Tessera Technologies Announces Second Quarter 2013 Results

  Tessera Technologies Announces Second Quarter 2013 Results

                       - Quarterly Dividend Declared -

Business Wire

SAN JOSE, Calif. -- July 31, 2013

Tessera Technologies, Inc. (NASDAQ: TSRA) (the “Company” or “we”) announced
its results for the second quarter ended June 30, 2013. Total revenue from
combined continuing operations and discontinued operations for the second
quarter of 2013 was $49.3 million, of which $46.6 million was from continuing
operations. Generally accepted accounting principles (GAAP) net loss from
continuing operations for the second quarter of 2013 was $24.0 million, or
$0.45 per basic share. Non-GAAP net loss for the second quarter of 2013 was
$12.3 million or $0.23 per basic share. Non-GAAP net loss excludes
non-recurring charges of $5.9 million, $5.2 million in amortization of
acquired intangibles, and $5.0 million of stock based compensation and the
related tax effect of such items of $4.4 million.

Year over Year Comparison

In the second quarter of 2013, total revenue from continuing operations was
$46.6 million. Compared with the Company’s second quarter of 2012 revenue from
continuing operations of $58.3 million, this is a decrease in total revenue
from continuing operations of $11.7 million. The decline was due to a decrease
in the Intellectual Property business revenue of $10.1 million and a decrease
in the DigitalOptics (DOC) revenue of $1.6 million.

The Company’s Intellectual Property revenue for the second quarter of 2013 was
$42.9 million, compared to $53.0 million in the year ago quarter. The $10.1
million decrease was due to the absence of royalty revenue from Micron
Technology, Inc., whose license agreement expired in May of 2012, and
Powertech Technology Inc. (PTI), who last made a payment in the third quarter
of 2012. Second quarter of 2013 Intellectual Property revenue included $18.9
million in episodic revenue.

The Company’s DOC revenue from continuing operations for the second quarter of
2013 was $3.7 million, compared to $5.3 million in the year ago quarter. The
$1.6 million decrease was due to lower revenues from the Company’s image
enhancement technologies.

Non-GAAP net loss for the second quarter of 2013 was $12.3 million or $0.23
per basic share. Non-GAAP net income/loss is defined as income/loss and
operating expenses adjusted for discontinued operations, restructuring and
other exit costs, acquired intangibles amortization, charges for acquired
in-process research and development, stock-based compensation expense,
impairment charges on long-lived assets and goodwill, and related tax effects.

“The second quarter of 2013 was a positive one for the Company in a few
areas,” stated Thomas Lacey, interim CEO of Tessera Technologies, Inc. “First,
we had our first quarter of increased recurring revenue from the two SK hynix
agreements announced in early January, which, as we have said, will generate
significantly higher recurring revenue from SK hynix on an annual basis.
Second, we received nearly $19 million of episodic revenue, which, as our
stockholders know, will be put towards the special dividend we will declare in
next year’s second quarter. And, we announced Samsung had licensed DOC’s Face
Detection and Face Tracking software technology for use in its Samsung Galaxy
S4s, the revenue impact of which we will start to see in the third quarter as
we recognize royalty revenue one quarter in arrears.

“For the remainder of 2013, we have three key priorities; relicense DRAM
manufacturers to our innovative IP patent portfolios, rationalize our DOC
strategy and determine the best strategic alternative for this business, and
stabilize and streamline our Company’s overall infrastructure and operations.
We have already taken significant steps and continue to make progress on all
fronts. I look forward to updating our stockholders on our progress in the
coming months.”

Discontinued Operations

Beginning in the second quarter of 2013, the Company has classified financial
results for its DigitalOptics facilities in Zhuhai, China and Charlotte, North
Carolina as discontinued operations. Refer to the discussion of discontinued
operations below for further details. Second quarter of 2013 discontinued
operations included total revenue of $2.7 million, GAAP operating expenses of
$7.8 million, and a tax benefit of $13.3 million. This compares with total
revenue from discontinued operations of $2.5 million, GAAP operating expenses
of $20.7 million and tax provision of $0.9 million in the first quarter of
2013. The expense decrease quarter over quarter reflects the Company’s winding
down of operations in its facility in Zhuhai during the second quarter as well
as higher restructuring and impairment charges incurred in the first quarter
related to the Zhuhai operation. The increase in tax benefit attributable to
discontinued operations in the second quarter is a reflection of the
allocation of total tax benefit between continuing and discontinued
operations.

