Good day, and welcome to the Immersion Corporation Q2 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jennifer Jarman of The Blueshirt Group. Please go ahead, ma'am.

Thank you, Dan. Good afternoon, and thank you for joining us today on Immersion's Second Quarter 2019 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 are Ramzi Haidamus, President and CEO; Len Wood, Interim CFO; and Ellen Finnerty, Interim VP of Finance. During this call, we may make Forward-Looking Statements, which may include projected financial results or operating metrics, business strategies, anticipated future litigation or absence of litigation, anticipated future product, future expense reduction, anticipated fact expenses, anticipated market demand or opportunities, our operating model and other forward-looking topics. These statements are subject to risks, uncertainties and assumptions. 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 the press release we issued today after market close. Immersion annual report on Form 10-K for 2018 and its most recent quarterly report on Form 10-Q which are on file with the U.S. Securities and Exchange Commission. The forward-looking statements mentioned on this call reflect Immersion’s belief and predictions as of today, except as required by law Immersion disclaim any obligation to update these forward-looking statements as a result of financial, business or any other developments occurring after the date of this release or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Additionally, please note that during this call, we may discuss non-GAAP financial measures. For each non-GAAP financial measure discussed our 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 will now turn the call over to the Chief Executive Officer Ramzi Haidamus. Ramzi.

Thank you, Jennifer and thanks everyone for joining us on today's call or listening via webcast. Today marks and major milestones for Immersion as we enter a new period with no ongoing IP litigation for the first time in almost two decades. For 17 years, Immersion has been mired in constant litigation, covering mostly patent infringement cases, which have been costly, distracting to management and provided unpredictable value to our shareholders. While Immersion will enforce its rights to protect its IP, we anticipate a period of reduced litigation as the value of our IP has been tested and proven through litigation and by the fact that so many industry leaders are now licensed. With our Motorola lawsuit settled and behind us, Immersion's new executive team and management will focus on launching a new strategy to drive sustainable growth, profitability and long-term value for our shareholders. On today's call, I would like to reflect back on some of the progress we have achieved in the last two quarters. I will then share with you in detail our revenue and operating model for the future and finally, I will touch on the fundamentals underlying the development of our go forward strategy, which is well underway. Our strategic framework and operating model will give you a sense of the Company's direction and guidelines as we focus our efforts on reaching profitability and sustained growth and we look forward to providing more details regarding our new strategy beginning next quarter. As you know, we continue to search for a permanent CFO. Meanwhile, we have relied on interim consultants to fill this role. I’m pleased to announce that Len Wood who has worked with us as our interim controller has been appointed interim CFO by our Board. I’m confident Len will support our needs during this period while we are completing our search. I will now turn the call over to Len for a review of our Q2 financial results.

Thanks Ramzi. Immersion’s revenues for the second quarter were $8.7 million up $2.6 million or 42% from revenues of $6.1 million in the year ago period. This increase primarily reflects lump sum fees related to new license agreements that we entered into in the second quarter of 2019. Revenues from royalties and licenses in the second quarter of 2019 included variable royalties based on shipping volumes and per unit prices, totaling $4.4 million and fixed license fees totaling $4.3 million. This compares the variable royalties of $4.1 million and fixed license fees of $1.9 million in the prior year period. Our revenue mix for each line of business typically fluctuates quarterly due to seasonality patterns and for the second quarter of 2019 a breakdown by line of business as a percentage of total revenues was as follows. 51% from mobility, 13% from auto and 36% from gaming. Looking at year-over-year trends, mobility revenues were up 86% from the same quarter last year, primarily due to a license agreement entered into in the second quarter of 2019, which contain both lump sum and variable revenue components. Gaming revenues were up 89% during the second quarter, primarily due to a renewed license agreement entered into in the second quarter of 2019, which also contains both lump sum and variable revenue components. Automotive revenues were down 33%, primarily related to certain per unit royalty agreements entered in the last year's second quarter that contain minimum royalty provisions for which we recognize the whole set of minimum royalties as revenue at the inception of such agreements. Gross profit was $8.7 million compared with gross profit for $6.1 million in the second quarter of 2018. Turning now to operating expenses, excluding cost of revenues. Total GAAP operating expenses were $17.9 million in the second quarter…

Thanks Len. Reflecting on my six months at Immersion, the transformation of the Company has been steadfast and continues today. In just two quarters we have hired a General Counsel and Senior Vice President of Licensing, a Vice President of Products and Marketing, a Senior Vice President of R&D, a Vice President of Worldwide Sales and a new Head of HR all reporting directly to me Immersion's New world class executive team is already on its way to creating a new strategy for growth and value creation for our shareholders. During the same period, we settled two major lawsuits with Samsung and Motorola. Settlements of these lawsuits which cost the Company over $11 million in 2019 alone will make a substantial contribution to our return to profitability based on cost savings and new streams of recurring royalty revenue. The last six months have also seen progress in our sales and business development efforts. In our gaming business, we announced an agreement last May with Sony Interactive Entertainment to license our haptic patent portfolio and technology for gaming and VR controllers. This agreement is based on variable royalties and we anticipate generating revenue from this deal when Sony ships its next generation console platform. In our automotive business, earlier this year, we expanded our customer base by licensing Sion and Alpine Electronics for in-vehicle touch interfaces, such as touch screens, pads, and related panel. This past quarter we also signed a new license with Continental to include access to our patented haptic technology for use in its accelerator force feedback pedals. In addition, we lenience Panasonic Avionic for in-flight entertainment, and Konica Minolta for multifunction printers. These deals further demonstrate the value haptic provide the screen based user interfaces being adopted broadly across various connected device categories. The majority of these…

Thank you, sir. [Operator Instructions] And our first question comes from Charles Anderson, Dougherty & Company. Please go ahead.

