Q1 2021 Immersion Corp Earnings Call
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Customers and suppliers as well as on the economy in general and also include projected financial results or operating metrics business strategies litigation or absence of litigation anticipated future product future expense reduction anticipated tax expenses anticipated market demand for.
Opportunities are operating model and other forward looking topic. These.
These statements are subject to risks uncertainties, an assumption, especially in light of the ongoing adverse effects of the COVID-19 global pandemic.
Many of these risks and uncertainties are beyond the control of members.
Or a more detailed discussion of these factors and other factors that could cause actual results are very materially.
Interested parties should review the risk factors listed in the press release, we issued today aftermarket clothes immersion annual report on form 10-K for 2020 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 mentioned on this call reflect the immersion beliefs and predictions as of today.
Except as required by law immersion does not intend to update these forward looking statements as a result of the financial business or any other development occurring after the date of this release or up where to update the reasons actual results could differ materially from those anticipated in these forward looking statements, even if new information becomes available in the future.
Except as required by law.
Additionally, please note that during this call we made a disgusted non-GAAP financial measures for each non-GAAP financial measure discuss a presentation of the most directly comparable GAAP financial measure and a reconciliation of the differences between the non-GAAP financial measure discussed in the most directly comparable GAAP financial measure is available.
In today's press release.
With that said I'll turn the call over to Jerry.
Thanks, Erin and thank everyone for joining us on the call today or listening via web.
As I reflect in the last 12 months.
Q1 of 2020, I am proud of our team progress in transforming our business day, the profitability of we reported today and.
Q1 of last year, we were at the beginning of what would become a global pandemic with deep worldwide economic impact and the following quarters and in our core market.
Right. The challenges in 2020, we finished Q1 2021, 14% year over year revenue growth across our core market.
Moreover, we reduced operating expenses by over 50%, yielding non-GAAP net income of $2.8 million compared to a non-GAAP net loss of $2.6 million in the same quarter last year.
Additionally, we generated positive operating cash flow and closed the quarter with over $3 a cash per share.
Many of our customers and our core market experienced severe challenges in 2020 Yep. We see continued investment in haptics as a differentiator a powerful user experience and.
And a safety feature.
Development and our core market.
And automotive we see continued market adoption of our technology do approve usability and state.
We are well positioned for strong double digit per cent revenue growth in fiscal 2021.
Gross outlook is based on three factors.
First is highlighted in previous calls we've seen a gradual market recovery from COVID-19 and based on recent forecast data from IHS, We believe light vehicles shipments will recover to pre COVID-19 levels by 2022.
We also expect stable growth a vehicle statement in the years ahead.
Second we see growing adopting relevant of haptic and new vehicle designs for.
We're excited to share that the Cadillac peak and the B M. W. I will feature haptic interfaces supplied by our existing pier one license fees.
The NW highlighted tactics the key technology feature of its new shy, Texas on.
Introduced as part of its vision Iron ex initiative.
BMW design, but is controlled in the background and only makes them visible when they are needed.
<unk> enables HMA designer to enhance the usability and functionality of control elegantly and discreetly integrated into touch base surfaces.
Our technology unlocks new user experience possibilities.
Third we continue to receive positive customer feedback on our automotive screen hardware unit.
Used for prototyping, and our technology and our product development yet.
We are engaged with the number of Oems pier ones, who are evaluating our technology and haptic for new vehicles on interfaces.
Does it provide the confidence that we will continue to be successful ending up additional tier one license fees and winning adoption and new oem's vehicles.
And gaming the Playstation five continues to be in high demand.
And his latest financial results published last week.
Any reported that it is seven 8 million Playstation five console since lunch, which is slightly ahead of where the Playstation poor was during the same period after lunch.
White supply chain constraints Noni noted that it currently expect the Playstations five <expletive> more units and the Playstation or sold in the year after lunch.
Just on high consumer demand for and positive reviews of the Playstation five and a dual sends controller, we expect it to be very successful throughout its life cycle and catalyze increased demand for haptic more generally and gaming and beyond and.
Similar to automotive, we expect double digit per cent revenue growth in fiscal 2021.
Primarily by a full year of Sony Playstation five dual sense controller ship.
You continue to make progress in our pipeline and I look forward to sharing more with you on the expanding role of haptic to NR technology and gaming N B R product.
And mobile we continue to grow revenue from the China market through our channel licensing program.
This program enabled our channel partners to offer license Pathic components to smartphone Oh, yeah. We.
We recently expanded the scope of argument with a key partner, who was engaged with additional China mobile Oh yeah.
We continue to see positive momentum in the China mobile market and the ecosystem is working to enable a high quality consistent gaming experience across Android devices, which has been one of the key barriers to meaningful adoption of high quality happy systems.
New working groups and I tripped believe with participation from leading game in mobile companies in China is developing a standard for advanced haptic experiences on mobile devices.
We believe this initiative will create new opportunities for ecosystem gross and corresponding revenue growth in 2022 and beyond.
As we touched on last quarter, we continue to expect the mobile market to recover this year to pre COVID-19 level Sam.
Samsung one of our largest license fees recently commented that as mobile communications business at quarter over quarter sales growth of smartphones underpinned by the launch of the Galaxy 21.
It expects sales of new Galaxy, a product to ramp up in the second quarter.
We continue to see growing relevant to pathics the smartphone functionality and this is reflected in continue customer renewal for pleased to share that Panasonic mobile communications recently renewed its licensing agreements and will continue to utilize on emerging technology and a smartphone.
Our mogul business is on track to meet or exceed our 20th 20 mobile revenue and we are particularly pleased with the growth of our channel licensing revenue stemming from the China market.
As part of our long term strategy to support continued adoption of advanced tactics and our target market market segments, we're leading development of industry standard.
Last Friday or initiatives standardized tactics and Mpeg achieved a target milestone.
Mpeg approved call for proposals for coding Pathic effect.
The proposal was developed by a working group comprised of Representatives from Apple Interdigital immersion and others.
Andrew development will support future growth through expanded licensing opportunities that our patents as well as implementation in our software product.
In addition to the standard we continue to drive New research and innovation to support longterm gross last quarter. We had numerous patents issued for new inventions relevant the gaming mobile automotive and use of haptics and content distribution and playback standard.
I will now turn the call over to Erin for review of our queue. One result.
Thanks, Jared let me begin by referring you to this afternoon press release for information regarding our Q1 2021 financial performance.
Total revenue of $7.2 million for the Chew on 2021 cause up 14% from total revenue of six 3 million in the same quarter last year.
Revenue from per unit royalty arrangements increased approximately 0.9 million for 18% compared with the prior year quarter, primarily due to revenue from new license fees.
Occurring revenues represented 99 per cent of revenue from Q1 2021 vs 98 per cent of revenue using the first quarter last year.
Ah revenue mix for each line of business typically fluctuate quarterly due to seasonality patterns and for the first quarter of 2021, a breakdown by line of business as a percentage of total revenues or just follow.
68% for mobility 19 per cent from gaming.
13% from automotive.
Gross profit was $7.1 million compared to gross profit of 6.2 million in the same quarter of 2020.
Turning to operating expenses GAAP operating expenses, a $4.6 million for the first quarter of 2021 for down 57 per cent or $6.1 million from the comparable period last year.
The reduction in expenses for the quarter reflected are disciplined focus on cost through various cost reduction initiatives, which resulted in $1.5 million lower salaries and benefits expensive $1.4 million lower litigation happens related in general legal costs.
1 million dollar lower professional service costs 0.9 million dollar lower vs.
[noise] told improvement amortization 0.5 million dollar lower facilities expenses as well as any.
0.8 million dollar reduction in other words.
Looking at our net results.
Net income for the first quarter of 2021 was $2 million or seven cents per diluted share compared to GAAP net loss of 4.8 million or 16 cents per share in the same quarter of 2020.
In addition to GAAP metrics views non-GAAP net income and non-GAAP net income per share to track our business performance.
As a reminder, we define non-GAAP net income as GAAP net income adjusted to reflect cash tax expense.
Doc based compensation depreciation and restructuring expensive.
On a non-GAAP fish, we had net income of $2.8 million for 10 cents per diluted share in the first quarter compared to non-GAAP net loss of 2.6 million or eight cents per share in the same period last year.
We expect to see continued improvement in our profitability on both GAAP and non-GAAP cases in the coming quarters.
Moving to the balance sheet overall, our balance sheet is growing stronger with total cash and cash equivalent of $102.6 million over $3 per outstanding share as of March 31, 2021, $43.1 million increase from the $59.5 million as of December 31st.
21.
We expect to continue to generate positive free cash flow in the coming quarters, Despite the tough business.
Thanks, Darren where.
We're very pleased with a significant improvement in our financial results compared to Q1, 2020, we generated 14% revenue growth, while cutting our operating expenses by over 50%.
Resulting in strong profitability in positive cash flow.
We also closed the quarter, but over $3 per share of cash and cash equivalents.
We continue to achieve sustained profitability under optimized operating instructions.
I'm excited that we are attracted delivered double digit per cent year over year growth in revenue and profitability.
I look forward to keeping you updated on our progress.
Before we open the call up for questions I'd like to note that given the circumstances, Aaron deny and the support team are all on separate location. So please bear with us as we take a little extra time to process your questions and deliver answers on real time.
We appreciate your patience.
With that I will turn the call over to the operator third Q&A operator.
Thank you if you would like to ask a question. Please press star one now.
If you're using a speaker phone. Please interior neat function as turned off to allow your signal to reach our equipment.
If you as I turned on make yourself friendly cute he may price dark too.
<unk> can I ask a question. Please press star one now.
We'll take our first question from Anthony stuff of Craig Hallum.
He got a couple of things here Jared you mentioned channel mobile several times in your prepared remarks in on the press release can you give us a sense of maybe how big it might be already what's your expectations are kind of for the size of that opportunity in China and then also I fell on a curious you your comments related.
Two haptics on gaming an Android in in China, I'd be thinking debate on the on the gaming side and you'll Google's, we're talking about embedding haptics an Android.
Love to hear a little bit more on each of the topic then at a follow up after that.
Hey, as far as the the.
China opportunity.
As I said, we've grown it quite significantly from.
And when we started the channel licensing program signed up our initial channel partners or recent channel partners in the past couple of years.
I can't really comment on on how big it will be from the from the standpoint of.
With a market looks like it was about 600 million pounds that are manufactured by the channel MOGO am. So it gives you an idea of the of the size of the market.
And what we want to do it is through channel licensing.
And expanding the channel licensing program, where we can to capture as much of that as we can we're at the front end of that.
It certainly has has a big potential in terms of gross because of.
Where we started from and we've grown a lot. This year. So I think the potential is pretty big I can't give you that number per se.
As far as the.
Your second question was specifically about the.
Haptics, Andrew I have to ask that we mentioned about China is that correct.
Yes.
Yeah. So yeah, that's a really interesting effort that's going on because this is something that has been a challenge for some time is that the the haptics performance and the hardware they use.
The other other aspects of those subsystems is very so much it's been very difficult for companies. As an example, like 10 cents a gaming company in in China to be able to for users to be able to have a consistent gaming experience. So.
The standard that they're pushing is is a big step forward, because whether they'll do it a little thrive more consistent and high quality hastate subsystems into phones, which is what they really need to happen you'll be able to enable that consistent experience. That's all good for us because.
It moves advantages advances haptics into.
Hiring happy system with utilizes are more advanced psyche.
And then.
On.
Good question.
Really just Android, making comments excuse me, Google, making comments related to embedding haptic the next generation Android.
Yeah, you'll get paid.
That scenario.
Well.
This.
This again flow through our customers in the in the mobile ecosystem from the from the standpoint of the ones that use Android.
Or Iowa on the standpoint of that's where that's where where monetizing in the mobile market is is.
Through but the handset so anytime that day.
Upgrade and I said I think there's been a lot of.
Kind of market pressure to do that to get better have experiences because of what day was there a another platform.
That's just going to.
Help us both for my technology, and just I E standpoint bye.
Upper level, a neat experience and which requires a level of hardware and more advanced features.
Okay.
And then on.
<unk> lastly on the P. S. Five in the poll true for maybe other accessory or other gaming controllers.
Soon we'll be approaching Christmas selling season again, you expect other new license he used to come on board licensing from immersion haptics were.
What types of game controllers into this fall.
Yeah, I I can't comment on specific engagements, but we're talking to a number of the of other other players in that market we did announce.
Our collaboration with Stryker B R, which is a company that makes it.
Accessory technology, that's going to utilize our figure technology.
And we have those discussions ongoing with others in terms of what but their shipment plans it would be in terms of when they can.
Or whether they would intersect the holiday season, I can't comment on but the the dual sense controllers, certainly sparking a lot of interest among third party peripheral manufacturers.
Don't have a comment on timing of when that might get.
Gotcha. Thank you I appreciate it.
Thank you.
Thank you and as a reminder, if you would like to ask a question. Please press star one now we'll make our next question from day.
Oh, you're back as call your security.
Hi, guys. Thanks for taking my questions Uhm wanted to talk a bit about automotive last for it sounded like the 2021 setup I was pretty nice you know you have a couple of wins for future vehicles. This quarter more on the premium and but you know what would you expect you know this year for us to see.
You know an acceleration of mid tier adoption or has that opportunity.
You know a little bit further down the line.
So we would we would expect to see her we do expect to see mid Mid-tier adoption for continued mid-tier adoption actually this year.
We see all this technology being.
Van down into the into the middle tiers from the luxury yet.
And then as it gets adopted into vehicles. This year you start seeing the revenue on the following years, but we're looking forward to more announcements this year from from OEM and also even new license fees from the standpoint of the different programs that there'll be supplied and we do see that both in luxury admits here so you're going to see.
See the day make you pick up.
Got it and then I'm curious as well on automotive if there's any opportunity with.
Apple in their car place systems. It seems like they have a decent chunk of the market is this potential upside for you guys or what do we have to wait for.
No renewal on that.
Is that an opportunity for you guys.
Well, so our current model and the automotive market is that.
We license to have to component manufacturers like in the tier what the ship into those.
Chip into those car. So that's our that's our current model.
To the extent debt debt any of the other technologies in the market at our driving.
Those haptic implementations and more have to give on the day to day better one we would we would benefit from that and week day revenue growth from that but that's currently we're we're focused that is it more.
Typically on the hardware site for that but again, what we see everywhere is that things that happened elsewhere in the ecosystem are helping to drive adoption of more advanced tactics.
And where.
Where they are beginning other parts of the ecosystem are actually <unk>.
Implementing things in their system that rely on haptics or engaged.
Got it and then finally, just wanted to ask a bit about cash it looks like they're not cash position is above 100 million Curie.
Curious as to what your plans are for use of cash. This year. You know is there anything out there.
Be supplemental to your portfolio to buy you know on are you considering the option to.
Spend some of that cash to to repurchase shares.
Yeah. So we we don't typically comment on you know use of cash before we actually do with you on public announcements, but certainly you know on board and management humor.
Get a cash balance in a couple of allocation policies to make sure that the ex my value for sure.
Great success.
Thank you and there are no further questions in queue. So I'll turn it back over T immersion.
For a closing statement.
Thanks, operator, and thank you all for joining us on this call today very excited with our continued progress on financial results for a physician to drive continued adoption of haptics in our core market grow the company.
We look forward to sharing updates on this effort in future calls.
Thank you and goodbye.
Thank you, ladies and gentlemen for attending today's teleconference. You may now disconnect.
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