IMMERSION CORP
For the period ended Jun 30, 2024. Filed Aug 19, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 19, 2024
IMMR$6.79+1.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001213900-24-040912
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-19.
0001213900-24-070789
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 68 previous paragraphs and 119 current paragraphs.
16 unchanged; 29 reworded; 73 added; 23 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (73)
Current report
COMPANY OVERVIEW
Current report
On June 10, 2024, we acquired a controlling interest in Barnes & Noble Education, Inc., a Delaware corporation (“Barnes & Noble Education”), refer to Note 2. Business Combination for more information. The financial results of Barnes & Noble Education have been included in our condensed consolidated financial statements from the acquisition date of June 10, 2024.
Current report
Following the closing of the Transactions(as defined in Note 2. Business Combination) with Barnes & Noble Education we operate our business intwo operating segments: Immersion and Barnes & Noble Education.
Current report
RESULTS OF OPERATION
Current report
Immersion generates license and royalty revenues from a wide range of intellectual property (“IP”) that more fully engage users’ sense of touch when operating digital devices. We focus on the following target application areas: mobile devices, wearables, consumer, mobile entertainment and other content; console gaming; automotive; medical; and commercial.
Current report
A summary of our results of operation for the three and six months ended June 30, 2024, and 2023 is as follows (in thousands):
Current report
Fixed fee license revenue increased by $85.1 million in the firstsix months of 2024 compared to the same period in 2023 primarily due to a $47.6 million increase in mobility license revenue and $37.5 million increase in gaming license revenue primarily resulting from new license agreements we entered into in the first half of 2024.
Current report
Per-unit royalty revenue decreased by $2.9 million, or 25%, in thefirstsix months of 2024 compared to the same period in 2023, primarily due to a $1.8 million decrease in royalties from gaming licensees and a $1.8 million decrease in royalties from mobility licensees.
Current report
Selling and administrative expenses increased $10.3 millionin thethree months ended June 30, 2024 as compared to the same period in 2023 primarily due to a $5.7 million increase in legal costs and a $4.9 million increase in compensation, benefits and other personnel related costs.
Current report
Selling and administrative expenses increased $33.7 millionin the six months ended June 30, 2024 as compared to the same period in 2023 primarily due to a $26.5 million increase in legal costs and a $7.6 million increase in compensation, benefits and other personnel related costs.
Current report
Barnes & Noble Education isone of the largest contract operators of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States. Barnes & Noble Education is alsoone of the largest textbook wholesalers, inventory management hardware and software providers. Barnes & Noble Education operates 1,163 physical, virtual, and custom bookstores and services more than 5.8 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment.
Current report
The strengths of Barnes & Noble Education's business include its ability to compete by developing new products and solutions to meet market needs, its large operating footprint with direct access to students and faculty, its well-established, deep relationships with academic partners and stable, long-term contracts and its well-recognized brands. Barnes & Noble Education provides product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. Barnes & Noble Education offers itsBNC First Day®equitable and inclusive access programs, consisting ofFirst Day CompleteandFirst Day, which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition.
Current report
Barnes & Noble Education expects to continue to introduce scalable and advanced solutions focused largely on the student and customer experience, expand its e-commerce capabilities and accelerate such capabilities through its service providers, Fanatics Retail Group Fulfillment, LLC (“Fanatics”) and Fanatics Lids College, Inc. D/B/A “Lids” (“Lids”) (collectively referred to herein as the “F/L Relationship”), win new accounts, and expand its revenue opportunities through strategic relationships. Barnes & Noble Education expect gross comparable store general merchandise sales to increase over the long term, as its product assortments continue to emphasize and reflect changing consumer trends, and Barnes & Noble Education evolves its presentation concepts and merchandising of products in stores and online, which Barnes & Noble Education expects to be further enhanced and accelerated through the F/L Relationship. Fanatics and Lids, acting on Barnes & Noble Education's behalf as its service providers, provide unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of its logo general merchandise business.
