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

Krish Sankar – Bank of America Gary Mobley – Benchmark Jorge Rivas – Craig-Hallum Capital Group Matthew Galinko – Sidoti.

Good afternoon, my name is James, and I’ll be your conference operator today. At this time, I would like to welcome everyone to Tessera Technologies Fourth Quarter 2015 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. Don Markley, Investor Relations, you may begin your conference..

Thank you, James. Good afternoon and welcome to Tessera Technologies fourth quarter 2015 financial results conference call. This call is also being webcast live over the Internet and today’s webcast is accompanied by a slide presentation that can be accessed at www.tessera.com in the Investors section under Events and Presentations.

Please be advised that during the course of today’s 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 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 call, February 2, 2016.

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 September 30, 2015, especially in the sections titled Risk Factors.

The company disclaims any obligation to publicly update or revise any forward-looking statements to reflect future 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 reconciliation of GAAP to non-GAAP financial results, please see the fourth quarter financial results news release issued earlier today.

Now, I would like to introduce Tessera’s Chief Executive Officer, Tom Lacey.

Tom?.

Thank you, Don. Whether live or via the webcast recording, thank you for joining us on the call today. Robert and I are very pleased to provide a summary of our Q4 2015 and full year 2015 results and our expectation is for 2016, including an update of our key growth initiatives and full-year revenue guidance.

We provided a slide deck, as Don mentioned, and we’ll refer to the slide number and slide titles as we proceed. As you will again hear today, we remain very positive on the developments of the company and we’re optimistic about our future. Let me begin with some highlights for 2015 summarized on Slide number 3, entitled 2015 full-year highlights.

Although, overall annual revenue from 2014 to 2015 was down slightly, recurring revenue, which we view as the primary measure for yearly growth, grew by approximately 62% from $150 million in 2014 to $242 million in 2015. Non-GAAP operating margin increased by 5 percentage points to 71% for the year. We also generated $145 million in free cash flow.

Our capital allocation program was very robust as we purchased 3.3 million shares during the year, it’s approximately 6% of the shares outstanding compared to the start of the year at a total cost of $119 million.

Additionally, at the beginning of the year, we doubled our quarterly dividend to $0.20 from $0.10 a share thereby returning $42 million to shareholders over the year.

During our recent board meeting, we increased our authorized share buyback program by $200 million, adding $200 million to the unused amount previous authorization totals approximately $225 million available for share repurchase. Our balance sheet remains very strong. It’s a clear asset in the uncertain financial times in the U.S. and world economy.

We ended 2015 with a debt free balance sheet and $382 million in cash and cash equivalents. Next, I will provide an update on our business units.

Before I get into the details at a high level as it reflects upon our relationships with those who pay our paychecks, our customers, I'm delighted to see the progress we have made with them during the course of the year.

Our collaborative approach continues to pay dividends as our level of engagement has meaningfully progressed in several important areas. Now, onto our technology and IP licensing efforts. We have been working diligently and have made significant progress over the course of the year with our Greenfield engagements.

As we mentioned in our previous calls, these discussions can take an excess of 12 to 24 months to close after initial contact. During the year, two of our Greenfield engagements have progressed to an advanced stage in the process where the customers are carrying out their own analysis of the portfolios.

We expect to continue to move these forward in the first half of the year. We’re also in the process of moving forward with several other Greenfield engagements and we’re reaching out other potential customers to initiate discussions.

Today, our investors’ team has engaged with leading semiconductor manufacturers and OSATs to further the development and broadly commercialize our portfolio of advanced packaging and interconnect technologies including xFD for stack memory, BVA for the integration of application processes and memory, and Ziptronix bonding technologies.

Our xFD technology enables the highest performance, lowest cost DRAM stacking technology in the market. This past year, we built and verified the basic functionality of high performance, high capacity DDR4 modules, and subsequently provided them to one of the world’s largest DRAM manufacturers for system level test.

We are waiting for the test results and are excited about the prospect of moving this technology forward into commercial product this year.

Our BVA technology addresses the industry’s demand for low profile scalable interconnect technology by readily allowing the integration of the latest generation of application processors and memory in mobile electronics.

