Good afternoon. My name is Katelyn and I will be your conference operator today. At this time I would like to welcome everyone to the Tessera Technologies 2015 First Quarter Financial Results Conference Call. All lines are placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. [Operator Instructions] Thank you. Don Markley, Investor Relations, You may begin your conference.

Thank you, Caitlin. Good afternoon and welcome to Tessera Technologies first quarter 2015 financial results conference call. This call is also being webcast live over the internet. Please be advised that during the course of today's call management will make forward-looking statements regarding future events including 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 speak only to the date of today’s call, May 5, 2015. More information about factors that may cause results to differ from the projections made in those 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, 2014 and Form 10-Q for the quarter ended March 31, 2015, especially 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 today’s date. Management may also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the first quarter financial results new release issued earlier today. Now, I would like to introduce Tessera’s Chief Executive Officer, Tom Lacey. Tom?

Thanks, Don. Whether live or via webcast recording, thank you for joining us today. Robert and I are very pleased to provide an update on our first quarter 2015 results as well as our guidance for the second quarter of 2015. As you will hear today, we remain very positive on the developments of the company and we are optimistic about our future. 2015 is off to a good start on multiple fronts that there were several important developments during the quarter including; number one, we exceeded expectations on virtually all financial metrics and delivered our fifth consecutive profitable quarter under GAAP and non-GAAP basis. Our financial management continues to be strong. The [mantra] inside the company is becoming part of our culture is, spend every dollar as if it's your own, and it's working. All of assets of the company are focused on our consideration. Our operating margin on a non-GAAP basis was 74%, our recurring revenue grew 122% in Q1 2015 versus Q1 2014 and grew 19.8% sequentially from Q4 2014. We're forecasting recurring revenue to grow again in the second quarter. In January, we finalized an almost decade long speed with Amkor which resulted in both companies agreement to explore technical collaboration. Amkor agreed to pay us $155 million which will be paid in equal quarterly amounts over the next four years. We received the initial payment in the first quarter. On capital allocation program continues as announced. During the quarter we paid our new quarterly dividend of $0.20 a share for the first time. Recall the previous dividend was $0.10 a share. Also during the quarter we bought back 722,000 shares of our stock at an average cost of $40.10 per share and in total cost of approximately $29 million. Our investment in R&D and technical…

Thank you, Tom. It should be clear from Tom's comments that are first quarter’s results goes after a strong start for the year. I particularly pleased with the progress made on growth initiatives during the quarter which Tom just covered in some details. Our focus on growth along with prudent financial management and thoughtful allocation of capital to continue to provide for foundation for strong returns to our investors and stakeholders. May provide a bit more detail on the quarter results. Total revenue for the quarter was 79.9 million of which 51.9 million was recurring revenues. Compared to the first quarter of 2014, recurring revenue grew by 28.5 million or 122% due mainly the new customer license agreements and recurring based settlements made over the past year. Our episodic revenue for the quarter was 28 million, main principally of our previously announced settlement. GAAP operating expenses for the quarter were 27.7 million a reduction of 4.8 million from the first quarter 2014 due to reduced spending on litigation lower SG&A cost and the absence of restructuring and impairment charges that were in last year's numbers. Investors will know that we now breakout amortization charge a separate line item on the income statement with the intention of providing better visibility on our expenses for the investors. Litigation expenses for the quarter were 4.5 billion lower than by 2.4 million from the first quarter of 2014 due to reduced case activity the sequential increase of 2.4 million from the fourth quarter of 2014 due primarily to the contingency of payment due to our outside cancles during the quarter and connection with ASE settlement. GAAP net income for the quarter was 35.6 million or $060 per share on a diluted basis. Earnings per share was $0.04 higher than the high end of our…

Thanks Robert. That concludes our prepared remarks. Now, we’ll open the call to your questions.

[Operator Instructions] Your first question comes from the line of Gary Mobley from Benchmark. Your line is open.

Congratulations to a good start to the year. I didn't hear any commentary about the recurring revenue. So if I don't ask from the elsewhere, what is embedded in your second quarter guidance from recurring revenue, and are you still targeting roughly $235 million for fiscal year 2015 recurring revenue?

