Company Restarts Patent Business Engine with
New Engagement Opportunities;Commences Absolute Return
Capital Allocation Investment Strategy
Acacia Research Corporation(1) ("Acacia" or "the Company")
(Nasdaq: ACTG) today reported results for the three months and year
ended December 31, 2018.
“As a result of the actions that we took during the second half
of 2018 to revive Acacia’s IP business, we capitalized on three
time-sensitive transactions from our legacy portfolio that
generated more than $44 million in revenue during the fourth
quarter,” commented Director Alfred V. Tobia Jr. “The result is a
short-term spike in licensing revenue that could have otherwise
been lost. These transactions demonstrate the skills of our
licensing team, led by our Chief IP Officer, Marc Booth, and the
ongoing value and viability of our IP business. Moreover, the
elimination of wasteful spending and reallocation of resources to
this business has allowed us to rebuild our IP team and employ a
responsible, measured strategy to identify new opportunities to
partner with patent owners to realize value from their intellectual
property.”
Clifford Press, Director, added, “We are advancing our strategic
plan systematically. With a streamlined cost structure, and a
rebuilt IP team, we are investing in our IP portfolio. Over the
course of the past eight months, we have secured and evaluated all
of Acacia’s corporate assets, strengthened governance, advanced
efforts to streamline the organization, and have reconstituted the
Board by appointing directors with relevant experience and
qualifications to provide strategic guidance and independent
oversight. Our next steps are to finalize our investment strategy,
and build out a new leadership team, something we expect to unveil
within the next quarter.”
Business Update
Mr. Tobia added, “We have expanded our licensing group to eight
professionals and restarted Acacia’s IP business engine. During the
fourth quarter we closed transactions with Nokia and with Motorola
on our legacy patent portfolios for a total of $44.5 million in
gross revenues. We have nine portfolios currently in litigation and
subsequent to the close of the fourth quarter we initiated several
new partnership opportunities with patent owners that are now under
option. These new opportunities were identified and secured by our
licensing team, allowing us to explore assertion opportunities in
partnership with the patent owners.”
Governance and Transparency
Update
“The recent appointment of Maureen O’Connell and Katharine
Wolanyk to our Board brings significant IP and public company
experience to Acacia that will be immensely valuable as we scale
our business,” Mr. Press added. “We have already taken action to
streamline and simplify our financial reporting which is an
initiative we will continue to advance as our business develops and
operations expand.”
Fourth Quarter Financial Summary:
- Gross revenues were $49.2 million of
which $20.0 million was received in cash during the quarter.
- Revenues, less inventor royalties and
contingent legal fees were $26.4 million, or 54% of fourth quarter
gross revenues.
- Operating income was $10.0
million.
- GAAP net loss was $11.4 million or
$0.23 per diluted share.
- Non-GAAP net income was $20.2 million
or $0.41 per diluted share. See below for information regarding
non-GAAP financial measures.
Full-Year 2018 Financial Summary:
- Gross revenues were $131.5
million.
- GAAP net loss was $105.0 million, or
$2.10 per diluted share.
- 2018 results also included $28.2
million in patent-related impairment charges, $4.2 million in
proxy-related expenses and $2.9 million in restructuring
costs.
- Non-GAAP net income was $28.2 million,
or $0.56 per diluted share. See below for information regarding
non-GAAP financial measures.
- Cash provided by operating activities
for the 12 months ended December 31, 2018 was $20.9 million.
Balance Sheet
- Cash and short-term investments totaled
$165.5 million as of December 31, 2018, as compared to $136.6
million as of December 31, 2017.
Investor Conference Call:
The Company will host an investor conference call and live
webcast to provide a business update on Thursday, March 14, 2019,
to begin at 11:00 AM (EDT) / 8:00 AM (PDT). To access the call,
please dial 1-888-394-8218 (toll-free) or 1-323-701-0225 (for
international callers), and reference conference ID 2573190.
The conference call will also be webcasted live on the Company’s
website at http://acaciaresearch.com/events/. 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 “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 period to period.
