Immersion Corporation Reports Third Quarter 2013 Results

  Immersion Corporation Reports Third Quarter 2013 Results

              Record Revenue; Strong Future Growth Opportunities

Business Wire

SAN JOSE, Calif. -- October 31, 2013

Immersion Corporation (NASDAQ: IMMR), the leading developer and licensor of
touch feedback technology, today reported financial results for the third
quarter ended September 30, 2013.

Quarterly Financial Results

Total revenues for the third quarter of 2013 were $11.3 million, an increase
of 59% compared to $7.1 million for the third quarter of 2012. Royalty and
license revenues of $11.0 million for the third quarter of 2013 were up 72%
from the same period last year. Net income for the third quarter of 2013 was
$1.2 million, or $ 0.04 per share. This compares to a net loss of $(3.0
million), or $(0.11) per share, for the third quarter of 2012. Adjusted EBITDA
for the third quarter of 2013 was $3.3 million, compared to a loss of $(1.6
million) in the third quarter of 2012.

Business Highlights and Opportunities

In addition to posting strong financial results, Immersion achieved important
milestones and continued to position itself to take advantage of strategic
opportunities during the quarter, including:

  *Entering into a multi-year license agreement with Xiaomi, one of the
    fastest-growing smartphone makers in China, providing for recurring
    revenues and covering Immersion’s Basic Haptics IP and select TouchSense^®
    and Integrator software solutions;
  *Expanding its license agreement with Samsung to enable Samsung to
    incorporate Immersion TouchSense technology into the recently-launched
    GALAXY Gear smartwatch, Samsung’s new wearable companion device that can
    communicate information to users through tactile notifications and alerts;
  *Receiving confirmation that Sony has exercised its option to license
    Immersion intellectual property for the DUALSHOCK^®4 controller included
    in its soon-to-be-released PlayStation®4 console system; and
  *Making ongoing progress on its initiative to bring immersive and engaging
    touch feedback to mobile media such as advertising and entertainment
    content by refining its content enablement tools and technology,
    conducting usability research and user studies, and continuing to meet
    with potential ecosystem partners.

“We are pleased to post another consecutive quarter of robust year-over-year
revenue growth and solid profitability as we generated record revenues for the
third quarter period,” said Vic Viegas, chief executive officer of Immersion.
“As we work to expand our customer base and global footprint, we achieved a
key milestone during the quarter with the signing of our first direct license
with a mobile OEM in China, Xiaomi. With the inclusion of our software in the
Samsung GALAXY Gear, we established a presence in the emerging wearable device
category, and with Sony’s exercise of its option to license our intellectual
property for use in the PS4™, we are now well-positioned to continue our
licensing success with a new generation of gaming products. We believe the
opportunities for haptics will continue to expand in evolving form factors and
methods for content consumption, and Immersion continues to explore and
innovate ahead of the curve in order to capitalize on the growing role of
haptics within the digital lifestyle.”

“As we enter the fourth quarter, we remain on track to achieve record top-line
results in 2013. We are narrowing our revenue guidance to the high end of our
previous range, and now expect annual revenues to be in the range of $46
million to $48 million, an increase of between 43% and 49% over last year’s
revenue of $32.2 million. In addition, we continue to anticipate Adjusted
EBITDA for 2013 to be in the range of $12 million to $15 million,” concluded
Mr. Viegas.

As of September 30, 2013, Immersion’s cash, cash equivalents, and short-term
investments were $64.7 million, compared to $43.5 million as of December 31,
2012.

Conference Call Information

Immersion will host a conference call with company management on Thursday,
October 31, 2013 at 2:00 p.m. Pacific time (5:00 p.m. Eastern time) to discuss
financial results for the third quarter ended September 30, 2013. 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 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 inhaptic
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 1,400 issued or pending patents in the U.S.
and other countries, Immersion helps bring the digital universe to life. Hear
what we have to say at blog.immersion.com.

