Immersion Corp (IMMR) 2015 Q4 法說會逐字稿

-- Immersion Corporation fourth-quarter 2015 earnings conference call.

Today's conference is being recorded.

At this time I would like to turn the conference over to Miss Jennifer Jarman, please go ahead.

Thank you Ron.

Good afternoon and thank you for joining us today on Immersion's fourth quarter and fiscal 2015 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, litigation strategies, anticipated future products, anticipated market demand or opportunities and other forward-looking topics.

These statements are subject to risks and 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 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 measure and a reconciliation of the differences between the non-GAAP financial measures 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 Chief Executive Officer Vic Viegas.

Vic?

Thanks, Jennifer, and thanks everyone for joining us this afternoon.

Today I'm pleased to report yet another set of record-breaking quarterly results as we cap off our highest revenue year ever, a year in which we generated strong profitability, built our haptic ecosystem, and achieved a number of significant accomplishments.

Our December quarter revenues were $16.6 million, substantially exceeding our guidance and representing our 14th straight quarter of record revenues on a year-over-year basis.

Boosted by these results, our annual revenues for 2015 totaled $63.4 million, an all-time high for Immersion that exceeded our guidance and was up 20% from 2014.

Net income for the fourth quarter was a solid $1.1 million, up 12% for the same period last year.

This is an exciting and pivotal time for Immersion.

Building on our prior investments, over the last five years we've achieved a significant jump in our financial performance.

Made great strides scaling our licensing business and positioned ourselves as the clear leader in haptics, a technology that is finally coming into its own.

With Immersion lighting the way, new and expanded opportunities for haptics are arising regularly as other companies have increasingly realized how valuable tactile feedback can be to the digital user experience.

As the value of haptics increases, so does the likelihood that others may attempt to capitalize on our technology without properly compensating us for using what we have created.

In this light and as you are aware, we recently brought patent infringement lawsuit against Apple and AT&T and the ITC, and in federal court to protect and preserve our IP, our business and the ecosystem of customers and partners that rely on our technology to differentiate and enhance their own Digital Products.

Also, a brief update on Samsung.

Their license with us expired at the end of 2015 and we have not reached agreement with them for a renewal.

We are dedicated to ensuring that any new agreement covering uses of our technology appropriately compensates us for the value we bring as the leading provider of touch feedback technology.

I will provide further color on our business and prospects later in the call, but first I'd like to take a moment to extend my thanks and appreciation to Paul, who has announced his plans to retire as Immersion CFO following the filing of our 10-K annual report.

Paul will discuss this more after he reviews our fourth quarter and fiscal 2015 financials.

Paul?

Thanks, Vic.

Revenues for the December quarter were $16.6 million, a record for Q4, and up 22% from revenues of $13.6 million in the year ago period.

Revenues from royalties and licenses of $15.8 million set a similar record and were up 18% from royalty and license revenues of $13.3 million in the fourth quarter of 2014.

Of these amounts our December 2015 variable royalties, based on shipping volumes and per-unit prices, totaled $8.7 million, and fixed payment license fees totaled $7.1 million.

This compares to variable royalties of $5.9 million and fixed license fees of $7.4 million in the December quarter last year.

While revenue mix for line of business is expected to fluctuate on a quarterly basis due to seasonality patterns, for the fourth quarter of 2015, a breakdown by line of business as a percentage of total revenues was as follows.

57% from mobility, 31% from gaming, 6% from auto and 6% from medical.

Looking at year-over-year trends, mobility revenues were up 4% from the fourth quarter of 2014, principally due to higher sales by our current customers and new customer relationships in Asia.

Gaming revenues were up 34%, due to increased sales by haptic gaming peripherals customers.

Automotive revenues were up 39%, driven by increased customer sales.

Medical revenues were up 99%, primarily due to increased customer sales and timing of revenue recognition.

Gross profit was $16.5 million or 99% of revenues, compared to gross profit of $13.5 million in the fourth quarter of 2014.

