Immersion Corporation (IMMR) Q2 2010 Earnings Call August 5, 2010 05:30 pm Executives Alex Wellins - The Blueshirt Group Vic Viegas - President and CEO Shum Mukherjee - Chief Financial Officer Analysts 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 Presentation Operator
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» Immersion Corporation Q1 2010 Earnings Call Transcript
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» Immersion Corporation Q1 2009 Earnings Call Transcript
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? Vic V iegas 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.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. Read the rest of this transcript for free on seekingalpha.com