have been applicable under ASC 605. The ASC 605 information should be considered in addition to, not as a substitute for, nor superior to or in isolation from, the financial information prepared in accordance with ASC 606.

 

   
Immersion Corporation

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)

(In thousands, except per share amounts)
(Unaudited)
 
Three Months
Ended March 31,
2018   2017
 
GAAP net income (loss) $ 69,883 $ (12,865 )
 
Add: Provision for income taxes 453 152
 
Less: Non-GAAP provision for income taxes (90 ) (39 )
 
Add: Stock-based compensation   1,222     1,557  
 

Non-GAAP net income (loss)

$ 71,468   $ (11,195 )
 

Non-GAAP net income (loss) per share

$ 2.34   $ (0.39 )
 

Shares used in calculating Non-GAAP net income (loss) per share

  30,566     29,024  
 
   
Immersion Corporation
Revenue by Line of Business
(Unaudited)
 
Three Months
Ended March 31,
2018   2017
 
Mobility 90 % 32 %
 
Gaming 2 % 47 %
 
Automotive 8 % 12 %
 
Medical 0 % 9 %
 
   
Immersion Corporation
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses
(In thousand)
(Unaudited)
 
Three Months
Ended March 31,
2018   2017
 
GAAP operating expenses $ 15,276 $ 22,033
 
Adjustments to non-GAAP operating expenses:
 
Stock-based compensation expense - R&D (256 ) (336 )
 
Stock-based compensation expense - S&M 67 (210 )
 
Stock-based compensation expense - G&A (1,033 ) (1,011 )
 
Depreciation and amortization expense   (227 )   (232 )
 
Non-GAAP operating expense $ 13,827   $ 20,244  
 

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