Balance Sheet

Total current assets were $417.9 million at June 30, 2013, a decrease of $25.8
million from March 31, 2013. Cash, cash equivalents and short-term investments
were $380.5 million at June 30, 2013, a decrease of $22.2 million from March
31, 2013. The quarter over quarter decrease resulted from a combination of the
cash loss from operations of $13.7 million, $21.4 million of dividend
payments, $1.6 million net capital expenditures, and $1.7 million of
intellectual property purchases, offset by $16.8 million cash proceeds from
stock option exercises.

Dividends

On May 31, 2013, $16.1 million was paid to stockholders of record as of May
23, 2013, for a special cash dividend of $0.30 per common share. This dividend
is part of the capital allocation strategy outlined by the Company during the
second quarter, whereby a portion of episodic gains will be distributed
through annual special dividends and share repurchases.

On June 13, 2013, $5.3 million was paid to stockholders of record as of May
23, 2013, for the quarterly $0.10 per share of common stock cash dividend.

On July 17, 2013, the board of directors declared a cash dividend of $0.10 per
share of common stock for the third quarter, payable on Sept. 19, 2013, for
stockholders of record at the close of business on Aug. 29, 2013.

Financial Guidance

The Company’s financial guidance for the third quarter of 2013 is based on
results from continuing operations and excludes revenue and expenses
associated with discontinued operations. We have also provided below an
estimate of the net loss from discontinued operations for the third quarter of
2013.

For the third quarter, the Company’s guidance is as follows:

The Company expects total revenue for the upcoming third quarter of 2013 to
range between $35 million and $38 million. Intellectual Property revenue is
expected to range between $30 million and $33 million. The Company expects
DigitalOptics revenue to be approximately $5 million.

GAAP operating expenses are expected to range between $59 million and $63
million, and includes

  *Cost of sales, R&D, and SG&A roughly equal with the prior quarter,
  *Litigation expenses equal to or slightly below the prior quarter,
  *Amortization of intangibles of $5 million,
  *Stock based compensation expense of $3 million, and
  *$1 million for restructuring.

The Company’s assumed tax rate is 30%. The Company expects a net loss from
discontinued operations of between $1 million and $4 million.

Conference Call Information

The Company will hold its second quarter 2013 earnings conference call at 5:00
A.M. Pacific (8:00 A.M. Eastern) today. To access the call in the U.S., please
dial (888) 723-9308, and for international callers dial 706-643-3789,
approximately 10 minutes prior to the start of the conference call. The
conference call will also be broadcast live over the Internet and available
for replay for 90 days at www.tessera.com. In addition, a replay of the call
will be available via telephone for two business days, beginning two hours
after the call. To listen to the telephone replay in the U.S., please dial
855-859-2056. International callers please dial 404-537-3406. Enter access
code 16889460.

Safe Harbor Statement

This document contains forward-looking statements, which are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements involve risks and uncertainties that could
cause actual results to differ significantly from those projected,
particularly with respect to the Company’s financial results and guidance, the
effects and duration of the SK hynix patent license agreements and Samsung’s
license to DOC’s Face Detection and Face Tracking software, the declaration
and payment of dividends, the relicensing of DRAM manufacturers, DOC
strategies and strategic alternatives, and stabilizing and streamlining the
Company’s overall infrastructure and operations. Material factors that may
cause results to differ from the statements made include the plans or
operations relating to the Company's businesses; market or industry
conditions; changes in patent laws, regulation or enforcement, or other
factors that might affect the Company's ability to protect or realize the
value of its intellectual property; the expiration of license agreements and
the cessation of related royalty income; the failure, inability or refusal of
licensees to pay royalties; initiation, delays, setbacks or losses relating to
the Company's intellectual property or intellectual property litigations, or
invalidation or limitation of key patents; the timing and results, which are
not predictable and may vary in any individual proceeding, of any ICC ruling
or award, including in the Amkor arbitration; fluctuations in operating
results due to the timing of new license agreements and royalties, or due to
legal costs; the risk of a decline in demand for semiconductor and camera
module products; failure by the industry to use technologies covered by the
Company's patents; the expiration of the Company's patents; the Company's
ability to successfully complete and integrate acquisitions of businesses; the
risk of loss of, or decreases in production orders from, customers of acquired
businesses; financial and regulatory risks associated with the international
nature of the Company's businesses; failure of the Company's products to
achieve technological feasibility or profitability; failure to successfully
commercialize the Company's products; changes in demand for the products of
the Company's customers; limited opportunities to license technologies and
sell products due to high concentration in the markets for semiconductors and
related products and camera modules; the impact of competing technologies on
the demand for the Company's technologies and products; and the reliance on a
limited number of suppliers for the components used in the manufacture of DOC
products. You are cautioned not to place undue reliance on the forward-looking
statements, which speak only as of the date of this release. The Company's
filings with the Securities and Exchange Commission, including its Annual
Report on Form 10-K for the year ended Dec. 31, 2012, and its Quarterly Report
on Form 10-Q for the quarter ended March 31, 2013, include more information
about factors that could affect the Company's financial results. The Company
assumes no obligation to update information contained in this press release.
Although this release may remain available on the Company's website or
elsewhere, its continued availability does not indicate that the Company is
reaffirming or confirming any of the information contained herein.

