Aug 5, 2016
Executives
Jennifer Jarman – Director-The Blueshirt Group Vic Viegas – President, Chief Executive Officer and Interim Chief Financial Officer
Analysts
Charlie Anderson – Dougherty and Company Josh Nichols – B. Riley Mark Argento – Lake Street Capital Markets James Medvedeff – Cowen and Company Matthew Galinko – Sidoti Lucas Schwalbe – Craig-Hallum Capital Group
Operator
Good day and welcome to the Immersion Corporation Second Quarter 2016 Earnings Conference Call. Today’s conference is being recorded.
At this time, I would like to turn the conference over to Jennifer Jarman. Please go ahead, ma’am.
Jennifer Jarman
Thank you, Michelle. Good afternoon, and thank you for joining us today on Immersion’s second quarter 2016 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 is Vic Viegas, President and CEO and Interim CFO.
During this call, we may make forward-looking statements, which may include projected financial results or operating metrics, business strategies, litigation, 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 Form 10-Q filed with the SEC, as well as the factors identified in the press release we issued today after market closed.
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?
Vic Viegas
Thanks, Jennifer, and thanks everyone for joining us this afternoon. Second quarter results were mixed as we continue to see positive momentum in our business and our IP enforcement actions tampered by certain OEMs or are either delayed in their reporting obligations or are taking more time to acknowledge the applicability of our intellectual property.
We’re in a good position with new products entering the market, new customer wins, validation of our solutions that will broaden our footprint in the advertising ecosystem and significant proof points indicating the strength of our intellectual property portfolio. We continue to execute on our long-term plan to bring haptics to the market and monetize to our solutions in IP offerings.
I’ll provide a more detailed update on our business in a few minutes, but first I’ll review our second quarter 2016 results. Revenue for the June quarter were $7.9 million, down 52% from revenues up $16.2% million in the year ago period, reflecting the absence of revenue from Samsung and other OEMs, who are either delayed in their reporting obligations or taking more time to acknowledge the applicability of our IP.
Revenues from royalties and licenses of $7.6 million were down 52% from royalty and license revenues of $15.9 million in the second quarter of 2015. Of these amounts in the second quarter of 2016 variable royalties based on shipping volumes and per unit prices totaled $5.6 million and fixed payment license fees totaled $2.0 million.
This compares to variable royalties of $6.3 million and fixed license fees of $9.6 million in the prior year period. While revenue mix per line of business is expected to fluctuate on a quarterly basis due to seasonality patterns for the second quarter of 2016 a breakdown by line of business as a percentage of total revenues was as follows: 38% from mobility, 37% from gaming, 13% from auto and 12% from medical.
Looking at year-over-year trends mobility revenues were down 74% from the second quarter of 2015, principally due to the non-renewal of our Samsung contract, a non-recurring license fee of $2 million from a completed contract in the prior year quarter and to a lesser extent decrease sales volumes from within our OEM customer base. Automotive revenues were down 18%, primarily due to the timing of reporting by our customers in 2015, partially offset by increased volume of vehicle sold.
Medical revenues were up 46%, primarily due to the timing of royalty reporting by certain customers during the year. Gaming revenues were also up 4%.
Gross profit was $7.8 million, or 99% of revenues compared to gross profit of $16.1 million in the second quarter of 2015. Turning now to our operating expenses, excluding cost of revenues, total GAAP operating expenses were $17.4 million in the second quarter of 2016, compared to $13.9 million in the year ago period with a significant contributing portion of the increase driven by higher legal expense primarily related to our recent litigation filings against Apple and various other legal matters.
Operating expenses in the second quarter of 2016 included non-cash charges related to depreciation and amortization of $226,000 and stock-based compensation of $1.3 million. Of the non-cash charges, $393,000 were included in sales and marketing, $357,000 in research and development, and $730,000 million in G&A expense.
And of the stock-based compensation charges $332,000 were included in sales and marketing, $258,000 in R&D, and $665,000 million in G&A. Looking now at our net results, net loss for the second quarter of 2016 was $5.6 million or $0.20 per basic and diluted share compared to net income of $1.6 million or $0.06 per basic and diluted share in the second quarter of 2015.
