Tessera Technologies Announces Fourth Quarter & Full Year 2013 Results

  Tessera Technologies Announces Fourth Quarter & Full Year 2013 Results

Business Wire

SAN JOSE, Calif. -- February 5, 2014

Tessera Technologies, Inc. (NASDAQ: TSRA) (the “Company” or “we”) announced
its results for the fourth quarter and full year ended Dec. 31, 2013. Total
revenue from continuing operations for the fourth quarter of 2013 was $56.4
million. Generally accepted accounting principles (GAAP) net loss from
continuing operations for the fourth quarter of 2013 was $46.2 million, or
$0.86 per basic share, and included $45.3 million in impairment charges
primarily related to the Company’s previously announced decision to stop its
mems|cam^TM manufacturing business. Non-GAAP net income for the fourth quarter
of 2013 was $7.7 million or $0.14 per diluted share.

“At Tessera we are laser focused on our core business again and fully expect
the Company to return to Non-GAAP profitability based on our recurring revenue
alone in 2014 which was bolstered by our recent signing of license agreements
with Samsung Electronics, Co Ltd.,” stated Thomas Lacey, CEO of Tessera
Technologies, Inc. “Tessera is at a strategic inflection point in its history
and is well positioned for future growth. We are excited for the opportunities
that lie ahead.”

Year over Year Comparison

Total revenue from continuing operations was $56.4 million in the fourth
quarter of 2013, as compared with revenue from continuing operations of $47.6
million in the fourth quarter of 2012, an increase of $8.8 million.

The Company’s Intellectual Property revenue for the fourth quarter of 2013 was
$49.1 million, compared to $43.0 million in the year ago quarter. The $6.1
million increase was primarily due to increased royalty revenue from SK hynix,
Inc., as compared to the prior year’s fourth quarter, and greater episodic
revenue in the fourth quarter of 2013 compared to 2012. Fourth quarter of 2013
Intellectual Property revenue included $30.8 million in episodic revenue
compared to $26.5 million in the fourth quarter of 2012.

The Company’s DigitalOptics (DOC) revenue from continuing operations for the
fourth quarter of 2013 was $7.2 million, compared to $4.6 million in the year
ago quarter. The $2.6 million increase was due to a one-time license fee
related to a legacy DOC license agreement, offset by lower product and
services revenue in the fourth quarter of 2013 as compared to 2012.

The GAAP net loss from continuing operations for the fourth quarter was $46.2
million, or $0.86 per basic share. The GAAP net loss from continuing
operations for the fourth quarter of 2012 was $12.7 million, or $0.24 per
basic share.

Non-GAAP net income for the fourth quarter of 2013 was $7.7 million or $0.14
per diluted share, as compared to non-GAAP net loss in the fourth quarter of
2012 of $3.5 million or $0.07 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.

Year Ended Dec. 31, 2013

Total revenue from continuing operations was $168.9 million in the full year
ended Dec. 31, 2013. The Company’s Intellectual Property revenue for the full
year was $150.0 million and the Company’s DOC revenue from continuing
operations for the full year was $18.9 million. GAAP net loss from continuing
operations for the year was $151.3 million, or $2.84 per basic share. Non-GAAP
net loss from continuing operations for the year was $63.8 million, or $1.20
per basic share.

Discontinued Operations

Fourth quarter of 2013 discontinued operations included total revenue of
$109,000. GAAP net loss from discontinued operations was $1.7 million, or
$0.03 per basic share. For the full year ended Dec. 31, 2013, discontinued
operations included total revenue of $6.4 million. Full year GAAP net loss
from discontinued operations was $28.0 million, or $0.52 per basic share.

Balance Sheet

Total current assets were $393.3 million at Dec. 31, 2013, a decrease of $16.8
million from Sept. 30, 2013. Cash, cash equivalents and short-term investments
were $359.6 million at Dec. 31, 2013, a decrease of $17.2 million from Sept.
30, 2013. The Company generated $12.0 million in cash from operations in the
fourth quarter of 2013. This was offset by $23.8 million of stock repurchases
pursuant to the Company’s stock repurchase program, $5.4 million of dividend
payments, and $1.0 million of patent purchases.

