Good day, ladies and gentlemen, and welcome to the Immersion Corporation Fourth Quarter and 2017 Conference Call. Please note today’s conference is being recorded. At this time, I’d like to turn the conference over to Ms. Jennifer Jarman. Please go ahead, ma’am.

Thank you, Hally. Good afternoon, and thank you for joining us today on Immersion’s fourth quarter and fiscal year 2017 conference call. This call is also being broadcast live over the web and can be accessed from the Investor Relations section of the Company’s website at www.immersion.com. With me on today’s call is Carl Schlachte, Interim CEO and Chairman of the Board; and Nancy Erba, CFO. During this call, we may make forward-looking statements, which may include projected financial results or operating metrics, business strategies, litigations, anticipated future products, anticipated market demand or opportunities and other forward-looking topics. These statements are subject to risks, uncertainties and assumptions. Accordingly, actual results could differ materially. For a listing of the risks that could cause this, please see our most recent Form 10-Q filed with the SEC as well as the factors identified in the press release we issued today after market close. Additionally, please note that during this call we may discuss 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 today’s press release. With that said, I’d like to turn the call over to Interim CEO, Carl Schlachte. Carl?

Thanks, Jennifer. Thanks to everyone for joining us this afternoon. I'm pleased to be speaking with you at this exciting point in Immersion's 25-year history. Today we will share our fourth quarter 2017 and full fiscal year results, and we will talk about the many opportunities in front of the Company after having reached a settlement and license agreement with Apple. Immersion has been and will continue to be the torchbearer of haptics. Our focus on innovation and development of cutting edge haptic technology remains at the forefront of our Company strategy. Today our employees are working on haptic technology solutions for fascinating and seemingly insurmountable challenges that will become mainstream in the market during the next five to 10 years. This is the work we do here. This is why our patent portfolio is exceptional and this is why I'm so excited about the future of Immersion. In December, we announced a restructuring of the Company through which we have refocused our strategy and investments on our core competencies in the mobile, wearables, and gaming, and automotive markets. In the mobile OEM market, we continue to innovate and work to provide end users with an optimized haptic experience. With Apple as a licensee, for the first time we are now able to provide Immersion-based haptic performance across the entire mobile ecosystem. Between our proven patent portfolio and our leading haptic expertise, we are well positioned to expand our market presence and revenue stream by attracting additional mobile and wearables OEM customers. Turning to the automotive market. We are pleased with the growth we are seeing both in terms of existing customer traction and the signing of new licensees. As the implementation of haptics begins to expand from luxury car models to mainstream vehicles, we expect our revenue will increase in line with this adoption rate. The gaming market including virtual reality and augmented reality has historically been an important area of innovation for Immersion. We continue to see revenue opportunities in this space both with the increased adoption of VR, but also the future AR applications that would benefit from the utilization of haptics. Our research efforts particularly in AR are both foundational and cutting edge, and I am continuously amazed by the ingenuity of our team. I can't emphasize enough that the innovation and research we are doing today in Immersion will become tomorrows mainstream technology. I am confident in the strength of our haptic technology solutions and patent portfolio and believe we are well positioned to drive value for our shareholders. I’ll now turn the call over to Nancy who will discuss the financials, recent accounting changes, and our outlook for 2018. Nancy?

Thanks Carl. We definitely have a lot to cover today. I'll start with our Q4 and full-year results. I’ll also cover the impact of the 2017 Tax Cuts and Jobs Act, and the implementation of the new revenue recognition accounting standard, ASC 606 before sharing our outlook for 2018. Revenues for the December quarter were $6.9 million, down 26% year-over-year reflecting decreases in revenue from the gaming, medical, and mobility lines of business, offset in part by increased automotive revenue. Revenues from royalties and licenses of $6.7 million were down 25% from the prior year period. In the fourth quarter of 2017, variable royalties based on shipping volumes and per unit prices totaled $5.3 million and fixed payment license fees totaled $1.4 million. This compares to variable royalties of $6.2 million and fixed license fees of $2.7 million in the prior year period. For the fourth quarter of 2017, a breakdown of total revenues by line of business was 39% from mobility, 37% from gaming, 22% from auto, and 2% from medical. Looking at year-over-year trends, gaming revenues were down 36% during the quarter, primarily due to a decrease in revenue from Sony which was partially offset by revenue from new customers like Nintendo. Mobility revenues were down 17% principally due to lower volume. Automotive revenues were up 35% due to increased volume from our existing automotive licensees as well as revenue recognized from new licensees. Medical revenues were down 87% in line with our expectations regarding our transitioning revenue mix. Gross profit was $6.9 million or 99% of revenues compared to gross profit of $9.2 million in the fourth quarter of 2016. Turning now to our fourth quarter operating expenses. Excluding cost of revenue, total GAAP operating expense was $19.1 million in the fourth quarter of 2017, compared to…

