Acacia Research's (ACTG) CEO Matthew Vella On Q1 2014 Results - Earnings Call Transcript

| About: Acacia Research (ACTG)

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Acacia Research Corporation (NASDAQ:ACTG)

Q1 2014 Earnings Conference Call

April 17, 2014 4:30 PM ET

Executives

Matthew Vella – CEO

Clayton Haynes – CFO

Analysts

Mark Argento – Lake Street Capital Markets

Brian Prohm – Cowen and Company

Timothy Quillin – Stephens, Inc.

Brett Reiss – Janney Montgomery Scott

Operator

Good afternoon, ladies and gentlemen and welcome to the Acacia Research First Quarter Earnings Release Conference Call. At this time I’d 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 up for questions-and-answers after the presentation.

I will now turn the conference over to Mr. Matthew Vella. Please go ahead, sir.

Matthew Vella

Thanks Steve. Thank you 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 its wholly and majority-owned operating subsidiaries. All patent and rights acquisitions, developments, 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 Ed Treska, our General Counsel. Today Clayton will start our call by taking you through the numbers for the past quarter. Clayton?

Clayton Haynes

Thank you, Matt. As detailed in our earnings release today on a consolidated basis revenues totaled $12.6 million as compared to $76.9 million in the comparable prior year quarter and were comprised primarily of 20 new licensing agreements executed in Q1, 2014 as compared to 29 new licensing agreements executed in the comparable prior year quarter. As discussed on previous conference calls license fee revenues continue to be uneven from period-to-period.

For the first quarter of 2014 we’ve reported a GAAP net loss of $24.4 million or $0.51 per share versus GAAP net income of $5.1 million or $0.10 per share for the comparable prior year quarter. The first quarter 2014 non-GAAP net loss, excluding the impact of non-cash charges totaling $19.2 million was $5.2 million or $0.11 per share as compared to $22.7 million of non-GAAP net income or $0.46 per share for the comparable prior year quarter. Please refer to our disclosures regarding the presentation of non-GAAP financial measures in today’s earnings release and 8-K with the SEC.

Inventor royalties and contingent legal fees expense decreased relatively consistent with the decrease in revenues quarter-to-quarter. Average margins were 80% for Q1, 2014 as compared to 56% for the comparable prior year quarter.

Litigation and licensing expenses were relatively flat quarter-to-quarter with a slight net decrease in litigation cost incurred in the first quarter of 2014. MD&A expenses, including non-cash stock compensation charges decreased $2.2 million or 16% due primarily to a decrease in non-cash stock compensation charges, variable performance based compensation expenses and other corporate general and administrative costs in Q1, 2014.

We ended Q1, 2014 with $229 million of cash in investments as compared to $256.7 million as of December 31, 2013. We made investments in three additional patent portfolios in the first quarter of 2014 incurring $15.8 million in upfront advances and other costs, $15.3 million of which were accrued as of March 31, 2014 and scheduled for payment in Q2, 2014.

Q1, 2014 quarterly cash dividends paid to shareholders totaled $6.3 million. Looking forward for fiscal 2014 we continue to expect fixed MD&A, excluding non-cash stock compensation charges to be in the range of $27 million to $28 million. And we expect patent-related litigation and licensing expenses to be in the range of $35 million to $36 million. Excluding additional 2014 patent portfolio acquisitions or accelerations scheduled fiscal year 2014 patent amortization expenses is expected to be approximately $49 million.

For additional details regarding the summary information provided in our prepared remarks today please refer to today’s earnings press release and 8-K filed with the SEC. Thank you all for joining us today. Matt, back to you.

Matthew Vella

Thanks, Clayton. Acacia’s mission statement remains the same. We empower patent owners and reward invention by providing a path to patent monetization for the people and companies who have contributed valuable patented inventions to an industry, but need a professional, experienced and independent third-party licensing partner to get rewarded for those inventions. We call these people, our customers the patented enfranchised. In so doing, Acacia is placing itself at the forefront of an emerging secondary market in patent assets.

