Business Wire | Nov 9, 2020 08:20AM EST

Acacia Research Reports Third Quarter 2020 Financial Results

Nov. 09, 2020

NEW YORK--(BUSINESS WIRE)--Nov. 09, 2020--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 Value Shares

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

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.

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

^2 Value of Oxford Nanopore Technologies securities based on observedtransactions during the quarter; Remaining holdings of private companysecurities 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 CORPORATIONUNAUDITED 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



Portfoliooperations:

Inventor 5,772 776 6,843 4,752 royalties

Contingent 6,609 35 6,855 587 legal fees

Litigation andlicensing 1,001 987 3,497 6,643 expenses -patents

Amortization 1,174 863 3,522 2,337 of patents

Otherportfolio - (475 ) (308 ) 175 expenses(income)

Totalportfolio 14,556 2,186 20,409 14,494 operations

Net portfolio 4,910 (475 ) 4,990 (3,936 )income (loss)

General andadministrative 7,692 4,630 18,089 12,048 expenses

Operating loss (2,782 ) (5,105 ) (13,099 ) (15,984 )



Other income(expense):

Change in fairvalue of (3,081 ) (4,266 ) 3,704 9,622 investment,net

Loss on sale - (915 ) (2,762 ) (8,147 )of investment

Impairment ofother - - - (8,195 )investment

Gain ondisposal of - 2,000 - 2,000 otherinvestment

Change in fairvalue of theSeries A and B 20,672 - (46,612 ) - warrants andembeddedderivatives

Change in fairvalue ofequitysecurities (64,011 ) - 17,542 - derivative andforwardcontract

Gain on saleof prepaid 2,845 - 2,845 - investment andderivative

Change in fairvalue oftradingsecurities and 84,499 (482 ) 81,907 132 equitysecurities -private

Gain (loss) onsale of 2,737 238 (4,272 ) 226 tradingsecurities

Loss onforeign (48 ) (106 ) (4,938 ) (106 )currencyexchange

Interestexpense on (2,410 ) - (3,178 ) - Senior SecuredNotes

Interestincome and 10 1,028 811 3,012 other

Total otherincome 41,213 (2,503 ) 45,047 (1,456 )(expense)



Income (loss)before income 38,431 (7,608 ) 31,948 (17,440 )taxes



Income taxbenefit (83 ) - 1,257 (323 )(expense)



Net income(loss)including 38,348 (7,608 ) 33,205 (17,763 )noncontrollinginterests insubsidiaries



Net lossattributableto - - - 14 noncontrollinginterests insubsidiaries



Net income(loss)attributable $ 38,348 $ (7,608 ) $ 33,205 $ (17,749 )to AcaciaResearchCorporation



Net income(loss)attributable $ 30,529 $ (7,608 ) $ 24,838 $ (17,749 )to commonstockholders -basic



Basic netincome (loss) $ 0.63 $ (0.15 ) $ 0.51 $ (0.36 )per commonshare

Weightedaverage numberof shares 48,467,885 49,828,361 48,949,706 49,727,385 outstanding -basic



Net income(loss)attributable $ 29,204 $ (7,608 ) $ 21,380 $ (17,749 )to commonstockholders -diluted



Diluted netincome (loss) $ 0.32 $ (0.15 ) $ 0.36 $ (0.36 )per commonshare

Weightedaverage numberof shares 90,624,702 49,828,361 60,153,773 49,727,385 outstanding -diluted





(1) Generalandadministrativeexpenses werecomprised ofthe following:



Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

General andadministrative $ 7,204 $ 4,330 $ 16,846 $ 11,295 expenses

Non-cash stockcompensation 488 300 1,243 753 expense - G&A

Total generaland $ 7,692 $ 4,630 $ 18,089 $ 12,048 administrativeexpenses

The accompanying notes are an integral part ofthese condensed consolidated financialstatements.

ACACIA RESEARCH CORPORATIONUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share data)September 30,

December 31,

2020

2019

ASSETSCurrent 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' equity200,458

173,125

Noncontrolling interests1,833

1,833

Total stockholders' equity202,291

174,958

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

426,515

$

218,161

View source version on businesswire.com: https://www.businesswire.com/news/home/20201109005603/en/

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