Hi, good afternoon. This is Matt Steinberg, following up regarding Tessera Technologies' third quarter 2016 financial results. We apologize for experiencing technical difficulties on our end. I will now reintroduce Tessera's CEO, Tom Lacey, who will begin his prepared remarks. Tom?

Awesome. So, today after Halloween, I guess, you know, we are spooked a little bit. So, all right, we will call this Take 2. Here we go. Okay. So, whether live or via webcast recording, thank you for joining us on the call today. Robert and I are pleased to report another strong quarter, and we are very excited about the developments of the company. Let me begin with some highlights for Q3. We once again delivered another strong quarter of financial performance. Our Q3 revenue was $62.4 million, slightly above the midpoint of our guidance range. We achieved a non-GAAP operating margin of 65% and we exceeded earnings per share guidance. On September 20, we announced the transformational transaction with the execution of a merger agreement with DTS Incorporated, whereby Tessera will acquire DTS for a total equity value of approximately $850 million. I will provide an update on this transaction later in the call. During the quarter, our normally robust stock buybacks were less than our recent historical repurchase rate, in large part due to the pending DTS announcement. During Q3 we purchased approximately $6 million of our stock, and we paid a regularly quarterly dividend of $0.20 per share for approximately $10 million return to shareholders. Q3 represents our seventh consecutive quarter whereby our fully diluted share count has decreased from the previous quarter. Robert will provide more detail later in the call with respect to our overall capital allocation program. Next, let me provide an update on developments with our FotoNation, Invensas, and IP licensing efforts during the third quarter. Let me start with FotoNation. We continue to see computer vision and imaging as critical technologies for a variety of devices, from smartphones to drones, to activity cameras to cars. And we're well-positioned to capitalize on…

Ladies and gentlemen, this is the operator. We'll be resuming again shortly. Thank you.

All right. Here we go, Take 3. We are in Silicon Valley; apparently the phones don't work quite well. We are going to try to complete this call absolutely on a smartphone with FotoNation technology on that. How's that? Okay. Here we go. I'm going to pick up where I understand we left off, so within the investors update. So, with regards to expanding new applications such as MEMS and RF devices, DRAM, 2.5D Logic and 3IC assemblies, we have been focused on bringing up internal wafer preparation and bonding capabilities as well as our supply chain to support our technology development and commercialization efforts. To that end, in September, we announced a license agreement with Fraunhofer, in Munich, a renowned research institute with world-class MEMS manufacturing capabilities which we can leverage to optimize ZiBond and DBI bonding processes on high-volume production compatible tools. This follows the agreement we announced with Fraunhofer Dresden late last year to demonstrate our DBI technology on their state-of-the-art 300 millimeter production line, and builds on complimentary collaborative efforts we have underway with other supply chain partners. In addition, we are actively engaged in technology demonstrations and license negotiations with several customers for non-image sensor applications. The progress to date is encouraging, and we look forward to providing updates on these developments in the future. Finally, we have observed steady progress on our die-to-wafer DBI development efforts, which will be important for 3D DRAM, and heterogeneous 2.5D and 3D IC products. We're confident that such an approach will readily address manufacturability challenges and performance limitations currently experienced when using current bonding techniques such as flip chip and thermal compression bonding. Thus, die-to-wafer development represents a significant opportunity for Invensas and our customers. Next, I'll give an update on our licensing activities. We continue to work…

I was wondering. I've heard some of that before. I just want to say thank you to everyone on the call for your patience. I have to call in a couple of times, so we appreciate that. So as Tom noted, we generated financial results that demonstrated the strong earnings power of our business. And we continue to make progress on our strategic goals for the year. Let me provide some additional details on the financial performance in the quarter. Total revenue for the third quarter was $62.4 million, above the midpoint of the company's guidance range, and was 100% recurring revenue. Compared with the third quarter of 2015, recurring revenue decreased by $4 million or 6% primarily due to the timing of contractual arrangements for certain customers, and as previously mentioned a certain FotoNation customer reaching a unit-based cap on a prior contract. It is important to note that this FotoNation customer recently began shipping products under a contract that is no longer subject to this cap and with a higher per-unit royalty leg. Given FotoNation currently reports revenue one quarter in arrears, we anticipate that the full impact of the higher per-unit agreement will be seen beginning in 2017. GAAP operating expenses for the quarter were $27.8 million compared with $27.6 million for the third quarter of 2015. R&D expense for the quarter increased slightly from the third quarter of 2015, but was lower by $1.7 million from the second quarter of 2016. While we have been increasing R&D expenses primarily as a result of increased headcount, through the acquisition of Ziptronix and strategic hiring, the lower expenses on a sequential basis to the decreased spending within advances and as a result of a one-time credit of 0.6 million related to value-added tax refund. SG&A expense for the…

Robert, nice job, as always. That concludes our prepared remarks. I'm glad we were able to get through that, and now we'll turn it over to the operator for questions. Nicole, over to you.