Through our customer engagement, we discover that BVA technology not only addresses opportunities in the package-on-package space targeting SoCs and memory, but also fits other market such as RF whereby vertical interconnect package technology provides better solutions that are currently available.

As we reported, we continue to make substantial progress on our technology qualification efforts with a leading OSAT and expect to lead to near-term customer engagements and evaluations.

During the fourth quarter, we also announced our first commercial BVA license agreement with Tong Hsing, a mid-sized Taiwanese provider of microelectronics, packaging and substrate manufacturing services for applications including wireless communication, MEMS and image sensors.

On the 3D front, we completed the acquisitions of Ziptronix to augment our 2.5 and 3DIC portfolio. We now have truly enabling and what we consider foundational technology for low temperature wafer bonding for wide range of applications including image sensors, stack memory, 2.5D FPGAs, RF, Front-End and MEMS devices.

We have subsequently focused our related engineering resources to the further development, market application and commercialization of this technology platform.

We have received very positive feedback from customers in all segments, which confirms our initial belief that Ziptronix technology represents a multi-hundred million dollar opportunity for the company over the next decade. Now, I’ll provide an annual summary of our FotoNation business.

First of all, our existing and new customer engagements and relationships continue to strength during the year, and large part due to our excellent technologies, capabilities and people as well as due to the increasing importance of imaging and computer vision markets to our customers products and their end customers.

We’ve earned our reputation as a respected world-class and experienced expert in high-performance, low power imaging. FotoNation’s annual revenue for 2015 totaled a record $30 million, which represents 29% increase from 2014.

Our growth prospects remain excellent as we have detailed on Slide 4, entitled FotoNation path to revenue of $100 million and beyond. As a reminder, given our software and hardware architecture implementation, once designed are actually won, they can’t take more than a year, in some cases to get into volume productions.

We remain confident to a path to $100 million and beyond and as you can see from Slide 4. It is feasible to achieve $100 million simply by being more successful in the mobile market alone. Additional subsidiary revenue opportunities are possible in additional import markets including drones, sports cameras, robots, surveillance and automotive.

During the year, IPU core was embedded in two chips from our close partner Socionext, which set us up nicely to grow this year and beyond in non-mobile segments such as DSLR cameras, activity cameras, robots and drones.

We made break-through developments in biometrics, during the year, for example, we developed best-in-class machine learning neural network technology that has produced where some customers have told us. It’s the world’s best face authentication technology. Similarly we’ve made excellent progress on our iris authentication technology.

We successfully demonstrated both face and iris authentication during the recent CES show and are optimistic, they have strong growth prospects. At this time last year, we outlined what we thought was a big opportunity in the automobile market for deployment of computer vision technologies.

As we stated today, we are more bullish and confident that this technology will in fact be broadly deployed in automobiles in the coming years. During the year, our in-car driver monitoring product was demonstrated on Texas Instruments platform.

More importantly, we further advanced the technology and have made substantial progress with multiple Tier 1 providers and solutions to the automobile market. We expect to complete commercial engagement agreements with multiple Tier 1s during the year, enabling our technologies deployed in future car models.

We view this as an important endorsement of our world-class technologies, similar to what occurred in smartphones. Whereby computer vision and imaging technologies will quite likely increase in importance and value to automobile manufacturers as customers demand safer cars equipped with imaging technologies.

Additional technology advancements during the year include, what our customers are telling us this is best-in-class image stabilization which promises to be important for mobile phones, activity cameras, robots and drones.

Additionally our fast focused technology which we’ve referred to as LifeFocus, was deployed in multiple international mobile phone customers. We also see good opportunities with our face feature modeling, face beautification and other advanced imaging capabilities.

As I wrap up, a review of our year, I’d like to say a few words about our organization and employees. Our employees are performing very well they are aligned with our corporate values goals and objectives and are motivated to continue toward growth.

While Tessera was once an uncertain brand amongst those considering working in our company this is no longer the case. We now attract world class talent across virtually all aspects of the company. Stating the obvious world class companies achieve this status in large part by attracting and motivating world class people.

