Immersion Corporation: This Company Delivered 3 Years' Worth Of Revenue In One Quarter

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Removing Barnes & Noble's P&L contribution, Immersion's haptic business generated $52m in Q2 after winning license agreements from OEMs.With no R&D spending and only 14 employees, Immersion is more ...

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Girts RagelisBackground Immersion Corporation (NASDAQ:IMMR) is a small cap valued at $280m that sells licenses for its haptic technology. Haptic technology is embedded in a variety of electronic devices, mostly gaming-based devices such as Sony PlayStation PS5 controllers and Nintendo Switches. Haptic feedback is also used in cars, mobile devices and VR sets to enrich the consumer experience and communicate through touch. Overall the largest segment was mobile in 2023; - Mobile - 41% revenue - Gaming - 32% revenue - Automotive - 22% revenue - Other - 5% Customers range from Google and Meta to Continental and Preh Automotive. Immersions sells OEMs a patent license and collects royalties on units sold embedded with haptic technology. The business hasn't taken off with revenue remain flat for several years. Tikr TerminalHowever, in recent quarters sales have taken off, helped by Meta signing a licensing deal (after a failed lawsuit) and as more customers renewed or extended their licensing agreements, such as Samsung and Nintendo. However, another key growth driver has been the acquisition of Barnes & Noble (BNED) which is now being consolidated in Immersions financial statements. In Q2 Immersion delivered $99m in sales, with $47m of that figure coming from Barnes & Noble which Immersion acquired in summer of 2024 (Toro 18 Holdings) in order to strategically diversify. Removing the $47m in sales from BNED means the 'core' haptic business done $54m in revenue, which is much higher than the company achieved in whole years periods prior. Immersion has a reputation as a patent house, as they are tie-in OEMs after legal battles using their haptic technology patents. VR Market is The Biggest Opportunity  I'd argue VR represents the largest growth opportunity for Immersion, as VR adoption is still early and less mature in my opinion than other segments. In fact, for the automotive segment, manufacturers have removed haptic technologies from their products, see section below from IDTechX: \"...Although haptic features have been adopted by many automakers, including Tesla, Hyundai, and Chrysler, feedback is not uniformly positive. VW recently abandoned haptic buttons in vehicle interiors, citing customer experience concerns. Adoption of newer actuator types may be one way that a premium experience could be delivered here, helping to convince consumers that solid state buttons are more than a cost-saving measure.\" Smartphone haptic feedback isn't new as a feature and is likely commoditized; however, VR is still a new and developing technology that hasn't been remotely mass adopted. Fortune Business Insights expects the global VR market to grow 28.6% yearly over the next 8 years, partly supported by VR gaming, which is being pushed hard right now by Meta, who is developing the Oculus Quest 4. This could be a growing segment moving forward based on Immersion's current gaming customer base. However, because management do not communicate with investors, it's hard to analyse their offering as the only source of information are 10-Q and 10-k filings. Valuation Immersion currently trades optically cheap based on FY24 net income of $86m, thus based on the guidance from only 1 sell-side analyst, Immersion trades at a forward P/E ratio of 3.1x. However, this is expected to jump to 13.5x in FY25 demonstrating the highly volatile earnings driven by randomly timed OEM license agreements and now Barnes & Noble's sales seasonality. For the similar reasons operating margins and net income margins have been extremely volatile over the years making it even harder to estimate earnings. This makes it hard to give Immersion a price target or valuation estimate. The two sell-side analysts following Immersion give the company a $13.75 12-month median price target, representing 58% upside from the current trading price. In terms of financial health, the balance sheet has a current ratio and quick ratio of 1.55x and 0.63x, respectively. As of Q2, Immersion had $133m in cash & cash equivalents and $186m in long-term debt (ignoring capital leases). 73% of the company's liquidity (cash & liquid investments) comes from the 42% stake (11m shares) in Barnes and Noble stock. Therefore, shares of Immersion are likely to follow movements in BNED stock going forward. Conclusion  Unfortunately, due to more relaxed listing requirements for smaller listed companies on the NasdaqGS, management aren't required to hold earnings calls and do not communicate with the market. My personal conclusion is, Immersion aren't investing into R&D but rather are a patent house making money off of the \"1,000 haptic patents\" in their small technology niche. We can see this through the small employee count of 14 staff and zero R&D spending on the income statement. The company has been call a patent troll in the past; therefore I wouldn't be comfortable recommending buy or sell due to the lack of measurable information or data coming from the company. Although I see an investment in Immersion stock as a partial investment in hard to judge haptic technology patents and related licensing agreements, plus a 42% exposure to Barnes & Noble stock.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2472954599"}