Acacia Research Reports Third Quarter 2020 Financial Results

Acacia Research Corporation (Nasdaq: ACTG) today reported results for the three-month period ended September 30, 2020.

Clifford Press, Chief Executive Officer, stated, “Since announcing our acquisition of the Woodford portfolio in June, we have completed dispositions that have recovered two-thirds of our purchase price. We continue to hold substantial value in the securities of public and private companies remaining in the portfolio.”

Holdings of the securities of life sciences companies in the Woodford portfolio as of September 30, 2020 include:

Public Company Securities (at market value at September 30, 2020)

    

Company

 

Ticker

 

Number of
Shares

 

Value

Arix Bioscience plc 1

 

LSE: ARIX

 

25.8 mm

 

$37.0 mm

Sensyne Health plc

 

AIM: SENS

 

15.2 mm

 

$11.4 mm

Induction Healthcare Group plc

 

AIM: INHC

 

4.2 mm

 

$4.0 mm

Others

 

 

 

$2.1 mm

 

Total Public Holdings

 

 

 

$54.5 mm

Private Company Securities (at September 30, 2020)

Company

 

Ownership Percentage

 

Value

Oxford Nanopore Technologies 2

 

6%

 

$108.0 mm

   

Next 4 positions:

 

 

Immunocore 2

 

5%

 

Viamet Pharmaceuticals 2, 3

 

26%

 

AMO Pharma 2, 4

 

18%

 

NovaBiotics 2, 4

 

4%

 

$31.0 mm

 

 

Total Private Holdings

 

 

$139.0 mm

1 To be transferred to the Company in the fourth quarter of 2020

2 Value of Oxford Nanopore Technologies securities based on observed transactions during the quarter; Remaining holdings of private company securities valued at cost.

3 To be transferred to the Company in the fourth quarter of 2020.

4 Transferred to the Company in October.

Mr. Press added, “We are working intensively with Starboard to execute our investment strategy, leveraging our ready access to committed capital for strategic transactions borne of our expertise in corporate governance and operational restructuring.”

Al Tobia, Acacia’s Chief Investment Officer, added, “We believe that structural inefficiencies in the small-cap value sector create opportunities for us. Our areas of focus remain mature technology, healthcare, industrial and certain financial services segments. We are continuing to see attractive market conditions in the IP market as well, and our team has recently completed an option agreement to add a new portfolio.”

Mr. Tobia continued, “In order to provide existing stockholders of Acacia the opportunity to invest alongside Starboard with substantially similar terms as the Senior Secured Notes and Series B Warrants issued to Starboard, today we expect to file a shelf registration statement on Form S-3 with the SEC to facilitate the rights offering and provide flexibility to the Company.”

Third Quarter 2020 Financial Summary:

  • Cash and short-term investments totaled $303.1 million at September 30, 2020, compared to $184.0 million at June 30, 2020 and $168.3 million at December 31, 2019.
  • Debt, which represents the Senior Secured Notes issued to Starboard, was $115.0 million at September 30, 2020.
  • Book value totaled $202.3 million as of September 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 September 30, 2020.
  • Gross revenues were $19.5 million.
  • General and administrative expenses for the third quarter of 2020 increased by $3.1 million or 66%, compared with the third quarter of 2019, due to business development and personnel expenses.
  • Operating loss was $2.8 million.
  • GAAP net income to common stockholders was $29.2 million, or $0.32 per diluted share, compared to a net loss of $(7.6 million), or $(0.15) per diluted share, in the third quarter last year.
  • The third quarter of 2020 reflected:
    • A net non-cash benefit of $20 million related to the change in the fair value of trading and investment securities, and securities derivatives and forward contracts; and
    • Income of $21 million related to the change in fair value of warrants and embedded derivatives.

Investor Conference Call:

The Company will host a conference call today, Monday, November 9, 2020 at 11 a.m. ET/ 8 a.m. PT to discuss these results and provide a business update.

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.

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 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.

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,

2020

2019

2020

2019

 

Revenues

$

19,466

$

1,711

$

25,399

$

10,558

Portfolio operations:

Inventor royalties

5,772

776

6,843

4,752

Contingent legal fees

6,609

35

6,855

587

Litigation and licensing expenses - patents

1,001

987

3,497

6,643

Amortization of patents

1,174

863

3,522

2,337

Other portfolio expenses (income)

-

(475

)

(308

)

175

Total portfolio operations

14,556

2,186

20,409

14,494

Net portfolio income (loss)

4,910

(475

)

4,990

(3,936

)

General and administrative expenses

7,692

4,630

18,089

12,048

Operating loss

(2,782

)

(5,105

)

(13,099

)

(15,984

)

Other income (expense):

