Ladies and gentlemen, thank you for standing by and welcome to the Tessera Technologies Second Quarter 2014 Financial Results. 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. I would now like to turn the call over to John Markley of Investor Relations. You may begin.

Thank you, Victoria. Good afternoon and welcome to the Tessera second 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 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 materially from those projected. You are cautioned not to place undue reliance on forward-looking statements, which speaks only to 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 and Form 10-Q for the quarter ended March 31, 2014 specially in the sections titled 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 today’s call management may discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and the reconciliation of non-GAAP to GAAP financial metrics please see the second quarter 2014 financial results press release issued earlier today. 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?

John, thanks a lot. Whether live or via the webcast recording, thank you for joining us on the call today. Robert and I are very please to provide an update on our Q2 results, Q3 forecasts and our expectation for fiscal 2015 baseline recurring revenue. As you will hear from us we remain very positive on the developments in the company and remain optimistic about our future. Before I get into the details on the call, the high level message I hope you take away from the call is that after years of challenges and underperformance, the company is producing tangible results, delivering on our commitments and growing responsibly. We are very well positioned to move forward profitably. There were several important developments during the quarter, including: We exceeded virtually all financial metrics and delivered our second consecutive profitable quarter on both the GAAP and non-GAAP basis; our world class imaging group FotoNation delivered a second consecutive all time record revenue quarter; continued to lower non-litigation operating expense levels; we executed on our capital allocation strategy which employs several different vehicles to return cash to shareholders, a combination of dividends and share buybacks. During the quarter the board authorized $0.10 per share quarterly dividend and paid $0.52 per share episodic dividend for which the company paid a total of $32.4 million during the quarter. Additionally, as we did last quarter, we continued substantial share buybacks, again resulting in a lower share count for the second time in the company’s history. During the quarter, we bought back approximately 1.4 million shares for $31.1 million and during the last four quarters, we have purchased more than $74 million in Tessera stock. Innovation continues to be alive and well at Tessera we recently moved up approximately 50 spots on a ranking of 169…

You’ve given some of that. Thank you, Tom. As Tom described in his remarks, this is a strong quarter for the company and our financial results reflect this trend as we exceeded our initial forecast and posted a net profit on a GAAP basis. This outcome is not incidental as our entire management team focused on exceeding our forecast by creating opportunities for incremental revenue while prudently managing our expenses. With the overall strength of the business particularly from recently announced business relationships I expect to be describing a profitable and growing business going forward. Financial results for the second quarter of 2014 were as follows, total revenue from continuing operations was 37.2 million. Compared to the second quarter of 2013 revenue decreased by 9.4 million or 20% due to a net decrease in episodic payments of 17.6 million. However recurring revenue increased between the two periods by 8.1 million or 29% due primarily to the company’s expanded relationship with Samsung. Total GAAP operating expenses from continuing operations for the second quarter were 36.3 million a reduction of 15 million from the second quarter of 2013 due to significant reductions in SG&A and litigation expense. Compared to the first quarter of 2014 operating expenses were sequentially higher by 3.7 million, primarily due to increased spending on litigation matters from a timing perspective on Amkor, UTAC and the AMD case. The sequential increase is also driven by higher patent management cost for new assets, particularly those received in the settlement with Renesas. As we manage expenses going forward we will continue to look for ways to do things better and more efficiently, including continue to review our expenses related to the maintenance of our patent portfolio. The GAAP tax provision from continuing operations resulted in a benefit of 1.1 million. Given…

Thanks Robert. Before I turn the call over to Victoria for Q&A, let me provide our views on as I normally do, on patent legislation activities ongoing in Washington DC. As previously indicated, we've been working with a board collision of stakeholders and members of the Senate on the Patent Transparency and Improvements Act to ensure a proper balance between the needs to deter abusive litigation practices on the one hand and the preservation of U.S. patent system, the very cornerstone of the U.S. economy on the other. Senate judiciary committee chairman Leahy announced in late May at the committee which held the patent reform measure in recognition of the concerns raised that it would have unintended consequences on legitimate patent holders. We applaud Senator Leahy efforts and his wise decision to hold off in pursuing a bill that did not strike appropriate balance. More recently, representative Lee Terry of Nebraska and the Chairman of the House Energy, Commerce Committee, Subcommittee on Commerce Manufacturing and Trade proposed measure the targeting (inaudible) aka Troll Act to specifically address the problem of mass mailing of bad fake demand letters. We -- our fellow members of the Innovation Alliance and many other organizations including the Biotechnology Industry Organization, Intellectual Property Owners Association and the American Intellectual Property Law Association support this measure that is appropriately target to the abusive of conduct. We'll remain -- as we have been, we will remain actively involved into discussions with stakeholders throughout the IP and technology industry as well our members of the both the house and senate to refine when necessary and strengthen where possible the U.S. patent system for all patent holders. That concludes Robert and my prepared remarks. Before I turn the call over to Victoria, I would like to take this opportunity to remind everyone about our upcoming Investor Meeting Analyst Day September 5, 2014 in New York City. The meeting will feature presentations by Robert, myself as well as other Tessera operating executives. We haven’t done this in quite a number of years and we're excited to be able to provide a more detailed update on the company, not only the recent positive developments but also what we see moving forward. We hope to see you there. With that, let me turn the call over to Victoria.

