This Administration's Dialogue and Evaluation of Monetary Situation and Outcomes of Operations contains forward-looking statements inside the that means of Part 27A of the Securities Act, as amended (the "Securities Act"), and Part 21E of the Securities Alternate Act of 1934, as amended (the "Alternate Act"). The forward-looking statements contain dangers and uncertainties. Ahead-looking statements are ceaselessly recognized by phrases corresponding to "anticipates", "believes", "expects", "intends", "might", "can", "will", "locations", "estimates", and different related expressions. Nonetheless, these phrases aren't the one means we determine forward-looking statements. Examples of forward-looking statements embody any expectations, projections, or different characterizations of future occasions, or circumstances, and embody statements relating to: the affect of COVID-19 on our enterprise, together with as to income, and potential value discount measures, and the affect of COVID-19 on our prospects, suppliers, and on the economic system in basic; our technique and our skill to execute our marketing strategy; our competitors and the market during which we function; our prospects and suppliers; our income and the popularity and parts thereof; our prices and bills, together with capital expenditures; our funding of surplus funds and gross sales of marketable debt securities; seasonality and demand; our funding in analysis and expertise growth; adjustments to basic and administrative bills; our overseas operations and the reinvestment of our earnings associated thereto; our funding in and safety of our IP; our staff; capital expenditures and the sufficiency of our capital sources; unrecognized tax profit and tax liabilities; the affect of adjustments in rates of interest and overseas trade charges, in addition to our plans with respect to overseas foreign money hedging normally; adjustments in legal guidelines and laws; together with with respect to taxes; our plans and estimates associated to and the affect of present and future litigation and arbitration; our leases, sublease and the timing and revenue associated thereto; and our inventory repurchase and fairness distribution applications. As a result of forward-looking statements relate to the longer term, they're topic to inherent uncertainties, dangers and adjustments in circumstances which might be tough to predict and lots of of that are outdoors of our management. Precise outcomes may differ materially from these projected within the forward-looking statements, due to this fact we warning you to not place undue reliance on these forward-looking statements. Essential components that would trigger our precise outcomes and monetary situation to vary materially from these indicated within the forward-looking statements embody, amongst others, the chance components contained under beneath Half II, Merchandise 1A, Threat Components. Any forward-looking statements made by us on this report converse solely as of the date of this report, and we don't intend to replace these forward-looking statements after the submitting of this report, until required to take action by relevant regulation. You might be urged to assessment fastidiously and think about our numerous disclosures on this report and in our different stories publicly disclosed or filed with theSEC that try and advise you of the dangers and components which will have an effect on our enterprise. OVERVIEW We're a premier licensing firm centered on the invention, acceleration, and scaling, by licensing, of modern haptic applied sciences that enable folks to make use of their sense of contact to interact with merchandise and expertise the digital world round them. We're one of many main specialists in haptics, and our focus on innovation permits us to ship world-class mental property ("IP") and expertise that allows the creation of merchandise that delight finish customers. Our applied sciences are designed to facilitate the creation of high-quality haptic experiences, allow their widespread distribution, and be sure that their playback is optimized. Our major enterprise is at present within the mobility, gaming, and automotive markets, however we imagine our expertise is broadly relevant and see alternatives in evolving new markets, together with leisure, social content material, digital and augmented actuality, and wearables, as effectively as residential, business, and industrial Web of Issues. In current years, we now have seen a development in the direction of broad market adoption of haptic expertise. As different firms observe our management in recognizing how vital tactile suggestions could be in folks's digital lives, we anticipate the chance to license our IP and applied sciences will proceed to develop. Now we have adopted a enterprise mannequin beneath which we offer technical help designed to combine our patented expertise into our prospects' merchandise or improve the performance of our patented expertise, and provide licenses to our patented expertise to our prospects. Our licenses allow our prospects to deploy haptically-enabled units, content material and different choices, which they sometimes promote beneath their very own model names. We and our wholly-owned subsidiaries maintain greater than 1,400 issued or pending patents worldwide as ofMarch 31, 2022 . Our patents cowl a variety of digital applied sciences and methods during which touch-related expertise could be included into and between {hardware} merchandise and parts, techniques software program, software software program, and digital content material. We imagine that our IP is related to a lot of an important and cutting-edge methods during which haptic expertise is and could be deployed, together with in connection with cellular interfaces and person interactions, in affiliation with strain and different sensing applied sciences, as a part of video and interactive content material choices, as associated to digital and augmented actuality experiences, and in reference to superior actuation applied sciences and methods. Our portfolio contains quite a few patents and patent purposes that we imagine might turn out to be important to rising requirements in 24
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We have been included in 1993 in
Outcomes of Operations Overview
Complete revenues for the three months ended
Complete value and working bills have been$3.7 million within the three months endedMarch 31, 2022 , a lower of$1.0 million , or 21% in comparison with the identical interval in 2021.