Overall the company is operating well and is well poised to execute against our growth initiatives. Now on to some details on our recently completed fourth quarter, we again exceeded expectations on virtually all financial metrics and delivered our eighth consecutive profitable quarter on both a GAAP and non-GAAP basis.

Our financial management continues to be strong. As Robert will detail we significantly exceeded earnings per share forecast due in part, to continued excellent expense control and also through reduced share count resulting from continued buyback activities during the quarter. During the quarter we purchased $25 million of our stock.

We continue to demonstrate our ability to be an industry leader in innovation. At 2015 patent power scorecard was published on November 30, by IEEE spectrum, a publication of the Institute of Electrical and Electronics Engineers.

The scorecard covers 17 industry sectors and 6,000 entities across aerospace, computer hardware and software, Biotechnology, government agencies and universities with the top 20 organizations in each sector reported.

The patent power scorecards are based on objective, quantitative benchmarking of the patent portfolios and take into account not only the size of organizations patent portfolios, but also the quality as reflected in characteristics such as growth, intact originality and general applicability. The ranking is based on 2014 patent data.

Tessera and Invensas listed separately are noted in the semiconductor manufacturing sector. Tessera was ranked number eight, Invensas number 11. During 2015 our R&D efforts continue to place strong emphasis on producing high quality intellectual property that will be valuable to our customers.

There by adding to our already very strong patent portfolio. I would like to again move to the slide deck and walk you through Slides number 5, and 6, entitled potential revenue drivers, and potential revenue growth opportunities. These slides were presented for the first time at the recent Needham conference in New York.

Alphabetically, left to right, which you can see as BVA and xFD revenue potential, FotoNation Automotive Growth, FotoNation Mobile Growth and Greenfield, which is semiconductor companies that have never been licensed by Tessera.

We also have a few outstanding legal matters and if our track record has any prediction of the future and we can successfully get one or more of these done that will certainly help us grow as well.

Finally we also have growth opportunities with relicensing former customers and from Ziptronix licensing which again we view as foundational and enabling bonding technology important in 2.5 and 3D packaging opportunities. So any of these are important in total they really represent substantial opportunities for us to continue to grow the company.

The next slide, revenue growth opportunity summaries each of the opportunities way to read this particular slide is the growth opportunities again alphabetically from top to bottom of the slide and then from left to right across the top is first the overall market size, the column on the right is our estimative Tessera specific opportunity.

So far BVA, excuse me so forth BVA and xFD license revenue we see BVA that package-on-package for the smartphone market has potential total available market of approximately $100 million annually. About $1.2 billion, 1.2 billion PoP or package-on-package units are being shift into the market today.

If we’re able to obtain 15% of that market it is we’re teens million or double digit millions in potential annual BVA revenue for us. As I mentioned earlier the qualification for BVA is going well, we hope the qualification gets completed during the first half of this year and that we begin to see some meaningful revenue from the rollout.

For FotoNation automotive growth, the driver monitoring and surround view market is over $1 billion market. The opportunity for us is to penetrate that market and proliferate our software and hardware product solutions.

The key driver that is prominently given as automotive, for us in 2016 is identifying tier 1 providers who have a channel into this automotive sector.

We are having very active discussions with a number of them and ideally we sign one or two who commit to us financially and help us on the R&D front but more importantly we’ll become a go-to-market channel into the automotive market. Mobile growth at 1.5 billion smartphones it’s a big, big market.

We have approximately 25% market share today and we intend to simply to gain more share in that market. A big opportunity for us remains through expanding existing relationships and gaining new customers. We also see opportunity in the drone, robot and surveillance markets, using our outstanding imaging technology.

Greenfield, we think this is a multi $100 million revenue opportunity for us and at this point I’m pleased to say we’re heading into the commercial and contract phase of discussions with two potential customers, ideally at the end of this process we end up with multiyear recurring revenue licenses but in some cases litigation maybe required.

On legal matters we don’t like to be in disputes with our customers, and if we are, some of which we’ve inherited, we want to clean them up and ideally put a license in or structured payments in place. We have proven ability to be successful with these and remain optimistic that we will continue to do so.