Turning now to operating expenses, excluding costs of revenues, total GAAP operating expenses were $15.2 million in the fourth quarter of 2015, compared to $12.3 million in the year ago period, with a substantial portion of the increase driven by higher headcount and legal expenses as we prepared for our recent litigation filings.

Operating expenses in the fourth quarter of 2015 included non-cash charges related to depreciation and amortization of $226,000 and stock-based compensation of $1.2 million.

Of the total non-cash charges, $325,000 was included in sales and marketing, $365,000 in research and development, and $760,000 in G&A expense.

And of the stock-based compensation charges, $263,000 was included in sales and marketing, $267,000 in R&D, and $696,000 in G&A.

Net income for the fourth quarter was $1.1 million or $0.04 per diluted share compared to net income of $1 million even, also $0.04 per diluted share in the fourth quarter of 2014.

Net income for the fourth quarter of 2015 includes a tax benefit of $55,000 that includes certain non-cash tax benefits and expenses associated with our international tax planning activities.

In addition to normal GAAP metrics, we use 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 adjusted to reflect an expected long-term effective tax rate of 19% less stock-based compensation.

We define non-GAAP earnings-per-share as non-GAAP net income per diluted share.

Non-GAAP net income in the December 2015 quarters was $2.1 million or $0.07 per diluted share, compared to non-GAAP net income of $2.4 million or $0.08 per diluted share in the same period last year.

Turning to full 2015 results, our revenues were $63.4 million, up 20% from revenues of $52.9 million in 2014.

Full-year revenues from royalties and licenses were $61.7 million in 2015, up 19% from $51.8 million in 2014, reflecting increased revenues in all of our lines of business.

Of these amounts, variable royalties totaled $29.8 million in 2015, and fixed license fees totaled $31.9 million, up from variable royalties of $21.6 million and fixed license fees of $30.2 million in 2014.

For the 2015 full year, a breakdown by line of business as a percentage of total revenues was as follows.

[62%] for mobility, 24% from gaming, 7% from auto, and 7% from medical.

Gross profit for 2015 was $63 million or 99% of revenues, up from gross profit of $52.5 million in 2014.

Operating expenses excluding cost of revenues were $58.2 million in 2015 compared to $46.5 million in 2014 with a large portion of the increase attributable to higher headcount, our international corporate and tax planning and legal expenses.

Net income for the year was $2.9 million or $0.10 per diluted share compared to net income of $4.1 million in 2014, or $0.14 per diluted share.

Non-GAAP net income for 2015 was $9.1 million or $0.31 per diluted share compared to non-GAAP net income of $10.4 million or $0.36 per diluted share in 2014.

Overall, both our 2015 revenues and non-GAAP net income were above the top end of our upwardly revised guidance for the year.

Our cash portfolio including cash and short-term investments was $64.9 million as of December 31, 2015, up from $57.4 million exiting 2014.

The increase was driven primarily by $10 million in cash generated from 2015 operations.

During the year we did not buy back any stock under our authorized stock repurchase program.

We will continue to monitor our cash balance and stock price as well as market conditions and strategic factors as we consider any future buyback activity.

Regarding guidance for 2016, in addition to normal considerations, we also have to take into account the current uncertainty regarding our relationship with Samsung and the anticipated cost of the lawsuits we recently filed against Apple and AT&T.

With this in mind, and given the health of our existing business, we are pleased to announce that even absent a new agreement with Samsung, we are currently expecting 2016 revenues of $55 million to $65 million, generating bottom-line results of between a non-GAAP net loss of $8 million and non-GAAP net income of $3 million.

In this guidance we have assumed receipt of a certain amount of revenue relating to the sale of Samsung products launched prior to the end of 2015, but no revenue relating to Samsung products launched in 2016.

On the expense side, we are currently assuming litigation expense of between $14 million and $16 million for 2016, GAAP operating expense outside of this litigation expense totaling $54 million to $56 million for the year and stock-based compensation of between $6.4 million and $6.8 million for the year with the highest expense occurring in the first quarter.

Finally, the last thing I wanted to cover in my prepared remarks today.

After nearly 4 years here at Immersion and after a lot of thought, I have decided to retire as the Company CFO in order to spend some more time with my family, to travel, have some fun and to explore some charitable ideas.

