Ceragon Networks Ltd.

Good day, and welcome to the Emerson Q1 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Chief Financial Officer, Aaron Ackerman. Please go ahead, sir.

Good afternoon, and thank you for joining us today on Emerson's first quarter 2021 conference call. This call is also being broadcast live over the web and can be accessed from the investor relations section of our website at ir.immersion.com. With me on today's call is Jared Smith, our interim CEO. During this call, we may make forward-looking statements which may include any expectations, projections, or other characterizations of future events or circumstances and include statements regarding the impact of COVID-19 on our business and the business of our customers and suppliers, as well as on the economy in general, and also include projected financial results or operating metrics, business strategies, litigation or absence of litigation, anticipated future products, future expense reduction, anticipated tax expenses, anticipated market demands or opportunities, our operating model, and other forward-looking topics. These statements are subject to risks, uncertainties, and assumptions. especially in light of the ongoing adverse effects of the COVID-19 global pandemic. Many of these risks and uncertainties are beyond the control of Immersion. For a more detailed discussion of these factors and other factors that could cause actual results to vary materially, interested parties should review the risk factors listed in the press release we issued today after market closed, Immersion's annual report on Form 10-K for 2020 and its most recent quarterly report on Form 10-Q, which are on file with the U.S. Securities and Exchange Commission. The forward-looking statements mentioned on this call reflect immersion's beliefs and predictions as of today. Except as required by law, immersion does not intend to update these forward-looking statements as a result of the financial, business, or any other developments occurring after the date of this release or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. except as required by law. Additionally, please note that during this call, we may have discussed 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'll turn the call over to Jared.

Thanks, Aaron, and thanks, everyone, for joining us on the call today or listening via webcast. As I reflect in the last 12 months, since Q1 of 2020, I am proud of our team's progress in transforming our business to the profitability we reported today. In Q1 of last year, we were at the beginning of what would become a global pandemic with deep worldwide economic impact in the following quarters and in our core market. Despite the challenges in 2020, we finished Q1 2021 with 14% year-over-year revenue growth across our core market. Moreover, we reduced operating expenses by over 50%, yielding non-GAAP net income of $2.8 million compared to a non-GAAP net loss of $2.6 million in the same quarter last year. Additionally, we generated positive operating cash flow and closed the quarter with over $3 of cash per share. Many of our customers in our core markets experienced severe challenges in 2020, yet we see continued investment in haptics as a differentiator, a powerful user experience, and a safety feature. Let's review developments in our core markets. In automotive, we see continued market adoption of our technology to improve usability and safety. We are well positioned for strong double-digit percent revenue growth in fiscal 2021. Our growth outlook is based on three factors. First, as highlighted in previous calls, we have seen a gradual market recovery from COVID, and based on recent forecast data from IHS, we believe light vehicle shipments will recover to pre-COVID levels by 2022. We also expect stable growth of vehicle shipments in the years ahead. Second, we see growing adoption relevance of haptics in new vehicle designs. We're excited to share that the Cadillac Celestique and the BMW iX will feature Haptic interfaces supplied by our existing Tier 1 licensees. BMW highlighted Haptics as a key technology feature of its new ChiTech design, introduced as part of its Vision iNEXT initiative. BMW's design puts controls in the background and only makes them visible when they are needed. Haptics enables HMI designers to enhance the usability and functionality of controls elegantly and discreetly integrated into touch-based surfaces. Our technology unlocks new user experience and possibilities. Third, we continue to receive positive customer feedback on our automotive touchscreen hardware unit used for prototyping and our technologies in our product development kit. We are engaged with a number of OEMs and Tier 1s who are evaluating our technology and haptics for new vehicles and interfaces. This provides us confidence that we will continue to be successful signing up additional Tier 1 licensees and winning adoption in new OEM vehicles. In gaming, the PlayStation 5 continues to be in high demand. In its latest financial results published last week, Sony reported that it had shipped 7.8 million PlayStation 5 consoles since launch, which is slightly ahead of where the PlayStation 4 was during the same period after launch. Despite supply chain constraints, Sony noted that it currently expects the PlayStation 5 to ship more units than the PlayStation 4 sold in the year after launch. Based on high consumer demand for and positive reviews of the PlayStation 5 and its DualSense controller, we expect it to be very successful throughout its lifecycle and catalyze increased demand for haptics more generally in gaming and VR. Similar to automotive, we expect double-digit percent revenue growth in fiscal 2021, driven primarily by a full year of Sony PlayStation 5 DualSense controller shipments. We continue to make progress in our pipeline, and I look forward to sharing more with you on the expanding role of haptic and our technology in gaming and VR products. In mobile, we continue to grow revenue from the China market through our channel licensing program. This program enables our channel partners to offer licensed haptic components to smartphone OEMs. We recently expanded the scope of our agreement with a key partner who is engaged with additional China mobile OEMs. We continue to see positive momentum in the China mobile market, and the ecosystem is working to enable a high-quality, consistent gaming experience across Android devices, which has been one of the key barriers to meaningful adoption of high-quality haptic systems. A new working group in IEEE with participation from leading game and mobile companies in China is developing a standard for advanced haptic experiences on mobile devices. We believe this initiative will create new opportunities for ecosystem growth and corresponding revenue growth in 2022 and beyond. As we touched on last quarter, we continue to expect the mobile market to recover this year to pre-COVID level. Samsung, one of our largest licensees, recently commented that its mobile communications business had quarter-over-quarter sales growth of its smartphones underpinned by the launch of the Galaxy S21. It expects sales of new Galaxy A products to ramp up in the second quarter. We continue to see growing relevance of plastics to smartphone functionality, and this is reflected in continued customer renewal. We're pleased to share that Panasonic Mobile Communications recently renewed its licensing agreement and will continue to utilize emerging technology in its smartphones. Our mobile business is on track to meet or exceed our 2020 mobile revenue. and we are particularly pleased with the growth of our channel licensing revenue stemming from the China market. As part of our long-term strategy to support continued adoption of advanced haptics in our target market segments, we are leading development of industry standards. Last Friday, our initiative Standardized Haptics in MPEG achieved a target milestone. MPEG approved a call for proposals for coding of haptic effects. The proposal was developed by a working group comprised of representatives from Apple, InterDigital, Immersion, and others. Andrew's development will support future growth through expanded licensing opportunities of our patents, as well as implementation in our software products. In addition to standards, we continue to drive new research and innovation to support long-term growth. Last quarter, we had numerous patents issued for new inventions relevant to gaming, mobile, automotive, and use of haptics in content distribution and playback standards. I'll now turn the call over to Aaron for a review of our Q1 results.