Geri Weinfeld - Senior Director of Investor Relations Thomas Lacey - Chief Executive Officer Jon Kirchner - President Robert Andersen - Chief Financial Officer.

Krish Sankar - Bank of America Merrill Lynch Gary Mobley - The Benchmark Company Richard Shannon - Craig-Hallum Capital Group James Colgan - Frontier Capital Management Company, LLC. Matthew Galinko - Sidoti & Company.

Good day, ladies and gentlemen, thank you for standing by. And welcome to the Tessera Fourth Quarter and Fiscal Year 2016 Earnings Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the call will be open for questions. This call is being recorded today Wednesday, February 22, 2017.

I would now like to turn the call over to Geri Weinfeld, Senior Director of Investor Relations for Tessera. Geri, please go ahead..

Good afternoon, everyone. Thanks for joining us as we report our fourth quarter 2016 and full-year financial results. With me on the call today are Tom Lacey, CEO; Jon Kirchner President; and Robert Anderson, CFO. Before we began, I would like to provide two reminders.

First, today's discussion contains forward-looking statements that are predictions, projections or other statements about future events, which are based on management's current expectations and beliefs and therefore subject to risks, uncertainties and changes in circumstances.

Please refer to the risk factors section in our SEC filings including our most recent Form 10-K and 10-Q for more information on the risks and uncertainties that could cause our actual results to differ materially from what we discussed today.

Please note that the Company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after this call.

Second, we refer certain non-GAAP financial measures which exclude discontinued operations, restructuring and other exit costs, acquisition and related expenses, acquired intangible asset amortization, charges for acquired in-process research and development, stock-based compensation expense, impairment charges on long-lived assets and goodwill, expense reductions from insurance recoveries and impudent an estimated 31% effective tax rate on the pretax earnings of the Company.

We will provide reconciliations of these non-GAAP measures to the most directly comparable GAAP measures in earnings release and on the Investor Relations section of our website. The reporting of this conference call will be available on our Investor Relations website at www.tessera.com and unauthorized recording of this webcast is not permitted.

After mid-night to night you can access this conference call at www. Xperi.com.

Tom?.

Thanks, Geri. And thanks everyone for joining us on the call today either live here on the call or on a webcast recording. Jon, Robert and I are extremely excited to be conducting our first post-merger conference call to share the progress we made in 2016 and update on the integration progress and our outlook for 2017.

The format of this and subsequent calls will be as follows; I will open with a high level overview and an update on our integration status. Jon will give an update on our product licensing business; I will then provide updates on our Invensas, and IP licensing business.

Finally, Robert will provide a financial update including our results, outlook and capital allocation strategies. Afterwards, three of us would be delighted to take your questions. As an FYI much of what we will cover today on this call can be found in our new investor deck which was posted to our investor website within the hour.

Let me start with an overview. Since the closing we are even more optimistic about the future of the combined company. Our confidence has grown in the outlook for the business. The strategic and tactical benefits of the DTS combination are everything we expected and more.

This transition has been even more seamless than expected given the significant similarities between our two cultures and combined leadership outlook in all of our employees is the passion to create technologies that transform our daily lives and the work ethic to make these transformations occur. There is a real sense of energy and focus here.

Next, let me proceed with a brief summary of the Company renaming and branding we announce pre-market today. This is an extremely exciting new chapter for all of our stakeholders.

In order to better reflect the combined Company's enhanced capabilities and technologies a new corporate name and stock symbol was announced this morning that reflects our new Company vision of enabling extraordinary experiences. As consumers, we no longer just want access to information.

In our cars, on our mobile devices and in our homes, we want our digital and physical world unified with invisible interfaces and effortless interaction. We want our environment to be comprised of smart, connected and powerfully personalized experiences.

Our new name Xperi is in fact an extract from the word experience and reflects our dedication to enabling extraordinary experiences with our customers’ products that are literally used by billions of people around the world everyday. Today's pre-market press release provides more information on our Company renaming and re-branding strategy.

Importantly, please note that tomorrow morning, we will no longer trade under the NASDAQ symbol TSRA. We will move to the new ticker XPER. Next, let me provide more details on our integration activities.

Critical to the success of Xperi is the continued development and the effective integration of our audio, imaging, radio interconnect and IP licensing businesses.

The overall integration has been focused on minimizing customer and business disruptions, driving collaboration between functions, facilitating broad internal communication and defining crystal clear roles for each employee.

Removing uncertainty and ambiguity are keys to a successful integration and we are actively working to our process to do just that. The early investments we made in planning the integration have already begun to pay off and we are ahead of schedule.

We have started formulating roadmaps that address the significantly larger markets for our technology and product offerings. More than 700 employees now have a larger platform, a roadmap for optimize global systems and the tools to successfully drive towards a singular strategic mission.

In summary, over the course of this year, we're confident that we will achieve the organizational and financial synergies we laid out when we announced the transaction. Before handing the call over to Jon and Robert, let me provide a high level summary of our Q4 and 2016 results.