This has been an extremely difficult decision, especially given how much I have enjoyed my time at Immersion, working with Vic, working with the entire Immersion team, and with you, the Company's investment community.

As Vic and I have discussed and will discuss, though, this is a good time and a transitional time for Immersion.

And it is the right time for me.

I will remain as Immersion CFO through our 10-K filing tomorrow and then will be available as necessary to ensure a smooth transition to our extremely able team.

Vic will act as the Company's interim CFO until Immersion selects a permanent replacement.

It's been a true privilege to serve as Immersion's CFO during this exciting period.

I'm extremely proud of what the Company has been able to accomplish during my tenure and I have absolute confidence in the Company's future.

With that I'll turn it back over to Vic.

Thanks Paul, and again we thank you for all your many contributions to Immersion.

Now I want to focus on three main areas during the remainder of my prepared remarks.

First, a recap of certain recent highlights.

Second, a broader perspective on what we built and where we are today, and third, a look at our priorities and focus for 2016 and beyond.

Looking to recent highlights, and as Paul and I earlier noted, we ended 2015 on a high note with record revenues for both the quarter and fiscal year.

Moreover, we gained -- we continued to gain momentum on new customer and content engagements as the year came to a close.

For example, our partnership with Opera Mediaworks yielded six advertising campaigns that ran in mobile apps across the US and Europe.

We also ran our first advertising campaign with TF1, the largest broadcast network channel in France.

In November we launched the second Games You Can Feel collection on Google Play, with popular mobile games such as PAC-MAN Championship Edition DX, by BANDAI NAMCO, Power Rangers Dash by Savin Brands and Hidden Artifacts by Blastworks.

The second campaign with Google demonstrates the continued interest in using haptics as a marketable differentiator, enabling game developers to effectively compete against an overabundance of other available game offerings.

The collaboration with Google has been influential in helping to persuade mobile game developers to join our ecosystem, and has proved provided an opportunity for us to promote haptic content to end consumers.

More recently, we announced an agreement with Tencent, one of the largest Internet companies in China.

We will be working with Tencent's in-house creative studio, Timi Studios, to add haptics to the 3-D action role-playing game, Kowloon War, due to launch later this year.

During the December quarter, we also renewed agreements with game peripheral manufacturers.

Established new deals with Chinese mobile device manufacturers such as Matoo.

And entered into a license with a new to market digital camera manufacturer.

These deals are representative of the continued traction we have been enjoying and licensing our technology and IP to the market.

Now stepping back to take a broader look at our accomplishments during 2015 and over the past four to five years, and how they positioned us for success today, I want to emphasize a few key areas.

Financially we have built on our prior investments to achieve a significant jump in our financial performance.

Notably, we have more than doubled our annual revenue in recent years, going from approximately $30 million in 2011 to over $63 million in 2015.

All while achieving consistent profitability, building a cash portfolio of over $60 million, repurchasing over $25 million of our own stock, and incurring no debt.

From a business perspective we have created a truly international company with strong China operations and a world-class sales organization throughout Asia and in other areas.

We have established and grown a successful IP licensing program in mobile, led by successful litigation against Motorola and HTC, and widespread licensing under our basic haptics initiative.

We have systematically set the foundation for a gamechanging new business in the area of content.

This has been a major effort that has involved a number of steps.

We started by generating and developing foundational IP and an end to end content tool system.

We then assembled a top-notch technical and business development team, which allowed us to create an ecosystem of customer and partner relationships.

Based on these relationships we have launched pilot programs that have showcased how haptics enhances content experiences, and generated various types of analytic evidence documenting this improved performance.

Collectively this significant momentum has positioned us well for commercialization and monetization in the near future.

Today, thanks largely to our groundbreaking innovation and evangelism, the opportunities for haptics are many and the future is bright.

Our customers and partners are part of an increasingly rich ecosystem that enables high-quality haptics from creation to delivery to playback.