Current report
TheBarnes & Noble brand (licensed from Barnes & Noble Education’s former parent) along with its subsidiary brands,BNCandMBS, are synonymous with innovation in bookselling and campus retailing, and are widely recognized and respected brands in the United States. Barnes & Noble Education’s large college footprint, reputation, and credibility in the marketplace not only support its marketing efforts to universities, students, and faculty, but are also important to its relationship with leading publishers who rely on Barnes & Noble Education asone of their primary distribution channels.
Current report
BNC First Day Equitable and Inclusive Access Programs
Current report
Barnes & Noble provides product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. Barnes & Noble Education offer itsBNC First Day®equitable and inclusive access programs, consisting ofFirst Day CompleteandFirst Day, which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition.******
Current report
• First Day Complete is adopted by an institution and includes all or the majority of undergraduate classes (and on occasion graduate classes), providing students both physical and digital materials. TheFirst Day Complete model drives substantially greater unit sales and sell-through for the bookstore.
Current report
• First Day is adopted by a faculty member for a single course, and students receive primarily digital course materials through their school's learning management system ("LMS").
Current report
Offering course materials through Barnes & Noble Education's equitable and inclusive accessFirst Day CompleteandFirst Day models is an important strategic initiative to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing Barnes& Noble Education market share, revenue and relative gross profits of course material sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. These programs have allowed Barnes & Noble Education to reverse historical long-term trends in course materials revenue declines, which has been observed at those schools where such programs have been adopted and improve predictability of its future results. In 2024, the growth of theBNC First Day programs offset the declines in a la carte courseware sales and closed store sales. Barnes & Noble Education is moving quickly to accelerate itsFirst Day Complete strategy. Many institutions adoptedFirst Day Complete in Fiscal 2024, and Barnes & Noble plans to continue to scale the number of schools adoptingFirst Day Complete in 2025 and beyond.******
Current report
***Relationship with Fanatics and Lids ***
Current report
In December 2020, Barnes & Noble Education entered into the F/L Relationship. Fanatics and Lids, acting on its behalf as its service providers, provide unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of our logo general merchandise business. Fanatics operates as Barnes & Noble Education's service provider, including processing consumer personal information on it behalf, using their cutting-edge e-commerce and technology expertise to offer our campus store websites expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with Lids, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, Barnes & Noble Education campus stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.******
Current report
Barnes & Noble Education maintains its relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of our campus bookstores. Barnes & Noble Education also work closely with its campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand. Barnes & Noble Education leverage Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of our campus store websites. Lids manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for its partner campus stores, and Lids owns the inventory it manages, relieving it of the obligation to finance inventory purchases from working capital.
Current report
Seasonality
Current report
Bares & Noble Education's business is highly seasonal. For example, its retail business is seasonal, particularly with respect to textbook sales and rentals, with the major portion of sales and operating profit realized during the fiscal quarters when college students generally purchase and rent textbooks for the upcoming semesters and lowest in the other fiscal quarters. Barnes & Noble Education's quarterly results also may fluctuate depending on the timing of the start of the various schools’ semesters, the revenue impact of accounting principles with respect to the recognition of revenue associated with its equitable and inclusive access programs, the ability to secure inventory on a timely basis.
Current report
Given the growth of BNC First Day programs, the timing of cash collection from Barnes & Noble Education's school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts our BNC First Day equitable and inclusive access offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor. As a higher percentage of Barnes & Noble Education's sales shift to BNC First Day equitable and inclusive access offerings, it is focused on efforts to better align the timing of its cash outflows to course material vendors and cash inflows from collections from schools. As the concentration of digital product sales increases, revenue will be recognized earlier during the academic term as digital textbook revenue is recognized when the customer accesses the digital content compared to: (i) the rental of physical textbooks where revenue is recognized over the rental period, and (ii) a la carte courseware sales where revenue is recognized when the customer takes physical possession of our products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by our customers for products ordered through our websites and virtual bookstores.
Current report
A summaryof Barnes & Noble Education results of operationfor the reporting period from June 10, 2024, to June 30, 2024, is as follows (in thousands):
Current report
Revenues
Current report
Barnes & Noble Education primarily derives its revenues from sale of course materials, which include new, used, rental and digital textbooks. Additionally, at college and university bookstores which Barnes & Noble Education operates, it sells general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and café items and graduation products. Barnes & Noble Education's rental income is primarily derived from the rental of physical textbooks. Barnes & Noble Education also derives revenue from other sources, such as sales of inventory management, hardware and point-of-sale software, and other services.
