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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Acacia Research Technologies | NASDAQ:ACTG | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.14 | -2.70% | 5.05 | 3.75 | 5.40 | 5.11 | 4.65 | 5.06 | 635,404 | 05:00:01 |
Acacia Research Corporation (Nasdaq: ACTG) (“Acacia” or the “Company”) today reported financial results for the three and six months ended June 30, 2023.
Key Business Highlights
Second Quarter 2023 Financial Highlights
(In millions, except per share data)
Three Months Ended June
Six Months Ended June 30,
2023
2022
2023
2022
(unaudited)
(unaudited)
Intellectual property operations
$
0.4
$
8.1
$
4.6
$
10.7
Industrial operations
7.5
8.7
18.1
19.5
Total revenues
$
7.9
$
16.7
$
22.7
$
30.2
Operating loss
$
(12.5
)
$
(5.7
)
$
(21.9
)
$
(14.2
)
Unrealized gains (losses) 1
$
6.6
$
(57.6
)
$
10.0
$
(229.9
)
Realized (losses) gains
$
(8.0
)
$
11.5
$
(9.4
)
$
78.4
Non-cash derivative liability (losses) gains 2
$
(9.9
)
$
(35.1
)
$
6.7
$
(7.0
)
GAAP Net loss
$
(18.8
)
$
(61.5
)
$
(9.3
)
$
(134.8
)
GAAP Diluted loss per share
$
(0.36
)
$
(1.44
)
$
(0.26
)
$
(3.06
)
1 Unrealized gains and (losses) are related to the change in fair value of equity securities as of the end of the reported period.
2 The non-cash derivative liability gains and (losses) are related to the change in fair value of Acacia’s Series A and B warrants and embedded derivatives.
Martin D. McNulty, Jr. “MJ”, Interim Chief Executive Officer, stated, “We successfully completed the recapitalization transaction with Starboard Value LP, which follows on the heels of our transformation of Acacia by revamping our processes for identifying and pursuing transactions and establishing the framework to support acquisitions of both public and private companies. I am confident that we have the right team and processes in place, along with incentives to create value. Our pipeline of acquisition targets has grown and matured, and we are methodically advancing specific opportunities.”
“We have a number of late-stage targets in our pipeline, and we are optimistic about our prospects,” continued Mr. McNulty. “Predicting the specific timing of deals remains impossible, and we maintain rigor in our processes, but I am confident in the progress. Additionally, we have successfully enhanced operations at Printronix.”
Second Quarter 2023 Financial Summary:
Life Sciences Portfolio
Acacia has generated $504.3 million in proceeds from sales and royalties of the Life Sciences Portfolio through June 30, 2023, which was purchased for an aggregate price of $301.4 million. At the end of the second quarter, the remaining positions in the Life Sciences Portfolio represent $67.9 million in book value:
Balance Sheet and Capital Structure
As Adjusted Book Value and Changes to Derivative Valuations
At June 30, 2023, book value was $335.4 million and there were 58.8 million shares of common stock outstanding, for a book value per share of $5.71, compared to $269.3 million, or $6.19 per share at December 31, 2022. The decrease in book value per share since December 31, 2022 is due to the $5.25 per share price of shares issued in the Rights Offering and concurrent private Rights Offering. Total liabilities for warrants and convertible preferred stock to be eliminated upon exercise or expiration of all such warrants and convertible preferred stock were $94.9 million at June 30, 2023.
Book value and book value per share calculations are performed in accordance with GAAP. The calculation of book value under GAAP requires the Company to reflect the impact of liabilities associated with issuances of shares related to the exercise of the Company’s Series B warrants and conversion of the Company’s Series A preferred stock. The value of those liabilities varies over time based on fluctuations in the trading price of the Common Stock. The previously announced agreement reached with Starboard to streamline the Company’s capital structure and strengthen its financial position (the “recapitalization transactions”) eliminated all of these instruments and the associated liabilities.
Management believes that providing investors with a presentation of adjusted book value and adjusted book value per share that reflect the impact of the completion of each component of the recapitalization transactions (as adjusted to give effect to the transaction as if they had been completed as of June 30, 2023) may assist investors in understanding the Company’s financial condition and capital structure (see below for a description of the material components of the recapitalization transactions). However, these adjusted calculations have limitations and should not be considered in isolation or as a substitute for the actual book value and book value per share amounts reflected in the Company’s balance sheet at June 30, 2023. These adjusted calculations have been presented for informational purposes only and do not purport to project the future financial position of the Company.
Book value at June 30, 2023 reflects the following:
In connection with the recently completed recapitalization transactions with Starboard, which occurred on July 13, 2023:
The completion of the recapitalization transactions resulted in an incremental $166.8 million increase in book value, and an incremental 41.1 million increase in shares outstanding. Adjusted book value as adjusted to give effect to the transaction as if it had been completed on June 30, 2023 would be $502.2 million, and diluted shares outstanding would be 99.9 million, resulting in adjusted book value per share of $5.03 at June 30, 2023.