Within the three months ended
The next desk units forth our Condensed Consolidated Statements of Revenue knowledge as a proportion of complete revenues:
Three Months Ended
March 31,
2022 2021
Revenues:
Per-Unit royalty income 75.0 % 81.0 %
Mounted price license income 23.9 18.0
Royalty and license 99.0 99.0
Improvement, companies, and different 1.1 1.0
Complete revenues 100.0 100.0
Prices and bills:
Value of revenues - -
Gross sales and advertising 6.7 15.0
Analysis and growth 7.0 18.0
Common and administrative 37.0 32.0
Complete prices and bills 51.0 65.0
Working revenue 49.0 35.0
Curiosity and different revenue 27.8 (5.0)
Revenue from operations earlier than advantages from (provision for) revenue taxes
77.0 30.0
Provision for revenue taxes (7.7) (2.0)
Web revenue 69.0 % 28.0 %
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Revenues
Our income is primarily derived from fastened price license agreements and per-unit royalty agreements, together with much less important income earned from growth, companies and different income. Royalty and license income consists of per unit royalties earned primarily based on utilization or internet gross sales by licensees and stuck fee license charges charged for our IP and software program.
A income abstract for the three months ended
Three Months Ended March 31,
2022 2021 $ Change % Change
Revenues:
Mounted price license income $ 1,745 $ 1,275 $ 470 37%
Per-unit royalty income 5,485 5,793 (308) (5)%
Complete royalty and license income 7,230 7,068 162 2%
Improvement, companies, and different income 78 91 (13) (14)%
Complete revenues $ 7,308 $ 7,159 $ 149 2%
Royalty and license income
Per-unit royalty income decreased by $0.3 million , or 5%, within the first quarter
of 2022 in comparison with the identical interval in 2021, primarily attributable to a $0.4 million
lower in royalties from mobility licensees and a $0.2 million lower
royalties from automotive licensees partially offset by a $0.3 million improve
in royalties from our gaming licensees.
Mounted price license income elevated $0.5 million or 37% in within the first quarter
of 2022 in comparison with the identical interval in 2021 on account of a $0.5 million improve in
gaming license income.
We anticipate royalty and license income to proceed to be a significant part of our
future income as our expertise is included in merchandise and we achieve our
efforts to monetize our IP. Our fastened price license income may fluctuate
relying upon the timing of execution of recent fastened license price preparations. We
additionally anticipate that our royalty income will fluctuate relative to our
prospects' unit shipments.
Geographically, revenues generated in Asia , North America and Europe for the
three months ended March 31, 2022 represented 75%, 16%, and 9%, respectively, of
our complete income as in comparison with 74%, 19%, and seven%, respectively, for the three
months ended March 31, 2021 .
Working Bills
A abstract of working bills for the three months ended
Three Months Ended March 31,
2022 2021 $ Change % Change
Gross sales and advertising $ 486 $ 1,106 $ (620) (56) %
Analysis and growth 509 1,307 (798) (61) %
Common and administrative 2,706 2,224 482 22 %
Gross sales and Advertising and marketing - Our gross sales and advertising bills primarily consisted of
worker compensation and advantages, together with stock-based compensation; gross sales
commissions; promoting and commerce reveals; collateral advertising supplies; market
growth funds; journey; and allotted amenities prices.