Dividends

On Dec. 12, 2013, $5.4 million was paid to stockholders of record as of Nov.
21, 2013, for the quarterly $0.10 per share of common stock cash dividend.

Stock Repurchase Program

During the fourth quarter of 2013, the Company repurchased 1.24 million shares
for an aggregate amount of $23.8 million. These purchases were executed under
the Company’s stock repurchase program. The Company’s Board of Directors in
November 2013 increased the total amount authorized to be repurchased from
$100.0 million to $150.0 million. For the full year 2013, Tessera repurchased
1.5 million shares under its stock repurchase program for an aggregate amount
of $28.8 million. This amount is greater than the amount purchased by the
Company in the entire 2007 – 2012 time period.

Financial Guidance

For the first quarter of 2014, the Company’s guidance is as follows:

The Company expects total revenue for the upcoming first quarter of 2014 to
range between $33 million and $36 million. GAAP operating expenses are
expected to range between $51 million and $53 million. Litigation expenses are
expected to be lower than the prior quarter. The Company expects approximately
$12.0 million of restructuring charges and other related exit costs,
amortization of intangibles of approximately $4.7 million and stock based
compensation expense of approximately $4.0 million.

Supplemental Presentation

Management will be using a supplemental presentation on its fourth quarter and
full year ended Dec. 31, 2013, earnings conference call to help investors
better understand the current state of the Company and its growth
expectations, especially after the recent announcements of the Company’s
subsidiaries Tessera, Inc. and Invensas Corporation each entering into new
patent license agreements with Samsung Electronics Co., Ltd. and DOC exiting
its mems|cam manufacturing business. The presentation may be accessed via this
link: http://ir.tessera.com/.

Conference Call Information

The Company will hold its fourth quarter and full year ended Dec. 31, 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 615-489-8916, 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 51790674.

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 Company's financial results and guidance, the
impact of the Company’s decision to cease its mems|cam manufacturing
operations, achievement of profitability, strategic decisions and
opportunities, expected recurring revenue, the declaration and payment of
dividends and future stock repurchases, and the impact of the new license
agreements with Samsung. Material factors that may cause results to differ
from the statements made include the plans or operations relating to the
Company's businesses; any need to spend more cash and/or incur greater charges
than anticipated in connection with the DOC restructuring, workforce
reduction, facility closures and related activities; any need to undertake
further restructuring activities; 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 products utilizing DOC
technologies; 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; and the impact of competing technologies
on the demand for the Company's technologies and 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 Sept. 30, 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, Invensas Corporation, mems|cam
and xFD 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 June of 2013, the Company closed its camera module assembly facility in
Zhuhai, China and announced the consolidation of its manufacturing
capabilities to Taiwan. The Company planned to continue to assemble lens
barrels and make limited quantities of camera modules in the Taiwan facility,
and rely on partners for high volume manufacturing. In August of 2013, the
Company sold a significant portion of its Micro-Optics business based in
Charlotte, NC. The Company has classified the revenue and expenses related to
the Zhuhai facility and the business in Charlotte as discontinued operations
starting with the 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.


TESSERA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

                                                  December 31,  December 31,
                                                   2013           2012
                                                                  
ASSETS
Current assets:
Cash and cash equivalents and short-term           $  359,587     $  442,603
investments
Current assets of discontinued operations             5,829          -
Other current assets                                 27,921       32,683  
Total current assets                                 393,337      475,286 
                                                                  
Intangibles and property and equipment, net           92,575         192,976
Other assets                                         1,759        36,840  
Total assets                                       $  487,671    $  705,102 
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities           $  33,586      $  48,303
Deferred revenue and other                           1,556        4,869   
Total current liabilities                            35,142       53,172  
                                                                  
Other long-term liabilities                           5,827          9,505
                                                                  
Stockholders' equity:
Common stock and additional paid-in capital           530,817        480,400
Treasury stock and other comprehensive income,        (39,785 )      (10,523 )
net
Retained earnings (accumulated deficit)              (44,330 )     172,548 
Total stockholders' equity                           446,702      642,425 
                                                                  
