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Press release content from Business Wire. The AP news staff was not involved in its creation.

Acacia Research Reports Third Quarter 2021 Financial Results

November 15, 2021 GMT

NEW YORK--(BUSINESS WIRE)--Nov 15, 2021--

Acacia Research Corporation (Nasdaq: ACTG) today reported results for the three- and nine-month periods ended September 30, 2021.

Clifford Press, Chief Executive Officer, stated, “This was a milestone quarter highlighted by the IPO of Oxford Nanopore Technologies Limited. Oxford Nanopore represented a nearly $120 million realized and unrealized gain in the quarter, between the sale of a small portion of our stake and the increased value in our remaining position. As a result, our pro forma book value at September 30, 2021 increased to $6.31 per share. In addition, subsequent to the end of the quarter, we completed our first operating company acquisition, as we welcome Printronix to the Acacia family.”

“Acacia’s recently completed and proposed M&A activity represents our mature business model coming into focus,” continued Mr. Press. “Over the past year, we have expanded our team, bolstered our capital base and positioned Acacia as a corporate acquirer, with the flexibility, capability and expertise to pursue multiple public and private opportunities, including complex transactions, avoiding large, competitive auctions, while evaluating a diverse set of situations. Our highly collaborative partnership with Starboard Value LP and our strong capital base, comprised of cash, public and private investments, IP assets and the addition of the profitable Printronix business, facilitates a healthy pipeline of potential attractive operating company investments.”

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During the third quarter, Acacia recognized $101 million in realized and unrealized gains in the value of the life sciences portfolio acquired in June 2020. To date, based on the current value of the remaining positions, Acacia has recovered $256 million of the aggregate portfolio purchase price of $282 million. As of September 30, 2021, Acacia holds the following positions in its life sciences portfolio:

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Public Securities
Based on Market Value (at September 30, 2021)
CompanyTickerNumber of SharesValue
Oxford Nanopore Technologies 1LSE: ONT35.1 mm$267.8 mm
Arix Bioscience plcLSE: ARIX25.8 mm$52.8 mm
Immunocore 2IMCR0.68 mm$25.2 mm
Induction Healthcare Group plcAIM: INHC4.2 mm$2.9 mm
 
Total Public Holdings 3$348.7 mm
 
Private Securities
Carried at Cost (at September 30, 2021)
CompanyOwnership PercentageValue
Viamet Pharmaceuticals26% \
AMO Pharma24% }$25.7 mm
NovaBiotics4% /
 
Total Private Holdings$25.7 mm
 
1 Sold 3.9 mm shares in Q3, balance carried at discount due to lockup.
2 Sold 0.75 mm shares in Q3.
3 Remaining value following $44 mm of sale proceeds.

Third Quarter 2021 Financial Summary:

  • Cash, cash equivalents and equity investments at fair value totaled $605.1 million at September 30, 2021, compared to $274.6 million at December 31, 2020.
  • Equity securities without readily determinable fair value totaled $5.8 million at September 30, 2021; compared to $143.3 million at December 31, 2020, which such reduction reflects the initial public offerings of two previously private portfolio companies in 2021.
  • Investment securities representing equity method investments totaled $31.8 million (before $11.9 million in noncontrolling interests), compared to $30.7 million (before $11.0 million in noncontrolling interests) at December 31, 2020.
  • Debt, which represents the Senior Secured Notes issued to Starboard Value LP, was $182.9 million at September 30, 2021.
  • Book value totaled $235.9 million, or $4.82 per share, as of September 30, 2021, compared to $292.5 million, or $5.94 per share, at December 31, 2020. Acacia’s current book value reflects the impact of the increase in the Company’s share price on its warrant and embedded derivative liabilities. Assuming full exercise of all issued derivatives, Acacia’s pro forma book value would rise to $1.0 billion, or $6.31 per share, up from $882.5 million, or $5.39 per share, as of December 31, 2020. [1]
  • Gross revenues were $1.6 million, compared to $19.5 million in the third quarter of last year.
  • General and administrative expenses were $10.3 million, compared to $7.7 million in the third quarter of last year due to increased business development and personnel expenses as we build out our capacity to identify, evaluate and execute acquisitions.
  • Operating loss was $12.7 million, compared to a loss of $2.8 million in the third quarter of last year.
  • GAAP net income to common stockholders was $80.2 million, or $0.86 per diluted share, compared to net income of $29.2 million, or $0.32 per diluted share, in the third quarter of last year.

Pro Forma Book Value and Changes to Derivative Valuations

As of September 30, 2021, book value was $235.9 million and there were 48.9 million weighted-average shares of common stock outstanding in the third quarter of 2021, for a book value per share of $4.82, up from $3.02 at June 30, 2021 and down from $5.94 at December 31, 2020. The decline since December 31, 2020 is due to the impact of the increase in non-cash liabilities associated with the warrants and preferred stock held by Starboard Value LP. This was driven by the increase in Acacia’s share price from $3.94 at December 31, 2020 to $6.79 at September 30, 2021. Total liabilities for these warrants and preferred stock stood at $289.6 million at September 30, 2021. All of these derivative liabilities would be eliminated upon exercise or expiration of all such warrants and preferred stock.

Book value at September 30, 2021 reflects the impact of the following:

  • $180 million of face value of Notes issued to Starboard Value LP, $115 million of which may be used to exercise Series B warrants at $3.65 per share;
  • $35 million in face value of Series A preferred stock issued to Starboard Value LP; and
  • $289.6 million of warrants and embedded derivative liabilities associated with all preferred stock and warrants held by Starboard Value LP, to be eliminated upon exercise or expiration of all such warrants and preferred stock.