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Gross sales and advertising bills decreased$0.6 million , or 56%, within the first quarter of 2022 as in comparison with the identical interval in 2021 primarily on account of a$0.5 million lower in compensation, advantages and different personnel associated prices largely attributable to decrease headcount and a lower in stock-based compensation expense.
Analysis and Improvement – Our analysis and growth bills primarily consisted of worker compensation and advantages, together with stock-based compensation; outdoors companies and consulting charges; tooling and provides; and assigned amenities prices.
Analysis and growth bills decreased$0.8 million , or 61%, within the first quarter of 2022 in comparison with the identical interval in 2021 primarily on account of a$0.7 million lower in compensation, advantages and different personnel associated prices largely attributable to decrease headcount and a lower in stock-based compensation expense. Common and Administrative - Our basic and administrative bills primarily consisted of worker compensation and advantages together with stock-based compensation; authorized different skilled charges; exterior authorized prices for patents; workplace expense; journey; and allotted amenities prices. Common and administrative bills elevated$0.5 million , or 22%, within the first quarter of 2022 as in comparison with the primary quarter of 2021 primarily on account of a$0.8 million improve in compensation, advantages and different personnel associated prices in compensation, advantages and different personnel associated prices partially offset by a$0.3 million lower in authorized prices and a$0.1 million lower as a result of non-recurrence of contract termination prices recorded in first quarter of 2021. The rise in compensation, advantages and different personnel associated prices was primarily on account of a rise in stock-based compensation expense within the first quarter of 2022 in comparison with the identical interval in 2021. The lower in authorized expense was primarily attributable to decreased actions, in addition to a lower in patent upkeep and prosecution prices. We could also be required to interact in litigation to guard our IP, during which case our basic and administrative bills may considerably improve reflecting such litigation prices.
Curiosity and Different Revenue (Loss)
Curiosity and Different Revenue (loss) – Curiosity and different revenue consists primarily of curiosity revenue from money and money equivalents and short-term investments.
Curiosity and different revenue (loss) elevated$2.4 million throughout the first quarter of 2022 in comparison with the primary quarter of 2021 primarily pushed by a$1.4 million improve in curiosity and dividend revenue, a$0.7 million improve in internet features on investments and a$0.2 million improve in overseas foreign money transaction and translation features. The rise in curiosity and dividend revenue within the first quarter of 2022 in comparison with the identical interval in 2021 primarily was on account of increased curiosity and dividend revenue from investments in addition to curiosity revenue from a Korean tax litigation settlement. The rise in internet features on investments primarily consisted of$2.1 million improve in internet unrealized features on fairness investments, a$1.0 million improve in internet realized features on fairness investments and a$0.4 million improve in internet realized features on funding in company bonds. These will increase have been partially offset by a$2.7 million in internet unrealized losses on by-product devices. 27
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Provision For Revenue Taxes
A abstract of provision for revenue taxes and efficient tax charges for the three months ended
Three
Months Ended
2022 2021 $ Change % Change
Revenue earlier than provision for revenue taxes $ 5,637 $ 2,177
Provision for revenue taxes 561 141 (420) 298 %
Efficient tax fee 10.0 % 6.5 %
Provision for revenue taxes for the three months ended March 31, 2022 and 2021
resulted primarily from estimated overseas taxes included within the calculation of
the efficient tax fee. We proceed to keep up a full valuation allowance
towards all of our federal and state deferred tax property in america as
effectively as federal tax property in Canada . Because of this, no profit for losses
generated from our U.S. territory was included within the calculation of the
efficient tax fee, which was the principle motive for the distinction between the
statutory tax fee and precise efficient tax fee. The year-over-year change in
provision for revenue taxes resulted primarily from the change in revenue from
persevering with operations throughout numerous tax jurisdictions.
We proceed to keep up a valuation allowance of $27.3 million towards sure
of our deferred tax property, together with all federal, state and sure overseas
deferred tax property in america and Canada on account of uncertainties
relating to the belief of the asset stability on account of historic losses, the
variability of working outcomes, and uncertainty relating to close to time period projected
outcomes. Within the occasion that we decide the deferred tax property are realizable
primarily based on an evaluation of related components, an adjustment to the valuation
allowance might improve revenue within the interval such willpower is made. The
valuation allowance doesn't affect our skill to make the most of the underlying internet
working loss carryforwards.