[Operator Instructions] Your first question comes from the line of Krish Sankar from Merrill Lynch. Your line is open.

Yes, hi. Thanks for taking my question. I had a few of them. First one, Tom or Robert, when you look at the Q4 guidance should we assume the FotoNation, the legacy Tessera -- the semiconductor business, both or going to grow, or is one going to grow at the expense of the other, and what about episodic revenues in Q4?

So in terms of giving the guidance for Q4, we don't distinguish between the two, we'll call them operating units or the two different businesses that you noted, the IP business and the FotoNation business. Nor do we breakout recurring and episodic in our guidance. So we're just giving overall guidance figure.

All right. And a while ago, you guys said how there was no DRAM renewals this year. I'm just kind of curious. Is there any DRAM renewals coming up over the next 12 months?

Well, at the moment we're just giving Q4 guidance. And when we give guidance for the year for 2017, which we expect to do, as I noted in our February call, we'll give any color on renewals if any occur for 2017 at that time.

Got you. And then, I had a question on the DTS. Once the acquisition is closed, what kind of tax rate would the combined entity have?

Our tax rates -- our effective tax rates are not all that different at the moment. So ours is in the low 30s, as is theirs. So I think combining tax rates is fairly straightforward at the moment. I would target us in the low 30s.

Got it. All right, thanks guys.

Thanks Krish.

Your next question comes from the line of Gary Mobley from Benchmark. Your line is open.

Hi, guys. Hopefully you can hear me okay.

Yes, no problem, Gary.

I had a question about the materiality of purchase accounting rules relating to DTS's royalties. Could you refresh our memory? What is the mix in DTS's revenue with a contribution from royalty revenue? And can you give us a sense of the magnitude as we roll into the first three months of that acquisition how much of a haircut should we think about from DTS's revenue? I think the quarterly revenue for the company has been running somewhere between $45 million and $50 million. Are we talking about half or the majority of the revenue?

Yes, they have a bit of a mix. I think it's fair to say that the majority of the revenue is royalty related. And that you have some I guess minimum guaranteed contracts as well. But it'll be a big portion of it I would say that majority.

Okay. And you said that this issue was contemplated when you announced the acquisition and discussed the merits of it and the EPS accretion expected from it. And I don't know that you gave specifics on the EPS accretion from the acquisition, but I think many of us sort of honed in on that number about $0.80 of EPS accretion. Is that still a reasonable number in light of this purchase accounting headwind out of the gate?

So yes, I think most -- so yes, I think you're -- I've heard the $0.80 number. We didn't give anything exactly as we're obviously not giving 2017. Well, I didn't go into the purchase accounting when we did the announcement of the acquisition. But it's something that we had considered, and that we continue to review and it will certainly be an issue. I think the way I tend to think about it is we can't control purchase accounting. The deal is still very, very accretive for the year. However I think it's going to have an impact at least in the first quarter. Obviously we've still continued to collect the cash for that revenue. And I think that's probably the main driver for the business and how we looked at it. So it's been fortunate that that's how purchase accounting works, but I just wanted to make sure that people where thinking about the right way. Not every business has a royalty basis under which they're recognizing a revenue quarter in arrears, so that's something to take into consideration. We're certainly used to it from a FotoNation side.

Sure. Okay. That's helpful. With respect to Pelican, I'm assuming this is not a material acquisition. Can you maybe speak about any potential revenue contribution from the acquisition; when you might expect revenue, if we're talking pre-revenue here; how many employees you're bringing over; and any additional OpEx associated with it?

Yes, so it's four additional people. It's a small design team here in Silicon Valley. Super-excited to get these guys, these are absolute imaging experts who've been working on this technology for quite some time. As I mentioned on the prepared script maybe two or three times depending on how many times you heard it, Gary, let's be -- what we see as an advantage here is we can take some of this technology and put it into RTL, which ultimately puts it in silicon. So I would say the revenue would probably be out a year I think for most cases. There are some things we may be able to do in a software basis. But the way we're planning on it, we're planning on some additional R&D during 2017. And as we get further into this -- I mean, literally their first day was today, but as we get further into this we'll be able to give you more clarity on when we can expect to see material revenue from it.

