Good afternoon and welcome ladies and gentlemen to the Acacia Research Second Quarter Earnings Release Conference Call. At this time, I would like to inform you that this conference is being recorded, and that all participants are in a listen-only mode. At the request of the Company, we will open the conference for question-and-answer after the presentation. I’ll now turn the conference over to Mr. Matthew Vella. Please go ahead, sir.

Thanks, Don. Thanks for being with us today. Today’s call may involve what the SEC considers to be forward-looking statements. Please refer to our 8-K, which was filed with the SEC today, for our forward-looking statement disclaimer. In today’s call, the terms we, us, and our, refer to Acacia Research Corporation and it’s wholly and majority owned operating subsidiaries. All patent rights acquisitions, development, licensing and enforcement activities are conducted solely by certain of Acacia Research Corporation’s wholly and majority owned operating subsidiaries. With me today are Clayton Haynes, our Chief Financial Officer and David Rosmann, our Executive Vice President of Licensing. Clayton will start our call by taking you through the numbers for this past quarter. Clayton?

Thank you, Matt and thank you to those joining us for today’s earnings conference call. As detailed in our earnings release today, second quarter 2015 revenues totaled $40.3 million, as compared to $50.1 million in the comparable prior year quarter. Second quarter 2015 revenues were comprised primarily of 20 new license agreements executed in the quarter, as compared to 15 new license agreements executed in the comparable prior year quarter. As we have discussed on previous conference calls, license fee revenues continue to be uneven from period-to-period. For the second quarter of 2015, we reported a GAAP net loss of $3.7 million or $0.18 per share versus a GAAP net loss of $12.9 million or $0.27 per share for the comparable prior year quarter. On a non-GAAP basis, we reported net income of $12.7 million or $0.25 per share as compared to a non-GAAP net income of $7.9 million or $0.16 per share for the comparable prior year quarter. As discussed on previous conference calls, non-GAAP net income or loss excludes the impact of certain non-cash charges. Please refer to our disclosures regarding the presentation of non-GAAP financial measures in other notes in today’s earnings release and 8-K filed with the SEC. On a combined basis, inventor royalties and contingent legal fees expense decreased 62% primarily due to the 19% decrease in related revenues quarter-to-quarter and a higher percentage of revenues generated during the second quarter of 2015 having no inventor royalty obligations as compared to the revenues generated during the second quarter of 2014. As a result, average margins for the second quarter of 2015 were 83%, as compared to 65% in the comparable prior year quarter. Litigation and licensing expenses decreased 17% to $9 million due primarily to a net decrease and litigation support and third-party technical consulting…

Thanks Clayton. Acacia continues its mission of charting for its patent partners, a path to financial returns for the unauthorized use of their patented technologies. To date, we have earned well over $1 billion of license revenue and have returned nearly $700 million to our partners, our customers. We remain confident in our strategy and operating focus and continue to expect revenue to ramp through the balance of 2015. This past quarter Acacia generated over $40 million in revenue and nearly $13 million in pro forma net profit, despite the absence of the significant revenue catalyst in this period. Though our expectations for the first half of 2015 were certainly higher, we did just deliver 19% year-over-year growth over the first half of 2014 while operating in a particularly challenging business environment that resulted in the brief, but nonetheless unanticipated postponement of several key trial dates this past quarter. And that also resulted despite three consecutive legal VoiceAge victories in Germany and German course choosing the state product injunctions subsequent to those victories. This quarter’s performance speaks at a robustness of Acacia's business model, the breadth and strength of our marquee portfolios and our ability to operate regardless of the legal and regulatory climate. Turning to VoiceAge and Adaptix, though we expected adjudicated trials for our VoiceAge and Adaptix portfolios to be the revenue drivers this past quarter. All those revenue drivers were postponed by one to two quarters. As of now, our first two Adaptix base station trials originally scheduled for June will now occur in August and in November. Also with the clarification of European Union law regarding standards-essential patents such as the VoiceAge patents as a result of last week's patented donor favorable decision in Huawei against ZTE at the European Court of Justice. Acacia is in…

Thank you, sir. [Operator Instructions] Our first question comes from Mark Argento with Lake Street Capital Markets.

