What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-11 compared with 2023-05-11 · 89 added, 50 removed, 140 unchanged (50% of the section changed)

38 unchanged sentences

Our licenses enable our customers to deploy haptically-enabled devices, content and other offerings, which they typically sell under their own brand names.

We and our wholly-owned subsidiaries hold more than 1,000 issued or pending patents worldwide as of March 31, 2023.

We and our wholly-owned subsidiaries hold more than 1,000 issued or pending patents worldwide as of June 30, 2023.

Our patents cover a wide range of digital technologies and ways in which touch-related technology can be incorporated into and between hardware products and components, systems software, application software, and digital content.

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Results of Operations

Total revenues for the three months ended March 31, 2023 was $7.1 million, a decrease of $0.2 million, or 3%, compared to the same period in 2022.

Total operating expenses were $3.8 million in the three months ended March 31, 2023, a decrease of $0.1 million, or 3%, compared to the same period in 2022.

Net income was $8.3 million in the three months ended March 31, 2023, a $3.2 million, or 63%, increase compared to a net income of $5.1 million in the three months ended March 31, 2022.

Total revenues for the three months ended June 30, 2023 was $7.0 million, a decrease of $1.0 million, or 13%, compared to the same period in 2022.

Total revenues for the six months ended June 30, 2023 was $14.1 million, a decrease of $1.2 million, or 8%, compared to the same period in 2022.

Total operating expenses were $3.9 million in each of the three months ended June 30, 2023 and 2022.

Total operating expenses were $7.7 million in the six months ended June 30, 2023, a $0.1 million, or 1% increase compared to the same period in 2022.

Net income was $7.0 million in the three months ended June 30, 2023 compared to a net loss of $1.8 million in the same period in 2022.

In the six months ended June 30, 2023 and 2022 we had net income of $15.3 million and $3.3 million, respectively.

The following table sets forth our Condensed Consolidated Statements of Income and Comprehensive Income data as a percentage of total revenues:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Fixed fee license revenue

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Income before provision for income taxes

Provision for income taxes

Benefit from (provision for) income taxes

Net income (loss)

Our revenue is primarily derived from fixed fee license agreements and per-unit royalty agreements, along with less significant revenue earned from development, services and other revenue.

Royalty and license revenue is composed of per unit royalties earned based on usage or net sales by licensees and fixed payment license fees charged for our IP and software.

A revenue summary for the three months ended March 31, 2023 and 2022 is as follows (in thousands, except for percentages):

Three Months Ended March 31,

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

A revenue summary for the three months ended June 30, 2023 and 2022 is as follows (in thousands, except for percentages):

Three Months Ended June 30,

Fixed fee license revenue

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Royalty and license revenue

Fixed fee license revenue decreased by $0.5 million, or 30%, in the first quarter of 2023 compared to the same period in 2022 primarily due to a $0.5 million decrease in automotive license revenue.

Per-unit royalty revenue increased by $0.3 million, or 6%, in the first quarter of 2023 compared to the same period in 2022, primarily due to an $ 0.7 million increase in royalties from gaming licensees and a $ 0.3 million increase in royalties from other licensees partially offset by a $ 0.6 million decrease in royalties from mobility licensees.

Fixed fee license revenue decreased by $0.1 million, or 5%, in the second quarter of 2023 compared to the same period in 2022 primarily due to a $0.1 million decrease in mobility license revenue.

Per-unit royalty revenue decreased by $0.9 million, or 14%, in the second quarter of 2023 compared to the same period in 2022, primarily due to an $1.3 million decrease in royalties from mobility licensees and a $0.4 million decrease in royalties from other licensees partially offset by a $ 0.5 million increase in royalties from gaming licensees and a $0.2 million increase in royalties from automotive licensees.

We expect royalty and license revenue to continue to be a major component of our future revenue as our technology is included in products and we succeed in our efforts to monetize our IP.

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We also anticipate that our royalty revenue will fluctuate relative to our customers’ unit shipments.

Geographically, revenues generated in Asia, North America and Europe for the three months ended March 31, 2023 represented 84 %, 12 %, and 4 %, respectively, of our total revenue as compared to 75%, 16%, and 9%, respectively, for the three months ended March 31, 2022.

Geographically, revenues generated in Asia, North America and Europe for the three months ended June 30, 2023 represented 83%, 14 %, and 3 %, respectively, of our total revenue as compared to 80%, 13%, and 7%, respectively, for the three months ended June 30, 2022.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

A revenue summary for the six months ended June 30, 2023 and 2022 are as follows (in thousands, except for percentages):

Six Months Ended June 30 ,

Fixed fee license revenue

Per-unit royalty revenue

Total royalty and license revenue

Development, services, and other revenue

Total revenues

Royalty and license revenue

Fixed fee license revenue decreased $0.6 million or 20% in the first six months of 2023 compared to the same period in 2022 primarily attributable to a $0.4 million decrease in automotive license revenue.