Change in fair value of investment, net

(3,081

)

(4,266

)

3,704

9,622

Loss on sale of investment

-

(915

)

(2,762

)

(8,147

)

Impairment of other investment

-

-

-

(8,195

)

Gain on disposal of other investment

-

2,000

-

2,000

Change in fair value of the Series A and B warrants and embedded derivatives

20,672

-

(46,612

)

-

Change in fair value of equity securities derivative and forward contract

(64,011

)

-

17,542

-

Gain on sale of prepaid investment and derivative

2,845

-

2,845

-

Change in fair value of trading securities and equity securities - private

84,499

(482

)

81,907

132

Gain (loss) on sale of trading securities

2,737

238

(4,272

)

226

Loss on foreign currency exchange

(48

)

(106

)

(4,938

)

(106

)

Interest expense on Senior Secured Notes

(2,410

)

-

(3,178

)

-

Interest income and other

10

1,028

811

3,012

Total other income (expense)

41,213

(2,503

)

45,047

(1,456

)

Income (loss) before income taxes

38,431

(7,608

)

31,948

(17,440

)

Income tax benefit (expense)

(83

)

-

1,257

(323

)

Net income (loss) including noncontrolling interests in subsidiaries

38,348

(7,608

)

33,205

(17,763

)

Net loss attributable to noncontrolling interests in subsidiaries

-

-

-

14

Net income (loss) attributable to Acacia Research Corporation

$

38,348

$

(7,608

)

$

33,205

$

(17,749

)

Net income (loss) attributable to common stockholders - basic

$

30,529

$

(7,608

)

$

24,838

$

(17,749

)

Basic net income (loss) per common share

$

0.63

$

(0.15

)

$

0.51

$

(0.36

)

Weighted average number of shares outstanding - basic

48,467,885

49,828,361

48,949,706

49,727,385

Net income (loss) attributable to common stockholders - diluted

$

29,204

$

(7,608

)

$

21,380

$

(17,749

)

Diluted net income (loss) per common share

$

0.32

$

(0.15

)

$

0.36

$

(0.36

)

Weighted average number of shares outstanding - diluted

90,624,702

49,828,361

60,153,773

49,727,385

(1) General and administrative expenses were comprised of the following:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

General and administrative expenses

$

7,204

$

4,330

$

16,846

$

11,295

Non-cash stock compensation expense - G&A

488

300

1,243

753

Total general and administrative expenses

$

7,692

$

4,630

$

18,089

$

12,048

 
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

ACACIA RESEARCH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 

September 30,

December 31,

2020

2019

 
ASSETS

Current assets:

Cash and cash equivalents

$

162,564

$

57,359

Trading securities - debt

-

93,843

Trading securities - equity

24,471

17,140

Equity securities - private

116,009

-

Equity securities derivative

17,818

-

Equity securities forward contract

340

-

Prepaid investment

42,900

-

Accounts receivable

263

511

Prepaid expenses and other current assets

1,685

2,912

Total current assets

366,050

171,765

Long-term restricted cash

35,000

35,000

Investment at fair value

982

1,500

Patents, net of accumulated amortization

18,071

7,814

Leased right-of-use assets

1,101

1,264

Other non-current assets

5,311

818

Total assets

$

426,515

$

218,161

 

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

2,707

$

1,765

Accrued expenses and other current liabilities

4,849

7,265

Accrued compensation

2,595

507

Royalties and contingent legal fees payable

14,230

2,178

Senior Secured Notes Payable - short-term

113,933

-

Total current liabilities

138,314

11,715

Series A warrant liabilities

5,604

3,568

Series A embedded derivative liabilities

25,682

17,974

Series B warrant liabilities

42,796

-

Long-term lease liabilities

1,101

1,264

Other long-term liabilities

593

593

Total liabilities

214,090

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 September 30, 2020 and December 31, 2019, respectively; aggregate liquidation preference of $35,000 as of September 30, 2020 and December 31, 2019, respectively

10,134

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; 49,279,453 and 50,370,987 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

49

50

Treasury stock, at cost, 4,604,365 and 2,919,828 shares as of September 30, 2020 and December 31, 2019, respectively

(43,270

)

(39,272

)

Additional paid-in capital

650,130

652,003

Accumulated deficit

(406,451

)

(439,656

)

Total Acacia Research Corporation stockholders' equity

200,458

173,125

 
Noncontrolling interests

1,833

1,833

 
Total stockholders' equity

202,291

174,958

 
Total liabilities, redeemable convertible preferred stock, and stockholders' equity

$

426,515

$

218,161

Contacts:

Acacia Research Investor Contact:
FNK IR
Rob Fink, 646-809-4048
rob@fnkir.com

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