RPX Corporation (RPXC)

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RPX Corporation (RPXC)

Q3 2013 Earnings Conference Call

October 29, 2013 05:00 PM ET


Joann Horne - Investor Relations

John Amster - President and CEO

Ned Segal - Chief Financial Officer


Daniel Amir - Lazard Capital Markets

Danielle Coker - Stephens Inc

Tim Quillin – Stephens, Inc

Adam Carron - Barclays Capital

Eric Ghernati - Bank of America

Jeff Meuler - Robert W. Baird



Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the RPX Corporation Third 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, October 29, 2013.

I would now like to turn the conference over to Joann Horne, Investor Relations for RPX Corporation. Please go ahead ma’am.

Joann Horne

Thank you, operator, and good afternoon, everyone. And welcome to RPX Corporation’s third 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 third quarter 2013 financial results, which is available on the company’s website at www.rpxcorp.com. The 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 contains 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 those forward-looking statements. Please refer to the company’s SEC filings for detailed information.

In addition, non-GAAP financial measures maybe discussed during this call. Reconciliation to the most directly comparable GAAP financial measures are included in table attached to the earnings release on the website.

Now, I’ll turn the call over to John.

John Amster

Thanks, Joann and good afternoon everyone. I am going to give my usual quick overview before handing it to Ned for the details. Going into this year validation was a key theme at RPX. Validation of the market opportunity for our unique form of patent risk management of the value of our transaction data and of our ability to build on that data to execute efficient acquisitions, add and renew clients, continue to convince key clients to pay us more and build the foundation of a successful insurance business.

Given these goals this was another quarter of validation on our way to a solid year of 20% plus growth. Revenues grew 24% year-over-year and net income was $11.4 million or $0.21 per pro-forma diluted share. We expanded the network with three net additions to finish the quarter at 160 members 23 of whom are insurance clients. Our pipeline remains very strong and our renewal rate remained about 90%. These solid results represent a continuation of the progress we have seen since RPX signed its first client a little more than five years ago.

We are proud of what we’ve accomplished in those five years. For instance we’ve acquired more than $700 million worth of patents comprising what we estimate to be nearly 10% of the open market buying activities since our founding in 2008. Preemptive buying on that kind of scale has helped our clients avoid what we believe are thousands of NPE litigations and more than $1 billion in legal costs.

At the same time our ability to intervene in active litigations has resulted in more than 400 dismissals since the inception of the RPX network, that’s 22% of our client’s dismissals in that period. Today our network represents many of the largest technology enabled businesses in the world and through our open market and litigation activity, we believe we have reduced their aggregate NPE risk by about 40%.

That success is reflected in our renewal track record. We have had more than 80 renewal events in our history, stock renewals beyond our control M&A bankruptcy. At the end of this year we will only have had three non-renewals of any significant size out of those 8, we’d only one of them in 2013.

We feel that these numbers approved that RPX’s network is the single most affective way to quantitatively and consistently reduce NPE risk. We estimate this to be around the $10 billion cost every year for operating companies. We believe that the numbers show that any company dealing with NPE litigation will benefit from being an RPX member. And that is our goal to build a broad based network of all affected companies that will serve as a clearing house for all for very nearly off risk in the patent market.

And that will be the ultimate validation of our vision. Those of you who were at our Investor Day in this spring, they will remember the presentation on how much capital do it actually requires to clear all the key patents every year. It is in $10 billion we think it’s more like $1.5 or $2 billion. The RPX network has shown it can be done and that scale is the key to success.

So our long term vision continuous to take shape. We are providing large scale risk mitigation for a large number of companies and the value proposition and clearing house opportunities with the RPX network gets more compelling everyday.

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