Acacia Research Corporation(1) ("Acacia" or "the Company")
(Nasdaq: ACTG) today reported results for the three and nine months
ended September 30, 2019.
Clifford Press, Chief Executive Officer, stated, “The systematic
restructuring of Acacia is now complete and we can commence a
focused strategy to diversify our business and augment our
portfolio of intellectual property assets. The opportunities for a
well-capitalized IP manager to partner with leading technology
companies in the current market environment are so significant that
Al Tobia and I will now focus our full attention on Acacia. Our
strategy involves a number of significant investment opportunities,
potential acquisitions and strategic partnerships, designed to
develop absolute return assets.”
Al Tobia, President and Chief Investment Officer, added, “During
the third quarter we further rationalized the legacy investment
portfolio by selling the interest in Miso Robotics. This
contributed to the $4.4 million, quarter over quarter increase in
cash and short-term investments. Acacia ended the quarter with cash
and short-term investments of $169.3 million, which is up by $34.5
million since the second quarter of 2018 when Clifford and I first
joined the Board. We are now in a position to leverage Acacia’s
strong capital position, significant net operating loss
carryforwards, and the relevant skills in Acacia’s senior
management team and Board of Directors. We have identified and are
working to finalize several compelling and significant
opportunities.”
“The existing portfolio of Acacia has a limited number of
remaining licenses to be negotiated and we did not generate
significant revenues during the quarter. Further we believe the
timing and magnitude of the remaining legacy revenues for the full
year will be less than the previously anticipated,” Press added.
“Accordingly, we are reducing our full-year revenue guidance from
approximately $25 million to between $15 and $20 million.”
Third Quarter Financial Summary:
- Cash and short-term investments totaled $169.3 million as of
September 30, 2019, an increase of $3.8 million from $165.5 million
as of December 31, 2018.
- Gross revenues were $1.7 million during the quarter.
- Operating loss was $5.1 million.
- GAAP net loss was $7.6 million or $0.15 per diluted share.
Investor Conference Call:
The Company will host an investor conference call and live
webcast to provide a business update on Tuesday, November 12, 2019
at 9 a.m. ET/ 6 a.m. To access the live call, please dial (800)
367-2403 (U.S. and Canada) or (334) 777-6978 (international) and
reference conference ID 5526693.
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 SEC filings.
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
Income (Loss) and EPS to Non-GAAP Net Income (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. 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 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)
September 30,
December 31,
2019
2018
ASSETS
Current assets:
Cash and cash equivalents
$
66,861
$
128,809
Trading securities - debt
86,390
33,642
Trading securities - equity
16,080
3,012
Accounts receivable
1,799
32,884
Prepaid expenses and other
current assets
2,329
3,125
Total current assets
173,459
201,472
Investment at fair value
2,674
7,459
Other investments
-
8,195
Patents, net of accumulated
amortization
8,671
6,587
Other non-current assets
2,126
236
Total assets
$
186,930
$
223,949
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses
$
8,268
$
8,347
Royalties and contingent legal
fees payable
2,274
22,688
Other current liabilities
29
-
Total current liabilities
10,571
31,035
Other liabilities
2,050
1,674
Total liabilities
12,621
32,709
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; 50,343,305 and 49,639,319
shares issued and outstanding as of September 30, 2019 and December
31, 2018, respectively
50
50
Treasury stock, at cost,
2,919,828 shares as of September 30, 2019 and December 31, 2018
(39,272
)
(39,272
)
Additional paid-in capital
651,988
651,156
Accumulated deficit
(440,290
)
(422,541
)
Total Acacia Research Corporation
stockholders' equity
172,476
189,393
Noncontrolling interests
1,833
1,847
Total stockholders' equity
174,309
191,240
Total liabilities and
stockholders' equity
$
186,930
$
223,949
ACACIA RESEARCH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except
share and per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
Revenues
$
1,711
$
13,725
$
10,558
$
82,303
Portfolio operations:
Inventor royalties
776
