Acacia Research Corporation (NASDAQ: ACTG) today reported
results for the three-month period ended March 31, 2021.
Clifford Press, Chief Executive Officer, stated, “Our defined
process, in collaboration with Starboard Value LP, to evaluate new
strategic opportunities is ongoing, and we continue to methodically
evaluate potential acquisitions. Our focus remains the small-cap
value sector with the goal of acquiring operating companies in the
mature technology, healthcare, industrial and certain financial
services segments. Our ongoing IP investments have resulted in a
balanced portfolio, positioned to capitalize both on soft licensing
and litigation. Our team is actively advancing a number of
opportunities.
“Subsequent to the end of the quarter, we led the reconstitution
of the Board of Directors of Arix Bioscience plc (ARIX.LN) of which
Acacia is an approximately 20% shareholder,” continued Mr. Press.
“Since becoming a shareholder in Arix at the end of last year, we
have sought to bring about a series of corporate governance
improvements and ensure that the company is served by a board that
is responsive to its shareholders. We believe it was incumbent upon
us to lead on these issues at a critical time when the company was
exposed to significant risk. Peregrine Moncreiffe has now joined
the Board of Arix as non-executive Chairman. Maureen O’Connell,
Chairman of the Board of Acacia, and Isaac Kohlberg, a director of
Acacia, were appointed to the Arix board as well. In addition,
Robert Lyne, Chief Operating Officer and General Counsel of Arix,
has been appointed to the Arix board to act as Interim Chief
Executive Officer while Arix recruits a permanent Chief Executive
Officer. We are grateful to our fellow shareholders for their
continued support during this period, and I am delighted that this
matter has now been brought to a satisfactory conclusion.”
First Quarter 2021 Financial Summary:
- Cash and equity investments at fair value totaled $325.1
million at March 31, 2021, compared to $274.6 million at December
31, 2020.
- Equity securities without readily determinable fair value
totaled $116.9 million at March 31, 2021; compared to $143.3
million at December 31, 2020. The decline relates to the
reclassification of Immunocore as an equity investment at fair
value upon completion of its IPO during the quarter.
- Investment securities representing equity method investments
totaled $33.7 million (before $11.9 million in noncontrolling
interests), compared to $30.7 million (before $11.0 million in
noncontrolling interests) at December 31, 2020.
- Debt, which represents the Senior Secured Notes issued to
Starboard, was $116.2 million at March 31, 2021.
- Book value totaled $128.1 million or $2.64 per share as of
March 31, 2021, compared to $292.5 million or $5.94 at December 31,
2020. Acacia’s current book value reflects the impact of the
increase in the Company’s share price on its warrant and embedded
derivative liabilities. Assuming full exercise of all issued
derivatives, Acacia’s pro forma book value would rise to $917.4
million or $5.62 per share, up from $882.5 million or $5.39 per
share as of December 31, 2020.1
- Gross revenues were $5.8 million.
- General and administrative expenses were $6.2 million, compared
with $4.9 million last year due to business development and
personnel expenses, as we build out our capability to identify,
evaluate and execute acquisitions.
- Operating loss was $5.7 million.
- GAAP net loss to common stockholders, inclusive of $198.9
million in non-cash expense related to the change in fair value of
the Series A and B warrants and embedded derivatives, was $(136.7
million), or $(2.81) per diluted share, compared to a net loss of
$(12.2) million, or $(0.24) per diluted share, last year.
Book Value and Changes to Derivative Valuations
As of March 31, 2021, book value was $128.1 million and there
were 48.6 million diluted shares of common stock outstanding in the
first quarter of 2021, for a book value per share of $2.64, down
from $5.94 at December 31, 2020. The decline is due to the impact
of the increase in non-cash liabilities associated with the
warrants and preferred stock held by Starboard Value LP. This was
driven by the increase in Acacia’s share price from $3.94 at
December 31, 2020 to $6.65 at March 31, 2021. All of these
derivative liabilities would be eliminated upon exercise or
expiration of all warrants and preferred stock.
Book value at March 31, 2021 reflects the impact of the
following:
- $115 million of Notes issued to Starboard Value;
- $35 million of Series A preferred stock issued to Starboard
Value; and
- $261.4 million of warrants and additional embedded derivative
liabilities associated with all preferred stock and warrants held
by Starboard Value, to be eliminated upon exercise or
expiration
Assuming Starboard Value converted all preferred stock and
exercised all warrants:
- $115 million of Notes liability would be eliminated, and 31.5
million shares would be issued;
- $35 million of preferred stock would be eliminated, and 9.6
million shares would be issued;
- $261.4 million of warrants and embedded derivative liabilities
would be eliminated; and
- $378 million of cash would be added upon exercise of the
remaining Series B warrants and Series A warrants, and 73.5 million
shares would be issued
The impact of this would be an incremental $789.2 million in
book value, and an incremental 114.6 million shares outstanding.
Assuming such conversion and exercise, pro forma book value would
be $917.4 million, and diluted shares outstanding would be 163.2
million, for book value per share of $5.62, up from $5.39 at
December 31, 2020.
Investor Conference Call:
The Company will host a conference call today, May 17, 2021 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 Events
& Presentations. 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.
