Immersion Corporation (IMMR)
Q2 2010 Earnings Call
August 5, 2010 05:30 pm
Alex Wellins - The Blueshirt Group
Vic Viegas - President and CEO
Shum Mukherjee - Chief Financial Officer
Jeff Schreiner - Capstone Investments
Matt Bendixen - Craig-Hallum Capital
Aaron Husock - Lanexa Global
Robert Kast - SunWest Capital
Chris Donnelly - Pacific Rock Capital
Shawn Boyd - Westcliff Capital Management
Previous Statements by IMMR
» Immersion Corporation Q1 2010 Earnings Call Transcript
» Immersion Corporation Q4 2009 Earnings Call Transcript
» Immersion Corporation Q1 2009 Earnings Call Transcript
Ladies and gentlemen, thank you for standing by. Welcome to the Immersion Second Quarter Fiscal 2010 Earnings Conference Call. During today's presentation, all participants are in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator instructions). This conference is being recorded today, Thursday, August 5th of 2010.
Now, I'd like to turn the conference over to Alex Wellins of The Blueshirt Group. Please go ahead, sir.
Good afternoon and thanks for joining us today on Immersion Second Quarter 2010 conference call. This call is also being broadcast live over the web and can be accessed from the Investor Relation section of the company's website at immersion.com. With me on today's call is the company's President and CEO, Vic Viegas, and Shum Mukherjee, the company's CFO.
During this call, we may make forward-looking statements which may include projected financial results for operating metrics, business strategies, anticipated future products, anticipated market demand or opportunities and other forward-looking topics. These statements are subject to risks, uncertainties and assumptions. Accordingly, actual results could differ materially. For a listing of the risks that could cause this, please see our latest Form 10-K and Form 10-Q filed with the SEC, as well as the factors identified in today's press release.
Additionally, please note that during the call we may discuss non-GAAP financial measures. For each non-GAAP financial measure discussed a presentation of the most directly comparable GAAP financial measure and a reconciliation of the differences between the non-GAAP financial measure discussed and the most directly comparable GAAP financial measure is available in the Investor Relations section of the company's website in the Shareholder Presentation section of the Investor Relation section.
With that said, I'll turn the call over to Chief Executive Officer, Vic Viegas. Vic?
Thanks Alex, and thanks everyone for joining us this afternoon. I'll start by providing a high level summary of our performance for the second quarter. Then I'll turn the call over to Shum for a more detailed review of our Q2 results. I will then discuss recent developments and our thoughts on the current business environment before opening up the call to your questions.
Total revenues of $8.5 million for the second quarter were greater than anticipated. We achieved strong growth in our royalty and license revenue, driven by continued traction for our haptic solutions across a variety of end markets.
In addition, we benefited from a reconciliation of certain customers royalty reports in the gaming market and from non-recurring gains in the medical business of approximately $1.1 million.
Net income for the second quarter totaled $180,000 or $0.01 per share, as compared to a net loss of $8.9 million or $0.32 per share in the same period last year. We generated positive adjusted EBITDA of $2 million.
Stepping back for a moment, Immersion has had a busy first half of the year. We completed the independent financial investigation and successfully transitioned the medical products group to CAE, thereby shifting the company to a predominately-licensing model. We have signed new licensees, launched new products, significantly reduced expenses and achieved a very favorable outcome in a piece of litigation in the medical simulation area. We now have a dedicated CEO and CFO in place. With the prior headwinds largely behind this, our ability to focus on execution coupled with a strong value proposition and favorable industry trends are allowing us to post strong growth in our ongoing business.
I'll now turn the call over to Shum, for a more detail review of our financial results.
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.