What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-13 compared with 2023-08-11 · 63 added, 64 removed, 165 unchanged (43% of the section changed)

36 unchanged sentences

As other companies follow our leadership in recognizing how important tactile feedback can be in people’s digital lives, we expect the opportunity to license our IP and technologies will continue to expand.

We have adopted a business model under which we offer licenses to our patented technology to our customers and offer our customers enabling software, related tools and technical assistance designed to integrate our patented technology into our customers’ products or enhance the functionality of our patented technology.

We have adopted a business model under which we offer licenses to our patented technology to our customers to integrate our patented technology into our customers’ products or enhance the functionality of our patented technology.

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 June 30, 2023.

We and our wholly-owned subsidiaries hold more than 1,000 issu ed or pending patents worldwide as of September 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.

3 unchanged sentences

Results of Operations

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.

Total revenues for the three months ended September 30, 2023 was $ 9.5 million, a decrease of $ 4.5 million, or 32 %, compared to the same period in 2022 .

Total revenues for the nine months ended September 30, 2023 was $ 23.5 million, a decrease of $ 5.8 million, or 20 %, compared to the same period in 2022 .

Total operating expenses were $ 3.0 million in each of the three months ended September 30, 2023 and 2022 .

Total operating expenses were $ 10.6 million in the nine months ended September 30, 2023 flat compared to $ 10.7 million total operating expense in the same period in 2022 .

Net income was $ 2.7 million in the three months ended September 30, 2023 compared to a net income of $ 7.7 million in the same period in 2022 .

Net income was $ 18.0 million and $ 11.0 million i n the nine months ended September 30, 2023 and 2022 , 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Fixed fee license revenue

11 unchanged sentences

Income before 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.

Provision for income taxes

Our revenue is primarily derived from fixed fee license agreements and per-unit royalty agreements.

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.

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,

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

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

Three Months Ended September 30,

Fixed fee license revenue

4 unchanged sentences

Royalty and license revenue

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.

Fixed fee license revenue decreased by $ 6.5 million, or 84 %, in the third quarter of 2023 compared to the same period in 2022 primarily due to a $ 6.5 million decrease in mobility license revenue.

Per-unit royalty revenue increased by $ 2.0 million, or 32 %, in the third quarter of 2023 compared to the same period in 2022 , primarily due to an $ 1.9 million in crease in royalties from automotive licensees and a $ 0.8 million increase in royalties from gaming licensees partially offset by a $ 0.5 million decrease in royalties from mobility 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.

1 unchanged sentence

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 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 ,

Geographically, revenues generated in Asia, North America and Europe for the three months ended September 30, 2023 represented 68 %, 8 %, and 24 %, respectively, of our total revenue as compared to 43 %, 54 %, and 3 %, respectively, for the three months ended September 30, 2022 .

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

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

Nine Months Ended September 30 ,

Fixed fee license revenue

4 unchanged sentences

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.

Fixed fee license revenue decreased $ 7.1 million, or 66 %, in the first nine months of 2023 compared to the same period in 2022 primarily attributable to a $ 6.4 million decrease in mobility license revenue and a $ 0.5 million decrease in automotive license revenue.

Per-unit royalty revenue increased by $ 1.4 million, or 7 %, in the first nine months of 2023 compared to the same period in 2022 , primarily caused by a $ 2.0 million increase in royalties from gaming licensees and a $ 2.0 million increase in royalties from automotive licensees partially offset by a $ 2.3 million decrease in royalties from mobility licensees and $ 0.4 million decrease from other licensees.

Geographically, revenues generated in Asia, North America and Europe for the nine months ended September 30, 2023 represented 77 %, 12 %, and 11 %, respectively, of our total revenue as compared to 61 %, 33 %, and 6 %, respectively, for the nine months ended September 30, 2022 .

Operating Expenses

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,

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

Three Months Ended September 30,

Sales and marketing

1 unchanged sentence

General and administrative

Six Months Ended June 30,

Nine Months Ended September 30,

Sales and marketing

2 unchanged sentences

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

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.

marketing costs and allocated facilities costs.

Sales and marketing expenses increased $ 0.1 million, or 30 %, in the three months ended September 30, 2023 compared to the same period in 2022 primarily attributable to a $ 0.1 million increase in compensation, benefits and other personnel-related costs due to an increase in stock-based compensation.

Sales and marketing expenses decreased $ 0.1 million, or 13 %, in the nine months ended September 30, 2023 compared to the same period in 2022 primarily attributable to a decrease in compensation, benefits and other personnel-related costs due to lower headcount partially offset by an increase in stock-based compensation expense.

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

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.

Research and development expenses decreased $ 0.2 million, or 88 %, and $ 0.9 million, or 77 % , in the three and nine months ended September 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.

4 unchanged sentences

and allocated facilities costs.

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.

General and administrative expense was flat in the three months ended September 30, 2023 compared to the same period in 2022 .