Total liabilities and stockholders' equity         $  487,671    $  705,102 


TESSERA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)


                       Three Months Ended         Twelve Months Ended
                        December 31,                December 31,
                        2013         2012          2013          2012
                                                                   
Total revenues          $ 56,370     $ 47,576     $ 168,908     $ 209,838 
                                                                   
Operating expenses:
Cost of revenues          837           1,743         4,515          7,845
Research, development
and other related         22,061        24,920        86,488         88,762
costs
Selling, general and      16,148        22,916        82,236         92,533
administrative
Litigation expense        16,201        14,113        60,386         34,018
Restructuring,
impairment of            45,285      2,524       63,907       2,524   
long-lived assets and
other charges
Total operating           100,532       66,216        297,532        225,682
expenses
                                                                   
Operating loss from       (44,162 )     (18,640 )     (128,624 )     (15,844 )
continuing operations
Other income and         540         492         1,780        5,872   
expense, net
                                                                   
Loss before income
taxes from continuing     (43,622 )     (18,148 )     (126,844 )     (9,972  )
operations
Provision for
(benefit from) income    2,539       (5,410  )    24,483       1,144   
taxes
Loss from continuing      (46,161 )     (12,738 )     (151,327 )     (11,116 )
operations
Loss from
discontinued             (1,723  )    (7,878  )    (27,963  )    (19,109 )
operations, net of
tax
Net loss                $ (47,884 )   $ (20,616 )   $ (179,290 )   $ (30,225 )
Earnings per share:
Loss from continuing
operations:
Basic                   $ (0.86   )   $ (0.24   )   $ (2.84    )   $ (0.21   )
Diluted                 $ (0.86   )   $ (0.24   )   $ (2.84    )   $ (0.21   )
Loss from
discontinued
operations:
Basic                   $ (0.03   )   $ (0.15   )   $ (0.52    )   $ (0.37   )
Diluted                 $ (0.03   )   $ (0.15   )   $ (0.52    )   $ (0.37   )
Net loss:
Basic                   $ (0.89   )   $ (0.39   )   $ (3.36    )   $ (0.58   )
Diluted                 $ (0.89   )   $ (0.39   )   $ (3.36    )   $ (0.58   )
                                                                   
Cash dividends          $ 0.10       $ 0.10       $ 0.70        $ 0.30    
declared per share
Weighted average
number of shares used    53,866      52,226      53,346       51,977  
in per share
calculations-basic
Weighted average
number of shares used    53,866      52,226      53,346       51,977  
in per share
calculations-diluted


TESSERA TECHNOLOGIES, INC.
RECONCILIATION TO NON-GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS
(in thousands, except per share amounts)
(unaudited)


                       Three Months Ended         Year Ended
                        December 31,                December 31,
                       2013         2012          2013          2012
                                                                   
GAAP income (loss)
from continuing         $ (46,161 )   $ (12,738 )   $ (151,327 )   $ (11,116 )
operations
Adjustments to GAAP
net income (loss):
Stock-based
compensation -
research, development     969           1,157         3,399          5,146
and other related
costs
Stock-based
compensation -            2,417         2,185         9,862          9,940
selling, general and
administrative
Amortization of
acquired intangibles      827           1,596         4,071          6,385
- cost of revenues
Amortization of
acquired intangibles
- research,               1,460         1,338         5,894          5,376
development and other
related costs
Amortization of
acquired intangibles      2,890         2,871         11,597         11,530
- selling, general
and administration
Restructuring,
impairment of             45,285        2,524         63,907         2,524
long-lived assets and
other charges
Tax adjustments for      -           (2,481  )    (11,238  )    (10,531 )
non-GAAP items
                                                                             
Non-GAAP net income
(loss) from             $ 7,687      $ (3,548  )   $ (63,835  )   $ 19,254  
continuing operations
Non-GAAP net income
(loss) from
continuing operations   $ 0.14       $ (0.07   )   $ (1.20    )   $ 0.36    
per common share -
diluted
                                                                   
