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Immersion Corporation (NASDAQ:IMMR)

Q2 2014 Results Earnings Conference Call

July 31, 2014 05:00 PM ET

Executives

Jennifer Jarman - The Blueshirt Group

Vic Viegas - President and CEO

Paul Norris - Chief Financial Officer

Analysts

Josh Nichols - B. Riley

David Williams - Ascendiant Capital

Matthew Galinko - Sidoti

Larry Solomon - Capital Research

John Fichthorn - Dialectic

Jessica McHugh - Dougherty & Company

Operator

Good day everyone and welcome to the Immersion Corporation Second Quarter 2014 Conference Call. Today’s conference is being recorded.

At this time I would like to turn the conference over to Jennifer Jarman. Please go ahead ma'am.

Jennifer Jarman

Thank you, April. Good afternoon and thank you for joining us today on Immersion’s second quarter 2014 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 Vic Viegas, President and CEO; and Paul Norris, CFO. During this call we may make forward-looking statements, which may include projected financial results or operating metrics, business strategies, anticipated future products, anticipated new markets, 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 latest Form 10-Q filed with the SEC, as well as the factors identified in the press release we issued today.

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'll turn the call over to CEO, Vic Viegas. Vic?

Vic Viegas

Thanks, Jennifer, and thanks everyone for joining us this afternoon. In our second quarter we generated revenues of 11.8 million a June quarter record and we were profitable for a sixth quarter in a row. During the quarter we launched our new official business entity in Shanghai, entered into a new multi-year license agreement with Huawei the largest mobile OEM in China and made great progress with key initiatives with our OEM customers and our mobile content business. We are pleased with the headway we have made to-date and our prospects for growth in the future. But as Paul will discuss shortly due to the timing of deals and the pace of certain negotiations, we are making an adjustment to our short-term 2014 financial outlook. After Paul has provided the details of our second quarter financials and described our adjusted guidance, I will share our recent business developments. Paul?

Paul Norris

Thanks Vic. As Vic mentioned, revenues for the June quarter were $11.8 million, up 16% from revenues of $10.2 million in the June quarter last year and a record for our second quarter. Revenues from royalties and licenses of $11.6 million were also up 16% from royalty and license revenues of $10 million in the second quarter of 2013.

Of these amounts, in the second quarter of 2014, variable royalties based on shipping volumes and per unit prices totaled $3.9 million and fixed payment license fees totaled $7.7 million. This compares to variable royalties of $3.8 million and fixed license fees of $6.2 million in the June quarter last year.

While revenue mix per line of business is expected to be fluctuate on a quarterly basis due to seasonality patterns, for the second quarter of 2014, a breakdown by line of business as a percentage of total revenues was as follows: 65% from mobility; 23% from gaming; 7% from medical; and 5% from auto. Gross profit was $11.7 million or 99% of revenues compared to gross profit of $10.1 million or 99% of revenues in the second quarter of 2013.

Turning now to our operating expenses. Excluding cost of revenues, total GAAP operating expenses were $11.6 million in the second quarter of 2014 compared to $9.6 million in the same quarter last year. Operating expenses in the second quarter of 2014 included non-cash charges related to depreciation and amortization of $147,000 and stock-based compensation of $1.3 million.

Of the non-cash stock-based compensation charges, $324,000 were included in sales and marketing, $268,000 in research and development, and $752,000 in G&A expense. Litigation related expense for the quarter was $925,000, up from $471,000 in the second quarter of 2013.

In addition to the increase in litigation expense, the higher year-over-year operating expenses were driven primarily by an increase in our headcount as we’ve invested to capitalize on key opportunities in strategic initiatives.

As we've expanded our presence in China and built out our content business over the last 12 months, we've increased our sales and marketing headcount by 15% and our research and development headcount by 12%.

Net income for the second quarter of 2014 was $169,000 or $0.01 per diluted share compared $466,000 or $0.02 per diluted share in the second quarter of 2013. Net income for the second quarter of 2014 includes a provision for tax expense based on an effective tax rate for the quarter of 35%.

As a reminder, beginning in 2014 in addition to normal GAAP metrics, we're using non-GAAP net income and non-GAAP earnings per share to track our business performance. We define non-GAAP net income as GAAP net income less stock-based compensation. We define non-GAAP earnings per share as non-GAAP income per fully diluted share.