General and administrative expenses increased $ 1.0 million, or 11 %, in the first nine months of 2023 as compared to the same period in 2022 primarily due to a $ 0.7 million increase in compensation, benefits and other personnel related costs and a $ 0.3 million increase in legal costs.

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

The increase in legal expenses in the three and nine months ended September 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.

1 unchanged sentence

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 June 30,

Three Months Ended September 30,

Interest and other income (loss), net

1 unchanged sentence

Interest and other income (loss), net

Six Months Ended June 30,

Nine Months Ended September 30,

Interest and other income (loss), net

1 unchanged sentence

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,

Interest and other income (loss) decreased $ 0.2 million during the three months ended September 30, 2023 compared to the same period in 2022 , primarily driven by a $ 1.1 million decrease in net gains from investments in marketable equity securities and derivative instruments partially offset by a $ 0.9 million increase in interest income.

Interest and other income (loss) increase $ 16.7 million during the nine months ended September 30, 2023 , compared to the same period in 2022 , primarily driven by a $ 14.6 million increase in net gains from investments in marketable equity securities and derivative instruments and a 2.2 million increase in interest income.

Other income (expense), net increased $ 0.4 million during the nine months ended September 30, 2023 compared to the same period in 2022 , primarily driven by a $ 0.4 million decrease in net foreign currency translation losses.

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

Three Months Ended September 30,

Income before provision for income taxes

1 unchanged sentence

Effective tax rate

Six Months Ended June 30,

Nine Months Ended September 30,

Income before provision for income taxes

1 unchanged sentence

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.

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

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

Provision for income taxes for the nine months ended September 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.

9 unchanged sentences

We also maintain liabilities for uncertain tax positions.

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.

As of September 30, 2023 , we had unrecognized tax benefits under Accounting Standards Certification (“ASC”) 740 Income Taxes of approximately $ 7.3 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 $ 3.5 million.

10 unchanged sentences

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 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,

Cash, cash equivalents and investments-current - As of September 30, 2023 , our cash, cash equivalents, and investments- current totaled $ 150.7 million, an increase of $ 1.0 million from $ 149.7 million on December 31, 2022.

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

Nine Months Ended September 30,

Net cash provided by operating activities

1 unchanged sentence

Net cash used in financing activities

Cash provided by operating activities - Our operating activities primarily consists of net income adjusted for certain non-cash items including depreciation and amortization;

Cash provided by (used in) operating activities - Our operating activities primarily consists of net income adjusted for certain non-cash items including depreciation and amortization;

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

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.

Net cash provided by operating activities was $ 12.8 million in the nine months ended September 30, 2023 , a $ 19.5 million decrease compared to the same period in 2022 .

This cash decrease was primarily attributable to a $ 14.7 million decrease from changes in non-cash items and $ 11.8 million decrease from changes in net operating assets partially offset by a $ 7.0 million increase in net income.

2 unchanged sentences

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.

Net cash used in investing activities during the nine months ended September 30, 2023 was $ 19.4 million primarily consisting of $ 167.9 million in cash used to purchase marketable securities and in the settlement of derivative instruments partially offset by $ 148.5 million in proceeds from selling marketable securities and derivatives.

Net cash used in investing activities during the first nine months of 2022 was $ 35.6 million primarily consisting of $ 141.9 million in cash used to purchase marketable securities and in the settlement of derivative instrument partially offset by $ 106.4 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 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.

Net cash used in financing activities during the nine months September 30, 2023 was $ 13.5 million primarily consisting of $ 6.4 million in dividend payments, $ 6.2 million stock repurchases and $ 1.1 million in shares withheld to cover payroll taxes.

Net cash used in financing activities during the nine months ended September 30, 2022 was $ 11.4 million primarily consisting of cash paid for stock repurchases.

Total cash, cash equivalents, and short-term investments were $ 150.7 million as of September 30, 2023 of which approximately 19 %, or $ 33.9 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.

3 unchanged sentences

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 .

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

On November 13 , 2023 , our Board declared a quarterly dividend in the amount of $ 0.045 per share , will be payable, subject to any prior revocation, on January 25, 2024 to shareholders of record on January 14, 2024.

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

The Board reserves the right to adjust or withdraw the quarterly dividend in future periods as it reviews the Company’s capital allocation strategy from time-to-time.

The Board reserves the right to adjust or withdraw the quarterly dividend in future periods as it reviews our capital allocation strategy from time-to-time.

We may continue to invest in, protect, and defend our extensive IP portfolio, which can result in the use of cash in the event of litigation.

6 unchanged sentences

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 repurchased 898,757 shares of our common stock for $ 6.2 million at an average purchase price of $ 6.8602 per share during the nine months ended September 30, 2023 .

As of September 30, 2023 , we had $ 43.8 million available for repurchase under the December 2022 Stock Repurchase Program.

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

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

14 unchanged sentences

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