Don Markley - Investor Relations Tom Lacey - Chief Executive Officer Robert Andersen - Chief Financial Officer.

Richard Shannon - Craig-Hallum Gary Mobley - Benchmark Krish Sankar - Bank of America Matthew Galinko - Sidoti James Lee - Potrero Capital.

Good afternoon. My name is April and I will be your conference operator today. At this time, I would like to welcome everyone to the Tessera Technologies Second Quarter Financial Results Conference Call. All lines have been 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. I would now like to turn the call over to our host, Mr. Don Markley. You may now begin your conference..

Thank you, April. Good afternoon and welcome to Tessera Technologies second 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 the future events, including the future financial performance of the company. These forward-looking statements are made pursuant to the Safe Harbor provision 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 conference call, August 3, 2015.

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, 2014 and the 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 the reconciliation of GAAP to non-GAAP financial results, please see the second quarter financial results news release issued earlier today. I would like to Tessera’s Chief Executive Officer, Tom Lacey.

Tom?.

Hey, Don. Thank you. Whether live or via the webcast recording, thank you for joining us on the call today. Robert and I are very pleased to provide an update on our second quarter 2015 results, a midyear update on our key growth initiatives as well as our guidance for the third quarter of 2015.

As you will hear today, we remain very positive on the developments at the company and we are optimistic about our future.

Q2 is another excellent quarter on multiple fronts, as there were several important developments during the quarter, including, we again exceeded expectations on virtually all financial metrics and delivered our sixth consecutive profitable quarter on both a GAAP and non-GAAP basis. Our financial management continues to be strong.

A mantra inside the company if it’s truly becoming part of our culture is spend every dollar as if it’s your own and it’s working. All facets of the company are focused on ROI consideration. Our operating margin on a non-GAAP basis was a healthy 64% for the quarter. Our recurring revenue grew 77% in Q2 2015 versus Q2 2014.

Our capital allocation program continues as announced. During the quarter, we paid our new quarterly dividends of $0.20 a share for the second time. Recall the previous dividend was $0.10 a share. Also, during the quarter, we bought back 645,000 shares of our stock at an average cost of $38.73 per share and total cost of approximately $25 million.

Our investments in R&D and technical collaboration with our customers progressed well throughout the quarter and continue to bode well for our future growth.

Worth noting, during the quarter, we formed the Tessera Advisory Board and recruited our first two members, one with deep knowledge of the imaging markets and one with extensive experience in the semiconductor packaging technologies. In fact, our first TAB, Tessera Advisory Board member is Tom DiStefano.

Those of you who are knowledgeable of Tessera’s long history will recall Tom was one of the founders of Tessera. We are thrilled to again have Tom as part of team Tessera. We plan to add additional TAB members in the coming quarters that will provide further industry, commercial and technical experience.

Let me provide a Q2 and mid-year progress report on our primary internal, organic or homegrown growth initiatives, which are FotoNation imaging products, semiconductor packaging conventions, including BBA and xFD and DRAM and non-DRAM new customer patent licensing opportunities, which we refer to as Greenfield opportunities.

I will discuss each starting with FotoNation in the specific areas of mobile, biometrics and automotive. Our FotoNation initiatives continue to progress. FotoNation followed its best quarter ever in Q1 with another strong quarter in Q2 ending at almost the same revenue level.

This trend should continue in the rest of the year as FotoNation remains well poised to achieve $100 million in annual revenue in the next several years. The mobile business continues to be the main state of activity where we expect the most opportunities for now.

China continues to play an important role in the strategy, with continued design wins, with existing product portfolio, which we see continuing. We are strategically working with some key accounts we work on roadmap and flagship products. Over the past several months, we have signed agreements with TCL ALCATEL, ZTV and a few others we cannot name.

In some cases, shipments commenced during the current quarter, others expected to commence shipments during the second half of this year. Product shipments will be in China, Europe, Africa and the Americas.

