Acacia Research Corporation(1) ("Acacia" or "the Company")
(Nasdaq: ACTG) today reported results for the three months ended
June 30, 2019.
Statements from Alfred V. Tobia Jr. and Clifford
Press
“During the second quarter, we completed the reconstitution of
Acacia’s Board of Directors,” commented Al Tobia, Director. “The
new Board submitted to our shareholders a comprehensive set of
governance reforms to complete the transformation that began at
last year’s Annual Shareholder meeting. At this year’s Annual
Shareholder meeting on July 15, 2019, Acacia’s shareholders voted
to approve these changes.”
“In the course of preparing this initiative, we met with nearly
all our large shareholders, soliciting input on the company which
shaped Acacia’s strategy and drove the actions of the past year,”
Mr. Tobia added. “Our shareholders expressed their view that the IP
business is deeply dislocated, offering attractive potential
returns for a well-capitalized company with a prudent asset
allocation strategy. In response, our new Board of Directors made
the strategic decision to invest in Acacia’s IP business and
rationalized our cost structure by directing wasteful corporate
spending to productive licensing assets. With solid capitalization,
significant net operating loss carryforwards, and a highly
relevant, commercially oriented Board that includes investors and
professionals with deep IP experience, we believe that Acacia is
uniquely positioned to pursue investments that are capable of
producing absolute returns over the long-term.”
Clifford Press, Director, added, “Subsequent to the end of the
second quarter, we announced that we had initiated a 5.1% equity
position in Immersion Corporation (NASDAQ: IMMR), a leading
developer and licensor of haptics technology with more than 3,600
issued and pending patents. This investment represents the first of
a number of opportunities where we have identified value in the
public markets and can capitalize on them opportunistically with
the capital and skills now represented in Acacia.”
Business Outlook
Mr. Press added, “The existing portfolio of Acacia has a limited
number of remaining licenses to be negotiated. As expected, we did
not generate significant revenues in the second quarter of 2019.
For the full year 2019, we continue to expect gross revenues of
approximately $25 million, all from the legacy portfolio.”
Second Quarter Financial Summary:
- Gross revenues were $5.5 million during the quarter.
- Revenues, less inventor royalties and contingent legal fees,
were $2.5 million, or 45% of second quarter gross revenues.
- Operating loss was $4.0 million.
- GAAP net loss was $5.8 million or $0.12 per diluted share.
- Non-GAAP net loss was $1.8 million or $0.04 per diluted share.
See below for information regarding non-GAAP financial
measures.
Balance Sheet
- Cash and short-term investments totaled $164.9 million as of
June 30, 2019, as compared to $165.5 million as of December 31,
2018.
Stock Repurchase Authorization
- On August 5, 2019, Acacia’s Board of Directors approved a
buyback of up to $10 million in Acacia common stock over the next
twelve months, which could be used, among other purposes, to offset
dilution from equity-based incentive grants.
Investor Conference Call:
The Company will host an investor conference call and live
webcast to provide a business update on Tuesday, August 6, 2019 at
11 a.m. ET/8 a.m. PT. To access the live call, please dial (800)
289-0438 (U.S. and Canada) or (323) 794-2423 (international) and
reference conference ID 7450827.
The conference call will also be simultaneously webcasted on the
investor relations section of the Company’s website at
http://acaciaresearch.com under the events and presentations tab.
Following the conclusion of the live call, a replay of the webcast
will be available on the Company's website for at least 30
days.
INFORMATION ABOUT NON-GAAP FINANCIAL MEASURES
As used herein, “GAAP” refers to accounting principles generally
accepted in the United States of America. This earnings release
includes financial measures, including (1) non-GAAP net income and
(2) non-GAAP Earnings Per Share (“EPS”), that are considered
non-GAAP financial measures as defined in Rule 101 of Regulation G
promulgated by the Securities and Exchange Commission. Generally, a
non-GAAP financial measure is a numerical measure of a company’s
historical or future performance, financial position, or cash flows
that either excludes or includes amounts that are not normally
excluded or included in the most directly comparable measure
calculated and presented in accordance with GAAP. The presentation
of this non-GAAP financial information is not intended to be
considered in isolation or as a substitute for, or superior to, the
financial information prepared and presented in accordance with
GAAP.
