Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Immersion Corporation Fourth Quarter and Fiscal Year 2013 Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, February 20, 2014. I would now like to turn the conference over to Jennifer Jarman of The Blueshirt Group. Please go ahead.

Thank you, operator. Good afternoon, and thank you for joining us today on Immersion’s fourth quarter and fiscal 2013 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, anticipated future products, anticipated market demand or opportunities and other forward-looking topics. These statements are subject to risks, 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 financial measure and a reconciliation of the differences between the non-GAAP financial measure discussed and the most directly comparable GAAP financial measure is available in today’s press release. With that said, I will turn the call over to Chief Executive Officer, Vic Viegas. Vic?

Thanks, Jennifer, and thanks everyone for joining us this afternoon. 2013 was a breakthrough year for Immersion. We successfully executed our Basic Haptics licensing strategy and saw the continued market success of cutting-edge products featuring our TouchSense software. As the market recognized the strength and increasing value of our technology and solutions, we were able to execute at a higher level and achieve record revenues throughout 2013. I am very pleased to report that this trend continued in the last quarter of 2013 as we generated record fourth quarter revenues of $12.1 million, reflecting robust growth of 36% from the year ago period. Aided by these strong Q4 results, our annual revenue for 2013 totaled $47.5 million, which was at the upper end of our guidance range and represents an all-time high for Immersion. Adjusted EBITDA for 2013, excluding the impact of a change in accounting method adopted in the fourth quarter, was $12.8 million also within our guidance range. Paul will provide details regarding the accounting method change in his review of financial results for the quarter and year. In 2013, Immersion also achieved key milestones that have established the foundation for future growth in the immediate and long-term. These milestones include extending existing licenses and securing additional new licenses with key mobile OEMs, including Samsung in Korea, Sharp in Japan, and Xiaomi in China. Building a strong team of Immersion sales and technical support staff in China to quickly serve the needs of customers and capture our growing opportunities in that region witnessing Cadillac, Aston Martin, Opel and Acura bring the very first haptically enhanced automotive touch surfaces to market signaling a bright future in which haptics plays an essential role in bringing safety and usability to the next generation of automotive user interfaces. Extending our license agreement with Sony to cover the use of Immersion haptics in the PlayStation 4 reinforcing the importance and popularity of haptics in gaming and setting the stage for Immersion to power haptic experiences in a new generation of game consoles, participating in the launch of Samsung’s first wearable device the Galaxy Gear smartwatch with Immersion’s TouchSense software and strengthening our senior management team through key hires including the appointment of Jason Patton as General Manger to lead and execute our content strategy, an area where we see great promise. In a few minutes I will discuss our recent business developments and expectations for 2014. But first, I will ask Paul to discuss the details of our fourth quarter and fiscal 2013 financials. Paul?

Thanks Rick. Revenues for the December quarter were $12.1 million, a record for Q4 and up 36% from revenues of $8.9 million in the year ago period. Revenues from royalties and licenses of $11.6 million were up 52% from royalty revenues of $7.6 million in the fourth quarter of 2012. While the revenue mix for line of business is expected to fluctuate on a quarterly basis for the fourth quarter of 2013 a breakdown by line of business was as follows: 61% from mobility, 26% from gaming, 7% from medical and 6% from auto. Note that the increase in the relative percentage of our gaming revenues up from 16% in the September quarter in part reflect amounts we have recognized in connection with the expansion of our license with Sony to cover the new PlayStation 4 gaming console as well as normally strong preholiday sales. Gross profit was $12 million or 99% of revenues compared to gross profit of $8.5 million or 96% of revenues in the fourth quarter of 2012. During the December quarter we adopted a change in accounting method relating to how we account for external legal fees incurred in applying for patents and maintaining our IP portfolio. Whereas our prior method was to capitalize these amounts and then amortize them over a 10-year period once the applicable patent was issued. Under the new method we simply have (expend) all of these amounts in the period incurred. We have adopted this change for several reasons. One, we believe it will make our financial statements more transparent in conveying the total amount we are spending to develop and maintain our patent portfolio and all such amounts whether external legal fees or internal technical resource expenditures will now be treated in the same way and expensed as incurred. In…

