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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 | |
---|---|---|---|---|---|---|---|---|---|---|
0.06 | 1.17% | 5.21 | 5.14 | 5.36 | 5.26 | 5.14 | 5.16 | 182,294 | 21:04:53 |
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DELAWARE
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95-4405754
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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ACACIA RESEARCH CORPORATION
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Table Of Contents
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Part I.
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Financial Information
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Part II.
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Other Information
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Item 1A.
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Risk Factors
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Item 5.
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Other Information
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Item 6.
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Signatures
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Exhibit Index
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September 30,
2016 |
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December 31,
2015 |
||||
ASSETS
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|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
116,016
|
|
|
$
|
135,223
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|
Restricted cash
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14,041
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|
|
10,725
|
|
||
Short-term investments
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30,326
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|
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—
|
|
||
Accounts receivable
|
53,700
|
|
|
33,500
|
|
||
Deferred income taxes
|
210
|
|
|
210
|
|
||
Prepaid expenses and other current assets
|
3,773
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|
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4,219
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Total current assets
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218,066
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|
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183,877
|
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||
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||||
Loan receivable and accrued interest (Note 5)
|
8,474
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|
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—
|
|
||
Investment at cost (Note 5)
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1,720
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|
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—
|
|
||
Property and equipment, net
|
155
|
|
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272
|
|
||
Patents, net
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94,716
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162,642
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Other assets
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365
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|
|
1,110
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||
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$
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323,496
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$
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347,901
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|
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
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Current liabilities:
|
|
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|
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Accounts payable and accrued expenses
|
$
|
22,688
|
|
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$
|
17,347
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Accrued patent investment costs
|
225
|
|
|
1,000
|
|
||
Royalties and contingent legal fees payable
|
25,009
|
|
|
14,878
|
|
||
Total current liabilities
|
47,922
|
|
|
33,225
|
|
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Deferred income taxes
|
210
|
|
|
210
|
|
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Other liabilities
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362
|
|
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311
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|
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Total liabilities
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48,494
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|
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33,746
|
|
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Commitments and contingencies (Note 6)
|
|
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|
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Stockholders’ equity:
|
|
|
|
|
|
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Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; no shares issued or outstanding
|
—
|
|
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—
|
|
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Common stock, par value $0.001 per share; 100,000,000 shares authorized; 50,460,880 and 50,651,239 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively
|
50
|
|
|
51
|
|
||
Treasury stock, at cost, 1,729,408 shares as of September 30, 2016 and December 31, 2015
|
(34,640
|
)
|
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(34,640
|
)
|
||
Additional paid-in capital
|
639,118
|
|
|
633,146
|
|
||
Accumulated comprehensive loss
|
(59
|
)
|
|
(215
|
)
|
||
Accumulated deficit
|
(331,587
|
)
|
|
(288,131
|
)
|
||
Total Acacia Research Corporation stockholders’ equity
|
272,882
|
|
|
310,211
|
|
||
Noncontrolling interests in operating subsidiaries
|
2,120
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|
|
3,944
|
|
||
Total stockholders’ equity
|
275,002
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|
314,155
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||
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$
|
323,496
|
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$
|
347,901
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|
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Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
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2015
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2016
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2015
|
||||||||
|
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||||||||
Revenues
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$
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64,658
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$
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12,994
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$
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130,730
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$
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87,540
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Operating costs and expenses:
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||||
Cost of revenues:
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||||
Inventor royalties
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17,844
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|
116