Net loss for the second quarter of 2016 includes a tax benefit of $3.3 million that includes certain non-cash tax benefits and expenses associated with our international tax structure. In addition to normal GAAP metrics, we use non-GAAP net income or loss and non-GAAP earnings or loss per share to track our business performance.
We define non-GAAP net income or loss as GAAP net income or loss adjusted to reflect an expected long-term effective tax rate of 19% less stock-based compensation. We define non-GAAP earnings or loss per share as non-GAAP net income or loss per share.
Non-GAAP net loss in the June, 2016 quarter was $5.8 million or $0.20 per basic and diluted share compared to non-GAAP net income of $3.1 million or $0.11 per diluted share in the same period last year. The linearity of our quarterly results is being impacted by the timing of certain transactions and both the delay and reporting and acknowledgement of the applicability of our intellectual property by certain customers.
At this time, we’re making no changes to our financial guidance, which cause for 2016 revenues to be in the range of $55 million to $65 million generating bottom line results of between a net loss of $11 million and net income of $400,000 and between a non-GAAP net loss of $8 million and non-GAAP net income of $.3 million. Our cash portfolio, including cash and short-term investments, was $56.3 million as of June 30, 2016, down from $64.9 million exiting 2015.
The decrease was driven primarily by cash used for operations. During the June quarter, we did not buyback stock under our authorized stock repurchase program.
We will continue to monitor our cash balance and stock price as well as market conditions and strategic factors as we consider any future buyback activity. Turning now to the business, we continue to execute on our strategy to provide Immersive haptic experiences to a wide and varied customer base.
This includes both licensing solutions that deliver haptic value and licensing IP that can be the foundation for customers to deliver their own innovative haptic solutions thereby creating an ecosystem of content creation, distribution and playback. In the second quarter, we saw significant design wins in our OEM business made important inroads in the mobile content business and has seen a significant spike in customer interest and media coverage for our innovative technology.
At the same time, we have continued to aggressively pursue those companies who are using our intellectual property without properly compensating us. This quarter we signed a multi-year agreement with Lenovo for use of our touch sense technology in their windows and Android smartphones and tablets enabling them to deliver higher quality and more competitive products to the market.
Also this quarter, we signed a multi-year license agreement with ALPS Electric for IP and consultation services to implement haptics in their new touch pad product modules which help PC OEMs designed thinner, quieter and higher quality notebook PCs. And we announced an agreement with CRI Middleware, a leading provider of audio and video solutions for the gaming industry to enable haptics on their CRI ware platform.
With over 3,000 game titles shipped their new CRI haptics tool will make it easier for mobile game developers to incorporate haptics in their Android mobile games. We’re also excited about the momentum we’re seeing in our content business, specifically in advertising.
A team from Immersion recently attended the Cannes Lions International Festival of Creativity, we’re partnering with festival organizers they designed haptics in over 40 of the mobile adds that we’re contenders for the prestigious Cannes Lions award. This onsite demonstration of the Power of Haptic’s in advertising provided Immersion with over 350 contacts from major global creative, media and production agencies, we’re excited about the impact haptics can have on their work.
But the impact haptics can have on advertisers the clients of these agencies is something they find even more compelling. Recent studies show that adding haptics to mobile advertising improves key performance metrics and overall brand sentiment.
As an example, the click through rates for one advertiser was 220% above industry norms for one of its haptified mobile ads. This demonstrates increased engagement with the content and results in a reduction in the overall cost of the campaign.
For the same ad campaign results showed a 65% increase in a likelihood to recommend the brand and a 100% increase in interest for the product win users engaged with haptified content. The same advertiser also saw a 100% increase in positive brand sentiment.
These are metrics that advertisers care about and agencies are measured against. During the show, we preannounced our new offering TouchSense Design Cloud, which is the first creative tool for haptics in mobile video.
This design tool kit will enable designers and editors to create tactile effects in their video projects and provides a cloud platform for designing, editing, iterating, and sharing these projects across their ecosystem. The ability to design visuals, sound and touch together is a compelling value proposition and we are working with a number of advertising professionals in our beta program in anticipation of our product release in the fall.
We continue to see momentum and the strength and growth of our patent portfolio. In April, we received a District Court order confirming arbitration award we received against Sony, which concluded that Sony’ controller sold in Japan infringed one of our Japanese patents.
In June, United States court of appeals for the federal circuit issued a unanimous ruling reversing a decision by the District Court for the District of Delaware invalidating three of emergence Basic Haptics patent in our law suit against HTC. Thereby returning three battle tested Basic Haptics patent to the portfolio.
Shortly thereafter, we resolved our dispute with Samsung relating to tail rights under the agreement that expired at the end of 2015 and for a payment of $19 million, we have granted them product lifecycle, wind down rights for products that were licensed under our prior agreement with them. We have already received the $19 million payment and will recognize it as revenue in the third quarter.
In addition, we agreed to a litigation standstill for a period of time. As of June 30, 2016, we had over 2,200 issued or pending patents in the U.S., China, and other countries.
And now for an update on our Apple litigation. In May, we filed the second action in the ITC against Apple, AT&T and AT&T Mobility alleging that the Apple iPhone 6s, Apple iPhone 6s Plus, the MacBook and the MacBook Pro with Retina Display, infringed certain Immersion patents, including patents covering pressure related haptics.
We also filed a corresponding patent infringement complaint in the U.S. District Court for the District of Delaware, which has been stayed pending the outcome of the ITC action.
The ITC instituted the second investigation on June 6, 2016 and consolidated the first and second actions into one, revising the schedule to accommodate the second case. Under the new schedule, our claim construction hearing will be held on October 18, 2016.
Our hearing before the ITC will be held April 27 to May 5, 2017. The initial determination date will now be August 11, 2017 and the target date for completion of the investigation will now be December 11, 2017.
We continue to believe that the merits of both of our cases are strong and substantial. On a related matter, on March 29, 2016 a petition for inter partes review or IPR challenging the validity of one of the patents asserted in our first action against Apple and AT&T Mobility was filed with the patent trial and appeals for our PTAB at the USPTO by an individual unrelated to either Apple or AT&T.
The PTAB will decide whether to institute the IPR, no later than October 5, 2016. We plan to vigorously defend the validity of our patent.
In addition, Apple also filed IPRs challenging the validity of the three patents included in the initial action we filed against Apple and AT&T Mobility on July 7 and 8. The PTAB will decide whether to institute the IPRs, no later than January 13, 2017.
We continue to invest in our employee base and are bringing specialized skill sets into our organization to ensure the long-term success of our business model. A particular note is the hiring of a new Vice President of Intellectual Property licensing and business development, who will focus his energies on monetizing our IP and developing standalone intellectual property offerings and pricing, which will help us identifying and capture new licensing opportunities.
And we are in the final stages of selecting our new CFO with several strong candidates under consideration and expect to have someone on board by the end of Q3. Finally, I am pleased to announce that we have added Sharon Holt as a new Board Member.
Sharon currently acts as an advisor for a number of companies including Analogix Semiconductor and comes to us with a wealth of experience with IP and solutions licensing from her days at Rambus, where she was the Senior Vice President and General Manager of the semiconductor business group; And at Agilent Technologies, where she served as Vice President and General Manager. Sharon’s experience will be instrumental and advising us on monetizing both our IP and solutions from an operational standpoint.
In closing, we’ve had some great wins, but also focused strongly and protecting our IP, which can cause some unpredictability in the business as was evident this quarter. However, we feel confident that with this focus and patience more customers will recognize and compensate us for the innovations we bring to the market.
We see new business opportunities in every segment we serve and we will continue to innovate and bring solutions to market that will appeal to an ever widening customer base. We will aggressively pursue patent protection, while working with partners to expand their use of and success with our technology.
We have a sound strategy and a great team and together we anticipate a successful remainder of the year. Lastly, I look forward to seeing some of you this quarter at the Canaccord Genuity Conference in Boston on August 10, and the Dougherty Conference on September 28 in Minneapolis.
We’ll now open up this call to your questions. Michelle?
Operator
[Operator Instructions] And our first question we'll hear from Charlie Anderson with Dougherty and Company.
Charlie Anderson
Yes, thanks for taking my questions. Hi, Vic.
Vic Viegas
Hey, Charlie.
Charlie Anderson
On the guidance, but there's a lot of moving parts there, right. You’ve added the $19 million from Samsung, I imagined that replaces the earlier number and then you were talking about this kind of delays and lack of acknowledgement of IP.
So I wonder if you could talk about how much of it was gained by Samsung and the guidance of how much is lost by some of these issues you're referring to. So we can just think about the plusses and minuses here.
Vic Viegas
Sure. So we – the Samsung wind down rights agreement generated $19 million and as I said it will be recognized in full in the third quarter.
When you take in consideration the $19 million plus the rest of our business Q3 and Q4, I believe that that still is consistent with the guidance of $55 million to $65 million in revenue. So there is as I mentioned in the call, there was one mobile OEM report that was delayed.
We have now received that. There is a number of other negotiations that were originally contemplated as part of that guidance that right now are at risk.
We continue to work hard to try to bring those to closure, but it's a combination of the upside of Samsung, wind-down rights as well as some of the risks associated with the late reporting and negotiating new license agreements that leads you back to the $55 million to $65 million guidance.
Charlie Anderson
And could you maybe speak to the driver because it doesn’t look like a convincible customers that derive why there is the lack of acknowledgement of that fee and what the remedies are?
Vic Viegas
Well, obviously there is great adoption of haptics in the market in all of the markets that we serve. So we're pleased to see that.
In many cases customers are coming up with their own solutions, we engage them many times, put together claims charts and other evidence as to the strength of our IP and those conversations are still taking time even though we're giving considerable evidence. I can't tell you if its result of our current activities with Apple and others feel that they’ll let Apple do the heavy lifting.
But in any case we are taking all the appropriate actions that we think are necessary to enforce our IP. And obviously during the quarter we did license a number of new OEMs.
And there are many more ahead of us that we think we can license as well. But at this stage, there are a few that are a little slower than what I had anticipated at the beginning of the year.
Charlie Anderson
Okay. And then just two more quick from me.
One is could you update us on just any conversations with Samsung around the longer-term license, we've got the wind-down rights. But in terms of pursuing from there longer-term just any updated thoughts there?
And then secondly you've got this cash in the quarter, you have a better balance sheet. Any thoughts around use of cash is it more likely that we see that back in market buying back stock or are you finding that there's not many windows period to do that given all that’s coming on?
Thanks.
Vic Viegas
Sure. In terms of Samsung the intent and the purpose of the standstill was to give us time to negotiate a renewal.
So there are active engagements at various levels that, we're working. And our hope is to work closely with them and move to a license renewal.
Obviously the products launched after the expiration of our prior agreement are no longer license then we obviously believe that they should be. So we're actively working that.
And the other issue as far as cash, you’re right the influx of the $19 million has substantially increased our cash balance and as normal we will consider uses of cash including for the legal actions, as well as buyback opportunities. When we make those decisions we’ll make them public.
Charlie Anderson
Great, thanks so much.
Vic Viegas
Thanks, Charlie.
Operator
And we’ll move on to Josh Nichols with B. Riley.
Josh Nichols
Yes. Hi.
Vic.
Vic Viegas
Hey, Josh.
Josh Nichols
I was looking at last 10-Q and I know that you won the arbitration with Sony. It looks like that was paid in Q2, right.
So we should see that in the next quarter or in the current quarter once the Q is filed?
Vic Viegas
So this was regards to the controllers they were selling in Japan,. I believe that was resolved and paid in Q2 and recognized as well.
Josh Nichols
And it looks like according to the Q that you also filed an arbitration demand for their U.S. controllers as well in March.
Is that correct?
Vic Viegas
That’s correct. Yes, yes.
Josh Nichols
So what's that pertaining to specifically any details you could provide?