Such agreements could be material and contribute significantly to the company’s financial performance. We see a growth opportunity to license our former customers, particularly OSATs, who have historically been big customers for us. They represent, in total of $20 billion plus market segment.

We think an opportunity may be there, certainly do technology licensing at a minimum with these folks. And Ziptronix, again we think this could be a multiple $100 million opportunity for us over the next decade, as 3D becomes more prevalent.

Next I would like to talk briefly about our inorganic growth opportunities, specifically M&A by leveraging our strong cash generation and cash balance. We continue to look at options relative to the overall strategic vision for the company.

We are very thorough in our analysis and the vast majority of our opportunities, we look at don’t pass our criteria. This is an area where patience is a virtue. And I am pleased with both the overall activity and quality of opportunities we are exploring.

In summary, although as Robert and my staff is going to test, I want things faster, and cheaper and better.

But given the complexity of a number of our initiatives, overall I’m pleased with the progress of our growth initiatives, all of our internal R&D efforts, Invensas semiconductor packaging, new Ziptronix initiatives and FotoNation imaging technologies continue to make solid progress, as we work together with our customers and partners.

Similarly, I am pleased with the volume and quality of M& options. Stating the obvious having zero debt, a large cash position, predictable recurring revenue and strong cash generation positions us very well, given the overall technology and stock market turbulence.

Before turning the call over to Robert, let me provide a brief update on the UTAC legal matter. As has been our practice, we have worked diligently to resolve legal matters with our customers and have been able to do so on most occasions. I was optimistic we could do so again with UTAC. But unfortunately this isn’t the case, as of this conference call.

We remain very confident in a positive court outcome should the matter go to trial. The currently scheduled trial date is now, April 2016, thus we are anticipating increased legal spend in Q1 as compared to Q4 in the event of settlement isn’t reached before the trial.

I will now turn the call over to Robert, who will address our Q4 and 2015 financials, our 2016 annual guidance and other financial matters.

Robert?.

Thank you, Tom. As just noted we had solid financial results for the fourth quarter and the year in a great stride towards continued growth during 2015. We developed new licensing agreements with customers such as Socionext, Huawei, ZTE and LG.

We witnessed further market penetration of FotoNation imaging technologies and we announced the acquisition of the Ziptronix in early August, which is an excellent fit with our 3D-IC technologies and has current applicability in the market.

We combine with the significant progress made on bringing our advanced packaging solutions to market and in licensing new customers to our technologies and IP portfolio, it was a solid year indeed. With that let me cover the quarter’s results.

Total revenue for the quarter was $61.8 million, at the high end of the Company’s guidance range of which $60.8 million with recurring revenue. Compared with the fourth quarter of 2014 recurring revenue grew by $17.5 million or 40%, due mainly to recurring base settlements along with revenue growth in our FotoNation business.

GAAP operating expenses for the quarter were $28.4 million compared with $13 million for the fourth quarter of 2014.

The increase is primarily result of a 2014 fourth quarter benefit of $11.9 from the sale of assets to China-based Shenzhen O-Film, reflected on the income line statement restructuring, impairment of long-lived assets and other charges and gain on sale of patents.

R&D expense for the quarter increased by $1.5 million from the fourth quarter of 2014, but was slightly lower sequentially. The year-over-year increase was the result of incremental spending related to the Ziptronix acquisition in 2015, an increase in stock-based compensation.

Litigation expense for the fourth quarter was $3.2 million, compared with $2.1 million from the fourth quarter of 2014. Litigation expense increased by $1.0 million from the prior year period due to increased case activity.

Amortization expense for the quarter increased by $1.4 million from the fourth quarter of 2014, and by $900,000 from the previous quarter, primarily due to the amortization of intangibles recorded from our Ziptronix acquisition in August 2015, as well as IP acquisitions over the past year.