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19,417
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|
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10,706
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|
||||
Contingent legal fees
|
7,709
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|
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1,972
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|
|
22,236
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|
|
12,268
|
|
||||
Litigation and licensing expenses - patents
|
7,348
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|
|
10,345
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22,395
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28,032
|
|
||||
Amortization of patents
|
6,467
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13,688
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27,986
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|
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39,954
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|
||||
General and administrative expenses (including non-cash stock compensation expense of $2,544 and $5,754 for the three and nine months ended September 30, 2016, respectively, and $2,164 and $8,588 for the three and nine months ended September 30, 2015, respectively)
|
8,334
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9,442
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23,863
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29,604
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|
||||
Research, consulting and other expenses - business development
|
666
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|
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802
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2,522
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2,531
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|
||||
Impairment of patent-related intangible assets
|
—
|
|
|
—
|
|
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40,165
|
|
|
—
|
|
||||
Other
|
—
|
|
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3,465
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|
|
500
|
|
|
3,891
|
|
||||
Total operating costs and expenses
|
48,368
|
|
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39,830
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|
159,084
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|
126,986
|
|
||||
Operating income (loss)
|
16,290
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|
|
(26,836
|
)
|
|
(28,354
|
)
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(39,446
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)
|
||||
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|
||||
Total other income (expense)
|
261
|
|
|
(180
|
)
|
|
206
|
|
|
(56
|
)
|
||||
Income (loss) before provision for income taxes
|
16,551
|
|
|
(27,016
|
)
|
|
(28,148
|
)
|
|
(39,502
|
)
|
||||
Provision for income taxes
|
(9,655
|
)
|
|
(337
|
)
|
|
(15,774
|
)
|
|
(626
|
)
|
||||
Income (loss) including noncontrolling interests in operating subsidiaries
|
6,896
|
|
|
(27,353
|
)
|
|
(43,922
|
)
|
|
(40,128
|
)
|
||||
Net (income) loss attributable to noncontrolling interests in operating subsidiaries
|
186
|
|
|
43
|
|
|
466
|
|
|
(3,998
|
)
|
||||
Net income (loss) attributable to Acacia Research Corporation
|
$
|
7,082
|
|
|
$
|
(27,310
|
)
|
|
$
|
(43,456
|
)
|
|
$
|
(44,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to common stockholders - basic and diluted
|
$
|
7,043
|
|
|
$
|
(27,450
|
)
|
|
$
|
(43,456
|
)
|
|
$
|
(44,691
|
)
|
|
|
|
|
|
|
|
|
||||||||
Basic and diluted income (loss) per common share
|
$
|
0.14
|
|
|
$
|
(0.55
|
)
|
|
$
|
(0.87
|
)
|
|
$
|
(0.90
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average number of shares outstanding - basic
|
50,124,302
|
|
|
49,630,369
|
|
|
50,024,047
|
|
|
49,423,548
|
|
||||
Weighted average number of shares outstanding - diluted
|
50,618,757
|
|
|
49,630,369
|
|
|
50,024,047
|
|
|
49,423,548
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash dividends declared per common share
|
$
|
—
|
|
|
$
|
0.125
|
|
|
$
|
—
|
|
|
$
|
0.375
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net income (loss) including noncontrolling interests in operating subsidiaries
|
$
|
6,896
|
|
|
$
|
(27,353
|
)
|
|
$
|
(43,922
|
)
|
|
$
|
(40,128
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized gain (loss) on short-term investments, net of tax of $0
|
16
|
|
|
(94
|
)
|
|
42
|
|
|
(356
|
)
|
||||
Unrealized gain (loss) on foreign currency translation, net of tax of $0
|
96
|
|
|
—
|
|
|
92
|
|
|
(141
|
)
|
||||
Reclassification adjustment for losses included in net income (loss)
|
—
|
|
|
274
|
|
|
22
|
|
|
617
|
|
||||
Total other comprehensive income (loss)
|
7,008
|
|
|
(27,173
|
)
|
|
(43,766
|
)
|
|
(40,008
|
)
|
||||
Comprehensive (income) loss attributable to noncontrolling interests
|
186
|
|
|
43
|
|
|
466
|
|
|
(3,998
|
)
|
||||
Comprehensive income (loss) attributable to Acacia Research Corporation
|
$
|
7,194
|
|
|
$
|
(27,130
|
)
|
|
$
|
(43,300
|
)
|
|
$
|
(44,006
|
)
|
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss including noncontrolling interests in operating subsidiaries
|
$
|
(43,922
|
)
|
|
$
|
(40,128
|
)
|
Adjustments to reconcile net loss including noncontrolling interests in operating subsidiaries to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
28,105
|
|
|
40,129
|
|
||
Non-cash stock compensation
|
5,754
|
|
|
8,588
|
|
||
Impairment of patent-related intangible assets
|
40,165
|
|
|
—
|
|
||
Other
|
(81
|
)
|
|
(127
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
|
|||
Restricted cash
|
(3,316
|
)
|
|
(10,721
|
)
|
||
Accounts receivable
|
(20,200
|
)
|
|
7,411
|
|
||
Prepaid expenses and other assets
|
1,191
|
|
|
(569
|
)
|
||
Accounts payable and accrued expenses
|
5,392
|
|
|
2,680
|
|
||
Royalties and contingent legal fees payable
|
10,131
|
|
|
(5,108
|
)
|
||
Net cash provided by operating activities
|
23,219
|
|
|
2,155
|
|
||
|
|
|
|
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Investments in patents/ patent rights
|
(1,000
|
)
|
|
(19,504
|
)
|
||
Loan receivable
|
(8,280
|
)
|
|
—
|
|
||
Investment at cost
|
(1,720
|
)
|
|
—
|
|
||
Purchases of property and equipment
|
(4
|
)
|
|
(8
|
)
|
||
Purchases of available-for-sale investments
|
(62,633
|
)
|
|
(23,296
|
)
|
||
Maturities and sales of available-for-sale investments
|
32,352
|
|
|
82,115
|
|
||
Net cash provided by (used in) investing activities
|
(41,285
|
)
|
|
39,307
|
|
||
|
|
|
|
|
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Dividends paid to stockholders
|
—
|
|
|
(19,091
|
)
|
||
Repurchased restricted common stock
|
(25
|
)
|
|
—
|
|
||
Distributions to noncontrolling interests in operating subsidiary
|
(1,358
|
)
|
|
—
|
|
||
Proceeds from exercises of stock options
|
242
|
|
|
938
|
|
||
Net cash used in financing activities
|
(1,141
|
)
|
|
(18,153
|
)
|
||
|
|
|
|
|
|
||
Increase (decrease) in cash and cash equivalents
|
(19,207
|
)
|
|
23,309
|
|
||
|
|
|
|
|
|
||
Cash and cash equivalents, beginning
|
135,223
|
|
|
134,466
|
|
||
Cash and cash equivalents, ending
|
$
|
116,016
|
|
|
$
|
157,775
|
|
|
●
|
Level 1 - Observable Inputs: Quoted prices in active markets for identical investments;
|
|
●
|
Level 2 - Pricing Models with Significant Observable Inputs: Other significant observable inputs, including quoted prices for similar investments, interest rates, credit risk, etc.; and
|
|
●
|
Level 3 - Unobservable Inputs: Significant unobservable inputs, including the entity’s own assumptions in determining the fair value of investments.