Vic Viegas
Well. We have 2,200 patents issued or pending.
A number of those patents are covering technologies in the gaming space and in addition in the VR space, as well. And so we have lot of patents in this area.
It appears that Sony in our litigation many years ago, there were two patents in suit [ph] those two patents have expired. And it appears that they're contesting our new patents.
And so we are taking those through the arbitration process and have a lot of confidence in the strength of that that IP.
Josh Nichols
Okay. And then I just want to clarify, because looking at revenue for the quarter.
Some people or some customers or potential customers haven’t really acknowledge the company’s IP. Whenever you say that, are you referring to some new on license customers, or are you expecting to bring into the ecosystem faster, or are you talking about some existing customers who are now not paying?
Vic Viegas
I would say primarily the new customers, we did have in the quarter rather unusual situation where an existing customer did not file a report. Subsequent to the quarter end, we did receive the report, but as a result we were not able to record that revenue until we received the report.
So I would say the point I was making is that in discussions in various markets, we are providing them evidence of the strength of our IP and in many cases those conversations go well and we reach agreement, in other cases, they dispute the applicability of that IP and it takes longer than to show them the legal arguments as to why they need a license.
Josh Nichols
And last question from me. So for the customer or customers there were late filing and they did file and it’s really just timing of revenue shift from Q2 to Q3.
What's the dollar value impact that that would have had so would that be one way for us to help us optically look at it, right.
Vic Viegas
Yes, sure. I was anticipating that the quarter would it come in around $8.5 million.
And we ended up at $7.9 million the unreported revenue that we now have received more recently was for about $700,000. So the shortfall in anticipated revenue is attributed to that one late report.
Josh Nichols
Thanks, Vic.
Vic Viegas
Thanks Josh.
Operator
And we’ll move onto Mark Argento with Lake Street Capital Markets.
Mark Argento
Hey, Vic.
Vic Viegas
Hey, Mark.
Mark Argento
Just a couple of quick questions around the couple of key patterns that were reinstated do you think some of the activities saw in the quarter in terms of the willingness or I guess more of the unwillingness for guys to come to the table as a function of the kind of the state of those patents that have now been reinstated in those conversations maybe taken new life here given the fact those patents are now back on the – back invalid about some thoughts around that. And then if you could remind us about any key dates around your legal activities with Apple that would be helpful as well.
Vic Viegas
Sure. So I think the basic haptics patents that you're referring to, we had a lot of confidence that they would be returned to Immersion.
And as we said in the script that their battle tested I think they have all been challenged at the Patent Office and reissued. So we expected that it's obviously nice to have happen.
I do believe that it shows we have the determination to protect our IP. We have the resolve and the ingenuity if you will that we truly are bringing innovative solutions to the market and as a result are gaining these patents.
So we felt good about that. I would say that it’s probably had some impact.
Our behavior and the fact that those patents are now back on board. I think it’s had some benefit to us for in the negotiations.
But for some of the bigger guys, they want to try to force the issues through the courts. They are using that as a proxy for negotiating a fair price.
And I think our mission here is to say resolute and make sure that we defend the IP, because it’s a great portfolio. In terms of key dates, the first key date is October 18 is when the Markman hearing in claims construction would be heard then the actual hearing itself April 27 and May 5, 2017, initial determination is August 11, 2017, and we'd expect completion of the investigation December 11, 2017.
Mark Argento
Great. Thanks, Vic.
Vic Viegas
Yes. Thanks Mark.
Operator
We’ll move onto James Medvedeff with Cowen and Company.
James Medvedeff
Hi, good afternoon, and thanks for taking my call. So most of my questions have been answered, but let me ask the mix between variable and fixed licenses about 74% variable this time.
Is that normal that we should expect going forward and that some of these contracts are signed especially the Samsung. How that might change?
Vic Viegas
It's going to be hard to tell. Many of our customers start out launching multiple products on a per unit royalty basis and they'll fall into that bucket.
When they get to a point where they've broadly adopted in a line of models and products, then they we may negotiate a more fixed payment stream. The Samsung renewal and I would imagine that like in the past it was a fix.