Okay, all right. That's it from me. Thanks guys.

Thanks, Gary.

Your next question comes from the line of Nacy Galinkov [ph]. Your line is open. Q – Unidentified Analyst: Hi, good afternoon guys. Can you hear me?

Yes. Q – Unidentified Analyst: I was hoping that you could go back to the beginning of the script and just maybe do it one more time.

I'd love to. I have it memorized now. Q – Unidentified Analyst: So Tom, last quarter and I think this quarter, too, you brought up iris biometrics, and the potential for design wins I think by mid-2017. So, can you go a little bit deeper into why you're so confident around the ability to bring some revenue in that initiative? And how you see the competitive landscape for you, and if you're going into an opportunity, why or why aren't you coming away with the win? Sort of what -- really where do you stand competitively?

Yes, a good series of questions. We didn't really mention it is because, number one, with all the focus around security and the importance of security -- oddly enough my phone right now has been into the store to the get the fingerprint sensors working. But I wish I had this biometric stuff on my own phone. But seriously, it has more -- it's more secure. So the technology is more secure, I think first and foremost. That's the reason. And we're seeing interest in it from a variety of industries, and in a number of customers, pretty broad set of customers that are looking at this. That's why we're confident it's going to happen. You're seeing some indications of it in some early cell phones today. And what we've managed to do is actually put it in a cell phone form factor. And we're able to go out to customers with an -- we could show you too, go out and show people it actually functioning in a smartphone. We think that's been proven to be very powerful. And we're obviously engaged with a number of folks that we think are important in this space. And we're certainly goaled -- our guys are goaled -- internal goals are to get those design wins, and we're progressing through that process. I think some of the things from a competitive perspective that are going in our favor; this liveliness detection is a big deal. What it means is, Matt, is if in some phones with this feature they hold up your picture it could authenticate your phone when it's actually obviously not you. So being able to do that -- to know that it's not a picture but it's actually a person. That's what they call liveliness detection, there's a huge…

So engineering horsepower, as you know, you've been following us a long time. We've continued to invest in that along the way. So we subsequently increased the investment, the number of people on the team. Pelican is another example of that; we're bringing in some heavy hitters in a specific area. With respect to how does it play with biometrics, it doesn't necessarily add anything that we don't already have on biometrics. It does deliver a big play and recall multi-camera apertures which enable depth -- I'm doing this with my hands, but depth focus, and gives you more DSLR-like focusing capabilities on a handheld device, as an example. And there are some other product ideas which I don't want to talk about at this point that we're already working on, we think to do in multiple form factors including in cell phone. Overall, we're pretty excited about the acquisitions, the people, the technology that we got with it, and certainly the patent portfolio is quite strong in what we think is pretty important and emerging area. Q – Unidentified Analyst: Great. Thank you.

[Operator Instructions] Your next question comes from the line of Richard Shannon from Craig-Hallum. Your line is open.

Hi, Tom and Robert. Thanks for taking my questions. I'll have to apologize for jumping on the phone call late with a bunch of earnings here today, although it appears I didn't miss as much as maybe I normally would have.

Richard, your timing was perfect, I think.

Okay. Good. So a few questions here, hopefully I'm not repeating stuff you had in your prepared remarks, but let me just follow up on the topic of Pelican Imaging, two quick sub-questions there. I didn't have a chance to read your press release, but I'm vaguely familiar with Pelican, and it sounds like the capability there is, generally speaking, similar in nature to what Apple brought onto their latest iPhone generation with multi-aperture cameras. Is that in general the idea of -- or the area of technology we're talking about here?

Yes, and beyond. They have that technology and beyond. But yes.

Okay. And in one of the more recent questions that you responded to, Tom, you mentioned something about incorporating the technology into RTL, which I think is something you're doing related to some of your FotoNation technology. Is that something you'd put together in the same RTL package or they would be disparate offerings?

We can do it both ways; it depends on the level of integration. But we could do an IPU that captures that functionality or almost like a la carte, so we can do it either way.

Got it. Okay, that makes sense. Let's see here, maybe a question on FotoNation, and I think I jumped on just as there were some comments coming in on this topic here. But it sounds like the new contract is being recognized a quarter in arrears. But curious, relative to, I think, earlier this year you recorded a record quarter in FotoNation. With the new contract with the higher ASPs, is it possible to see a record quarter coming in the first or possibly second quarter, depending on the ramp of units from your customers with the new ASPs?