Good afternoon guys.

Hi, Mark.

Maybe we could touch on gross margins in the quarter looked higher than normal. Could you talk a little bit about what drove the gross margins higher?

Sure, sure each quarter the gross margins are based upon which portfolios are contributing to revenues in a particular quarter you know just it will happen that in this particular quarter one of the programs that contributed a significant portion of the revenues from an economic standpoint the inventor royalty on that particular program where next to zero and so that translate to higher margins for that particular portfolio in the quarter.

Gotcha. Do you know I know in the queue you typically breakout, the top two or three contributors on a percentage of revenue basis do you happen to have that handy?

Yes, yes we included that in the release as well in the second quarter of 2015 one licensee contributed to or comprise 74% of the revenue during the quarter.

Gotcha.

And that’s compared which I believe 54% and 30% in the prior quarter.

And Mark I will add that in general when we deploy capital and we have deployed capital as we’ve said publicly we do seek to have preferred rates of return on licensing proceeds until we recover that capital and in some cases we are able to obtain those preferred rates of return even beyond capital of recovery. So I think part of what you're seeing is that principal put into operation.

Great, good to hear. And then capital allocation I know capital that a premium in this industry right now especially just given the amount of turmoil, it looks like you guys quite generate a little bit of cash given the result in the quarter. Thoughts on buyback I know you have still some authorized I don’t I am guessing you didn’t buy any stock back with the stock $310 have you guys given any more thought or maybe just remind us on kind of what the criteria there is other than you know this kind of continuously evaluating. Is there anything more that you guys are looking at or just too choppy as an environment right now to want to buy more stock?

Well, first of all you know we obviously discussed at lengthen we will obviously keep discussing it at length we’re not happy with the stock price performance. Having said that the dividend now stands at 6% and that’s always been the boards preferred mechanism for returning capital to shareholders. And we've just to recap declared and paid $63 million in dividends and we’ve bought back around $35 million of stock. Having said that dividend is the preferred capital of return mechanism we thought it would be imprudent to layer a buyback on top of the dividend at this time, but since a lot of going on with the Company in terms of prospectively good revenue opportunities and a lot of very high-profile trials coming up in just the next two months. You can rest assure that we will continuously monitor the situation and then continuously consider whether or not we should be reinitiating a buyback authorization.

Great. And then last question in terms of Europe, obviously you guys have gone a lot more active in Europe and for obvious reasons. Is that trend going to continue or are you starting to see any of the kind of the courts at least in the U.S. start to act a little bit more say rational, but not as active as this maybe they added a one-point in the continuum.

Well, two things. I think just two separate issues in there. One, we will continue to increase our presence in Europe and that simply because the court system there as evidenced by that recent Huawei ZTE decision is well-suited for certain kinds of patent licensing matters, specifically standards-essential patents. In the U.S., turning to a different issue I wouldn’t call the courts activist I just think that the course like us have been dealing with a lot of churn and with a lot of procedural mechanisms that were in there before. What we are finding is this, we’ll learn to live with the procedural mechanisms and we learn to navigate them as you can seen from our recent IPR records for example, our recent records on claim constructions. And the courts have to go through that same process as well and as they stabilize and catch-up to the changes, we find things are operating more efficiently. The other thing we find as I mentioned in my remarks is our impression seems to be that fewer matters are going to trial, not always we seem to be taking a minute in the same rate more or less or we seem to see fewer matters in general, which means that we’re getting speedier in trial date and that makes the U.S. system look a little more interesting and it did perhaps three months ago.

I appreciate it. Congrats on the decent quarter guys.

Thanks.

We will go next to Bryan Prohm with Cowen and Company.

Hey Matt, hey Clayton. How are you guys doing?

Good Bryan, how are you?