1,181
4,752
24,166
Contingent legal fees
35
2,949
587
19,745
Patent acquisition expenses
-
-
-
4,000
Litigation and licensing expenses
- patents
987
1,549
6,643
7,177
Amortization of patents
863
4,952
2,337
15,560
Other portfolio expenses
(475
)
2,202
175
2,202
Total portfolio operations
2,186
12,833
14,494
72,850
Net portfolio income (loss)
(475
)
892
(3,936
)
9,453
General and administrative
expenses
4,670
5,855
12,175
16,072
Impairment of patent-related
intangible assets
-
-
-
28,210
Operating loss
(5,145
)
(4,963
)
(16,111
)
(34,829
)
Other income (expense):
Change in fair value of
investment, net
(4,266
)
(24,211
)
9,622
(53,961
)
Loss on sale of investment
(915
)
(3,705
)
(8,147
)
(3,705
)
Impairment of other
investment
-
-
(8,195
)
(1,000
)
Gain on disposal of other
investment
2,000
-
2,000
-
Interest income and other
718
321
3,391
796
Total other expense
(2,463
)
(27,595
)
(1,329
)
(57,870
)
Loss before provision for income
taxes
(7,608
)
(32,558
)
(17,440
)
(92,699
)
Provision for income taxes
-
(306
)
(323
)
(782
)
Net loss including noncontrolling
interests in subsidiaries
(7,608
)
(32,864
)
(17,763
)
(93,481
)
Net (income) loss attributable to
noncontrolling interests in subsidiaries
-
(331
)
14
(179
)
Net loss attributable to Acacia
Research Corporation
$
(7,608
)
$
(33,195
)
$
(17,749
)
$
(93,660
)
Net loss attributable to common
stockholders - basic and diluted
$
(7,608
)
$
(33,195
)
$
(17,749
)
$
(93,660
)
Basic and diluted net loss per
common share
$
(0.15
)
$
(0.67
)
$
(0.36
)
$
(1.87
)
Weighted average number of shares
outstanding - basic and diluted
49,828,361
49,557,748
49,727,385
50,080,234
ACACIA RESEARCH CORPORATION Unaudited Reconciliation of
GAAP Net Income (Loss) and EPS to Non-GAAP Net Income (Loss) and
EPS (In thousands, except share and per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
GAAP net loss
$
(7,608
)
$
(33,195
)
$
(17,749
)
$
(93,660
)
Add back:
Change in fair value of investment, net
4,266
24,211
(9,622
)
53,961
Loss on sale of investment
915
3,705
8,147
3,705
Impairment of other investment
-
-
8,195
1,000
Non-cash stock compensation
300
(10
)
753
172
Non-cash patent amortization
863
4,952
2,337
15,560
Total non-GAAP adjustments
6,344
32,858
9,810
74,398
Non-GAAP net loss
$
(1,264
)
$
(337
)
$
(7,939
)
$
(19,262
)
Pro forma non-GAAP net loss per
common share — basic and diluted
$
(0.03
)
$
(0.01
)
$
(0.16
)
$
(0.38
)
GAAP weighted-average shares — basic and diluted
49,828,361
49,557,748
49,727,385
50,080,234
ACACIA RESEARCH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Nine Months Ended
September 30,
2019
2018
Cash flows from operating
activities:
Net loss including noncontrolling
interests in subsidiaries
$
(17,763
)
$
(93,481
)
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
(9,622
)
53,961
Impairment of other
investment
8,195
1,000
Loss on sale of investment
8,147
3,705
Gain on disposal of other
investment
(2,000
)
-
Depreciation and amortization
2,344
15,582
Non-cash stock compensation
753
172
Change in value of trading
securities
(914
)
-
Purchases of trading
securities
(103,718
)
-
Maturities and sales of trading
securities
38,816
-
Impairment of patent-related
intangible assets
-
28,210
Other
-
(506
)
Changes in assets and
liabilities:
Accounts receivable
31,085
(5,877
)
Prepaid expenses and other
assets
(983
)
(183
)
Accounts payable and accrued
expenses
326
1,052
Royalties and contingent legal
fees payable
(20,414
)
3,864
Net cash provided by (used in)
operating activities
(65,748
)
7,499
Cash flows from investing
activities:
Patent acquisition costs
(4,420
)
-
Sale of investment at fair
value
6,260
10,440
(Purchase) Sale of other
investments
2,000
(7,000
)
Purchases of available-for-sale
investments
-
(65,883
)
Maturities and sales of
available-for-sale investments
-
32,508
Purchases of property and
equipment
(119
)
-
Net cash provided by (used in)
investing activities
3,721
(29,935
)
Cash flows from financing
activities:
Repurchase of common stock
-
(4,634
)
Repurchase of restricted common
stock
-
(229
)
Proceeds from exercise of stock
options
79
257
Net cash provided by (used in)
financing activities
79
(4,606
)
Decrease in cash and cash
equivalents
(61,948
)
(27,042
)
Cash and cash equivalents,
beginning
128,809
136,604
Cash and cash equivalents,
ending
$
66,861
$
109,562
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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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 /
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