For the quarter we are very pleased that we were able to complete the DTS acquisition without disruption to either of our respective businesses and both continued to execute extremely well. It was clearly a very, very busy quarter for us. Revenue for the fourth quarter grew thirteen percent year-over-year.

On the technology development front, we had a very active quarter, substantial R&D progress was made by a roughly 450 engineers, working on a variety of exciting programs including our driver monitoring and connected radio automotive solutions, world-class object detection algorithms, advanced face and iris biometrics, breakthrough machine learning algorithms, die-to-wafer and wafer-to-wafer low temperature bonding efforts, surround sound living room and headphone audio technologies to camera imaging solutions and much more.

As we work to integrate these innovation efforts into our market roadmaps, we are genuinely excited about being uniquely position to live to deliver truly integrated sight and sound products to large target markets.

As will be discussed by Robert the expected application of purchase accounting rules impact our financial results on a GAAP and non-GAAP basis, particularly for revenue, but important metrics such as cash flow from operations are not impacted by the accounting rules and highlight tremendous future earnings and cash flow growth potential.

Robert will provide more details on the purchase accounting impact during his update. For the full-year 2016 notably the audio and imaging businesses achieved new revenue milestones. Looking ahead, our product licensing business is expected to deliver overall growth in 2017.

Our intellectual property licensing business as a last resort, we filed what we believe were well planned and executed legal matters against Broadcom. We remain optimistic that we can reach a positive resolution to these matters for our shareholders during 2017. We had a very active capital allocation program in 2016.

We bought back 2.3 million shares at an average price of $30.04 for a total of $67.7 million. As referenced in the past three years, we have bought back 8.3 million shares for a total of $252.5 million at an average price of $30.27. Additionally during the year, we paid out $39.2 million in dividends.

And in the most substantive allocation of our capital, we acquired the equity of DTS for $888.2 million in early December. With that, I'm extremely pleased to hand the call over to Jon, the President of Xperi to discuss the product license business.

Jon?.

Thanks, Tom and welcome everyone. I share Tom’s enthusiasm as we introduce our customers and partners to an impressive portfolio of solutions that enhance all aspects of the human and consumer electronics experience.

As a combined Company, the strength of our audio, digital radio and imaging solutions establishes us as a market leader in innovative and partner-focused product licensing. Our vision for Xperi’s product licensing business is to create more intelligent, immersive and personalized experiences.

We want our environment smart, connected and personalized and our employees are relentlessly dedicated to delivering on this vision. Within the Product Licensing segment, we focused our business activities around three revenue generating end markets; automotive, mobile are on the go and home.

During this call, I will discuss the progress we made during the past year in each of these markets, the key areas we are focused on to drive further penetration of our solutions, and what to expect from us over the next 12 months. Beginning with automotive.

Cars have become a major entertainment hub and will become ever more so as we move towards autonomous driving. We currently have a number of solutions meant to enhance entertainment value in cars and over the long-term, we are working to enhance safety value as well.

In 2016, our automotive business represented about 30% of our product licensing revenue excluding the impact of purchase accounting. We see three key growth drivers in the automotive market. Near-term, continued penetration of our HD Radio technology in cars shipped in North America.

Mid-term penetration of our connected radio solution in cars across the globe, and longer-term cross selling synergies which will better enable the penetration of imaging products in cars such as driver, monitoring and surround camera solutions. The largest revenue contributor to this category is our HD Radio solution.

The only FCC approved digital AM/FM terrestrial broadcast standard in North America. Today, HD Radio technology is in more than 40% of new car sold in the U.S. The solution is in over 200 different car models across all 36 auto brand sold in the U.S.

Our mission is the deploy HD Radio technology in the vast majority of all North American consumer vehicles. At CES, we unveiled our new connected radio platform. A format that pairs terrestrial digital radio with Internet connectivity.

Over the mid to long-term, we will focus on expanding our footprint globally providing high quality connected broadcast radio content to all consumers. In addition, through our combination, we believe there are significant automotive channel synergies that will benefit our imaging business.

For example, we expect to see future growth in automotive through offering driver monitoring and surround view camera solutions. Specifically, we expect to leverage the HD Radio team strong working relationship with car manufacturers and Tier 1 suppliers to more quickly deploy our advanced imaging solutions.

At CES for example, we saw increased industry interest in pedestrian detection and using our face detection in iris identification technologies for driver, monitoring and authentication. Turning to the mobile market which includes smartphones, PC's, headphones, drones and activity cameras.

In 2016, the mobile category represented about 25% of product licensing revenue excluding the impact of purchase accounting, and our technology was shipped in approximately 450 million devices.

Today, we are working with more than 20 smartphone manufacturers offering imaging and audio solutions that provide a best-in-class entertainment experience to users. We see three key growth drivers in the mobile market.

The continued penetration of core imaging and audio solutions on mobile devices, the licensing of our advanced biometric solutions into new applications and markets, and delivering a combined Headphone X and 3D imaging solutions for VR/AR markets. On the imaging side, 2016 was a year of significant progress.

We added smartphone manufacturers to our roster of customers, and to date, we have 12 mobile manufacturers, four SOC partners and have reached 25% mobile market penetration. On the audio side, we expanded our footprint to 12 mobile manufacturers all of whom share our passion for providing immersive entertainment experiences to users.