Current report
Total revenue was $47.0 million during the period from June 10, 2024, to June 30, 2024, primarily consisting of $45.1 million product and other sales and $1.9 million of rental sales.
Current report
Cost of sales
Current report
Barnes & Noble Education cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses.
Current report
Selling and administrative
Current report
Barnes & Noble Education selling, and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, and finance and accounting.
Current report
*** Restructuring and other charges***
Current report
During the period of June 10, 2024, to June 30, 2024, Barnes & Noble Education recognized restructuring and other charges totaling $2.4 million, comprised primarily of $2.0 million of severance costs related to the departure of its Chief Executive Officer on June 11, 2024 and $0.4 million costs associated with legal and advisory professional services.
Current report
Interest and Other Income (loss), Interest Expenses and Income Taxes
Current report
Interest and other income (loss), net decreased $0.6 million during the six months ended June 30, 2024, compared to the same period in 2023, primarily driven by a $1.8 million decrease in net gains from investments in marketable equity securities and derivative instruments and a $0.3 million increase in net foreign currency translation loss partially offset a $1.5 million increase in interest income.
Current report
Interest expense -Interest expenses primarily consisted of the interest charges related to Barnes& Noble Education's credit facility.
Current report
Provision for income taxes –The changes in the provision for income taxes are described below.
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Removed paragraphs (23)
Previous report
OVERVIEW
Previous report
We are a premier licensing company focused on the invention, acceleration, and scaling, through licensing, of innovative haptic technologies that allow people to use their sense of touch to engage with products and experience the digital world around them. We areone of the leading experts in haptics, and our focus on innovation allows us to deliver world-class intellectual property (“IP”) and technology that enables the creation of products that delight end users. Our technologies are designed to facilitate the creation of high-quality haptic experiences, enable their widespread distribution, and ensure that their playback is optimized. Our primary business is currently in the mobility, gaming, and automotive markets, but we believe our technology is broadly applicable and see opportunities in evolving new markets, including virtual and augmented reality, and wearables, as well as residential, commercial, and industrial Internet of Things. In recent years, we have seen a trend towards broad market adoption of haptic technology. 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.
Previous report
Results of Operations
Previous report
Overview
Previous report
Total revenues for the three months ended March 31, 2024 was $43.8 million, anincrease of $36.8 million, or 520%, compared to the same period in 2023.
Previous report
Total operating expenses were $27.2 millionthe three months ended March 31, 2024, an increase of $23.4 million, or 614%, compared to the same period in 2023.
Previous report
Net income was $18.7 million in the three months ended March 31, 2024 compared to a net income of $8.3 million in the same period in 2023.
Previous report
The following table sets forth our Condensed Consolidated Statements of Income and Comprehensive Income data as a percentage of total revenues:
Previous report
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Previous report
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. Our fixed fee license revenue could fluctuate depending upon the timing of execution of new fixed license fee arrangements. We also anticipate that our royalty revenue will fluctuate relative to our customers’ unit shipments.
Previous report
Sales and Marketing - Our sales and marketing expenses primarily consisted of employee compensation and benefits, including stock-based compensation; marketing costs and allocated facilities costs.
Previous report
Sales and marketing expenses increased $1.2 million in thethree months ended March 31, 2024 compared to the same period in 2023 primarily attributable to a $1.3 million increase in compensation, benefits and other personnel-related costs due to an increase in variable compensation and stock-based compensation.
Previous report
Research and Development - Our research and development expenses primarily consisted of employee compensation and benefits, including stock-based compensation and office expense.
Previous report
Research and development expenses decreased $0.1 million, or 68%, in thethree months ended March 31, 2024, compared to the same period in 2023. This decrease was primarily attributable to decreases in compensation, benefits and other personnel-related costs due to a decrease in severance costs.
Previous report
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.