                                                                   
Weighted average
number of shares used
in per share              55,124        53,261        53,346         53,061
calculations
excluding the effects
of FAS123R - diluted


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


                       Three Months Ended         Twelve Months Ended
                        December 31,                December 31,
                        2013         2012          2013          2012
Revenues:
Intellectual Property
Segment:
Royalty and license     $ 49,129      $ 43,024      $ 149,972      $ 192,892
fees
DigitalOptics
Segment:
Royalty and license       7,241         4,552         18,936         16,946
fees
                                                              
Total revenues           56,370      47,576      168,908      209,838 
                                                                     
Operating Expenses:
Intellectual Property     29,935        29,126        118,839        97,984
Segment
DigitalOptics Segment     64,641        25,779        137,559        80,675
Corporate Overhead       5,956       11,311      41,134       47,023  
                                                                     
Total operating           100,532       66,216        297,532        225,682
expenses
                                                                     
Operating loss:
Intellectual Property     19,194        13,898        31,133         94,908
Segment
DigitalOptics Segment     (57,400 )     (21,227 )     (118,623 )     (63,729 )
Corporate Overhead       (5,956  )    (11,311 )    (41,134  )    (47,023 )
                                                                     
Total operating loss    $ (44,162 )   $ (18,640 )   $ (128,624 )   $ (15,844 )


TESSERA TECHNOLOGIES, INC.
NET LOSS FROM DISCONTINUED OPERATIONS
(in thousands)
(unaudited)


                          Three Months Ended       Twelve Months Ended
                           December 31,              December 31,
                           2013        2012         2013         2012
Revenues from
discontinued operations:
Product and service        $ 109        $ 5,660      $ 6,427       $ 24,185
revenues
                                                                
Total revenues              109        5,660      6,427       24,185  
                                                                   
Operating expenses from
discontinued operations:
Cost of revenues             11           10,518       11,238        32,521
Research, development        241          2,831        5,903         11,919
and other related
Selling, general and         6            1,321        3,771         4,762
administrative
Restructuring,
impairment of long-lived     1,368        -            6,749         -
assets and other charges
Impairment of goodwill      -          -          6,664       -       
                                                                   
Total operating expenses     1,626        14,670       34,325        49,202
                                                                   
Loss from discontinued      (1,517 )    (9,010 )    (27,898 )    (25,017 )
operations before taxes
Provision for (benefit      206        (1,132 )    65          (5,908  )
from) income taxes
Net loss from              $ (1,723 )   $ (7,878 )   $ (27,963 )   $ (19,109 )
discontinued operations


TESSERA TECHNOLOGIES, INC.
QUARTERLY REVENUE BY SEGMENT – NON-GAAP
(in thousands)
(unaudited)


               Mar 31,   Jun 30,   Sep 30,   Dec 31,   Mar 31,   Jun 30,   Sep 30,   Dec 31,
                2012       2012       2012       2012       2013       2013       2013       2013
Revenues:
Intellectual
Property                                                                                     
Segment:
Royalty and
license fees
Recurring       $ 38,404   $ 41,312   $ 38,029   $ 16,498   $ 19,138   $ 23,903   $ 22,836   $ 18,360
revenue
Episodic         624       11,662    19,837    26,526    6,500     18,966    9,500     30,769
revenue
Total
Intellectual      39,028     52,974     57,866     43,024     25,638     42,869     32,336     49,129
Property
revenues
                                                                                             
DigitalOptics
Segment:
Royalty and
license fees
Recurring        4,510     5,341     2,543     4,552     3,026     3,745     4,924     7,241
revenue
Total
DigitalOptics     4,510      5,341      2,543      4,552      3,026      3,745      4,924      7,241
revenues
                                                                                      
Total           $ 43,538   $ 58,315   $ 60,409   $ 47,576   $ 28,664   $ 46,614   $ 37,260   $ 56,370
revenues

TSRA-E

Contact:

Tessera Technologies, Inc.
Robert Andersen, 408-321-6779
Executive Vice President and Chief Financial Officer
Moriah Shilton, 408-321-6713
Sr. Director, Communications & Investor Relations
 
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