IMMERSION CORP Q1 FY2020 earnings call

• Implemented work-from-home policy and suspended travel for employees due to COVID-19. - Q1 revenue grew 22% while non-GAAP operating expenses were down 40%. - Identified ~$3 million in additional savings in fiscal 2020 in areas like legal, travel, and consulting. - Repurchased ~4.3 million shares for ~$26 million, with ~$7.1 million remaining under repurchase program. - Strong balance sheet with $76.2 million cash as of March 31, 2020. - In auto, expanded partnership with Alps Alpine for active licensing technology for touch feedback devices. - In gaming, anticipation of PlayStation 5 launch benefiting from haptic technology license. - Strategic partnership with FeelRobotics for entry into the adult device market.

Total revenue for Q1 2020 was $6.3 million, up 22% from $5.1 million in the same quarter last year. Revenue from per unit royalty arrangement was up ~$1.6 million or 48%, mainly driven by $2.5 million in revenues from mobile licensees signed in 2019. Revenue from fixed license fee arrangement was down 26% due to a lump sum license fee from one customer in Q1 2019. Recurring revenues represented 96% of Q1 2020 revenues vs 90% last year. By line of business as a percentage of total revenues: 77% from mobility, 12% from automotive, 11% from gaming.

• Intend to be profitable on a non-GAAP basis for the fiscal year. - Expect to exit 2020 with an annual non-GAAP operating expense run rate of approximately $21 million to $23 million. - No revenue guidance provided, withdrew prior guidance.

• Impact of COVID-19 on business, customers, suppliers, and the economy. - Risks and uncertainties beyond Immersion's control detailed in Risk Factors in press release, 10-K, and 10-Q.

Q: Given the substantial cuts to operating expenses, are there any strategies or goals laid out at last year’s Analyst Day that will be any harder to achieve?

A: Not at all. The OpEx cutting plan was in place for some time, and Board changes accelerated initiatives which are in line with strategy.

Q: Clearly, auto and mobile will be impacted by the pandemic. Are you seeing strength in gaming and then also is the pandemic accelerating your prospects in the adult market?

A: On the gaming side, excitement building on PS5 launch with haptic technology, and shelter-in-place benefiting gaming software. Adult market with FeelRobotics partnership is strong, tracking to plan.