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

Yes, hi. Can you hear me?

Hey Krish.

Yes, we can.

Hey, Tom and Robert. Hey, congrats on the good results. Good to see profitability again and couple of quick questions. First and foremost, in the June quarter, if it surpassed episodic revenue compared the original guidance was about $4 million in revenue upside, is it fair to assume that all came from the legacy IT microelectronic business versus FotoNation?

Yes Chris this is Robert, that’s certainly part of it, especially given Tom’s remarks on the very strong quarter from FotoNation. So that’s a piece of it, it’s just a combination of the business. So FotoNation was definite lead.

Got it. And then in terms of the guidance I know you guys don’t break it up always, but kind of get a sense of how much of episodic revenue component in your Q3 guidance or if you don’t want to break it up, is it fair to assume the recurring revenue growth from Q2 to Q3?

The only piece that is included in the guidance is the PCI settlement, since we know that in advance. And what we said on PCI is that, out of the total settlement of 196 million, we would receive over half of that by March 31, 2015 and I think you are aware that we raised our guidance by 50 million when we originally announced the deal for Q2. So I think give you enough points to triangulate roughly what it is for this quarter.

Got it alright, fair enough. And then two quick questions do you expect to get episodic revenue from Micron and if so would it be in the second half of this year or do you think it’s going to be next year?

For the Micron settlement actually it’s rather for the Micron license, I have to be clear on that it is a license, the arrangement does take into consideration the past with us not a piece of information that we are able to share is part of the deal, sorry about that.

Got it, no worries. And the final question how do you think about R&D as far as picking up kind of trying to get a sense of how to model R&D on a go forward basis And I know last year, Rick showed target model, I'm just trying to get a sense of is this still the model to go with?

Yes, we've targeted in terms of the operating model that I provided earlier this year. By Q4, we are expecting the R&D expense to be approximately 17% on revenue. And that was at our operating plan of $180 million to $200 million. And I think that percentage still holds true for, I mean we're certainly ahead of that given the revenue numbers in terms of being on a lower percentage. But I expect that's a reasonable percentage to apply going forward in the next year.

Got it, that's very helpful. And congratulations guys on the good results. Thank you.

Thank you Krish. Much appreciated.

Thank you sir.

Your next question comes from the line of Richard Shannon with Craig Hallum.

Hi, Tom and Rob. How are you guys doing?

Doing great. Thanks.

Hi Richard.

Good. I'll extend my congratulations as well, good results to see. A few questions from me. You raised your recurring revenue outlook here based on what you communicated last quarter and you have obviously signed a new license agreement with the sizable customers in that interim. Is there any other customers adding to the recurring revenue base or should we assume it's coming primarily almost entirely from Micron?

The lateral assume primarily obviously Micron. First of all, before I go there, Richard let me say publicly thank you for initiating coverage and welcome to the customer store. I have to tell you your timing is quite good. So, maybe you are a rabbit’s foot here for us. But in terms of increasing the guidance from $150 million to $195 million, clearly the major event that’s happened between the time we stated 150 and now we’re talking about 195 is the Micron patent license and xFD agreement, so it’s fair to assume that’s the bulk of it.

Okay. That’s fair enough. Maybe couple questions on FotoNation. First of all, do you expect the third quarter to be a record quarter as well and any update into the I think you previously communicated thoughts about seeing recurring revenues in that business of $15 million this year?

We don’t forecast that business going forward on a quarterly basis. In terms of the $15 million bogie that we talked about publicly in the year I mean we’re still well on that and continue to see excellent growth opportunities in that business. So, we’d expect to do much better than that next year.

Okay. Let’s see here, may be couple more questions from me. Related to your Micron license agreement announced last week, you talked also about collaborating on xFD can you give us an idea of our thoughts on when that, when you might see a unit based royalties coming out from that? And have you included anything like that in your current revenue base that you just gave us new one today?

Good question and that’s in particular we’re very excited about that elements as you saw in Mark Durcan’s quote and my quote we’re both really excited about collaborating together on technology that puts Micron, so it’s obviously in the Micron releases, it was in the Samsung releases, it was in the Qualcomm releases, it was in the ASU release, that’s really a key part of where we’re trying to take the company as much deeper collaboration with our partners. And obviously with Micron, part of the agreement was not just the patent license agreement but there is also as you noted a separate xFD technology engagement in addition to I think we referred to other technology, the intent is to work together. So except the portion of that would be contemplated in the license -- patent license agreement that we did reached with Micron. So as we report earnings moving forward, the Micron portion of it will capture the xFD portion of that.

