Acquires Woodford portfolio of life science
assets for $282 million (£223.9 million); Recovered $185 million to
date in sales of certain acquired assets
Acacia Research Corporation (“we,” “us,” “our,” “Acacia” or “the
Company”) (Nasdaq: ACTG) today reported results for the three-month
period ended June 30, 2020.
Clifford Press, Chief Executive Officer, stated, “We announced
our first Approved Transaction, under our strategic alliance with
Starboard Value LP (“Starboard”), acquiring the former Woodford
portfolio of life science assets for $282 million from LF Equity
Income Fund. To date, we have recovered approximately $185 million
through the sale of securities of certain public companies in the
portfolio. Notably, the remaining positions include a 6% stake in
Oxford Nanopore and a 5% stake in Immunocore. In aggregate, our
sales to date and the potential of our remaining holdings represent
a strong path to increasing book value. This transaction
demonstrates our ability to navigate complex financial structures,
identifying and executing on opportunities, supported by our ready
access to capital.”
Mr. Press continued, “As of the end of the second quarter, the
market value of the remaining public securities in the portfolio
was approximately $50 million. The Woodford portfolio is a mix of
public and private company securities. Under GAAP, we assigned the
portfolio purchase price first to the public securities at market
value, and the residual value to the private company assets. We
will mark the public assets to market each quarter, and we will
adjust our carrying value in the private assets based on any
observed primary or secondary transactions in those companies’
shares or recognize any impairment.”
“During the quarter, we recognized $63 million of non-cash costs
associated with an increase in our derivative liability related to
our warrants and preferred, as our share price increased during the
quarter,” added Mr. Press. “This brings the aggregate value of
non-cash liability associated with these warrants and embedded
derivatives to a total of $95 million, or $1.93 per share. These
are non-cash items, and upon exercise or expiration, would be
eliminated and booked to equity. Our current book value at June 30
is $164.7 million, or $3.36 per share, as reduced by these
liabilities.”
Al Tobia, President and Chief Investment Officer, added, “To
fund the Woodford portfolio acquisition, we issued $115 million in
Senior Secured Notes to Starboard, convertible into shares of our
common stock at an exercise price of $3.65 per share if exchanged
with the Series B Warrants previously issued to Starboard. As we
noted at that time, we intend to offer stockholders the opportunity
to invest alongside Starboard. We currently intend to commence, as
soon as reasonably practicable, a Stockholder Offering (as defined
below) of up to $31.5 million of senior secured notes, and warrants
to purchase shares of common stock, to existing holders of our
common stock, with substantially similar terms as the Senior
Secured Notes and Series B warrant issued to Starboard1.”
Mr. Tobia continued, “We worked on a tight timeline to complete
the Woodford portfolio purchase; however, our strategic committee
continues its focus on identifying potential operating company
acquisitions. Acacia’s liquidity and financial flexibility create
inherent advantages in today’s market. Acacia is starting to
exhibit some of the potential of its operating model, and we are
adding investment professionals to build out our execution
capability.”
Second Quarter 2020 Financial Summary:
- Cash and short-term investments totaled $184.0 million at June
30, 2020, compared to $158.1 million at March 31, 2020 and $168.3
million at December 31, 2019.
- Debt, which represents the Senior Secured Notes issued to
Starboard, was $115.0 million at June 30, 2020.
- Book value totaled $164.7 million as of June 30, 2020, compared
to $175.0 million at December 31, 2019. Acacia’s current book value
reflects issuance of Senior Secured Notes and liabilities
associated with upfront funding of the life science portfolio
acquisition, and reflects the allocated value based on U.S. GAAP of
assets transferred as of June 30, 2020.
- Gross revenues were $2.1 million.
- General and administrative expenses for the second quarter of
2020 increased by $1.8 million or 47%, compared with the second
quarter of 2019, due to business development efforts and personnel
expenses.
- Operating loss was $6.7 million.