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator (in thousands):
|
|
|
|
|
|
|
|
|
||||||||
Basic and Diluted
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
|
$
|
7,082
|
|
|
$
|
(27,310
|
)
|
|
$
|
(43,456
|
)
|
|
$
|
(44,126
|
)
|
Undistributed earnings allocated to participating securities
|
|
(39
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total dividends declared / paid
|
|
—
|
|
|
(6,342
|
)
|
|
—
|
|
|
(19,091
|
)
|
||||
Dividends attributable to common stockholders
|
|
—
|
|
|
6,202
|
|
|
—
|
|
|
18,526
|
|
||||
Net income (loss) attributable to common stockholders – basic and diluted
|
|
$
|
7,043
|
|
|
$
|
(27,450
|
)
|
|
$
|
(43,456
|
)
|
|
$
|
(44,691
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares used in computing net income(loss) per share attributable to common stockholders – basic
|
|
50,124,302
|
|
|
49,630,369
|
|
|
50,024,047
|
|
|
49,423,548
|
|
||||
Effect of potentially dilutive securities:
|
|
|
|
|
|
|
|
|
||||||||
Common stock options and restricted stock units
|
|
494,455
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted-average shares used in computing net loss per share attributable to common stockholders – diluted
|
|
50,618,757
|
|
|
49,630,369
|
|
|
50,024,047
|
|
|
49,423,548
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Basic and diluted net income (loss) per common share
|
|
$
|
0.14
|
|
|
$
|
(0.55
|
)
|
|
$
|
(0.87
|
)
|
|
$
|
(0.90
|
)
|
Anti-dilutive equity-based incentive awards excluded from the computation of diluted income (loss) per share
|
|
3,593,708
|
|
|
71,468
|
|
|
4,410,974
|
|
|
71,468
|
|
||||
Minimum price of awards excluded from the computation of diluted income (loss) per share
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Maximum price of awards excluded from the computation of diluted income (loss) per share
|
|
$
|
13.38
|
|
|
$
|
13.38
|
|
|
$
|
13.38
|
|
|
$
|
13.38
|
|
Valuation Technique
|
|
Significant Unobservable Inputs
|
|
Range of Inputs
|
|||
Monte Carlo simulation model
|
|
Volatility
|
|
40
|
%
|
-
|
50%
|
|
|
Marketability discount
|
|
7%
|
|||
|
|
Scenario probabilities
|
|
25
|
%
|
-
|
75%
|
|
August 15, 2016 (Effective Date)
|
|
As of and For the Three Months Ended September 30, 2016
|
||||
Loan receivable
|
$
|
8,280
|
|
|
$
|
8,280
|
|
Accretion on loan discount
|
—
|
|
|
194
|
|
||
Adjusted Veritone Loan balance
|
—
|
|
|
8,474
|
|
||
Investment at cost
|
1,720
|
|
|
1,720
|
|
||
Total
|
$
|
10,000
|
|
|
$
|
10,194
|
|
|
|
|
|
||||
Interest receivable
|
|
|
$
|
75
|
|
||
Interest income
|
|
|
$
|
269
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Revenues (in thousands)
|
$
|
64,658
|
|
|
$
|
12,994
|
|
|
$
|
130,730
|
|
|
$
|
87,540
|
|
New agreements executed
|
11
|
|
|
8
|
|
|
30
|
|
|
51
|
|
||||
Licensing and enforcement programs generating revenues
|
14
|
|
|
13
|
|
|
27
|
|
|
28
|
|
As of Date:
|
|
Trailing Twelve -Month Revenues
|
|
% Change
|
|||
|
|
|
|
|
|||
September 30, 2016
|
|
$
|
168,227
|
|
|
44
|
%
|
June 30, 2016
|
|
$
|
116,563
|
|
|
1
|
%
|
March 31, 2016
|
|
$
|
115,548
|
|
|
(8
|
)%
|
December 31, 2015
|
|
$
|
125,037
|
|
|
5
|
%
|
September 30, 2015
|
|
$
|
118,570
|
|
|
—
|
%
|
•
|
the dollar amount of agreements executed each period, which can be driven by the nature and characteristics of the technology or technologies being licensed and the magnitude of infringement associated with a specific licensee;
|
•
|
the specific terms and conditions of agreements executed each period including the nature and characteristics of rights granted, and the periods of infringement or term of use contemplated by the respective payments;
|
•
|
fluctuations in the total number of agreements executed each period;
|
•
|
the number of, timing, results and uncertainties associated with patent licensing negotiations, mediations, patent infringement actions, trial dates and other enforcement proceedings relating to our patent licensing and enforcement programs;
|
•
|
the relative maturity of licensing programs during the applicable periods;
|
•
|
other external factors, including the periodic status or results of ongoing negotiations, the status or results of ongoing litigations and appeals, actual or perceived shifts in the regulatory environment, impact of unrelated patent related judicial proceedings and other macroeconomic factors; and
|
•
|
historically, based on the merits and strength of our operating subsidiary’s patent infringement claims and other factors, many prospective licensees have elected to settle significant patent infringement cases and pay reasonable license fees for the use of our patented technology, as those patent infringement cases approached a court determined trial date.