Per-unit royalty revenue decreased by $0.6 million, or 5%, in the first six months of 2023 compared to the same period in 2022, primarily caused by a $1.7 million decrease in royalties from mobility licensees partially offset by a $1.2 million increase in royalties from gaming licensees.

Geographically, revenues generated in Asia, North America and Europe for the six months ended June 30, 2023 represented 83%, 13%, and 4%, respectively, of our total revenue as compared to 78%, 14%, and 8%, respectively, for the six months ended June 30, 2022.

Operating Expenses

A summary of operating expenses for the three months ended March 31, 2023, and 2022 is as follows (in thousands, except for percentages):

Three Months Ended March 31,

A summary of operating expenses for the three and six months ended June 30, 2023, and 2022 is as follows (in thousands, except for percentages):

Three Months Ended June 30,

Sales and marketing

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General and administrative

Six Months Ended June 30,

Sales and marketing

Research and development

General and administrative

Sales and Marketing - Our sales and marketing expenses primarily consisted of employee compensation and benefits, including stock-based compensation;

sales commissions;

collateral marketing materials;

market development funds;

and allocated facilities costs.

Sales and marketing expenses decreased $0.4 million, or 80%, in the three months ended March 31, 2023, compared to the same period in 2022 This decrease was primarily attributable to decreases in compensation, benefits and other personnel-related costs due to lower headcount and a decrease in stock-based compensation expense.

sales commissions and allocated facilities costs.

Sales and marketing expenses increased $0.2 million, or 83% in the three months ended June 30, 2023compared to the same periods in 2022 primarily attributable to a $0.2 million increase in compensation, benefits and other personnel-related costs due to an increase in stock-based compensation and variable compensation.

Sales and marketing expenses decreased $ 0.2 million, or 30 % in the six months ended June 30, 2023 compared to the same period in 2022 primarily attributable to a $0.2 million decrease in compensation, benefits and other personnel-related costs due to lower headcount and a decrease in stock-based compensation expense.

Research and Development - Our research and development expenses primarily consisted of employee compensation and benefits, including stock-based compensation;

outside services and consulting fees;

tooling and supplies;

and allocated facilities costs.

Research and development expenses decreased $0.4 million, or 75%, in the three months ended March 31, 2023, compared to the same period in 2022.

This decrease was primarily attributable to decreases in compensation, benefits and other personnel-related costs due to lower headcount and a decrease in stock-based compensation expense.

office expense and allocated facilities costs.

Research and development expenses decreased $0.3 million, or 72%, and $0.6 million, or 74% , in the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022.

This decrease was primarily attributable to decreases in compensation, benefits and other personnel-related costs due to lower headcount.

General and Administrative - Our general and administrative expenses primarily consisted of employee compensation and benefits including stock-based compensation;

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and allocated facilities costs.

General and administrative expenses increased $0.9 million, or 33%, in the three months ended March 31, 2023 as compared to the same period in 2022.

This increase was primarily due to a $1.0 million increase in compensation, benefits driven by increases in stock-based compensation expense and variable compensation.

General and administrative expense increased $0.1 million, or 2%, in the three months ended June 30, 2023 compared to the same period in 2022 primarily attributable to $0.4 million increase in legal expense partially offset by a $0.3 million decrease in compensation, benefits and other personnel related costs.

General and administrative expenses increased $1.0 million, or 16%, in the first half of 2023 as compared to the same period in 2022 primarily due to a $0.6 million increase in compensation, benefits and other personnel related costs and a $0.4 million increase in legal costs.

The increase in compensation, benefits and other personnel related costs in the six months ended June 30, 2023 compared to the same period in 2022 were largely driven by increases in variable compensation costs.

The increase in legal expenses in the three and six months ended June 30, 2023 compared to the same period in 2022 was largely attributable to an increase in legal consulting costs.

We are engaged in, and may be required to engage in further, litigation to protect our IP, which may cause our general and administrative expenses to substantially increase reflecting such litigation costs.

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Interest and Other Income (loss) - Interest and other income consists primarily of interest and dividend income from cash and cash equivalents and marketable debt and equity securities, short-term investments realized and unrealized gains (losses) on our marketable equity securities and derivative instruments and realized gains (losses) on our marketable debt securities.

Three Months Ended March 31,

Three Months Ended June 30,

Interest and other income (loss), net

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Interest and other income (loss), net

Interest and other income (loss) increased $4.2 million during the three months ended March 31, 2023, compared to the same period in 2022, primarily driven by a $3.6 million increase in net gains from investments in marketable equity securities and derivative instruments and a $0.7 million increase in interest income.