Thanks, Paul. As I mentioned in the opening remarks, Immersion successfully executed our Basic Haptics licensing strategy and is performing at a higher rate leading to record revenues in 2013. We are now investing in critical programs to set the company up for continued growth in 2014 and beyond, which include establishing a sales and technical support team in China, investing in our mobile ads and entertainment initiative, expanding our support for the automotive market and driving demand for haptics in gaming and variables. I’d like to take this opportunity to dive into each of these initiatives in greater detail. During 2013, Immersion announced its first direct mobile licensee in China, Xiaomi. As a technology innovator, Xiaomi is a high profile and well regarded OEM in China. Its use of Immersion’s TouchSense software to incorporate numerous customized haptic features into its flagship Mi3 product was highlighted by Xiaomi’s CEO in his keynote address at the products launch event. Our success at Xiaomi points to the value that Immersion can bring to China OEMs. We are looking to rapidly incorporate high impact technologies to differentiate their user experiences. During the fourth quarter, we continue to deepen our relationships with OEMs in the region, including being invited as a technology innovator at the China Mobile industry event in Guangzhou in December. As a result of the level of activity we have experienced throughout 2013, Immersion has established a regional headquarters in Shanghai and we will continue to build our technical support teams to meet the growing needs of Chinese customers. As the value of haptics in mobile devices has expanded beyond reassuring touchscreen confirmation, we have been investing in novel ways that our touch feedback technologies can increase realism and open the door to richer ways of communicating with various forms of…

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) And our first question comes from the line of Jeff Schreiner with Feltl and Company. Please go ahead.

Yes, thank you gentlemen for taking the time to answer my questions. I have two here just some housekeeping items that I wanted to go over. One is, is Immersion going to provide a historical reconciliation for the adjustments that were made within G&A and amortization expense that happened probably on a quarterly basis and have been changed to be in accordance with GAAP? Is there going to be some type of reconciliation that we can to update our models?

Yes. When we file the 10-K report in the next week or so, we will include a set of reconciling tables that basically show you the roadmap of the adjustments from the old – the new method.

Okay, nothing that could be released today in terms of getting that into the analysts’ hands and investors’ hands?

No. We don’t have anything today although I will be happy to answer any questions you may have at this time.

Okay. Well, I will pass on that and take questions for later. But I’ve also wanted to just understand what was going to be the add-backs to non-GAAP net income that you’re now reporting from GAAP. I didn’t hear anything talked about in terms of what the offsets were going to be?

We’re going to be adding back in just the stock-based compensation.

Okay. Thanks for giving those the other way there. I guess the first thing I’d like to understand is (fair to call) why did mobile decline sequentially, that is not seasonal by any means, it’s typically an up quarter sequentially. What – can you tell us about mobile and what was going on there?

Mobile is very healthy and we’re excited with the performance and the outlook. If you look at it over the prior year which I think is the right comparison because you do have some seasonality, you’ll see healthy growth over the prior year’s quarters. As you mentioned sequentially it was down a little bit and I guess I would say that there are certain quarters where there are catch-up payments, contract timing and other types of seasonality that impact the revenue. But we have in the past also had other sequential revenue declines in mobility again just because it can’t be lumpy. So I still think it’s a very robust healthy growing business and our 2014 outlook is very positive.

Okay. And then can you just talk about the recent acquisition by Lenovo, a Immersion licensee Motorola. First, is the license is transferable and is there any risk to revenues from this transaction in calendar year 2014?