We additionally preserve liabilities for unsure tax positions. As of March 31, 2022 ,
we had unrecognized tax advantages beneath ASC 740 Revenue Taxes of roughly
$6.3 million and relevant curiosity of $0.1 million . The entire quantity of
unrecognized tax advantages that might have an effect on our efficient tax fee, if
acknowledged, is $1.3 million . We account for curiosity and penalties associated to
unsure tax positions as a part of revenue tax provision. We don't anticipate
to have any important adjustments to unrecognized tax advantages throughout the subsequent
twelve months.
Liquidity and Capital Assets
Our money equivalents and marketable fairness securities consist primarily of money-market funds, funding in fairness marketable securities (together with mutual funds). All marketable fairness securities are acknowledged at market worth. Realized features and losses on marketable fairness securities and marketable debt securities are recorded in Different revenue (expense), internet on the Condensed Consolidated Statements of Revenue and Different Complete Revenue. Unrealized features and losses on marketable fairness securities (together with mutual funds) are reported as Different revenue (expense), internet on our Condensed Consolidated Assertion of Revenue and Different Complete Revenue. Unrealized features and losses on marketable debt securities reported as a part of Gathered different complete revenue on our Condensed Consolidated Steadiness Sheets.
Money, money equivalents and short-term investments
As of
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A abstract of choose money move data for the three months ended
Three Months Ended
March 31 .
2022 2021
Web money supplied by working actions$ 11,038
Web money supplied by (utilized in) investing actions
Web money supplied by (utilized in) financing actions
Money supplied by working actions – Our working actions primarily include internet revenue adjusted for sure non-cash gadgets together with depreciation and amortization; stock-based compensation expense, deferred revenue taxes and the impact of adjustments in working property and liabilities.
Web money supplied by working actions was$11.0 million within the first quarter of 2022, a$6.6 million improve in comparison with the identical interval in 2021. This money improve was primarily attributable to a$3.0 million improve in internet revenue and a$3.9 million improve on account of adjustments in internet working property and liabilities partially offset by a$0.3 million lower ensuing from adjustments in non-cash gadgets.
Money supplied by (utilized in) investing actions – Our investing actions primarily include purchases of marketable securities and different investments and proceeds from disposal of marketable securities and different investments; proceeds from issuance of by-product devices; funds made to settle by-product devices and purchases of pc gear, furnishings and leasehold enhancements.
Web money supplied by investing actions throughout the first quarter of 2022 was$4.8 million primarily consisting of$46.7 million in proceeds from promoting marketable securities and by-product devices partially offset by$41.9 million in money used to buy marketable securities and within the settlement of by-product devices.
Web money utilized in investing actions throughout the first quarter of 2021 was
Money supplied by (utilized in) financing actions - Our financing actions primarily consist of money proceeds from issuance of widespread inventory, proceeds from inventory choice workout routines and inventory purchases beneath our worker inventory buy plan and money paid for repurchases of our widespread inventory.
Web money utilized by financing actions throughout the first quarter of 2022 was
Web money supplied by financing actions throughout the first quarter of 2021 was$38.7 million primarily consisting of$35.9 million of internet proceeds from widespread inventory issuances and$2.8 million money proceeds from inventory choice workout routines and inventory purchases beneath our worker inventory buy plan. Complete money, money equivalents, and marketable fairness securities have been$146.5 million as ofMarch 31, 2022 of which roughly 32%, or$46.4 million , was held by our overseas subsidiaries and topic to repatriation tax results. Our intent is to completely reinvest a majority of our earnings from overseas operations, and present plans don't anticipate that we are going to want funds generated from overseas operations to fund our home operations.
We might proceed to spend money on, defend, and defend our intensive IP portfolio, which can lead to the usage of money within the occasion of litigation.