Just as Acacia’s mission statement remains the same the operational framework management has put in place to achieve that mission, which we described to you in recent earnings calls also remain the same. Moreover, our perspective about the future of our company remains the same. Specifically our future trial date calendar and revenue pipeline has never been more robust. Our pipeline of new marquee portfolios remains strong and our commitment to increasing the transparency of our operations remains in place.

In 2013 we learned two pivotal lessons that we believe will make Acacia a stronger and more consistently profitable company moving forward. First, Acacia’s strategically chosen to become a company that serves a small number of customers, each having higher quality portfolios. In examining our past success we found that the vast majority of our growth in profits stemmed from high quality, high revenue potential patent portfolios, marquee portfolios.

Second, Acacia has evolved into a company that will be more patient about getting the right prices for licenses under its own, under its customers’ patent portfolios, even if it means enduring a temporary revenue trough to get those right prices.

Now looking strictly at the numbers Clayton just shared with you and thus strictly at the agreements we have done to this past first quarter, the company’s revenue trough continued through this past first quarter. However we still believe the poor revenue and loss numbers of the past few quarters this revenue trough one belies the underlying strength of our company and two is only temporary.

In the examination of our business I referenced in previous earnings calls we learned that the vast majority of our revenues and profits stemmed from our marquee portfolios. And this finding has driven our focus in dealing in marquees.

With our organization as a result now focused on such marquee portfolios our intake of them has accelerated. While we only had one such portfolio in the beginning of 2012 we now have 10, and we expect to have 12 to 15 by the end of this year. And this is one reason we are confident the revenue trough is only temporary. Another reason for our confidence stems from the litigation and patent office records pertaining to our major portfolios. We think that a close examination of those records shows that one, virtually all of our major patents have remained intact or in some cases even been strengthened.

Two, we have a retooled organization, honed to bring in and execute against marquee portfolios at an unprecedented rate. And as a result we have more valuable major portfolios than we ever had before. And three, our future trial date calendar and revenue pipeline has never been more robust. Now we had greater confidence in our ability to continue strengthening that calendar and pipeline.

And turning once again to these trial dates, though not perfect predictors of revenue they are historically correlated to revenue events. In all of 2013 for example we only had three such trial dates, all falling in the first quarter of that year and in-line with that correlation we saw strong revenue that quarter and poor revenue in the following quarters of 2013 when we had no such trial dates.

Looking forward, for the rest of 2014 we’ve roughly seven scheduled trial dates and better still for the first half of 2015 there are over 20 scheduled additional trial dates, most of which relate to marquee portfolios. While it was the paucity of marquee portfolios and trial dates that put us in this revenue trough it is the strength and portfolio depth and subsequent trial dates that we believe will pull us out of the trough. We continue to sense a connection between these upcoming trial dates and the altered cadence and tenure of our negotiations with respect of licensees.

Turning to our portfolio intake, since our last earnings call we’ve ventured into an additional partnership agreement for marquee portfolio and also strengthened one of our existing marquee portfolios by deepening our relationship with one of our customers, Nokia Siemens Networks. Specifically we invested a total of $15.75 million for rights in the following three patent portfolios. One, Nokia Siemens Networks, we gained rights in more of their standard essentials patents coverings 3G and 4G mobile handsets and network infrastructure including patents covering signaling, power control and carrier aggregation.

Two, a portfolio whose identity must remain confidential for a few more weeks that comprises patents covering application processor and video decoder memory architectures, as used in mobile devices such as smartphones and tablets. And three, our Fraunhofer Institute portfolio comprising patents covering ceramic materials used to manufacture orthopedic artificial joint implants, such as artificial hips, knees and in the near future, shoulders.

As previously stated our pipeline for new marquee portfolios is robust thanks in part to the changes we made to strengthen portfolio intake. We expect a solid and consistent intake of new high quality portfolios to diminish the likelihood and severity of future revenue troughs.