I don’t believe that, that transaction is actually occurred yet. So that’s still subject to the normal closing process. We see that as a net positive for Immersion. We don’t see it as a significant risk with our Motorola relationship. We think that Motorola has a bright future and if anything Lenovo probably helps support their growth effort. So we see this as a net positive. Obviously with the relationship directly with Motorola we’d like to think that we can continue to work with Lenovo and eventually sign into a license agreement for Lenovo-branded products. So to be clear the Motorola agreement I don’t believe is transferable and really is covering the Motorola branded products.

Okay.

Jeff, it covers Motorola branded products and it’s been IP license so as we go forward talking currently with the Motorola group and in the future to the extent the acquisition goes through with Lenovo will be focused on opportunities to expand the license scope and to shift the attention from IP to higher quality TouchSense solutions as well.

And then last one from me. I was just wondering within mobile – within gaming revenues what’s the reasonable assumption we’ve seen such volatility in terms of the contribution we just saw last quarter went from 16 to 26 in one quarter. What’s the range in terms of level of sales that we think gaming could be in 2014?

Well, I guess I would say that the whole gaming industry I think is excited by the launch of these two successful platforms. And so we’ve benefited as well as the number of others. There is also this growing mobile gaming opportunity that we believe could also be substantial. So net-net I believe many in the industry are benefiting from some of those successes that they’re having. In terms of quantifying our gaming business I don’t think we’re able to break out the specific vertical from the guidance but we obviously expect gaming to be growing in a bigger part of our 2014 revenue as a result of these new platforms launching and the new initiatives we have underway.

Alright. Thank you gentlemen.

Thanks, Jeff.

Thank you. And our next question comes from the line of Charlie Anderson with Sidoti and Company. Please go ahead.

Yes, thanks, good afternoon. Thanks for taking my questions. I want to make sure I heard this right Vic. Are you talking about on content revenue, it’s possible but you’re probably not included in guidance to any degree in terms of some of the probabilities?

That’s correct. Yes, I think we’ve made enough progress more recently that we believe we will generate some revenue in 2014. We have not included any of the content revenue opportunities in the guidance.

And then frame for us what’s happening in content that’s going to drive revenue, just give us some examples of some things and how that might be structured?

Well as I said there is a series of kind of metrics that we measure our own internal progress were moving quickly through a number of them. I would say that one of the next key events would be to conduct pilot studies with a number of different ecosystem partners, using that data then we believe if we wanted to predict that data we believe it will show meaningful increase in an engagement as we’ve done in our own test. So if we can prove that in the marketplace with our partners then we believe those relationships quickly convert over to revenue generating and they will be actively promoting this capability to their customers and that’s what gives us some confidence that the content business can generate revenue in 2014. Specifically the kinds of revenue generating relationships that we’re looking at would be the typical ad business which is measured in cost per thousand impressions and we’d like to participate at that level. There are also opportunities maybe to participate per campaign, revenue sharing or time-based. So these are the kinds of revenue generating relationships that could trigger meaningful revenue for us.

Great. And then question for Paul on the OpEx guidance I think you’re going to be up maybe $6 million or so in absolute dollars over 2013. Could you help me what sort of the puts and takes between legal expense, the change in accounting and then the increase in headcount that maybe driving some of that?

Yes, I think as I mentioned in the prepared remarks legal expense associated with the litigation was around $5 million last year. And our trial with HTC is scheduled for March of 2015. So assuming we don’t have all that, we’ll see legal expenses continuing for HTC throughout the year probably ramping up a little bit towards the end if we – as we get nearer to the trial date. Overall though, I would expect litigation expense to be down relatively substantially from 2013, maybe a couple of million lower. And then going forward looking at the change of accounting policy you’ll see rather than the run rate of around 400K or so of amortization you’ll see a very minimal amount of amortization, but you’ll see a full expenditure on patents and outside legal fees to either maintain or file the initial applications for patents to go into G&A expense. And that generally – you can look at our prior cash flow investments in capitalizing IP, but call it around $1 million a quarter. And then beyond that we’re – in the last year our headcount went from 101 employees at the beginning of the year to 112 at the end of the year. We’re going to continue to invest in some of these real opportunities that we’re seeing. We’re going to try to do that very smartly so that we’re tying the investment to revenue that is within site as we make the investments. But we’ll continue to grow I would say at the same pace or even a little bit more as we ramp up on content throughout 2013. So those are the main drivers I would say in the OpEx picture for the coming year.