Via continued an ecosystem interactions, we continue to believe that biometric technology will continue to be an important capability for computer and handheld wireless devices. Authentication technologies will be an important part of overall identity theft reduction on computers and wireless devices.

As such, our face authentication developed from our leading face detection technology and property and our recently acquired Iris biometric authentication technology continues to be a strategic growth opportunity area for FotoNation.

Specifically, with respect to our Iris authentication technology, we continue to invest in this technology and the team has made progress since the acquisition of SSL 7 months ago.

We have integrated the technology and working towards our proof-of-concept demo in a form foreign factor, and the roadshow was getting planned for the second half of the year, leading to targeted designs with OEMs. Overall, authentication market is huge and growing.

Our competitive in the fact that we have a lengthy heritage and IT in this space gives us reason to be optimistic of our ultimate success. Our automotive effort continues to make solid progress.

During the quarter, we completed putting efforts into the industry leading SoCs and have completed two road shows in Asia and Europe, with key target OEMs with ecosystem partners from sensor companies, SoC companies and selected Tier 1 vendors. Lastly, the underlying architecture is being well received.

Our new architecture IPU, which stands for Image Processing Unit, which was introduced to customers in a roadshow in Q1, has seen excellent traction.

We have already signed up for two future SoCs, that will carry IPU from [Technical Difficulty] and in 2017 flagship products with computer vision and computational photography as key differentiators in both cases.

Our leadership with FacePower continues and this is now growing into a more general purpose object detection stage with human body being the first object of interest for the computer vision used cases.

Our ability to produce some market leading solution for video stabilization has also gained traction, riding on our low power, low latency performance mantra in video applications like mobile sports cameras, drones, home robots, wearables and other markets, where real-time videography decision-making is required.

Now, for a brief update on our semiconductor packaging growth initiatives, customer collaboration continues to bear fruit. At Tessera, we are focused on understanding the key technical issues and challenges facing the electronics industry and subsequently developing production solutions and increasingly collaboratively with our customers.

Establishing such tactical engagements is the priority for us and we made significant progress this year.

Today, our investors’ team is actively engaged with multiple leading memory manufacturers on our xFD technology and one of the four leading OSATs in the high-volume qualification of our BVA technology for package-on-package application processors.

We also have qualified our BVA platform at multiple midsized OEMs, one of which is qualifying BVA interconnect for MEMS applications, another that is evaluating BVA technology for system-in-package applications, a very exciting time for us.

Given the size of the opportunity, I would like to spend a few minutes expanding on the status of our BVA technology platform.

As we have communicated previously, we have been developing this technology as a vertical interconnect platform with our first targeted application being a high density package [Technical Difficulty] pump solution, primarily for smartphones and tablets.

This technology enables higher bandwidth between processor and memory and smaller physical size, while utilizing existing and readily available wire bonding manufacturing equipment.

Over just the last quarter, we have made significant progress working with our key partner, including completing a technology transfer and supporting an initial production evaluation.

Assuming success of this collaboration, reliability results [Technical Difficulty] towards the end of this year and present an opportunity to shortly thereafter engage in end customers for functional product evaluations and qualifications.

Once BBA technology is available in the market from a high volume manufacturer, we are confident that this platform provides us significant opportunity to bring value to our customers and our customers’ customers improving the performance of their ultimate products. That is, of course, in addition to growing the company’s revenue base.

And many adopters of PoP solutions today, our application processor and baseband processor manufacturers, companies like Qualcomm, MediaTek, Apple, Samsung, HiSilicon, etcetera, whose processors are used in smartphones, tablets and a plethora of other end products.

According to Prismark, the PoP market is forecasted to grow from around 720 million units in 2013 to over 1.2 billion units in 2018. Should the BVA platform secured 80% of the PoP market it could provide an annual revenue stream in the low double-digit millions of dollars for the company.

In parallel and with certain other manufacturing partners, we are investigating additional opportunities for the BVA platform growth segments, growth markets, such as system-in-package and MEMS, which could increase the magnitude of the revenue potential for this platform even further. Our xFD technology continues to progress as well.