Hey, thanks for taking my question. Hey Matt in your prepared remarks I believe you said that revenue would ramp through the back half of 2015 and what you don't guide that certainly sounds like you're at least expecting a higher revenue in the back half versus the first half based on the visibility into Adaptix and VoiceAge and some of the trial that you spoke to earlier. So give us a better sense of how optimistic you are in the back half? Is this really the inflection point where all of the business model changes put together over the last 18 to 24 months are finally starting to come together and trial delays have reached the point where they can no longer be pushed further out in the calendar and some favorable rulings out of Europe and some recent market opinions make it sound like to lend credence to your optimism? Thanks

The short answer is yes. I mean and obviously I can’t give you too lengthy in answer, but the slightly longer answer is we've been pretty forthright in telling folks that the initiation of our revenue ramp was going to come on the back of Adaptix and VoiceAge. And so Adaptix has to reiterate, we don't think those trial dates are going to get pushed out any more and I think always could you never know what can happen. But at this point, we really don’t think they are going to get pushed out, they’ve already been pushed out a couple of times. And it seems that our impression from the cadence of the rulings and their nature is that they are locked in now. On the VoiceAge matters that touch murkier, but really not that much murkier because again unlike Adaptix there we actually have the three trial wins, those don't go back that there’s. And now we seem to have a clear path into what German and other European courts will do with those wins. And so that reasoning holds up then I come back to what I’ve been saying about the revenue ramp that will happen on the backs of those portfolios initially and they seem well positioned accordingly.

Okay, so then how many specific trial dates or major revenue events are there from here into your end? Is it more than 10 I mean I know you’ve given ranges on these numbers in the past, but I mean outside my head there areat least three Adaptix and depending on the number of defendants and the number of android OEMs that are infringing VoiceAge that seems like a reasonable number, is that fair?

Well, it depends on the chunk of revenue you're talking about this for more than 10 and we are talking about revenue drivers period, because we have trials coming up in the Labyrinth, we have trials coming up in [indiscernible] develop more keys, but they are very valuable portfolios and those are revenue drivers potentially as well. I’ll keep my remarks contained to Adaptix and VoiceAge because that’s the data I have off top of my head. On Adaptix we have two trial date scheduled on the base station side, on the handset side we still haven’t been scheduled as of yet, what we've gotten is a bit of clarification on how, but we think we’ve gotten some clarification on how courts are going to handle. I’m going to call it [indiscernible] inaccurately, but how they are going to handle, basically the impact of the unfavorable Apple decision we received last February that leads us to believe that we should be getting scheduled. When we get schedule we don't know the lots of know, so there is two there. On VoiceAge, it's a little more variable let me hand it over to David, but I think basically you are looking at episode of decoupled the revenue events from the trials, right. There is three trials coming up, there is two injunctions that might be enforced and there is really three licensees that are positioned to which license agreements along with a number of others that are talking to us, but maybe I’ll hand it over to David for detail.

Yes, just summarizing on VoiceAge, we've already won this year on three patents in VoiceAge and the court was prepared to move into the remedy phase in which case and injunction would be the typical remedy to apply in this case, but they were put on hold pending the resolution of the European Court of Justice decision. That decision came down on July 16 and we think that allows us to move forward not just on the three cases that we've already won and move forward in a very positive way. But it opens the door now for the remaining three cases that we are going to proceed over the next three months to move to resolution without the cloud of uncertainty that has now been resolved by the European Court of Justice and we believe that the decision of the European Court of Justice rendered allows gives us tools to compel infringers to actually face the fact that fringing the patents as supposed to take shelter on the ambiguity that existed prior to this decision. So we think it’s very positive.

Great. Thanks for the color on that I appreciate the detail. Last follow-up question on capital return, so if dividend is the preferred method of return does that mean we could see special dividends, one-time dividends if you get some home runs and grand slams on some of these trials that are upcoming? Thanks.

Yes.

Okay, that was a quick answer. I’ll pass on to the next. Thanks, and I’ll get back in the queue.

We’ll take our next question from Mike Latimore with Northland Capital.

Great. Thanks a lot. I guess just back on VoiceAge. So it sounds likes there is a number of positive events there, but I guess are there clear revenue events in the third quarter around VoiceAge at this point?