Previous report
Interest and Other Income (Loss)
Previous report
Other income (expense), netdecreased $0.3 million during thethree months ended March 31, 2024 compared to the same period in 2023, primarily driven by a$0.2 million increase in net foreign currency translation losses.
Previous report
Income Taxes
Previous report
A summary of provision for income taxes and effective tax rates for thethree months ended March 31, 2024 and 2023 is as follows (in thousands):
Previous report
Net cash used in financing activities during the three months ended March 31, 2023 was $5.2 million primarily consisting of $4.4 million cash paid for stock repurchases and $0.8 million in shares withheld to cover payroll taxes.
Previous report
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 our capital allocation strategy from time-to-time.
Previous report
We did not have any other significant non-cancellable purchase commitments as of March 31, 2024.
Previous report
We anticipate that capital expenditures for property and equipment for the remainder of 2024 will be less than $1.0 million.
Reworded paragraphs (29)
Previous wording
This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21 E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements involve risks and uncertainties. Forward-looking statements are frequently identified by words such as “anticipates”, “believes”, “expects”, “intends”, “may”, “can”, “will”, “places”, “estimates”, and other similar expressions. However, these words are not the only way we identify forward-looking statements. Examples of forward-looking statements include among other things, any expectations, projections, or other characterizations of future events, or circumstances, and include statements regarding:*our strategy and our ability to execute our business plan; our competition and the market in which we operate; our customers and suppliers;**our revenue and trends related thereto, and the recognition and components thereof; our costs and expenses, including capital expenditures; our investment of surplus funds and sales of marketable securities *seasonality and demand; our investment in research and technology development; changes to general and administrative expenses; our foreign operations and the reinvestment of our earnings related thereto; our investment in and protection of our IP; our employees; capital expenditures and the sufficiency of our capital resources; unrecognized tax benefit and tax liabilities; the impact of changes in interest rates and foreign exchange rates, as well as our plans with respect to foreign currency hedging in general; changes in laws and regulations, including with respect to taxes; our plans and estimates related to and the impact of current and future litigation and arbitration and our dividend, stock repurchase and equity distribution programs.
Current wording
This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21 E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements involve risks and uncertainties. Forward-looking statements are frequently identified by words such as “anticipates”, “believes”, “expects”, “intends”, “may”, “can”, “will”, “places”, “estimates”, and other similar expressions. However, these words are not the only way we identify forward-looking statements. Examples of forward-looking statements include among other things, any expectations, projections, or other characterizations of future events, or circumstances, and include statements regarding:*our strategy and our ability to execute our business plan; our competition and the market in which we operate; our customers and suppliers;**our revenue and trends related thereto, and the recognition and components thereof; our costs and expenses, including capital expenditures; our investment of surplus funds and sales of marketable securities *seasonality and demand; our investment in research and technology development; changes to general and administrative expenses; our foreign operations and the reinvestment of our earnings related thereto; our investment in and protection of our intellectual property (“ IP”); our employees; capital expenditures and the sufficiency of our capital resources; unrecognized tax benefit and tax liabilities; the impact of changes in interest rates and foreign exchange rates, as well as our plans with respect to foreign currency hedging in general; changes in laws and regulations, including with respect to taxes; our plans and estimates related to and the impact of current and future litigation and arbitration and our dividend, stock repurchase and equity distribution programs.
Previous wording
Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results could differ materially from those projected in the forward-looking statements, therefore we caution you not to place undue reliance on these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the risk factors contained under Part I, Item 1 A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 11, 2024.
Current wording
Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results could differ materially from those projected in the forward-looking statements, therefore we caution you not to place undue reliance on these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the risk factors contained under Part I, Item 1 A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission the (“SEC”) on March 11, 2024 and Part I, Item 1 A, “Risk Factors” in Barnes & Noble Educations’ Annual Report on Form 10-K for the fiscal year ended April 27, 2024 filed with the SEC on July 1, 2024.
Previous wording
We were incorporated in 1993 in California and reincorporated in Delaware in 1999.