During the quarter, first functional test units using a customers’ advanced DDR, SDRAM die – DDR4, sorry, SDRAM die, we view this as an important step towards the ultimate goal of achieving volume product shipments by late this year or in Q1 of 2016.

In addition, we continue to have good dialogue on potential technical collaboration and license discussions with remaining approximately 8% of the DRAM industry.

Turning to our Greenfield opportunities, which we define as customers that we have not historically licensed, I remain pleased with the progress we are making and are engaged with industry leaders in the semiconductor and mobile segments to introduce our new packaging and imaging technologies.

In addition to Greenfield opportunities that we are discussing potential technology engagements with, we have also been working with several customers to close new [Technical Difficulty] licenses.

As we have explained in the past, Tessera has been an innovation leader for over 25 years and we have a broad patent portfolio in multiple technology areas, including semiconductor packaging memory, semiconductor circuitry and process, and imaging. I thought it would be helpful to provide an overview of our process generally.

Our process to close a new license agreement can often take 12 to 24 months to complete.

This process involves closing initial engagement agreements, presenting relevant assets to customers’ licensing groups allowing our customers to carry out their own analysis and ask questions, agreeing to business terms and then moving to close the final licensing agreement.

While I am not able to provide you details of our discussions with specific customers due to the confidentiality restrictions, we have been making steady progress with several customers and are now at a point with two potential licensees where we have completed presenting the portfolio and they are in the middle of their own analysis.

We are working with them to help this process and are looking forward to moving to contract discussions in the latter part of the year. Next, I would like to talk briefly about our inorganic growth opportunities, specifically, M&A.

Given the strength of our management team, which is executing very well, our balance sheet continued strong profitability. We continue to explore M&A opportunities.

These opportunities include a wide variety range of options, including smaller tuck-in acquisitions, like we did in the fourth quarter with smart sensors [Technical Difficulty] biometrics company to larger transformational opportunities and sizes in between. We continue to look at options versus overall strategic vision for the company.

Robert, Board and I all share the same philosophy regarding M&A. We have a very discerning approach to acquisitions. We are very thrilled and the vast majority of opportunities, we look at don’t pass our criteria. This is an area where patience is simply a virtue.

I am pleased to report the overall activity and quality of the opportunities we are exploring. In summary, I am pleased with our overall progress on our growth initiatives.

Our internal R&D efforts, both on our Invensas semiconductor packaging and circuitry initiatives and our FotoNation Imaging Technologies continue to progress well against our internal targets, developed in conjunction with our customer. Similarly and I am pleased with the volume and quality of M&A options.

We have a very thorough and disciplined approach to M&A as I mentioned before. Next, I want to provide a brief update on our outstanding litigation matters. As those of you who have followed Tessera know, we have successfully settled almost all of our outstanding litigation over the past two plus years.

We currently have no outstanding patent litigation and we have only two active litigation matters, both of which are breach of contract cases.

As I have stated before, we continue to do litigation as a last resort, but sometimes litigation is necessary to protect our rights and ensure that our stockholders receive a fair return on our valuable inventions in intellectual property. Turning to our open matters, in the UTAC Taiwan case, we are starting to see the light at the end of the tunnel.

Summary judgment notions are scheduled to be heard in September and after that we will start getting ready for trial. The court has scheduled the trial to begin in February 2016. We remain confident in our position in this case.

Obviously, there are a variety of factors that could change in the case including the number of matters that are currently under consideration by the court. Due to confidentially obligations, we can’t disclose, at this time, the specific amount of damages that we will be seeking at the trial.

Assuming the case is ultimately resolved in our favor, however, I can’t give you a rough sense of magnitude by telling you that UTAC Taiwan was not a significant customer of ours and this case is not of the same order of magnitude as our Amkor settlement, for example. Our only other active litigation matter is with Toshiba.

