Tessera Technologies Announces First Quarter 2007 Financial Results

Tessera Technologies, Inc. (Nasdaq:TSRA), a leading provider of miniaturization technologies for the electronics industry, announced today its results for the first quarter ended March 31, 2007. "Increased use of chip scale packaging and market share gains drove our first quarter royalties and license fees up 84 percent compared to the prior year’s quarter, with total revenues for the first quarter 2007 reaching $46.8 million,” stated Bruce McWilliams, Tessera’s chairman, president and chief executive officer. "For the year 2007, we believe our royalties and license fees will grow approximately 55 percent as compared to 2006.” Revenue Highlights: First Quarter 2007 Total revenue was $46.8 million. Royalties and license fees were $35.7 million. Payments for past production were $1.7 million. Product and service revenues were $9.4 million. Generally accepted accounting principles (GAAP) net income for the first quarter of 2007 was $11.1 million, or $0.23 per diluted share. Pro forma net income for the first quarter of 2007 was $24.5 million and pro forma net income per diluted share was $0.51. Pro forma net income is defined as income excluding non-cash tax expense, stock-based compensation and non-cash amortization charges related to acquisitions. Pro forma net income per share equals pro forma net income divided by the weighted diluted share count as of that period end. "We continue to focus our efforts to ensure Tessera will be a leading developer of semiconductor and consumer optics technologies for years to come,” continued McWilliams. "In April, we announced our MicroPILRTM Interconnect platform, which we believe will be a fundamental building block for next-generation mobile, computing and consumer electronics products. We also advanced our wafer level camera technology development efforts, and with the acquisition of Eyesquad now have several key enabling consumer optics technologies we believe meet the industry’s needs for smaller and more cost effective solutions. We believe our consumer optics efforts will expand our customer base, broaden our addressable markets, and substantially enhance our long-term growth potential.” 2007 Financial Guidance "The first quarter of 2007 exceeded our revenue expectations due to solid performance in our core royalties and licenses business, and continued contributions from our compliance program. In addition, operating cash flow in the first quarter reached almost 60 percent of revenues,” stated Charles Webster, Tessera’s chief financial officer. "Although the second quarter has historically been a bit slower than other quarters for Tessera, we believe our second quarter royalties and license fees should be sequentially flat to slightly up.” Tessera expects second quarter 2007 total revenue within the range of $46 million to $47 million, with royalties and license fees flat to slightly up as compared to the first quarter of 2007. As per company policy, quarterly revenue guidance does not include the impact of new agreements that are not already signed. Pro forma expenses for the second quarter are projected to approximate $25 million to $25.5 million, including $5 million to $5.5 million of litigation expense. This includes cost of revenue, research and development, and selling, general and administration expenses, but excludes stock based compensation and non-cash, deal-related expenses. The company’s second quarter book tax rate is projected to be 44 percent of pre-tax profit, as a portion of stock compensation expense is not deductible for tax purposes. Cash taxes are projected to be approximately $2.4 million in the second quarter, due to a one-time shifting of roughly $800,000 in cash taxes from the first quarter into the second quarter. Stock based compensation expense is projected to be approximately $4.0 million. Non-cash deal amortization is expected to be approximately $1.5 million. The fully diluted share count is expected to be 49 million shares. Tessera is reaffirming its full year 2007 total revenue in the range of approximately $193 million to $198 million, which assumes no settlements, license fees, or associated past production payments related to the company’s current litigation efforts. Annual royalties and license fees are projected to be up roughly 55 percent as compared to 2006. As a reminder, Tessera had $83.1 million in past production payments in 2006. Pro forma expenses for 2007 are projected to be approximately $103 million to $106 million, including $22 million to $25 million of litigation expense. This includes cost of revenue, research and development, and selling, general and administration expenses, but excludes stock-based compensation and non-cash, deal-related expenses. Stock-based compensation expense is projected to be approximately $18 million to $20 million. Non-cash deal amortization is expected to be approximately $6 million. Other income is projected to be $8 million. The company’s book tax rate is projected to be 43 percent of pre-tax profit. Cash taxes are projected to approximate $7 million for the year. The fully diluted share count is expected to be 50.5 million shares. Conference Call Information Tessera Technologies will host its first quarter 2007 conference call on May 3, 2007 at 1:30 p.m. Pacific Time. To access the call in the U.S., please dial 877-866-5534, and for international callers dial 706-679-0753 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 800-642-1687 and for international callers, dial 706-645-9291. Enter access code 5426717. About Tessera Technologies, Inc. Tessera is a leading provider of miniaturization technologies for the electronics industry. Tessera provides a broad range of advanced packaging, interconnect, and consumer optics