Okay. I guess may be just top on head is there any timeframe which you expect to see those products ramped using xFD in the market and generating royalties for you?

Yes. So what we intend to do we talked about in the release is collaborate together. So given the agreement we signed last week you would expect that virtually immediately the two companies are working together to get that know-how license into Micron's hands so that production can ramp. In terms of -- I'll provide probably the next time we get together where we're at in terms of -- these things can take a quarter or two at a minimum to get into volume production would be my expectation.

Okay. I'll look forward to that update. Last question from me guys I'll jump on the line, again related to Micron. I know a lot of the details are highly confidential, but any sense that you can give us as to the timeframe of the license with them. I don't know if you compare to what -- relative to the other two large players or what you’ve seen in the past from the kind of three – the larger DRAM players any sense would be great to hear please?

Yes. I wish I could tell the exact timing. Obviously we know what it is, it's multiyear, it's multiyear and it's substantial and we're delighted with how this has come out. But unfortunately, Richard for a number of reasons I can't provide the exact link to the agreement.

That’s what I thought, but I thought I’d try. So I appreciate the thoughts (inaudible). Very happy to be on…..

You're not alone, don't worry.

Yes, I'm sure, I'm not. But thanks anyway for giving the best thoughts you can convey and also happy to be on-board here with you guys as well. Thanks a lot; all the question for me.

Alright. Thanks. Welcome to the team. Thank you.

(Operator Instructions). Your next question comes from Geoff Hulme with AMICI Capital.

Yes, hi. Thanks to everybody…

Hey, Geoff.

Hi Tom and Robert. Thanks to everyone for all the hard work, I appreciate it. So now that you’ve had some success with the primary objective, I was just curious if you could talk a little bit about how -- I guess a two part question, how you think the other part of the semiconductor industry relates to your core IP and the IP in Invensas? And maybe if you could just give us some idea of how you could -- the company could monetize its IP base and the non-DRAM semiconductor industry? And also I think last quarter you decided to officially keep a lot of the old DigitalOptics, now FotoNation imaging patents. I wonder if you could just maybe walk us through how you see monetizing those in the future?

Yes Geoff, thank you. Two quick questions and ones that we are focused on, laser focused on inside the company, it's all about growth. Now that we have as you mentioned some of these high priority items finally behind us as the company stabilized very profitable and we love where we're at. And so now it's all about continuing to focus. And I mentioned on the last call that we have reorganized the company and we reorganized around growth initiatives and you outlined two key ones here. So the first one is on the core IP business in Invensas, it’s really focusing on, on the mobile segment and these are the BVA and 3DIC technologies that we talk about. And who we would license those kinds of technologies to would be folks in the mobile ecosystem, whether it’d be the semiconductor players themselves, the contract manufacturers, the OSAP and it’s anybody who touches advanced packaging technology in the mobile semiconductor or adjacent areas. So that’s the first one. We think there is an excellent opportunity to further monetize the Invensas IP, I’d say further monetizes because it’s a key part of the agreements we signed including the one we signed last week with Micron, right. The other thing that this speaks to, as I mentioned with Richard is us really collaborating and with the likes of a Qualcomm or Samsung and ASC or a Micron, that’s a key part of what we do. And N number of these folks that I just mentioned, arguably all of them have a participation in this mobile space. And around the second part of your question, DigitalOptics FotoNation assets, what are we going to do with those assets, obviously continuing to try to grow this FotoNation business in its own way. It’s really front center of the biggest opportunity we see with those assets. And what we are doing in demonstrating and beginning to see some success is drive our per unit royalties to a higher rate because it includes not just world class imaging technology but also includes patent license assets to the technology as well. So that’s a business again, two record quarters in a row is executing well, pretty bullish on it. Although some of these things take a little bit longer, once you get a design win, it may take some time before it comes into fruition, but all in all that team in particular is executing quite well for us. Thanks for the question.

Okay. Thank you.

Thanks.

(Operator Instructions). And there are currently no further phone questions.

Okay. Hey Victoria, thank you. So, in summary again thanks everybody for your interest in Tessera. We really do appreciate you spending the time either live with us now or if you are listening to this in recorded fashion. We come a long way over the recent past and we are proud of progress we've made and we continue to focus on really growing our partnerships and as importantly growing our revenues, our efforts to rightsize the company, cost structure together with our partnership style approach with customers, absolutely yielding tangible bottom results, we're thrilled about that. We have improved our internal communication with our employee team as well and we continue to strive to be as transparent as possible with external audiences. In summary, we're very optimistic about our future and again Robert and I hope to see many of you in New York at September 5th Analyst Day. Thank you very much.

Again, thank you for your participation. This conclude today's call. And you may now disconnect.