As you know, we filed a breach of contract case against Toshiba in the state court in May of this year. The case is just getting started and there is no case scheduled yet. The first case management – the first case management conference with the court is not scheduled until October.

Toshiba has been in the news due to financial matters and executive and board resignations and we are examining what this might mean to us with respect to our matter. As a reminder, Tessera Inc. entered into a license agreement with Toshiba in 1999.

Our lawsuit alleges that Toshiba has failed to pay royalties both under the party’s license agreement, including unpaid amounts that have been outstanding for years. We also believe that Toshiba failed to cooperate with audits that were authorized by the agreement.

As we have previously indicated, we take the decision to initiate our lawsuit very seriously and generally try to exhaust other avenues to resolve a dispute before initiating a lawsuit. Given our longstanding relationship with Toshiba, we attempted to resolve this dispute for several years in a way that would be mutually acceptable to both parties.

Unfortunately, we were not able to reach a settlement and had to file this case. In terms of the potential magnitude of the case, confidentiality obligations, restrict us from disclosing the exact amount that Toshiba was paying with the amounts that we found to owe in the audit.

However, what I can’t tell you is that until we stop paying in 2013, Toshiba was a more significant customer of ours in UTAC, Taiwan. With that said, Toshiba’s payments never amounted to more than 10% of our annual revenue in any given year, so that should give you a rough sense of the magnitude.

As always, we remain open to having discussions with Toshiba and UTAC Taiwan about resolving these matters on fair terms and we will continue to explore avenues to settle with both of them as these cases move forward. I will now turn the call over to Robert who will address our excellent Q2 financials and Q3 guidance.

Robert?.

cost of revenue of $22 million, R&D of $6.9 million, SG&A of $8.6 million, and litigation expense of $3.5 million. The tax adjustment for the non-GAAP items in the second quarter of 2015 totals $2.6 million.

Non-GAAP results exclude discontinued operations, restructuring and other exit costs, stock-based compensation, charges for acquired in-process research and development, acquired intangibles, amortization, impairment charges on long-lived assets and goodwill and related tax effects.

We have included a detailed reconciliation between our GAAP and non-GAAP net income in both our earnings release and on our website for your reference.

Moving to the balance sheet, we finished the quarter with $431.9 million in cash, cash equivalents and investments, a decrease of just $0.6 billion from the prior quarter as cash generated from operating activities was offset by common stock repurchases and a quarterly dividend payment.

As Tom noted earlier, common stock repurchases in the quarter totaled 645,000 shares pursuant to our stock repurchase program. Looking back over the past eight quarters, we have purchased 5.6 million shares of our stock for $148.4 million.

As of the quarter’s end, we have approximately $91.9 million remaining under the program for future share purchases. On July 31, 2015, the Board of Directors approved a regularly quarterly dividend of $0.20 per share of common stock payable on September 18, 2015 to shareholders of record on August 28, 2015.

In terms of financial guidance, for the third quarter of 2015, we expect revenue to be between $64 million and $66 million. We expect GAAP earnings per share of between $0.46 and $0.48 per share and non-GAAP earnings per share of between $0.55 and $0.57 per share.

A detailed reconciliation between the GAAP and non-GAAP measures is provided in the earnings release. Given that we are at the midpoint of the year, I will reiterate our confidence of reaching at least $235 million of recurring revenue for 2015.

Since I am sure someone will ask, let me say upfront it is my intention to provide a baseline for our 2016 recurring revenue during our Q3 conference call. With that, let me turn the call back to Tom..

Thanks, Robert. Great quarter. That concludes our prepared remarks. Now, we will open the call to our attendees for questions. Over to you April, for Q&A..

[Operator Instructions] And your first question comes from Richard Shannon..

Hi, Tom and Robert.

How are you guys doing?.

Great..

Very well, thanks..

Good. Congratulations on a good quarter and thank you for taking my questions. I apologize somewhere in the transmission here, I had a bad line and I missed a couple of your prepared comments, Tom was hoping I get you to repeat one or two of them.