Perfect. Thank you so much for that color. And then I wonder if you now that you’re moving to have the greater percentage of revenue coming from fixed deals. If you’re able to breakout first at all, what percent of revenue came from fixed in 2013 versus what’s your expectation is in 2014 that would be helpful?

It’s very difficult actually to do that because in some cases we have the fixed elements in the same relationship as in which we’re generating variable revenues as well. And so we haven’t done that and we can certainly try to give you as much color as we go forward as possible but right now we don’t have that kind of a breakout.

If I look at close – sorry go ahead Vic.

I was just going to add that our fixed portion of our mobile revenues is exceeding 50%. So, it’s a bigger percentage of our total mobile revenue.

Got it. And then a way to ask the question on gaming in the quarter, was any of the, I mean, Sony didn’t start shipping until I guess in Q4 which makes me think more like Q1 royalty as opposed to a Q4 impact. So help me understand sort of what happened in Q4 with that relationship that had an impact on revenue and anything sort of one-time upfront license type payments versus what was just happening in the market to drive it if we stripped out the new Sony relationship?

Sure. I think we have characterized in the past that the relationship with Sony for the PS4 is coming in really two fashions. One is a license payment that allowed them this option to extend the license and then the other is a per unit royalty. So, clearly the per unit royalties are typically reported a quarter in arrears. And as you said, most of their shipments occurred in Q4. So, we will be picking up the variable portion in Q1 of 2014, but there was some revenue generated in 2013 as a result of this option exercise. And I might add that that revenue continues for quite sometime. So, this is not front-end loaded just in the fourth quarter revenue, it’s something that I think you will see on a recurring basis.

Got it. So both the fixed and the recurrent element there and we only saw the fixed in Q4?

Exactly.

Got it. And then did you have 10% customers that you can talk about in Q4?

We also have one or two I think. And I imagine that during the quarter, we probably I think we’ll disclose in the K, the number of customers, but I would imagine that in the fourth quarter we probably have one or two as we usually do.

We did have one, Charlie. And the odd thing about the way you report your 10-K result is you don’t actually break out that and report that quarter’s 10% customers you go back to the whole year. And so what you will see when we file the 10-K is our disclosure of our 10% customer for the year.

Fair enough. Thanks so much.

Thanks, Charlie.

Thank you. And our next question comes from the line of Richard Magnuson with B. Riley & Company. Please go ahead. Richard Magnuson - B. Riley & Company: Hello, thank you for taking my question. Yes, regarding the recent announcement with the Tokai Rika, you mentioned some multi-year licensing agreements and of course you didn’t give the amount, is there any way you can give us maybe an idea of how many years and how soon we can see some of that revenue?

Well, Tokai Rika is a world leader in automotive component supply. And the typical auto relationship is multi-year, I would say, five years and in some cases even longer than that, because of the time it takes to design and launch a vehicle. So, whereas in the mobile space our agreements tend to be shorter in duration may be two to three years so, Tokai Rika definitely five years or longer and some of their efforts will generate revenue here in the near-term, specific quarters of product launches are not able to really disclose, but we also mentioned today continental and continental already has the design win in the 2015 Mercedes so, the timing of license agreement doesn’t necessary dictate the beginning of development relationship that maybe documenting and existing relationship with the design efforts have occurred for some period of time. So, we expect Tokai Rika to be a very meaningful part of our business as we go forward. Richard Magnuson - B. Riley & Company: Okay. And just to be clear near-term that would mean we like we see some revenue in 2014?

