Good afternoon. My name is Heather and I will be your conference operator today. At this time, I would like to welcome everyone to the Tessera Technologies First Quarter 2014 Financial Results 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. [John Markley], you may begin your conference.

Thank you, Heather and good afternoon and welcome to the Tessera first quarter 2014 financial results conference call. This call is also being webcast live over the Internet. Please be advised that, during the course of this conference call, management will make forward-looking statements regarding future events, including the future financial performance of the Company. These forward-looking statements are made pursuant for 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 materially from those projected. You are cautioned not to place undue reliance on the forward-looking statements, which speaks only for the date of this call. More information about factors that may 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 its Annual Report on Form 10-K for the year ended December 31, 2013 in the section entitled as Risk Factors. The Company disclaims any obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that occur after this call. During this call today, management may discuss certain non-GAAP financial measures for comparison purposes only. The non-GAAP amounts of cost of revenues, research and development, selling, general and administrative expenses, net income or loss, and earnings per share do not include the following: discontinued operations, stock-based compensation expense, acquired intangibles, amortization charges, charges for acquired in-process research and development, impairment charges on long-lived assets and goodwill, restructuring and other related exit costs and related tax effects. On the call today from management are Tom Lacey, Chief Executive Officer and Robert Andersen, Chief Financial Officer. I will now turn the call over to Tom Lacey. Tom?

Thanks a lot. Whether live or via the webcast recording, thanks very much for joining us on the call today. What an amazing quarter. I know let's just do it again and again why don't we do something likely. But seriously that continues to be a great deal going on as a company and I welcome the opportunity to provide update during today's call. We fully understand that the company is completing a substantial transition and is important to current and potential shareholders to learn more and more about our changed company. As you will hear from us remainder and positive on the developments at the company and remain optimistic about our future. Before I get into the details, the high level massage I hope you take away from the call is that after years of challenges and under performance, the company is producing tangibles results and is well position to profitably move forward. I view our first quarter as transformational one for the company. The important achievements include exiting our DOC manufacturing operations, substantially restructuring the company, lowering the overall operating expenses levels, continued share buyback resulting a lower basic share count for the first time in the Company's industry, completing in internal reorganization to better align our remaining resources around our growth initiatives, completing several important settlements and license agreements, returning to profitability, achieving greater than 60% operating income including restructuring charges which is the second most profitable quarter in the company's history and finally the highest revenue quarter in five years. All these accomplishment positioned the company to move forward in 2014. Now, some details on the many developments during the quarter. First of all, it's clear that, our partnership approach with customers and our practice of using litigation as tool rather than a strategy is bearing…

Thanks, Tom. As Tom just noted, this is certainly eventful and transformative quarter with settlements, business changes and key new customer contracts. From a revenue perspective which was driven by product events, we had third highest quarters since the company went in public in 2003 and our highest quarters in five years. These developments provide both foundation for business growth and profitability. I'm personally very optimistic about our business and ability to grow and the ability to provide value to our customers. Before I cover the financial results, I would like to highlight that, the discontinued operations now include the mems/cam manufacturing business that was closed at the beginning of first quarter and the prior period that re-classified to reflect this change. Also given a significance to mems/cam business closure, we'll not be reporting separate operating segments at this point. We will evaluate the nature of product FotoNation as a separate business segment as that business grows. Let me now cover financial results for the first quarter 2014. Total revenue from continuing operations for the first quarter 2014 was $88.3 million. In comparison to the first quarter of 2013, revenue increased by $59.7 million or 209%. The key reasons for the year-over-year increase was the significant change in episodic revenue, which increased by $58.4 million from $6.5 million to $64.9 million at the current year's first quarter and a $1.3 million increase in recurring revenue was mainly for the strong quarter for FotoNation. Total GAAP operating expenses from continuing operations for the quarter were $33.6 million, consisting of the following. Constant revenues, $0.6 million; R&D, $8.6 million; SG&A, $15.3 million; litigation expense, $7 million and restructuring and impairment of long-lived assets and other charges $1 million; Fees relating primarily for the personnel and cost reductions in the company's corporate overhead…

Thanks Robert. Before I turn the call over to Heather for Q&A, let me provide our reviews on patent legislation activities going on in Washington DC. As noted last quarter, a more deliberate selling process for consideration of patent litigation reform is underway. We've been working with some peers and stakeholders from across the technology industry to character responsible build to address abusive litigation practices, while maintaining the strength and integrity of the U.S. patent system. In an effort to achieve this balance, the summit judiciary committee members, the various build sponsors and stakeholders including Tessera have engaged in subsequent deliberations. To-date the house in summit builds reflected important principle the fact that we should focus on abusive litigation not on specific business models. We continue to encourage Congress to maintain this principled approach additional certainly overly brought provision such as the proposed mandatory customer say remain unresolved and likely to have unintended consequences, in particular for small business individual and ventures. We're actively engaged on the visions and working constructively with other stakeholders summit to achieve consensus and a proper balance. With that, let me turn it over to Heather for Q&A for Robert and I.

