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8-K - 8-K - TESSERA TECHNOLOGIES INCd623668d8k.htm

Exhibit 99.1

 

LOGO

Company Contact:

Moriah Shilton

Sr. Director, Communications & Investor Relations

408-321-6713

TESSERA TECHNOLOGIES ANNOUNCES THIRD QUARTER 2013 RESULTS

- Quarterly Dividend Declared -

San Jose, Calif., Nov. 6, 2013 – Tessera Technologies, Inc. (NASDAQ: TSRA) (the “Company” or “we”) announced its results for the third quarter ended Sept. 30, 2013. Total revenue from continuing operations for the third quarter of 2013 was $37.3 million. Generally accepted accounting principles (GAAP) net loss from continuing operations for the third quarter of 2013 was $59.0 million, or $1.09 per basic share. Non-GAAP net loss for the third quarter of 2013 was $46.8 million or $0.87 per basic share. These GAAP and Non-GAAP net losses from continuing operations for the third quarter of 2013 include a provision for income taxes of $40.5 million due to a valuation allowance on the Company’s deferred tax assets.

Year over Year Comparison

Total revenue from continuing operations was $37.3 million in the third quarter of 2013, as compared with revenue from continuing operations of $60.4 million in the third quarter of 2012, a decrease of $23.1 million.

The Company’s Intellectual Property revenue for the third quarter of 2013 was $32.3 million, compared to $57.9 million in the year ago quarter. The $25.5 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. Third quarter of 2013 Intellectual Property revenue included $9.5 million in episodic revenue.

The Company’s DOC revenue from continuing operations for the third quarter of 2013 was $4.9 million, compared to $2.5 million in the year ago quarter. The $2.4 million increase was due to higher revenues from the Company’s image enhancement technologies.

The GAAP net loss from continuing operations for the third quarter was $59.0 million, or $1.09 per basic share. The GAAP net income from continuing operations for the third quarter of 2012 was $4.2 million, or $0.08 per diluted share. The GAAP tax provision from continuing operations was $40.5 million in the third quarter of 2013. The Company recorded a valuation allowance against substantially all of its federal deferred tax assets during the quarter, as it concluded such assets were no longer fully realizable given current uncertainties regarding the timing of future profits.

 

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Non-GAAP net loss for the third quarter of 2013 was $46.8 million or $0.87 per basic share, as compared to non-GAAP net income of $11.1 million in the third quarter of 2012. 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.

“In the third quarter of 2013, and the beginning of this quarter, we achieved key milestones for our DOC business,” stated Thomas Lacey, interim CEO of Tessera Technologies, Inc. “First, we sold a significant portion of the assets of our Micro-Optics business for $14.9 million. Second, we signed an agreement with Lite-On Technology Corp. for Lite-On to produce DOC’s mems|cam™ modules. We are now working closely together to ramp initial production in the fourth quarter. Finally, in October we announced that Guangdong Oppo Mobile Telecommunications Corp., Ltd (OPPO), a leading Chinese smartphone OEM, had placed the first high volume mems|cam production purchase order.

“Turning to the IP side of the business, we reached a settlement with Freescale Semiconductor, Inc., who made a payment to Tessera, Inc. in the third quarter. In our Invensas business, we announced that ADATA, a leading memory module maker, agreed to supply xFDTM based modules to the server market. In addition, we continue to work with Hermes, a leading semiconductor manufacturing and services company headquartered in Taiwan, who will complete their high volume manufacturing line for xFD components in the first quarter of 2014.

“In the current quarter, our efforts and attention are focused on our three near-term main 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 are making significant progress on all fronts and I look forward to updating you as developments unfold.”

“We are pleased with the overall progress on spending reductions and believe that conscious efforts to closely manage day-to-day spending decisions made by employees contributed to this reduction,” stated John Allen, acting CFO of Tessera Technologies, Inc. “Of note, due in part to our renewed focus and processes regarding our litigation spend, our quarter over quarter litigation expenses were down substantially. In addition, our SG&A expenses came in below our guidance due to prudent business development and patent analysis decisions, some activities of which may be pushed out into the fourth quarter.

“We remain on track for exiting 2013 with $29 million annual run rate in Corporate Overhead and $53 million exiting the year for combined DOC R&D and SG&A expense annual run rate, excluding cost of revenues and restructuring, impairment and other charges.”

Discontinued Operations

Third quarter of 2013 discontinued operations included total revenue of $1.2 million. GAAP operating expenses included a $2.6 million net gain from the sale of Micro-optics assets, offset by impairment and restructuring charges, resulting in total GAAP Operating Expenses of $860,000. The third quarter tax provision was $12.3 million, due to the allocation of the total tax provision between continuing and discontinued operations.