What happened is when the courts were waiting for the European Court of Justice to rule and keep in mind that’s been – that case in the European Court of Justice has been pending for almost two years. The courts really didn't know what remedies they could render on standard-essential patent. They know now, we know now, but most importantly the infringers know now that they can't rely on that ambiguity and so we expect that they are going to based on what the court is ruled have to negotiate in good faith to either enter into an agreement with us or facing injunction in Europe. And so that answers your question.

And then - are there scheduled meeting were these injunctions would be kind of determined or date?

Yes, there are courts, there are scheduled court hearings over the next several months, we actually have hearings in March and June where the court has found patents to be infringed and as simply stayed the final judgment on infringement and in ECJ decision. Now that is the result, we are going to go almost first three patents of infringed and discuss the injunction issue on September 22. In addition we have on August 5 in Munich where we are going to be taking up all those issues and then again in January of 2016. So we are going to be addressing our additional patents that are infringe and also addressing the resolution – the final resolution of the patents that all you have been found are infringe. And that’s been only in our view facilitate those cases.

And then for the large element in the second quarter I guess was that with the Marquee portfolio and I guess other potential licensee for that?

Yes and yes.

And you mentioned – I saw you mentioned that you have new Marquee portfolio in the energy space and then one in the e-commerce server form arena. So you are announcing two marquees is that right?

No, for now one, you’ll recall in previous calls that sometimes it might take us a few months to figure out whether something hits us with one we are confident that the energy one with the other one we have to wait and see how certain things span out.

Great thank you.

[Operator Instructions] We will next go to David Huff a Private Investor. Please state you question.

Hi, Matt great quarter really interesting to see a lot of different things that are going on in the docket. Two quick questions I will try to make them brief, Reed portfolio has basically less the cases have been dismissed. When we’re running – when I am running my models is that something I should continue to expect new events, new litigation to be filed or is that something that kind of wrapped up?

Well, first of all [indiscernible] Private Investors, reports are mixed with very interesting reading, but that aside and on Reed I know there is more coming up and that does need to be modeled. Let me pass it to David for some clarification.

Yes, and I would say that there will be additional briefcases that are going to be eminently filed. We talked about some of the developments that are seem to be moving in our direction, one of those was the elimination of the [SaaS] program within the PTO that was a secret of highly controversial program, but have the effect of essentially barring valuable patents that were pending through the process. Specifically with Reed, we have valuable families of patents that were pending for seven years within the PTO. With the suspension or the elimination of the SaaS program in March 2015 those patents issued almost immediately. And so we think those are very valuable patents just to take an example and we will be bringing those to – very soon.

Okay, that’s good to know. I guess the second question is the 74% license looks like that deal was done shortly after the Markman hearing and right before the Markman opinions were issued against the other defendants, it looks like it was done at competitive rate probably at a discount that few of the remaining defendants are we looking at even better rate going forward?

Well, I know the difficulty – I’m having a little bit of difficulty kind of figure out what’s confidential and what’s not, but let me answer with some general observations. We have at times entered into agreements well before trial dates and when we do it we will offer people very, very attractive early adopter discounts. When they don't take those discounts and we go to trial we will get very much higher rate and so for any situation where we’ve done early deals even the ones we’ve gotten quite a bit of money and then quite a bit of profit and the rates do significantly increase, increase is probably too softer word, they sore as we get to towards trial. And that’s simply because the costs and risk source and so that’s the way we price and that’s the way we always going to price and it’s good business for us to license early, it’s good business for license, use to take their license as early, but if don’t go with that way everyone is got to pay more.

I just had a quick follow-up question in that portfolio? Does that put that portfolio close to the black or in the black?

I can’t comment on individual portfolios, but I can say that’s’ for all the portfolios we license this quarter the ones at least that come to mind we’re very happy with the P&L on those.

Okay, that’s it from me. Thank you. End of Q&A

This will conclude the question-and-answer session. I will now turn the call back to Mr. Vella.

Well, again thanks for your support and stay tuned. This is going to be I think a very interesting and hopefully positive quarter. Bye for now.