Jefferies 2013 TMT Investor Conference · including Rockstar Games, SEGA, Konami Digital...

© 2013 Immersion Corporation–Confidential

NASDAQ: IMMR

Jefferies 2013 TMT Investor Conference

NASDAQ: IMMR

Victor Viegas, CEO & Paul Norris, CFO

May 9, 2013


Forward-Looking Statements

All statements, other than the statements of historical fact, are statements that may be deemed forward-looking statements, including any statements of the plans, strategies, and objectives of management for future operations, statements regarding projected future financial results, market size and any other projections, and statements of belief or assumptions underlying any of the foregoing. Immersion’s actual results might differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with Immersion’s business, which include but are not limited to, the effects of the current negative macroeconomic climate; delay in or failure to achieve commercial demand for Immersion’s or its licensees’ products; a delay in or failure to achieve the acceptance of force feedback as a critical user experience; the commercial success of applications or devices into which Immersion's technology is licensed; potentially lengthy sales cycles and design processes; adverse outcomes in any intellectual property-related litigation and the costs related thereto; unanticipated difficulties and challenges encountered in development efforts; potential restructuring charges; failure to retain key personnel; potential and actual claims and proceedings relating to such matters, including stockholder litigation; and other factors. Many of these risks and uncertainties are beyond the control of Immersion. For a more detailed discussion of these factors, and other factors that could cause actual results to vary materially, interested parties should review the risk factors listed in Immersion’s most recent Form 10-K and Form 10-Q, which are on file with the U.S. Securities and Exchange Commission. The forward-looking statements in this presentation reflect Immersion’s beliefs and predictions as of the date of this presentation. Immersion disclaims any obligation to update these forward-looking statements as a result of financial, business, or any other developments occurring after the date of this presentation.

In addition, the use of the word “partner” or “partnership” does not imply a legal partnership between Immersion and any other company.

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Non-GAAP Measures

� This presentation includes information on adjusted EBITDA. This measure is not based on any standardized methodology prescribed by U.S. generally accepted accounting principles (“GAAP”) and is not necessarily comparable to similar measures presented by other companies. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization after removing the effect of stock-based compensation expense, and other non-operating expenses. This measure should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP, and because this amount is not determined in accordance with GAAP, it should not be used exclusively in evaluating Immersion’s business and operations. Immersion believes that this non-GAAP information is useful as an additional means for investors to evaluate Immersion’s operating performance, when reviewed in conjunction with Immersion’s GAAP financial statements. Management also reviews this information as an additional means for measuring the performance of Immersion. Immersion compensates for these limitations by realizing that these amounts are not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating its business and operations.

� Additionally, please note that during this presentation, we may discuss historical 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 Immersion’s website at www.immersion.com.

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Company Highlights

4

Leader in Haptics Solutions & IP

Established in Large and Rapidly Growing Markets– Mobile, Gaming, Medical, Auto, Other

– TouchSense in 550+M devices

– Opportunity: 4B devices per year

World-class Customer Base– Samsung, Nokia, LG, Motorola,

Sony, Lexus, Logitech, CAESmall, Agile Licensing Company– 100 employees leveraging world-class ecosystem

– Scalable business modelStrong IP– Largest haptic IP portfolio

– Proven ability to defend IP

Solid Financial Performance– $64M cash, no debt

– High margin, profitable business


Haptics – The Science of Touch

� Touchscreens without haptics are limited:– Small controls; fingers can obscure screen interactions– “Realistic” apps, but no feeling– No physical connection between real-world life and

digital media

� Haptic feedback offers reassuring confirmation, greater realism and rich communication:– Improved confidence and greater accuracy when typing

with input/gesture confirmation– Cool effects in games– Apps that are immersive, that “come alive”– Realistic surgical simulations– Reduced driver distraction– Personal connection through richer communication

channels

� Compelling value proposition: significantly enhanced UX enables OEMs to differentiate products

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Bringing Devices to Life with Touch Feedback


Mobile Phone Automotive• Infotainment• Navigation• Climate Control• X by Wire

Large and Rapidly Growing Markets

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Touch Screens and Surfaces Are Driving Adoption of Haptics

Consumer

Commercial

• Personal Computers• Personal Navigation Device• Personal Media Players• Home Automation • White Goods• Cameras• Printers

• Multimodal UX• Virtual Keyboard• Gaming• Personalized Alerts• Immersive Messaging

2.0B PHONES

• Controllers• Handheld • Arcade • Casino

Gaming

188M DEVICES

83M VEHICLES 1.7B DEVICES

Medical• Robotic Surgery • Medical Devices• Medical Simulators

15M DEVICES 145M DEVICES

• Desktop Phones• Office Printer s• Point-of-Sale • Fitness • Portable Data Terminals• Industrial Controls

Sources: BofA ML, PWC, Display Search, Company Estimates


Touch Screen Deployment is Rising

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2010 2011 2012 2013 2014 2015 2016 2017 2018