GAAP net income for the quarter was $22.8 million or $0.44 per share on a diluted basis. Earnings per share exceeded the high-end of our Q4 guidance range, mainly related to higher revenue, lower expenses and reduced share count. Non-GAAP net income for the fourth quarter of 2015 was $29.7 million or $0.57 per diluted common share.

The EPS number was $0.05 better than the high-end of our guidance range, primarily due to factors just noted for the GAAP difference, plus lower than planned taxes on a non-GAAP basis. Non-GAAP expenses were $19.3 million for the quarter. The tax adjustments for the non-GAAP items in the fourth quarter of 2015 totaled $2.3 million.

Non-GAAP results exclude discontinued operations, restructuring and other exit costs, stock-based compensation, charges for acquired in-process research and development, stock-based compensation expense, 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. Turning to the full-year results, total revenue was $273.3 million in the full-year ended December 31, 2015. Recurring revenue for the year was $282.3 million, while episodic revenue was $31 million.

The year-over-year growth in recurring revenue was $92.5 million or 62%, driven by full-year is Micron license, FotoNation growth and PTI and Amkor settlements. GAAP net income from continuing operations for the year was $117.1 million or $2.23 per share on a fully diluted basis. GAAP operating margin was 59% for the second consecutive year.

And non-GAAP operating margin improved to 71% compared with 66% in 2014. Non-GAAP net income from continuing operations for the year was $136.4 million or $2.55 per fully diluted share.

Moving to the balance sheet, we finished the quarter with $381.7 million in cash, cash equivalents and investments, a decrease of $52.7 million from the December 31, 2014. As the $146.6 million cash generated from operating activities was largely offset by $119.2 million of common stock repurchases and $41.7 million in annual dividend payments.

Common stock repurchases in the quarter, pursuant to our stock repurchase program, totaled 776,000 shares for an aggregate amount of $25.3 million, reducing our quarterly weighted average diluted shares outstanding to $51.4 million, a reduction of approximately 1.1 million shares from the third quarter of 2015.

On Slide 7, titled share repurchases, you will see that fiscal 2015, we repurchased more than 3.3 million shares for an aggregate amount of $119.2 million.

As of the quarter’s end, we had approximately $25.9 million remaining under the current share repurchase program, subsequently on January 27, 2016, the Board of Directors approved an additional $200 million for share repurchases as Tom noted earlier.

On January 27, 2016, the Board of Directors approved a regular quarterly dividend of $0.20 per share of common stock payable on March 16, 2015 to shareholders of record on February 24, 2016. On the Slide 8, for financial guidance, for the first quarter of 2016, we expect total revenue to be between $55 million and $59 million.

We expect GAAP earnings per share of between $0.30 and $0.35 and non-GAAP earnings per share of between $0.41 and $0.46. A detailed reconciliation between the GAAP and non-GAAP measures is provided in the earnings release and on Slide 10. For the 2016 fiscal year, we expect total revenue to be between $250 million and $270 million.

The guidance range for 2016 does not contemplate the completion of all open legal and Greenfield matters or significant upside to the FotoNation business. With that, let me turn the call back to you Tom..

Thanks, Robert. That concludes our prepared remarks. Thanks for being patient with us. It was a lot to cover. Now, we’ll open the call to your questions. Over to James, the operator for Q&A..

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

Yes. Hi, thanks for taking my question. I had a couple of them Tom and Robert.

First one, on the Q1 guidance, how much is a litigation expense going up? Is it a main reason for the EPS being marginally lower than revenue run rate?.

We’re not – it’s a reasonable increase. I think we finished at roughly $3 million for the quarter $2.3 million I think. So we’re up sequentially due specifically to the UTAC case as Tom mentioned. So I’m not going to give you an exact number. That is one of the main increases quarter-over-quarter.

I think if you are looking more broadly at the expense numbers, you have to remember that the Social Security tax recess during Q1, so on a sequential basis that’s an increase. We also have a R&D tax credit in Q4 that isn’t repeated in Q1. So those are two of the big differences quarter-over-quarter..

Got you. And then on the guidance for both Q1 and the full year on the top line.

Can you – is that all recurring revenue guidance or does it include episodic event?.

