Immersion Corporation Reports Fourth Quarter and Fiscal 2013 Results

  Immersion Corporation Reports Fourth Quarter and Fiscal 2013 Results

   Record Annual Revenues up 48% over Prior Year; Financial Results Reflect
 Impact of Change in Accounting Method and Release of Tax Valuation Allowance

Business Wire

SAN JOSE, Calif. -- February 20, 2014

Immersion Corporation (NASDAQ: IMMR), the leading developer and licensor of
touch feedback technology, today reported financial results for the fourth
quarter and year ended December 31, 2013.

Results for the three months ended December 31, 2013

Total revenues for the fourth quarter of 2013 were $12.1 million, an increase
of 36% compared to $8.9 million for the fourth quarter of 2012. Royalty and
license revenues of $11.6 million for the fourth quarter of 2013 were up 52%
from the same period last year.

Net income for the fourth quarter of 2013 was $37.4 million, or $1.26 per
diluted common share, compared to a net loss of $(402,000), or $(0.01) per
share, for the fourth quarter of 2012. Net income for the fourth quarter of
2013 included an income tax benefit of $36.8 million, or $1.24 per diluted
common share, resulting primarily from the release of a tax valuation
allowance relating to net deferred tax assets. In addition, these results
reflect the impact of a change in accounting method we adopted in the fourth
quarter of 2013, pursuant to which we now expense external legal fees incurred
in applying for patents and maintaining our IP portfolio in the period
incurred, rather than capitalizing them and then amortizing them over time.

Adjusted EBITDA for the fourth quarter of 2013 was $2.0 million, compared to
$610,000 in the fourth quarter of 2012, in each case reflecting the change in
accounting method.

Results for the twelve months ended December 31, 2013

Revenues for fiscal 2013 were $47.5 million, an increase of 48% as compared to
$32.2 million for fiscal 2012. Royalty and license revenue for fiscal 2013
totaled $46.2 million, an increase of 59% over $29.0 million for fiscal 2012.

Net income for fiscal 2013 was $40.2 million, or $1.37 per diluted common
share, as compared to a net loss of $(7.2) million, or $(0.26) per share, for
fiscal 2012, in each case reflecting the change in accounting method. Net
income for 2013 included an income tax benefit of $36.5 million, or $1.24 per
diluted common share, resulting primarily from the release of a tax valuation
allowance relating to net deferred tax assets.

Adjusted EBITDA for fiscal 2013 was $8.9 million, compared to a loss of $(2.9)
million in fiscal 2012, in each case reflecting the change in accounting
method.

As of December 31, 2013, Immersion’s cash, cash equivalents, and short-term
investments were $71.1 million, compared to $43.5 million as of December 31,
2012.

Management Commentary

“2013 was a breakthrough year for Immersion as we delivered record revenues
within the upper end of our guidance range. Excluding the impact of a change
in accounting method adopted in the fourth quarter, Adjusted EBITDA for 2013
was also within our guidance range,” said Vic Viegas, chief executive officer
of Immersion. “During the year, Immersion successfully executed our Basic
Haptics licensing strategy and saw the continued success of products in the
market using Immersion TouchSense software. We made strong progress in further
validating the importance of haptics in our key mobile, gaming and automotive
verticals as well as expanding the market for our technology in evolving
categories such as wearables. In addition, we began to lay the foundation to
capitalize on longer-term growth opportunities in the area of mobile content,
which is a natural fit for our solutions.”

Business Outlook

"We are extremely confident in the prospects for our business in 2014 and
beyond and believe that we have the right combination of talent, resources and
targeted investments in place to continue a trajectory of strong profitable
growth. Based on our current outlook, we expect revenues for 2014 to be in the
range of $54 million to $62 million, reflecting growth of 14% to 31% over the
prior year, which included a one-time benefit of more than $2.0 million
related to a contract renewal transition, and we expect Non-GAAP Net Income
for 2014 to be in the range of $8 million to $15 million, which results in
Non-GAAP earnings per share of $0.27 to $0.50, assuming 30 million shares
outstanding,” concluded Mr. Viegas.

Business Highlights

During the fourth quarter, Immersion made notable progress within key
verticals and continued to lay the foundation to capitalize on strategic
opportunities, including:

  *Appointing Jason Patton to the new role of Vice President and General
    Manager of Content & Media. Patton will spearhead business development and
    operational execution for the company’s mobile ads and entertainment
    initiative.
  *Establishing a regional headquarters in Shanghai to further expand its
    sales and technical teams to support mobile OEMs in the region.
  *Forging new multi-year licensing agreements with industry leading
    automotive suppliers Tokai Rika and Continental to create haptic-enabled
    touch surfaces in automotive interfaces.
  *Launching an automotive haptics portal offering technical and integration
    recommendations, user experience guidelines, and research that evaluates
    the impact of haptics in automotive environments.