|
•
|
4G Wireless technology
|
|
•
|
Lighting Ballast technology
|
•
|
Audio Communications Fraud Detection technology
|
|
•
|
Oil and gas drilling technology
(2)
|
•
|
Bone Wedge technology
|
|
•
|
Online Auction Guarantee technology
|
•
|
Broadband Communications technology
|
|
•
|
Optical Networking technology
|
•
|
Cardiology and Vascular Device technology
|
|
•
|
Reflective and Radiant Barrier Insulation technology
|
•
|
Diamond and Gemstone Grading technology
(1)(2)
|
|
•
|
Semiconductor 3D die stacking technology
(2)
|
•
|
DisplayPort and MIPI DSI technology
|
|
•
|
Semiconductor memory circuit and manufacturing processes technology
(2)
|
•
|
DRAM and Flash Memory technology
|
|
•
|
Shared Memory for Multimedia Processing technology
|
•
|
Electronic spreadsheet, data analysis and software development technology
|
|
•
|
Speech codes used in wireless and wireline systems technology
|
•
|
Flash Memory technology
(2)
|
|
•
|
Super Resolutions Microscopy technology
|
•
|
Gas Modulation Control Systems technology
|
|
•
|
Telematics technology
|
•
|
High Speed Circuit Interconnect and Display Control technology
|
|
•
|
Variable Data Printing technology
(1)(2)
|
•
|
Interstitial and Pop-Up Internet Advertising technology
|
|
•
|
Wireless Infrastructure and User Equipment technology
|
•
|
Knee Replacement technology
|
|
|
|
(1)
|
Initial revenues recognized during the three months ended September 30, 2016
|
(2)
|
Initial revenues recognized during the nine months ended September 30, 2016
|
•
|
360 Degree View Technology
(1)
|
|
•
|
Location Based Services technology
|
•
|
3G & 4G Cellular Air Interface and Infrastructure technology
|
|
•
|
Messaging technology
|
•
|
4G Wireless technology
|
|
•
|
Oil and Gas Production technology
|
•
|
Audio Communications Fraud Detection technology
|
|
•
|
Online Auction Guarantee technology
|
•
|
Automotive Safety, Navigation and Diagnostics technology
|
|
•
|
Optical Networking technology
|
•
|
Bone Wedge technology
|
|
•
|
Optimized Microprocessor Operation technology
|
•
|
Broadband Communications technology
|
|
•
|
Reflective and Radiant Barrier Insulation technology
|
•
|
Cardiology and Vascular Device technology
|
|
•
|
Semiconductor Testing technology
(1)
|
•
|
DisplayPort and MIPI DSI technology
(1)
|
|
•
|
Speech codes used in wireless and wireline systems technology
|
•
|
Electronic Access Control technology
|
|
•
|
Super Resolutions Microscopy technology
|
•
|
Gas Modulation Control Systems technology
|
|
•
|
Surgical Access technology
|
•
|
Innovative Display technology
|
|
•
|
Suture Anchors technology
|
•
|
Intercarrier SMS technology
|
|
•
|
Telematics technology
|
•
|
Interstitial and Pop-Up Internet Advertising technology
|
|
•
|
Unicondylar Knee Replacement technology
|
(1)
|
Initial revenues recognized during the three months ended September 30, 2015
|
(2)
|
Initial revenues recognized during the nine months ended September 30, 2015
|
|
Three Months Ended
September 30, |
|
%
|
|
Nine Months Ended
September 30, |
|
%
|
||||||||||||||
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
$
|
64,658
|
|
|
$
|
12,994
|
|
|
398
|
%
|
|
$
|
130,730
|
|
|
$
|
87,540
|
|
|
49
|
%
|
Operating costs and expenses
|
48,368
|
|
|
39,830
|
|
|
21
|
%
|
|
159,084
|
|
|
126,986
|
|
|
25
|
%
|
||||
Operating income (loss)
|
16,290
|
|
|
(26,836
|
)
|
|
(161
|
)%
|
|
(28,354
|
)
|
|
(39,446
|
)
|
|
(28
|
)%
|
||||
Income (loss) before provision for income taxes
|
16,551
|
|
|
(27,016
|
)
|
|
(161
|
)%
|
|
(28,148
|
)
|
|
(39,502
|
)
|
|
(29
|
)%
|
||||
Provision for income taxes
|
(9,655
|
)
|
|
(337
|
)
|
|
*
|
|
|
(15,774
|
)
|
|
(626
|
)
|
|
*
|
|
||||
Net (income) loss attributable to noncontrolling interests in operating subsidiaries
|
186
|
|
|
43
|
|
|
333
|
%
|
|
466
|
|
|
(3,998
|
)
|
|
(112
|
)%
|
||||
Net income (loss) attributable to Acacia Research Corporation
|
7,082
|
|
|
(27,310
|
)
|
|
(126
|
)%
|
|
(43,456
|
)
|
|
(44,126
|
)
|
|
(2
|
)%
|
•
|
Revenues increased