We realized a little under 10% mobile market penetration, and in addition we increased our Headphone X footprint to eight brands and over 40 models. For those of you that are less familiar with Headphone X, this innovative technology creates a theater like experience using any set of headphones.

For 2017 and beyond, we remained focused on increasing both our imaging and audio penetration in the mobile market through design wins on new phones, PC's, and tablets, headphones, drones and activity camera models. In addition, our new biometric solutions also saw significant progress in mobile this past year.

As we look to the future with increasing demand for private and secure transactions where fingerprint systems are not sufficient or iris biometric solution has a clear and strong application in the mobile space. Simply stated iris based systems are a thousand times less likely than fingerprint sensors to incorrectly accept the wrong person.

We recently announced an agreement to deliver our advance iris biometric solution as part of India’s Aadhaar program. The world's largest biometric identity system with more than 1.1 billion people in the world today.

We also announced the acquisition of technology from Pelican imaging whose multi aperture technology will support and improve the use of our biometrics technology and photo-savvy tools. Lastly, we are also starting to see market interest in our mobile solutions related VR and AR.

One of our key priorities will be the execution of mid and long-term market in technology solution roadmaps. That will fully leverage the combination of audio, image and machine learning technologies.

We are excited about the range of ideas currently being discussed by our teams and we are hoping to demonstrate some of those innovation efforts in 2018. Turning to the home market. For the year this market represented over 40% of our product licensing business excluding purchase accounting.

In 2016, our audio technology was shipped in more than 150 million consumer electronics devices in the home including TVs, game consoles, sound bars, wireless speakers, Blu-ray players, AVR's and set top boxes.

The home market in 2016 was flat and we anticipate the same in 2017 as growth in certain product categories offsets decline and others in the near-term. However, over the long-term we see three key growth drivers in this market. Continued expansion of our Play-Fi Wireless, Whole-Home Audio Ecosystem.

New technologies and programs being sold into the home such as our new DTS X codec deployment. And combining our imaging technologies with our audio technologies to create smart home solutions.

The key driver for growth in the home market is our Play-Fi technology a Whole-Home Wireless Audio platform that allows the synchronized streaming of music directly from a mobile device or PC over Wi-Fi to compatible speakers.

At CES this year, we announced several new brands join the Play-Fi ecosystem, including dish networks, TL audio and sound cast bringing the total number of brands to more than 20. Notably several Play-Fi products launching this year also will be equipped with far field microphones and built in voice access to the Amazon Alexa voice service.

Adding Alexa to the Play-Fi ecosystem delivers a new level of functionality for Play-Fi users and we expect this feature to drive future growth in the home market. Critical to the success of our audio businesses the generation and proliferation of DTS enable to content which feels demand for our audio technologies.

Constant support a broad suite of audio solutions and a large device footprint of combined to develop an ecosystem around our core technologies. These elements continue to interact in ways that further reinforce the growth and sustainability of the DTS audio ecosystem.

For example, as studios release movies in DTS X onto Blu-ray and through streaming services. Manufacturers seed to license or DTS X coding solution to enable the playback of DTS immersive audio content. Our ecosystem building strategy has served our audio business well over the past 20 years and as the combined business moves ahead.

We've begun to think about ways to promote ecosystem building throughout our entire product licensing business. Before turning back to Tom let me provide a few highlights from the content side of our business. Today there are more than 350 DTS X enable to cinemas which is nearly five times the number from a year ago.

In addition, studios have release 59 movies in DTS X in the cinema, 32 in DTS X. on Blu ray. And importantly 39 of the top dubbing stages in 10 countries around the world are now equipped with the tools to create content in the DTS X form and.

In the last few years we've launched fifteen streaming services around the world with partners that include Fandango now in North America, CIBN in China and [indiscernible] in Europe. With that, I will turn the call over to Tom who will provide an update on our Invensas and IP licensing businesses.

Tom?.

Thank you, Jon, awesome. Our Invensas business continues to make excellent progress in developing, optimizing and commercializing our broad portfolio of innovative semiconductor technologies. We see growth from our Invensas business coming through our foundational wafer bonding technologies, ZiBond and direct bond interface or DBI platforms.

We are currently focused on the following markets to drive this growth. Number one, broadening our customer base in the image sensor market. Number two, expanding into new applications including MEMS and RF devices, and number three, ultimately expanding into DRAM, 2.5D logic, and 3D IC assemblies.

For some additional context, there are many applications where wafer bonding is critical to the consumer electronics device. Our solutions unable the next generation of devices to be smaller, faster, use less power and contain more functionality. Today our Zibond and DBI are found in more than 1 billion smartphones and counting.

One of the areas in which we have focused on broadening our customer base is the image sensor market, where we have already licensed market leaders like Sony and very recently OmniVision. As we work towards expanding into new applications such as MEMS, RF devices, DRAM, 2.5D logic, and 3D IC assemblies.

