) reported first-quarter 2013 net loss of 41 cents, which was
greater than the Zacks Consensus Estimate of a loss of 27
Tessera's reported revenues of $31.1 million, down 41.5%
sequentially and 33.3% year over year, in line with the Zacks
In the first quarter, Intellectual Property continued to
generate the bulk of Tessera's revenues (82%) compared to just
18% for Digital Optics. Intellectual Property revenues were down
40.4% sequentially and 34.3% year over year.
The broadening of its relationship with Hynix (an 8-year
contract) should help revenues in the future. Tessera has had
problems with its largest licensees:
), Powertech and SK Hynix that have impacted its revenues over
the past year.
Tessera has come out winner in some cases, for instance, the
$1.5 million it recovered in past production payments in the last
quarter. Notably, the company recovered $24.7 million in past
production payments in the Dec quarter, which was the main reason
for the sequential decline. Excluding these amounts in both
periods, core revenue was up 3.8% sequentially.
Tessera is also developing other licensable technology beyond
the traditional packaging area that should translate to
additional revenues going forward.
The Digital Optics line declined 46.3% sequentially and 28.2%
from last year. The sequential decline was due to reduced focus
on fixed camera module sales as management shifts focus to core
The GAAP gross margin was 74.5%, down 249 basis points (bps)
sequentially and 1,318 bps from a year ago. A high gross margin
is typical for a technology company that is largely dependent on
the licensing model.
Tessera's quarterly operating expenses were $87.7 million, up
30.7% from $67.1 million reported in the previous quarter and
70.1% from $51.5 million in the year-ago quarter. The operating
margin shrank 18,450 bps to -207.3%, impacted by much higher
research and development (R&D) and selling, general and
administrative (SG&A) expenses (as a percentage of sales).
Litigation charges have also jumped up and were more than 4X the
amount in the year-ago quarter.
Tessera's pro forma net loss was $21.4 million or 68.9% of
revenues compared to loss of $15.4 million or 28.9% of revenues
in the Dec 2012 quarter and loss of $3.3 million or 7.0% of
revenues in the Mar quarter of 2012. Our pro forma calculation
excludes restructuring charges and intangibles amortization
charges on a tax-adjusted basis but includes stock-based
compensation. The pro forma estimates may not match management's
presentation due to the inclusion/exclusion of some items that
were not considered by management.
Net loss on a GAAP basis was $44.6 million ($0.85 per share)
compared to net loss of $19.6 million ($0.38 per share) in the
Mar 2012 and $8.1 million ($0.16 per share) in the Dec quarter of
Tessera's balance sheet remains strong, despite the $39.9
million reduction in cash and short-term investments to $402.7
million. It has no debt.
Inventories were down 32.8% during the quarter, with turns
going from 32.5X to 31.4X. DSOs went from 20 to around 15.
Capital expenditure in the quarter was $68.1 million, down from
the fourth quarter capex of $72.5 million
Management declared a cash dividend of 10 cents per share for
the second quarter payable on Jun 13, 2013 to stockholders of
record at the close of business on May 23, 2013.
For the second quarter of 2013, Tessera expects revenues in
the range of $42 million-$50 million. Intellectual Property
revenues are expected in the range $38-$45 million whereas
Digital Optics revenues are expected in the range of $4-$5
million. GAAP operating expense is expected between $77- $81
million. GAAP loss per share is forecasted to be in the range of
40-45% with tax rate of 30%.
Tessera remains a company with good intellectual property,
which it has protected with great difficulty. However, management
is keen on shifting to a lower-margin but safer product-oriented
model involving camera modules for mobile devices.
We believe the company is on the right track as this could
reduce if not eliminate the significant litigation expenses it
has been incurring. The fact that the target market is
fast-growing is an added bonus. We are encouraged by the fact
that Samsung is licensing Tessera's unique software technology
for face recognition. Tessera will be the global supplier for
Samsung's latest flagship model, S4.
Tessera shares currently carry a Zacks Rank #2 (Buy). Other
technology stocks performing well at the moment include
Maxim Integrated Products Inc.
Lam Research Corp.
), both with a Zacks Rank #2 (Buy).
LAM RESEARCH (LRCX): Free Stock Analysis
MICRON TECH (MU): Free Stock Analysis Report
MAXIM INTG PDTS (MXIM): Free Stock Analysis
TESSERA TEC INC (TSRA): Free Stock Analysis
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