As has become our habit in the past few earnings calls I’ll briefly touch upon the government and its activities relating to patent reform. Our view regarding patent reform remains unchanged from a quarter ago. As mentioned before Acacia is generally supportive of the draft bill that we understand might pass into law, the one that is sponsored by Congressman Goodlatte and that has passed through the House. While the Senate version of the same bill has been delayed we believe this version might turn out to be less onerous with regard to fee shifting, that is loser pays, which incidentally is the issue that has reportedly been holding up the bill in the Senate. With that said whether or not loser pays passes that will not change our stance on the Bill.

And turning to patent reform generally, its net effect has been and continues to be to make patent licensing more complex and needful of experienced guidance and resources. The increased complexity and expense make it even harder for the patented franchisee to monetize their own patents which means our present and future customers need us, our expertise, our experience, our risk reduction models and our financing more than ever.

Turning back to our future revenue prospects, as you have very recently seen happily the cadence and quality of our licensing deals has been gradually increasing. With this increase we remain committed to giving you more information to be able to better track our licensing progress in the coming quarters. Our licensing opportunity page already provides a lot of this information by cataloging our large number of portfolios. The formidable array of high-quality patents, the high covered unit counts, the billions of dollars of exposed revenue, the extensive geography that patents cover and the increasing number of upcoming trial dates driving negotiation deadlines; as well of course is the high-quality patent portfolios themselves.

The Bonutti orthopedic portfolio, the Boston Scientific stem graft and vena cava filter portfolio, the Rambus back lighting portfolio, the Breed Automotive portfolio, the ADAPTIX 4G and 4G plus portfolio, the silicon image interconnect portfolio, the Nokia Siemens 2G, 3G and 4G portfolio which I’ve mentioned has reasonably been bolstered thanks to our deepening relationship with Nokia Siemens, the Palm Pilot software portfolio we’re working on for ACCESS company. The VoiceAge portfolio that we recently filed suit on and that we just licensed to Samsung earlier this week and soon get at least another marquee portfolio that we’ve brought for which we will provide details on our opportunity stage later this quarter.

In addition to this information going forward as we get more data points and higher confidence in our pricing we will also begin to share some of that pricing information with you where possible. As pricing around an individual portfolio starts to stabilize, that is as we keep getting paid the right price on an individual portfolio for certain types of patents we will put up forward-looking pricing information in the form of licensing rate tables. The roll-out of those tables will commence before our next earnings call.

In conclusion, thinking of our upcoming trial dates and the marquee patents that will go to trial on those dates, the continuing high-quality of our patent intake and our increased focus on such high-quality intake, the increase need of our customers, the patented enfranchised for the services we provide thanks in part to patent reform and the quality and technical skill of our professional staff, Acacia has never been better positioned for high caliber long-term performance. We’re now determined for Acacia to take advantage of its superior positioning to become strongly and sustainably profitable.

So while our revenues and the number of portfolios that we acquired declined over the last year, if one considers our present portfolios, our upcoming trial dates and the portfolios we believe we can soon bring into Acacia I am truly more optimistic about Acacia’s future than I’ve ever been. I look forward to reporting our progress to you next quarter. Thank you very much.

Now with that we will turn to questions from various folks listening on this call.

Question-and-Answer Session

Operator

Thank you, sir. The question-and-answer session will begin. (Operator Instructions). Our first question comes from Mark Argento with Lake Street Capital Markets.

Mark Argento – Lake Street Capital Markets

Hi guys. Good afternoon.

Matthew Vella

Hi, Mark.

Mark Argento – Lake Street Capital Markets

Matt you had touched on some of your trial activity, could you just review that again in terms of when you expect the activity levels over the next few quarters and then kind of in aggregate over the next couple of years? And then my second question would be Samsung, you had mentioned you licensed the VoiceAge portfolio to Samsung, maybe talk about I know historically you guys have had more of a comprehensive licensing agreement with them, maybe how that relationship has changed a little bit seeing that now that you’re – looks like you are licensing specific portfolios to them?