Other income (expense), net increased $0.3 million during the three months ended March 31, 2023, compared to the same period in 2022, primarily driven by a $0.1 million increase in net foreign currency translation gains and a $0.1 million decrease in interest expense.

A summary of provision for income taxes and effective tax rates for the three months ended March 31, 2023 and 2022 is as follows (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Interest and other income (loss), net

Other income (expense), net

Interest and other income (loss), net

Interest and other income (loss) increased $12.7 million during the three months ended June 30, 2023 compared to the same period in 2022, primarily driven by a $12.1 million increase in net gains from investments in marketable equity securities and derivative instruments and a $0.6 million increase in interest income.

Interest and other income (loss) increased $16.9 million during the six months ended June 30, 2023, compared to the same period in 2022, primarily driven by a $15.6 million increase in net gains from investments in marketable equity securities and derivative instruments and a $1.3 million increase in interest income.

Other income (expense), net increased $0.1 million during the three months ended June 30, 2023 compared to the same period in 2022 , primarily driven by an increase in net foreign currency translation gains .

Other income (expense), net increased $0.4 million during the six months ended June 30, 2023 compared to the same period in 2022 , primarily driven by a $0.2 million increase in net foreign currency translation gains and a $0.1 million decrease in interest expense.

A summary of provision for income taxes and effective tax rates for the three and six months ended June 30, 2023 and 2022 is as follows (in thousands):

Three Months Ended June 30,

Income before provision for income taxes

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Effective tax rate

Provision for income taxes for the three months ended March 31, 2023, and 2022 resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate.

Six Months Ended June 30,

Income before provision for income taxes

Provision for income taxes

Effective tax rate

Provision for income taxes for the three and six months ended June 30, 2023 resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate.

Benefit from income taxes for the three months ended June 30, 2022 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.

Provision for income taxes for the six months ended June 30, 2022 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.

We maintain a partial valuation allowance against our U.S.

federal deferred tax assets and maintain a full valuation allowance against our U.S.

state and Canadian federal deferred tax assets.

The change in the estimated effective tax rate was mainly driven by higher U.S.

taxable income which was a result of higher U.S.

passive income.

We provided a partial valuation allowance for certain U.S.

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We also maintain liabilities for uncertain tax positions.

As of March 31, 2023, we had unrecognized tax benefits under Accounting Standards Certification (“ASC”) 740 Income Taxes of approximately $7.2 million and applicable interest of $0.1 million.

As of June 30, 2023, we had unrecognized tax benefits under Accounting Standards Certification (“ASC”) 740 Income Taxes of approximately $7.2 million and applicable interest of $0.1 million.

The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $3.2 million.

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Interest income from certificates of deposit are reported as Interest and other income (loss), net on the Condensed Consolidated Statement of Income and Comprehensive Income.

Cash, cash equivalents and investments-current - As of March 31, 2023, our cash, cash equivalents, and investments- current totaled $148.4 million, a decrease of $1.3 million from $149.7 million on December 31, 2022.

A summary of select cash flow information for the three months ended March 31, 2023 and 2022 are as follows (in thousands):

Three Months Ended March 31,

Cash, cash equivalents and investments-current - As of June 30, 2023, our cash, cash equivalents, and investments- current totaled $157.5 million, an increase of $7.8 million from $149.7 million on December 31, 2022.

A summary of select cash flow information for the six months ended June 30, 2023 and 2022 are as follows (in thousands):

Six Months Ended June 30,

Net cash provided by operating activities

Net cash provided by ( used in) investing activities

Net cash used in investing activities

Net cash used in financing activities

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stock-based compensation expense, deferred income taxes and the effect of changes in operating assets and liabilities.

Net cash provided by operating activities was $3.5 million in the three months ended March 31, 2023, a $7.5 million decrease compared to the same period in 2022.

This cash decrease was primarily attributable to a $ 7.2 million decrease from changes in net operating assets and a $3.5 million decrease from changes in non-cash items partially offset by a $ 3.2 million increase in net income.

Net cash provided by operating activities was $8.8 million in the six months ended June 30, 2023, a $9.9 million decrease compared to the same period in 2022.

This cash decrease was primarily attributable to a $15.7 million decrease from changes in non-cash items and $6.3 million decrease from changes in net operating assets partially offset by a $12.0 million increase in net income.

Cash provided by (used in) investing activities - Our investing activities primarily consist of purchases of marketable securities and other investments and proceeds from disposal of marketable securities and other investments;

proceeds from issuance of derivative instruments;

payments made to settle derivative instruments and purchases of computer equipment, furniture and leasehold improvements.

