Acacia Research Corporation(1) (Nasdaq: ACTG) today reported
results for the three months ended March 31, 2016.
- Revenues for the first quarter of 2016
were $24,721,000, as compared to $34,210,000 in the comparable
prior year quarter.
- GAAP net loss for the first quarter of
2016 was $9,965,000, or $0.20 per diluted share, as compared to
$13,130,000, or $0.27 per diluted share for the comparable prior
year quarter.
- Non-GAAP net income for the first
quarter of 2016 was $2,530,000, or $0.05 per diluted share, as
compared to non-GAAP net income of $3,155,000, or $0.06 per diluted
share for the comparable prior year quarter. See below for
information regarding non-GAAP measures.
- Cash and cash equivalents and
restricted cash totaled $156,852,000 as of March 31,
2016.
Consolidated Financial Results - Overview
Financial highlights and operating activities during the periods
presented included the following:
Three Months EndedMarch 31,
2016 2015
Revenues (in thousands) $ 24,721 $ 34,210 Net loss (in thousands) $
(9,965 ) $ (13,130 ) Non-GAAP net income (in thousands) $ 2,530 $
3,155 Diluted loss per share $ (0.20 ) $ (0.27 ) Non-GAAP net
earnings per common share - diluted $ 0.05 $ 0.06 New agreements
executed 12 23 Licensing and enforcement programs generating
revenues 15 18
Trailing twelve-month revenues were as follows (in
thousands):
As of Date:
Trailing Twelve-
Month Revenues
% Change March 31,
2016 $ 115,548 (8 )% December 31, 2015 125,037 5 % September 30,
2015 118,570 (17 )% June 30, 2015 142,768 (6 )% March 31, 2015
152,508 — %
Summary Consolidated Financial ResultsThree months
ended March 31, 2016 compared with the three months ended
March 31, 2015
Revenues (in thousands):
Three Months EndedMarch 31,
Change 2016
2015 $ % Revenues
$ 24,721 $ 34,210 $ (9,489 ) (28 )% New revenue agreements
12 23 — —
First quarter 2016 revenues decreased $9,489,000, or 28%, to
$24,721,000, as compared to $34,210,000 in the comparable prior
year quarter. In the first quarter of 2016, four licensees
individually accounted for 22%, 19%, 16% and 11% of revenues
recognized, as compared to two licensees individually accounting
for 58% and 15% of revenues recognized during the first quarter of
2015.
Cost of Revenues (in thousands):
Three Months EndedMarch 31,
Change 2016
2015 $ % Inventor
royalties $ 1,573 $ 9,325 $ (7,752 ) (83 )% Contingent legal fees
4,109 4,784 (675 ) (14 )% Total inventor royalties
and contingent legal fees $ 5,682 $ 14,109 $ (8,427 )
(60 )%
First quarter 2016 inventor royalties expense decreased 83% due
primarily to the 28% decrease in related revenues and a greater
percentage of revenues generated in the first quarter of 2016
having lower average inventor royalty rates, primarily due to
higher average levels of cost recovery related preferred returns,
as compared to the portfolios generating revenues in the prior
year quarter. First quarter 2016 contingent legal fees expense
decreased 14%, as compared to a 28% decrease in related revenues,
due primarily to certain patent portfolios generating revenues in
the first quarter of 2015 having lower contingent fee rates, as
compared to the portfolios generating revenues in the first quarter
of 2016.
First quarter 2016 total revenues, less inventor royalties
expense and contingent legal fees expense was $19,039,000, or 77%
of first quarter 2016 revenues, as compared to $20,101,000, or 59%,
of revenues recognized in the comparable prior year quarter.
Three Months EndedMarch 31,
Change 2016
2015 $ %
Litigation and licensing expenses - patents $ 7,723 $ 8,675 $ (952
) (11 )%
First quarter 2016 litigation and licensing expenses decreased
11% due to a net decrease in litigation support costs associated
with upcoming trials. We expect litigation and licensing expenses
to continue to fluctuate period to period in connection with our
current and future patent partnering, prosecution, licensing and
enforcement activities.