Non-GAAP net income for the June 2014 quarter was $1.5 million or $0.05 per diluted share compared to non-GAAP net income of $1.6 million or $0.06 per diluted share for the same quarter last year.

Our cash portfolio including cash and short-term investments was $74.2 million as of June 30, 2014, up from $71.1 million as of the end of 2013. The increase was driven primarily by $9.7 million in cash generated from operations during the first six months of 2014. During the first half of 2014, we spent approximately $7 million to buy back 616,000 Immersion shares leaving us with $12.4 million remaining under our authorized stock repurchase program. Management and the Board remain very confident in our business fundamentals and future prospects, continue to believe that our stock is attractively priced and expect to continue to execute opportunistically to buy back shares under our authorized stock repurchase program.

We will continue to monitor our cash balance and stock price relative to any future buyback activity. As Vic mentioned, due to the timing of deals and the pace of certain negotiations including our renewal negotiations with LG Electronics, we now expect revenues for 2014 to be in the range of $51 million to $56 million, an increase of 7% to 18% over 2013. Non-GAAP net income for 2014 is anticipated to be in the range of $6 million to $12 million.

With that, I’ll turn it back over to Vic.

Vic Viegas

Thanks, Paul. As I mentioned earlier during the second quarter we made great strides in expanding our OEM business and executing on our content strategy. We’re pleased by our record revenues during the quarter and our progress in building the foundation for increased and sustainable growth in the future but do recognize that the timing structure of new deals, renewal negotiations and revenue recognition principles can impact of pace of that growth in the shorter term. Our exciting progress in China illustrates the progress we are making. Just weeks ago, we announced that we had entered into a multi-year TouchSense license agreement with Huawei, the third largest smartphone maker in the world behind only Samsung and Apple.

This relationship represents a tremendous endorsement of emerging technology by a premier Chinese company. The deal enables Huawei to use emerging software to create rich haptic experiences in certain of its branded devices and could set the stage for a substantial increase in a number of Immersion enabled Huawei mobile devices in the future generating increased revenue for us.

Huawei has already launch its first Immersion powered smartphone the Honor 6 handset. We work closely with Huawei to design and implement a number of fun and creative haptic features in this handset targeted toward young techsavy Chinese consumers. One of these applications uses the camera as a mirror allowing users to add animated effect to their own images.

For example, when users press on their glass reflections while using the app, they can feel, see and hear the glass cracking in their hand. We also collaborated with Huawei to create a haptically-enhanced whether app allowing users to physically experience to whether forecast. Feeling for instance the drum beat of rain and a clap of thunder on the fingers is part of a stormy forecast.

In May, we expanded our presence in China with the opening of an official business entity Immersion Shanghai Science and Technology Company. This new entity will be our regional technology center focusing on design and development of haptic user experiences and enabling us to expand our sales and support for our growing China business. While we just launched the Shanghai development center and are still in the early stages of our China OEM initiative we have already established a broadly comprehensive relationship with Xiaomi, one of the hottest brands in most innovative companies worldwide as well as the newer more targeted relationship with Huawei. These early success are a testament to the energy, dedication and skill of the sales and technical team we have been building in China, something that I witnessed first hand during my recent travels to Shanghai for the opening of our new office.

In the short-term since our Huawei announcement we have already seen heightened interest from other significant Chinese OEMs as well as content providers, social media and gaming companies and others in the Chinese mobile ecosystem. While some new relationships in China may take time to establish and some of these details maybe structured to expand to broader overall relationships we have never felt more positive about our prospects for building a substantial growing and profitable business in China.

As we continue to advance our OEM business and deploy rich new haptic features, we have also been taking steps to ensure that we are able to realize the full value of our haptic innovations. In that light we have been engaged in contract renewal negotiations with LG Electronics one of our large OEM customers. Our current agreement with LG has now expired and we have not yet entered into acceptable new terms. We are currently in discussions with LG and are actively working towards mutually acceptable terms but are firmly committed to ensuring that we receive fair value to Immersion haptic technology.

We also made substantial progress on our important content initiative during the second quarter we have solidified our IT position, enhanced our tools, made key hires to strengthen our team and successfully integrated our enablement technology into the platform of our first evaluation partner a major mobile ad network. In addition, I'm pleased to announce that during the quarter, we entered into an evaluation license agreement with a second significant mobile ad network setting the stage for additional testing and integration work as the we move toward commercial launches as early as later this year.