Yes, good afternoon, and thanks for taking my questions and Ramzi thanks for all the detail on OpEx and the strategy. So I wanted to start just maybe the outlook for the rest of the year that you guys are sort of implying in the guidance at the midpoint, a little bit more than $12 million a quarter in revenue. That is obviously a step-up from where we were in the first half, I wonder maybe if you were able to articulate kind of roughly how much of that is of a recurring nature versus some of this episodic or lump sum nature. So we just sort of establish what is the kind of the run rate of the business? And then on OpEx, so the target at $8 million a quarter run rate next year. I wonder, do you achieve that by Q4 this year? Does that happen gradually over 2020 such that you actually are a lower number? Any color that'd be helpful. Thanks.

Sure, thanks for Charle. Let me take the OpEx question. And I will turn it over to Len for the revenue piece. We foresee that the OpEx will be a linear drop, the work has already started. We don't foresee that hitting that 32 run rate until 2020. But the work, as I said already started, because the bulk of the work pertains to patent prosecution, stopping applications. And anybody that just takes things taking effort on our side, the team is already at work to patent by patents to visit all 3600 patents. So as we continue down that path, the law firms that we work with will be putting down their pens and that savings will basically materialize over time and over that period. The work towards shifting towards Montreal has already started. We have several open locator open positions that have now been located in Montreal, so we are on our way there. And the fees that pertain to our mostly professional consulting is a lot of that that has to do with our search firms. As you know, we already have a team in place, the only search we have going on as a CFO. So that is a big chunk of it. One step behind us will be on our way. So as you can see most of it is going to be linear over the next two quarters but I don't foresee a full 32 until 2020. As far as the revenue, I will turn it over to Len.

Thank you, Ramzi. Thanks, Charlie, for your question. On modeling revenue for the majority of revenue, which is structured on a quarterly basis with Samsung and Motorola are now part of we expected to be heavily back end loaded towards Q3 and Q4, maintaining upwardly revised revenue guys provided last quarter. As far as the mix of the revenue, we are going to be more highly weighted towards the per unit revenue in the mix then in the first half of the year. Motorola will be a lump sum payment in Q3, but we don't have further information on that. Thank you.

Okay, great. And then for my follow-up, we did see a 13-D filed after the close of the market today from Acasia Research Corporation I just want to see if you guys want to make any comments on that, thanks.

Sorry, from who again?

Acasia Research 5% tie up.

We don't usually comment on communications with our shareholder community, but I will highlight that we are indeed in constant communication with them so I don't really have much to add to that.

Okay, thanks so much guys.

[Operator Instructions] And our next question comes from Tony Strauss, Craig Hallum. Please go ahead.

Hey you guys, thanks for taking my questions. First just on the automotive front I'm curious what traction you are seeing as far as haptics penetration into automotive OEMs and different models would you say that the number of models featuring haptic is that material year-over-year or flat just curious what you can say.

Sure, the trend in haptic inclusion in automotive has been increasing right now we are about mid-single digit penetration into the market, there's about a 100 million cars out there shipping and where is that market share on revenue of low single-digit dollars reflect that penetration. So we are pretty steady in terms of a tax rate in all of the automotive companies that have installed haptics so we are feeling pretty good. So now we are pretty much riding along and observing the growth of that single-digit growth to grow to higher and we find out the majority of the companies providing haptic enabled pads and displays, so we are in a good position and on top of that I would like to add that our R&D team is also working on providing technology into that and for that market so with that we are feeling pretty good about our position.

Would you say that the majority of the haptics that are still in kind of the high-end part of market or have they started to trickle down into more the mid tier type models?

I would say still in the high end but the units the demo units we have been seeing as well as the components that are provided are dropping in price, so we do foresee a higher penetration in the mid tier and later on in lower tiers.

Great, and I’m just curious what magnitude of growth do you expect in gaming from the new console watches coming up in the next few years, Sony and Nintendo the others. And then do you expect Sony to be the majority of any potential gaming related growth or do you anticipate other customers possibly contributing to gaming growth as well.

The majority of the short-term growth or near term growth is going to be from Sony since we have a 100% attach rate to all the controllers, so that is already in place as you know, as far as additional revenue that could be some potential accessories that will ride along the launch of that console. In addition to this in terms of mid to long-term of course VR is still up ahead and we still have some large companies that are not licensed and we look forward to working with them on both technology and patent licensing.

Alright great, that is it from me thanks guys.

Thank you. And now there're no more questions in the queue. I will now turn it back over to management for closing remarks.

Thanks, operator and thank you all for joining us on this call today. I look forward to updating you again next quarter. Goodbye.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.