Again, I don’t really know the design schedule and the product launches. So, I couldn’t tell you if it’s going to occur in 2014. Richard Magnuson - B. Riley & Company: Okay, fair. Thank you very much.

Thanks, Richard.

(Operator Instructions) And our next question comes from the line of Paolo Gorgo with Nortia Research. Please go ahead.

Thanks for taking the questions and congratulations on the quarter.

Thank you, Paolo.

Thank you. I just noticed a report from Frost & Sullivan talking about the impact of haptics, can you comment on that, are you aware of this report?

I am aware they just released it. I can’t say that I have actually read it however.

Well, they are talking about haptics implementations in ATM kiosks and industrial monitors, which is something you haven’t touched in this conference call, is it quite to be kind of a longer term opportunity for the company or do you believe that this would be marginal in terms of revenues?

Well, I would probably characterize it as marginal at least in the near-term. We are quite familiar with Frost & Sullivan and have worked with them in the past numerous times as they educate themselves around the haptic industry. These particular verticals and these opportunities, we have historically looked to our partners such as Atmel, Cypress, Microchip and others who have had success in getting design wins in these other verticals. And so we see longer term the opportunity for home, office, appliances and other types of devices to incorporate haptic touch-screen. So we are quite excited by that opportunity, but I believe that, that will take some time. And at this stage, I’d say it would be marginal impact on our revenue.

Okay, thanks. And just a quick comment, if you can, there is a rumor that Samsung – the next Samsung watch launch might not have Android, but Tizen as the OS, would this change something as to haptics or your relationship with Samsung related to this vertical?

We have worked with Samsung on both the Tizen OS and the Android OS and there could be certain reasons why they would launch one product with one operating system and another with another, but from our standpoint, each represents an opportunity.

Okay, great. And just a quick comment on the Mercedes and Continental win, can we really see like I kind of said in the past that Mercedes is really endorsing haptics and we might expect it included in most of their products?

I don’t know if I make the statement that most of their products, but clearly they appreciate the value that haptics brings to the interface, the user interface as well as the safety aspects of incorporating haptics in the touch interaction. So Continental obviously has published some very interesting research, which is consistent with the research that we have conducted and the other technical literature that’s out in the marketplace. So, yes, I think in general the industry understands the value of haptics. Continental has done a really good job of promoting it. And we hope that they are successful with Mercedes and other OEMs. Specific trends and adoption rates within Mercedes is something we are just – we don’t know ourselves, we wouldn’t be able to predict that.

Yes. We understand it involves the C-class. And typically at this stage, the types of packages that include the touch-screens are optional navigation packages, how Mercedes decides to offer those to its customers is a little hard to say. It certainly seems like those are becoming more commonly selected options, if not universally chosen in the luxury automobile class as the time has passed.

Okay, great. And just the last comment if you had to hit the high end of guidance basically the company would have doubled revenues in a couple of years, that’s basically correct, I believe?

Yes. I believe almost. Couple of years ago, we were at $32 million. So if we hit the high end, it would be $62 million.

Yes, thanks a lot.

Thank you, Paolo. Thanks very much.

Thank you. And we have a follow-up question from Jeff Schreiner with Feltl and Company. Please go ahead.

Yes, thanks gentlemen. I am going to try to come at this a different way, I think you might have answered it, Vic, but I was wondering now given that you have these fixed and fixed plus agreements and some are mixing with variable and obviously we are kind of in the dark about what is what, I was just wondering if you might be able to provide to us a base level of revenues per quarter right now that Immersion has (you are able find) through fixed or fixed plus type agreements?

It’s hard to really give you that sense because in some cases agreements come up for renewal, so you would have to assume that these agreements would continue to renew that’s our expectation. But to give you a percentage of revenue which is fixed, it would only be for a period of time and there would be some variations to those. So I am not sure I can give you a percentage of what’s fixed on a given quarter.