ALL OTHERS COMBINED

MOBILE PHONES

7

Un

its

(M)

Source: Display Search Touch Panel Market Analysis 2012 Annual Report


Royalty & license98%

Product sales0%

NRE2%

Mix as a Percentage of Total Revenue in 2013

Mobility66%

Gaming19%

Medical11%

Auto4%

By Type By Vertical

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Highly Scalable Licensing Model


World Class Customers and PartnersLeveraging a Best-in-Class Ecosystem

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The World’s Largest Haptics IP Portfolio

10

0

100

200

300

400

500

600

700 � Levels of Innovation:

– Foundational haptics technology

– New UX contexts

– System-level solutions

� Embedded level technology

� Integration & application level software

� Proven ability to defend IP

Number of Active Patents Granted

1,300+ Lifetime Granted & Pending Patents Globally


Hybrid Business Approach

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TouchSense® SolutionsReference Designs, Software, and SDKs

TouchSenseSeries

HapticsApplication

Target Markets

1000

300040005000

Industrial StrengthHeavy grade screensExtreme environments

Mass MarketLightweight touch surfaces and touch screens

Mobile PhoneSingle-actuator Multi-sensor HD Haptics

• Automotive• Gaming - Casino • Consumer Electronics• Commercial

• Consumer Electronics• Commercial• Gaming - Portable• Medical Devices

• Mobile Phone• Smart Phone• Feature Phone

2000

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Mobile Business Model

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Basic Haptics to HD Haptics: strong IP & compelling solutions

IP LicensingBasic Haptics

Differentiated effects created through sophisticated control of frequency, waveform, amplitude, duration

Ex: Rich UIs, customized alerts, gaming

Simple touch feedback on a touch screen device with a GUI

Ex: Button press confirmation

TouchSense 3000, 4000 SD Haptics

TouchSense 5000HD Haptics

High fidelity haptics create widest range of effects with advanced hardware

Ex: Realistic textures, tactile gestures communicate intensity and emotion


Systems Level Process

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TouchSense® Brings Digital Devices to Life with Touch Feedback

Integrated or Separate

Tactile FeedbackActuation

Touch Location Touch Screen

ControllerHost or

Embedded Application

Touch Location

(Digital)

Selected Tactile Effect

TouchSensePlayer

Effects

Electroactive Polymers

Actuator Technology

Piezo

LRAs/ERMs


Ecosystem LeadershipEcosystem coordination & expertise creates premium experiences

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Haptic Development Platform

� Outreach program to create awareness of Haptic SDK and train developers on Immersion tools

� Adoption by top tier app developers, including Rockstar Games, SEGA, Konami Digital Entertainment & Handy Games

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� Integrator for OEMs - automated tool works with TouchSense embedded technology to seamlessly integrate haptics into Android

� Haptic SDK - tools for easy addition of pre-designed and custom-programmed haptic effects into developer apps

Developer Program


Future Mobility Business GrowthR

EV

EN

UE

TIME

New Haptic SW and

Content Modules

Higher ASPs via Richer

SW Capability

New OEMs (China, etc.)

High Definition

Integrator

High Definition

TouchSense

Standard Definition

Integrator

Standard Definition

TouchSense

Advanced Haptics

Patent Licensing

Basic Haptics Patent

Licensing

CurrentBusiness

FutureBusiness

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EV

EN

UE

TIME

Advanced Haptics Patent Licensing

Basic Haptics Patent Licensing

CurrentBusiness

FutureBusiness

� Motorola, LG Electronics and Samsung now license Basic Haptics IP

� Additional licensees to fuel incremental growth

� Opportunities to license advanced IP for new applications, wearable, etc.

� Motorola, LG Electronics and Samsung now license Basic Haptics IP

� Additional licensees to fuel incremental growth

� Opportunities to license advanced IP for new applications, wearable, etc.

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EV

EN

UE

TIME

Standard Definition Integrator

Standard Definition TouchSense

CurrentBusiness

FutureBusiness

� Basic Haptics IP supports upsell to standard definition programmable haptics solutions

� Should grow moderately in line with overall market, focus on mid-tier products

� Basic Haptics IP supports upsell to standard definition programmable haptics solutions

� Should grow moderately in line with overall market, focus on mid-tier products

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EV

EN

UE

TIME

High Definition Integrator

High Definition TouchSense

CurrentBusiness

FutureBusiness

� High definition products now being launched in Japan, Korea

� Expect increased growth as hardware ecosystem scales up, consumer demand for higher fidelity increases

� High definition products now being launched in Japan, Korea

� Expect increased growth as hardware ecosystem scales up, consumer demand for higher fidelity increases

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EV

EN

UE

TIME

New OEMs(China, etc.)