Three Months EndedMarch 31,
Change 2016
2015 $ %
Amortization of patents $ 10,760 $ 13,038 $ (2,278 ) (17 )%
First quarter 2016 non-cash patent amortization charges
decreased 17%, reflecting a decrease in scheduled amortization on
existing patent portfolios due primarily to various patent
portfolio impairment charges previously recorded in the fourth
quarter of 2015.
General and Administrative Expenses (in thousands):
Three Months EndedMarch 31,
Change 2016
2015 $ % General
and administrative expenses $ 6,259 $ 7,328 $ (1,069 ) (15 )%
Non-cash stock compensation expense -
G&A
1,735 3,247 (1,512 ) (47 )% Total general and
administrative expenses $ 7,994 $ 10,575 $ (2,581 )
(24 )%
First quarter 2016 general and administrative expenses,
excluding non-cash stock compensation expense, decreased due
primarily to a reduction in personnel costs in connection with our
recent head count reduction activities and a decrease in variable
performance based compensation costs. The decrease was partially
offset by an increase in non-recurring employee severance costs.
Non-cash stock compensation expense decreased due to a decrease in
the grant date fair value for the shares expensed during the period
and a decrease in the number of shares expensed resulting from a
net reduction in employee headcount.
Other Operating Expenses:
First quarter 2016 other operating expenses were $1,742,000, as
compared to $426,000 in the comparable prior year quarter. Other
operating expenses includes expense accruals for court ordered
attorney's fees and settlement and contingency accruals for other
matters.
Financial Condition (in
thousands)
Summary Balance Sheet Information:
March
31, 2016 December 31, 2015 Cash and cash
equivalents and restricted cash
$
156,852
$
145,948
Accounts receivable 25,175 33,500 Total assets 339,813 347,901
Accounts payable and accrued expenses 14,580 17,347 Accrued patent
investment costs — 1,000 Royalties and contingent legal fees
payable 18,618 14,878 Total liabilities 33,753 33,746
Summary Cash Flow Information:
Three Months EndedMarch 31, 2016 2015
Net cash provided by (used in): Operating activities
(excluding restricted cash)
$
11,908
$
(5,112
) Restricted cash (798 ) (10,718 ) Cash management and patent
investment activities (1,004 ) (11,651 ) Financing activities —
(5,437 )
Patent Acquisition Costs. Patent related investments and upfront
advances paid in the first quarter of 2016 totaled $1,000,000.
Patent related investments and scheduled milestone payments paid in
the first quarter of 2015 totaled $16,861,000.
Refer to the section below entitled “Summary Financial
Information” for additional summary consolidated balance sheet,
statements of operations and cash flow information as of and for
the applicable periods presented.
INFORMATION ABOUT NON-GAAP FINANCIAL MEASURES
As used herein, “GAAP” refers to accounting principles generally
accepted in the United States of America. To supplement our
consolidated financial statements prepared and presented in
accordance with GAAP, 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.
We use these non-GAAP, or pro forma, financial measures for
internal financial and operational decision making purposes and as
a means to evaluate period-to-period comparisons of the performance
and results of operations of our core business. Our management
believes that these non-GAAP financial measures provide meaningful
supplemental information regarding the performance of our core
business by excluding non-cash stock compensation charges, non-cash
patent amortization charges, excess benefit related non-cash tax
expense and certain non-cash tax benefits, that may not be
indicative of our recurring core business operating results. These
non-GAAP financial measures also facilitate management’s internal
planning and comparisons to our historical performance and
liquidity. We believe these non-GAAP financial measures are useful
to investors as they allow for greater transparency with respect to
key metrics used by management in its financial and operational
decision making and are used by our institutional investors and the
analyst community to help them analyze the performance and
operational results of our core business.