We have been able to leverage this ecosystem to benefit not only our new customers in the content world but also our traditional OEM customers, as exemplified by our recent collaboration with Acer on the launch of a dual actuator haptics tablet, the Predator A.

This device is powered by TouchSense technology and comes preloaded with a TouchSense version of Gameloft's Asphalt 8, the first Android mobile game to include directional tactile effects.

Moreover, other companies have been following our leadership and finally recognizing how important tactile feedback can be in people's digital lives.

Not only has Apple adopted and heavily promoted haptics in many of its products, including those covered by our recently filed litigation, but many other haptic implantations have recently reached or are nearing the marketplace.

For example, at this year's CES, haptic technology was a highlighted feature in many consumer electronics goods on the show floor, including Bosch's TouchScreen automotive infotainment system, the Ford e-bike, and many new Android wear devices.

Haptic technology is also featured in a variety of new and emerging platforms such as virtual reality, augmented reality, extended gaming and social media.

All of this activity underscores the point that now is the time for haptics.

Turning to our priorities and focus for 2016 and beyond, we are excited about our prospects but focused on and serious about protecting our position and executing effectively on our opportunities.

We will insist on appropriate compensation for our valuable technologies, and where appropriate or necessary, take legal action to protect the interests of our business, employees, customers, partners and stockholders.

We will also invest strategically in key areas to maintain our leadership position and bring increasing value to our customers and partners.

We understand that we will need financial discipline and perseverance as we protect our business and work towards realizing our opportunities.

We know that this process may require time and investment of resources and that there may be some trade-offs with regards to short-term financial performance as we move towards long-term success.

We have done this before and are confident in our position and ability to do it again.

We embrace the challenge.

We see that if we execute well, our future will be one where the worldwide market for haptics is dramatically larger, where our technology is more valuable.

Where we are successfully licensing in new markets.

Where our IP position has been validated and is more relevant than ever.

And where we have achieved our highly scalable licensing model.

With that said, and as we close out the year, I'd like to thank our dedicated employees around the world.

Our customers and partners and you, our valued investors, for your ongoing support.

We will now open the call to your questions.

Ron?

(Operator Instructions).

Tony Stoss, Craig-Hallum Capital.

Hi Paul, hi Vic, Jeanette in for Tony Stoss.

First of all, Paul, congratulations on your retirement, we will be sad to see you go.

Pretty impressive (multiple speakers) given that pending Samsung renewal.

Can you provide a little more specifics about where you expect to see this revenue growth come from?

Sure.

As I think you've just seen in 2015 revenue grew really across all verticals.

And we are continuing to see that trend going into 2016.

I guess one easy way to look at this and maybe a good way to consider Immersion without regards to Samsung, if you were to take the fourth-quarter revenue of $16.6 million and annualize that, because that was a relatively stable run rate, you would end up at about $66 million.

If you back out Samsung for the year, they were about $20 million.

So you get a base business of about $46 million.

And that leaves about $9 million in order to get to the low end of our guidance or 20% growth.

So I would highlight that in 2015, we've grown our non-Samsung revenue at about 33%, actually growing from $33 million in 2014 to $44 million in 2015.

And so if you look at that revenue growth and you assume that we continue to grow with the 33%, then you would actually get closer to $61 million.

So, we see the revenue growth trends continuing much as they have in the past year or two, and then more specifically we can look at individual verticals where we feel like we've built a strong base of existing licensees, we've got a number of design wins that we are clearly aware of.

In fact if you've noticed at Mobile World Congress you've seen a number of new launches from Xiaomi and Huawei and others.

If you look at the automotive, we are aware of new design wins and cars, we expect to continue to see growth in medical, and we expect to see the beginnings of some early revenue in our content space.

We believe we will generate some revenue in the PC market for the first time, and we think that we will generate some revenue from the virtual reality markets.

So the assumptions that we made to get to 55 to 60 really don't include any revenue from Apple, assumes no renewal from Samsung, and yet continues the strong growth that we've had over the last couple of years.

Thanks.

Just as a follow-up, I think you just mentioned Xiaomi, I wanted to confirm you're still in discussions with them and if there is a potential to have that agreement renewed again.