Matthew Vella

Sure, on the trial activities and just to kind of give you a more general overview, focusing just on marquee because if I extend the scope of my response I might be here a while and we certainly have the smartphone trials against Huawei and DTE coming up in June in [inaudible] of Texas, we also have some German litigation that is reaching a decision of first instance shortly. We have ADAPTIX litigation occurring in Japan that’s set to go to trial in the May and June time frame.

We have a – I call it Boston Scientific trial that’s set to go against Gore in Germany again a trial of first instance in August. And then we switch to 2015 we have a large number of lawsuits going to trial in California and Texas relating to ADAPTIX. We have a Bonutti trial going forward in Florida, we have the Rambus backlighting portfolio go into trial in Texas against a number of companies. And we also have the Breed automotive portfolio going to trial and all of this in the first six months and that’s where the numbers we gave you in the earnings call come from.

Beyond 2015 again we could keep going but I’ll just stop my remarks at that point, we are obviously getting trial dates on a continuing basis beyond the first half of 2015.

Turning to the VoiceAge question, I will call it with respect to Samsung, you know it’s interesting the relationship if you want to call that it’s there and it’s going to take on different outcomes as the portfolio mix changes, as the patience of perhaps our company changes and also its going to be a function of a bunch of industry trends in the market place.

And so with Samsung suffice it to say if you look at the amount of litigation going on, if you look at the history between the two companies there is still a dialogue occurring. Dialogue is going to get tense at times. The other times we are going to resolve and get to agreements, the dialogue is by no stretch stable. But that makes things very interesting on the upside and down side potentially and if I go into any further details I am probably going to be getting into a bunch of confidential information.

Mark Argento – Lake Street Capital Markets

Great, that’s helpful last question, in terms of the amount of capital you deployed, looks like you deployed $50 million in the quarter and you talked about taking kind of your marquee portfolios from roughly 10 right now to I think you said, close to maybe 14 or 15 by year-end. And do you see deploying $5 million to $10 million per kind of marquee portfolios more of an hybrid type of deal, maybe your thoughts around capital deployment and how much capital you guys are willing to put out for some of these better portfolio now that, that’s seems to be really key focus for the company?

Matthew Vella

Well, it depends on the portfolio and I can certainly speak to what’s being going on in the past few quarters. We have been primarily focused on hybrid agreements and the kind of price range we have been discussing. But as a functional of what’s before us and the pricing almost before us.

Mark Argento – Lake Street Capital Markets

All right. Thank you.

Operator

We’ll take our next question from Brian Prohm with Cowen and Company.

Brian Prohm – Cowen and Company

Hey, good afternoon Matt, Clayton how are you doing guys?

Matthew Vella

Good.

Brian Prohm – Cowen and Company

Hey so my first question Matt is on the overall market environment for the technology licensing. We’ve seen a fair number of high profile events, deals since the beginning of the year from Google from Samsung and Nokia and some others; a $100 million patent sales from Unwired Planet, do you think those deals were – do you characterize it as of a one-time cluster in mobile wireless space or is this maybe evidence that the market overall are starting to stall. Even your comments around what ultimately is going to come out of the Senate reform legislation. And if so does that sort of herald that deal momentum is going to pick up across multiple sectors?

Matthew Vella

It’s hard for us to prognosticate and then crying over what’s going on in the industry as a whole. Well I can tell you is what’s going on with our company and with our company we are very happy to increase cabins around our negotiations our license negotiations. We are very happy with the fact that cadence is relating to marquee portfolios and may be those observations are linked into what’s going on with all the other folks, maybe we are an outlier, I am not sure but I can just speak for ourselves. And again we are happy with what we are seeing in the licensing front.

Brian Prohm – Cowen and Company

Yeah I asked because if I look at the 20 agreements in all of Calendar 1Q but then I look at the last five weeks and there is 20 agreements in last five weeks. It feels like there is – it changed in the trajectory or the momentum on deals from the company?

Matthew Vella

Yeah, I mean the numbers speak for themselves Brian and the distribution over time speaks for itself. And again, as we’ve been saying we are getting closer to trial dates and there is a historical correlations to revenue events and trial days and we certainly expect that to continue playing out and we expect that to continue playing out in part based on the observations we are making of the licensing environment as we are participating in.

