RPXC

RPX Corporation (RPXC)

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RPX Corporation (RPXC)

Q42012 Earnings Call

February 12, 2013 5:00 pm ET

Executives

JoAnn Horne - Investor Relations, Market Street Partners

John Amster - President, Chief Executive Officer, Director

Adam Spiegel - Chief Financial Officer, Senior Vice President - Finance, Treasurer

Analysts

Brian Karimzad - Goldman Sachs

Adam Carron - Barclays Capital Inc.

Tim Quillin - Stephens Inc.

Paul Coster - JPMorgan

Daniel Amir - Lazard Capital Markets

Dan Leben - Robert W. Baird

Eric Ghernati - Bank of America Merrill Lynch

Presentation

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the RPX Corporation's fourth quarter and fiscal 2012 earnings conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) Today's conference is being recorded February 12, 2013.

I would now like to turn the conference over to JoAnn Horne of Investor Relations. Please go ahead, ma'am.

JoAnn Horne

Thank you, operator and good afternoon, everyone and welcome to RPX Corporation's fourth quarter and full year 2012 financial results conference call. I would like to apologize for the delay in starting the call but we had some logistical issues at our SEC filing service.

Joining the call today are John Amster, CEO; and Adam Spiegel, CFO. The agenda for today's call includes commentary from John followed by a discussion of the financial results from Adam.

This afternoon RPX issued a press release announcing its fourth quarter and full year financial results, which is available on the company's website at www.rpxcorp.com. This call is being broadcast live over the Internet and the audio of the call will be available on Investor Relations page of the company's website.

I would like to remind everyone that the conference call will contain forward-looking statements that are not historical facts, but rather are based on the company's current expectations and beliefs. RPX's actual results may differ materially from these forward-looking statements. Please refer to the company's SEC filings for detailed information.

In addition, non-GAAP financial measures may be discussed during the call. Reconciliations to the most directly comparable GAAP financial measures are included in a table attached to the earnings release on the website.

Now, I would like to introduce John Amster.

John Amster

Thank you for joining us today. I am very pleased to report that a strong Q4 capped a solid 2012 for RPX. Our progress on all fronts, financial results, client growth, renewals, new services, patent acquisition activity illustrates two key things about the company. One, RPX's unique approach to managing and reducing patent risk is being embraced by the market. Two, as we have often said, our business is best assessed over the longer period and not one quarter at a time.

The nature of our prospects and their experiences with patent risk means that our sales cycle and new client adds will vary from quarter-to-quarter but the frequency and high cost of patent risk means that our services are becoming increasingly valuable for a broad group of companies that collectively billions of dollars of legal and settlement costs annually.

Our data shows that transaction cost are nearly 50% and companies increasingly understand that this is not sustainable. RPX has proven to be the only scalable alternative to control and reduce these costs and we believe the company has a tremendous opportunity to grow if we execute as we did in 2012.

So looking first at some highlights of the fourth quarter. Revenues grew 22% to $51.6 million as compared to the fourth quarter of 20011, while non-GAAP net income totaled $12.3 million or $0.24 per pro forma diluted share. We completed seven acquisitions of patent assets investing over $23 million of our own money and over $100 million when counting contributions from two structured transactions completed during the quarter.

We ended the quarter with 140 clients, up 12 from the end of Q3. Again, our sales cycle can vary widely and the number of subscribers added in a given quarter is not always the clearest indicator of our overall operating progress. At the same time, we are pleased that our pipeline produced our strongest quarterly client increase in almost two years. Three of our new clients in the quarter came in connection with our insurance book.

This solid quarter contributed to 28% revenue growth for the full year with revenues totaling $197.7 million for 2012. Non-GAAP net income was $47.1 million or $0.90 per diluted share. This revenue growth and increasing profitability are clearly positive results but we are equally encouraged by the success RPX had leading a strategic roadmap we laid out for 2012.

For example, this year we expanded our product line to include insurance which remarkably increases the number of companies we can protect from unnecessary legal costs and operating risks. Our insurance products targets the long-tail of technology companies. They are just starting to experience NPE litigation. We ended the year with six insurance customers and are very pleased with the sales pipeline we have already done.

Adam will give you some more visibility on the insurance business in a moment but I want to take a minute to remind you how insurance is an integral part of our vision for RPX. Not only does insurance expand our addressable market, it also helps our core service and it should create new business opportunities in the future. Each insurance discussion that we have provides a continuing stream of cost information to add to our already unmatched database. This data will steadily improve our ability to predict and quantify patents risks and we are now using these actuarial and underwriting tools to help our clients and prospects manage their patent risk more effectively.

Read the rest of this transcript for free on seekingalpha.com