Non-GAAP Net income and EPS. We define non-GAAP net income
as net income calculated in accordance with GAAP, plus non-cash
stock compensation charges, non-cash patent amortization charges
and excess benefit related non-cash tax expense, less certain
non-cash tax benefits included in tax expense. 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.
Due to the inherent volatility in stock prices, the use of
estimates and assumptions in connection with the valuation and
expensing of share-based awards and the variety of award types that
companies can issue under FASB ASC Topic 718, management believes
that providing a non-GAAP financial measure that excludes non-cash
stock compensation allows investors to make meaningful comparisons
between our recurring core business operating results and those of
other companies period to period, as well as providing our
management with a critical tool for financial and operational
decision making and for evaluating our own period-to-period
recurring core business operating results. Similarly, due to the
variability associated with the timing and amount of patent
acquisition payments and estimates inherent in the capitalization
and amortization of patent acquisition costs, management believes
that providing a non-GAAP financial measure that excludes non-cash
patent amortization charges allows investors to make meaningful
comparisons between our recurring core business operating results
and those of other companies, and also provides our management with
a useful tool for financial and operational decision making and for
evaluating our own period-to-period recurring core business
operating results. Management also believes that providing a
non-GAAP financial measure that excludes the impact of excess
benefit related non-cash tax expense and certain non-cash tax
benefits included in tax expense allows investors to assess our net
results and the economic impact of income taxes based largely on
cash tax obligations, make more meaningful comparisons between our
recurring core business net results and those of other companies
period to period, and also provides our management with a useful
tool for financial and operational decision making and for
evaluating our own period-to-period recurring core business net
results.
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. For example, non-GAAP net income excludes the
impact of significant non-cash stock compensation charges, non-cash
patent amortization charges, excess benefit related non-cash tax
expense and certain non-cash tax benefits included in tax expense
that are or may be recurring, and that may or will continue to be
recurring for the foreseeable future. In addition, non-cash stock
compensation is a critical component of our employee compensation
programs and non-cash patent amortization reflects the cost of
certain patent portfolio acquisitions, amortized on a straight-line
basis over the estimated economic useful life of the respective
patent portfolio, and may reflect the acceleration of amortization
related to recoupable up-front patent portfolio acquisition costs.
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 accompanying table below provides a reconciliation of the
non-GAAP financial measures presented to the most directly
comparable financial measures prepared in accordance with GAAP.
______________________________________________
A conference call is scheduled for today. The Acacia Research
presentation and Q&A will start at 1:30 p.m. Pacific Time (4:30
p.m. Eastern).
To listen to the presentation by phone, dial (877) 591-4951 for
domestic callers and (719) 325-4790 for international callers, both
of whom will need to enter the conference ID 5873924 when
prompted.
The call is being webcast by CCBN and can be accessed at
Acacia’s website at www.acaciaresearch.com.
ABOUT ACACIA RESEARCH CORPORATION
Founded in 1993, Acacia Research Corporation (ACTG) is the
industry leader in patent licensing. An intermediary in the patent
marketplace, Acacia partners with inventors and patent owners to
unlock 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
develop licensing programs and attract new business, rapid
technological change in relevant markets, 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 and
general economic conditions. 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 period to period.