OnFebruary 23, 2022 , our Board of Administrators authorized a inventory repurchase program of as much as$30 million of our widespread inventory for a interval of as much as twelve months. Any inventory repurchases could also be made by open market and privately negotiated transactions, at such occasions and in such quantities as administration deems applicable, together with pursuant to a number of Rule 10b5-1 buying and selling plans adopted in accordance with Rule 10b5-1 of the Securities Alternate Act of 1934. Moreover, the Board approved the usage of any by-product or related instrument to impact inventory repurchase transactions, together with with out limitation, accelerated share repurchase contracts, fairness ahead transactions, fairness choice transactions, fairness swap transactions, cap transactions, collar transactions, bare put choices, flooring transactions or different related transactions or any mixture of the 29
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foregoing transactions. The inventory repurchase program was carried out as a way to return worth to our stockholders. The timing, pricing and sizes of any repurchases will rely upon quite a few components, together with the market value of our widespread inventory and basic market and financial circumstances. The inventory repurchase program doesn't obligate us to repurchase any greenback quantity or variety of shares, and this system could also be suspended or discontinued at any time. Within the first quarter of 2022, we repurchased roughly 34,282 shares of our widespread inventory for$0.2 million at a median value of$4.89 per share. As ofMarch 31, 2022 , we now have$29.8 million accessible for repurchase beneath the inventory repurchase program.
At
We didn’t have some other important non-cancellable buy commitments as of
We anticipate that capital expenditures for property and gear for the rest of 2022 might be lower than
Whereas the unprecedented public well being and governmental efforts to comprise the unfold of COVID-19 have created important uncertainty as to basic financial and capital market circumstances in 2022 and past, as ofMight 13, 2022 , the date of this Quarterly Report on Kind 10-Q, we imagine we now have adequate capital sources to fulfill our working capital wants for the following twelve months and past.
Essential Accounting Estimates
Our dialogue and evaluation of our monetary situation and outcomes of operations are primarily based upon our condensed consolidated monetary statements, which have been ready in accordance withU.S. GAAP. The preparation of those condensed consolidated monetary statements requires administration to make estimates and assumptions that have an effect on the reported quantities of property, liabilities, revenues, bills, and associated disclosure of contingent property and liabilities. On an ongoing foundation, we consider our estimates and assumptions, together with these associated to income recognition, marketable securities and by-product devices, revenue taxes and contingencies. We base our estimates and assumptions on historic expertise and on numerous different components that we imagine to be affordable beneath the circumstances, the outcomes of which type the foundation for making judgments in regards to the carrying values of property and liabilities that aren't readily obvious from different sources. Precise outcomes might differ from these estimates and assumptions. As a result of COVID-19 pandemic, there was uncertainty and disruption within the international economic system and monetary markets. We're not conscious of any particular occasion or circumstance that might require updates to our estimates or judgments or require us to revise the carrying worth of our property or liabilities as ofMight 13, 2022 the date of issuance of this Quarterly Report on Kind 10-Q. These estimates might change as new occasions happen and extra data is obtained. Precise outcomes may differ materially from these estimates beneath completely different assumptions or circumstances. Please seek advice from Administration's Dialogue and Evaluation of Monetary Situation and Outcomes of Operations contained in Half II, Merchandise 7 of our Annual Report on Kind 10-Ok for the 12 months endedDecember 31, 2021 filed with theSEC onFebruary 25, 2022 , for an entire dialogue of our vital accounting insurance policies and estimates. The preparation of economic statements and associated disclosures in conformity withU.S. typically accepted accounting rules ("GAAP") and our dialogue and evaluation of our monetary situation and working outcomes require the administration to make judgments, assumptions and estimates that have an effect on the quantities reported. See Notice 1. Vital Accounting Insurance policies of the Notes to Condensed Consolidated Monetary Statements in Half I, Merchandise 1 herein, which describes the numerous accounting insurance policies and strategies used within the preparation of our condensed consolidated monetary statements. Administration bases its estimates on historic expertise and on numerous different assumptions it believes to be affordable beneath the circumstances, the outcomes of which type the foundation for making judgments in regards to the carrying values of property and liabilities.
Latest Accounting Pronouncements
See Notice 1 Vital Accounting Insurance policies of the Notes to Condensed Consolidated Monetary Statements for data relating to the impact of recent accounting pronouncements on our monetary statements.
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