So the guidance we’re providing is total revenue. However, we would expect recurring revenue to grow year-over-year. We’re crystal clear that – clear that’s the goal and intent is to maximize recurring revenue.

It’s important to understand that completing Greenfield licenses and settling legal matters can have a revenue impact that is just recurring, just episodic or some combination, not subject to negotiation. So it’s best to provide a general range for the guidance and we’ll update guidance as appropriate as our visibility improves over the year.

We would expect that recurring revenue growth again for the year and also even quarter-over-quarter, so we’re looking at Q1 last year compared to this year..

Got it. And then my final question is on the FotoNation business, I know you guys have some unit based cap is going to come into effect this year, right.

So you did $30 million last year, how do we think about the revenue on the FotoNation is it going to be flat or is it going to be up?.

Yes, did you get a chance, I don't know Krish to see the slides. It's Tom. Slide number 4 what we did as we try to answer that. So let me take it in two ways. So the unit based cap we talked about in – on the Q3 call, still exist and we're still working on it, right.

And we still like to get that so that's not quote embedded in anything but our goal is very clear, right. While we tried to outline in this slide as we see a path to $100 million and beyond simply by just executing – continued executing and execute better in the mobile segment alone.

And then there is a number of different opportunities on top of that automotive, drones, robots, sports cameras, surveillance et cetera et cetera but tremendous opportunity in front of us. In mobile, we characterize our overall share in the market as our estimate is about 25% of the market today.

So simply by increasing our share their increasing our ASP in some of our legacy contracts. We see a path definitely and remain confident on the number we've provided in the past..

Got it, I mean, I understand the slide but that's a long-term one. But I'm just kind of curious on 2016, how to think about FotoNation revenues..

We would expect to continue to obviously – to continue to grow the business..

Yes, I think it's fair to say that even with the cap still in place, which we would obviously work on we could still grow the business and that’s certainly our plan for the year..

Got it, got it. That’s very helpful. Thanks a lot folks. Thank you very much..

Thanks for the questions..

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

Hey, guys congratulations to a….

Bank of America….

To Benchmark – Benchmark….

Yes….

I don’t – which firm – firm, Gary….

No, I don't think we're both working at Bank of America..

Thank you..

Thank you..

So I quite just start out with a question talking about some of the Greenfield licensing specifically for BVA and xFD if I'm not mistaking you have a technology transfer underway with BVA and xFD for that matter.

With I believe ChipPAC and Micron respectively and I'm just wondering if any of that the portion of a final license is going to be relating to those, is embedded in your full year 2016 revenue guide..

I think it’s fair to say that some, but not all. So as with any guidance we are expecting to have some achievement both in rolling out BVA and in assign new license agreement under Greenfield. So we have – we certainly have opportunities there.

And I think when we are giving the guidance, as I noted even in the remarks, it’s not like running the table but we did believe, we’ll make some progress there..

Okay, and as I look at the – what’s implied in the sequential changes in revenue throughout 2016, are we to assume that second half revenue is going to be 20% higher than the first half and what drives that, beside seasonality?.

Well, I mean, we – it’s not – I think you’re referring to the guidance we are giving for Q1, I’ve gone through this a few times before, but its probably worth going over again which is just the way our contracts are structured, we have a certain seasonality….

In Q1….

Such that Q1 tends to be – if you will seasonally weak, Q3 a little bit stronger. So it’s not as though we have – so I think naturally the second half has a bit more strength to it. You saw this last year, if you look at the recurring revenue for over the year that the Q1 piece of the recurring revenue was just 21%.

So it is structurally the way it tends to work. I think that’s what you are getting at..

Sure, sure. That’s helpful. Thank you for the legal update on UTAC I believe you have two other cases….

I wish I didn’t have to provide it, you know it isn't always what you would expect..

Well, I guess there is two more as well to contemplate, you have Toshiba and you have OVT that when you inherited. OVT is in the process of being acquired, does that change the negotiation dynamic with them.

And then likewise with Toshiba going through its problems and potential sale of the group that you’d be licensed to, how have those negotiations gone as well?.

