U.S. Markets open in 5 hrs 3 mins

Tessera Technologies (TSRA) Misses on Q4 Earnings, Revenues

Zacks Equity Research

Tessera Technologies renamed as Xperi Corporation XPER reported fourth-quarter adjusted earnings of 32 cents per share, missing the Zacks Consensus Estimate by 25 cents. Also, revenues of $70 million missed the consensus mark.

Following the weak earnings release, the leading chip packaging and interconnect solutions provider shares slipped more than 13% in the after-hours trading. Over the past year, shares of Tessera Technologies underperformed the Zacks categorized Electronics Manufacturing Machinery industry. While the industry gained 27.66%, the stock generated a loss of 2.13%.

During the call, Tessera announced that it will change its company name to Xperi Corporation and will trade under the ticker symbol XPER on the Nasdaq, effective February 23. The company will also have a new corporate logo and brand platform.

Revenues

Tessera’s revenues of $70.1 million were up 12.3% sequentially and 13.4% year over year. However, revenues were below the Zacks Consensus estimate of $70.1 million and came in at the lower end of the company’s guidance range of $70–$74 million.

The decrease was partially due to the timing of the execution of an agreement which was signed in early first quarter of 2017.

Margins

Owing to the high percentage of licensing revenues, Tessera usually generates strong gross margins. Accordingly, Tessera’s fourth-quarter gross margin was 99.55%, down 29 basis points from 99.84% reported in the previous quarter.

Tessera’s operating expenses (research, development and other related costs & selling, general and administrative) were $53.1 million, up 179.8% year over year. Also, as a percentage of sales, both the expenses increased on a year-over-year basis.

Net Income

Pro forma net income was $15.6 million or earnings of 32 cents a share compared with $26.1 million or 53 cents in the prior quarter and $27.3 million or 53 cents in the year-ago quarter.

On a GAAP basis, net loss was ($9.3) million or a loss of 19 cents per share compared with net earnings of $22.8 million or of 44 cents in fourth-quarter 2015.

Balance Sheet and Cash Flow

At quarter end, cash, cash equivalents and short-term investments were $113.0 million, down $283.3 million from the prior quarter. The decline was due to the amount spent on share repurchases, dividends and cash paid in connection with the acquisition of DTS in the fourth quarter.

Also, as a result of the acquisition, Tessera has $600 million in debt as of Dec 31, 2016.

Share Repurchase & Dividend

Tessera spent $39.2 million on cash dividends and $67.7 million on share repurchases in the reported quarter. Further, management declared a cash dividend of 20 cents per share for the fourth quarter, payable on Mar 22, 2017 to stockholders on record as on Mar 1.

Guidance

For the first quarter of 2017, Tessera expects revenues in the range of $60 million–$63 million. GAAP loss per share is expected between (53) cents and (48) cents, and non-GAAP loss per share are projected within (15)–(9) cents. Currently, the Zacks Consensus Estimate is pegged at 50 cents.

For 2017, the company expects revenues in the range of $370 million–$445 million. The Zacks Consensus Estimate is pegged at $2.15.

Our Take

Tessera posted weak fourth-quarter results with both the bottom line and the top line figures missing the Zacks Consensus Estimate.

Tessera has intensified its Invensas, FotoNation and IP licensing efforts and is currently working with a number of semiconductor manufacturers and OSATs to enhance its portfolio of advanced packaging and interconnect technologies that encompass ZiBond, Direct Bond Interface (DBI) bonding technologies and BVA.

Also, the integration of DTI Inc. which was acquired in last December is well on track. Revenue synergies are expected to be achieved once the combined company reaches an optimum level of customer channel and technology utilization and expands addressable markets.

The combined company will keep its balance sheet strong by maintaining pro forma cash and investments of around $100 million. It will also try to maintain an optimum level of free cash flow available for funding quarterly dividends, paying debts, making investments and financing future acquisitions. The acquisition will make Tessera one of the leading product and technology licensing companies globally.

Tessera’s premium imaging technology continues to see interest thereby indicating that the business will grow significantly in the mobile and adjacent markets. The company stayed aggressive on the capital allocation front with a combination of dividends and share buybacks.

The company is making good progress on the SOC front and its IPU architecture is creating interest among several Asia-based SOC providers, thereby opening up opportunities in China.

Tessera is also making progress on the automotive front and continues to create advanced and intelligent automotive application solutions.

Overall, the company’s internal R&D efforts, Invensas, FotoNation and IP licensing initiatives and prospects in the automotive market remain as bright spots and are expected to drive growth.

Tessera Holding Corporation Price, Consensus and EPS Surprise

 

Tessera Holding Corporation Price, Consensus and EPS Surprise | Tessera Holding Corporation Quote

Currently, Tessera has a Zacks Rank #3 (Hold). Stocks worth considering in the industry include Texas Instruments TXN and Xcerra Corporation XCRA, carrying a Zacks Rank #1 (Strong Buy) and Intersil Corporation ISIL, carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments delivered a positive earnings surprise of 7.09%, on average, in the trailing four quarters.

Xcerra delivered a positive earnings surprise of 187.5%, on average, in the trailing four quarters.

Intersil delivered a positive earnings surprise of 2.92%, on average, in the trailing four quarters.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Texas Instruments Incorporated (TXN): Free Stock Analysis Report
 
Intersil Corporation (ISIL): Free Stock Analysis Report
 
Xcerra Corporation (XCRA): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research