About Tessera Technologies, Inc.

Tessera Technologies, Inc. is a holding company with operating subsidiaries in
two segments: Intellectual Property and DigitalOptics. Our Intellectual
Property segment, managed by Tessera Intellectual Property Corp., generates
revenue from manufacturers and other implementers that use our technology. Our
DigitalOptics business delivers innovation in imaging systems for smartphones.
For more information call 1.408.321.6000 or visit www.tessera.com.

Tessera, the Tessera logo, DOC, the DOC logo, and Invensas Corporation are
trademarks or registered trademarks of affiliated companies of Tessera
Technologies, Inc. in the United States and other countries. All other
company, brand and product names may be trademarks or registered trademarks of
their respective companies.

Recurring and Episodic Revenue

Recurring revenue is defined as revenue from payments made pursuant to a
license agreement or other agreement that are scheduled to occur over at least
one year of time. Episodic revenue is revenue other than revenue payable over
at least one year pursuant to a contract. Episodic revenue includes
non-recurring engineering fees, initial license fees, back payments resulting
from audits, damages awards from courts or other tribunals, and lump sum
settlement payments. Although the royalty revenue reported by the Company’s
licensees quarterly is generally not assured, for ease of reference, the
Company refers to these revenues as “recurring revenue”.

Importantly, a source of episodic revenue may become a source of recurring
revenue, when, for example, a company settles litigation with the Company by
paying a settlement amount and entering into a license agreement that calls
for an initial license fee and ongoing royalty payment over several years. In
that scenario, the settlement amount would be episodic revenue, as would the
initial license fee, and the ongoing royalties would be recurring revenue.

Discontinued Operations

In March of 2013, the Company determined its DigitalOptics business was to be
restructured and announced its plans to close its facility in Zhuhai, China
and announced the consolidation of its manufacturing capabilities to Taiwan.
The Company will continue to assemble lens barrels and make limited quantities
camera modules in the Taiwan facility, but will increasingly rely on partners
for high volume manufacturing. In the fourth quarter of 2012, the Company
announced that its business in Charlotte, North Carolina was no longer part of
its long-term strategy, and that it was exploring strategic alternatives for
this business. In the second quarter of 2013, the Company actively pursued a
sale of this business. The Company has classified the revenue and expenses
related to the Zhuhai facility and the business in Charlotte as discontinued
operations starting with this second quarter of 2013, and also reclassified
results from those facilities to discontinued operations for all prior
reporting periods.

Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with U.S.
Generally Accepted Accounting Principles (GAAP), the Company’s earnings
release contains non-GAAP financial measures adjusted for discontinued
operations, either one-time or ongoing non-cash acquired intangibles
amortization charges, acquired in-process research and development, all forms
of stock-based compensation, impairment charges on long-lived assets and
goodwill, restructuring and other related exit costs, and related tax effects.
The non-GAAP financial measures also exclude the effects of FASB Accounting
Standards Codification 718, “Stock Compensation” upon the number of diluted
shares used in calculating non-GAAP earnings per share. Management believes
that the non-GAAP measures used in this release provide investors with
important perspectives into the Company’s ongoing business performance. The
non-GAAP financial measures disclosed by the Company should not be considered
a substitute for, or superior to, financial measures calculated in accordance
with GAAP, and the financial results calculated in accordance with GAAP and
reconciliations to those financial statements should be carefully evaluated.
The non-GAAP financial measures used by the Company may be calculated
differently from, and therefore may not be comparable to, similarly titled
measures used by other companies.

Set forth below are reconciliations of non-GAAP net loss to the Company’s
reported GAAP net loss.