$51.7 million
, or
398%
, to
$64.7 million
for the three months ended
September 30, 2016
, as compared to
$13.0 million
in the comparable prior year quarter,
due primarily to an increase in average revenue per agreement
.
|
•
|
Income before taxes was
$16.6 million
for the three months ended
September 30, 2016
, as compared to a loss before income taxes of
$27.0 million
for the three months ended
September 30, 2015
. The change was due primarily to a
$51.7 million
increase in revenue, partially offset by a net decrease in operating expenses, including the following:
|
•
|
Cost of Revenues and Other Operating Expenses:
|
•
|
Inventor royalties and contingent legal fees, on a combined basis, increased
$23.5 million
, in excess of 400%, compared to the
398%
increase in related revenues for the same periods, due primarily due to lower average inventor royalty rates for the portfolios generating revenues in the third quarter of 2015, as compared to the portfolios generating revenues in the third quarter of 2016.
|
•
|
Litigation and licensing expenses-patents decreased
$3.0 million
, or
29%
, to
$7.3 million
, d
ue primarily to a net decrease in litigation support costs associated with upcoming trials and a decrease in patent prosecution and litigation expenses associated with ongoing licensing and enforcement programs.
|
•
|
Amortization expense decreased
$7.2 million
, or
53%
, to
$6.5 million
, due to a decrease in scheduled amortization on existing patent portfolios resulting from various patent portfolio impairment charges previously recorded in the fourth quarter of 2015 and second quarter of 2016.
|
•
|
General and administrative expenses decreased
$1.1 million
, or
12%
, to
$8.3 million
,
due primarily to a net decrease in personnel costs in connection with head count reduction activities in 2015 and 2016.
|
•
|
Other operating expense was
$3.5 million
for the three months ended September 30, 2015. Other operating expense included expense accruals for court ordered attorney fees related to a matter initiated in 2010, and settlement and contingency accruals for other matters.
|
•
|
Revenues increased
$43.2 million
, or
49%
to
$130.7 million
, as compared to
$87.5 million
in the comparable prior year period,
due primarily to an increase in average revenue per agreement
.
|
•
|
Loss before income taxes decreased
29%
, to
$28.1 million
, as compared to
$39.5 million
in the comparable prior year period, due to the
49%
increase in revenues,
offset by an increase in inventor royalties and contingent legal fees and
$40.2 million
of patent impairment charges.
|
•
|
Cost of Revenues and Other Operating Expenses:
|
•
|
Inventor royalties and contingent legal fees, on a combined basis, increased
$18.7 million
, or
81%
, as compared to the
49%
increase in related revenues for the same periods, due to lower average inventor royalty and contingent legal fee rates the portfolios generating revenues during the nine months ended September 30, 2015 as compared to the portfolios generating revenues during the nine months ended September 30, 2016.
|
•
|
Litigation and licensing expenses-patents decreased
$5.6 million
, or
20%
, to
$22.4 million
, d
ue primarily to a net decrease in litigation support costs associated with upcoming trials and a decrease in patent prosecution and litigation expenses associated with ongoing licensing and enforcement programs.
|
•
|
Amortization of patents decreased
$12.0 million
, or
30%
, to
$28.0 million
, due primarily to a decrease in scheduled amortization on existing patent portfolios resulting from various patent portfolio impairment charges previously recorded in the fourth quarter of 2015 and the second quarter of 2016.
|
•
|
Marketing, general and administrative expenses decreased
$5.7 million
, or
19%
, to
$23.9 million
,
due primarily to a net decrease in non-cash stock compensation charges and a decrease in personnel costs in connection with head count reduction activities in 2015 and 2016.