One thing, I think you maybe able to gain a little bit of insight from is to take a look at our deferred revenue balances short-term and long-term and look at the – I think now we have had some movement in both of those accounts that’s been relatively substantial over a one year period and you can kind of see how those will go up. Certainly the short-term deferred revenue is all fixed revenue that we are expecting or its revenue that we are expecting to recognize within 12 months that we have now. So that would fall into your category. And I think you could look back a couple of quarters on that as well.

Okay that’s helpful. Thank you, Paul. You talked about being a couple of million less in litigation costs for ’14, could you just give us quickly on a housekeeping basis just what the litigation cost was for the quarter?

It was $650,000 I believe I had that in my prepared remarks, hold on one second. I will give it to you exactly in just a minute. It was $627,000 in the fourth quarter.

Okay and you think its going go down this year a couple of million dollars?

Yes, we had about $5 million in 2013. So that was the ballpark I gave you for 2014, down a couple million say for 2014. It’s very difficult as I am sure you are aware to be precise with litigation projections because we don’t control how the other party approaches the litigation. We do expect that they will be lower this year.

I will say Jeff we will spend what we need to win.

Okay.

Yes, that’s absolutely correct.

And then just coming back to this OpEx, Paul maybe I missed – misheard or didn’t hear the full context of your statement, but you talked about it being $10 million to $11 million a quarter, that would basically suggest that OpEx is flat versus what you reported for ’13, is it maybe just $10 million to $11 million in the first quarter and then move up from there?

I am going to look at the exact question, that’s excluding stock comp, so I am not sure it depends on which whether you are looking at non-GAAP or GAAP OpEx for 2013, but…?

On a GAAP basis what would it be?

Well, you would add in the stock comp.

Right.

So another $5 million above that for the year.

Stock comp is going to be $5 million for you guys this year after – I guess that’s kind of in line, so stock comp is going to $5 million this year?

Yes, that’s I am using this year as a benchmark for going forward, so yes.

Okay, so just to be clear, you take the $10 million to $11 million and you add $10 million to $11 million is non-GAAP is what you are saying?

That’s correct.

Okay. Thank you. Thank you for that. And then I guess that’s it for me gentlemen. I appreciate you taking the time answer to my follow-up question.

Great, thank you Jeff.

Thank you and our next question comes from the line of Richard Marshall with SunWest Capital. Please go ahead.

Hi Vic and Paul. How are you?

Hi Richard.

Hi Richard.

Just on your guidance, Vic how much of that is growth from existing customers and how much is from new customers?

There is – let’s see, in the guidance maybe one way to answer this is kind of looking at the requirements to hit the high end we would need to be successful in some of our renewals. So some of the existing customers those agreements will come up for renewal and it also includes some additional new OEMs that we anticipate bringing on. And then there is other areas like growth in wearables, growth in gaming and potentially transitioning some of our current customers from basic haptics up to our full TouchSense. So those are kind of the sales initiatives. And that would give you a mixture of existing customers and growth within those relationships as well as bringing new customers on board.

Okay, but not much from those major initiatives that you sort of mentioned that might be up for in 2015, like the content?

Correct, the 2014 guidance includes nothing from content.

And Paul, you mentioned that towards the end of your remarks, you mentioned when you were talking about the buyback something about I remember $86 million, is that – and you said January 2014, is that your cash position or I misunderstood that?

Yes, I was giving our cash position at the end of January 2014 and that balance is of cash and cash equivalents with $86.6 million and that takes into account that we did spend $4.4 million during the month of January repurchasing shares.

Okay, well so that – so you are aggressive buying shares in January and your cash was still up about $60 million from December?

That’s exactly right.

That’s very encouraging, great, I thought I heard that, but I wasn’t quite sure. Anyway I will leave it that for now, but I will be seeing you guys in Barcelona.

Great, looking forward to Richard.

Thanks Richard.

There are no further questions at this time. I would like to turn the call back over to management for closing remarks.

Well, thank you everyone for being on the call with us today. And we do look forward to updating you again on our next quarterly call. Thank you and good day.