We have focused on bringing up internal wafer preparation and bonding capabilities as well as developing in qualifying a supply chain to support our technology development and commercialization efforts. In 2016, we signed several licensing agreements in this category including Sandia National Lab and MIT Lincoln Labs.

In Q4, we signed a license agreement with Teledyne DALSA, one of the largest pure-play MEMS foundries in the world and recently initiated technology transfer activities. The progress we've made in these markets to-date is encouraging and we expect to make announcements around further penetration in these areas in the coming quarter and beyond.

Next I'll give an update on our IP licensing activities. We continue to be of the mindset that our inventions are widely used by many companies outside of the memory market.

These opportunities fall within our Greenfield licensing efforts the Greenfield term refers to potential customers that have not previously been directly licensed to our intellectual property. We have a variety of stages in engaging with potential Greenfield customers. One of course of note is Broadcom.

Each engagement is unique and follows its own path and timeline, but we believe we are making positive progress in the Greenfield area. So Broadcom at a high level remains on track and is proceeded exactly as we expected, a trial was held in Germany on February third a ruling is expected before the end of March i.e. next month.

In this case, we are seeking to enjoin the sale and distribution in Germany of Broadcom chips. That we believe infringe our intellectual property. Similarly the ITC case remains on track. The administrative law judge issued a claim construction order, which we view as generally positive. For ITC rules, we've engaged in mediation sessions.

Trial remains scheduled for the last week of March of 2017 again next month, and initial determination is expected in June with a final determination in October.

The Dutch and Delaware actions continue with nothing of significance to report the trial in The Netherlands is scheduled for November 2017 and trial in one of the Delaware cases is scheduled for October 2018. Finally, Broadcom has filed petitions for inter parties review or IPR against eight of our patents.

The patent office has not instituted the petitions and no hearing dates have been set. We don't expect these IPRs to impact the ITC schedule or European proceedings. Overall the Broadcom matters remain solidly on track.

The Toshiba contract case continues towards the June 2017 trial, where currently in the middle of expert discovery and summary judgment proceedings, a summary judgment hearing is scheduled for March 16, an expert discovery closes on April twenty first.

Lastly I'm pleased that we were able to successfully settle with OmniVision, in the OmniVision TSMC matter, we inherited as part of the August 2015 acquisition of Ziptronix. OmniVision agreed to take a license under a Ziptronix patents and the OmniVision TSMC matter and related counterclaims how now have now been dismissed.

As it will be reflected in our outlook, 2017 presents both normal challenges and great opportunities to advance our IP licensing efforts. As it is commonplace, we have a combination of relicensing and Greenfield efforts in play. This year we have one significant relicensing matter.

Importantly, as we have demonstrated over time what we can't always predict the exact timing of license agreements, we are very confident in our ability to successfully conclude relicenses and convert our Greenfield efforts.

As you know for more than three years, we have been working on multiple Greenfield efforts, at least one of which we expect to drive resolution during 2017.

In both our Greenfield and significant relicensing matters, we are deeply engaged in frequent active with the right people and active discussions and remain very confident in our abilities to drive successful outcomes. Our wider than normal revenue guidance takes into account a variety of outcomes in these matters.

With that, it’s my distinct pleasure to turn the call over to Xperi CFO, Robert Andersen.

Robert?.

Thank you, Tom. And thanks to everyone for joining us on the call today. DTS acquisition and the work we are doing recognized both revenue and cost synergies across the combined business, positions us to deliver meaningful value to our shareholders this year and into the future.

In terms of cost benefits, our integration efforts are ahead of schedule and we currently forecast a net of $11 million of non-GAAP costs synergy during fiscal year 2017 and exiting the year at an annualized run rate of $15 million of non-GAAP cost synergies consistent with our prior expectations.

I would like to go into more detail on our fourth quarter results then our full-year highlights, and finally a preview of our expectations for 2017. Please note that with all of my comments I'll begin with GAAP and then provide a comparable non-GAAP figure. Our GAAP to non-GAAP reconciliations can be found on our website in the earnings release.

As a reminder, in Q4 we recognized the cost of DTS operations for one month, but due to purchase accounting rules relating to minimum guaranteed contracts and quarter lag revenue recognition for royalty reports only a very small amount of DTS related revenue was recorded on our books even though we will receive the cash from the contracts.

It is also important to note that the purchase accounting rules impact both our GAAP and non-GAAP results. Total revenue for the fourth quarter was $70.1 million. This was towards the low end of our outlook to a delay in the contract signing which the cash receivable is completed in early Q1.

Compared with the fourth quarter of 2015, revenue increased by $8 million or 13% primarily due to higher episodic revenue. Total revenue for the full-year was $259.6 million down 5% versus 2015. The decline was primarily driven by lower episodic revenue offset by slightly higher recurring revenue.

GAAP operating expenses for the quarter were up significantly based on the transaction costs and subsequent absorption of the DTS business for one-month during the quarter. Otherwise, the legacy Tessera expense was consistent with expectations. Operating expense was $75.6 million compared with $28.4 million for the fourth quarter of 2015.

The year-over-year operating expense increases primarily due to costs associated with the acquisition of DTS and one-month of DTS expenses, higher amortization and stock-based compensation associated with the acquisition, and increased year-over-year litigation expense.

R&D expense for the fourth quarter was $15.7 million, an increase of $7.3 million from the fourth quarter of 2015. The increase was due to $3.7 million for one-month of DTS R&D expense, $1.4 million for severance costs associated with the acquisition and $0.5 million for higher Tessera related R&D spending.

SG&A expense for the fourth quarter was $37.3 million, an increase of $26.8 million from the prior year mainly due to $14.1 million for the transaction costs and severance expense related to the DTS acquisition and $7.7 million for one-month of DTS SG&A expense.

Litigation expense for the fourth quarter was $8.5 million, an increase of $5.4 million from the prior year, primarily due to increased activity on our docket of open legal matters particularly for preparation of our Broadcom ITC and German trials. Non-GAAP operating expense was $51.8 million for the fourth quarter.

For the full-year GAAP operating expenses were $170.2 million compared with $111.1 million last year. Non-GAAP operating were $103.8 million compared with $78.4 million last year. GAAP net loss for the fourth quarter was $9.3 million or a loss of $0.19 per share on a diluted basis.

Non-GAAP net income for the fourth quarter of 2016 was $23.3 million or $0.45 per diluted share. GAAP net income for the year was $56.1 million or $1.12 per share on a diluted basis. Non-GAAP net income for the year was $106.7 million or $2.06 per diluted share. Moving to the balance.

We finish the year with $113 million in cash, cash equivalents and investments. A decrease of $283 million from the prior quarter due to the cash used for the DTS acquisition partially offset by cash generated from operations. We also finished the year with 600 million in debt as a result of the term loan B issuance made finance the DTS acquisition.

We ended the year with average diluted shares outstanding of $50.2 million down from $52.6 million shares a year ago. The 4.6% year-over-year decline in diluted shares outstanding was due to 2.3 million shares repurchased over the course of 2016.

As of December 31, 2016 we had approximately $158.2 million available under the current share repurchase program. On January 25, 2017 the Board of Directors approved a regular quarterly dividend of $0.20 per share, common stock table on March 22, 2017, to shareholders of record on March 1.

As a combined company we plan to continue the payment of the dividend on a quarterly basis. However, as I would stated previously we plan to focus primarily on debt pay down rather than stock repurchases for 2017. Before I turn to outlook. I would like to walk through a few factors consider as they relate to our 2017 outlook.

First, as we think about the long-term future prospects of our larger and more diversified combined company. We’re evaluating moving toward emphasizing our progress over a longer period of time and that's providing more detail annual instead of quarterly guidance.

We think it is most useful for investors as we run and build our business over multi-year period. Today in a first step. We have given you some additional detail for 2017 as well as Q1 guidance. Over time we work to find the right balance of information for investors on a go forward basis.

Second, our revenue outlook for 2017 excludes approximately $54 million in contributions from DTS. It is the impact of purchase accounting, but approximately $34 million impact in the first quarter and the remaining $20 million over the following three quarters. Please refer to Slide 20, in our Q4 investor deck for additional detail.

This accounting treatment is due to the inability to recognize revenue from certain minimum guarantee contracts in place at the time of the acquisition and the impact of two months of loyalty recognition that usually occurs on a one quarter lag basis for the DTS business.

Despite the treatment from purchase accounting we will maintain the associated receivables on our balance sheet on the lines unbilled contract receivables and other non-current assets and expect the cash collection. Lastly, licenses with our customers are typically term licenses and that’s re-licensing is a known and normal part of our business.

Our guidance reflects that we currently believe as the potential range of outcomes for the entire business including growth and underlying markets, license renewals, Greenfield efforts and new business conversion.

In 2017, We have one significant re-licensing matter and multiple ongoing Greenfield engagements that are factored into the annual guidance range. For the first quarter of 2017 including the $34 million impact from purchase accounting we noted earlier, we expect total revenue to be between $60 million and $63 million.

We expect GAAP loss per share between $0.53 and $0.48 and non-GAAP loss per share between $0.15 and $0.09. For the full-year 2017, including the $54 million impact of purchase accounting, we expect total revenues to be between $370 million and $445 million.

Given the wind of revenue range, we expect GAAP EPS to be in the range of negative $0.80 to a gain of $0.50 per share. On a non-GAAP basis, we expect EPS between $1.15 and $2.69. This assumes the GAAP tax rate of 48% and a non-GAAP tax rate of 31%.

We also assume a basic share count of 50 million shares, a GAAP diluted share count of 51 million shares and a non-GAAP diluted share count of 52 million.

With regards to expenses for the year expect the following ranges, cost of revenue expense between $5 million and $10 million, R&D expense between $90 million and $100 million, SG&A expense between $100 million and $110 million.

Litigation expense between $20 million and $35 million, amortization expense between $112 million and $117 million, stock-based compensation expense between $27 million and $32 million, acquisition and related expenses approximately $15 million, interest expense in the amortization of debt related financing costs between $27 million and $28 million.

That concludes our prepared remarks. Operator, we’re now ready to go for questions..