Current wording
Immersion Corporation (“Immersion”) was incorporated in 1993 in California and reincorporated in Delaware in 1999. In this Management’s Discussion and Analysis of Financial Condition and Results of Operations the terms the“Company,”“us,” “we,” or “our” refer to Immersion and its consolidated subsidiaries. Immersion generates license and royalty revenues from a wide range of intellectual property (“IP”) that more fully engage users’ sense of touch when operating digital devices. We focus on the following target application areas: mobile devices, wearables, consumer, mobile entertainment and other content; console gaming; automotive; medical; and commercial.
Previous wording
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.
Current wording
Immersion 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.
Previous wording
Fixed fee license revenue increased by $37.5 million in the first quarter of 2024 compared to the same period in 2023 primarily due to an increase in gaming license revenue we recognized in the first quarter of 2024 following the License and Settlement Agreement we entered into with Meta Platforms, Inc., (“Meta”) in February 2024.
Current wording
Fixed fee license revenue increased by $47.5 million in the second quarter of 2024 compared to the same period in 2023 primarily due to an increase in mobility license revenue we recognized in the second quarter of 2024 following the new license agreements we entered into in the first half of 2024.
Previous wording
Per-unit royalty revenue decreased by $0.7 million, or 12%, in the first quarter of 2024 compared to the same period in 2023, primarily due to a$1.1 million decrease in royalties from gaming licensees partially offset by a $0.5 million increase in royalties from automotive licensees.
Current wording
Per-unit royalty revenue decreased by $2.1 million, or 37%, in the second quarter of 2024 compared to the same period in 2023, primarily due to a$1.6 million decrease in royalties from mobility licensees, a $0.9 million decrease in royalties from gaming licensees and a $0.5 million decrease in royalties from automotive licensees.
Previous wording
Geographically, revenues generated in North America, Asia and Europe for the three months ended March 31, 2024 represented 88%, 11%, and 1%, respectively, of our total revenue as compared to 12%, 84%, and 4%, respectively, for the three months ended March 31, 2023.
Current wording
Geographically, revenues generated in Asia, North America and Europe for the three months ended June 30, 2024 represented 98%,2%, and 0%, respectively, of our total revenue as compared to 14%,83%, and 3%, respectively, for the three months ended June 30, 2023.
Previous wording
A summary of operating expenses for thethree months ended March 31, 2024, and 2023 is as follows (in thousands, except for percentages):
Current wording
A summary of operating expenses for thethree and six months ended June 30, 2024, and 2023 is as follows (in thousands, except for percentages):
Previous wording
General and Administrative - Our general and administrative expenses primarily consisted of employee compensation and benefits including stock-based compensation; legal and other professional fees; external legal costs for patents; office expense; travel; and allocated facilities costs.
Current wording
Selling and administrative expenses - Our selling and administrative expenses primarily consisted of employee compensation and benefits including stock-based compensation; legal and other professional fees; external legal costs for patents; office expense; travel; and facilities costs.
Previous wording
General and administrative expenses increased $22.3 millionin the three months ended March 31, 2024 as compared to the same period in 2023 primarily due to a $20.8 million increase in legal costs and a $1.7 million increase in compensation, benefits and other personnel related costs. The increase in compensation, benefits and other personnel related costs in the three months ended March 31, 2024 compared to the same period in 2023 were largely driven by increases in variable compensation partially offset by a decrease in stock-based compensation. The increase in legal costs in the three months ended March 31, 2024 compared to the same period in 2023 was due to an increase from legal costs related to the Meta litigation.
Current wording
The increase in compensation, benefits and other personnel related costs in the three and six months ended June 30, 2024 compared to the same period in 2023 were largely driven by increases in variable compensation. The increase in legal costs in the three and six months ended June 30, 2024 compared to the same period in 2023 was due to an increase from legal costs related to the new license agreements and Barnes & Noble Education Transactions.
Previous wording
A revenue summary for the three months ended March 31, 2024 and 2023 is as follows (in thousands, except for percentages):
Current wording
A summaryof consolidated interest and other Income (loss), interest expense and income taxes for the three and six months ended June 30, 2024 and 2023 are as follows (in thousands, except for percentages):
Previous wording
Interest and other income (loss)increased $1.9 million during the three months ended March 31, 2024 compared to the same period in 2023, primarily driven by a $0.9 million increase in net gains from investments in marketable equity securities and derivative instruments and a $0.9 million increase in interest income.