- GAAP net income to common stockholders was $4.2 million, or
$0.09 per diluted share, compared to a net loss of $(5.8 million),
or $(0.12) per diluted share, in the second quarter last year. The
second quarter of 2020 included an $82 million benefit related to
the change of the fair value of equity securities derivative and
forward contract, partially offset by a $63 million non-cash charge
related to the change in fair value of warrants and embedded
derivatives, $4.2 million in non-recurring transaction-related
expenses and a $4.9 million foreign exchange loss.
Investor Conference Call:
The Company will host a conference call today, Monday, August
10, 2020, to discuss these results and provide a business update at
11 a.m. ET/ 8 a.m. PT.
To access the live call, please dial (877) 407-0778 (U.S. and
Canada) or (201) 689-8565 (international). The conference call will
also be simultaneously webcasted on the investor relations section
of the Company’s website at http://acaciaresearch.com under the
News & Events 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 (the “SEC”).
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.
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.
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.
1As previously disclosed by us when we entered into the
Securities Purchase Agreement dated November 18, 2019, by and among
the Company, Starboard and the Buyers named therein, we have the
option to complete one or more rights offerings to our stockholders
(a “Stockholder Offering”) of senior secured notes with terms
substantially identical to the notes issued to Starboard, in an
aggregate principal amount of up to $100.0 million, and warrants to
purchase up to 27,397,261 shares of common stock with terms
substantially similar to the Series B Warrants. As soon as
reasonably practicable, the Company intends to, but has not yet to
commenced, a Stockholder Offering of up to $31.5 million of senior
secured notes, and warrants to purchase shares of common stock,
with substantially similar terms as the Senior Secured Notes and
Series B Warrants issued to Starboard. Additional details,
including the timing of the Stockholder Offering, are to be
determined at a later date and, while the Company can provide no
assurance that a Stockholder Offering will be ultimately initiated
or completed or that any holders of its common stock will exercise
any such rights in connection with the Stockholder Offering, we
believe that a Stockholder Offering is not only a potential source
to aid in our current capital-raising goals, but also a means of
allowing our stockholders to participate in our anticipated future
growth. The description of the Stockholder Offering is contained
herein for informational purposes only and is not an offer to buy
or the solicitation of an offer to sell any securities. The Company
has not yet filed a registration statement with the SEC for
Stockholder Offering, but intends and expects to do so and expects
to promptly commence the Stockholder Offering as soon as
practicable after the SEC declares such registration statement
effective. The Stockholder Offering will be made only by means of a
prospectus that the Company intends to file with the SEC as part of
the registration statement. Such prospectus will be delivered to
holders of the Company’s common stock as of the record date of the
rights offering.
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, including the impact of the COVID-19
pandemic 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
foregoing, 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,
2020
2019
ASSETS Current assets: Cash and cash equivalents
$
164,280
$
57,359
Trading securities - debt
-
93,843
Trading securities - equity
19,697
17,140
Equity securities derivative
7,369
-
Equity securities forward contract
75,534
-
Prepaid investment
93,956
-
Accounts receivable
1,393
511
Prepaid expenses and other current assets
1,894
2,912
Total current assets
364,123
171,765
Long-term restricted cash
-
35,000
Investment at fair value
4,063
1,500
Patents, net of accumulated
amortization
19,245
7,814
Leased right-of-use assets
1,249
1,264
Other non-current assets
5,466
818
Total assets
$
394,146
$
218,161
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND
STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
$
3,235
$
1,765