Non-GAAP Net income and EPS. We define non-GAAP net income as
net income calculated in accordance with GAAP, plus unrealized
change in fair value of investments, loss on investment, non-cash
stock compensation charges and non-cash patent amortization
charges. Non-GAAP EPS is defined as non-GAAP net income divided by
the weighted average outstanding shares, on a fully-diluted basis,
calculated in accordance with GAAP, for the respective reporting
period. Additional information regarding these non-GAAP measures is
available in previously disclosed filings with the Securities and
Exchange Commission (“SEC”).
Non-GAAP net income does not reflect realized losses and
unrealized changes to the fair value of our investment in Veritone,
Inc. We had previously included unrealized changes to the fair
value of our investment in Veritone, Inc. in Non-GAAP net income in
our previously reported earnings releases. However, given the
volatility of Veritone’s market price, we believe excluding our
Veritone investment from Non-GAAP net income more accurately
reflects our financial performance.
These non-GAAP measures are presented because they are important
metrics used by management as a means to assess financial
performance.
There are a number of limitations related to the use of non-GAAP
net income and EPS versus net income and EPS calculated in
accordance with GAAP and these non-GAAP measures should not be
considered alternatives to financial metrics derived in accordance
with GAAP. Management compensates for these limitations by
providing specific information regarding the GAAP amounts excluded
from non-GAAP net income and EPS and evaluating non-GAAP net income
and EPS in conjunction with net income and EPS calculated in
accordance with GAAP.
The table below titled “Unaudited Reconciliation of GAAP Net
Loss and EPS to Non-GAAP Net Loss and EPS (In thousands, except
share and per share data)” provides a reconciliation of the
non-GAAP financial measures presented to the most directly
comparable financial measures prepared in accordance with GAAP.
Due to uncertainties related to our ability to utilize certain
deferred tax assets in future periods, we have recorded a full
valuation allowance against our net deferred tax assets for the
periods presented herein. Tax expense for the periods presented
reflects foreign taxes withheld on revenue agreements with
licensees in foreign jurisdictions and other state taxes, and the
impact of the full valuation allowance recorded for net operating
loss and foreign tax credit related tax assets generated during the
periods. As such, no tax benefit was recognized for net operating
loss and foreign tax credit related tax benefits generated during
the applicable periods presented. Accordingly, there are no income
tax effects related to our adjustments to arrive at our non-GAAP
measures included herein.
ABOUT ACACIA RESEARCH CORPORATION
Founded in 1993, Acacia Research Corporation (ACTG) invests in
Intellectual Property Assets and partners with inventors and patent
owners to realize the financial value in their patented inventions.
Acacia bridges the gap between invention and application,
facilitating efficiency and delivering monetary rewards to the
patent owner.
Information about Acacia Research Corporation and its
subsidiaries is available at www.acaciaresearch.com.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
This news release contains forward-looking statements within the
meaning of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements in this
press release include: the expectation that Acacia’s investments
may produce absolute returns in an increasingly predictable manner
over the long-term; the potentially significant optionality that
could be provided by Acacia’s investment in Immersion Corporation;
and the potential opportunities to consolidate IP related
businesses within the public markets. These statements are based
upon our current expectations and speak only as of the date hereof.
Our actual results may differ materially and adversely from those
expressed in any forward-looking statements as a result of various
factors and uncertainties, including but not limited to the ability
to successfully implement our strategic plan, the ability to
successfully build out a new leadership team within a certain
timeframe, the ability to streamline financial reporting, the
ability to successfully develop licensing programs and attract new
business, changes in demand for current and future intellectual
property rights, legislative, regulatory and competitive
developments addressing licensing and enforcement of patents and/or
intellectual property in general, general economic conditions and
the success of our investments. Our Annual Report on Form 10-K,
recent and forthcoming Quarterly Reports on Form 10-Q, recent
Current Reports on Form 8-K, and any amendments to the forgoing,
and other SEC filings discuss some of the important risk factors
that may affect our business, results of operations and financial
condition. We undertake no obligation to revise or update publicly
any forward-looking statements for any reason.