Current wording
Interest and other income (loss), net decreased $2.2 million during the three months ended June 30, 2024 compared to the same period in 2023, primarily due to a $2.7 million decrease in net gains from investments in marketable equity securities and derivative instruments and a $0.6 million increase in interest income.
Previous wording
Provision for income taxes for the three months ended March 31, 2024 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 March 31, 2023 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.
Current wording
Provision for income taxes for thethree andsix months ended June 30, 2024 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 June 30, 2023 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate. We maintain no valuation allowance against our U.S. federal deferred tax assets and maintain al valuation allowance against certain our U.S. state and Canadian federal deferred tax assets. The change in the estimated effective tax rate was mainly driven by higher U.S. taxable income which was a result of higher U.S. passive income.
Previous wording
We provided no valuation allowance for federal assets, whose future realization is more likely than not and continue to maintain full valuation allowance for state deferred tax assets in the United States as well as federal tax assets in Canada. The year-over-year change in provision for income taxes resulted primarily from the change in income from continuing operations across various tax jurisdictions.
Current wording
The year-over-year change in provision for income taxes resulted primarily from the change in income from continuing operations across various tax jurisdictions.
Previous wording
We continue to maintain full valuation allowance for state and certain foreign deferred tax assets in the United States and Canada as a result of uncertainties regarding the realization of the asset balance due to historical losses, the variability of operating results, and uncertainty regarding near term projected results. In the event that we determine the deferred tax assets are realizable based on an assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made. The valuation allowance does not impact our ability to utilize the underlying net operating loss carryforwards.
Current wording
In the event that we determine the deferred tax assets are realizable based on an assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made. The valuation allowance does not impact our ability to utilize the underlying net operating loss carryforwards.
Previous wording
We also maintain liabilities for uncertain tax positions. As of March 31, 2024, we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $7.5 million, of which $4.9 million could be payable in cash. In addition, interest and penalty $0.2 million could also be payable in cash in relation to the unrecognized tax benefits. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $4.9 million. We account for interest and penalties related to uncertain tax positions as a component of income tax provision. We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months.
Current wording
We also maintain liabilities for uncertain tax positions. As of June 30, 2024, we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $7.6 million, of which $4.9 million could be payable in cash. In addition, interest and penalty $0.3 million could also be payable in cash in relation to the unrecognized tax benefits. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $4.9 million. We account for interest and penalties related to uncertain tax positions as a component of income tax provision. We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months.
Previous wording
Our cash equivalents, investments - current and investments - noncurrent consist primarily of money-market funds, investments in marketable equity and debt securities (including mutual funds), investments in U.S. treasury securities and certificates of deposit. All marketable securities are stated at market value. Realized gains and losses on marketable equity securities and marketable debt securities are recorded in Other income (expense), net on the Condensed Consolidated Statements of Income and Comprehensive Income. Unrealized gains and losses on marketable equity securities (including mutual funds) are reported as Other income (expense), net on our Condensed Consolidated Statement of Income and Comprehensive Income. Unrealized gains and losses on marketable debt securities reported as a component of Accumulated other comprehensive income on our Condensed Consolidated Balance Sheets. Certificates of deposit are report as Investment - current or Investment -noncurrent based on their remaining maturity days. Interest income from certificates of deposit are reported as Interest and other income (loss), neton the Condensed Consolidated Statement of Income and Comprehensive Income.
Current wording
Our cash equivalents, investments - current and investments - noncurrent consist primarily of money-market funds, investments in marketable equity and debt securities (including mutual funds), investments in U.S. treasury securities and certificates of deposit. All marketable securities are stated at market value. Realized gains and losses on marketable equity securities and marketable debt securities are recorded in Other income (expense), net on the Condensed Consolidated Statements of Operations and Comprehensive Income. Unrealized gains and losses on marketable equity securities (including mutual funds) are reported as Other income (expense), net on our Condensed Consolidated Statement of Operations and Comprehensive Income. Unrealized gains and losses on marketable debt securities reported as a component of Accumulated other comprehensive income on our Condensed Consolidated Balance Sheets. Certificates of deposit are reported as Investment - current or Investment -noncurrent based on their remaining maturity days. Interest income from certificates of deposit are reported as Interest and other income (loss), neton the Condensed Consolidated Statement of Operations and Comprehensive Income.