Yes, so I will start in reverse order. Toshiba, probably that the bigger impediment initially was the fact that they had the top five Senior Managers and six – I forget what it is now five of their six Board Members all left on the same day, as part of the [indiscernible].

So there was a bit of chaos over there, now it is really more second half, third, fourth quarter of last year. It is stabilizing they have got an organization in place. We are not scheduled to go to trial until 2017 with them.

So this is no more in the discovery phase and as you know, as well, you would expect us to continue to see if we can get something done, prior to going to trial. But unfortunately, this was one of those examples.

I think it’s the only one at this point under my watch where we actually had to file against the customer and we had to file largely to protect some of our rights and the fact that there was such chaos at the customer. So we still believe and want to optimistically see if we can reach settlement.

If we don’t, as you know, in the event we do end up going to trial, we’re always very well prepared and feel very good about our cases. And our track record speaks for itself. On the OVT front, I recall, Gary, you’re familiar with those, other on the call that might not be.

We bought a company called Ziptronix and in that was a outstanding litigation between Ziptronix, the company we bought and OVT, TSMC. And that has gone through a serious of mediations at this point. There is no court date at this point.

I don’t think the acquisition of either business has any direct impact on our potential opportunity with these guys at this point..

Okay. All right, last question from me, Robert. Just to clarify with free cash flow that you’re modeling over the next 12 months, 24 months and that is well, your appetite to buyback stock.

So we assume that the share count, now that you’re – you’re no longer facing the headwinds of our issues and most of the options have been expired by ex-employees and we’re not – should we assume the share base drops by about 5% per annum?.

Yes. I think it’s a reasonable assumption. I mean, that’s all things being equal.

What I showed at the Needham conference in the deck that’s on our website is that, now that we have worked through a lot of the backlog that you’ve noted, if we continue to buyback at the rates we bought back during 2015 and taking current dilution into consideration, 5% per year decline is for the share count, it’s just about right.

It will depend on the market dynamics. Share price goes down, it makes it all that more attractive..

Sure. All right. Great. Thank you, guys..

Thanks, Gary..

Thanks, Gary..

Your next question comes from the line of Jorge Rivas with Craig-Hallum Capital Group. Your line is open..

Good afternoon, gentlemen. Thanks for taking my question..

Hi, Jorge..

I wanted to dig in a little bit more on the revenue guidance for 2016. So it’s about $20 million higher than what you provided at the third quarter. So if you can help me understand the assumptions on that increase, seems like BVA and xFD are the – causes opportunities to see revenue growth this year.

Is there anything else that am I missing there, any order streams of revenues that you expect to see in 2016?.

Yes, it’s a good question. Look, what I provided during the third quarter conference call was a baseline for recurring revenue, which is something we kind of been asked about over the course of the year. So I never considered that to be a formal guidance. What I did say during that call was we would give formal guidance which we have done today.

So that number is still relevant of course to the extent that it shows. We have already in place backlog of recurring revenue. The pieces of the growth that you are describing between $250 million to $270 million that we’ve given in terms of the guidance range today, really is outlined in a lot of detail in the slides we’ve given.

The various opportunities within FotoNation and also within our Greenfield, BVA, et cetera, and settlements et cetera. So there’s a number of different factors that come into that..

Okay..

Jorge, just for clarification – just for clarification, you shouldn’t take away the bulk of the growth or as Robert outlined, $250 million to $270 million is depended up BVA and xFD. They are part of it, but probably overall – probably a small part of it..

Yes, that’s fair..

That’s what I was trying to get at, thank you. So and then, does this growth imply any type of out from ferments that you can receive during the year, just trying to – I guess, I get a better idea of how to do model revenues going forward.

I know you guys only a quarter ahead, but I know sometimes you can get enough from payment or get royal fuels for units?.

Yes, I mean what we’ve said is we’re giving an overall revenue number. It is difficult to determine in advance based on some of the discussions we have with our customers as to exactly what those structures look like..

Okay..

So it could include recurring, it could include episodic. It’s hard to say in advance. Obviously the recurring revenue is our goal and what we seek to focus on. So if we could get all of that recurring revenue we certainly would..