I'm sorry if I misspoke, I meant to say [Jiaoni] which is a different company then Xiaomi.

So they are -- Jiaoni is a licensee multiple products in the market, and a very positive relationship.

We continue to hope that we can be successful in bringing Xiaomi back into the fold, I know there are conversations at the lower levels, and in China and the team over there, but I don't anticipate any revenue from Xiaomi in 2016.

That's not based into our current forecast.

Thanks for the clarification.

And can you just talk about the trajectory and growth in China?

In other words can you give us a sense of how much revenue you expect Chinese customers contributed in 2015, and what you expect China to contribute in 2016?

We don't break revenue out that way, at least not for reporting purposes.

We have been increasing the talent and the resources in China to address the large market.

We've grown the salesforce and the field application engineering team, so our integration efforts and our tuning, our user experience, knowledge are all being fully utilized by our Chinese OEM partners.

We grew revenue in 2015, I can say qualitatively, and we expect to grow even more in 2016.

They are quite aggressive in seeing the value of haptics and utilizing the benefits that TouchSense technology brings to their products.

We expect to see continued growth in 2016 from China.

Great.

And then, last from me, if you had to rank order where you're seeing the most interest or most potential to monetize your IP and software outside of general smartphone, is it mobile gaming, mobile advertising, PCs and tablets or is it something else?

I think I would say all of the above.

There's a lot of interest in adding haptic capability to touchpads on PCs, so we see that as a really big near-term opportunity.

Clearly the second campaign with Google, Games You Can Feel, shown that we can bring top 10 titles in some of the world's largest team developers to add haptics to the lineup of good product so there's a lot of demand there, a lot of success.

Google is very pleased with that campaign.

Seeing success and adoption on the ad side, mobile video, where we continue to see analytic evidence that shows it has a big impact on retention and engagement and even monetization metrics.

So we feel like that's a very positive trend.

As you probably know, lots of momentum in the virtual reality side.

And as it combines with gaming, we think that that's a real robust area, one that we have been invested in for many, many years.

We initially had a line of [glub-based] products, and now we have taken advantage of existing controller technology and advanced controller technology, wearables that can benefit from this.

So all of those market opportunities are really starting to come into their own.

And we are feeling like there is good, strong revenue potential in 2016.

I would add to that, I agree with everything Vic said.

Probably if you were not rank ordering them, but ordering them temporarily, you might look at the PC market, PC and tablet opportunity as being one where the market might have a quicker growth trajectory for us, and might impact 2016 a little bit earlier.

The opportunities in content might take -- there might be more of a ramp-up period alternately the size of either mobile games or mobile advertisements or one of those other areas in the content world might end up being even greater than the PC and tablet opportunity.

But again that might be a little further out in the future.

Thanks guys, congrats again Paul.

(Operator Instructions).

Josh Nichols, B. Riley.

First of all, Paul, congratulations on the retirement, but sorry to see you go.

Could you --

I'll miss you, Josh.

You too.

Could you real quick -- I know you mentioned some of the guide for OpEx and how much that is going to be potential legal expense for 2016?

Sure.

Right now, we are projecting $14 million to $16 million of litigation expense.

We do have legal expense relating to everything from normal contract matters to maintaining and expanding our patent portfolio.

But just looking at the separate litigation expense, I would project that at about $14 million to $16 million right now.

That's our best view at this stage, litigation obviously can evolve and develop in different ways as we go forward with our strategy, but we will keep you up-to-date if there's any alteration in that projection.

As far as the other remaining OpEx, which would include other legal expense as well as all the headcount expense, third-party contractor expense, overhead facilities and the like, that we are projecting out at $54 million to $56 million for 2016.

Great, thanks a lot.

I appreciate that.

And then I was going to ask, so currently there's no catch-up agreements with Samsung in place where you're still able to receive some revenue from them now that the contract has expired, is that correct?

No, I would say there clearly is revenue that will be received in 2016 that covers products that have been launched during the contract period that continue to ship into the market place.

So there's some amount of revenue for that.