So, with regards to recurring guidance, we don’t breakout episodic and recurring in our guidance number. However I think it’s fair to assume that since, we’ve added decrease in case activity that the episodic make up a smaller portion of our revenue and in terms of the guidance we’ve given in terms of the recurring revenue, no change to the previously provided number of 235, we’re still confident in that.

One another comment on that is, in my prepared statements, I mentioned that from Q1 to Q2 we currently we expect recurring revenue to grow.

Okay, all right. And previously you mentioned, you might give fiscal year 2016 recurring revenue guidance at some point as this calendar year unfolds and is there particular venue that you're expecting to make the announcement?

I think we announced Q1 we’ll focus on the first half of the year. I expect we’ll provide that 2016 number in the second half of this year. We don’t have a particular venue in line in that regard.

Okay, fair enough. All right. I guess, some sort of long-term growth story is predicated on licensing activity for some of the newer IP and curious to know how your negotiations are going in striking patent license deals with some of the OSAT guys, who are currently paid structured payment. And then as well, can you elaborate a little bit on how this product evaluation license engagement for BVA will evolve over time? And that's it from me.

I’ll take the three of them and I have captured three questions here. So, number one, on the OSAT I didn’t mentioned in my prepared statements that we are in various stages of discussions, business discussion with people who are following under license and as Gary knows that’s several of the OSAT, those who have been not as familiar with the story we reached several settlements over the last years and half two year and in virtually every case those settlements were to clean up past issues and result are not -- historic customers are not under license today. So given their confidential discussions I said on the call, I would just reiterate as we're comfortable that that in overall engagement on those discussions we're having. And they include in many cases, and this has been announced publicly, technical collaboration has been part of the ongoing relationship. So it's great to be candidly backed at the table with long-time customers and not only on licensing discussions but also on technical collaboration. With respect to non-OSATs or non-historically DRAM customers who referred to those as Greenfield, these are folks that we've never been under license with. We are certain that our inventions and our patents in fact are applicable to non-DRAM parts of the overall market. We characterize that in some detail and it's more or less conferences and whatnot but suffice to say there as well. Discussions are continuing, both technology so i.e., on a patent licensing side as well. And then, your last question is around BVA. The way I think about it is pretty substantial milestone was passed in the first quarter where we actually have agreements to build functional test units, that's a big deal. When you're trying to qualify something that gets built in such high volumes we would expect to be able to provide and update that -- will give an update on that each quarter and ideally what happens and this is certainly falls under Don's definition of forward looking statement. But in terms of catalyst for 2015 I would love to be able to get on one of these call source about back half of the year, maybe first quarter of 2016. I don't know, but that says we actually have an agreement and are in volume production on BVA. So far so good. And we're pleased with the overall. Just rate of execution on the program and the breadth, a number of folks we're talking to -- are garnering and showing some real interest in the technology.

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

Let's see, a couple of them, you had some interesting comments about FotoNation and BVA, I do have a couple of questions on that area. I did want to focus on when you didn't mention beside of your xFD, just give us an update on progress there, engagements etc especially incremental in the last quarter or so?

Sure, it's Tom. I will talk about xFD -- so we talked about publicly is engagement with Micron that continues. And we continue to be in collaboration with them and as well as others in the market including I mentioned on the prepared statement we would expect to be able to build xFD based modules based on leading semiconductor provider's advanced die, which we think is a pretty significant step forward. So similarly Gary's question I would like to see product announcement sometime in the back half of this year.

Okay, fair enough. And then I guess may be the other question from me, Tom, and I think you touch the name that you've used, you've said IPU are a bigger, broader frame with FotoNation. Can you just tell us a bit more about that, how complex a product is and what's kind of the selling cycle for which you are talking about here?