Brian Prohm – Cowen and Company

Great. Hey quick follow up on the Bonutti deal in 1Q, was that the 39% revenue deal that’s in the K?

Clayton Haynes

I am not sure we can answer that question with level of specificity and…

Brian Prohm – Cowen and Company

Fair enough, all right so let me ask this question then. So through the first two weeks of April there are three Bonutti and one ADAPTIX what you call marquee portfolio, those deals are announced. But if I look and try to track them back to a Markman and then a trial date it looks like these are deals that are getting done may be a year ahead of a trial date? Is that correct?

Matthew Vella

Yeah, I think what’s happening – now remember we’ve called this agreements that are detached from trial dates, I must call them transients at time, all right. There are things where they might emerge and it might not emerge. And we think we’ve been really close to entering into these so called transients even as we’ve been in what we are calling the revenue trial for the past few quarters. Once in a while transients will occur.

Now the interesting thing is that I think I urge guys to do the kind of thing you are doing which is look at the trial dates, look at the markman dates, look at the wording on the press releases carefully right, and I suspect you’ll be able to piece together a bit of the story of what’s going on. But to answer your question generally, yes, there are transient deals they are still possible. We never said they were impossible and we still expect those to happen every so often.

Brian Prohm – Cowen and Company

And would you characterize those as incremental to the top tier or marquee portfolio revenues that you referenced in your prepared remarks or are they tied together somewhat?

Matthew Vella

What do you mean by that?

Brian Prohm – Cowen and Company

I mean in the case of well, I mean I guess if it’s a Bonutti, if its ADAPTIX, if it’s a top tier portfolio and it’s a transient deal then its settled then it’s no longer one of the maybe potential major revenue catalytic events that are likely to settle historically based on proximity to trial date. I just want to make sure that I am not counting apples and oranges when there are only apples.

Matthew Vella

Well again I am not entirely sure I am understanding the question. But maybe to review my answer I’ll give you another shot at the question I apologize for not getting it. But we – transient agreements are always being negotiated sometimes they come in sometimes they don’t and the back-up always been agreements that’s agreed after trials.

Brian Prohm – Cowen and Company

That’s fine. I think there are…

Matthew Vella

Now when we do a transient, by the way then yeah obviously that’s our potential trial revenue event, that been perhaps addressed depending on what inside the transient agreement, if that’s what you are asking?

Operator

And we’ll take our next question from Tim Quillin with Stephens, Incorporated.

Timothy Quillin – Stephens, Inc.

Hey, good afternoon and thank you for taking my question. First I hopped on a little bit late and I was wondering Clayton would you be able to repeat your financial guidance on the four areas that you typically give us?

Clayton Haynes

Sure, Tim. It’s not only consistent with the guidance at the end of 2013 but with respect to MG&A we are expecting that to be in the range of $27 million to $28 million excluding non-cash stock compensation as usual. We expect patent litigation and license expenses to be in the range of $35 million to $36 million and patent amortization be roughly $49 million excluding off-course additional acquisitions and any accelerations throughout the rest of the year.

Timothy Quillin – Stephens, Inc.

And stock comp, I think at the beginning year you said $18 million is that still accurate?

Clayton Haynes

Yes it is.

Timothy Quillin – Stephens, Inc.

Okay. And then in terms of the licensing deals in the quarter, so there were two licensing agreements or revenue agreements around marquee, what we probably consider marquee patent portfolios ADAPTIX and Bonutti. There was only one 10% customer so you know only one deal over $1 million or so. And maybe the way I ask is may be the different flavors of agreements that you might be getting around marquee patent portfolios. I know all license fees aren’t created equal and maybe especially Bonutti, maybe the patents you are licensing aren’t necessarily all created equal. But maybe if you can just talk about the differences and agreements you might sign around those marquees?