But it does not include any revenue for any new products launched, and those products are not licensed, so we will -- like any nonlicensed product -- have to take a look at those and consider strategic options in terms of how we would monetize that.

Right, so it would include like any revenue from the S6 but not the coming S7 launch in the next couple weeks.

Is that correct?

Yes, I think you've appropriately separated out the products that we are going to market under the contract that were launched last year, 2015.

Those are still to be paid and those we expect to receive monies from Samsung this year for the old expired contract.

New contract which has not been renewed or signed, or any new products coming up, like the S7 would not be included, but as I said I'm assuming it will have some level of haptic capability and we will have to take a look at it to see whether it should be a revenue-generating item that will have to enforce our IP.

Right.

I hear you.

And any idea as far as ballpark as whatever you're talking about the guidance for 2016, what you are thinking, and how much the legacy Samsung product revenue will factor into that?

No, we haven't provided any kind of specificity around that.

And then the one thing I was going to ask, Q4 was a really strong quarter, but the top line did come in $2.5 million above guidance, which was only a few months ago.

I was kind of curious what drove such a big topline beat, given that most of the other revenue's usually more predictable license revenue?

Like any revenue projection, there is still some level of uncertainty, deals to get signed, units that need to be shipped and reported.

So, there was still some uncertainty around that.

We felt it was appropriate to be a little more conservative, and so we just had a strong quarter across the entire set of verticals.

I wouldn't say it's any one-time event, it was just good solid performance across the board.

It really was every -- all the customers that we were kind of looking at and watching and had a range for did very well and came in at the top end of where we'd gotten as a range.

So it added up to being a very, very strong quarter.

My understanding is a lot of these license contracts may have kickers, based on if the sales go really well, that make them into place particularly kind of Q4; is that pretty much what happened?

No, I would say that we have a handful of accounts where there might be true-ups that could occur.

I don't believe any of that happened in the Q4, at least not substantively.

Some of those, because not everybody has calendar year end, some of those are -- occur in -- all of the four quarters, really, some occur because of compliance audits, some are self-reported, but none of that really affected, materially affected, Q4.

And last question from me, and I'll step out.

Historically, the Company has given some guidance for Q1 as far as deferred revenue or cash flow just because there so many licensees that pay upfront for the year.

Is there any comments you could make around that?

No, I'd say at this point we feel like we've given good 2016 guidance specifically on revenue, on our litigation budget, and then the overall OpEx.

I don't think we can provide any more color.

In terms of seasonality we would expect Q1 to be seasonally a pretty good quarter as usually the case.

But I don't think we can give you any more precision around the Q1 results yet.

Okay, thanks.

And Paul, best of luck on your future endeavors.

Charlie Anderson, Doherty & Company.

Good afternoon, thanks for taking my questions, and Paul, best of luck on all your future endeavors, really enjoyed working with you.

Thanks, Charlie.

So I wanted to ask about seasonality.

I think this year sounds like it's going to be a little bit different because we are going to have kind of the Samsung tail effect, and there's also the seasonal effect of these litigation expenses given the IBC case.

So I wonder what degree account you can kind of map that out for us to make sure that we don't have models that are sort of out of step with what's going on.

I think it's going to be a little difficult, because clearly with Samsung there's no revenue tied to a new contract, so that will not be in our Q1 estimates.

At least not yet.

In terms of the costs, ITC costs, we have been spending in this last quarter healthy amount of money preparing for the case.

We would continue to expect to see that cost continue throughout 2016.

I would assume that we would have more of that spending at the front end of the year but I don't know that specifically I can give you quarter by quarter expectations.

I think 2014 to 2016 should capture the bulk of what we think will occur, including all of the activities we might expect, plus any additional litigation we may have to initiate during the year.

But I don't think I can give you any more seasonality details.

I guess maybe one way to ask it is do we expect that -- often you have a very strong first quarter and then you sort of finish the year stronger for a dip down after that, it implied in the guide that you have a lot of new things coming in, talk about PCs and VR and the like.

Is it going to be pretty flat year or are we assuming that we have a ramp in the back half with some of the new stuff of the products you are launching?

