© 2013 Immersion Corporation–Confidential NASDAQ: IMMR Jefferies 2013 TMT Investor Conference NASDAQ: IMMR Victor Viegas, CEO & Paul Norris, CFO May 9, 2013
© 2013 Immersion Corporation–Confidential
NASDAQ: IMMR
Jefferies 2013 TMT Investor Conference
NASDAQ: IMMR
Victor Viegas, CEO & Paul Norris, CFO
May 9, 2013
© 2013 Immersion Corporation–Confidential
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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© 2013 Immersion Corporation–Confidential
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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© 2013 Immersion Corporation–Confidential
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
© 2013 Immersion Corporation–Confidential
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
© 2013 Immersion Corporation–Confidential
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
© 2013 Immersion Corporation–Confidential
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
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Un
its
(M)
Source: Display Search Touch Panel Market Analysis 2012 Annual Report
© 2013 Immersion Corporation–Confidential
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
© 2013 Immersion Corporation–Confidential
World Class Customers and PartnersLeveraging a Best-in-Class Ecosystem
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© 2013 Immersion Corporation–Confidential
The World’s Largest Haptics IP Portfolio
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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
© 2013 Immersion Corporation–Confidential
Hybrid Business Approach
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© 2013 Immersion Corporation–Confidential
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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© 2013 Immersion Corporation–Confidential
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
© 2013 Immersion Corporation–Confidential
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
© 2013 Immersion Corporation–Confidential
Ecosystem LeadershipEcosystem coordination & expertise creates premium experiences
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© 2013 Immersion Corporation–Confidential
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
© 2013 Immersion Corporation–Confidential
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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© 2013 Immersion Corporation–Confidential
Future Mobility Business GrowthR
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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© 2013 Immersion Corporation–Confidential
Future Mobility Business GrowthR
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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© 2013 Immersion Corporation–Confidential
Future Mobility Business GrowthR
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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© 2013 Immersion Corporation–Confidential
Future Mobility Business GrowthR
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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© 2013 Immersion Corporation–Confidential
Future Mobility Business GrowthR
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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© 2013 Immersion Corporation–Confidential
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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© 2013 Immersion Corporation–Confidential
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
© 2013 Immersion Corporation–Confidential 25
Financial Highlights
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© 2013 Immersion Corporation–Confidential
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
© 2013 Immersion Corporation–Confidential
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)
© 2013 Immersion Corporation–Confidential
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)
© 2013 Immersion Corporation–Confidential
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)
© 2013 Immersion Corporation–Confidential
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