So I would imagine that a renewal would be a fixed payment, but it could also be per unit depending on how those negotiations go. So a little hard to predict, but I would say the bigger ones are going to tend to be in the fixed and the smaller ones are going to continue to be on a per unit royalty.
James Medvedeff
So, is that happens is more and more become as the bigger contracts become fixed, this phenomenon of people reporting late it becomes less of an issue. Would that be fair to say?
Vic Viegas
Yes, absolutely. The fixed are typically payments due – as a result of the contract as opposed to determined by quarterly activity.
So, yes, those fixed agreements would take that risk out.
James Medvedeff
Okay. My final question is on the – it’s kind of a two part question on the pipeline for some of your – just on the pipeline of new business, new customers and on the – our new business from existing customers.
And also when the content piece – start to deliver some revenue. The advertising content…
Vic Viegas
Yes, the pipeline is significant as I mentioned before we’re building business development resource capability on the IP side. We’ve always been focused on selling the value of our solutions.
We’re getting a lot of interest on our IP. So we’re spending more time and energy bringing those solutions and having the value evidence and analytic evidence of that.
So we’re putting that together in packages that that we can offer. So I would say the pipeline in terms of new licensees in all the markets we serve or the existing licensees that are growing and renewals that that pipeline is very significant and rich.
In terms of the content, it is definitely growing we are increasing the use of haptics in mobile video and ads in particular. The revenue stream is still, I think this year will be $100 million, next year I’d imagine that will be something north of $1 million, but I think before it becomes many millions of dollars, it could be another few years.
So right now, I think we’re still establishing a value, building the relationships, launching the products, and building the foundation for a healthy business.
James Medvedeff
All right. Thank you.
Vic Viegas
Okay, thanks.
Operator
We’ll move onto Matthew Galinko with Sidoti.
Matthew Galinko
Hey, Vic, thanks for taking my questions. First one is…
Vic Viegas
Yes. Hi, Matt.
Matthew Galinko
You announced two tier strategy for TouchSense yesterday. Can you talk about what motivated, how you evolve that strategy was driven by what you hearing from existing or potential customers.
Or is it just an interpretation from your end of how the device market is evolving.
Vic Viegas
Sure, the premium – TouchSense solution is targeted at the premium handset market. That are typically using a linear resonant actuator, LRA motor.
So these are higher quality motors and that software has been designed to be optimized for those types of actuators. We’ve added new features including support for pressure sensing, which has become a very popular feature from a number of OEMs in multiple markets.
So we’re tailoring that solution to the high end market and then the mid to low end markets typically use a lower cost actuator a little less fidelity and those are called centric rotating mass or ERM. And so the light product actually is optimized for those types of actuators it’s also an easier solution to integrate.
It can be integrated directly into the application, whereas TouchSense Premium is typically integrated at the OS level. So a lot easier to use by our customers, it’s tailored for the mid to the low end market, and by offering the two which has been requested by the marketplace.
We think we grow the markets substantially.
Matthew Galinko
Got you. And then I guess, secondly on the new products you touched on TouchSense – I’m sorry, the design cloud I guess just recently.
So can you talk about how that evolves your monetization strategy for that piece of the business.
Vic Viegas
Sure. So as I’ve said now for a number of quarters the content space is growing dramatically for us in terms of the usage and more importantly the interest level throughout the industry.
So you do need to design good quality haptics and the design tool is what we’ve now called the design cloud. We’ve been creating the content typically in-house and building up post production capability.
We’re starting to exceed the capacity of Immersion doing all of the creative work and we want to provide the tools to the customers and the creators. And we’re getting a lot of interest from ad agencies and creative networks that want to begin offering this capability to their clients or their advertisers.
So we’ve actually productized this tool and we’ve given it a lot of flexibility by having it delivered through the cloud that allows you to create the content, edit the content and then host the content in the cloud until the point at which you’re ready to release the product to the marketplace. So this gives us control, gives more capability for the marketplace and gives us a better opportunity to monetize the value we bring to the advertising community.