As we’ve progressed with this business, we found that participants throughout the mobile ecosystem quickly capture our enthusiasm and are validating our early findings that haptically enhance mobile entertainment content and ads are more engaging and perform better, both in terms of subjective measurements such as enjoyment and favorable brand sentiment as well as objective metrics, such as likelihood to watch a movie or purchase an advertise product.

Moreover many other studios, brands, agencies, networks and publishers who have experienced our content enhancements have become advocates and have made introductions to other important players in the content ecosystem, providing us with additional connections and future opportunities.

A further positive development has been that, as we have explored the many ways our technology can enhance mobile user experiences, we've identified growing interest in opportunities in the social media space. Over the last couple of years, social chat and messaging platforms have enjoyed explosive growth and commercial success by offering consumers new and innovative ways of sharing information.

We have begun discussions with several chat and messaging providers, regarding how haptics can improve and differentiate various elements of their offerings such as through stickers and emoticons. We look forward to updating you on these and other content opportunities in future quarters.

Moving to the automotive markets, we are deepening our engagements with major car makers, we are looking at haptics as a key technology in the next generation automotive interfaces. We've been working closely with both brands and tier suppliers as they develop in response to RFQs that identify haptics as a system requirement for new car models and are pleased with what we're seeing on the design win front.

Most recently [Laxus] announced that its 2015 NX and RC models have moved to its next generation remote touch interface which will feature a touch pad enhanced with hepatic feedback to provide more intuitive navigation of the infotainment system.

The automotive community continues to embrace the safety and usability benefits of haptic technology and we expect to see more automotive brands announced models with tactical user interfaces in the near future.

Lastly we are continuing with the expert deposition phase of our law suit against HTC Corporation in the U.S. District Court in Delaware. Our trial is now eight months away commencing on March 23, 2015. We remain extremely confident in our case.

Overall we are confident that we are building a healthy and sustainable growth oriented business. We've successfully built the teams we need to succeed in the key initiatives we have established for our OEM and content businesses. We're focused on developing the tools and technology to bring emergence offerings to new mobile user experiences including mobile ads and entertainment and social applications. And we're seeing great progress in activity that will bring early implementations of these programs to market in the coming quarters.

I'll close my formal remarks by mentioning that Paul is scheduled to present at the Needham Interconnect Conference on August 6th in New York. With that said we'll now open up the call to your questions. April?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). And we’ll first hear from Josh Nichols of B. Riley.

Josh Nichols - B. Riley

Hey guys, thank for taking the call. Real quick, I was looking, I see the revenue guidance dropped and I am sure a lot of people are thinking about. I’m just going through my head, okay so LG is in the renegotiation but when we signed up Huawei, they were the third largest smartphone provider. I was wondering why are we still getting such a large drop in revenue when LG is not that bigger of the market, I’m kind of wondering wouldn’t Huawei more than offset that or at least get to breakeven by Q4?

Vic Viegas

Sure, Josh. So, LG is a well established customer of ours and has a large number of models that they launch each year. So, they’ve built up a sizable revenue base with us in the past. Huawei is a new customer and one that is launching individual models. As you would expect in an early relationship, they’ll launch a handful of models. And since they’re on a per unit basis that revenue will ramp as they increase the number of models. So, we’re excited about the Huawei opportunity and we’re hopeful with the LG negotiations.

Josh Nichols - B. Riley

Great. And real quick, I guess I was just looking for, I know that you said cash was up as far as at the end of Q4 but the decline sequentially was fairly significant. I was wondering what the outflow was?

Paul Norris

Yes, hi Josh. I think it was down from $81 million at the end of the first quarter and that’s really just timing; it reflects our -- in many cases having payments that we received under fixed relationships and that we recognize in future quarters. So, it's sort of normal flow throughout the year that I think you're seeing.

Josh Nichols - B. Riley

Yes, I was just looking at 2013 and seem to a bit more than normal. But yes with the deferred revenue I understand the most people pay upfront. That’s Fine. And then lastly, are you still looking, I know the HTC litigation that you mentioned, original target was around 3 million and I think you are probably around like about 2.4 spend through Q2 or are you still targeting around 3 million in spend for that figure?

Vic Viegas

Yes, it's maybe a hair above what had looked like about a quarter ago. So you might want to go and think about 4 million, 3.5 million that range.