|
•
|
Impairment of patent-related intangible asset charges totaled
$40.2 million
for the nine months ended September 30, 2016, reflecting the impact of reductions in expected estimated future net cash flows for certain patent portfolios and certain patent portfolios that management determined it would no longer allocate resources to in future periods.
|
•
|
The effective tax rates for the nine months
ended
September 30, 2016
and
2015
were
56%
and
2%
, respectively. Tax expense for the periods presented primarily reflects the impact of foreign withholding taxes related to revenue agreements executed with third party licensees domiciled in foreign jurisdictions.
|
•
|
Increases in patent-related legal expenses associated with patent infringement litigation, including, but not limited to, increases in costs billed by outside legal counsel for discovery, depositions, economic analyses, damages assessments, expert witnesses and other consultants, re-exam and i
nter partes review costs,
case-related audio/video presentations and other litigation support and administrative costs could increase our operating costs and decrease our profit generating opportunities;
|
•
|
Our patented technologies and enforcement actions are complex and, as a result, we may be required to appeal adverse decisions by trial courts in order to successfully enforce our patents. Moreover, such appeals may not be successful;
|
•
|
New legislation, regulations or rules related to enforcement actions, including any fee or cost shifting provisions, could significantly increase our operating costs and decrease our profit generating opportunities.
Increased focus on the growing number of patent-related lawsuits may result in legislative changes which increase our costs and related risks of asserting patent enforcement actions. For instance, the United States House of Representatives passed a bill that would require non-practicing entities that bring patent infringement lawsuits to pay legal costs of the defendants, if the lawsuits are unsuccessful and certain standards are not met;
|
•
|
Courts may rule that our subsidiaries have violated certain statutory, regulatory, federal, local or governing rules or standards by pursuing such enforcement actions, which may expose us and our operating subsidiaries to material liabilities, which could harm our operating results and our financial position; and
|
•
|
The complexity of negotiations and potential magnitude of exposure for potential infringers associated with higher quality patent portfolios may lead to increased intervals of time between the filing of litigation and potential revenue events (i.e. markman dates, trial dates), which may lead to increased legal expenses, consistent with the higher revenue potential of such portfolios.
|
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Revenues (in thousands, except percentage change values)
|
|
$
|
64,658
|
|
|
$
|
12,994
|
|
|
$
|
51,664
|
|
|
398
|
%
|
|
$
|
130,730
|
|
|
$
|
87,540
|
|
|
$
|
43,190
|
|
|
49
|
%
|
New agreements executed
|
|
11
|
|
|
8
|
|
|
|
|
|
|
30
|
|
|
51
|
|
|
|
|
|
||||||||||
Average revenue per agreement (in thousands)
|
|
$
|
5,878
|
|
|
$
|
1,624
|
|
|
|
|
|
|
$
|
4,358
|
|
|
$
|
1,716
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||
|
|
2016 vs. 2015
|
|
2016 vs. 2015
|
||||
|
|
|
||||||
Change in number of agreements executed
|
|
$
|
4,873
|
|
|
$
|
(36,046
|
)
|
Change in average revenue per agreement executed
|
|
46,791
|
|
|
79,236
|
|
||
Total change in revenues
|
|
$
|
51,664
|
|
|
$
|
43,190
|
|
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
|
(in thousands, except percentage change values)
|
||||||||||||||||||||||||||||
Income (loss) before provision for income taxes
|
|
$
|
16,551
|
|
|
$
|
(27,016
|
)
|
|
$
|
43,567
|
|
|
(161
|
)%
|
|
$
|
(28,148
|
)
|
|
$
|
(39,502
|
)
|
|
$
|
11,354
|
|
|
(29
|
)%
|
|
Three Months Ended
September 30, |
|
|
|
Nine Months Ended
September 30, |
|
|
||||||
|
2016 vs. 2015
|
|
%
|
|