ACACIA RESEARCH CORPORATION
SUMMARY FINANCIAL INFORMATION
(In thousands, except share and per
share information)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months EndedMarch 31, 2016
2015 Revenues $ 24,721 $
34,210 Operating costs and expenses: Cost of revenues:
Inventor royalties 1,573 9,325 Contingent legal fees 4,109 4,784
Litigation and licensing expenses - patents 7,723 8,675
Amortization of patents 10,760 13,038 General and administrative
expenses (including non-cash stock compensation expense of $1,735
for the three months ended March 31, 2016 and $3,247 for the three
months ended March 31, 2015, respectively) 7,994 10,575 Research,
consulting and other expenses - business development 522 997 Other
1,742 426 Total operating costs and expenses 34,423
47,820 Operating loss (9,702 ) (13,610 )
Total other income (expense)
(3 ) 228 Loss before provision for income taxes (9,705 )
(13,382 ) Provision for income taxes (192 ) (170 ) Loss including
noncontrolling interests in operating subsidiaries (9,897 ) (13,552
) Net (income) loss attributable to noncontrolling interests in
operating subsidiaries (68 ) 422 Net loss attributable to
Acacia Research Corporation $ (9,965 ) $ (13,130 ) Net loss
attributable to common stockholders - diluted $ (9,965 ) $ (13,345
) Diluted loss per common share $ (0.20 ) $ (0.27 )
Weighted average number of shares outstanding, diluted 49,925,550
49,212,207
Reconciliation of GAAP Net Loss and EPS
to Non-GAAP Net Income and EPS
(In thousands, except share and per
share data)
Three Months EndedMarch 31, 2016
2015 GAAP net loss $
(9,965 ) $ (13,130 ) Non-cash stock compensation 1,735 3,247
Non-cash patent amortization 10,760 13,038 Pro forma
non-GAAP net income $ 2,530 $ 3,155
Pro forma non-GAAP net earnings per common
share - diluted(3)
$ 0.05 $ 0.06 GAAP weighted-average shares — diluted
49,942,591 49,290,069
ACACIA RESEARCH CORPORATION
SUMMARY FINANCIAL INFORMATION
(CONTINUED)
(In thousands)
(Unaudited)
CONDENSED CONSOLIDATED BALANCE
SHEETS
March 31, 2016 December 31, 2015
ASSETS Current assets: Cash and cash equivalents $ 145,329 $
135,223 Restricted cash 11,523 10,725 Accounts receivable 25,175
33,500 Deferred income taxes 210 210 Prepaid expenses and other
current assets 4,352 4,219 Total current assets 186,589
183,877
Property and equipment, net
231 272
Patents, net
151,882 162,642 Other assets 1,111 1,110 $ 339,813 $
347,901
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable and accrued expenses $ 14,580 $
17,347 Accrued patent investment costs — 1,000 Royalties and
contingent legal fees payable 18,618 14,878 Total current
liabilities 33,198 33,225 Deferred income taxes 210 210
Other liabilities 345 311 Total liabilities 33,753 33,746
Total stockholders’ equity 306,060 314,155 $ 339,813
$ 347,901
ACACIA RESEARCH CORPORATION
SUMMARY FINANCIAL INFORMATION
(CONTINUED)
(In thousands)
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Three Months EndedMarch 31, 2016
2015 Cash flows from operating
activities: Net loss including noncontrolling interests in
operating subsidiaries $ (9,897 ) $ (13,552 )
Adjustments to reconcile net loss
including noncontrolling interests in operating subsidiaries to net
cash provided by (used in) operating activities:
Depreciation and amortization 10,803 13,101 Non-cash stock
compensation 1,735 3,247 Other 69 (12 ) Changes in assets and
liabilities: Accounts receivable 8,325 (9,839 ) Prepaid expenses
and other assets (134 ) (702 ) Accounts payable and accrued
expenses (2,733 ) (2,133 ) Royalties and contingent legal fees
payable 3,740 4,778 Net cash provided by (used
in) operating activities - excluding restricted cash 11,908 (5,112
) Restricted cash (798 ) (10,718 ) Net cash provided by (used in)
operating activities 11,110 (15,830 ) Cash flows from
investing activities: Purchases of property and equipment (4 ) —
Purchase of available-for-sale investments — (13,369 ) Maturities
and sales of available-for-sale investments — 18,579 Investments in
patents/ patent rights (1,000 ) (16,861 ) Net cash used in
investing activities (1,004 ) (11,651 ) Cash flows from
financing activities: Dividends paid to shareholders — (6,375 )
