Immersion Corporation CEO Discusses Q4 2011 Results - Earnings Call Transcript

Immersion Corporation (IMMR)

Q4 2011 Earnings Call

March 01, 2012 05:00 PM ET


Jennifer Jarman - IR

Vic Viegas - CEO


Charlie Anderson - Dougherty and Company

Jeff Schreiner - Capstone Investments

Darice Liu - Brigantine Advisors

Larry Solomon - Capital Research



Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Immersion Corporation Fourth Quarter Fiscal Year 2011 Earnings Conference Call. (Operator Instructions). This conference is being recorded today, Thursday, March 1, 2012.

I would now like to turn the conference over to Ms. Jennifer Jarman of the Blue Shirt Group. Please go ahead, ma’am.

Jennifer Jarman

Thank you, Camille. Good afternoon and thank you for joining us today on Immersion’s Fourth Quarter and Fiscal 2011 Conference Call. This call is also being broadcast live over the Web and can be accessed from the Investor Relations section of the company’s website at With me on today’s call is Vic Viegas, President and CEO.

During this call we may make forward-looking statements which may include projected financial results or operating metric, 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-Q filed with the SEC as well as the factors identified in today’s press release.

Additionally, please note that during this 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 company’s press release issued today after market closed.

With that said, I’ll turn the call over to Chief Executive Officer, Vic Viegas. Vic?

Vic Viegas

Thank you Jennifer and thank you everyone for joining us this afternoon. 2011 was a productive year for Immersion. While total revenues of $30.6 million was slightly down from 2010, royalty and licensing revenues were up 16% from the prior year and represented 88% of our business, reflecting the successful transition to a scalable licensing model.

We kicked off the year by launching our integrator product, which created an automated way for OEMs to deeply integrate haptic effects into their Android UI and then quickly followed with the launch of an easy to use SDK for third-party developers to encourage the adoption of haptic effects into the design of mobile applications. Even more impressively, we saw these products adopted in the market very quickly, confirming that our haptic solutions helped solve real world, user interface problems.

During the year haptics enjoyed widespread adoption in the mobile market, with operating systems such as the Android OS adopting haptics as a critical user interface element for todays touch screen-driven devices. As the same time we enjoyed a broadening of our patent portfolio which represents years of Immersion investment and innovation in haptic space.

As you may know, we recently initiated a complaint with the ITC against Motorola Mobility to protect several of our patents covering various uses of haptic effects in touch screens. Outside of the mobile market, we continue to see strength for haptics in the Gaming segment and also experienced more engagement with partners and manufacturers in the automotive markets.

I will discuss our recent business developments in just a few minutes, but first I’d like to highlight our financial results for the fourth quarter and fiscal 2011. Revenues in the fourth quarter of 2011 were $7.7 million, up 20% from revenues of $6.4 million in the fourth quarter of 2010.

As a percentage of total revenue in the fourth quarter, 41% came from Mobility, 32% from Gaming, 16% from Medical, 7% from Auto and 4% from Chip and Other. Revenues from royalties and licenses were $6.8 million, up 26% from royalty revenues of $5.4 million in the fourth quarter of 2010 primarily reflecting strong demand in the Gaming and Mobility lines of business.

Revenues from the sale of products was $691,000 compared to $768,000 in the same quarter last year and revenues from development contracts were $193,000 compared to $223,000 in the year ago period. As I mentioned previously, revenues for the full year were $30.6 million, down 2% from revenues of $31.1 million for fiscal 2010.

As a reminder, the prior year included revenue from medical product lines that have been transferred to CAE or discontinued and some true-up adjustments for the Gaming line of business. Excluding these items, revenue for 2010 from ongoing business was $26.4 million.

License and royalty revenues for fiscal 2011 were $26.9 million, up 16% from $23.3 million in 2010. Revenues from products and development contracts were $2.6 million and $1.1 million respectively, compared to revenues of $6.8 million and $1.1 million respectively in 2010.

Cost of product sales in the fourth quarter of 2011 was $342,000, compared to $314,000 in the fourth quarter of 2010. Gross profit in the fourth quarter of 2011 was $7.3 million or 96% of revenues, compared to gross profit of $6.1 million or 95% of revenues in the same period last year.

Gross profit for the year was $29.4 million or 96% of revenues compared to gross profit margin of $28.2 million or 91% of revenues in 2010. The increase in gross profit as a percentage of revenues from year to year was primarily driven by the higher mix of revenues from royalties and licenses, which generated higher gross margins than gross margins from revenues related to product sales.

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