Net cash used in investing activities during the three months ended March 31, 2023 was $19.7 million primarily consisting of $56.3 million in cash used to purchase marketable securities and in the settlement of derivative instruments partially offset by $36.6 million in proceeds from selling marketable securities and derivatives.

Net cash provided by investing activities during the three months ended March 31, 2022 was $4.8 million primarily consisting of $46.7 million in proceeds from selling marketable securities and derivative instruments partially offset by $41.9 million in cash used to purchase marketable securities and in the settlement of derivative instruments.

payments made to settle derivative instruments and purchases of property and equipment.

Net cash used in investing activities during the six months ended June 30, 2023 was $22.7 million primarily consisting of $104.6 million in cash used to purchase marketable securities and in the settlement of derivative instruments partially offset by $81.9 million in proceeds from selling marketable securities and derivatives.

Net cash used in investing activities during the first six months of 2022 was $6.7 million primarily consisting of $80.9 million in cash used to purchase marketable securities and in the settlement of derivative instrument partially offset by $74.2 million in proceeds from selling marketable securities and derivatives.

Cash provided by (used in) financing activities — Our financing activities primarily consist of cash proceeds from issuance of common stock, proceeds from stock option exercises and stock purchases under our employee stock purchase plan and cash paid for repurchases of our common stock.

Net cash used in financing activities during the three months ended March 31, 2023 was $5.2 million primarily consisting of $4.4 million in dividend payments and $0.8 million in shares withheld to cover payroll taxes..

Net cash used in financing activities during the three months ended March 31, 2022 was $4.4 million primarily consisting of cash paid for stock repurchases.

Total cash, cash equivalents, and short-term investments were $148.4 million as of March 31, 2023 of which approximately 30%, or $44.8 million, was held by our foreign subsidiaries and subject to repatriation tax effects.

Net cash used in financing activities during the six months June 30, 2023 was $9.0 million primarily consisting of $5.4 million in dividend payments, $2.9 million stock repurchases and $0.9 million in shares withheld to cover payroll taxes.

Net cash used in financing activities during the six months ended June 30, 2022 was $6.0 million primarily consisting of cash paid for stock repurchases.

Total cash, cash equivalents, and short-term investments were $157.5 million as of June 30, 2023 of which approximately 23%, or $35.9 million, was held by our foreign subsidiaries and subject to repatriation tax effects.

Our intent is to permanently reinvest a majority of our earnings from foreign operations, and current plans do not anticipate that we will need funds generated from foreign operations to fund our domestic operations.

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On February 21, 2023, our Board declared a second quarterly dividend, in the amount of $0.03 per share, which was paid on April 28, 2023, to stockholders of record on April 13, 2023.

On May 10, 2023, we announced that the Board declared a quarterly dividend.

The quarterly dividend, in the amount of $0.03 per share, will be payable, subject to any prior revocation, on July 28, 2023, to shareholders of record on July 13, 2023.

On May 10, 2023, the Board declared a third quarterly dividend in the amount of $ 0.03 per share which was paid on July 28, 2023, to shareholders of record on July 13, 2023.

On August 11, 2023 , the Board declared a quarterly dividend in the amount of $0.03 per share,.which will be payable on October 27 , 2023 to shareholders of record on October 16 , 2023 .

Future dividends will be subject to further review and approval by the Board in accordance with applicable law.

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The December 2022 Stock Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be suspended or discontinued at any time.

We did not repurchase shares during the three months ended March 31, 2023.

As of March 31, 2023, we had $50.0 million available for repurchase under the December 2022 Stock Repurchase Program.

We did not have any other significant non-cancellable purchase commitments as of March 31, 2023.

On August 8, 2023, the Board approved an amendment to extend the expiration date of the December 2022 Stock Repurchase Program that was set to expire on December 29, 2023 to December 29, 2024.

We repurchased 413,696 shares of our common stock for $2.9 million at average purchase price of $6.88 per share during the six months ended June 30, 2023.

As of June 30, 2023, we had $ 47.1 million available for repurchase under the December 2022 Stock Repurchase Program.

We did not have any other significant non-cancellable purchase commitments as of June 30, 2023.

We anticipate that capital expenditures for property and equipment for the remainder of 2023 will be less than $1.0 million.

While the unprecedented public health and governmental efforts to contain the spread of COVID-19 have created significant uncertainty as to general economic and capital market conditions in the past, as of the date of this Quarterly Report on Form 10-Q, we believe we have sufficient capital resources to meet our working capital needs for the next twelve months and beyond.

As of the date of this Quarterly Report on Form 10-Q, we believe we have sufficient capital resources to meet our working capital needs for the next twelve months and beyond.

Critical Accounting Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis