0001213900-23-086179.txt : 20231113 0001213900-23-086179.hdr.sgml : 20231113 20231113163409 ACCESSION NUMBER: 0001213900-23-086179 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 75 CONFORMED PERIOD OF REPORT: 20230930 FILED AS OF DATE: 20231113 DATE AS OF CHANGE: 20231113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMMERSION CORP CENTRAL INDEX KEY: 0001058811 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 943180138 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38334 FILM NUMBER: 231399428 BUSINESS ADDRESS: STREET 1: 2999 N. E. 191ST STREET STREET 2: SUITE 610 CITY: AVENTURA STATE: FL ZIP: 33180 BUSINESS PHONE: 408-467-1900 MAIL ADDRESS: STREET 1: 2999 N. E. 191ST STREET STREET 2: SUITE 610 CITY: AVENTURA STATE: FL ZIP: 33180 FORMER COMPANY: FORMER CONFORMED NAME: IMMERSION HUMAN INTERFACE CORP DATE OF NAME CHANGE: 19980602 10-Q 1 immr-20230930.htm 10-Q immr-20230930.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to                                

Commission File Number 000-38334

 

Immersion Corporation

(Exact name of registrant as specified in its charter)

Delaware

 

94-3180138

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

2999 N.E. 191st Street, Suite 610, Aventura, FL, 33180

(Address of principal executive offices, zip code)

(408) 467-1900

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

IMMR

NASDAQ Global Market

Series B Junior Participating Preferred Stock Purchase Rights

IMMR

NASDAQ Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes         No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes       No ☐

 

 


 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company"  in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   No

 

Number of shares of common stock outstanding at November 8, 2023 was 31,839,986.




 

IMMERSION CORPORATION

(In thousands)

(Unaudited)

 


September 30, 2023


 


December 31, 2022


ASSETS


Current assets:


 


 


 


Cash and cash equivalents

$

28,701


 

$

  48,820


Investments - current


 121,997


 


 100,918


Accounts and other receivables


 2,558


 


1,235


Prepaid expenses and other current assets


  7,589


 


 9,347


Total current assets


  160,845


 


160,320


Property and equipment, net


  231


 


 293


Investments - noncurrent


 29,855


 


 17,040


Long-term deposits


 6,230


 


  4,324


Deferred tax assets


 7,217


 


 7,217


Other assets


 303


 


 916


Total assets

$

204,681


 

$

190,110


LIABILITIES AND STOCKHOLDERS’ EQUITY


Current liabilities:


 


 


 


Accounts payable

$

44


 

$

 86


Accrued compensation


 616


 


 2,029


Deferred revenue - current


 4,731


 


 4,766


Other current liabilities


 20,424


 


 12,465


Total current liabilities


25,815


 


 19,346


Deferred revenue - noncurrent 


 9,088


 


 12,629


Other long-term liabilities


 345


 


 435


Total liabilities


 35,248


 


32,410


Commitments and contingencies (Note 5)


 


 


 


Stockholders’ equity:


 


 


 


Common stock and additional paid-in capital


 322,747


 


 322,714


Accumulated other comprehensive income


 1,195


 


 202


Accumulated deficit


(52,030

)

 


(70,016

)

Treasury stock


(102,479

)

 


 (95,200

)

Total stockholders’ equity


 169,433


 


157,700


Total liabilities and stockholders’ equity

$

 204,681


 

$

   190,110


 

See accompanying Notes to Condensed Consolidated Financial Statements.


IMMERSION CORPORATION

AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

 

 


Three Months Ended September 30,




Nine Months Ended September 30,

 


2023


 


2022




2023


2022

Revenues:


Royalty and license

$

9,474


 

$

13,931



$ 23,401

$ 29,079

Development, services, and other


 8


 


 75




138


218

Total revenues

9,482


 


 14,006




23,539


29,297

Operating expenses:

Sales and marketing


 367


 


 282




861


990

Research and development


30


 


 254




259


1,118

General and administrative


 2,566


 


 2,540




9,528


8,550

Total operating expenses


 2,963


 


 3,076




10,648


10,658

Operating income


6,519


 


 10,930




12,891


18,639

Interest and other income (loss), net


 (2,554

)

 


(2,348

)

10,731


(6,413 )

Income before provision for income taxes


 3,965


 


8,582



23,622


12,226

Provision for income taxes


(1,285

)

 


(877

)

(5,636 )

(1,264 )

Net income

$

2,680

 

$

7,705


$ 17,986

$ 10,962

Basic net income per share

$

0.08



$

0.23


$ 0.56

$ 0.33

Shares used in calculating basic net income per share


 32,523


 


 33,201




32,254


33,601

Diluted net income per share

$

 0.08


 

$

0.23


$ 0.55

$ 0.32

Shares used in calculating diluted net income per share


 32,750


 


 33,682




32,586


34,035

Other comprehensive income, net of tax

Deferred gains on available-for-sale marketable debt securities


 320


 


 156




776


(1,025)

Realized losses on available-for-sale marketable debt securities reclassified to net income


188


217
556
Total other comprehensive income
320


344

993


(469 )

Total comprehensive income

$

 3,000



$

8,049

$ 18,979
$ 10,493

 

See accompanying Notes to Condensed Consolidated Financial Statements.


 

IMMERSION CORPORATION

(In thousands, except number of shares)

(Unaudited)

  Three Months Ended September 30, 2023
 

Common Stock and Additional Paid-In Capital

 

Accumulated Other Comprehensive Income

 

Accumulated Deficit

  Treasury Stock
 

Total

Stockholders’ Equity

  Shares
 
Amount
  Shares
 
Amount
 
Balances at June 30, 2023

47,519,064


$

 322,870


$

875


$

(54,710

)


 15,260,452


$

 (98,999

)


$

170,036


Net income




2,680




2,680


Unrealized gain on available-for-sale securities, net of taxes



320





320


Release of restricted stock units and awards, net of shares withheld

51,875





21,527



(152

)


(152

)

Stock option exercises








Shares issued to an employee in lieu of cash compensation

7,326


48






48


Stock repurchases










485,061


(3,328

)

(3,328 )
Dividends declared


(991

)










(991

)
Stock-based compensation


820






820


Balances at September 30, 2023

47,578,265


$

 322,747


$

1,195


$

(52,030

)


15,767,040


$

(102,479

)


$

169,433


 

Three Months Ended September 30, 2022
Common Stock and
Additional Paid-In Capital

Accumulated
Other
Comprehensive
Income (Loss)

Accumulated
Deficit
Treasury Stock
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
Balances at June 30, 2022 46,851,509 $ 325,351
$ (401
) $ (97,423
) 13,378,528 $ (87,790
) $ 139,737
Net income


7,705

7,705
Unrealized gains on available-for-sale securities, net of taxes

344


344
Stock repurchases


954,247
(5,304 )
(5,304 )
Release of restricted stock units and awards, net of shares withheld 51,875


13,768
(74 )
(74 )
Issuance of stock for ESPP purchase 3,691

16





16
Stock-based compensation
730



730
Balances at September 30, 2022 46,907,075 $ 326,097
$ (57
) $ (89,718
) 14,346,543 $ (93,168
) $ 143,154

 

  

IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except number of shares)

(Unaudited)

  

  Nine Months Ended September 30, 2023
  Common Stock and Additional Paid-In Capital
 

Accumulated Other Comprehensive Income



Accumulated Deficit



Treasury Stock

Total Stockholders’ Equity


  Shares

Amount

Shares

Amount
Balances at December 31, 2022 46,974,598
$   322,714
$ 202
$ (70,016 )
14,727,582
$ (95,200 ) $ 157,700
Net income

 



17,986





17,986
Unrealized gain on available-for-sale securities, net of taxes 



993







993
Stock repurchases







 898,757

(6,180 )
(6,180 )
Release of restricted stock units and awards, net of shares withheld 508,344







140,701

(1,099 )
(1,099 )
Proceeds from stock options exercises 21,222


160













160
Issuance of stock for ESPP purchase 1,298

6









6
Shares issued to an employee in lieu of cash compensation 72,803


538













538
Dividends declared


(3,197 )












(3,197 )
Stock-based compensation

2,526








2,526
Balances at September 30, 2023 47,578,265
$ 322,747
  $  1,195
$ (52,030 )
15,767,040
$ (102,479 ) $ 169,433

  

Nine Months Ended September 30, 2022
Common Stock and
Additional Paid-In Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit

Treasury Stock
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
Balances at December 31, 2021 46,534,198 $ 323,296 $ 412 $ (100,680 )
12,143,433  $ (81,733 ) $ 141,295
Net income




10,962





10,962
Unrealized loss on available-for-sale securities, net of taxes
(469 )


(469 )
Stock repurchases






2,174,793 
(11,281 )
(11,281 )
Issuance of stock for ESPP purchase 11,416
51




51
Release of restricted stock units and awards, net of shares withheld 344,944


28,317
(154 )
(154 )
Shares issued to an employee in lieu of cash compensation 16,517
84




84
Shares issued in connection with public offering, net of issuance costs
5




5
Stock-based compensation

2,661


2,661
Balances at September 30, 2022 46,907,075 $ 326,097 $ (57 ) $ (89,718 )
14,346,543 $ (93,168 ) $ 143,154

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 


IMMERSION CORPORATION

(In thousands)

(Unaudited)

  


Nine Months Ended September 30,


 


2023


 


2022


Cash flows provided by (used in) operating activities:


 


 


 


Net income

$

   17,986


 

$

10,962


Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:


 


 


 


Depreciation of property and equipment


  56


 


95


Reduction in carrying value of right of use assets
277


524
Stock-based compensation
2,526


2,661

Net (gains) losses on investment in marketable securities


(4,330

)

 


13,288

Net loss on derivative instruments


(341

)

 


(3,393

)

Foreign currency remeasurement gains


68

 


161


Shares issued to an employee in lieu of cash compensation


   538


 


84


Other noncash


(86

)

 


(29

)

Changes in operating assets and liabilities:


 


 


 


Accounts and other receivables


(1,323

)

 


(1,373

)

Prepaid expenses and other current assets


1,024

 


5,702


Long-term deposits


(1,967

)

 


1,114


Other assets


337


 


5,084


Accounts payable


(44

)

 


16


Accrued compensation


(1,413

)

 


715


Other current liabilities


3,080

 


527

Deferred revenue


(3,576

)

 


(2,954

)

Other long-term liabilities


(33)

 


(950

)

Net cash and cash equivalents provided by operating activities


12,779

 


   32,234


Cash flows provided by (used in) investing activities:


 


 


 


Purchases of marketable securities and other investments
(158,347 )

(131,100
)

Proceeds from sale or maturities of marketable securities and other investments


     130,602


 


95,225


Proceeds from sale of derivative instruments


17,888

 


11,170


Payments for settlement of derivative instruments


(9,508

)

 


(10,844

)
Purchases of property and equipment
(1 )

(29 )

Net cash and cash equivalents used in investing activities


(19,366

)

 


(35,578

)

Cash flows provided by (used in) financing activities:


 


 


 


Dividend payments to stockholders


(6,419

)

 


 


Payment for purchases of treasury stock


(6,180

)

 


(11,281

)
Proceeds from issuance of common stock under employee stock purchase plan
6


51
Proceeds from stock options exercises
160



Shares withheld to cover payroll taxes


(1,099

)

 


(154

)

Other financing activities



 


5


Net cash and cash equivalents used in financing activities


(13,532

)

 


(11,379

)

Net decrease in cash and cash equivalents


(20,119

)

 


(14,723

)

Cash and cash equivalents:


 


 


 


Beginning of period


    48,820


 


51,490


End of period

$

28,701


 

$

36,767


 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

Nine Months Ended September 30,



2023


 


2022


Supplemental disclosure of cash flow information:

Cash paid for income taxes

$

883

 

$

662


Supplemental disclosure of non-cash investing, and financing activities:


 


 


 


Dividends declared but not yet paid

$

991


 

$


Leased assets obtained in exchange for new operating lease liabilities $

$ 120

 


1.   SIGNIFICANT ACCOUNTING POLICIES

 

Description of Business

Immersion Corporation (the “Company”, “Immersion”, “we” or “us”) was incorporated in 1993 in California and reincorporated in Delaware in 1999. We focus on the creation, design, development, and licensing of innovative haptic technologies that allow people to use their sense of touch more fully as they engage with products and experience the digital world around them. We offer licenses for our patented technology to our customers.

