Immersion Corporation Restates Financials Due to Barnes & Noble Education Investigation

Immersion Corporation Restates Financials Following Barnes & Noble Education Investigation

Immersion Corporation (IMMR) has restated its previously issued unaudited condensed consolidated financial statements for multiple interim periods, including the fiscal third quarter and nine months ended January 31, 2025, the fiscal second quarter and six months ended October 31, 2024, and the calendar second quarter and six months ended June 30, 2024. This action follows an investigation into accounting matters at Barnes & Noble Education, Inc., a consolidated variable interest entity of Immersion, primarily related to the recording of cost of digital sales. The investigation revealed that a former Barnes & Noble Education employee made unsupported manual journal entries that improperly reduced cost of sales in fiscal years ended April 27, 2024, and May 3, 2025, and that certain revenue recognized in the third quarter of fiscal 2025 related to First Day Complete was incorrectly accelerated.

The restatement also includes corrections related to lease accounting, textbook rental inventory, a legal settlement, remeasurement of noncontrolling interest, revenue recognition, and business combination accounting. Specifically, a review of Barnes & Noble Education’s aged textbook rental inventory identified $4.6 million of rental textbooks that should have been written off in prior fiscal years, and a $1.3 million class action settlement was incorrectly accrued. The restatement also corrected the timing of revenue recognition for a customer contract and the timing of the remeasurement of the noncontrolling interest in Barnes & Noble Education. As a result of these restatement adjustments, goodwill increased by $54.9 million.

Immersion reported total revenues of $1.56 billion for the fiscal year ended April 30, 2025, with $74.1 million coming from Immersion and $1.48 billion from Barnes & Noble Education. The company's net income was $93.6 million, or $1.90 per diluted share. Selling and administrative expenses for Immersion were $25.8 million, while Barnes & Noble Education's selling and administrative expenses totaled $252.8 million. The Immersion segment's revenue was primarily derived from fixed fee license agreements and per-unit royalty agreements, with 64% and 24% of total revenue generated from customers in the mobile communications and gaming/VR markets, respectively.

Looking ahead, Immersion aims to maximize profitable licensing opportunities and drive the adoption of its touch technology across markets. The company's strategy focuses on driving adoption of its patents and technologies, and monetizing its technology through licensing agreements. Immersion has adopted the Immersion Dodd-Frank Clawback Policy, but concluded that recovery of erroneously awarded compensation was not required in connection with the restatement. Management has concluded that the company's disclosure controls and procedures and internal control over financial reporting were not effective as of April 30, 2025, and is taking steps to remediate the material weaknesses in internal control over financial reporting.