Previous wording
Cash, cash equivalents and investments-current -As of March 31, 2024, our cash, cash equivalents, and investments- current totaled $179.1 million, an increase of $18.7 million from $160.4 million on December 31, 2023.
Current wording
Cash, cash equivalents and investments-current -As of June 30, 2024, our cash, cash equivalents, and investments- current totaled $133.4 million, a $27.0 million decrease from $160.4 million on December 31, 2023. In addition, as of June 30, 2024, we had restricted cash of $14.6 million.
Previous wording
Net cash provided by operating activities was $29.9 million in the three months ended March 31, 2024, a $26.4 million increase compared to the same period in 2023. This cash increase was primarily attributable to a $10.0 million increase in net income and $16.9 million increase from changes in net operating assets partially offset by a $0.9 million decrease in non-cash items. The increase in cash from changes in net operating assets primarily consisted of $8.5 million increase in deferred revenue resulted from the Nintendo license agreement renewal and $6.1 million increase in income taxes payable.
Current wording
Net cash provided by operating activities was $8.8 million in the six months ended June 30, 2023, a $9.9 million decrease compared to the same period in 2022. This cash decrease was primarily attributable to a $15.7 million decrease from changes in non-cash items and $6.3 million decrease from changes in net operating assets partially offset by a $12.0 million increase in net income
Previous wording
Cash provided by (used in) investing activities - Our investing activities primarily consist of purchases of marketable securities and other investments and proceeds from disposal of marketable securities and other investments; proceeds from issuance of derivative instruments; payments made to settle derivative instruments and purchases of property and equipment.
Current wording
Cash used in investing activities - Our investing activities primarily consist of purchases of marketable securities and other investments and proceeds from disposal of marketable securities and other investments; proceeds from issuance of derivative instruments; payments made to settle derivative instruments and purchases of property and equipment.
Previous wording
Net cash provided in investing activities during the three months ended March 31, 2024 was $6.9 million primarily consisting of$48.7 million in proceeds from selling marketable securities and derivatives partially offset by a$40.9 million in cash used to purchase marketable securities and in the settlement of derivative instruments.
Current wording
Net cash used in investing activities during thesix months ended June 30, 2024 was $31.4 million primarily consisting of$87.4 million in cash used to purchase marketable securities and in the settlement of derivative instruments, $29.6 million cash used in business acquisition, net of cash acquired partially offset by$86.6 million in proceeds from selling marketable securities and derivatives.
Previous wording
Net cash used in investing activities during the three months ended March 31, 2023 was $19.7 million primarily consisting of $56.3 million in cash used to purchase marketable securities and in the settlement of derivative instrument partially offset by $36.6 million in proceeds from selling marketable securities and derivatives.
Current wording
Net cash used in investing activities during thesix 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 instrument partially offset by $81.9 million in proceeds from selling marketable securities and derivatives.
Previous wording
Net cash used in financing activities during thethree months March 31, 2024 was $1.7 million primarily consisting of $1.5 million in dividend payments, and $0.3 million in shares withheld to cover payroll taxes.
Current wording
Net cash used in financing activities during the six months ended 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.
Previous wording
Total cash, cash equivalents, and short-term investments were $179.1 million as of March 31, 2024 of which approximately 35%, or $63.4 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.
Current wording
Total cash, cash equivalents, and short-term investments were $133.4 million as of June 30, 2024 of which approximately 25%, 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.
Previous wording
On February 21, 2023, the Board declared a quarterly dividend, in the amount of $0.03 per share, which was paid on April 28, 2023 to stockholders of record on April 13, 2023.
Current wording
On November 13, 2023, our Board declared a quarterly dividend in the amount of $0.045 per share, which was paid on January 25, 2024 to stockholders of record on January 14, 2024.
