Immersion Corp. Reports Operating Results (10-Q)
Immersion Corp has a market cap of $150.6 million; its shares were traded at around $5.64 with and P/S ratio of 4.9.
Highlight of Business Operations:We increased our royalty and license revenue by 9%, but our overall revenue remained nearly flat with a decrease of 1% for the three months ended March 31, 2012 compared to the three months ended March 31, 2011. The increase in royalty and license revenue was mainly due to increased revenue primarily from our gaming and medical licensees. This increase was offset by a 73% decrease in product sales mainly due to decreased sales of our Virtual IV simulation product.
We categorize our geographic information into four major regions: North America, Europe, Far East, and Rest of the World. In the first quarter ended March 31, 2012, revenue generated in North America, Europe, Far East, and Rest of the World represented 48%, 13%, 39%, and 0% of total revenue, respectively, compared to 43%, 18%, 39%, and 0% of total revenue, respectively, for the first quarter ended March 31, 2011. The shift in revenues among regions was mainly due to a decrease in product sales in North America and a decrease in royalty and license revenue in Europe partially offset by an increase in royalty and license revenue in North America. The decrease in product sales was primarily due to a reduction in sales of our Virtual IV medical simulator products. The decrease in European royalty and license revenue was primarily due to decreased mobile device revenue arising from the timing of revenue recognition. The increase in North American royalty and license revenue was primarily from increased royalties from gaming and medical licensees.
Cost of Revenues Our cost of revenues (exclusive of amortization and impairment or abandonment of intangibles) consists primarily of direct materials, contract manufacturing, and other overhead costs for product sales, and labor related costs for development contracts and other. It excludes amortization and impairment or abandonment of intangibles. Lower product sales was the major contributor to the overall reduction of cost of revenues for the first quarter ended March 31, 2012 as compared to the first quarter ended March 31, 2011. Specifically, the decrease in cost of revenues for 2012 as compared to 2011 was primarily due to decreased direct material costs, contract manufacturing costs, and related costs of $278,000 partially offset by an increase in obsolescence expense of $91,000. The decrease in direct material, contract manufacturing, related costs, and freight expense of approximately 71% was mainly due to a decrease in related product sales. We expect cost of revenues will remain at reduced levels for the remainder of 2012 primarily as a result of expected continued reduced demand for medical product sales in 2012.
Sales and Marketing Our sales and marketing expenses are comprised primarily of employee compensation and benefits, sales commissions, advertising, trade shows, market development funds, travel, and an allocation of facilities costs. The decrease in sales and marketing expense for the first quarter ended March 31, 2012 as compared to the first quarter ended March 31, 2011 was primarily due to decreased compensation, benefits, and other related costs of $198,000 mainly due to decreased sales and marketing headcount and benefits, partially offset by increased marketing, advertising, and public relations costs of $84,000 due to current marketing initiatives. We expect that sales and marketing expenses will continue to be significant as we continue to invest in sales and marketing to further our focus on building greater market acceptance for our touch technologies.
Net cash provided by operating activities during the three months ended March 31, 2012 was $1.8 million, a decrease of $2.9 million from the $4.7 million provided by operating activities during the three months ended March 31, 2011. Cash provided by operating activities during 2012 was primarily the result of an increase of $1.3 million due to a change in accounts payable mainly from increased litigation activity, an increase of $1.1 million due to a change in deferred revenue and customer advances primarily due to additional deferred revenue billings, and an increase of $343,000 primarily due to a change in other long-term liabilities. Cash provided by operating activities during 2012 was also affected by noncash charges and credits of $1.2 million, including $720,000 of noncash stock-based compensation, $341,000 in amortization, impairment, and abandonment of intangibles, and $166,000 in depreciation and amortization. These increases were partially offset by our net loss of $219,000, a decrease of $1.5 million due to a change in accounts and other receivables mainly due to the timing of customer billings, and a decrease of $415,000 due to a change in accrued compensation and other current liabilities.
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