Josh Nichols - B. Riley

Okay. So thanks a lot guys.

Vic Viegas

Thanks Josh.

Josh Nichols - B. Riley

Sure.

Operator

Next, we’ll hear from David William with Ascendiant Capital.

David Williams - Ascendiant Capital

Hey, good afternoon guys and congratulation on the progress you made. It sounds like you guys have been busy.

Vic Viegas

Thanks David.

David Williams - Ascendiant Capital

Just one due to ask, I guess kind of looking at the midpoint of your guidance. On the revenue, it sounds like that's coming down about 8%. So if we look through the net income line, it looks like we’re down about 22%. Is there maybe -- is that just a loss leverage of revenues there, is there anything else going on that we should be thinking about, maybe running through OpEx, outside of just litigation that maybe coming in the second half year here?

Paul Norris

Well, the possibility of the business, obviously the margins are still very strong. And so we're benefiting from that. The increasing costs are primarily from increased headcount and those are investments we're making for example in China to build out a sales force and a technical team to support those initiatives. I think in that region, we're now over -- we're close to 10 people. And so as we add headcount there, we’re also adding some headcount on our content initiative, we're building out a sales team and a marketing team and an operations team to bring our content solution into the content media space. So, I would say the increase in OpEx primarily from headcount, partly from litigation and we do expect to see that continue and the impact of that will affect Q3 and Q4.

David Williams - Ascendiant Capital

And how should we maybe think about the fix and the variable mix split? Obviously you buys achieved about 50-50 last quarter; obviously it’s down, the variable portion is down this quarter. But going forward if we are looking, maybe over the longer term one to two years out, where should we really expect that to fit and what kind of volatility would you expect to see in that once we get out a couple of years, just looking at the progress that you made at really moving to that fix model?

Vic Viegas

Yes. I think in general, you will see more fixed than variable all things being equal. In the first quarter, variable is a bit higher because in that quarter the per unit sales that some of our customers make during the holiday season come in and we recognize those. And then in the remainder of the year, you will see in general, the fix take a higher percentage. I think last year for the whole year, we had a balance; it was a little bit closer to what we saw in this quarter than in the first quarter. I think we had a total of 26.7 million fixed out of the 47 million and changed total revenue. I think looking into future years, we should continue to see a bit more on the fixed side than the variable side as we look to establish future recurring fixed payment relationships but some of it depends too on new initiatives we are doing like the content business. As that goes slower depending on how we structure things that could be advertising or other revenue that might be based more on a variable basis. So, again all things being equal, a bit more fixed than variable, but there are some factors that could change the mix.

Vic Viegas

And just to add to Paul's comment the Q1 variability really, it's a mix across a number of verticals. So if you look the large yearend sales of gaming products which is typically recorded by Immersion in the first quarter, those predominantly variable in nature. So, you'll see I think typically first quarter will be higher in variable basis and then throughout the year as you see more normalized revenue stream, you should see the fixed become a larger percentage.

David Williams - Ascendiant Capital

Great. And one more if I can, I just kind of wanted to think about Samsung and realizing that you guys have a fixed contract with those guys. So, we're definitely starting to see a little bit of softness in their business. Is there anything that you could see or maybe look at as maybe being a contributor to your business, any concern of maybe about the softness there?

Vic Viegas

Well, I think the nature of the relationship we have with them is that we said in the past relatively fixed. And so I think we are somewhat insulated from any other market challenges that they might have. We still work hard to bring new technology, the new product areas and have the opportunity to continue to increase revenue there. But for the most part, I'd say we are fairly well protected from the market differences or the volume assumptions that happen throughout the year.

Paul Norris

Yes. And as Samsung may play a slightly smaller percentage wise role, and they mean that we have opportunities either with new growing OEMs in China or other customers of ours that could actually be a benefit to us.

And obviously Android is still doing well overall. I think the total percentage that Android represents out of the smartphone pies increased up to 85% over the last several days so it's doing very well.

David Williams - Ascendiant Capital

Great, thanks guys for the comments certainly appreciate it.

Vic Viegas

Thanks David.

Operator

Next we'll hear from Mathew Galinko of Sidoti.

Matthew Galinko - Sidoti

Hey guys, a couple of questions first on the Huawei deal, I think you mentioned it starts off under variable, just curious given your preference for fixed license deals is there a plan to at some point to sort of lock that in as a fixed or is it going to remain variable for the foreseeable future?