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 Adjusted EBITDA, 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 relating to new growth opportunities
and the expansion of addressable markets and long-term growth and our
expectation that revenues for 2013 will be in the range of $46 million to $48
million and adjusted EBITDA for 2013 will be in the range of $12 million to
$15 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, particularly for new and emerging applications; potentially lengthy
sales cycles and design processes; unanticipated difficulties and challenges
encountered in development efforts; unexpected costs; failure to retain key
personnel; competition; the inherently uncertain nature of litigation which
makes future outcomes and timing difficult to predict; 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 most recent Quarterly Report on Form 10-Q
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, TouchSense, HD Haptics and Reverb 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,
                                                2013              2012
                                                (Unaudited)       (1)
ASSETS
Cash and cash equivalents                       $    16,664       $  4,558
Short-term investments                               47,990          38,988
Accounts and other receivables, net                  294             1,878
Inventories                                          0               141
Deferred income taxes                                165             165
Prepaid expenses and other current assets           870            706     
              Total current assets                   65,983          46,436
                                                                  
Property and equipment, net                          984             1,281
Intangibles and other assets, net                   17,165         15,725  
                                                                  
TOTAL ASSETS                                    $    84,132       $  63,442  
                                                                  
LIABILITIES
Accounts payable                                $    618          $  338
Accrued compensation                                 3,353           2,502
Other current liabilities                            1,379           1,022
Deferred revenue and customer advances              11,186         3,934   
              Total current liabilities              16,536          7,796
                                                                  
Long-term deferred revenue                           8,045           10,221
Deferred income tax liabilities                      165             165
Other long-term liabilities                         551            619     
TOTAL LIABILITIES                                    25,297          18,801
                                                                  
STOCKHOLDERS’ EQUITY                                58,835         44,641  
                                                                  
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY        $    84,132       $  63,442  
                                                                  
(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,
                              2013       2012       2013       2012   
                                                                    
Revenues:
Royalty and license          $ 10,951     $ 6,371      $ 34,580     $ 21,386
Product sales                  12           529          44           1,145
Development contracts and     379        242        779        778    
other
Total revenues                11,342     7,142      35,403     23,309 
                                                                    
Costs and expenses:
Cost of revenues               111          273          386          802
Sales and marketing            2,151        1,632        6,692        5,072
Research and development       2,640        2,088        7,876        6,406
General and administrative     4,533        5,750        14,647       14,882
Amortization and              487        337        1,364      1,071  
abandonment of intangibles
Total costs and expenses      9,922      10,080     30,965     28,233 
                                                                    
Operating Income (loss)        1,420        (2,938 )     4,438        (4,924 )
Interest and other income     42         66         80         144    
                                                                    
Income (loss) from
continuing operations          1,462        (2,872 )     4,518        (4,780 )
before provision for
income taxes
                                                                    
Provision for income taxes    (257   )    (118   )    (284   )    (737   )
                                                                    
Income (loss) from             1,205        (2,990 )     4,234        (5,517 )
continuing operations
                                                                    
Discontinued operations:
Gain on sales of               0            0            0            153
discontinued operations
                                                                 
Net Income (loss)            $ 1,205     $ (2,990 )   $ 4,234     $ (5,364 )
                                                                    
Basic net income (loss)
per share
Continuing operations        $ 0.04       $ (0.11  )   $ 0.15       $ (0.20  )
Discontinued operations      $ 0.00      $ 0.00      $ 0.00      $ 0.01   
Total                        $ 0.04      $ (0.11  )   $ 0.15      $ (0.19  )
Shares used in calculating
basic net income (loss)       28,558     27,658     28,047     27,885 
per share
                                                                    
Diluted net income (loss)
per share
Continuing operations        $ 0.04       $ (0.11  )   $ 0.14       $ (0.20  )
Discontinued operations      $ 0.00      $ 0.00      $ 0.00      $ 0.01   
Total                        $ 0.04      $ (0.11  )   $ 0.14      $ (0.19  )
Shares used in calculating
diluted net income (loss)     29,653     27,658     29,205     27,885 
per share
                                                                             

Immersion Corporation
Reconciliation of GAAP Net Income to Adjusted EBITDA
(In thousands)
(Unaudited)
                                                               
                               Three Months             Nine Months
                               Ended September 30,      Ended September 30,
                                2013     2012       2013     2012   
                                                                    
GAAP Net Income (Loss)         $ 1,205     $ (2,990 )   $ 4,234     $ (5,364 )
                                                                    
Interest and other income        (42   )     (66    )     (80   )     (144   )
Provision for income taxes       257         118          284         737
Depreciation and                 146         163          459         490
amortization
Amortization and impairment      487         337          1,364       1,071
of intangibles
Stock-based compensation         1,249       808          3,438       2,346
Discontinued operations         0         0          0         (153   )
Total adjustments                2,097       1,360        5,465       4,347
                                                                    
Adjusted EBITDA                $ 3,302    $ (1,630 )   $ 9,699    $ (1,017 )

Contact:

Edelman
Reagan Crossley, +1 650-762-2955 (Media)
reagan.crossley@edelman.com
or
The Blueshirt Group
Jennifer Jarman, +1 415-217-5866 (Investor)
jennifer@blueshirtgroup.com
 
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