Basically, I missed a lot of the comments you made regarding the status of BVA and specifically around customer qualifications and things like that.

I wonder if you could kind of summarize the quick comments there please?.

Yes, Richard. That was a fairly lengthy part of the conference call and a hazard to repeat it, but what we can do is we can send you the actual script if you want, that piece of the script is that – it’s fine right? But at a high level, it’s gone quite well.

We are continuing to make solid progress with a leading OSAT, working with several smaller OSATs as well. The initial targets are that implies smartphone market and also secondarily some other markets, including MEMS based focus as well, but solid quarter for BBA for sure.

We also went as far as to try to size, Richard, what that could mean if we were able to get 15% to 20% of the PoP market, which is about 700 million units today, by Prismark going to $1.2 billion by 2018.

That would be worth double-digit millions – low double-digit millions of revenue to us if we were able to capture 12%, 15% to 20% of the smartphone market..

Okay, great. That is helpful as well. Okay. A quick question on xFD, it sounds like you are making some progress there and you are hoping to get some testing that’s out by the end of year, and I think you mentioned something about discussions with 8% of the DRAM industry.

Did I catch that correctly?.

So, two different points, yes, so on xFD, what we mentioned, we have not done this before, we were able – not accomplished before, we are able to actively build functional die – using functional die, a DDR4 die on xFD. And then a separate point we made is and I will call it that the rest of the unlicensed DRAM, there is about 8% of that market.

There is an opportunity for licensing that remaining part of the market as you are well aware were under license, with the big three, the remaining 8%. So, those are two different points we make..

Got it, okay. I think that’s maybe where my line went out there. I appreciate your squaring me away on that one, Tom. A couple of other questions. You mentioned FotoNation second quarter numbers were very close to sound alike slightly down from the record first quarter.

How should we expect the trend throughout the rest of the year and was the decline there was due to follow-through on unit sales from your customers or some other dynamic?.

Yes. It’s really some other – it’s really some other dynamic. What we start to fare about is we have got a lot of traction in China principally in the smartphone area. We named a couple of OEMs and [Technical Difficulty] some of those shipments started this quarter and some will start in the second half of the year.

We would expect that business to continue to grow. We reiterated that statement we made before that we expect to achieve $100 million in revenue in that business over the next several years. So, we would expect second half to be candidly up over the first half..

Okay. I guess just two more quick questions from me. First of all, I know that Qualcomm you have mentioned as a key target for at least a couple of your technologies. You have obviously going to be going through some restructuring here, it sounds like lowering their cost base significantly.

Has this affected any of the partnership activities you have had going on with them?.

No..

No?.

No. Okay, good. Good to hear..

Okay, good to hear. Last question from me regarding the guidance for the third quarter, we were trying to fit in the revenues and the earnings numbers here and it seems like somewhere between OpEx and below that line, it seems like the costs are a lot lower like a few million dollars.

Robert, can you help us out understanding where the moving parts here on the OpEx are below that to help us to fit those numbers together?.

Are you referring to the Q2 results or the Q3 results?.

Q3 guidance?.

Q3 guidance, yes, by our calculation we need to have one..

Compared to last quarter it seems like the OpEx – if that’s the moving part, it would have to be down a few million dollars.

I just want to make sure that’s the place where it’s coming from and if so where is that coming out of?.

No, I think in terms of OpEx I would expect the litigation line to be relatively flat and in terms of the remaining parts of the OpEx, it’s probably sequentially up, just slightly. We have some hires in R&D at the end of the quarter that I expect to be fully loaded in the number during Q3.

But if you are thinking broadly about the numbers, we finished at $64 million and I am guiding to $64 million to $66 million and we finished at $0.49 per share and I am guiding to $0.46 to $0.48.

What I noted in the numbers is there was about $0.03 of sort of one-time benefits during Q2 that I wouldn’t expect to repeat during the following quarters so that’s kind of averages..

Okay. Maybe that’s what I missed then. Okay, great. I think that’s all my questions. I will jump out of line. Thank you, guys..