2016 vs. 2015
|
|
%
|
||||||
|
(in thousands, except percentage values)
|
||||||||||||
Increase in revenues
|
$
|
51,664
|
|
|
119
|
%
|
|
$
|
43,190
|
|
|
380
|
%
|
Increase in inventor royalties and contingent legal fees
|
(23,465
|
)
|
|
(54
|
)%
|
|
(18,679
|
)
|
|
(165
|
)%
|
||
Decrease in general and administrative expenses
|
1,108
|
|
|
3
|
%
|
|
5,741
|
|
|
51
|
%
|
||
Decrease in litigation and licensing expenses
|
2,997
|
|
|
7
|
%
|
|
5,637
|
|
|
50
|
%
|
||
Decrease in patent amortization expenses
|
7,221
|
|
|
17
|
%
|
|
11,968
|
|
|
105
|
%
|
||
Increase in impairment of patent-related intangible assets
|
—
|
|
|
—
|
%
|
|
(40,165
|
)
|
|
(354
|
)%
|
||
Other
|
4,042
|
|
|
8
|
%
|
|
3,662
|
|
|
33
|
%
|
||
Total change in income (loss) before provision for income taxes
|
$
|
43,567
|
|
|
100
|
%
|
|
$
|
11,354
|
|
|
100
|
%
|
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
|
(in thousands, except percentage change values)
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Inventor royalties
|
|
$
|
17,844
|
|
|
$
|
116
|
|
|
$
|
17,728
|
|
|
*
|
|
|
$
|
19,417
|
|
|
$
|
10,706
|
|
|
$
|
8,711
|
|
|
81
|
%
|
Contingent legal fees
|
|
$
|
7,709
|
|
|
$
|
1,972
|
|
|
$
|
5,737
|
|
|
291
|
%
|
|
$
|
22,236
|
|
|
$
|
12,268
|
|
|
$
|
9,968
|
|
|
81
|
%
|
|
|
Three Months Ended
September 30, |
|
%
|
|
Nine Months Ended
September 30, |
|
%
|
||||||
|
|
2016 vs. 2015
|
|
|
2016 vs. 2015
|
|
||||||||
Inventor Royalties:
|
|
|
||||||||||||
Increase in total revenues
|
|
$
|
493
|
|
|
3
|
%
|
|
$
|
5,609
|
|
|
64
|
%
|
Increase in inventor royalty rates
|
|
17,430
|
|
|
98
|
%
|
|
12,501
|
|
|
144
|
%
|
||
Increase in revenues without inventor royalty obligations primarily due to upfront advance related preferred returns
|
|
(195
|
)
|
|
(1
|
)%
|
|
(9,399
|
)
|
|
(108
|
)%
|
||
Total change in inventor royalties expense
|
|
$
|
17,728
|
|
|
100
|
%
|
|
$
|
8,711
|
|
|
100
|
%
|
Contingent Legal Fees:
|
|
|
|
|
|
|
|
|
||||||
Increase in total revenues
|
|
$
|
8,089
|
|
|
141
|
%
|
|
$
|
6,191
|
|
|
62
|
%
|
Increase (decrease) in contingent legal fee rates
|
|
(1,686
|
)
|
|
(29
|
)%
|
|
4,460
|
|
|
45
|
%
|
||
Increase in revenues without contingent legal fee obligations
|
|
(666
|
)
|
|
(12
|
)%
|
|
(683
|
)
|
|
(7
|
)%
|
||
Total change in contingent legal fees expense
|
|
$
|
5,737
|
|
|
100
|
%
|
|
$
|
9,968
|
|
|
100
|
%
|
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
|
(in thousands, except percentage change values)
|
||||||||||||||||||||||||||||
Litigation and licensing expenses - patents
|
|
$
|
7,348
|
|
|
$
|
10,345
|
|
|
$
|
(2,997
|
)
|
|
(29
|
)%
|
|
$
|
22,395
|
|
|
$
|
28,032
|
|
|
$
|
(5,637
|
)
|
|
(20
|
)%
|
Amortization of patents
|
|
$
|
6,467
|
|
|
$
|
13,688
|
|
|
$
|
(7,221
|
)
|
|
(53
|
)%
|
|
$
|
27,986
|
|
|
$
|
39,954
|
|
|
$
|
(11,968
|
)
|
|
(30
|
)%
|
Impairment of patent-related intangible assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
40,165
|
|
|
$
|
—
|
|
|
$
|
40,165
|
|
|
100
|
%
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
General and administrative expenses
|
$
|
5,790
|
|
|
$
|
7,278
|
|
|
$
|
(1,488
|
)
|
|
(20
|
)%
|
|
$
|
18,109
|
|
|
$
|
21,016
|
|
|
$
|
(2,907
|
)
|
|
(14
|
)%
|
Non-cash stock compensation expense
|
2,544
|
|
|
2,164
|
|
|
380
|
|
|
18
|
%
|
|
5,754
|
|
|
8,588
|
|
|
(2,834
|
)
|
|
(33
|
)%
|
||||||
Total general and administrative expenses
|
$
|
8,334
|
|
|
$
|
9,442
|
|
|
$
|
(1,108
|
)
|
|
(12
|
)%
|
|
$
|
23,863
|
|
|
$
|
29,604
|
|
|
$
|
(5,741
|
)
|
|
(19
|
)%
|
|
Three Months Ended
September 30, |
|
|
|
Nine Months Ended
September 30, |
|
|
||||||
|
2016 vs. 2015
|
|
%
|
|
2016 vs. 2015
|
|
%
|
||||||
|
|
|
|
||||||||||
Personnel cost reductions due to headcount reductions
|
$
|
(1,509
|
)
|
|
136
|
%
|
|
$
|
(4,745
|
)
|
|
83
|
%
|
Variable performance-based compensation costs
|
979
|
|
|
(88
|
)%
|
|
783
|
|
|
(14
|
)%
|
||
Corporate, general and administrative costs
|
447
|
|
|
(40
|
)%
|
|
1,781
|
|
|
(31
|
)%
|
||
Non-cash stock compensation expense
