Good afternoon, ladies and gentlemen. And welcome to the Acacia Research Corporation's Second Quarter 2018 Earnings Release Conference Call. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Clayton Haynes, Chief Financial Officer. You may begin.

Thank you, operator. Welcome and thank you for joining today's second quarter 2018 shareholder conference call. The earnings release that was disseminated this afternoon is available on the Investor Relations section of our website. The earnings release contains definitions of various financial terms as well as reconciliations of certain non-GAAP financial measures we will be discussing in today's call. Today, I will provide a summary of the second quarter 2018 results and update of our current financial condition and a recap of our remaining 2018 expense outlook. First, our Safe Harbor statement. Today's call may involve what the SEC considers to be forward-looking statements. Please refer to our earnings release filed with the SEC today as an exhibit to our 8-K on our forward-looking statement disclaimer. In today's call, the terms we, us, and our, refer to Acacia Research Corporation and its wholly and majority-owned operating subsidiaries. All patent rights, licensing, and enforcement activities are conducted solely by certain of Acacia Research Corporation's wholly and majority owned operating subsidiaries. As reported today, second quarter 2018 revenues decreased to $6.5 million compared to $16.5 million of revenues in the comparable prior year quarter. For the second quarter of 2018, two licensees individually accounted for 48% and 42% of revenues recognized. For the second quarter of 2017, one licensee accounted for 85% of revenues recognized. For the second quarter of 2018, we reported a GAAP net loss of $28.4 million or $0.57 per share versus a GAAP net loss of $14.3 million or $0.28 per share for the comparable prior year quarter. On a non-GAAP basis, excluding general and administrative non-cash stock compensation and patent amortization and impairment charges, we reported second quarter 2018 non-GAAP net income of $6.6 million or $0.13 per share as compared to a non-GAAP net loss of…

Thank you, Clayton. And good afternoon, everyone. As we disclosed in today's earnings release, both Ed Treska and Clayton Haynes are in the process of transitioning out of their respective roles at the company. Both Clayton and Ed have agreed to stay on as consultants to help ease the transition. And I'd like to say it's been a pleasure working with them recently. And on behalf of the Board of Directors, we thank Clayton and Ed and wish them all the best in their future endeavors. Now, I'd like to discuss recent business updates and priorities for Acacia. Clifford Press and I are implementing the plans we outlined ahead of the 2018 Annual Meeting, including cutting costs, protecting stockholder capital, and prudent corporate governance, stabilizing the business, and reconstituting Acacia's Board with highly credentialed independent directors. I am pleased to announce that we have made tangible progress executing on our strategic plan and are ahead of schedule on many of these initiatives. We have significantly reduced operating expenses, decreasing Acacia's annual G&A expense run rate from $13 million to approximately $4.5 million. We will continue to identify opportunities for cost reduction going forward to optimize our business. We will add new highly qualified independent directors as part of our goal of having a total of five directors on the Board. Allen Bradley brings deep leadership experience and extensive financial, legal and operational expertise to the Board. We are thrilled to have him join the Board, and know he will be a great asset to Acacia moving forward. We are also working to improve the company's capital allocation decision process for both current and potential investments. Until we have completed the restructuring, the Board will directly oversee capital allocation decisions at the company and establish a sensible order of operations to…

Thank you. [Operator Instructions]. We'll take our first question from Ted Moreau with Terrace Research.

Yes. Thank you for taking my questions. Good afternoon, gentlemen. First question in William Anderson's letter resigning from the Board, he mentioned a potential transaction that sell through. Can you explain why that has -- had fallen apart?

Thanks, Ted. I'll take that. The -- that proposal was a desperate last ditch response to the eminent loss of the shareholder vote. It would have involved a reverse merger combination with a speculative software startup that had a very high valuation and it also valued Acacia at a discount to its cash. It gave no credit for its NOL. And to give you an idea of how bad the deal was, the transaction involved the company making an offer to greenmail us out at a 40% premium to the market. We rejected the greenmail offer and that began the unraveling of the proposed transaction. I would say the potential transaction was not in the best interest of Acacia’s stockholders. It was riddled with conflicts and problems and not one that we felt was worth engaging in.

Okay. And then you were talking a little bit in your prepared remarks about the patent portfolio. Can you kind of elaborate a little bit on how you're going to fix the patent portfolio?