solutions which are widely adopted in high-growth markets including consumer, computing, communications, medical and defense electronics. Tessera's customers include the world's top semiconductor companies such as Intel, Samsung, Texas Instruments, Toshiba, Micron and Infineon. The company's stock is traded on the Nasdaq National Market under the symbol TSRA. Tessera is headquartered in San Jose, California. www.tessera.com. Pro Forma 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 pro forma financial measures that are adjusted for non-cash tax expense, and stock compensation and the requirements of SFAS No. 123R, "Share-based Payment” ("123R”). The pro forma financial measures used by management and disclosed by the company exclude the income statement effects of non-cash tax expense, either one-time or ongoing non-cash deal amortization charges and all forms of stock compensation and the effects of 123R upon the number of diluted shares used in calculating pro forma earnings per share. The pro forma 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 pro forma 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 the pro forma income to our reported GAAP net income. Safe Harbor Statement This press release 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. Material factors that may cause results to differ from the statements made include delay in completing the transaction or the risk that the transaction may not be completed; failure to achieve the revenues, cost savings, growth prospects and any other synergies expected from the transaction; and delays and challenges associated with integrating the companies, including employees and operations, after the transaction is completed. Other factors that might cause or contribute to such differences include, but are not limited to, fluctuations in Tessera's operating results due to the timing of new license agreements and royalties, Tessera's ability to protect its intellectual property and the risk of a decline in demand for semiconductor products. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this release. Tessera's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2006 include more information about factors that could affect the company's financial results. TESSERA TECHNOLOGIES, INC.   CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)   Three Months Ended March 31, 2007  2006  Revenues: Royalty and license fees $ 35,708  $ 19,372  Past production payments 1,748  223  Product and service revenues   9,363    4,069  Total revenues   46,819    23,664  Operating expenses: Cost of revenues 4,702  3,432  Research, development and other related costs 8,353  3,876  Selling, general and administrative   16,154    13,870  Total operating expenses   29,209    21,178  Operating income 17,610  2,486  Other income, net   2,758    1,205  Income before taxes 20,368  3,691  Income tax provision   9,274    2,320  Net income attributable to common stockholders $ 11,094  $ 1,371  Basic and diluted net income per share attributable to common stockholders: Net income per common share; basic $ 0.24  $ 0.03  Net income per common share; diluted $ 0.23  $ 0.03  Weighted average number of shares used in per share calculations; basic   47,001    45,432  Weighted average number of shares used in per share calculations; diluted   48,749    47,345  TESSERA TECHNOLOGIES, INC.   SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA (in thousands, except share amounts) (unaudited)     Three Months Ended March 31, 2007  2006    Non-cash income tax expense $ 8,470  $ 1,395  Stock compensation - cost of revenues $ 550  $ 935  Stock compensation - research, development and other related costs $ 508  $ 50  Stock compensation - selling, general and administrative $ 2,623  $ 2,793  Amortization of acquired intangibles $ 1,301  $ 274    Weighted average number of shares used in per share calculations excluding the effects of 123R; diluted 48,335  47,345  TESSERA TECHNOLOGIES, INC.   CONSOLIDATED SUMMARY BALANCE SHEET INFORMATION (in thousands)         March 31, December 31, 2007  2006  (unaudited) (audited) ASSETS Current assets: Cash and cash equivalents $ 204,259  $ 194,076  Accounts receivable 14,311  6,783  Inventory 1,843  1,548  Short term deferred tax assets 4,814  4,814  Other current assets   1,997    13,434  Total current assets 227,224  220,655    Property and equipment, net 25,880  24,705  Intangible assets 45,615  27,529  Goodwill 35,426  35,425  Long term deferred tax assets 12,550  12,530  Other assets   570    444  Total assets $ 347,265  $ 321,288    LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,870  $ 3,895  Accrued legal fees 3,993  3,166  Accrued liabilities 5,597  7,350  Deferred revenue 620  646  Income tax payable   8,247    376  Total current liabilities   22,327    15,433    Stockholders' equity:   Common Stock 47  47  Additional paid-in capital 253,008  245,019  Retained earnings   71,883    60,789  Total stockholders' equity   324,938    305,855    Total liabilities and stockholders' equity $ 347,265  $ 321,288  TESSERA TECHNOLOGIES, INC.     RECONCILIATION OF PRO FORMA NET INCOME TO NET INCOME (in thousands, except per share amounts) (unaudited)       Three Months Ended March 31, 2007  2006      Pro forma net income $ 24,546  $ 6,818      Less: Stock compensation - cost of revenues 550  935  Stock compensation - research, development and other related costs 508  50  Stock compensation - selling, general and administrative 2,623  2,793  Amortization of acquired intangibles 1,301  274  Non-cash income tax expense 8,470  1,395      Net income, as reported $ 11,094  $ 1,371    Pro forma net income per common share; diluted $ 0.51  $ 0.14  Weighted average number of shares used in per share calculations excluding the effects of 123R; diluted 48,335  47,345