Thanks Nancy. I’d now like to provide a brief update on our current legal proceedings. I'll begin with Apple. On January 29, we announced the settlement of all litigation and the signing of the multi-year license agreement with Apple, and on February 16, the ALJ issued an order terminating the ITC investigation. In August 2017 we commenced patent enforcement proceedings against Samsung in District Court in the Eastern District of Texas and against Motorola in District Court in Delaware, alleging that Samsung and Motorola are infringing our basic haptics patents. For the Samsung case, the first day of jury selection will be in February 2019. For the Motorola case, the trial date has been scheduled for September 2019. Finally, we continue to make progress on our cases against Fitbit for patent infringement of our wearables portfolio in the Shanghai Intellectual Property Court and District Court of Northern District of California. The trial date has been scheduled for May 6, 2019. We remain confident in our portfolio and look forward to making significant progress in these actions in the coming year. In closing, I want to thank all of the Immersion employees for their tireless efforts in 2017. Their hard work and commitment is bearing fruit and we look forward to a profitable year in 2018. As we've stated previously, we are unwavering in our focus to deliver value to our shareholders through the adoption and monetization of haptics. The achievements thus far in 2018 helped confirm the confidence we have in our patent portfolio and the innovative work that we do. We will now open up the call to your questions.

Thank you. [Operator Instructions] Our first question today will come from Anthony Stoss from Craig-Hallum.

Hi, thanks. Congrats on your settlement with Apple. Quite a few questions, I'm curious and just want to confirm in your guide that you're not assuming anything from Samsung or other litigations in that $80 million to $95 million at this point?

That’s correct.

Okay. And then I wanted to hear more on the auto side that it's really starting to grow for your folks, I’m curious how much you think you penetrated the auto market? Are you touching all the major OEMs? What are you finding? Is it migrating more to the dashboard, just love to here a little more than that and I had one last follow-up.

Sure. This is Carl. We think we've penetrated it just at the beginning part of this market. If you look in modern cars, certainly luxury and higher end cars, the dashboard is becoming more and more yet another screen, and the whole aspect of distracted driving and the ability to know when you're touching something without taking your eyes off the road is a big area for growth for us going forward. So we're pleased with our progress so far, but we're just at the start.

And then late last year, you shared some expense, you start going after the advertising opportunity in light of the settlement with Apple and your cash balance, is that something that you would look back to put back on or I’m curious your thoughts on that?

Yes. I don't think it's something that we're looking to add back on. We generated some really interesting intellectual property along the way. One of the things that we learned as it relates to advertising, especially with a company our size is that despite the success that we were seeing and we were seeing good traction and good success. The amount of money that we would have to spend in order to scale along with that just didn't make prudent fiscal sense for us. So I don't see us adding that back in, but I do think that we've got avenues for having discussions with partners in that space that might make sense.

Great. Final question, Carl. Following the announcement of the settlement with Apple have you noticed any uptick in terms of consumer interest – customer interest, was there anybody that you feel sitting on the sidelines and now they’re moving ahead quickly?

We have an engagement discussion with folks where they've actually referenced that particular settlement as a reason for engaging in discussions with us. I think it's a very nice validation of the strength of the intellectual property that we've developed, and that kind of public validation always helps when it comes to talking to customers.

Perfect. Great job, guys. Thank you.

Thank you.

Thank you, Anthony. Our next question will come from Josh Nichols with B. Riley FBR.

Yes. Thanks for taking my question. I was curious just looking at 2018 guidance, ballpark about what amount of revenue is assumed for growth that's not currently signed?

Not currently signed. I would say as a percentage it would be – I'll just say small. We feel good about the revenue forecast. There's always a pipeline that we're taking into consideration, so every year we do our forecast and you're well aware of this Josh. If you look at our full pipeline and see where things are in different stages and we make some assumptions that some will achieve what we need and some won't. And we also have the variability of our royalty-based agreements where we're dependent upon our customer volumes. So there is some judgment that have to take place there, but certainly we feel good about the range that we've given. Over the year, we maybe able to tighten that a little bit if we see things come through, but for right now that's where we feel comfortable.

And then, how should we think about seasonality throughout the business? Historically, there has been some in the gaming and handset space particularly in Q4 and Q1?

Yes. I think given the new rev rec, we will likely see that seasonality particularly in gaming move into more Q3 and Q4 versus Q4 and Q1 simply won't be recognizing in arrears. But I would also say that for 2018 you should expect overall for revenues to be front-end loaded this year.