About Acacia Research Corporation
Acacia Research (NASDAQ: ACTG) seeks to acquire undervalued
businesses and pursues opportunities for value creation. We
leverage our (i) access to flexible capital that can be deployed
unconditionally, (ii) expertise in corporate governance and
operational restructuring, (iii) willingness to invest in out of
favor industries and businesses that suffer from a complexity
discount and untangle complex, multi-factor situations, and (iv)
expertise and relationships in certain sectors, to complete
strategic acquisitions of businesses, divisions, and/or assets with
a focus on mature technology, healthcare, industrial and certain
financial segments. We seek to identify opportunities where we
believe we are advantaged buyers, where we can avoid structured
sale processes and create the opportunity to purchase businesses,
divisions and/or assets of companies at an attractive price due to
our unique capabilities, relationships, or expertise, or where we
believe the target would be worth more to us than to other buyers.
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 successfully identify and
complete strategic acquisitions of businesses, divisions, and/or
assets, the ability to successfully identify and complete strategic
acquisitions of businesses, divisions, and/or assets, 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 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.
_________________________________________________
1 Under GAAP, book value reflects the impact of the liabilities
associated with potential issuance of shares related to the
Company’s warrants and convertible preferred stock. As the value of
those liabilities varies with fluctuations in our share price, we
believe a presentation of book value assuming full exercise of all
warrants and preferred presents a useful measure of book value for
investors. This non-GAAP measure does have its limitations as an
analytical tool and should not be considered in isolation or as a
substitute for an analysis of our results under GAAP.
ACACIA RESEARCH
CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share
and per share data)
March 31, December 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
$
144,807
$
165,546
Equity securities at fair
value
180,320
109,103
Equity securities without readily
determinable fair value
116,946
143,257
Investment securities - equity
method investments
33,665
30,673
Investment at fair value
-
2,752
Accounts receivable
4,425
506
Prepaid expenses and other
current assets
2,647
5,832
Total current assets
482,810
457,669
Long-term restricted cash
35,419
35,000
Patents, net of accumulated
amortization
45,050
16,912
Leased right-of-use assets
845
951
Other non-current assets
4,834
4,988
Total assets
$
568,958
$
515,520
LIABILITIES, REDEEMABLE
CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
3,633
$
1,019
Accrued expenses and other
current liabilities
3,673
3,707
Accrued compensation
2,017
2,265
Royalties and contingent legal
fees payable
2,445
2,162
Accrued patent investment
costs
10,000
-
Senior Secured Notes Payable -
short-term
116,211
115,663
Total current liabilities
137,979
124,816
Series A warrant liabilities
18,243
6,640
Series A embedded derivative
liabilities
40,419
26,728
Series B warrant liabilities
225,956
52,341
Long-term lease liabilities
845
951
Other long-term liabilities
5,591
591
Total liabilities
429,033
212,067
Commitments and contingencies
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
March 31, 2021 and December 31, 2020, respectively; aggregate
liquidation preference of $35,000 as of March 31, 2021 and December
31, 2020, respectively
11,777
10,924
Stockholders' equity:
Common stock, par value $0.001
per share; 300,000,000 shares authorized; 49,279,453 shares issued
and outstanding as of March 31, 2021 and December 31, 2020
49
49
Treasury stock, at cost,
4,604,365 shares as of March 31, 2021 and December 31, 2020
(43,270
)
(43,270
)
Additional paid-in capital
650,753
651,416
Accumulated deficit
(491,326
)
(326,708
)
Total Acacia Research Corporation
stockholders' equity
116,206
281,487
Noncontrolling interests
11,942
11,042
Total stockholders' equity
128,148
292,529
Total liabilities, redeemable
convertible preferred stock, and stockholders' equity
$
568,958
$
515,520
ACACIA RESEARCH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except
share and per share data)
Three Months Ended
March 31,
2021
2020
Revenues
$
5,803
$
3,815
Patent portfolio operations:
Inventor royalties
95
426
Contingent legal fees
1,094
234
Litigation and licensing expenses
- patents
2,262
1,037
Amortization of patents
1,862
1,043
Other patent portfolio expenses
(income)
-
(234
)
Patent portfolio expenses
5,313
2,506
Net patent portfolio income
490
1,309
General and administrative
expenses
6,166
4,878
Operating loss
(5,676
)
(3,569
)
Other income (expense):
Change in fair value of
investment, net
-
4,108
Gain (loss) on sale of
investment
839
(3,316
)
Change in fair value of the
Series A and B warrants and embedded derivatives
(198,909
)
(4,382
)
Change in fair value of equity
securities
37,849
(6,117
)
Gain on sale of equity
securities
819
112
Equity method investment
income
2,730
-
Loss on foreign currency
exchange
(24
)
-
Interest expense on Senior
Secured Notes
(1,310
)
-
Interest income (expense) and
other
(26
)
535
Total other expense
(158,032
)
(9,060
)
Loss before income taxes
(163,708
)
(12,629
)
Income tax benefit (expense)
(10
)
1,338
Net Loss including noncontrolling
interests in subsidiaries
(163,718
)
(11,291
)
Net Income attributable to
noncontrolling interests in subsidiaries
(900
)
-
Net Loss attributable to Acacia
Research Corporation
$
(164,618
)
$
(11,291
)
Net Loss attributable to common
stockholders - basic and diluted
$
(136,665
)
$
(12,185
)
Basic and diluted net loss per
common share
$
(2.81
)
$
(0.24
)
Weighted average number of shares
outstanding - basic and diluted
48,596,040
49,875,396
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210517005519/en/
Investor Contact: Rob Fink FNK IR 646-809-4048
rob@fnkir.com
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