ACACIA RESEARCH
CORPORATIONSUMMARY FINANCIAL INFORMATION(In
thousands, except share and per share
information)(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months EndedDecember
31,
Year EndedDecember 31,
2018 2017 2018 2017
Revenues $ 49,203 $ 3,458 $ 131,506 $
65,402 Portfolio operations: Inventor royalties 11,002 13
35,168 4,952 Contingent legal fees 11,756 646 31,501 16,682 Patent
acquisition expenses — — 4,000 — Litigation and licensing expenses
- patents 1,689 3,626 8,866 18,219 Amortization of patents 11,560
5,443 27,120 22,154 Impairment of patent-related intangible assets
— — 28,210 2,248 Other portfolio expenses 400 1,200
2,602 1,200 Total portfolio operations 36,407
10,928 137,467 65,455 Net revenue (loss)
12,796 (7,470 ) (5,961 ) (53 )
General and administrative expenses
(including non-cash stockcompensation expense (credit) of ($489)
and ($317) for the threemonths and year ended December 31, 2018,
respectively, and($4,183) and $8,885 for the three months and year
endedDecember 31, 2017, respectively)
2,778 (140 ) 18,850 27,219 Operating income
(loss) 10,018 (7,330 ) (24,811 ) (27,272 ) Other income (expense):
Change in fair value of investment, net (5,142 ) (104,042 ) (59,103
) 42,239 Loss on sale of investment (15,390 ) — (19,095 ) — Gain on
conversion of loans and accrued interest — — — 2,671 Gain on
exercise of Primary Warrant — — — 4,616 Equity in losses of
investee — (90 ) — (220 ) Other income (expense) (629 ) 1,000
(1,629 ) 1,000 Interest income and other 173 182 969
1,605 Total other income (expense) (20,988 ) (102,950
) (78,858 ) 51,911 Income (loss) from operations before
provision for income taxes (10,970 ) (110,280 ) (103,669 ) 24,639
Provision for income taxes (397 ) (20 ) (1,179 ) (2,955 ) Net
income (loss) including noncontrolling interests in subsidiaries
(11,367 ) (110,300 ) (104,848 ) 21,684 Net (income) loss
attributable to noncontrolling interests in subsidiaries (2 ) 97
(181 ) 496 Net income (loss) attributable to Acacia
Research Corporation $ (11,369 ) $ (110,203 ) $ (105,029 ) $ 22,180
Net income (loss) attributable to common stockholders
- basic and diluted $ (11,369 ) $ (110,203 ) $ (105,029 ) $ 22,147
Basic and diluted income (loss) per common share $
(0.23 ) $ (2.18 ) $ (2.10 ) $ 0.44 Weighted average
number of shares outstanding, basic 49,639,172 50,590,460
49,969,062 50,495,119 Weighted average number
of shares outstanding, diluted 49,639,172 50,590,460
49,969,062 50,692,012
Reconciliation of GAAP Net Income
(Loss) and EPS to Non-GAAP Net Income and EPS
(In thousands, except share and per share data)
Three Months EndedDecember
31,
Year Ended December 31, 2018 2017
2018 2017 GAAP net income (loss) $
(11,369 ) $ (110,203 ) $ (105,029 ) $ 22,180 Add
back: Change in fair value of investment, net 5,142 104,042 59,103
(42,239 ) Loss on sale of investment 15,390 — 19,095 — Non-cash
stock compensation expense (489 ) (4,183 ) (317 ) 8,885 Patent
amortization expense 11,560 5,443 27,120 22,154 Impairment of
patent-related intangible assets — — 28,210
2,248 Pro forma non-GAAP net income $ 20,234 $
(4,901 ) $ 28,182 $ 13,228 Pro forma non-GAAP
net income per common share — diluted $ 0.41 $ (0.10 ) $
0.56 $ 0.26 GAAP weighted-average shares — diluted
49,670,274 50,750,021 50,037,920 50,692,012
ACACIA RESEARCH
CORPORATIONSUMMARY FINANCIAL INFORMATION,
(CONTINUED)(In thousands)(Unaudited)
CONDENSED CONSOLIDATED BALANCE
SHEETS
December 31, 2018
December 31, 2017 ASSETS Current assets: Cash
and cash equivalents $ 128,809 $ 136,604 Trading securities - debt
33,642 — Trading securities - equity 3,012 — Accounts receivable