And historically the company has provided before, what’s the company’s current cash balance?

Well we've decided to – we're giving you that 12/31 balance which is $46.5 million. We're not going to disclose our current balance as of today. You'll get that with the Q1 numbers, but I will say that we are very pleased with the health of the balance sheet and where we sit with cash.

Okay. Thank you. That's all for me. Those are helpful.

Okay. Thanks Josh.

Thank you. [Operator Instructions] Our next question will come from Charlie Anderson with Dougherty & Company.

Yes. Thanks for taking my questions and good afternoon. So I wondered if you could talk a little bit as it relates to the 2018 guidance if there is any episodic or non-recurring revenue in there. I'm thinking about often there's a past sales element and deals, and then where they ASC 606 you mentioned recognized at the time of execution, I wonder if maybe you could help us with the impact there and again with something that's potentially non-recurring as we think about sort of what’s the consistent run rate of the business? And then I’ve got a few follow ups.

Sure. So I will say that over the past couple of months and we mentioned this on our last call, we've been working really closely with our accountant. I think everyone in the Valley has relative to the new revenue standard. And where we have landed is that certain of our contracts will have almost a mix component, meaning we will have some portion of that that will be recognized upfront, but due to ongoing performance obligation, there will also be a portion that's recognized ratably over the license fee agreement. So what the guidance reflects is that interpretation and it is slightly different from what we had thought previously where we thought the majority would be or that all of that would be recognized upfront. Now, we've been able to come to alignment that a portion of it will actually be recognized over the term of the agreement. And that's only for certain subset of our contracts. It will depend on the individual agreement.

Okay. Can you be specific on how much is front-end loaded specifically on 2018 and maybe if not on the call is there – is that something that would be disclosed in the K and 10-Q, just to help us understand how we look at sort of the baseline of the business if that makes sense?

We won't be disclosing that in the K. As part of the Q, we will do the modified retrospective and there will be a little bit more information at that point in time. But as of now and what we disclosed in the K, we will not have that detail.

Okay. Got it. So share count for the full-year, I'm curious, and then also you mentioned the $300,000 of tax expense, the tax provision, how should we think about the long-term tax rate on the business?

Yes. So full-year 292 in terms of share count and because of the valuation allowance that we have on the books right now, we are going to be forecasting our cash tax expense going forward, which like I said was $300,000, as we move through this year and continue to evaluate the impact of the tax act on Immersion. We may make some modifications to that during the year, but as of now with the valuation allowance we're not seeing a huge impact.

Got it. And then a couple questions for Carl. So Carl that you've got Apple done, I'd be curious your views on in terms of monetizing the rush the portfolio going forward to what degree do you feel like there is some enough there for other people to sort of read into what's the right rate? And I'm also curious in general given where the balance sheet that sounds like you guys are really comfortable there? Do you feel like you've got enough on the balance sheet to most efficiently maximize the licensing program independently; doesn't it make sense to do with partners over time? Just your general views there? And then I have one more questions.

Yes, I’ll answer the second question first. I think if you we feel really comfortable that with the status of our balance sheet as it relates to being able to handle what we see on our plate in the near and mid-term future, so not particularly worried about that – any of that kind of stuff. As it relates to closing other license deals, these things are – they're all individual by nature and that different things get pulled into different negotiations in different time, some people are interested in licensing. In addition to things like getting access to our patents that are also interested in discussing different pieces of technology that we have that can actually supplement their own technology portfolio going forward. Haptics, it turns out as one of the few areas in the mobile phone, hardware ecosystem that is actually increasing in cost. In the Android market, it's gone up something on the order of like 200% the actuators are. So there is a lot of emphasis being placed on that and how do you take advantage of that? And that hasn’t effect on the way that you do these negotiations and there's kind of a roundabout way of answering the question, do we have a rate in mind for each of these folks. It's highly dependent on the suite of technologies and portfolios that they're interested in licensing.

Got it, so I’ve just got one more that Nancy, you mentioned there would be a portion that’s sort of fixed as in a portion that’s has a future deliverable. Can you maybe just help us understand what is the future deliverable in that component larger or smaller than the fixed portion and some of these deals you're talking about?

Again it will be specific to the particular agreement and they do vary depending upon the structure. What I can say and we do describe this in the K, is that it will be dependent on planned what we deliver in terms of our portfolio and other deliverables and the solutions and technology over the life of the agreement. So the amount upfront versus ratable in the future will be very specific by customer.

Okay, thanks so much.

Thanks Charles. End of Q&A

Thank you. Ladies and gentlemen, this does conclude our question-and-answer session for today in addition to our conference. We thank you all for your participation. You may now disconnect.