Thank you. The question-and-answer session will be conducted electronically. [Operator Instructions] And we'll take our first question from Krish Sankar with Bank of America Merrill Lynch..

Thanks for taking my question. I had a few of them first one, Robert you mentioned about $54 million from DTS – revenue is not going to be recognized due to purchase accounting.

When will that eventually be recognized?.

It's never going to be recognized. So it just becomes an asset on our balance sheet. And we recognize the cash as we collected from what would normally have occurred. So even though you don't see it as revenue we get the cash..

Gotcha and then in Q4, how many days of DTS rev did you recognize and just completed quarter?.

We had a very small amount. It was less than $0.25 million of DTS revenue was recognized..

Gotcha.

All right, and then couple other question, I think you mentioned that there is one significant re-licensing matter this year, is it fair to assume that’s the one of the DRAM customer appears?.

We’re not identifying it necessarily, but I think it's a significant customer. So it's worth us pointing it out as an activity we have for this year..

Is there any timeline, is it going to be in the first half or second half of this year?.

Let me add Tom take that one..

Sure. More actively talking to the right people and whatnot and we would expect to get it done and certainly the goal is to get it done as soon as we can Krish.

And my expectation would be that we do get it done in the first half of the year, but we'll see when we got all hands on deck to try to get that done just as soon as we can, given it's a material event we would certainly disclose when that does happen..

Gotcha.

Gotcha and then a couple other questions just on a follow up, I think when you guys did the DTS acquisition, expectations are like something around like $0.80 in EPS secretion clearly that's not happening this year, but is that still a fair enough target assume based on post purchase accounting issue?.

Yes I think that that assumption still holds true that was never there was suggested on the call when we did the announcement and I think the map still – it still works out.

But the purchase accounting has a pretty significant impact and one thing I’ll mention here Krish that’s probably worth taking a look at the investor deck we've posted on to our website, which will show some of the specifics of the impact..

Got it. All right.

And then two last questions, one is, the full-year revenue guidance $370 million to $445 million, is that a way you can parse it down between recurring and episodic and also between the legacy Tessera and the DTS business?.

It wouldn't be a complete call unless you ask that question Krish, so I appreciate it. We don't plan to breakout the episodic and recurring nor the business segments in our guidance..

All right.

And the last question then if you guys said the relicensing matter with the big customers baked into your guidance, so I’m kind of curious how do you handicap that, like what is the probability of success? Are you assuming that they are going to renew at the same rate or is there like some kind of thing that you assume that’s going to factored in your full-year guidance?.

And I think as we look at the year, obviously at this vantage point a variety of things that can occur. So one of the reasons why we've given a fairly wide range is there is a fairly wide number of matters that are on the table. So I wouldn't say it's baked into our guidance. It is part of our guidance..

Got it.

If I can just squeeze in one last, is this customer whom you relicensing both the customer of legacy Tessera and DTS?.

Yes, it is..

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

You are welcome..

Hey, Krish. Just a couple of other points. Number one and I mentioned it just briefly in my introduction. There's an investor deck that's on the investor portion of our website and has some of the details and more details on some of the purchase accounting..

Yes. Got it. Thanks..

And again on the accretion portion it is being recognized, you see it in the cash flow for sure..

Yes. You can see it in the EPS column..

Got it. All right. Thank you very much. Very helpful..

You are welcome..

And next we’ll move to Gary Mobley with Benchmark..

Hi, guys..

Hey, Gary..

Welcome to the call Jon and Geri..

Thank you..

Thank you..

Okay.

So just to clarify, Robert I know you didn't have the specifics in your press release, but the non-GAAP EPS guidance range for 2017, I think you said the lower end to the $1.15, but I missed the upper end?.

The upper end if $2.69..

And Jon, I think you mentioned just prior to, I guess on your last earnings call you mentioned a goal of reaching $185 million to $190 million in revenue for the year 2016, excluding any impact from accounting rules and what not, or you went within that range as you concluded the year, and do you see building on the growth sort of working towards that 2020 forecast that you had outlined previously?.

Nothing has fundamentally changed with our growth outlook as we think about the audio business.

In fact, I think what is interesting is the opportunity set that comes from having convergent technology solutions, imaging and audio as we look a few years downstream, but to your first question, yes, our business performed as expected and well during the course of 2016, and of course we've hit the ground running as we've joined Tessera over the past 90 days or so..

And Robert I know the Tessera businesses had some seasonal patterns in the past and surely the DTSI business is got to have some seasonal pattern, so all things considered how do you see outside of these accounting rules that you're dealing within near-term the seasonal breakout of any given fiscal year?.

Well there's a lot of things that can move around this year. I'm always aware of that and that's probably a little bit more so as we combine with the DTS business.

As we sit here today, I would say that the revenue is more backend loaded, so we would see probably 55% to 60% of our revenue in the second half and that should give you I think a little bit of a feel since we've given you in Q1..

Okay.

And the recurring revenue for the Tessera business, if I’m not mistaken it ended about $244 million versus the initial goal of $250 million and you sort of identified which should be occurred in the latter part of the fourth quarter and subsequently in the first quarter?.