Again, I would say there's a certain amount of uncertainty, I think some of the design wins, the PC would clearly come later in the year.

Any revenue that would be associated with ongoing Samsung shipments under the old agreement really will be subject to enforcement actions and the timing of those payments.

So that's a little too uncertain to predict right now.

So I wouldn't give you any sense that we see or can predict the seasonality.

I would expect Q1 to continue to benefit from some of the gaming shipments from Q4, which becomes Q1 revenue, but again you are not going to have -- at least we don't anticipate in the current guidance any revenue from Samsung on renewals, so that will have a reduction from our normal Q1.

But again, if you measure it out over the year, we are confident with the $55 million to $65 million.

But I'm not sure I can give you much more clarity around that seasonality.

Right.

I wanted to ask about -- take the Samsung negotiations.

Obviously you've made a couple of statements in your script about being fairly compensated.

I wonder if part of what's going on here that in a way the Samsung is valuable to have but it's also potentially valuable not to have, it creates an encumbrance when you're talking with other strategic players.

I mean, the (inaudible) is so valuable now it's going to be it looks like a feature on pretty much every flagship at a certain point.

Just maybe step back and talk to us about sort of the stakes here and why you guys are holding out for what you're holding out for, maybe compared to the negotiation three years ago?

Sure.

I would say that we are having ongoing discussions, so there's active engagement.

I would say that the substantive differences are price.

They want to pay less than what we think it's worth.

We have consciously told them and decided that we are not going to give or provide them access to any software, any engineers, any new design ideas, any know-how, any tools.

So until they are licensed, we are not going to enable them in any way.

I think that the value of haptics, as you have seen, you were with us at CES, and I don't know if you've seen the Mobile [World] Congress momentum.

But growth of haptic adoption, the pressure-sensing capability which is, we think, a very popular and beneficial feature is something that I think Samsung will need in their products.

They're going to need it because their customers want it.

So, we feel there's a fair value for that, and we are not going to do a deal unless we get what we think is fair.

I'd say that is the state of the discussion that's active and ongoing but we haven't reached agreement on price.

Got it.

Okay, thanks so much.

(Operator Instructions).

Richard Mashaal, Senvest.

Hi Paul, hi Vic.

First off Paul, I wanted (multiple speakers) great working with you, and you've done a heck of a job and I will wish you all the best.

(multiple speakers) and I also want to congratulate you guys on great numbers, and the very, very solid and positive guidance.

Certainly better than we were looking for, so that's great to hear that there is continued momentum in the other parts of your business without Samsung.

And I guess obviously we have been with you guys for a while, and it's very frustrating.

We are very excited about your lawsuit against Apple, that (technical difficulty) finally collect from them after you showed them and talked to them all about haptics for the last five or six years, then they took your idea and put it into their phones and now aren't paying for it.

So we are very upset about it and we are very happy with that.

And on Samsung, I don't even know if we want Samsung as a licensee.

Who needs a partner that works with you and then all of a sudden turns their back on you and just tries to throw their weight around and pay you nothing for your technology?

As far as I'm concerned I agree with you.

Haptics is getting more valuable by the day.

And you should tell Samsung the longer they wait, your price is going to go up.

If they want to sign now, it's one price.

If they want to jerk you around for three months and you've got to take legal action, that's another price.

So we are -- we think you guys should play hardball with these guys, and don't let them off the hook.

We are right behind you guys, and we really are a big believer in your technology and we think this -- haptics is only going to become more important and more key to -- in all areas from virtual reality to handsets, to tablets, and the longer they wait the more it's going to cost.

Thanks, Rich, appreciate the support and I promise you we will be very vigorous in enforcing that kind of mindset.

Great.

Good job, Vic, good job, Paul.

And that will conclude today's question-and-answer session.

At this time I would like to turn the conference back to management for any additional or closing remarks.

Thank you all for being on the call with us today.

Appreciate your support, dedicated efforts, we look forward to updating you again on our next call.

Thank you and have a great day.

Ladies and gentlemen, this concludes today's call.

Thank you for your participation, you may now disconnect your lines.