|
380
|
|
|
(34
|
)%
|
|
(2,834
|
)
|
|
49
|
%
|
||
Non-recurring employee severance costs
|
(1,405
|
)
|
|
126
|
%
|
|
(726
|
)
|
|
13
|
%
|
||
Total change in general and administrative expenses
|
$
|
(1,108
|
)
|
|
100
|
%
|
|
$
|
(5,741
|
)
|
|
100
|
%
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Provision for income taxes (in thousands)
|
$
|
(9,655
|
)
|
|
$
|
(337
|
)
|
|
$
|
(15,774
|
)
|
|
$
|
(626
|
)
|
Effective tax rate
|
(58
|
)%
|
|
1
|
%
|
|
56
|
%
|
|
2
|
%
|
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
|
|
|
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
23,219
|
|
|
$
|
2,155
|
|
Investing activities
|
(41,285
|
)
|
|
39,307
|
|
||
Financing activities
|
(1,141
|
)
|
|
(18,153
|
)
|
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
|
|
|
|
||||
Available-for-sale investments, net
|
$
|
(30,281
|
)
|
|
$
|
58,819
|
|
Investments in patents/ patent rights
|
(1,000
|
)
|
|
(19,504
|
)
|
||
Loan receivable
|
(8,280
|
)
|
|
—
|
|
||
Investment at cost
|
(1,720
|
)
|
|
—
|
|
||
Purchases of property and equipment
|
(4
|
)
|
|
(8
|
)
|
||
Net cash provided by (used in) investing activities
|
$
|
(41,285
|
)
|
|
$
|
39,307
|
|
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
|
|
|
|
|
|
||
Dividends paid to stockholders
|
$
|
—
|
|
|
$
|
(19,091
|
)
|
Distributions to noncontrolling interests in operating subsidiary
|
(1,358
|
)
|
|
—
|
|
||
Repurchased restricted common stock
|
(25
|
)
|
|
—
|
|
||
Proceeds from exercises of stock options
|
242
|
|
|
938
|
|
||
Net cash used in financing activities
|
$
|
(1,141
|
)
|
|
$
|
(18,153
|
)
|
|
Payments Due by Period (In thousands)
|
||||||||||||||||||
Contractual Obligations
|
Total
|
|
Less than 1 year
|
|
1-3 years
|
|
3-5 years
|
|
More than 5 years
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating leases, net of guaranteed sublease income
|
$
|
4,219
|
|
|
$
|
201
|
|
|
$
|
2,569
|
|
|
$
|
1,449
|
|
|
$
|
—
|
|
Investment Agreement - Second Loan, contingent obligation
(1)
|
10,000
|
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Investment Agreement - Primary Warrant Put Right, contingent obligation
(1)
|
30,000
|
|
|
—
|
|
|
30,000
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
44,219
|
|
|
$
|
10,201
|
|
|
$
|
32,569
|
|
|
$
|
1,449
|
|
|
$
|
—
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||
|
|
2016
|
|
2016
|
||||
|
|
|
|
|
||||
Preliminary net income (loss), initially included in release
|
|
$
|
7,989
|
|
|
$
|
(42,549
|
)
|
Interest income and accretion on First Loan
(1)
|
|
269
|
|
|
269
|
|
||
Additional non-cash stock compensation - options with market based vesting conditions
(2)
|
|
(1,176
|
)
|
|
(1,176
|
)
|
||
Adjusted net income (loss), as reported on Form 10-Q
|
|
$
|
7,082
|
|
|
$
|
(43,456
|
)
|
|
|
|
|
|
||||
Preliminary income (loss) per share, initially included in release
|
|
$
|
0.16
|
|
|
$
|
(0.85
|
)
|
Adjusted income (loss) per share, as reported on Form 10-Q
|
|
$
|
0.14
|
|
|
$
|
(0.87
|
)
|
EXHIBIT
NUMBER
|
EXHIBIT
|
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
32.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
|
32.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
|
101
|
Interactive Data Files Pursuant to Rule 405 of Regulation S-T
|
|
ACACIA RESEARCH CORPORATION
|
|
|
|
/
s/ Marvin Key
|
|
By: Marvin Key
|
|
Interim Chief Executive Officer
|
|
(Principal Executive Officer and Duly Authorized Signatory)
|
|
|
|
/s/ Clayton J. Haynes
|
|
By: Clayton J. Haynes
|
|
Chief Financial Officer and Treasurer
|
|
(Principal Financial and Accounting Officer)
|
EXHIBIT
NUMBER
|
EXHIBIT
|
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
32.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
|
32.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
|
101
|
Interactive Data Files Pursuant to Rule 405 of Regulation S-T.
|
1 Year Acacia Research Technolo... Chart |
1 Month Acacia Research Technolo... Chart |
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