At present, I think we sort to said everything we're going to say about the portfolio for now. We’ve put a steady hand in, in Marc Booth and we’ve taken the cost of the business down. And at present, that's sort of what we're saying.

I see. Okay. And then there were several incumbent directors that all recently resigned. Can you kind a go into a little bit of detail on why that occurred and is that an indignant of your -- the strategy that you're going after or can you kind of elaborate what's going on there?

Well. I mean if you look at the proxy materials we've sort of drawn connections between the legacy directors where all kind of close friends or associates of one person. And once he was overwhelmingly removed from the Board by the shareholders there really wasn't much reason for them to stay. As I said, we anticipated reconstituting the Board with new highly qualified independent directors. We're ahead of our plan now. So the fact that the resignations occurred rapidly should not be viewed as anything other than good news for our execution strategy. And having added Allen Bradley to the Board, who has deep experience and expertise, will be an excellent independent voice and he is a strong shareholder representative. So we're actually very pleased where we are.

Okay great. And then so when do you expect to appoint a new management team? And are there any particular characteristics you're looking for in a new CEO? And was this a priority when you joined the Board or can you kind of go into your thought process there?

So currently having brought back Marc Booth, we feel that he will oversee the patent business and it's in capable hands right now. The Board currently will oversee capital allocation directly and we are proceeding methodically and carefully. We're going to get the right team in place for the business operations as they develop and will appoint an appropriate CEO and Chief Investment Officer when we identify the right candidates that are aligned with our strategy.

Okay great. And then last one from me. How are you implementing the strategic plan that you outlined or -- that’s been outlined in the proxy file?

Sure, so in the strategic plan, we’ve basically laid out a lot of these thoughts about reconstituting the Board, improving governance and taking a careful measured look at the patent business. And obviously a lot of things have happened quickly. But given the fact that we've reduced the cost basis significantly and we'll be mindful through our strategic analysis, we’ll hire the right people and we will look at a measured capital allocation decision process moving forward that will be in the best interest of Acacia’s shareholders. And that's pretty much the strategy that we laid out when we spoke with shareholders during the proxy contest.

We'll take our next question from Chris Galvin with Westerly.

Thanks. I guess it’s a question for Al. What's the expectation for new smaller investments or follow-on investments in entities like Miso?

So one of the things that we thought we wanted to get right with investments is the order of operations. That being get a good investment team together that could operate in the best interest of shareholders and align your interest with the shareholders' interest and then allocate capital appropriately. Miso and Bitzumi and Veritone are not investments that we necessarily would have made, but they are investments that we now have. And so, we will look to right size those in the case of maybe Veritone which we believe is too large for us. Miso, we will -- diligence and make appropriate allocations. But as of now, not much to report other than get the right people in the right place and then go about it in the best interest of shareholders.

We'll take our next question from Brett Reiss with Janney.

Yes. Hi, Al.

Hi, Brett.

You have outstanding litigation at various stages, there maybe offers that come in on settlements and decisions that have to be made. Is it Marc Booth that you will look to guide you in that and Mr. Treska in his transition period?

Yes. So right now I would look at our patent business as having added Marc Booth who is very knowledgeable about our patent portfolio and also having the benefit of Ed services as a consultant to the company. So net, we've added really one executive and a very qualified one in our IP system. So I wouldn't view that as being any disruption there. We did reduce the G&A burn significantly, but we didn't reduce the people in the patent business significantly. We've actually added one.

Right, right. How long -- time table on how long you think it will take to do your assessment of the patent business, any ballpark estimate there?

I don't think at this time I'm prepared to do that. Obviously Marc has been here for minutes basically. So he will get up to speed as quickly as possible and report back to the Board. And so, it will be an iterative process. But we’ll be -- he'll be hard at work, and obviously he's got the benefit of having Ed. So he'll be up to speed fairly quickly but I wouldn't want to put an exact time table on it.

Right. And I've been in the situation five or six years, my apologies to Mr. Booth if he was there. Could you tell me a little bit more about him, just some color on his background? And how long he was with the company prior?

So Marc has been with the company -- was with the company for 11 years.

Okay. And he's a lawyer?

Yes, but I would say he's also a graduate-level engineer. He's an IT professional.

And it appears there are no further questions at this time. I’d like to turn the conference back to Al Tobia for any additional or closing remarks.

Okay. I'd like to thank everyone for attending. And we will be back for our next earnings call and we'll have more details to show on the patent portfolio then.

And ladies and gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.