Previous wording
On February 28, 2024, our Board declared a quarterly dividend in the amount of$0.045 per share, which was paid on April 19, 2024 to shareholders of record on April 12, 2024.
Current wording
On February 28, 2024, our Board declared a quarterly dividend in the amount of$0.045 per share, which was paid on April 19,2024, tostockholders of record on April 12,2024.
Previous wording
On December 29, 2022, our Board of Directors (the “Board”)approved a stock repurchase program of up to $50.0 million of our common stock for a period of up totwelve months (the “December 2022 Stock Repurchase Program”), which terminated and superseded the stock repurchase program that had been approved by the Board on February 23, 2022. Any stock repurchases may be made through open market and privately negotiated transactions, at such times and in such amounts as management deems appropriate, including pursuant toone or more Rule 10 b 5-1 trading plans adopted in accordance with Rule 10 b 5-1 of the Securities Exchange Act of 1934, as amended. Additionally, the Board authorized the use of any derivative or similar instrument to effect stock repurchase transactions, including without limitation, accelerated share repurchase contracts, equity forward transactions, equity option transactions, equity swap transactions, cap transactions, collar transactions, naked put options, floor transactions or other similar transactions or any combination of the foregoing transactions. The December 2022 Stock Repurchase Program was implemented as a method to return value to our stockholders. The timing, pricing and sizes of any repurchases will depend on a number of factors, including the market price of our common stock and general market and economic conditions. The December 2022 Stock Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be suspended or discontinued at any time. 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.
Current wording
On December 29, 2022, our Board approved a stock repurchase program of up to $50.0 million of our common stock for a period of up totwelve months (the “December 2022 Stock Repurchase Program”), which terminated and superseded the stock repurchase program that had been approved by the Board on February 23, 2022. Any stock repurchases may be made through open market and privately negotiated transactions, at such times and in such amounts as management deems appropriate, including pursuant toone or more Rule 10 b 5-1 trading plans adopted in accordance with Rule 10 b 5-1 of the Securities Exchange Act of 1934, as amended. Additionally, the Board authorized the use of any derivative or similar instrument to effect stock repurchase transactions, including without limitation, accelerated share repurchase contracts, equity forward transactions, equity option transactions, equity swap transactions, cap transactions, collar transactions, naked put options, floor transactions or other similar transactions or any combination of the foregoing transactions. The December 2022 Stock Repurchase Program was implemented as a method to return value to our stockholders. The timing, pricing and sizes of any repurchases will depend on a number of factors, including the market price of our common stock and general market and economic conditions. The December 2022 Stock Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be suspended or discontinued at any time. 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.
Previous wording
During 2023, we repurchased 1,217,774 shares of our common stock for $8.3 million at an average purchase price of $6.77 per share. We did not repurchase any stock during the three months ended March 31, 2024. As of March 31, 2024, we had $41.7 million available for repurchase under the December 2022 Stock Repurchase Program.
Current wording
As of June 30, 2024, we had $41.7 million available for repurchase under the December 2022 Stock Repurchase Program.
Previous wording
Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024, for a complete discussion of our critical accounting policies and estimates. The preparation of financial statements and related disclosures in conformity with U.S. GAAP and our discussion and analysis of our financial condition and operating results require the management to make judgments, assumptions and estimates that affect the amounts reported. See Note 1. Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 herein, which describes the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Current wording
Please refer toManagement's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 11, 2024, and Barnes & Noble Education's Annual Report on Form 10-K for the year ended April 27, 2024 for a complete discussion of our critical accounting policies and estimates. The preparation of financial statements and related disclosures in conformity with U.S. GAAP and our discussion and analysis of our financial condition and operating results require the management to make judgments, assumptions and estimates that affect the amounts reported. SeeNote 1. Significant Accounting Policies of the* Notes to Condensed Consolidated Financial Statements* in Part I, Item 1 herein, which describes the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Geographically, revenues generated in Asia, North America and Europe for the six months ended June 30, 2024 represented 58%,41%, and 1%, respectively, of our total revenue as compared to 83%,13%, and 4%, respectively, for the six months ended June 30, 2023.