The results achieved in the most recent quarter are not
necessarily indicative of the results to be achieved by us in any
subsequent quarters, as it is currently anticipated that Acacia
Research Corporation’s financial results will vary, and may vary
significantly, from quarter to quarter. This variance is expected
to result from a number of factors, including risk factors
affecting our results of operations and financial condition
referenced above, and the particular structure of our licensing
transactions, which may impact the amount of inventor royalties and
contingent legal fees expenses we incur from period to period.
ACACIA RESEARCH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands, except share and
per share data)
June 30,
December 31,
2019
2018
ASSETS Current assets: Cash and cash equivalents
$
63,487
$
128,809
Trading securities - debt
90,482
33,642
Trading securities - equity
10,934
3,012
Accounts receivable
15,308
32,884
Prepaid expenses and other current assets
3,289
3,125
Total current assets
183,500
201,472
Investment at fair value
9,070
7,459
Other investments
-
8,195
Patents, net of accumulated
amortization
9,534
6,587
Other non-current assets
1,658
236
Total assets
$
203,762
$
223,949
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities:
Accounts payable and accrued
expenses
$
9,461
$
8,347
Royalties and contingent legal
fees payable
10,518
22,688
Other current liabilities
35
-
Total current liabilities
20,014
31,035
Other liabilities
2,131
1,674
Total liabilities
22,145
32,709
Commitments and contingencies Stockholders' equity:
Preferred stock, par value $0.001 per share; 10,000,000 shares
authorized; no shares issued or outstanding
-
-
Common stock, par value $0.001 per share; 100,000,000 shares
authorized;50,132,871 and 49,639,319 shares issued and outstanding
as of June 30, 2019 and December 31, 2018, respectively
50
50
Treasury stock, at cost, 2,919,828 shares as of June 30, 2019 and
December 31, 2018
(39,272
)
(39,272
)
Additional paid-in capital
651,688
651,156
Accumulated deficit
(432,682
)
(422,541
)
Total Acacia Research Corporation stockholders' equity
179,784
189,393
Noncontrolling interests
1,833
1,847
Total stockholders' equity
181,617
191,240
Total liabilities and stockholders' equity
$
203,762
$
223,949
ACACIA RESEARCH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except
share and per share data) Three Months Ended
Six Months Ended June 30, June 30,
2019
2018
2019
2018
Revenues
$
5,458
$
6,485
$
8,847
$
68,578
Portfolio operations: Inventor royalties
2,622
1,241
3,976
22,985
Contingent legal fees
375
1,037
552
16,796
Patent acquisition expenses
-
-
-
4,000
Litigation and licensing expenses - patents
1,855
2,639
5,656
5,628
Amortization of patents
817
5,278
1,474
10,608
Other portfolio expenses
-
-
650
-
Total portfolio operations
5,669
10,195
12,308
60,017
Net portfolio income (loss)
(211
)
(3,710
)
(3,461
)
8,561
General and administrative expenses
3,810
6,916
7,505
10,217
Impairment of patent-related intangible assets
-
28,210
-
28,210
Operating loss
(4,021
)
(38,836
)
(10,966
)
(29,866
)
Other income (expense):
Change in fair value of
investment, net
6,981
11,347
13,888
(29,750
)
Loss on sale of investment
(1,642
)
-
(7,232
)
-
Impairment of cost investment
(8,030
)
(1,000
)
(8,030
)
(1,000
)
Interest income and other
964
268
2,508
475
Total other income (loss)
(1,727
)
10,615
1,134
(30,275
)
Loss before provision for income taxes
(5,748
)
(28,221
)
(9,832
)
(60,141
)
Provision for income taxes
(9
)
(285
)
(323
)
(476
)
Net loss including noncontrolling interests in subsidiaries
(5,757
)
(28,506
)
(10,155
)
(60,617
)
Net loss attributable to
noncontrolling interests in subsidiaries
-
79
14
152
Net loss attributable to Acacia
Research Corporation
$
(5,757
)
$
(28,427
