Immersion Corporation Q3 FY2020 earnings call

• Jared Smith appointed as Interim CEO, joining from Worldwide Sales role.
• Profitable on GAAP and non-GAAP basis in Q3, generated positive free cash flow.
• Automotive market: Signs of recovery, developed updated touchscreen reference solution with partners.
• Mobile market: Recovering, executed multiyear renewal with LG Electronics and growth in China market.
• Gaming market: PlayStation 5 launch with dual sense controllers using Immersion tech, positive media reviews and developer reception. Guimo renewed license for gaming peripherals.
• Industry standards: Presented proposals at MPEG 132 meeting to establish haptics as a first order media type.

Total revenue for Q3 2020 was $7.6 million. Segment performance:

• Automotive: Saw signs of market recovery from COVID-19, with strong royalty reports from Tier 1 licensees and increased customer/OEM engagements. Developed an updated touchscreen reference solution in collaboration with partners. Revenue contribution: 12% of total revenues.
• Mobile: Seeing signs of recovery, with revenue tracking expectations. Executed a multiyear renewal with LG Electronics and growth in the China market through the China partner program. Revenue contribution: 74% of total revenues.
• Gaming: Excited about PlayStation 5 launch, where Sony's dual sense controllers use Immersion technology. Guimo Corporation renewed its license for haptic technology in gaming peripherals. Revenue contribution: 14% of total revenues.

• Expect growth in revenues, profitability (GAAP and non-GAAP), and positive cash flow in Q4.
• Q4 expected to be better than pre-COVID expectations.
• No explicit full-year guidance beyond the range ($17 million to $19 million), but expecting continued growth.

• Impact of COVID-19 on business, customers, suppliers, and economy.
• Risks and uncertainties beyond Immersion's control, detailed in press release, 10-K, and 10-Q.
• Upcoming hearings for LGE and Samsung cases in mid-November.

Q: On OpEx, what drove it lower in Q3 and OpEx outlook?

A: Q3 OpEx lower due to transition to Montréal team, subletting San Jose facility, and optimization of patent/legal expenses. Outlook maintains guidance of $17M to $19M with room for customer engagement but strict financial discipline.

Q: On automotive design wins, end markets, and gaming momentum?

A: Automotive design wins in mid-range, expecting continued adoption. Gaming seeing momentum from PlayStation 5 and recovery from COVID.

Q: December quarter expectations and strategy change?

A: No explicit Q4 guidance, but expecting growth in revenues and profitability. Strategy remains focused on core markets (automotive, gaming, mobile) with no major shift under interim leadership.

Q: China strategy and other verticals?

A: China strategy with partner program, continuing to evaluate other approaches for serving the market, keeping options open for other verticals.