Robert, may be add additional color as you did in your quote, what’s specifically excluded from that guidance..

All right, I think that we have said that there are – when we are talking about the overall guidance?.

Yes, what do we think is excluded from the $250 million to $270 million?.

We basically said that is – it’s not that we are going to have all – everything that we have actually got on the table in other words. So we have opportunity in Greenfield and we have opportunities in FotoNation and perhaps some things like that where we – not saying we’re going to get absolutely everything.

That’s actually what I said during my script is it’s a combination of….

The point is, this is opportunity well above what we’ve guided to. We tried to do is set out a guidance that we have higher confidence, high confidence in, I guess is the way to think about it..

Okay..

Yes..

All right, yes. So thanks for that and one last one for me on the M&A environment.

So just wondering what you’re seeing out there? Are you seeing enough opportunities, so it may be, what you’re seeing is just still lack of acceptable pricing and what’s out there?.

Yes, things have gotten cheaper. Just say it, very bluntly. Yes, things have gotten cheaper.

And that’s why – I’ve said a couple of times in my script, it’s nice being in a position we’re at where we a strong predictable cash flow, where we have strong cash, we have no debt, and we have a large cash balance and a well functioning team, and a very high performance staff at this point in board, right.

So, we’re in a good position to continue to shop and shop with things that match our vision. I’m also give a quick shout out to the guys on our team there. We have just some world-class people running this part of the company for us. So, very pleased with quality and our overall process.

A lot of stuff we pass on, if we think the expectations are too high and – but more have kind of fallen into our radar, as a result of the stock market taking the beating, especially in the tech sector that it has..

Okay, great. Thanks gentleman. Keep up the good work..

Thank you..

Thanks, Jorge..

Thanks, man..

[Operator Instructions] Your next question comes from the line of Matthew Galinko from Sidoti. Your line is open..

Hey, Matt..

Hey, good afternoon guys..

Hey, hello..

Hi, Matt..

Hey, so, three part question for you.

Regarding market share gains, one of your drivers for FotoNation’s growth in mobile, can you talk about what you’re seeing in the sale cycle – in the sales cycle, the length and whether it’s sort of contracting or expanding? What your level of engagement is with the remaining 75% of the market that’s not currently using FotoNation? And how much of that remaining 75% do you consider realistically adjustable?.

Boy, several – all good questions. So the sales cycle, it depends, if its software only, it can go quite faster. You can be in something, depending on when a customer’s launch date is, it can certainly be inside six months, we’ve seen that. If it’s a hardware/software where RTL is embedded in their chip, that’s a longer design cycle.

That can be certainly as I mentioned in the prepared statement that can be in excess of a year, that’s simply the semiconductor process itself. So, we get kind of a mix of both, some cases its software, some cases it’s both hardware and software, the RTL nature. Candidly, our preference is the latter although it’s longer sometimes prime to money.

And we’ve been working on this everyday for since we’ve been aware, I would say most of that share is accessible to us simply because the market overall is pretty concentrated. You saw us during the year make some penetration into China, we think those are important some of the Chinese smartphone providers.

There’s still more to get there and there’s others in the world that we don’t have, but you can do the straight math in terms of our overall share. Right, there’s a few large players by our share we’re seeing we don’t yet have them as customers at this point.

So we feel good about that business continuing to grow that’s one of the reasons we did that slide is to - a number of people have been asking us is, can you get your target this $100 million.

Do you need - how much penetration do you need in other markets? Now the reality is we would love to get penetration in other markets and we’re working on them, but we can get there just in mobile alone. I think, I answered your three questions. Sales cycle….

Yes..

Yes, okay..

Yes, that’s all I have. I appreciate it..

Okay, thanks, Matt..

Thanks, Matt..

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

James, thank you very much. And everybody again listening live or online. Thanks again for your interest in Tessera. We very much appreciate you spending time to learn more about us. In summary we’re super pleased with our results and outlook.

And our solid foundation continues to provide an excellent financial platform from which to continue to grow the company. Thanks again and take care..

This concludes today’s conference you may now disconnect..