Feb. 5, 2014 12:05 UTC

Tessera Technologies Announces Fourth Quarter & Full Year 2013 Results

SAN JOSE, Calif.--(BUSINESS WIRE)-- 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|camTM 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,
2013

 

December 31,
2012

 
ASSETS
Current assets:
Cash and cash equivalents and short-term investments $ 359,587 $ 442,603
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, net (39,785 ) (10,523 )
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
December 31,

 

Twelve Months Ended
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 costs 22,061 24,920 86,488 88,762
Selling, general and administrative 16,148 22,916 82,236 92,533
Litigation expense 16,201 14,113 60,386 34,018
Restructuring, impairment of long-lived assets and other charges   45,285     2,524     63,907     2,524  
Total operating expenses 100,532 66,216 297,532 225,682
 
Operating loss from continuing operations (44,162 ) (18,640 ) (128,624 ) (15,844 )
Other income and expense, net   540     492     1,780     5,872  
 
Loss before income taxes from continuing operations (43,622 ) (18,148 ) (126,844 ) (9,972 )
Provision for (benefit from) income taxes   2,539     (5,410 )   24,483     1,144  
Loss from continuing operations (46,161 ) (12,738 ) (151,327 ) (11,116 )
Loss from discontinued operations, net of tax   (1,723 )   (7,878 )   (27,963 )   (19,109 )
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 declared per share $ 0.10   $ 0.10   $ 0.70   $ 0.30  
Weighted average number of shares used in per share calculations-basic   53,866     52,226     53,346     51,977  
Weighted average number of shares used in per share calculations-diluted   53,866     52,226     53,346     51,977  
 
TESSERA TECHNOLOGIES, INC.
RECONCILIATION TO NON-GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
 
 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

2013   2012 2013   2012
 
GAAP income (loss) from continuing operations $ (46,161 ) $ (12,738 ) $ (151,327 ) $ (11,116 )
Adjustments to GAAP net income (loss):
Stock-based compensation - research, development and other related costs 969 1,157 3,399 5,146
Stock-based compensation - selling, general and administrative 2,417 2,185 9,862 9,940
Amortization of acquired intangibles - cost of revenues 827 1,596 4,071 6,385

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

1,460 1,338 5,894 5,376
Amortization of acquired intangibles - selling, general and administration 2,890 2,871 11,597 11,530
Restructuring, impairment of long-lived assets and other charges 45,285 2,524 63,907 2,524
Tax adjustments for non-GAAP items   -     (2,481 )   (11,238 )   (10,531 )
 
Non-GAAP net income (loss) from continuing operations $ 7,687   $ (3,548 ) $ (63,835 ) $ 19,254  
Non-GAAP net income (loss) from continuing operations per common share - diluted $ 0.14   $ (0.07 ) $ (1.20 ) $ 0.36  
 
 

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

55,124 53,261 53,346 53,061
 
TESSERA TECHNOLOGIES, INC.
SEGMENT INFORMATION FROM CONTINUING OPERATIONS
(in thousands)
(unaudited)
 
 
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2013   2012 2013   2012
Revenues:
Intellectual Property Segment:
Royalty and license fees

$

49,129

$

43,024

$

149,972

$ 192,892
DigitalOptics Segment:
Royalty and license fees 7,241 4,552 18,936 16,946
               
Total revenues   56,370     47,576     168,908     209,838  
 
Operating Expenses:
Intellectual Property Segment 29,935 29,126 118,839 97,984
DigitalOptics Segment 64,641 25,779 137,559 80,675
Corporate Overhead   5,956     11,311     41,134     47,023  
 
Total operating expenses 100,532 66,216 297,532 225,682
 
Operating loss:
Intellectual Property Segment 19,194 13,898 31,133 94,908
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
December 31,

 

Twelve Months Ended
December 31,

2013   2012 2013   2012
Revenues from discontinued operations:
Product and service revenues $ 109 $ 5,660 $ 6,427 $ 24,185
       
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 and other related 241 2,831 5,903 11,919
Selling, general and administrative 6 1,321 3,771 4,762
Restructuring, impairment of long-lived assets and other charges 1,368 - 6,749 -
Impairment of goodwill   -     -     6,664     -  
 
Total operating expenses 1,626 14,670 34,325 49,202
 
Loss from discontinued operations before taxes   (1,517 )   (9,010 )   (27,898 )   (25,017 )
Provision for (benefit from) income taxes   206     (1,132 )   65     (5,908 )
Net loss from discontinued operations $ (1,723 ) $ (7,878 ) $ (27,963 ) $ (19,109 )
 
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 revenue $ 38,404 $ 41,312 $ 38,029 $ 16,498 $ 19,138 $ 23,903 $ 22,836 $ 18,360
Episodic revenue   624   11,662   19,837   26,526   6,500   18,966   9,500   30,769
Total Intellectual Property revenues 39,028 52,974 57,866 43,024 25,638 42,869 32,336 49,129
 
DigitalOptics Segment:
Royalty and license fees
Recurring revenue   4,510   5,341   2,543   4,552   3,026   3,745   4,924   7,241
Total DigitalOptics revenues 4,510 5,341 2,543 4,552 3,026 3,745 4,924 7,241
               
Total revenues $ 43,538 $ 58,315 $ 60,409 $ 47,576 $ 28,664 $ 46,614 $ 37,260 $ 56,370

TSRA-E

Contacts

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


Source: Tessera Technologies, Inc.