  

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Immersion and our wholly-owned subsidiaries. All intercompany accounts, transactions, and balances have been eliminated in consolidation.

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions for Form 10-Q and the applicable articles of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, and cash flows, in conformity with U.S. GAAP and should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. In the opinion of management, all adjustments consisting of only normal and recurring items necessary for the fair presentation of the financial position and results of operations for the interim periods presented have been included. Certain prior year amounts have been reclassified to conform with the current year presentation. 

 

Use of Estimates

The preparation of condensed consolidated financial statements and related disclosures requires management to make estimates and assumptions that affect the reported amounts of the condensed consolidated financial statements. Significant estimates include revenue recognition, fair value of financial instruments, valuation of income taxes including uncertain tax provisions, stock-based compensation and long-term deposits for withholding taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The results of operations for the nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year. 


Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation.

 

Segment Information

We develop, license, and support a wide range of intellectual property (“IP”) that more fully engage users’ sense of touch when operating digital devices. We focus on the following target application areas: mobile devices, wearables, consumer, mobile entertainment and other content; console gaming; automotive; medical; and commercial. We manage these application areas in one operating and reporting segment with only one set of management, development, and administrative personnel.

Our chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM approves budgets and allocates resources to and assesses the performance of our business using information about our revenue and operating loss. There is only one segment that is reported to management. 

 

Recent Account Pronouncements

We do not expect recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, 2023, to have significant impact on our financial positions and results of operations.

 

2. REVENUE RECOGNITION

Disaggregated Revenue

 

The following table presents the disaggregation of our revenue for the three and nine months ended September 30, 2023, and 2022 (in thousands):

 

 


Three Months Ended September 30,



Nine Months Ended September 30,

 


2023


 


2022




2023


2022

Fixed fee license revenue

$

1,191


 

$

7,662



$ 3,594

$ 10,653

Per-unit royalty revenue


8,283


 


6,269




19,807


18,426

Total royalty and license revenue


 9,474


 


13,931




23,401


29,079

Development, services, and other revenue


8


 


75




138


218

Total revenues

$

9,482


 

$

14,006



$ 23,539

$ 29,297

Per-unit Royalty Revenue

We record per-unit royalty revenue in the same period in which the licensee’s underlying sales occur. When we do not receive the per-unit licensee royalty reports for sales during a given quarter within the time frame that allows us to adequately review the reports and include the actual amounts in our quarterly results for such quarter, we accrue the related revenue based on estimates of our licensees’ underlying sales, subject to certain constraints on our ability to estimate such amounts. We develop such estimates based on a combination of available data including, but not limited to, approved customer forecasts, a look back at historical royalty reporting for each of our customers, and industry information available for the licensed products. 

As a result of accruing per-unit royalty revenue for the quarter based on such estimates, adjustments will be required in the following quarter to true up revenue to the actual amounts reported by our licensees. In the three months ended September 30, 2023, we recorded adjustments of $0.5 million to increase royalty revenue. We recorded adjustments of $0.2 million to decrease royalty revenue during the three months ended September 30, 2022.

Contract Assets

As of September 30, 2023, we had contract assets of $6.3 million included within Prepaid expenses and other current assets, and $0.2 million included within Other assets on the Condensed Consolidated Balance Sheets. As of December 31, 2022, we had contract assets of $7.7 million included within Prepaid expenses and other current assets, and $0.5 million included within Other assets on the Condensed Consolidated Balance Sheets.


Contract assets decreased by $1.7 million from January 1, 2023, to September 30, 2023, primarily due to actual royalties billed during the nine months ended September 30, 2023.

Deferred Revenue

We recognize revenue from a fixed fee license agreement when we have satisfied our performance obligations, which typically occurs upon the transfer of rights to our technology upon the execution of the license agreement. However, in certain contracts, we grant a license to our existing patent portfolio at the inception of the license agreement as well as rights to the portfolio as it evolves throughout the contract term. For such arrangements, we have concluded that there are two separate performance obligations:

      Performance Obligation A: Transfer of rights to our patent portfolio as it exists when the contract is executed; and

      Performance Obligation B: Transfer of rights to our patent portfolio as it evolves over the term of the contract, including access to new patent applications that the licensee can benefit from over the term of the contract.