Clayton Haynes

Hey Tim, it’s Clayton, before Matt jumps into that answer just to clarify, as far as Q1, 2014 one license fee individually accounts for let’s say 39% of the revenues recognized, you had mention 10% but it’s not correct.

Timothy Quillin – Stephens, Inc.

It’s greater than 10% so there is only one greater than 10%?

Clayton Haynes

Yes.

Timothy Quillin – Stephens, Inc.

Thanks for the clarification.

Matthew Vella

Yeah Tim it’s Matt so, that’s a good question, it’s interesting. There is a few variables that you can imagine get changed from deal-to-deal. One is the subject matter, right so on Bonutti for example there are a number of patents covering full knees, a number of patents covering half knees, numbers of patents covering suture anchors and other technologies, actually about four five in there. And what you want to look at is which technologies have been announced, which losses have been withdrawn which patents have been pulled back, what the businesses looks like the sort of through that information right.

The other thing is timing, I mean we’ve done deals historically where you have blends of licenses and covenants. You have blends in terms of the timing of each price. You typically have covenants which are personal to a company, covenants not for licensing. You have licenses which tend to carry with the patents, so there is a number of reasons why companies would want to get into those. You’ve got some variability in terms of geographical scope right. So there are number of variables that we’ve historically done in that we expect to keep doing going forward in answer to your question.

Timothy Quillin – Stephens, Inc.

Yeah and just more specifically around the Bonutti portfolio are the suture anchors considered to be a kind of a less marquee portion of the portfolio?

Matthew Vella

No, not at all. But different companies have different sales volumes on suture anchors, right. So that’s where you might get some variability.

Timothy Quillin – Stephens, Inc.

That’s fair. And then on VoiceAge portfolio, typically when I talk about Samsung I say that even a very small royalty rate across a couple of 100 unit volume is a big number, a potentially big number. But is there any way without talking about specifics you can help us think about how you might size out that patent portfolio or how licensee, may be not Samsung but may be a licensee might look at that and how that would fit into the stack on a cellular handset?

Matthew Vella

It depends on the technology. It depends – Samsung does sell a lot of phones and does sell a lot of phones in lot of geographies. So generally speaking your estimates that any time you talk about Samsung and smartphones you are going to be looking at largest numbers, that’s right. But obviously not all technologies are deployed evenly and so that can be one variability.

And again there’s other variables that can come in along the lines of what I mentioned before but generally speaking Samsung sells a lot of phones and that’s an undeniable fact.

Timothy Quillin – Stephens, Inc.

What can we read into the fact that they licensed ahead of the five, the suit filings, what did they see in that portfolio, what did they like enough to get ahead of the litigation?

Matthew Vella

I can’t speak for Samsung, there’s confidentiality obligation, there is a number of reasons I would not do that. I can speak for ourselves though and maybe our reasoning applies to Samsung, they may have adopted and may be they haven’t, I am not sure. We think the VoiceAge portfolio is very important with respect to high def voice. And we like the geographic scope of the patent coverage. We like the quality of the claims and we’re very excited about partnering with the University of Sherbrooke people that control that portfolio going forward as high def voice continues to become increasingly popular in smartphones throughout North America, Europe and Asia.

Timothy Quillin – Stephens, Inc.

Okay. And then in terms of the patent portfolio intake you had mentioned I think it’s something like $16 million – $15.75 million in outlays on three new partnerships and I think the CapEx in the quarter was only about $1 million, so does that mean that the most of the capital outlay that you discussed are on a patent portfolio that I guess the one that you alluded to that you are sourcing this quarter?

Clayton Haynes

No, Tim, this is Clayton. We invested the $15.7 million in the quarter but just based upon the timing of when those deals were done $15.3 million is accrued as of March 31, 2014 and those were scheduled to be paid in Q2, 2014. So it’s just a timing issue as it relates to when the cash, actually payments were made.

Timothy Quillin – Stephens, Inc.

Okay, and then Matt I guess you can’t – can you tell us which of the three you consider one of the marquee patent portfolios I think you or I think you’ve made some mysterious comments about that but is there anything else you can tell us about that?