Conference Call Information

Immersion will host a conference call with company management on Thursday,
February 20, 2014 at 2:00 p.m. Pacific time (5:00 p.m. Eastern time) to
discuss financial results for the fourth quarter and year ended December 31,
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 inhaptics,
or tactile effects; 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 1,500 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 atblog.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, Non-GAAP Net Income (defined as
Net Income less stock-based compensation) and Non-GAAP earnings per share,
because it is useful in understanding the company’s performance as it 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 our expectations relating to new growth opportunities
and the expansion of addressable markets and long-term growth and our
expectation that revenues for 2014 will be in the range of $54 million to $62
million and Non-GAAP Net Income for 2014 will be in the range of $8 million to
$15 million, resulting in Non-GAAP earnings per share of $0.27 to $0.50,
assuming 30 million shares outstanding.

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)
                                                    
                                 December 31,              December 31,
                                 2013                      2012
                                 (Unaudited)               (1)
ASSETS
Cash and cash equivalents        $      14,136             $    4,558
Short-term investments                  56,976                  38,988
Accounts and other                      598                     1,878
receivables, net
Inventories                             0                       141
Deferred income taxes                   7,784                   0
Prepaid expenses and other             690                    706       
current assets
Total current assets                    80,184                  46,271
                                                           
Property and equipment,                 944                     1,281
net
Deferred income tax assets              29,066                  97
Intangibles and other                  381                    362       
assets, net
                                                           
TOTAL ASSETS                     $      110,575            $    48,011    
                                                           
LIABILITIES
Accounts payable                 $      682                $    338
Accrued compensation                    4,680                   2,502
Other current liabilities               1,653                   1,119
Deferred revenue                       8,920                  3,934     
Total current liabilities               15,935                  7,893
                                                           
Long-term deferred revenue              13,441                  10,221
Other long-term                        528                    619       
liabilities
TOTAL LIABILITIES                       29,904                  18,733
                                                           
STOCKHOLDERS’ EQUITY                   80,671                 29,278    
                                                           
TOTAL LIABILITIES &              $      110,575            $    48,011    
STOCKHOLDERS’ EQUITY
                                                           
(1) Derived from Immersion’s annual audited consolidated financial statements,
as adjusted for change in accounting method.


Immersion Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
                                                               
                               Three Months              Twelve Months
                               Ended December 31,        Ended December 31,
                               2013         2012         2013       2012
                                           (1)                    (2)
Revenues:
Royalty and license            $ 11,574     $ 7,603      $ 46,154   $ 28,989
Product sales                    61           837          105        1,982
Development, services, and      432        420        1,211     1,198  
other
Total revenues                  12,067     8,860      47,470    32,169 
                                                                    
Costs and expenses:
Cost of revenues                 76           386          462        1,188
Sales and marketing              2,646        1,703        9,338      6,775
Research and development         3,007        2,015        10,883     8,421
General and administrative       5,671        5,110        23,104     22,464
Amortization of intangibles     19         19         79        49     
Total costs and expenses        11,419     9,233      43,866    38,897 
                                                                    
Operating Income (loss)          648          (373   )     3,604      (6,728 )
Interest and other income       (12    )    26         68        170    
                                                                    
Income (loss) from
continuing operations before     636          (347   )     3,672      (6,558 )
provision for income taxes
                                                                    
Benefit (provision) for         36,767     (55    )    36,483    (792   )
income taxes
                                                                    
Income (loss) from               37,403       (402   )     40,155     (7,350 )
continuing operations
                                                                    
Discontinued operations:
Gain on sales of                 0            0            0          153
discontinued operations
                                                                 
Net Income (loss)              $ 37,403    $ (402   )   $ 40,155   $ (7,197 )
                                                                    
Basic net income (loss) per
share
Continuing operations          $ 1.31       $ (0.01  )   $ 1.42     $ (0.27  )
Discontinued operations        $ 0.00      $ 0.00      $ 0.00     $ 0.01   
Total                          $ 1.31      $ (0.01  )   $ 1.42     $ (0.26  )
Shares used in calculating
basic net income (loss) per     28,614     27,288     28,190    27,735 
share
                                                                    
Diluted net income (loss)
per share
Continuing operations          $ 1.26       $ (0.01  )   $ 1.37     $ (0.27  )
Discontinued operations        $ 0.00      $ 0.00      $ 0.00     $ 0.01   
Total                          $ 1.26      $ (0.01  )   $ 1.37     $ (0.26  )
Shares used in calculating
diluted net income (loss)       29,675     27,288     29,338    27,735 
per share
                                                                    
(1) As adjusted for change in accounting method.
(2) Derived from Immersion’s annual audited consolidated financial statements,
as adjusted for change in accounting method.


Immersion Corporation
Reconciliation of GAAP Net Income to Adjusted EBITDA
(In thousands)
(Unaudited)
                                                               
                            Three Months              Twelve Months
                            Ended December 31,        Ended December 31,
                             2013       2012      2013       2012   
                                                                    
GAAP Net Income/(Loss)      $ 37,403      $ (402  )   $ 40,155      $ (7,197 )
                                                                    
Interest and other income     12            (26   )     (68     )     (170   )
Benefit (provision) for       (36,767 )     55          (36,483 )     792
income taxes
Depreciation and              125           164         584           654
amortization
Amortization of               19            19          79            49
intangibles
Stock-based compensation      1,206         800         4,644         3,146
Discontinued operations      0           0         0           (153   )
Total adjustments             (35,405 )     1,012       (31,244 )     4,318
                                                                    
Adjusted EBITDA             $ 1,998      $ 610      $ 8,911      $ (2,879 )

Contact:

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