CurrentBusiness

FutureBusiness

� Chinese OEMs currently shipping lower-end chip based solutions

� Increasing demand for direct licensing of more advanced solutions

� Rapidly growing sector increasingly focused on international markets

� Chinese OEMs currently shipping lower-end chip based solutions

� Increasing demand for direct licensing of more advanced solutions

� Rapidly growing sector increasingly focused on international markets

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EV

EN

UE

TIME

New Haptic SW & Content Modules

Higher ASPs via Richer SW Capability

CurrentBusiness

FutureBusiness

� Innovation drives new solutions focused on greater realism and rich communications

� Integrated Themes and Tactile Presence modules launched at 2013 Mobile World Congress

� Potential for haptics to add substantial value to mobile media

� Innovation drives new solutions focused on greater realism and rich communications

� Integrated Themes and Tactile Presence modules launched at 2013 Mobile World Congress

� Potential for haptics to add substantial value to mobile media

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Basic Haptics Licensing Milestones

� November 2012: Basic Haptics patent settlement/license signed with Motorola/Google

� February 2013: LG Electronics license expanded to include Basic Haptics patents

� March 2013: Samsung and Immersion enter into renewed license agreement expanding the license to include Basic Haptics patents

� April 2013: Immersion terminates ITC action against HTC and requests stay to be lifted in District Court action to accelerate potential damages recovery from HTC

� May 2013: Immersion files amended complaint against HTC in District Court

� Upcoming:• Scheduling conference in District Court action

• Markman (claims construction) hearing

• Trial in District Court

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Innovation Cycle

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Innovation, building ecosystems & monetizing haptic technology

Innovate Productize Adoption

Research & developmentExtension of patent portfolio

New solutions & IPEcosystem partnerships

Design wins & new licenseesMonetization


Long-Term Target ModelPro Forma Model Based on Focus on Licensing

2012 2013 Long-Term

Revenue $32.2M $44M - $48M 100%

Gross Margin 96% 99% 99%

Opex 112%* 67 - 72%* 53 - 57%

Adjusted EBITDA 1% 28 - 32% 42 - 46%

Net Income (17)% 15 - 20% 30 - 35%

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*Reflects actual and estimated litigation spend in 2012 and 2013, respectively, on HTC lawsuits


Q1’13 Q1’12 FY’12 FY’11

Revenues $13,860 $9,691 $32,169 $30,635

Cost of Product Sales 148 315 1,188 1,255

Gross Margin 13,712 9,376 30,981 29,380

% of Revenues 99% 97% 96% 96%

Sales and Marketing 2,247 1,746 6,775 7,085

Research and Development 2,573 2,194 8,421 8,386

General and Administrative 6,138 4,771 19,326 12,568

Amortization of Intangibles 494 341 1,554 1,394

Operating Income (Loss) $2,260 $324 $(5,095) $(53)

Interest and Other 10 10 170 204

Income Taxes / Benefit (17) (553) (792) (1,816)

Discontinued Ops - - 153 61

Net Income (Loss) $2,253 $(219) $(5,564) $(1,604)

% of Revenues 16% -2% -17% -5%

EBITDA (non-GAAP) $3,955 $1,551 $259 $6,024

% of Revenues 29% 16% 1% 20%

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Income Statement($ in thousands)


Q1’13% of total

Q1’12% of total

Growth ’13 v ’12

Royalty & License $13,649 98% $9,085 94% 50%

Product Sales 19 0% 272 3% (93)%

Development Contract & Other 192 2% 334 3% (43)%

Total $13,860 100% $9,691 100% 43%

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Revenues – Q1 2013 and FY 2012

FY’12% of total

FY’11% oftotal

Growth ’12 v ’11

Royalty & License $28,989 90% $26,916 88% 8%

Product Sales 1,982 6% 2,583 8% (23)%

Development Contract & Other 1,198 4% 1,136 4% 5%

Total $32,169 100% $30,635 100% 5%

($ in thousands)

($ in thousands)


Mar 31, 2013 Dec 31, 2012

Cash and Short Term Investments 64,217 43,546

Other Current Assets 4,106 2,890

PP&E 1,193 1,281

Intangibles and Other 16,271 15,725

Total Assets $85,787 $63,442

Deferred Revenues (short & long term) 28,720 14,155

Other Liabilities 7,364 4,646

Total Liabilities $36,084 $18,801

Stockholder’s Equity $49,703 $44,641

Total Liabilities & Equity $85,787 $63,442

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Balance Sheet($ in thousands)


Company Highlights

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Leader in Haptics Solutions & IP

Established in Large and Rapidly Growing Markets– Mobile, Gaming, Medical, Auto, Other

– TouchSense in 550+M devices

– Opportunity: 4B devices per year

World-class Customer Base– Samsung, Nokia, LG, Motorola,

Sony, Lexus, Logitech, CAESmall, Agile Licensing Company– 100 employees leveraging world-class ecosystem

– Scalable business modelStrong IP– Largest haptic IP portfolio

– Proven ability to defend IP

Solid Financial Performance– $64M cash, no debt

– High margin, profitable business

Jefferies 2013 TMT Investor Conference · including Rockstar Games, SEGA, Konami Digital...

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