IPU, Image Processing Unit, I probably garbled it when I said in the prepared statement. It's an IP block. Today, our IPU has advanced hardware face detection unit. Okay, that's if you look at our IP block for FotoNation that what we announced and rolled out to a number of different prospects and existing customers in the first quarter is the next version of the IPU and it has many more IP blocks to do things like you know image stabilization, to do things like object detection, things like Iris and face detection authentication. So there's just more IP block. It's a much broader set of primitives that support overall computational imaging platform. It's a way to think about it. In terms of design and design cycles, we are working on that now. It's not impossible for us to begin to design wins, and then again second half of this year. It depends on where somebody is in their silicon process. We are very encouraged on the overall reception to the ideas, the overall concept, the overall architecture. I mentioned on some of these calls before Richard, as you know, as I think one of the reasons we're doing as well as we are in FotoNation is not only the decades and decades of experience that we have in our team, but it is in the underlying architecture. It just delivers very high performance and low battery usage which really matters on these handheld devices. Of course, Robert can give you more color on that, kind of the financial for FotoNation, if you will or if you would like.

Okay. May be I'll -- I did have one more question on FotoNation and then maybe I'll jump off line here, and then maybe if it makes sense to Robert to talk about the broader financials for FotoNation in this question that will be appreciated. I know you've announced one larger kind of a tier 1 OEM in the mobile space, it's your licensee too in the past and expect you may have others in the past. How does the competitive environment look like, and do you expect to maintain that set of customers especially, the Tier 1s as you've had this year and into next. Can you give us a sense of your view there?

Yes, as I mentioned overall, the architecture in the team and the products are being very well received. I would expect to continue to grow our business in that area, among the top folks and also in terms of China raised OEMs. We mentioned a couple of design wins, one we could mention by name and one we can't -- we're not allowed to mention by name. But nonetheless we think these can be pretty important to us in the future, and it's part of our overall future growth.

Yes, I would add to that, talking to the team and watching the business, definitely the customer relationships remain very strong. So we're confident that we're delivering a good deal of value to the business as a whole. It's a royalty basis and so we actually report revenue or we see revenue from and we take it on a one quarter in arrears basis and this is a very strong quarter for FotoNnation. And actually, in fact a record quarter for them.

[Operator Instructions] Your next question comes from the line James Lee from Potrero. Your line is opened.

Just clarify on the OSAT opportunity. So the settlement you had with Amkor, PTI, ASE, those are just for past infringement, correct?

Correct. You got it exactly.

So there is still quite a bit of revenue opportunity for current and future licensing, right?

That's absolutely correct.

Would you say the magnitude in aggregate for all the OSATs could be just as big as the aggregate for the DRAMs that you've signed up?

It's difficult to state with specificity, but if you look historically at the size of these customers we don't see any reason why we couldn't be in the same order of magnitude which we have done historically. But like anything it's a negotiation. Yes, I mean you're right to call this out this it's been historically a significant part of our overall revenue picture. And this point right we're not under license with the folks you mentioned. So we think that's an excellent opportunity for us and we're at the table in technology collaboration you know similar to what we were able to do with as we relicense the DRAM folks and we were able to do without having to engage in litigation which is what was also the first in the company's history. So some other folks, James, that you talked about when we were sitting down trying to resolve past issues in fact want to go forward licenses. And I made the decision that it's pretty complicated to put a go forward patent license, technical collaboration takes a lot of time to get those done. So we thought it was best to separate and so let's get the past cleaned up and then work on the companies really engaging both from a collaboration perspective and also on a go forward business perspective. So you're right to call it out and I'm sorry if I didn't -- wasn't clear on that in the prepared statement

On the OSAT, is the opportunity only for DRAM or could it be for other semiconductor technologies?

Well it's absolutely the broad portfolio. It's much broader than just DRAM. It's much broader than that. Some of the things we talked about -- that Richard was asking about both BVA and xFD and even broader set of overall IP than just those two product instantiation. But it's much broader than just DRAM packaging for sure.

And is there opportunity for you guys to be involved on 3D NAND?

3-D, for sure, what are which underlying technology?

Micro-semi [ph], Samsung, Intel, Micron, they're all about to ship 3D NAND. Is there --?

Yes we have a fairly significant 3-D portfolio that we've been developing internally and a mixture of internal developments and external patent acquisitions we've been doing for many-many years. So the answer to your question is we think that there is an opportunity there for sure, but fundamentally I know you follow Moore's Law, right. We do see 3-D as a pretty substantial opportunity in the future

And on buyback, where you guys able to buy back stock over the last few weeks?