 

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Balance Sheet

Total current assets were $410.2 million at Sept. 30, 2013, a decrease of $7.8 million from June 30, 2013. Cash, cash equivalents and short-term investments were $376.8 million at Sept. 30, 2013, a decrease of $3.7 million from June 30, 2013. The quarter over quarter decrease resulted from a combination of the cash loss from operations of $19.9 million, $5.5 million of dividend payments, $5.0 million of stock repurchases pursuant to our stock repurchase program, and $1.7 million of capital expenditures, offset by $14.9 million in proceeds from the sale of a significant portion of the assets of the Company’s Micro-Optics business based in Charlotte, North Carolina and $13.4 million cash proceeds from the exercise of stock options and the purchase of stock under our employee stock purchase plans.

Dividends

On Sept. 19, 2013, $5.5 million was paid to stockholders of record as of Aug. 29, 2013, for the quarterly $0.10 per share of common stock cash dividend.

On Oct. 14, 2013, the board of directors declared a cash dividend of $0.10 per share of common stock for the third quarter, payable on Dec. 12, 2013, for stockholders of record at the close of business on Nov. 21, 2013.

Stock Repurchase Program

During the third quarter of 2013, the Company repurchased 259,000 shares for an aggregate amount of $5.0 million. As a reminder, in May 2013 the Company announced it expected to execute at least $16.0 million of stock repurchases through its stock repurchase program over the next four quarters based on the Company’s episodic gains in the prior four quarters. In November 2013 our Board of Directors increased the total authorized to be repurchased from $100.0 million to $150.0 million. The Company intends to use this new authorization to execute stock repurchases in excess of the previously committed $16.0 million of stock repurchases.

Financial Guidance

The Company’s financial guidance for the fourth quarter of 2013 is based on results from continuing operations and excludes revenue and expenses associated with discontinued operations.

 

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

The Company expects total revenue for the upcoming fourth quarter of 2013 to range between $56 million and $60 million. Intellectual Property revenue is expected to range between $48 million and $50 million. The Company expects DigitalOptics revenue to range between $8 million and $10 million, including initial product sales of its mems|cam camera modules and a one-time license fee related to a legacy DOC license agreement.

GAAP operating expenses are expected to range between $59 million and $63 million. Due to the anticipated ramp in production of the Company’s mems|cam modules in the fourth quarter, the Company expects cost of sales and R&D to be higher than the prior quarter. SG&A is expected to be higher than the prior quarter due to increased patent analysis and business development activities, some of which relate to anticipated expenses that moved from the third quarter to the fourth quarter. Litigation expenses are expected to be slightly higher than the prior quarter. The Company expects amortization of intangibles of $5.4 million and stock based compensation expense of $4 million.

Conference Call Information

The Company will hold its third quarter 2013 earnings conference call at 5:30 A.M. Pacific (8:30 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 84223120.

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

 

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to the Company’s financial results and guidance, mems|cam initial production ramp, the OPPO purchase order, ADATA’s agreement to supply xFD based modules, Hermes completion of their high volume manufacturing line, the Company’s near term priorities, including relicensing Samsung and Micron, DOC’s strategy and strategic alternatives, stabilizing the Company’s infrastructure and operations, spending reductions, the Company’s expected annual run rates in Corporate Overhead and DOC R&D and SG&A, the declaration and payment of dividends and future stock repurchases. 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 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.

 

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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 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 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.

 

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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 –

 

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TESSERA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     September 30,     December 31,  
     2013     2012  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 78,276      $ 103,802   

Short-term investments

     298,538        338,801   

Accounts receivable, net

     2,497        11,595   

Inventories

     —          1,507   

Short-term deferred tax assets

     929        3,880   

Current assets of discontinued operations

     3,543        —     

Other current assets

     26,370        15,701   
  

 

 

   

 

 

 

Total current assets

     410,153        475,286   
  

 

 

   

 

 

 

Property and equipment, net

     53,220        72,544   

Intangible assets, net

     93,342        120,432   

Long-term deferred tax assets

     —          22,499   

Other assets

     858        7,677   

Goodwill

     —          6,664   
  

 

 

   

 

 

 

Total assets

   $ 557,573      $ 705,102   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 5,885      $ 14,437   

Accrued legal fees

     12,437        11,726   

Accrued liabilities

     10,791        22,140   

Deferred revenue

     1,197        4,869   

Current liabilities of discontinued operations

     2,758        —     
  

 

 

   

 

 

 

Total current liabilities

     33,068        53,172   
  

 

 

   

 

 

 

Long-term deferred tax liabilities

     537        3,102   

Other long-term liabilities

     5,983        6,403   

Stockholders’ equity:

    

Common stock

     55        53   

Additional paid-in capital

     524,975        480,347   

Treasury stock

     (16,080     (10,642

Accumulated other comprehensive income

     60        119   

Retained earnings

     8,975        172,548   
  

 

 

   

 

 

 

Total stockholders’ equity

     517,985        642,425   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 557,573      $ 705,102   
  

 

 

   

 

 

 


TESSERA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2013     2012     2013     2012  

Total revenues

   $ 37,260      $ 60,409      $ 112,538      $ 162,262   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Cost of revenues