Distributions to noncontrolling interests in operating subsidiary —
938 Net cash used in financing activities —
(5,437 ) Increase (decrease) in cash and cash
equivalents 10,106 (32,918 ) Cash and cash equivalents,
beginning 135,223 134,466 Cash and cash
equivalents, ending $ 145,329 $ 101,548
Business Highlights and Recent
Developments(2)
Business highlights of the first quarter of 2016 and recent
developments include the following:
Revenues for the three months ended March 31, 2016,
included fees from the following technology licensing and
enforcement programs:
• 4G Wireless technology
• Online Auction Guarantee technology • Audio Communications
Fraud Detection technology • Reflective and Radiant Barrier
Insulation technology • Bone Wedge technology • Speech codes used
in wireless and wireline systems technology • Broadband
Communications technology •
Telematics technology
• Cardiology and Vascular Device technology •
Unicondylar Knee Replacement
technology
• DisplayPort and MIPI DSI technology •
Variable Data Printing technology
• Gas Modulation Control Systems technology •
Wireless Infrastructure and User Equipment
technology
• Lighting Ballast technology
________________________________________
- Adaptix, Inc. signed a patent license
agreement with Ericsson, Inc. and Telefonaktiebolaget LM Ericsson.
The agreement resolved litigation that was pending in the United
States District Court for the Eastern District of Texas.
- Bonutti Skeletal Innovations LLC
entered into a settlement and patent license agreement with DePuy
Synthes Products, Inc. and DePuy Synthes Sales, Inc. The agreement
resolved litigation that was pending in the United States District
Court for the District of Massachusetts.
- Cellular Communications Equipment LLC
and Cellular Communications Equipment GmbH entered into patent
license agreements with Sony Mobile Communications Inc.
- Industrial Print Technologies LLC
entered into a settlement and license agreement with Canon Inc.,
Canon U.S.A., Inc., Canon Solutions America Inc. and OCE Holding
B.V.
- LifePort Sciences LLC, LifeScreen
Sciences LLC and LifeShield Sciences LLC entered into a settlement
and license agreement with Endologix, Inc. This agreement resolved
patent litigation, Civil Action No. 12-cv-1789-GMS, pending in the
United States District Court for the District of Delaware.
- Nexus Display Technologies LLC entered
into a settlement and patent license agreement with ViewSonic
Corporation. The agreement resolved litigation that was pending in
the United States District Court for the Central District of
California.
- Nexus Display Technologies LLC entered
into a settlement and license agreement with Dell Inc. This
agreement resolved patent litigation, Civil Action No.
2:14-cv-00762-RWS, pending in the United States District Court for
the Eastern District of Texas.
- Promethean Insulation Technology LLC
entered into a settlement and patent license agreement with
Soprema, Inc. (Canada), Soprema, Inc. (United States) and Soprema
U.S.A., Inc. The agreement resolved litigation that was pending in
the United States District Court for the Eastern District of
Texas.
________________________________________
(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 acquisition, development, licensing and
enforcement activities are conducted solely by certain of Acacia
Research Corporation’s wholly and majority-owned operating
subsidiaries. (2) Adaptix, Inc., Bonutti Skeletal
Innovations LLC, Cellular Communications Equipment LLC, Cellular
Communications Equipment GmbH, Industrial Print Technologies LLC,
LifePort Sciences LLC, LifeScreen Sciences LLC, LifeShield Sciences
LLC, Nexus Display Technologies LLC and Promethean Insulation
Technology LLC are wholly and majority-owned operating subsidiaries
of Acacia Research Corporation. (3)
Calculated based on pro forma non-GAAP net
income attributable to common stockholders - diluted, not
shown.
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version on businesswire.com: http://www.businesswire.com/news/home/20160421006602/en/
Investor Relations & Media Contact:Acacia Research
CorporationRob StewartTel: (949) 480-8300Fax: (949) 480-8301
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