Tessera Technologies, Inc. (TSRA)

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Tessera Technologies, Inc. (TSRA)

Q1 2009 Earnings Call

April 30, 2009 4:30 pm ET


Moriah Shilton - Senior Director, IR

Hank Nothhaft - President and CEO

Mike Anthofer - EVP and CFO


Brett Hodess - Banc of America

Bennett Notman - Davenport & Company

C. J. Muse - Barclays Capital

Kevin Vassily - Pacific Crest Securities

Raj Seth - Cowen & Company

Michael Cowen - MDC Financial Research



Good afternoon. My name is Lemont; and I will be your conference operator today. At this time I would like to welcome everyone to the first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you, Ms. Shilton. You may begin your conference.

Moriah Shilton

Thank you, Lemont and good afternoon, everyone. Thank you for joining us for the Tessera Technology’s First Quarter 2009 Earnings Conference Call. This call is being broadcast live over the internet. A webcast replay will be available at tessera.com for 90 days after the call.

In addition, a telephone replay of this call will be made available for two business days beginning approximately two hours after the completion of this call. To listen to the replay in the US, please dial 800-642-1687 and internationally dial 706-645-9291. The access code is 93592195.

I will now read a short Safe Harbor statement. During the course of this conference call management will make a number of forward-looking statements. Which are statements regarding future events including the future financial performance of the company. These forward-looking statements 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. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this call. More information about factors and they cause results to differ from the projections made in these forward-looking statements can be found in Tessera’s filings with the Securities and Exchange Commission including it’s annual report on Form 10-K for the year ended December 31, 2008 especially in the sections of these filings titled risk factors. The company disclaims any obligations to publicly update or revise any forward-looking statements to reflect events or circumstances that occur after this call.

On the call today from management are Hank Nothhaft, Tessera’s President and Chief Executive Officer and Mike Anthofer, Chief Financial Officer. During this call today, management will discuss certain non-GAAP financial measures for comparison purposes only and they will be using non-GAAP numbers in their prepared remarks. The non-GAAP amounts of cost of revenues; research and development; selling, general and administrative expenses; net income and earnings per share do not include the following: stock-based compensation, acquired intangibles, amortization charges, charges for acquired in-process research and development and related tax effects.

Management believes that non-GAAP amounts provide a more meaningful comparison, a measure of quarter-over-quarter and year-over-year financial performance. Please refer to the company’s first quarter 2009 earnings press release and to the company’s website for reconciliation of non-GAAP measures to GAAP.

After managements' opening remarks we will open the call to your questions. So, that management is able to respond to as many of you as possible, please restrict yourself to an opening and a follow-on question. And with that, I will turn the call over to Hank.

Hank Nothhaft

Thank you, Moriah. Greetings to all of you and thank your for your interest in Tessera. I will discuss our first quarter 2009 results and recent accomplishments and then open the call for your questions.

Total revenue for the first quarter of 2009 was $114.6 million. We managed expenses tightly during the quarter, particularly with respect to litigation, which was significantly below what we spend in the previous quarter.

We generated substantial free cash flow, which was driven primarily but not solely by the $64.1 million Amkor payment we received in the quarter. As a result, we now have $383.8 million in cash, cash equivalents and investments on our balance sheets.

In our Micro-electronics business, we generated $106.6 million in total revenue in the first quarter of 2009. 100% of which was royalties and license fees. With Amkor’s payment, we demonstrated strong growth year-over-year.

Our royalties and license fees without this payment exhibited slight growth year-over-year, which is encouraging considering the challenging macro economic environment that existed in fourth quarter.

Our royalties and license fees were negatively impacted by non-payment by Qimonda, who has publicly declared insolvency in Germany.

Over the next few quarters, we believe this company’s market share will be absorbed by other suppliers, some of them are licensees of ours.

When looking at our overall served markets of computing and wireless mobile devices, we believe there was an inventory burn off in the first quarter as companies cut back unit shipments more than end demand dropped. This later resulted in many rush orders and we are seeing company's first quarter results are stronger then anticipated, although still significantly compared to the first quarter one year ago.

Short term visibility has improved a bit although it is still not clear if current improving conditions are sustainable. The second half of 2009 should be higher then first half due to typical seasonality. However, the macro economic outlook is still uncertain. Regards to some of our longer term efforts in the first quarter, we continued to make progress with our Micro pillar interconnect platform and in our thermal management efforts.

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