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Immersion Corporation Q2 2010 Earnings Call Transcript

I'll now turn the call over to Shum, for a more detail review of our financial results.

Shum Mukherjee

Thank you, Vic. Revenues in the second quarter of 2010 were $8.5 million, up 27% over revenue of $6.7 million in the second quarter of 2009 reflecting growth of 76% in royalty and license revenues, partially offset by a decline of 33% in product revenues primarily the result of the recent transition of certain medical products to CAE.

Growth in royalty and license revenues was strong across our various market segments. Mobile and gaming comprised more than two-thirds of total royalty and license revenues due to increase in touch screen phone sales and reconciliation of our customers gaming royalties, as Vic mentioned. In addition we saw strong results in royalties from the automotive and consumer market segment.

Product revenues in the second quarter were $1.9 million including approximately $900,000 of revenues from the three medical product lines that was sold to CAE Healthcare in the March quarter. We do not expect to generate any additional product revenue from the three product lines in the future.

Revenues generated from development contracts were $321,000 in the second quarter of 2010, in line with revenues of $330,000 generated from development contracts in the year ago quarter.

Gross profit was $7.7 million in the second quarter of 2010, 91% of revenues, compared to gross profit of $4.4 million, 65% of revenues, in the second quarter of 2009. The increase in gross profit reflects higher revenues and also the mix shift in business to licensing revenues, which accounted for 74% of total revenues in the second quarter of 2010, compared to 54% of total revenues in the same periods last year. As we look at our long-term model, we expect licensing revenues to grow as a percentage of our overall mix driving gross margins higher.

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