32,884 153 Prepaid expenses and other current assets 3,125
2,938 Total current assets 201,472 139,695 Investment at
fair value 7,459 104,754 Other investments 8,195 2,195 Patents, net
of accumulated amortization 6,587 61,917 Other non-current assets
236 207 $ 223,949 $ 308,768
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and
accrued expenses $ 8,347 $ 7,956 Royalties and contingent legal
fees payable 22,688 1,601 Total current liabilities 31,035
9,557 Other liabilities 1,674 3,552 Total liabilities
32,709 13,109 Total stockholders’ equity 191,240 295,659 $
223,949 $ 308,768
ACACIA RESEARCH
CORPORATIONSUMMARY FINANCIAL INFORMATION,
(CONTINUED)(In thousands)(Unaudited)
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Three Months EndedDecember
31,
Year EndedDecember 31,
2018 2017 2018 2017 Cash
flows from operating activities:
Net income (loss) including noncontrolling
interests in operatingsubsidiaries
$ (11,367 ) $ (110,300 ) $ (104,848 ) $ 21,684
Adjustments to reconcile net income (loss)
including noncontrollinginterests in operating subsidiaries to net
cash provided by (used in)operating activities:
Gain on conversion of loans and accrued interest — — — (2,671 )
Gain on exercise of Primary Warrant — — — (4,616 ) Change in fair
value of investment, net 5,142 104,042 59,103 (42,239 ) Loss on
sale of investment 15,390 — 19,095 — Depreciation and amortization
11,563 5,463 27,145 22,243 Non-cash stock compensation (489 )
(4,183 ) (317 ) 8,885 Impairment of patent-related intangible
assets (1,000 ) — 28,210 2,248 Other 1,070 99 564 (374 ) Changes in
assets and liabilities: Accounts receivable (22,312 ) 147 (28,189 )
26,597 Prepaid expenses and other assets (25 ) 739 (208 ) (135 )
Accounts payable and accrued expenses (89 ) 259 963 (6,349 )
Royalties and contingent legal fees payable 15,495 (18,223 )
19,359 (12,307 ) Net cash provided by (used in)
operating activities 13,378 (21,957 ) 20,877 12,966
Cash flows from investing activities: Investment in
Investee — — (7,000 ) (31,514 ) Sale of investment 8,657 — 19,097 —
Advances to Investee — — — (4,000 ) Purchases of property and
equipment (34 ) (2 ) (34 ) (2 ) Purchase of short-term investments
(36,886 ) (23,443 ) (102,769 ) (448,388 ) Sales and maturities of
short-term investments 34,132 80,870 66,640
467,790 Net cash provided by (used in) investing
activities 5,869 57,425 (24,066 ) (16,114 )
Cash flows from financing activities: Repurchase of common stock —
— (4,634 ) — Proceeds from exercises of stock options — 65 257 745
Repurchases of restricted common stock — (10 ) (229 ) (45 )
Net cash provided by (used in) financing activities —
55 (4,606 ) 700
Increase (decrease) in cash and cash equivalents 19,247 35,523
(7,795 ) (2,448 ) Cash and cash equivalents, beginning
109,562 101,081 136,604 139,052
Cash and cash equivalents, ending $ 128,809 $ 136,604
$ 128,809 $ 136,604 Footnotes:
(1)
As used herein, “Acacia Research
Corporation,” “we,” “us,” and “our” refer to Acacia Research
Corporation and/or itswholly and majority-owned operating
subsidiaries. All intellectual property investment, development,
licensing andenforcement activities are conducted solely by certain
of Acacia Research Corporation’s wholly and majority-ownedoperating
subsidiaries.
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version on businesswire.com: https://www.businesswire.com/news/home/20190313005833/en/
Investors:Hayden IRRob Fink,
646-415-8972actg@haydenir.com
orMedia:Sloane & CompanyJoe Germani / Kristen Duarte,
212-486-9500jgermani@sloanepr.com / kduarte@sloanepr.com
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