Yes, we would expect that, yes.

Okay. That's kind of what I thought. Two other quick questions from me, your guidance range for revenues in the fourth quarter is little bit wider than normal. Is there -- can you give us a sense of the reason for that wider range?

Well, I think actually probably we give a very narrow range on revenue guidance. So I wanted it a little bit this quarter, there are some puts and takes that I just wanted to make sure we had enough room to cover, but I'm certainly comfortable with that range and in the middle of it. I am well aware that that's what typically it's taken. Yes, the range is wider because there's some potential puts and takes in the numbers.

kay. Maybe I'll follow up with that off-line. My last quick question, Tom, I don't know if you had any sort of update on BVA. In the last couple quarters, you talked about ASE and Jabil that you've done some work with. Can you talk about any progress there?

Yes. So we the work with ASC continued and was completed, which was quite good. You are familiar with this, so I am not going into a deep dive on it, but we continue to promote the versatility of this particular technology in what I call manufacturing-ready vertical interconnect technology. In the best most recently, Richard, we found that it fits in SIP applications. So we tend to wet out these opportunities, and if and when appropriate, transfer them to the assemblers. That's ASC and Tong Hsing, right, that we already enabled with BVA technology. So, we will give you updates as it goes, but I don't want to jinx it, but there are some encouraging early feedback, given the election season from earlier precincts reporting, so…

Okay, sounds good. That's all my question guys, thank you very much.

All right. Thanks, Richard.

Your next question comes from the line of Geoff Hulme with Hulme Family Investments. Your line is open.

Hi, Robert and Tom. Thanks for taking the question.

Hey, Geoff.

A couple of questions on the FotoNation; congrats on the design win, I was just curious as can you say that was that MediaTech and I was curious if they were using another technology or how the technology decision was made kind of how the bake off went down and why you think you won? And then a follow-up.

It's a major Asia-based SOC provider zone, you know, it was probably more than one, we can't name it, but anyway we think it's significant. That's why we led with it. It's kind of the big deal. And it's similar to the process we have gone through in earnings design win here as we have done in other pretty major players is often you are up against -- it can be an internal design team and in some cases third-parties and it's pretty heavily vetted from a technical perspective. In our case it's hybrid architecture performance and the battery usage are always key factors, and I think SOC provider enabling and providing what we call an IPU architecture, but our imaging architecture really enables, maybe cell phone providers who aren't as skilled or don't have large internal design teams to produce very productive, very competitive products, if you will, by incorporating our silicon, we're pretty excited about it and it's a big deal.

Okay. It sounds great. And then related to a previous question, is there a way to give just a basic range about what percentage of the FotoNation unit volume was re-priced with the new contract?

I don't know that we can give you anything particularly exact, what we have said is it's an important customer and therefore whereas worthwhile to mention, because of the significance. So I can't give you a specific…

It matters, obviously it matters, yes.

So, just to review, so the shipping starts now and then we see the revenue impact in 2017?

Yes, you got them.

Yes. We expect the revenue impact to be much more significant beginning in 2017. So, you are correct. And it's similar to what I mentioned in terms of how we take revenue at FotoNation similar to DTS as a quarter in arrears.

Okay. And we have lot of the DTS question, and we'll wait till you close.

You can bring it in, if we can answer, we will, sure…

So, I was reviewing their documents, did they -- it seems like they get unit based royalties not so much -- and not subject to like cliff type renewals, is that -- what's the timeline for their contracts in general?

Similar to ours; it's all over the map. Yes.

It's all over the map, okay, so…

So what we will do is let us get into that level of detail when we actually are operating the business, SEC rules are such that you know, we are only able to talk to integrate activities at this time, but good question.

No problem. And Robert, nice to see the share count in the 40s.

Thank you, Geoff. It looks good…

Okay. Thanks. Take care.

Okay.

There are no further questions at this time. I will turn the call back over to management.

Nicole, thank you. And in closing, we are super-pleased with the operating results and the direction of the company. We are continuing to perform well, and I'm immensely proud of candidly the internally team and how they're operating under a variety of increases responsibilities, especially as we look at the integration plan with DTS. So, overall, thanks again for your interest. Sorry for the mix up on the drop-off on the phone call, and thanks for joining us.

This concludes today's call. You may now disconnect.