Matthew Vella

No, I think I can’t tell you anything for now. Over time you will get to know, I have been pretty good about telling folks but for now I certainly can’t get into that. The other thing is that for Nokia Siemens we’re not really counting that as a new marquee, I mean I guess we could but we really think if it as a deepening, commitment to deepening relationship with Nokia Siemen, those are patents that read on the same product as the ones we’ve already identified as requiring a license under the first batch of Nokia Siemens guidance.

And so other than that one clarification which is somewhat subjective I guess, that’s what I can tell you for now Tim.

Timothy Quillin – Stephens, Inc.

Okay. And then I’ll just maybe take one last attempt to try and figure out how big this agreement with Samsung is? Maybe set expectations right or help us set expectations right, is it something that we consider – should consider as kind of a game changing revenue contributor or just a nice sizeable agreement that will be helpful in 2Q? Thanks.

Matthew Vella

The real answer is yes, wait and see until we really start 2Q numbers. I’ve spoken about the VoiceAge portfolio, I’ve spoken about Samsung phones and really would be improper for me to go beyond that.

Timothy Quillin – Stephens, Inc.

Okay. That’s fair. Thank you.

Matthew Vella

Thanks.

Operator

We’ll take our next question from Brett Reiss with Janney Montgomery Scott.

Brett Reiss – Janney Montgomery Scott

Good afternoon gentlemen.

Matthew Vella

Hi, Brett.

Brett Reiss – Janney Montgomery Scott

The seven trial dates for 2014 and 20 for 2015 that you alluded to in your preparatory comments, that seems lower than the numbers I either remember you saying in prior calls or something I’ve seen on the website or am I wrong, that’s been what it’s been. The 2015 counts actually up, I mean technically I think in my mind it’s a little up.

The 2014 count is a little down but that’s what happens when you do license deals, right, certain deals that might be going to trial get settled and none of them are marquees.

Brett Reiss – Janney Montgomery Scott

Okay, because I kind of remember like number 10, so from 10 down to 7 because of the settlements prior to a trial date.

Clayton Haynes

Yeah, things get resolved and I think we’ll more like in 8 to 10 range before by the way. And so a lot of it is you are sort of trying to divine how these things are going to be turning out. And so you use words like roughly and we give you ranges but on 2014 the natural progression of matters is going to mean that, that count we’ll come down right and for 2015 the count’s been stable if anything it’s probably in step. And their schedule dates right they can always change but so far the 2015 counts remained stable and it might have been stopped.

Brett Reiss – Janney Montgomery Scott

Okay, other than settlements once something is put down for a trial calendar date, is there anything that can derail that?

Matthew Vella

Yeah. Of course try not to let things derail, most courts, in fact pretty much all courts they really try to run tight ships and they try and make sure their trial dates go off on time. But just speaking from personal experience and I don’t mean to say this is typical just again sort of a random collection of things can happen, I mean I’ve been involved matters in federal court where all of a sudden a very high profile case that the federal courts need to hear suddenly might need to be schedule that can happen.

You can have defendants or plaintiff discovering certain things in manners that they could not have predicted that in the interest of justice might require an extension, you can have judges suddenly wanting to retire, there’s number of things that can happen, now they typically don’t. But they can happen and then so that’s my best answer at this point.

Brett Reiss – Janney Montgomery Scott

Okay, no, I appreciate that. All right, thanks for taking the question.

Matthew Vella

You are very welcome.

Operator

And ladies and gentlemen this concludes the question-and-answer session. I will now turn the call back to Mr. Vella.

Matthew Vella

Well again thanks for participation on the call. Thanks for your interest in the company, to our shareholders thanks for your continuing patience and belief in us. We do look forward to our next earnings call. Thanks very much.

Operator

Ladies and gentlemen if you wish to access replay for this call you may do so by dialing 888-203-1112 or 719-457-0820 with the confirmation code of 2173616. This concludes our conference for today. Thank you for participating and have a nice day. All parties may now disconnect.

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