     850        2,068        3,678        6,102   

Research, development and other related costs

     20,852        21,611        64,427        63,842   

Selling, general and administrative

     17,433        22,848        66,088        69,617   

Litigation expense

     12,698        9,689        44,185        19,905   

Restructuring, impairment of long-lived assets and other charges

     4,403        —          22,003        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     56,236        56,216        200,381        159,466   

Operating income (loss) from continuing operations

     (18,976     4,193        (87,843     2,796   

Other income and expense, net

     418        3,725        1,240        5,380   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes from continuing operations

     (18,558     7,918        (86,603     8,176   

Provision for income taxes

     40,484        3,741        21,944        6,554   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     (59,042     4,177        (108,547     1,622   

Loss from discontinued operations, net of tax

     (11,927     (5,289     (22,859     (11,231
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (70,969   $ (1,112   $ (131,406   $ (9,609
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share:

        

Basic

   $ (1.31   $ (0.02   $ (2.47   $ (0.19
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ (1.31   $ (0.02   $ (2.47   $ (0.19
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash dividends declared per share

   $ 0.10      $ 0.10      $ 0.60      $ 0.20   
  

 

 

   

 

 

   

 

 

   

 

 

 


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     Nine Months Ended  
     September 30,     September 30,  
     2013     2012     2013     2012  

GAAP income (loss) from continuing operations

   $ (59,042   $ 4,177      $ (108,547   $ 1,622   

Adjustments to GAAP net loss:

        

Stock-based compensation - research, development and other related costs

     694        1,114        2,430        3,989   

Stock-based compensation - selling, general and administrative

     1,977        2,548        7,445        7,755   

Amortization of acquired intangibles - cost of revenues

     824        1,596        3,244        4,789   

Amortization of acquired intangibles - research, development and other related costs

     1,450        1,332        4,434        4,038   

Amortization of acquired intangibles - selling, general and administration

     2,892        2,833        8,707        8,659   

Restructuring, impairment of long-lived assets and other charges

     4,403        —          22,003        —     

Tax adjustments for non-GAAP items

     —          (2,503     —          (7,755
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income (loss) from continuing operations

   $ (46,802   $ 11,097      $ (60,284   $ 23,097   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income (loss) from continuing operations per common share - diluted

   $ (0.87   $ 0.21      $ (1.13   $ 0.44   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares used in per share calculations excluding the effects of FAS123R - diluted

     54,076        53,029        53,199        52,986   


TESSERA TECHNOLOGIES, INC.

SEGMENT INFORMATION FROM CONTINUING OPERATIONS

(in thousands)

(unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2013     2012     2013     2012  

Revenues:

        

Intellectual Property Segment:

        

Royalty and license fees

   $ 21,936      $ 57,721      $ 74,902      $ 149,723   

Past production payments

     9,900        79        25,400        79   

Product and service revenues

     500        66        541        66   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Intellectual Property revenues

     32,336        57,866        100,843        149,868   

DigitalOptics Segment:

        

Royalty and license fees

     4,798        2,393        10,772        11,840   

Product and service revenues

     126        150        923        554   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total DigitalOptics revenues

     4,924        2,543        11,695        12,394   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     37,260        60,409        112,538        162,262   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expenses:

        

Intellectual Property Segment

     27,050        25,533        88,904        68,858   

DigitalOptics Segment

     21,718        19,308        76,299        54,896   

Corporate Overhead

     7,468        11,375        35,178        35,712   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     56,236        56,216        200,381        159,466   

Operating (income) loss:

        

Intellectual Property Segment

     5,286        32,333        11,939        81,010   

DigitalOptics Segment

     (16,794     (16,765     (64,604     (42,502

Corporate Overhead

     (7,468     (11,375     (35,178     (35,712
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating income (loss)

   $ (18,976   $ 4,193      $ (87,843   $ 2,796   
  

 

 

   

 

 

   

 

 

   

 

 

 


TESSERA TECHNOLOGIES, INC.

NET LOSS OF DISCONTINUED OPERATIONS

(in thousands)

(unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2013     2012     2013     2012  

Revenues:

        

Product and service revenues

   $ 1,195      $ 12,281      $ 6,318      $ 18,525   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     1,195        12,281        6,318        18,525   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expenses:

        

Cost of revenues

     1,807        14,680        11,227        22,003   

Research, development and other related

     866        3,004        5,662        9,088   

Selling, general and administrative

     833        1,162        3,765        3,441   

Restructuring, impairment of long-lived assets and other charges

     (2,646     —          2,000        —     

Impairment of goodwill

     —          —          6,664        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     860        18,846        29,318        34,532   

Operating income (loss) from discontinued operations before taxes

     335        (6,565     (23,000     (16,007
  

 

 

   

 

 

   

 

 

   

 

 

 

Provision for (benefit from) income taxes

     12,262        (1,276     (141     (4,776
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss from discontinued operations

   $ (11,927   $ (5,289   $ (22,859   $ (11,231