Accrued expenses and other
current liabilities
2,716
7,265
Accrued compensation
1,998
507
Royalties and contingent legal
fees payable
2,143
2,178
Senior Secured Notes Payable - short term
113,401
-
Total current liabilities
123,493
11,715
Series A warrant liabilities
6,952
3,568
Series A embedded derivative liabilities
29,513
17,974
Series B warrant liabilities
58,290
-
Long-term lease liabilities
1,249
1,264
Other long-term liabilities
593
593
Total liabilities
220,090
35,114
Series A redeemable convertible preferred stock, par
value $0.001 per share; stated value $100 per share; 350,000 shares
authorized, issued and outstanding as of June 30, 2020 and December
31, 2019, respectively; aggregate liquidation preference of $35,000
as of June 30, 2020 and December 31, 2019, respectively
9,400
8,089
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; 300,000,000 shares
authorized; 49,306,137 and 50,370,987 shares issued and outstanding
as of June 30, 2020 and December 31, 2019, respectively
49
50
Treasury stock, at cost, 4,604,365 and 2,919,828 shares as of June
30, 2020 and December 31, 2019, respectively
(43,270
)
(39,272
)
Additional paid-in capital
650,843
652,003
Accumulated deficit
(444,799
)
(439,656
)
Total Acacia Research Corporation stockholders' equity
162,823
173,125
Noncontrolling interests
1,833
1,833
Total stockholders' equity
164,656
174,958
Total liabilities, redeemable convertible preferred stock,
and stockholders' equity
$
394,146
$
218,161
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,
2020
2019
2020
2019
Revenues
$
2,118
$
5,460
$
5,933
$
8,847
Portfolio operations: Inventor royalties
645
2,623
1,071
3,976
Contingent legal fees
12
375
246
552
Litigation and licensing expenses - patents
1,459
1,855
2,496
5,656
Amortization of patents
1,305
818
2,348
1,474
Other portfolio expenses (income)
(74
)
-
(308
)
650
Total portfolio operations
3,347
5,671
5,853
12,308
Net portfolio income (loss)
(1,229
)
(211
)
80
(3,461
)
General and administrative expenses(1)
5,519
3,763
10,397
7,418
Operating loss
(6,748
)
(3,974
)
(10,317
)
(10,879
)
Other income (expense):
Change in fair value of
investment, net
2,677
6,980
6,785
13,888
Gain (loss) on sale of
investment
554
(1,642
)
(2,762
)
(7,232
)
Impairment of other
investment
-
(8,195
)
-
(8,195
)
Change in fair value of the Series A and B warrants and embedded
derivatives
(62,902
)
-
(67,284
)
-
Change in fair value of equity
securities derivative and forward contract
81,553
-
81,553
-
Change in fair value of trading
securities
3,525
(61
)
(2,592
)
614
Gain (loss) on sale of trading
securities
(7,121
)
31
(7,009
)
(12
)
Loss on foreign currency
exchange
(4,890
)
-
(4,890
)
-
Interest expense on Senior
Secured Notes
(768
)
-
(768
)
-
Interest income and other
266
1,113
801
1,984
Total other income (expense)
12,894
(1,774
)
3,834
1,047
Income (loss) before income taxes
6,146
(5,748
)
(6,483
)
(9,832
)
Income tax benefit (expense)
2
(9
)
1,340
(323
)
Net income (loss) including noncontrolling interests in
subsidiaries
6,148
(5,757
)
(5,143
)
(10,155
)
Net loss attributable to
noncontrolling interests in subsidiaries
-
-
-
14
Net income (loss) attributable to
Acacia Research Corporation
$
6,148
$
(5,757
)
$
(5,143
)
$
(10,141
)
Net income (loss) attributable to
common stockholders - basic and diluted
$
4,201
$
(5,757
)
$
(7,105
)
$
(10,141
)
Basic net income (loss) per common share
$
0.09
$
(0.12
)
$
(0.14
)
$
(0.20
)
Weighted average number of shares outstanding - basic
48,457,620
49,696,016
49,166,508
49,676,059
Diluted net income (loss) per common share
$
0.09
$
(0.12
)
$
(0.14
)
$
(0.20
)
Weighted average number of shares outstanding - diluted
49,033,824
49,696,016
49,166,508
49,676,059
(1) General and administrative expenses were
comprised of the following:
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
General and administrative
expenses
$
5,096
$
3,302
$
9,642
$
6,965
Non-cash stock compensation
expense - G&A
423
461
755
453
Total general and administrative
expenses
$
5,519
$
3,763
$
10,397
$
7,418
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200810005314/en/
Acacia Research Investor Contact: FNK IR Rob Fink,
646-809-4048 rob@fnkir.com
Acacia Research Technolo... (NASDAQ:ACTG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Acacia Research Technolo... (NASDAQ:ACTG)
Historical Stock Chart
From Apr 2023 to Apr 2024