Vic Viegas

Well I think what's typical with our early engagements is our OEM partners want some number of models and part of it is to test the market and influence other product managers within their companies and overtime as those products gain success in the market really appreciates the value of haptic experience.

Then we move from those few models to many more models. And at some point there is a tipping point where they're launching a large number of models they're utilizing a wide range of different solutions from Immersion. And at some point it makes sense to offer them let's say a package or bundled offering where we move to the fixed revenue in nature.

So I would say this is following a path of LG and Samsung and many of our other licensees. So I don’t know how fast the adoption will be, but I would assume that over the next year or two that we will begin having those types of discussions moving from a per unit to a much larger fixed payment stream.

Matthew Galinko - Sidoti

Got it. And then on the headcount growth, how do you feel about your numbers through the balance of the year and then looking into ‘15?

Paul Norris

Well, at the end of the quarter we were up to a 125 employees which is I think at the end of last year it was 112. We may see that similar growth pattern as we continued through the year and then next year as well, we obviously will be looking at how for example our content initiative is beginning to playout in the commercial phases as we make investment decisions. But generally we still see that and the China business as areas that that we’ll be investing in at a similar pace.

Matthew Galinko - Sidoti

Got you. All right, that’s all from me. Thanks guys.

Paul Norris

Thanks Matt.

Operator

(Operator Instructions). We’ll now hear from Larry Solomon of Capital Research.

Larry Solomon - Capital Research

Yes, thank you. So, if you sign the deal with LG would you expect that the guidance would go back up in other words with all of the mix from LG going from ongoing customer to a customer in dispute? And then secondly, here is a lot of speculation that Apple is going to have haptics that are much more significant in the iPhone 6 and if that were to occur is that something you would recognize for the quarter after they begin shipping or how might the relationship like that work?

Vic Viegas

Sure. Thanks Larry for the question. So, in the LG case I would say at this stage LG actually is a relatively large factor in the guidance low end to high-end. So having them licensed at a fair price would be obviously good for us and would start to move us to the upper end. Other things that affect the guidance would include things like just the normal volumes and success of our current customers and the timing of new licensees and their product launches. So a handful of things go into or thinking but clearly the biggest swing factor will be the LG initiatives.

With regards to the Apple, we've heard rumors with Apple for a number of years and the whole for potential that they might adopt haptics. So I wouldn't be able to really predict whether those rumors are true or what impact it might have on our revenue. Simply we're hopeful that they do adopt haptics, but we do think that the haptics will improve there products and we would obviously welcome the chance to work with them.

Larry Solomon - Capital Research

And then this deal with LG is that then basically wanting to renegotiate at lower rate and is that the main reason for the dispute or what are major issues there?

Vic Viegas

Yes, I wouldn't characterize it as dispute necessary, it's as these negotiations proceeds many times they get done and you're able to strike a fair balance of price and terms. In this particular case, the majority of issue is around price, our expectations versus their expectations, there is a gap and that's why we continue to talk. But I wouldn't characterize it as a dispute even though we may choose not to license, I mean that may lead to other activities. So for now I think we're going to try hard to get them licensed.

Larry Solomon - Capital Research

Great, thanks.

Operator

Next, we’ll hear from John Fichthorn of Dialectic.

John Fichthorn - Dialectic

Hi guys.

Vic Viegas

Hey John, how are you?

John Fichthorn - Dialectic

Good, how are you?

Vic Viegas

Great.

John Fichthorn - Dialectic

Couple of quick questions, first, how many guys are you currently in active negotiations with outside of the LG renewal, what’s your pipeline?

Vic Viegas

Well, I would say across all of our verticals, we are probably engaged with over 30 or more OEMs and that includes auto companies and tier suppliers, gaming companies, and the whole mobile ecosystems, not only OEMs but content providers, game developers, chat providers. So, I would say probably well over 30.

John Fichthorn - Dialectic

How about specifically on the mobile side if you include China and globally?