Yes. I think it's important to know; we don't guide to recurring or episodic, so that may have been analysts numbers, but that was not our number..

Okay. Well can we agree that….

I think what you're getting at was there anything that happened that was unexpected during the year and there wasn't Gary we call the guidance was 250 to 270 and we finished just 260, we finished within guidance..

Okay..

So actually recurring revenue is the highest it's been in five years a group slightly over last year..

Do you assuming your successful and renewing the one big agreement in the year. Do you think you can grow the recurring revenue in 2017..

Absolutely, yes..

Okay. That is it for me. Thank you..

Thank you..

And next move on to Matthew Galinko with Sidoti..

Good afternoon, guys, thanks for taking my questions.

First, one is did you engage with any new Greenfield opportunities in the fourth quarter or continuing to engage with additional close in that classification if you will?.

Yes and yes..

Okay.

And has the progress with Broadcom had any influence on the willingness for folks that you are engaging with to have discussions?.

I think it's you know they're not going to disclose that per say Matt, right. So I think it's fair to say people are watching. And if fact in trial already in Germany and we've got a couple of things coming down the pike here in the next month or two people are watching..

Got it, all right. So you also in your script called out progress in iris authentication I know you touched on the deal that you signed in India.

I'm just wondering if there's you know I assumes there's more in the pipeline there but is there I think you could talk about in terms of you know that that moving more quickly in the 17 timeframe or are getting out to the device in the 70, 80 timeframe..

Well here's, here's what I would do that the industry interest and advanced biometric solutions is certainly growing as you begin to see real deployment and I think you know some of the security challenges around fingerprint sensing are also becoming more well known which kind of I think drives people a direction that we're going anyway given that we have both an iris space solution and we have face recognition technology that when combined provides a pretty incredible lift in the accuracy of the solution.

So yes there are other things in the pipeline. I still think you know in the grand scheme of the size of our combined business the biometric piece is going to remain fairly small on a revenue basis.

But that being said I think there are some exciting things happening in the - you know I think the jet the broad industry trend towards mobile based authentication plays very well into the footprint of business that we have.

And we're hitting the gas pedal about as hard as we can on that business but it'll take while to the further develop as you know country-by-country people get more comfortable with you know having biometric information stored and whatnot and use for a variety of various validation authentication and security purposes..

Got it. And maybe just last one for me put I jump back in the queue.

The litigation frame seems a little wider than you typically had disclosed and if we hit the high end of that range, we'd be quite a bit above where we've been in the past two years? Can you just talk about let's get to the you know extremes of the range?.

Yes, this is Robert. It's impressively difficult one for us to forecast particularly at the beginning of the year as we kind of look out over the next kind of remainder of the year and we've given a bit of a broad range because it really depends on how cases proceed how discussions proceed and so forth.

We have given a range I think in terms of our operating model, but I think if you look at it as a percentage of revenue it's actually within the type of range we've had previously. So I don't think it's that dramatically different we've been at the high end of our prior range previously and that's pretty close to these numbers..

Got it. All right. Thank you..

You’re welcome..

And next we will move to Richard Shannon with Craig-Hallum..

Hi, guys. Thank you for taking my questions as well..

Hi, Richard..

Hi. I guess my first question is how do you guys expect to offer some sort of segment reporting on a go forward basis? So unclear to me based on the prepared comments is how we should try to do this, I mean obviously not going to do a Tessera versus DTS.

Are you going to see at this home versus mobile versus auto or how should we expect this to be done in the future?.

Great question, Richard. We will be segment in the business on product licensing, which will really be a combination of our audio and imaging businesses. And that should probably be clear in the way that Jon addressed the remarks. And the other segment of our business will be semiconductor and IP licensing, which was what Tom addressed.

So that's how you'll see it reflected in our financials for 2016 and going forward..

Okay.

So it sounds like a product licensing is most if not all DTS plus FotoNation?.

That’s correct, yes..

Okay. Okay, helpful. Let’s see here. I'm asking a question or two on the guidance, once assume and then I guess, I'll ask the question most of have asked already which is relative to the customer relicensing, here the big one.

Is the low end of the range is that assume any revenues from this customer or is that a zero shot at the low end there?.

Yes, I think it's probably fair to say that that's a zero shot..

Okay..

That gives a reason for the width of the range..

Okay. Is there any assumes benefit in that range from anything coming out of the Broadcom case and it related cases from the Broadcom litigation..

Not specifically, I mean it's certainly a possible outcome, but the way we think about the revenue range is there's a variety of things that can occur that is one of them. We obviously have a degree of confidence and reaching an agreement on a Greenfield to share. But it is not – it's just a piece of the probability waiting..

In the Greenfield, you’re expecting to settle or to complete this year is not – are you saying that that's a Broadcom case or could be could be different?.

Yes, I think with Greenfield it's best not to get into specifics about the discussions and probably it doesn't necessarily help us..

Yes, understand. Just want to make sure and I understand which you’re saying, but some well understood. No problem with that. Let’s see here. Robert, I tried to do the calculations based on one of the slides and here and the numbers I came up told me I can't add time off today.