Thank you, Richard..

See you, Richard..

And your next question comes from the line of Gary Mobley from Benchmark..

Hi, guys. Thanks for taking my questions.

Regarding your revenue guidance for Q3, just taking the midpoint, would you expect that to be all recurring revenue or is there any episodic component to that?.

I think given that we have had very little – we have just a de minimis number of open litigation matters, whether it would be logical to expect that our episodic revenue in Q3 in terms of forecast would be very minimal since I don’t know when these cases will settle and it wouldn’t make sense to forecast that..

Okay..

So, I would expect you have small number for sure..

Okay. Well, then I guess that makes your full year ‘15 recurring revenue guidance $235 million looks even more conservative. And I guess the assumption is that Q4 revenue dips about 12% sequentially.

And I know there might be some seasonal component to that, but maybe if you can just help reconcile sort of the conservative appearance?.

Well, I think I have tended to guide the $235 million as a baseline. I would certainly like to exceed that. So, again, I think given that we are midyear here, I don’t want to be in a position of raising it just yet, but I do like to think that it’s somewhat conservative, yes..

Okay, alright. Thank you. And Tom, you mentioned some assumption on BVA perhaps achieving 15% share in the 2018 timeframe translating to potentially low tens of millions of potential revenue for the company.

I am just wondering why you are signaling 15% share, is that a function of being engaged with one specific potential customer that has roughly 15% share or is that just what you think your technology is applicable to in the PoP market?.

Gary, good question. What we have heard from many investors as we continue to invest in BVA is try to get some idea of what size of the opportunity is. So, I wouldn’t read any specific customer into that. As I said in the prepared statements, there is a lot of activity around BVA – or BVA I guess, but we are around BVA.

And in the event, we are successful in achieving 20% share, it could be as I stated. That by no means is our goal, but more aggressive than that, but we are just trying to give investors idea of what the size of BVA will be. So, that was just straight math.

It wasn’t – don’t read into a one – we have secured somebody of that percentage and that’s all we are going to get, if it’s just more trying to get people an idea of what this could mean to the company..

It seems reasonable. I think of that just as our estimate at this point..

Yes..

Okay, alright.

And as far as legal expense goes, I think your annual target range is roughly about $10 million to $25 million in legal expenses, would you – based on your guide, it looks you might be at the midpoint to that range, is that – am I viewing that correctly?.

I think that’s correct. That’s sort of indicated last quarter is that the midpoint of the range seemed a reasonable estimate for this year..

Okay, alright. That’s it for me. Thanks guys..

Thanks, Gary..

Thanks, Gary..

[Operator Instructions] And your next question comes from Krish Sankar from Bank of America..

Hey, Tom and Robert. Sorry, I just jumped in. So, if some of my questions have been answered, I apologize.

First and foremost, on the guidance, did you guys break it between recurring and episodic?.

Just a moment ago, it’s – we don’t guide to the difference between those two, but it stands to reason probably have very little episodic since we have de minimis caseload, and I wouldn’t normally guide to episodic loans, I had clear visibility to it in advance..

Got it. Alright.

And then when I look at beyond 2015, let’s assuming, our recurring revenue does grow above the $235 million baseline you gave, what would be the key driver of that recurring revenue? Would it still be all the DRAM contracts you signed or would it come more from FotoNations or it would be new customers?.

I think it can be a number of different factors. I estimate that it will be a combination of several things. I would like to see new Greenfield customers as part of that. Certainly, BVA can come into play there and some of the new advanced packaging technologies.

And certainly, we would expect given the sort of dimensions we have given to FotoNation that would continue to be part of our growth story for next year..

Got it.

And within the $235 million recurring revenue for this year, would FotoNation be up year-over-year compared to last year?.

We haven’t given specifics to the numbers and....

What was the question?.

Specifically, on FotoNation and so that was on the numbers. So, we haven’t broken that out specifically, but I think it’s fair to say that they are part of the growth story for this year. We are only halfway through.