)
$
(10,141
)
$
(60,465
)
Net loss attributable to common
stockholders - basic and diluted
$
(5,757
)
$
(28,427
)
$
(10,141
)
$
(60,465
)
Basic and diluted net loss per common share
$
(0.12
)
$
(0.57
)
$
(0.20
)
$
(1.20
)
Weighted average number of shares outstanding - basic and
diluted
49,911,545
50,061,812
49,784,419
50,345,808
ACACIA RESEARCH CORPORATION
UNAUDITED RECONCILIATION OF GAAP NET LOSS AND EPS TO NON-GAAP
NET LOSS AND EPS (In thousands, except share and per share
data) Three Months Ended Six Months Ended
June 30, June 30,
2019
2018
2019
2018
GAAP net loss
$
(5,757
)
$
(28,427
)
$
(10,141
)
$
(60,465
)
Add back: Change in fair value of investment, net
(6,981
)
(11,347
)
(13,888
)
29,750
Loss on sale of investment
1,642
-
7,232
-
Impairment of cost investment
8,030
1,000
8,030
1,000
Non-cash stock compensation
462
1,206
453
182
Non-cash patent amortization
817
5,278
1,474
10,608
Total non-GAAP adjustments
3,970
(3,863
)
3,301
41,540
Non-GAAP net loss
$
(1,787
)
$
(32,290
)
$
(6,840
)
$
(18,925
)
Pro forma non-GAAP net loss per common share — basic and
diluted
$
(0.04
)
$
(0.65
)
$
(0.14
)
$
(0.38
)
GAAP weighted-average shares — basic and diluted
49,911,545
50,061,812
49,784,419
50,345,808
ACACIA RESEARCH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Six Months Ended
June 30,
2019
2018
Cash flows from operating activities: Net loss including
noncontrolling interests in subsidiaries
$
(10,155
)
$
(60,617
)
Adjustments to reconcile net loss including noncontrolling
interests in subsidiaries to net cash provided by (used in)
operating activities: Change in fair value of investment, net
(13,888
)
29,750
Change in value of cost investment
8,195
1,000
Loss on sale of investment
7,232
-
Depreciation and amortization
1,482
10,627
Non-cash stock compensation
453
182
Income from trading securities
(1,004
)
-
Purchases of trading securities
(75,154
)
-
Maturities and sales of trading securities
11,396
-
Impairment of patent-related intangible assets
-
28,210
Other
-
(313
)
Changes in assets and liabilities: Accounts receivable
17,576
(934
)
Prepaid expenses and other assets
(1,595
)
(571
)
Accounts payable and accrued expenses
1,606
861
Royalties and contingent legal fees payable
(12,170
)
1,436
Net cash provided by (used in) operating activities
(66,026
)
9,631
Cash flows from investing activities: Patent
acquisition costs
(4,420
)
-
Sale of investment
5,045
-
Investments in Investees
-
(7,000
)
Purchases of available-for-sale investments
-
(49,895
)
Maturities and sales of available-for-sale investments
-
15,400
Net cash provided by (used in) investing activities
625
(41,495
)
Cash flows from financing activities: Repurchase of
common stock
-
(4,634
)
Repurchase of restricted common stock
-
(7
)
Proceeds from exercise of stock options
79
51
Net cash provided by (used in) financing activities
79
(4,590
)
Decrease in cash and cash equivalents
(65,322
)
(36,454
)
Cash and cash equivalents, beginning
128,809
136,604
Cash and cash equivalents, ending
$
63,487
$
100,150
Footnotes:
(1)
As used herein, “Acacia Research
Corporation,” “we,” “us,” and “our” refer to Acacia Research
Corporation and/or its wholly and majority-owned operating
subsidiaries. All intellectual property investment, development,
licensing and enforcement activities are conducted solely by
certain of Acacia Research Corporation’s wholly and majority-owned
operating subsidiaries.
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version on businesswire.com: https://www.businesswire.com/news/home/20190805005682/en/
Investor Contact: FNK IR Rob Fink, 646-809-4048
rob@fnkir.com
or
Media Contact: Sloane & Company Joe Germani / Kristen
Duarte, 212-486-9500 jgermani@sloanepr.com /
kduarte@sloanepr.com
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