If a fixed fee license agreement contains only Performance Obligation A, we recognize the revenue from the agreement at the inception of the contract. For fixed fee license agreements that contain both Performance Obligation A and B, we allocate the transaction price based on the standalone price for each of the two performance obligations. We use a number of factors primarily related to the attributes of our patent portfolio to estimate standalone prices related to Performance Obligation A and B. Once the transaction price is allocated, the portion of the transaction price allocable to Performance Obligation A is recognized in the period the license agreement is signed and the customer can benefit from rights provided in the contract. The portion allocable to Performance Obligation B is recognized on a straight-line basis over the contract term which best represents the ongoing and continuous nature of the patent prosecution process. For such contracts, a contract liability account is established and included within Deferred revenue on the Condensed Consolidated Balance Sheets. As the rights and obligations in a contract are interdependent, contract assets and contract liabilities that arise in the same contract are presented on a net basis. 

Based on contracts signed and payments received as of September 30, 2023, we expect to recognize $13.8 million in revenue related to Performance Obligation B under our fixed fee license agreements, which are satisfied over time, including $8.1 million over one to three years and $5.7 million over more than three years.

As of December 31, 2022, total deferred revenue was $17.4 million. We recognized $3.6 million of deferred revenue during the nine months ended September 30, 2023.

 

3.  INVESTMENTS AND FAIR VALUE MEASUREMENTS

Marketable Securities

We invest surplus funds in excess of operational requirements in a diversified portfolio of marketable securities, with the objectives of delivering competitive returns, maintaining a high degree of liquidity, and seeking to avoid the permanent impairment of principal.

We regularly review our investment portfolio to identify and evaluate investments that have indicators of possible impairment. Investments are considered impaired when a decline in fair value is judged to be other-than-temporary. If the cost of an individual investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and our intent and ability to hold the investment. Once a decline in fair value is determined to be other-than-temporary, we will record an impairment charge and establish a new cost basis for the investment.


 

Marketable securities as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands):

 



September 30, 2023




Cost or Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value

Marketable equity securities
















Mutual funds

$

13,009



$

 



$

(1,381

)


$

11,628


Equity securities


69,253




3,087




(7,437

)



64,903


Total marketable equity securities


82,262




 3,087




(8,818

)



76,531


Marketable debt securities
















U.S. treasury securities


58,237




808




(87

)



58,958


Corporate bonds


16,123




273




(33

)



16,363


Total marketable debt securities


74,360




 1,081




(120

)



 75,321



$

156,622



$

4,168



$

(8,938

)


$

151,852


 



December 31, 2022




Cost or Amortized Cost




Unrealized Gains




Unrealized Losses




Fair Value


Marketable equity securities
















Mutual funds

$

26,352



$

 



$

(3,143

)


$

23,209


Equity securities


 53,273




2,776




(5,836

)



50,213


Total marketable equity securities


79,625




 2,776




  (8,979

)



73,422


Marketable debt securities
















U.S. treasury securities


25,640




182




(24

)



25,798


Corporate bonds


13,496




48




(106

)



13,438


Total marketable debt securities


 39,136




230




(130

)



39,236



$

118,761



$

 3,006



$

(9,109

)


$

 112,658


 

The amortized costs and fair value of our marketable debt securities, by contractual maturity, as of September 30, 2023 (in thousands) are as follows: 

 



September 30, 2023




Amortized Cost




Fair Value


Less than 1 year

$

 44,691



$

45,466


1 to 5 years


29,669




29,855


Total

$

 74,360



$

75,321



 

Derivative Financial Instruments

 

Our derivative instruments consisted of call and put options sold at their fair value as of the balance sheet date. These derivative instruments are reported as Other current liabilities on our Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 (in thousands):

 



September 30, 2023




Cost




Unrealized Losses




Fair Value


Derivative instruments

$

9,306



$

2,383



$

11,689



$