See Attachment A which illustrates the sequential impact of each component of the recapitalization transactions on book value and book value per share as adjusted to give effect to the transactions as if they had been completed on June 30, 2023.
In previous quarterly reports, prior to the approval of the recapitalization transactions, Acacia had presented a similar adjusted book value per share calculation assuming the exercise of all outstanding Series A and Series B warrants, as well as the conversion of the Series A preferred stock. This resulted in a reported adjusted book value per share of $5.10 at March 31, 2023, $5.18 at December 31, 2022, $5.22 at September 30, 2022, $5.87 at June 30, 2022, $5.91 at March 31, 2022 and $6.51 at December 31, 2021. The $5.25 per share cash exercise feature of 68.5 million Series B warrants expired on October 28, 2022 and 5.0 million $3.65 per share Series A warrants were exercised on November 1, 2022.
Investor Conference Call
The Company will host a conference call today, August 3, 2023 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time).
To access the live call, please dial 888-506-0062 (U.S. and Canada) or 973-528-0011 (international) and if requested, reference conference ID 435061. The conference call will also be simultaneously webcasted on the investor relations section of the Company’s website at http://www.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 the Company
Acacia is an opportunistic capital platform with a strategy to purchase businesses based on the differentials between public and private market valuations. Acacia leverages its (i) disciplined focus on identifying opportunities where it can be an advantaged buyer, initiate a transaction opportunity spontaneously, avoid a traditional sale process and complete the purchase of a business, division or other asset at an attractive price, (ii) willingness to invest across industries and in off-the-run, often misunderstood assets that suffer from a complexity or multi-factor discount, (iii) relationships and partnership abilities across functions and sectors, and (iv) strong expertise in corporate governance and operational transformation. Acacia seeks to identify opportunities where it believes it is an advantaged buyer, where it can avoid structured sale processes and create the opportunity to purchase businesses, divisions and/or assets of companies at an attractive price due to Acacia’s unique capabilities, relationships or expertise, or Acacia believes the target would be worth more to it than to other buyers. Acacia operates its businesses based on three key principles of people, process and performance and has built a management team with demonstrated expertise in research, transactions and execution, and operations and management. Additional information about Acacia and its subsidiaries is available at www.acaciaresearch.com.
Safe Harbor Statement
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 the Company’s current expectations and speak only as of the date hereof. This news release attempts to identify forward-looking statements by using words such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” or other forms of these words or similar words or expressions or the negative thereof, although not all forward-looking statements contain these terms. The Company’s 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 Company’s ability to successfully implement its strategic plan, changes to our relationship and arrangements with Starboard Value LP, 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, the decrease in demand for Printronix' products, general economic conditions, and the success of the Company’s investments. The Company’s Annual Report on Form 10-K, and other SEC filings discuss these and other important risks and uncertainties that may affect the Company’s 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 by the Company in prior periods are not necessarily indicative of the results to be achieved by us in any subsequent periods. It is currently anticipated that the Company’s financial results will vary, and may vary significantly, from quarter to quarter.
ACACIA RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
June 30, 2023
December 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
355,188
$
287,786
Equity securities
52,853
61,608
Equity securities without readily determinable fair value
5,816
5,816
Equity method investments
30,934
30,934
Accounts receivable, net
6,267
8,231
Inventories
14,006
14,222
Prepaid expenses and other current assets
20,728
19,388
Total current assets
485,792
427,985
Property, plant and equipment, net
2,950
3,537
Goodwill
7,541
7,541
Other intangible assets, net
30,590
36,658
Leased right-of-use assets
910
2,005
Other non-current assets
6,925
5,202
Total assets
$
534,708
$
482,928
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
5,789
$
6,036
Accrued expenses and other current liabilities
4,461
14,058
Accrued compensation
5,505
4,737
Royalties and contingent legal fees payable
579
699
Deferred revenue
1,022
1,229
Senior secured notes payable
60,450
60,450
Total current liabilities
77,806
87,209
Deferred revenue, net of current portion
535
568
Series A embedded derivative liabilities
12,881
16,835
Series B warrant liabilities
82,018
84,780
Long-term lease liabilities