No, we were closed, no.

When can you guys start buying back stock?

When and where in an open window which happens after this quarter is announced. As long as we're not in -- there is two different ways to do it. As you know as long as we're not in possession of material -- non-public information.

Have you guys thought about putting in a 10b-5 plan in place so that you could buy outside of the window?

Yes, absolutely and we do occasionally put those in place me and Robert's and my tenure, we've used both.

Yes. I think we have 116 -- probably $116 million left on the buyback, and yet you wouldn't know that we were fairly aggressive buyers this last quarter.

Your next question comes from the line of Matthew Galinko from Sidoti. Your line is opened.

You mentioned being on a roadshow for the improved IPU. I guess, I'm curious if, given the feedback you captured, can you speak if you're able to drive any source of pricing increases or capture additional value from those events?

Just to clarify your question, you're talking about the advances in the IPU?

Right.

Repeat that question

Sorry, I guess the question is, you talked about being on a roadshow for your graphics processor essentially, your IT cores for FotoNation. I'm just curious if just given the feedback you've captured in that virtual process, if you feel like you're to be able to drive increased pricing from those improvements?

Yes, definitely. It's a function of what kind of value ultimately a customer sees in the technology and by putting more computational imaging primitives in hardware it offers the ultimately the OEM, the ability to get better performance across a wider range of imaging features today. It's all about hardware face detection and we have much more capability including the biometric of imitation whether it be Iris or face, and biometrics like biomeasures is continuing to be quite important. And then things like image stabilization is important in video and be able to do that in hardware as a much more favorable impact to the battery. So absolutely we believe we can drive higher overall penetration in unit ASP with the introduction of this new technology.

Fair enough, and then in terms of the biometrics can you just talk a little bit about potentially use cases that the OEMs are looking at when it comes Iris authentication.

Yes, I think the way to think about it is, passwords are probably ultimately on their way out and people are looking for natural ways to authenticate and the financial institutions are looking for more reliable ways to authenticate. Obviously Apple with fingerprint sensor is a major step in that direction. But biometrics there's more biometric information in your eyes than there is in your fingerprint. And ultimately I think the way you're talking about the use case I think what people want to be able to do, whether it's biometrics on an iPad or Iwasnt going iPad, but up Pad, it's funny. They like Linux. It is gone, but on a tablet or a book or a computer where you're already staring at the screen, so it would be very natural to authenticate that way if it looks in it and says hey, I know this is Matt sitting in front of this screen. I know that Matt is a real person and not a photograph. I know that Matt. I may also have what they call activity based authentication metrics. Maybe IP address, a whole variety of kinds of apps that are on your phone or things like this source, ultimately it's going to be -- it still appears to us to be a combination of several different technologies that overall drive a much higher rate -- in fact a lower much lower failure accepting trace is much higher. And it is not yet easy to use. That's what we're hearing from across the industry. It's got to be natural. You don't want to hold a cell phone two inches from your nose to get Medicaid for example. You don't have to get right on top of your computer screen. So there's some of those challenging technologies that doesn't work in the dark as it work in the light, doesn't go through glasses, there's a whole-whole wide variety of different issues and challenges with authentication. But overall I think the other way. No question you're going to see it on cars. They call it DMS, Driver Monitoring Systems. We're very confident we're going to see that. It's going to do -- you're driving a car and your trial doesn't allow to drive the car etc, there's a number of different things that are happening, pretty exciting field.

We have no further questions at this time. I will now turn the call back over to management for closing remarks.

Thank you, Katelyn. Thanks again for your interest in Tessera, I very much appreciate you spending time to learn more about our company. In summary we're very-very pleased with our results and outlook. Our solid foundation continues to provide an excellent financial platform from which we continue to grow the company. I hope we are able to convey to you today that we are as optimistic as ever about our growth prospects for our company. Thanks again for joining us. We look forward to speaking with you again during our second quarter update and we will be attending a few conferences as well which we will announce ahead of time. So thank you very much.