Vic Viegas

Well, the advantage we have, in China we have a strong team, we have a great momentum right now with Xiaomi and now Huawei. Number of the other OEMs are using a solution through our chip partners and so they have already been exposed to Immersion software but they are quite interested in working with advanced software products and tools. So clearly, the other guys on our list include ZTE, Lenovo, a whole host of Tier 2 guys, TCL, OPPO, Xiaomi and a number of others. So there is quite a number of Chinese companies. And what we are really enjoying is the fact that in China there is a very well established content community. And so that community includes people who are focused on chat applications, gaming applications as well as media. And we are seeing that the opportunity to bring these OEMs and this content together in China is really a big opportunity.

John Fichthorn - Dialectic

And so with regard to similar question to the previous question that was asked, if you were to really land some deals, you got the LG deal, just for the sake of argument and maybe you landed some of your more optimistic negotiations, you still don't think you would be above the current high end of your range for the year? And if not since you did get that as your high end, is that due to more the way the deals are structured and that they are either like the Huawei deal tie to a scale of unit basis or due to the total size?

Paul Norris

Well, we haven't said we are limited to the upper end of that range at 56%. Our hope is that we continue to have success that we do renew the LG under favorable terms. There is always new cars that are in designs that could launch in the part of the revenue stream, there is number of OEMs that we think would be in a position to launch products and could generate substantial amount of revenue.

I mean, if you're talking bluebird opportunities, there are things that could take us well above the 56. What we’re trying to do is capture what we think is a reasonable moderate level of risk given the success or lack from some of the customers and the likelihood of renewing the LG license. That gives us some confidence it will be within that range. But we're hopeful and have expectations we could go well above that range.

Vic Viegas

But John, I would add to that on the some of the Chinese deal just as an example, you are right there are structural and timing elements that could impact the 2014 revenue but wouldn't be indicative of the overall value of the contract for example when we do a per unit deal as opposed to a fixed deal, we're going to typically recognize at quarter if you think about the fact that we've got now a little less than, half that left in 2014 you are going to have relatively smaller period of time to recognize revenue on a per unit deal.

John Fichthorn - Dialectic

Super. And just last question on the media side, you talked about that fairly extensively I know it's not meaningful on the revenue side but you talked about possibly even a commercial launch this year and having may be two mobile ad networks, do you think you could exit this year with 1 million, 5 million, 10 million run rate of revenue. Do you think there really is going to be revenue from that business by year end and you can kind of show proof of concept, I mean you talk about a lot of different opportunities there it seems exciting, could help to quantify it for us?

Vic Viegas

We are very excited and this is a space where if we can prove the value in these pilot studies, the business could ramp quickly and could become very substantial. Our current expectation is that it goes at a slightly slower pace, we don’t anticipate a lot of revenue this year. But I do think it's really going to hinge on rolling out the pilot studies, proving through analytics that it makes a meaningful impact on buyer behavior and then if it does these are people who -- that's how they make their money as monetizing the marketability of technology and solutions.

So it could ramp quickly but at this stage we don’t expect it to be more than $1 million in revenue this year. It would be substantially less but it could ramp fast. So we're hopeful and working hard to try to achieve those types of growth opportunities.

John Fichthorn - Dialectic

Super. Thank you.

Vic Viegas

Thanks John.

Operator

And next we’ll hear from Jessica McHugh of Dougherty & Company.

Jessica McHugh - Dougherty & Company

Hi. Thank you for taking my question. It seems like there are lot more cards coming out in Haptics and I know mentioned the Lexus model for 2015, and but could you maybe elaborate on what the design pipeline looks like for the rest of the year and then maybe more into 2015?

Vic Viegas

Well, yes Jessica thanks for the questions. The adoption is growing substantially. We’re actually starting to see a number of RFQs requesting haptics in the new interfaces. And so we’re actively involved with the OEMs themselves in specking their capability and helping them in that process to request haptics as part of the solution. And we also work with the tier suppliers to make sure they’re able to build the right capability, they’re aware of all the advanced technology we have to offer.

So we’re working hard through OEMs and through the tier suppliers. Active licensees that I think are having great success in the market include Alps, Continental, Tokai Rika. So we’re seeing them in front of a lot of design opportunities, and time will tell how many they launch and in which years.

Jessica McHugh - Dougherty & Company

Okay. Thank you.

Vic Viegas

Thanks Jessica.

Operator

And it appears there are no further questions at this time. I’ll turn the conference back over to management for any additional or closing comments.

Vic Viegas

Well, thank you all for being on the call with us today. And as always we look forward to updating you again on our next quarterly call. Good day.

Operator

That does conclude today’s conference. Thank you all for your participation.

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