(Operator Instructions) Your first question comes from the line of Krish Shankar of Bank of America. Your line is open.

Yeah. Hi. Thanks for taking the question. Good afternoon Tom and Robert.

Hey, Krish.

Hi. Couple of questions. Number one, on the Q1 revenue, it looks like you are now going to split between IP and optics on the recurring side is the true. So, can you give some color on how they trend is compared to the December quarter on a sequential basis?

Yeah. Krish, this is Robert. For the total quarter actually we finished at 88.3 and the total of the episodic revenue which was the key driver for the corner was I think that's $60 million, $65 million roughly. I'll get you an exact number here in a second. Why don't we go on with your second question?

Right. So, I just wanted to figure out the $23 million in non-episodic revenue in Q1. What is the split between IP and FotoNation?

We are not at this point breaking up the FotoNation business as a separate segment.

Got it. But how was it relative to December quarter sequential split?

Okay. Understood. I don't know the exact percentage of the increase, but it was I would say probably 30% higher than the prior quarter.

Got it. All right. And then second question is the guidance for the Q2 which is $31 million to $33 million, is that all recurring or does it have episodic and how much that including?

And so, we are not going to provide guidance between recurring and episodic, but I think as we have mentioned in the past, it's very difficult to actually provide a forecast on the episodic. So, unless I have something to which we have clear visibility, I am not going to include an episodic piece in the forecast, and I'm not providing a breakdown at point.

Okay, alright. And then just to follow-up, in your last earnings call, you mentioned that you might exit Q4 with about $120 million annualized run rate for recurring revenue and I think today you guys said, you could probably do like things that are prior to customers, your recurring revenue will increase by $30 million next year. So is it fair to assume that, everything was being flat at least $115 million recurring revenue is possible for next year?

You've got it. That's right. So, on February 5th, we talked about $120 million recurring revenue for 2014 and to that what we're suggesting assuming all that remains the same best occurs as we would expect to that we have had approximately $30 million in agreements that we talked about that would commence 2015. So, will you $150 million that makes sense.

Got it. Alright. And then couple of other quick questions. So, A, number one, in this recurring revenue, I'm guessing it include some of the FotoNation component. B, number two, in the non-FotoNation which is legacy IP microelectronics business, what is the split between DRAM and non-DRAM or the wireless guys you have?

So, in terms of the FotoNation fees, yes, the recurring revenue includes FotoNation. And initially, it's about $15 million as we talked about in the past in 2014 and expect that to rose substantially, that's piece of it and then in terms of what the split is DRAM and non-DRAM, we don't break it out but it's overwhelmingly DRAM based. I mean, that became evident and we have had historically read through the case and what not. You can see 10% customers have historically they have been multi RAM guys.

Got it. And then just a final question from my end, I think Tom, in your prepared comments you said that FT micro trial scheduled for November, I was under the impression that it's scheduled for August?

Good question. I will get back to you on that. November is the date I have in my notes. So, I don't recall it was push down or not, do you know?

Yeah, my recollection is pushed out.

Okay.

Got it. Okay, all right. I think that's what I have for now. Thank you, guys. Appreciate it.

Thanks a lot.

Thanks.

Alright. We will try to get continued record quarters if we can.

(Operator Instructions). There are no further questions at this time. I will turn the call back over to the presenters.

Heather, Thanks. Again, thanks again for your interest in Tessera, most of you listen are listening live over recorded playback. We really, really appreciate you are spending time to learn about company. We come a long way over the recent past and we continue to build our referring and revenue stream the same time pursuing episodic revenue and other growth opportunities. We continue to right size the company's cost structure and these improvements together with our partnership style approach to customers are yielding tangible bottom line results. We have improved our internal communication with our strong employee team; we try to be as transparent as possible with external audience. In summary, we are really optimistic about our future and look forward to provide an update in the next quarter. Thanks again.