Matthew Galinko
Got it. So, if I might ask in a different way, is it simply you’re expanding your capacity or expanding really beyond your capacity to get trials into the market and to get testing and utilization in the market?
Or is it something that you’ll actually be charging for and what’s the timeframe for collecting? If you do plan to charge for access to it, when do you plan to start that?
Vic Viegas
Sure. So we took an internal tool and we created a product.
The product allows people to create the haptic tracks for video, ad, and advertising. We will charge for it, but it won’t be a significant revenue stream, it’s a tool.
The purpose really is to hand the capability, put the capability in the hands of the ad agencies and the creative brands. And then let them launch without having Immersion doing the creative work.
It’s away for us to scale and leverage the technology.
Matthew Galinko
Got it. Thank you.
Vic Viegas
Yes, thanks Matt.
Operator
[Operator Instructions] And next we move on Tony Stoss of Craig-Hallum Capital Group.
Lucas Schwalbe
Hey, Vic. This is Lucas Schwalbe in for Tony Stoss.
Vic Viegas
Yep, Hi.
Lucas Schwalbe
Hey, how you going. So most of my questions of pretty much been answered at this point, but maybe could comment a little more on the deal with Lenovo.
Do you think it could be material in the next year or two?
Vic Viegas
Yes, sure. Well, Lenovo is a world class company.
They offer a broad product line in multiple markets. And we believe that they are a significant leader in the marketplace.
So having a relationship direct with them, it’s important as you probably know we have an indirect relationship with our arrangement with Motorola, which is a subsidiary of Lenovo. But having a direct relationship and being a part of their product roadmap is exciting.
I think the early engagement will be around a number of products and as we build the value evidence and as those products succeed in the marketplace and I’d expect to expand the relationship into more models, more products, more markets. So we think that it’s a beginning of a great relationship, I can’t really provide you any near-term revenue targets, just simply say it’s a great relationship and one we think they could grow into something real meaningful.
Lucas Schwalbe
Okay, Thank you. And then outside of mobility and media advertising, what – which area are you most excited about like by like gaming, medical, auto, where you’re seeing the most traction?
Vic Viegas
Yes, I would say those are – auto is clearly an exciting area, as I mentioned bringing on board an IP BD function is going to allow us to target the auto market and the VR market in gaming space in particular, as well as wearables. So those are exciting markets for us.
The base of business today is still very small. So it has the potential to be a meaningful part of our growth.
And it’s one that I think we’re very focused on an IP licensing.
Lucas Schwalbe
Thanks. I think that’s it for questions I have.
Thank you.
Vic Viegas
Thank you.
Operator
And next we move on to [indiscernible] with LPL Financial.
Unidentified Analyst
Hey, Vic, thanks for taking my questions. Which speaking about, they’ve all been pretty much answered.
However I thought I’d share a thought jus to put this out there. With the uncertainty regarding a near-term deal with Samsung, which indicates that you – that’s has translates into some uncertainty with an existing customer.
It’s coincided with the largest short position that I’ve ever witnessed in your stock over three million shares as of last count. Are there things that you can do to sort of show some additional confidence I know that you’re sort of saving firepower for your cases against Apple and AT&T, and so you’ve suspended the stock purchase program, but that were insider purchases.
Could you just spend a signal to the investment community that you guys see a very strong outlook, despite the near-term uncertainty and I would just share with you that the people I work with are looking for those kind of signs, when you’re seeing this kind of weakness in the stock price.
Vic Viegas
Okay, Mark, I appreciate the thoughts and the comments. I would say that we did not suspend the buyback program in order to have a plan in place that’s executable.
We normally would put a 10b5 program in place. And there are times when we’re not allowed to do that because we’re aware of private and confidential information.
I would say that, now that we’ve announced the Samsung in the quarter, I would say that we’re probably no longer precluded and we will take a serious look at the buyback program.
Operator
And that will be all the questions, I’ll now turn the call back over to Mr. Viegas for any additional or closing remarks.
Vic Viegas
Well, thank you again everyone for being on the call with us today and I wish you a good day. Good bye.
Operator
And that will conclude today’s call. We thank you for your participation.