                              - Tables Follow -

TESSERA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
                                               
                                                June 30,     December 31,
                                                 2013          2012
                                                               
ASSETS
Current assets:
Cash and cash equivalents                        $ 76,770      $  103,802
Short-term investments                             303,736        338,801
Accounts receivable, net                           2,237          8,440
Short-term deferred tax assets                     4,272          3,880
Assets held for sale                               4,311          -
Current assets of discontinued operations          13,256         19,331
Other current assets                              13,346       14,822  
Total current assets                              417,928      489,076 
                                                               
Property and equipment, net                        55,912         50,550
Intangible assets, net                             97,597         117,806
Long-term deferred tax assets                      57,738         22,499
Long-term assets of discontinued operations        730            18,224
Other assets                                      860          6,947   
Total assets                                     $ 630,765    $  705,102 
                                                               
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                 $ 6,135       $  11,984
Accrued legal fees                                 11,534         11,524
Accrued liabilities                                14,581         17,306
Deferred revenue                                   4,597          4,837
Current liabilities of discontinued operations    4,874        7,521   
Total current liabilities                         41,721       53,172  
                                                               
Long-term deferred tax liabilities                 -              3,102
Other long-term liabilities                        5,752          6,403
                                                               
Stockholders' equity:
Common stock                                       54             53
Additional paid-in capital                         508,751        480,347
Treasury stock                                     (10,854 )      (10,642 )
Accumulated other comprehensive income             (107    )      119
Retained earnings                                 85,448       172,548 
Total stockholders' equity                        583,292      642,425 
                                                               
Total liabilities and stockholders' equity       $ 630,765    $  705,102 
                                                               


TESSERA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
                                                              
                                                                   
                          Three Months Ended         Six Months Ended
                          June 30,                   June 30,
                          2013          2012         2013          2012
Revenues:
Royalty and license       $ 32,225      $ 58,185     $ 58,940      $ 101,449
fees
Past production             14,000        -            15,500        -
payments
Product and service        389         130        838         404     
revenues
Total revenues             46,614      58,315     75,278      101,853 
                                                                   
Operating expenses:
Cost of revenues            1,014         2,117        2,828         4,034
Research, development       20,170        21,521       43,575        42,231
and other related costs
Selling, general and        24,642        23,299       48,655        46,769
administrative
Litigation expense          17,406        6,724        31,487        10,216
Restructuring,
impairment of              5,947       -          17,600      -       
long-lived assets and
other charges
Total operating             69,179        53,661       144,145       103,250
expenses
                                                                   
Operating income (loss)
from continuing             (22,565 )     4,654        (68,867 )     (1,397  )
operations
Other income and           486         987        822         1,655   
expense, net
                                                                   
Income (loss) before
income taxes from           (22,079 )     5,641        (68,045 )     258
continuing operations
Provision for (benefit     1,899       3,977      (18,540 )    2,813   
from) income taxes
Income (loss) from          (23,978 )     1,664        (49,505 )     (2,555  )
continuing operations
Income (loss) from
discontinued               8,164       (2,073 )    (10,932 )    (5,942  )
operations, net of tax
Net loss                  $ (15,814 )   $ (409   )   $ (60,437 )   $ (8,497  )
Income (loss) per
share:
Income (loss) from
continuing operations:
Basic                     $ (0.45   )   $ 0.03      $ (0.94   )   $ (0.05   )
Diluted                   $ (0.45   )   $ 0.03      $ (0.94   )   $ (0.05   )
Income (loss) from
discontinued
operations:
Basic                     $ 0.15       $ (0.04  )   $ (0.21   )   $ (0.11   )
Diluted                   $ 0.15       $ (0.04  )   $ (0.21   )   $ (0.11   )
Net loss:
Basic                     $ (0.30   )   $ (0.01  )   $ (1.14   )   $ (0.16   )
Diluted                   $ (0.30   )   $ (0.01  )   $ (1.14   )   $ (0.16   )
                                                                
Cash dividends declared   $ 0.40       $ 0.10      $ 0.50       $ 0.10    
per share
                                                                   
Weighted average number
of shares used in per      53,157      51,881     52,789      51,765  
share
calculations-basic
                                                                   
Weighted average number
of shares used in per      53,984      52,072     52,789      51,765  
share
calculations-diluted
                                                                   


TESSERA TECHNOLOGIES, INC.
RECONCILIATION TO NON-GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS FROM GAAP
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
(in thousands, except per share amounts)
(unaudited)
                                                              
                                                                    
                         Three Months Ended           Six Months Ended
                         June 30,                     June 30,
                         2013          2012           2013          2012
                                                                    
