RPX Corporation (RPXC)

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RPX Corporation (RPXC)

Q2 2013 Earnings Conference Call

July 30, 2013 5:00 PM ET


Joann Horne – Investor Relations

John A. Amster – President and Chief Executive Officer

Ned Segal – Chief Financial Officer, Senior Vice President, Treasurer, Principal Financial Officer


Timothy J. Quillin – Stephens, Inc.

Jeffrey P. Meuler – Robert W. Baird & Co.

Adam Carron – Barclays Capital, Inc.

Philip H. Lee – Lazard Capital Markets, LLC

Eric A. Ghernati – Bank of America Merrill Lynch



Good day, ladies and gentlemen. Thank you for standing by and welcome to the RPX Corporation Second Quarter 2013 Earnings Conference Call. During today’s presentation, all parties will in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Tuesday, July 30 of 2013.

And I would now like to turn the conference over to Joann Horne, Investor Relations. Please go ahead.

Joann Horne

Thank you, operator, and good afternoon, everyone, and welcome to RPX Corporation’s second quarter 2013 financial results conference call. Joining the call today are John Amster, Chief Executive Officer; and Ned Segal, Chief Financial Officer. The agenda for today’s call includes commentary from John followed by a discussion of the financial results from Ned, and then Q&A.

This afternoon RPX issued a press release announcing its second quarter 2013 financial results, which is available on the company’s website at www.rpxcorp.com. This call is being broadcast over the Internet and the audio of this call will be available on the Investor Relations page of the company’s website. Also please note that there are slides corresponding to the information on today’s call available on the IR website.

I’d like to remind everyone that the conference call will contain forward-looking statements that are not historical facts, but are rather 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 this call. Reconciliation to the most directly comparable GAAP financial measures are included in a table attached to the earnings release on the website.

Before I turn the call over to John, I just want to point out that we’ve had some phone issues and while we do not anticipate any interruption, if for some reason we do loose the call, please remain on the line and we’ll dial right back in. Thanks.

Now, I’ll turn the call over to John Amster.

John A. Amster

Thanks, Joann. Good afternoon and thank you all for joining us today. As usual, I am going to give a quick overview of the quarter before handing it over to Ned for more details on our results. Overall, RPX had a very solid second quarter. Revenue and net income both exceeded our expectations. We added 11 net new clients to the network and expanded our presence in both the content distribution vertical and in Asia. We continue to meet or exceed our client renewal objectives and the insurance business grew inline with our plans.

We also strengthened the infrastructure for our continued growth further building up the data gathering and market intelligence capabilities that are a key differentiator and competitive advantage for RPX. All in all, a good quarter to conclude a good first half, which we think leaves us well positioned for a solid second half of 2013. In the second quarter, subscription revenues increased 20% year-over-year with total revenues increasing 4% year-over-year. We are also pleased with our net income and EPS growth. Ned will provide additional color on this.

Our network stood at 157 members at the end of the quarter. We continue to add clients in the cable sector and now with a little over a year after the Altitude transaction, we have a very strong penetration in cable. Our success here is further evidence of our strategy of establishing anchor tenants in the vertical and we are optimistic that we’ll succeed in this approach to build our penetration of other verticals overtime.

It’s also worth noting that several of our second quarter client additions joined in part because of the GPH acquisition we completed at the end of last year. This is a good illustration of how our ability to clear specific patent risk for operating companies can lead to a membership dialogue. These client adds also illustrate how the capital we deploy in acquisitions result in leverage over many quarters to build our client base. We said it before, but it bears repeating, the length of our sales cycle can vary widely from client to client. Sometimes our value proposition is immediately obvious to a prospect, sometimes it can take several quarters or longer.

Despite this variability, we remain confident that more and more clients can and will benefit from our proven ability to quantifiably reduce the costs associated with NPE litigation. NPE activity is not declining and the number of companies at risk is large and growing. In Q2 alone, 716 unique companies were sued, almost 650 of these are perspective RPX clients and more than 80 of them were sued more than once in the quarter. There is a lot of running room still ahead for RPX in our core business.

Those of you, who attended our Investor Day in May, heard us talk at some length about the market opportunity and how we ensure that we’re addressing the entire team for RPX services. We began that process with a rollout of our insurance product, which cost effectively addresses the risks faced by small and medium sized companies that have not yet become regular targets of NPE assertion.

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