But your Slide 21, talked about a long-term operating margin target of 55% plus as I recall and similar to what you said at the time of the acquisition? For 2017, I know if you want to talk about the non-GAAP number with or without the accounting changes here, but what's the operating margin range here for the yearly numbers?.

Yes. So for an operating margin, it's going to vary because we've given such a wide range if we’re on the high end of this, see here – yes, it's going to be in the high fifty's, for at the high end of our range and that's without the impact of purchase accounting.

So we would actually be pretty close to the operating margin that we're talking about here. However, I think and then we've mostly focused on is on the EPS. So I think let's take one thing at a time. With Slide 21 giving you a lot of pieces to understand them all this year because I think it was critical.

Given all the change that occurred of the company that to provide those that non-GAAP long-term operating model target is something that will communicate more going forward. We wanted to say we haven't taken our eye up on that ball.

If we look at the guidance we've provided and I take out the impact the purchase accounting, we really start to see some pretty interesting EPS numbers similar to what was discussed earlier. So if we take the high end of our range in the middle of all the expenses, we're talking about non-GAAP EPS in the $315 million to $317 million range.

I don't want to think all the [indiscernible] of a lot of building, so..

Well, I appreciate. You're leaving some of that. That's right. One last question for me, I'll jump on a line.

I can’t really mention in the same in your prepared remarks that what should we think about for free cash flow for you guys this year?.

Well, let me not give you free cash flow, but let's stick with operating cash flow. They're fairly close to us in both cases since we have pretty minimal CapEx.

And based on the guidance range, we've given – it's obviously pretty wide itself, it's just over $100 million to as much as $180 million and again that's just based on the revenue range we've provided..

Right. Perfect. Well you've given us more enough to think a lot and to have fun with as you put it Robert, so I think that's….

Sure. Thanks..

Next we’ll move to Jim Colgan with Frontier Capital..

So I look through your guidance on Slide 21 and just trying to make sure I fully understand it with the purchase accounting.

So in the first quarter, if you were able to recognize revenue, your revenue would come in at $94 million and $96 million?.

Yes, that's correct. You'd add another $34 million..

Okay.

And for the fiscal year maybe the cash flow if you will instead of revenue if you add back $424 million to $500 million for the revenue range of $462 million midpoint?.

That’s right..

That’s right, okay. So when I look at your non-GAAP range of $1.15 to $2.69, if I look at the cash flow that should occur given that you're going to not be able to recognize revenues to your non-GAAP earnings.

Is it fair to say that the cash flow should be about $0.75 a share more than the non-GAAP EPS on both ranges the $1.15 and the $2.69?.

Yes. The difference related to the purchase accounting is about $0.72. You need to tax effect that and I gave you the non-GAAP rate..

But Jim that’s impressive you did that so quickly. You got it..

Okay..

You can help Richard build this model..

Yes. So the cash flow is going to be pretty significant even if the relicensed didn't happen you're going to be close to $2 and then with the opportunity to be over $3 in free cash flow..

That's correct..

Okay. I think I understand where you went with this. Okay, thanks for the time. Appreciated..

No problem Jim..

And we’ll move to a follow-up question from Krish Sankar with Bank of America Merrill Lynch..

Hey, thanks for taking the follow-up. Just had two quick ones.

One is what kind of seasonality does the DTS business have?.

We’ve talked about this a little bit which is we're not providing specific seasonality for each of the pieces of the business, but rather said that if you look at it as a whole this were weighted more heavily to the second half to the degree of 55% to 60% of our revenue in the second half..

Is that what we should assume going forward? It is just a 2017 event?.

I would stay with 2017 for now. I think when we get out a little bit more it's best that we give some closer guidance, but I think from where we're seeing it at the moment that's a good proxy to work with..

Gotcha. And then one quick follow-up. I think you guys mentioned in your prepared comments auto with 30% of revenues.

I'm just curious is that all coming from the DTS side?.

Yes..

Yes..

Got it..

30% of the product licensing revenue..

And that are for 2016, right?.

Correct..

All right. Thank you. End of Q&A.

And that will conclude today's question-and-answer session. At this time, I would like to turn the call back over to management for any additional or closing remarks..

Michele, thank you and thanks for hosting the call today.

In summary, we're very pleased with our strategic and business performance in 2016, perhaps most importantly, hopefully it came through in the call today, and we are really excited about the prospects ahead of us and the exciting momentum we're experiencing as a result of the acquisition of DTS.

The combination is truly compelling and we deliver strong cash flow and increasing value to our shareholders as we start to see revenue and operating synergies emerge. Again, as I'm sure you can tell Jon, Robert, and I are extremely confident and pleased with the opportunity set of our transform and effective today are now re-branded company Xperi.

We have a deep and talented group of employees who are executing very well. The integration is fully on track and we expect to be able to generate meaningful growth as we address much larger market opportunities together than either of our standalone companies could previously. Again, thanks for your interest in Xperi.

We look forward to seeing you guys on the road over the next few months and updating you on our next call. Again, thanks for joining us..

Thank you. That concludes today's call and thank you for your participation. You may now disconnect..