So, I think Tom noted earlier that we expect them to continue to grow in the second half and they have already had – that part of the business has already had a very strong first half. So, we are excited about the business for sure..

Got it.

And then just a final question, stats of Toshiba the two still outstanding litigations you guys have at this point?.

It’s UTAC, Taiwan and....

UTAC and Toshiba?.

Toshiba, which we recently filed yes. And we tried to give some – again we have confidentiality reasons and other reasons, we can’t – we tried to do on our prepared statement pressures to give some relative size of what those things could be..

Got it. Thank you very much guys. Thank you..

Thanks, Krish..

Thank you..

And your next question comes from the line of Matthew Galinko from Sidoti..

Just mostly on M&A, how would you sort of describe the funnel at this point? Are there any opportunities that are sort of going deeper into it or is everything getting screened out early on valuation or are there other factors that have prevented things from getting to the finish line?.

Hi, Matt, it’s Tom. So, we are – as I mentioned on the prepared statements, we are very judicious in how we are going to use shareholder capital and they have got to meet several important criteria.

We look for businesses that are offering strong potential for profitable growth that could be more valuable as part of Tessera than they are as standalone.

An acquisition either needs to be an area quarter where investors of FotoNation are adjacent to our businesses, where we can push kind of our core strength, technology development and licensing expertise, while ideally expanding our addressable markets.

So, it’s a fairly broad statement, but on one the hand, what’s that?.

And I think with regard to your part of the question on the pipeline, we have certainly seen a lot of activity in that area in terms of evaluating companies and that this has ranged from small tuck-ins – exactly to more to larger pieces.

I don’t know if I can characterize a much more beyond that?.

Alright, fair enough. Thank you..

Anything else Matt or are we good?.

Your next question comes from the line of James Lee of Potrero Capital..

Thanks. Just to follow-up on the answer to one of the questions regarding 2016 and I appreciate that you are not giving the specific guidance until the next call.

Fractionally, are you guys expecting to grow your recurring revenue in 2016 versus 2015?.

Well, I think we will provide that when we give the numbers that would certainly be our goal..

Okay.

So, that is your objective to grow it?.

Of course..

Okay. And then on FotoNation, you guys ticked up about this $100 million target, I think I’d say $23 million last year.

Maybe you can talk about the path to the $100 million, do need to – how many more design wins you need to get to the $100 million or can you get to the $100 million based on your existing customer base and potentially your average unit price uplift?.

Yes, it’s both. And we have to continue to progress with our existing customers in getting ASPs and add customers like we did. We have added several this year – this first part of the year, which we talked about it on the call..

How much cash do you guys expect to generate this year?.

That’s a good question. I mean, we have been generating, I think over the course of the last quarter, it will vary depending on the quarter, but I think we are well north of $100 million per year..

Okay, that’s it. Thank you..

Thanks, James..

And your next question comes from the line of Richard Shannon from Craig-Hallum..

He is back..

Hi, I am back. Just one question for me guys.

In your FotoNation business, of the largest mobile OEMs that also happened to be your licensees at the start of this year, do you expect them all to remain licensees exiting the year as well?.

We would – certainly, our goal, yes, absolutely, our goal..

I think there is every indication that will be the case..

Yes. Okay, that’s all for me guys. Thank you..

Thanks, Richard..

Thanks, Richard..

[Operator Instructions] And I will now turn the call back over to management..

Thank you, April. So, thanks again for your interest in Tessera. We really appreciate you spending the time to learn more about our company. In summary, we are very pleased with the results and outlook. Our solid foundation continues to provide an excellent financial platform from which we continue to grow the company.

I hope we were able to convey to you that we are as optimistic as ever about the growth prospects of our company. Thanks for joining us. We look forward to speaking with you again during our third quarter update.

And just one last thing, I am going to get killed for this, but I am going to do it anyway, for those of you who know Brandi, The Piacente Group, please congratulate her. Thanks, again..

This concludes today’s conference call. You may now disconnect..