898
1,873
Deferred income tax liabilities, net
125
742
Other long-term liabilities
1,858
1,675
Total liabilities
176,121
193,682
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 June 30, 2023 and December 31, 2022; aggregate liquidation preference of $35,000 as of June 30, 2023 and December 31, 2022
23,154
19,924
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; 58,754,795 and 43,484,867 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
58
43
Treasury stock, at cost, 16,183,703 shares as of June 30, 2023 and December 31, 2022
(98,258
)
(98,258
)
Additional paid-in capital
738,712
663,284
Accumulated deficit
(316,121
)
(306,789
)
Total Acacia Research Corporation stockholders' equity
324,391
258,280
Noncontrolling interests
11,042
11,042
Total stockholders' equity
335,433
269,322
Total liabilities, redeemable convertible preferred stock, and stockholders' equity
$
534,708
$
482,928
ACACIA RESEARCH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Revenues:
Intellectual property operations
$
394
$
8,062
$
4,570
$
10,677
Industrial operations
7,510
8,655
18,137
19,547
Total revenues
7,904
16,717
22,707
30,224
Costs and expenses:
Cost of revenues - intellectual property operations
5,010
4,634
9,748
9,198
Cost of sales - industrial operations
3,933
4,592
9,153
8,784
Engineering and development expenses - industrial operations
205
145
421
335
Sales and marketing expenses - industrial operations
1,859
2,294
3,772
4,310
General and administrative expenses
9,426
10,722
21,466
21,775
Total costs and expenses
20,433
22,387
44,560
44,402
Operating loss
(12,529
)
(5,670
)
(21,853
)
(14,178
)
Other (expense) income:
Equity securities investments:
Change in fair value of equity securities
6,617
(57,647
)
9,960
(229,850
)
(Loss) gain on sale of equity securities
(7,999
)
11,498
(9,360
)
78,374
Earnings on equity investment in joint venture
—
42,085
—
42,085
Net realized and unrealized (loss) gain
(1,382
)
(4,064
)
600
(109,391
)
Change in fair value of the Series A and B warrants and embedded derivatives
(9,935
)
(35,146
)
6,716
(7,048
)
Gain (loss) on foreign currency exchange
15
(1,814
)
95
(2,627
)
Interest expense on Senior Secured Notes
(900
)
(1,859
)
(1,800
)
(4,460
)
Interest income and other, net
4,307
863
7,748
1,870
Total other (expense) income
(7,895
)
(42,020
)
13,359
(121,656
)
Loss before income taxes
(20,424
)
(47,690
)
(8,494
)
(135,834
)
Income tax benefit (expense)
1,645
200
(838
)
15,078
Net loss including noncontrolling interests in subsidiaries
(18,779
)
(47,490
)
(9,332
)
(120,756
)
Net income attributable to noncontrolling interests in subsidiaries
—
(14,013
)
—
(14,013
)
Net loss attributable to Acacia Research Corporation
$
(18,779
)
$
(61,503
)
$
(9,332
)
$
(134,769
)
Loss per share:
Net loss attributable to common stockholders - Basic
$
(21,155
)
$
(63,443
)
$
(13,962
)
$
(138,560
)
Weighted average number of shares outstanding - Basic
58,408,711
43,988,677
53,219,152
45,259,435
Basic net loss per common share
$
(0.36
)
$
(1.44
)
$
(0.26
)
$
(3.06
)
Net loss attributable to common stockholders - Diluted
$
(21,155
)
$
(63,443
)
$
(13,962
)
$
(138,560
)
Weighted average number of shares outstanding - Diluted
58,408,711
43,988,677
53,219,152
45,259,435
Diluted net loss per common share
$
(0.36
)
$
(1.44
)
$
(0.26
)
$
(3.06
)
Attachment A
The following table illustrates the sequential impact of each component of the recapitalization transactions on book value as of June 30, 2023 on an as adjusted basis to give effect to each such component of the recapitalization as if it had been completed as of June 30, 2023:
As Adjusted Book Value at 6/30/2023
Series A Preferred Conversion
Series B Warrant Transactions
$ Millions
Basic
Series A Preferred Converted
Remove Liability
6/30/2023 As Adjusted
Senior Secured Notes Converted
Series B Warrants Exercised
Series B Payment*
Transaction Fees
Remove Liability
6/30/2023 As Adjusted
Cash and cash equivalents
355.2
355.2
(0.5
)
55.0
(66.0
)
(0.3
)
343.4
Equity securities at fair value
52.9
52.9
52.9
Equity securities without readily determinable fair value
5.8
5.8
5.8
Investment securities - equity method investments
30.9
30.9
30.9
Other assets
89.9
89.9
89.9
Total assets
534.7
—
—
534.7
(0.5
)
55.0
(66.0
)
(0.3
)
—
523.0
Notes payable
(60.5
)
(60.5
)
60.5
—
Warrant and derivative liabilities
(94.9
)
12.9
(82.0
)
82.0
—
Other liabilities
(20.8
)
(20.8
)
(20.8
)
Total liabilities
(176.1
)
—
12.9
(163.2
)
60.5
—
—
—
82.0
(20.8
)
Preferred stock
(23.2
)
23.2
—
$
—
Total liabilities and preferred stock
(199.3
)
23.2
12.9
(163.2
)
$
60.5
$
—
$
—
$
—
$
82.0
$
(20.8
)
Book value - stockholders equity
335.4
23.2
12.9
371.5
60.0
55.0
(66.0
)
(0.3
)
82.0
502.2
Shares outstanding - basic
58.8
9.6
—
68.3
16.4
15.1
—
—
—
99.9
Book value per share
5.03
KPIs:
Cash and cash equivalents
355.2
355.2
343.4
Cash and equity securities at fair value
408.0
408.0
396.3
Cash and equity securities at fair value / share
3.97
*Note: This amount reflects the $66.0 million payment the Company subsequently made to Starboard in consideration for the early exercise of the Series B warrants, and convertible preferred stock.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230803203856/en/
Investor Contact: FNK IR Rob Fink, 646-809-4048 rob@fnkir.com
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