GAAP income (loss)
from continuing          $ (23,978 )   $ 1,664        $ (49,505 )   $ (2,555 )
operations
Adjustments to GAAP
net loss:
Stock-based
compensation - cost of     80            248            134           398
revenues
Stock-based
compensation -
research, development      808           1,483          1,736         2,875
and other related
costs
Stock-based
compensation -             4,064         3,013          5,468         5,207
selling, general and
administrative
Amortization of
acquired intangibles -     824           1,596          2,420         3,193
cost of revenues
Amortization of
acquired intangibles -
research, development      1,468         1,353          2,984         2,706
and other related
costs
Amortization of
acquired intangibles -     2,892         2,899          5,815         5,826
selling, general and
administration
Restructuring,
impairment of              5,947         -              17,600        -
long-lived assets and
other charges
                                                                             
Tax adjustments for       (4,417  )    (2,786 )      (10,494 )    (5,252 )
non-GAAP items
                                                                             
Non-GAAP net income
(loss) from continuing   $ (12,312 )   $ 9,470       $ (22,842 )   $ 12,398 
operations
Non-GAAP net income
(loss) from continuing   $ (0.23   )   $ 0.18        $ (0.45   )   $ 0.23   
operations per common
share - diluted
                                                                    
Non-GAAP weighted
average number of
shares used in per
share calculations         53,157        52,897         52,789        52,919
excluding the effects
of stock-based
compensation - diluted
                                                                    

                                                             
TESSERA TECHNOLOGIES, INC.
SEGMENT INFORMATION FROM CONTINUING OPERATIONS
(in thousands)
(unaudited)

                                                                   
                       Three Months Ended            Six Months Ended
                       June 30,                      June 30,
                       2013          2012            2013          2012
Revenues:
Intellectual
Property Segment:
Royalty and license    $ 28,828      $ 52,974        $ 52,966      $ 92,002
fees
Past production          14,000        -               15,500        -
payments
Product and service     41          -             41          -       
revenues
Total Intellectual      42,869      52,974        68,507      92,002  
Property revenues
                                                                   
DigitalOptics
Segment:
Royalty and license      3,397         5,211           5,974         9,447
fees
Product and service     348         130           797         404     
revenues
Total DigitalOptics      3,745         5,341           6,771         9,851
revenues
                                                                
Total revenues          46,614      58,315        75,278      101,853 
                                                                   
Operating Expenses:
Intellectual             32,509        23,234          61,854        43,325
Property Segment
DigitalOptics            21,444        18,655          54,581        35,588
Segment
Corporate Overhead      15,226      11,772        27,710      24,337  
                                                                   
Total operating          69,179        53,661          144,145       103,250
expenses
                                                                   
Operating (income)
loss:
Intellectual             10,360        29,740          6,653         48,677
Property Segment
DigitalOptics            (17,699 )     (13,314 )       (47,810 )     (25,737 )
Segment
Corporate Overhead      (15,226 )    (11,772 )      (27,710 )    (24,337 )
                                                                   
Total operating
income (loss) from     $ (22,565 )   $ 4,654        $ (68,867 )   $ (1,397  )
continuing
operations
                                                                             

                                                               
TESSERA TECHNOLOGIES, INC.
NET INCOME (LOSS) OF DISCONTINUED OPERATIONS
(in thousands)
(unaudited)
                                                                    
                                                                    
                           Three Months Ended         Six Months Ended
                           June 30,                   June 30,
                           2013          2012         2013          2012
Revenues:
Product and service        $ 2,663       $ 3,109      $ 5,123       $ 6,244
revenues
                                                                 
Total revenues              2,663       3,109      5,123       6,244  
                                                                    
Operating Expenses:
Cost of revenues             3,292         3,480        9,420         7,323
Research, development        2,252         3,349        4,796         6,084
and other related
Selling, general and         1,695         1,138        2,932         2,279
administrative
Restructuring,
impairment of long-lived     544           -            4,646         -
assets and other charges
Impairment of goodwill      -           -          6,664       -      
                                                                    
Total operating expenses    7,783       7,967      28,458      15,686 
                                                                    
Loss from discontinued       (5,120  )     (4,858 )     (23,335 )     (9,442 )
operations before taxes
Benefit from income         (13,284 )    (2,785 )    (12,403 )    (3,500 )
taxes
Net income (loss) from     $ 8,164      $ (2,073 )   $ (10,932 )   $ (5,942 )
discontinued operations
                                                                    

TSRA-E

Contact:

Tessera Technologies, Inc.
Moriah Shilton, 408-321-6713
Sr. Director, Communications & Investor Relations