Assuming Starboard Value LP converted all preferred stock and exercised all warrants:

  • $115 million of liabilities attributable to the Notes would be eliminated, and 31.5 million shares of common stock would be issued;
  • $35 million in face value of preferred stock would be eliminated, and 9.6 million shares of common stock would be issued;
  • $289.6 million embedded derivative liabilities attributed to the warrants would be eliminated; and
  • $378 million of cash would be added upon exercise of the remaining Series B warrants and Series A warrants, and 73.5 million shares of common stock would be issued

The expected impact of this would be an incremental $796.1 million in book value, and an incremental 114.6 million shares outstanding. Assuming such conversion and exercise, pro forma book value would be $1,032 million, and diluted shares outstanding would be 163.5 million, for book value per share of $6.31, up from $5.77 at June 30, 2021 and from $5.39 at December 31, 2020.

_____________________

[1] Under generally accepted accounting principles, or GAAP, book value reflects the impact of the liabilities associated with potential issuance of shares related to the Company’s warrants and convertible preferred stock. As the value of those liabilities varies with fluctuations in our share price, we believe a presentation of book value assuming full exercise of all warrants and preferred presents a useful measure of book value for investors. This non-GAAP measure does have its limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results under GAAP.

Investor Conference Call:

The Company will host a conference call today, November 15, 2021 at 4:30 p.m. ET/ 1:30 p.m. PT.

To access the live call, please dial 888-506-0062 (U.S. and Canada) or 973-528-0011 (international). The conference call will also be simultaneously webcasted on the investor relations section of the Company’s website at http://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 Acacia Research Corporation

Acacia Research (NASDAQ: ACTG) seeks to acquire undervalued businesses and pursues opportunities for value creation. We leverage our (i) access to flexible capital that can be deployed unconditionally, (ii) expertise in corporate governance and operational restructuring, (iii) willingness to invest in out of favor industries and businesses that suffer from a complexity discount and untangle complex, multi-factor situations, and (iv) expertise and relationships in certain sectors, to complete strategic acquisitions of businesses, divisions, and/or assets with a focus on mature technology, healthcare, industrial and certain financial segments. We seek to identify opportunities where we believe we are advantaged buyers, where we can avoid structured sale processes and create the opportunity to purchase businesses, divisions and/or assets of companies at an attractive price due to our unique capabilities, relationships, or expertise, or where we believe the target would be worth more to us than to other buyers. 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 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, 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 foregoing, and other SEC filings discuss some of the important risk factors that may affect our business, results of operations and financial condition. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

The results achieved in the most recent quarter are not necessarily indicative of the results to be achieved by us in any subsequent quarters, as it is currently anticipated that Acacia Research Corporation’s financial results will vary, and may vary significantly, from quarter to quarter. This variance is expected to result from a number of factors, including risk factors affecting our results of operations and financial condition referenced above, and the particular structure of our licensing transactions, which may impact the amount of inventor royalties and contingent legal fees expenses we incur from period to period.

ACACIA RESEARCH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 
September 30,December 31,

 

2021

 

 

2020

 

 
ASSETS
Current assets:
Cash and cash equivalents

$

217,957

 

$

165,546

 

Restricted cash

 

761

 

 

-

 

Equity securities at fair value

 

387,120

 

 

109,103

 

Equity securities without readily determinable fair value

 

5,816

 

 

143,257

 

Investment securities - equity method investments

 

31,840

 

 

30,673

 

Investment at fair value

 

-

 

 

2,752

 

Accounts receivable

 

412

 

 

506

 

Other receivable

 

21,539

 

 

-

 

Prepaid expenses and other current assets

 

3,986

 

 

5,832

 

Total current assets

 

669,431

 

 

457,669

 

 

Long-term restricted cash

 

35,424

 

 

35,000

 

Patents, net of accumulated amortization

 

39,826

 

 

16,912

 

Leased right-of-use assets

 

671

 

 

951

 

Other non-current assets

 

4,482

 

 

4,988

 

Total assets

$

749,834

 

$

515,520

 

 

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable

$

2,196

 

$

1,019

 

Accrued expenses and other current liabilities

 

5,586

 

 

3,707

 

Accrued compensation

 

4,019

 

 

2,265

 

Royalties and contingent legal fees payable

 

1,793

 

 

2,162

 

Accrued patent investment costs

 

8,000

 

 

-

 

Senior Secured Notes Payable

 

182,855

 

 

115,663

 

Total current liabilities

 

204,449

 

 

124,816

 

 
Series A warrant liabilities

 

18,527

 

 

6,640

 

Series A embedded derivative liabilities

 

41,411

 

 

26,728

 

Series B warrant liabilities

 

229,637

 

 

52,341

 

Long-term lease liabilities

 

671

 

 

951

 

Other long-term liabilities

 

5,591

 

 

591

 

Total liabilities

 

500,286

 

 

212,067

 

 
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 September 30, 2021 and December 31, 2020; aggregate liquidation preference of $35,000 as of September 30, 2021 and December 31, 2020

 

13,686

 

 

10,924

 

 
Stockholders' equity:
Common stock, par value $0.001 per share; 300,000,000 shares authorized; 49,591,852 and 49,279,453 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

50

 

 

49

 

Treasury stock, at cost, 4,604,365 shares as of September 30, 2021 and December 31, 2020

 

(43,270

)

 

(43,270

)

Additional paid-in capital

 

649,349

 

 

651,416

 

Accumulated deficit

 

(382,215

)

 

(326,708

)

Total Acacia Research Corporation stockholders' equity

 

223,914

 

 

281,487

 

 
Noncontrolling interests

 

11,948

 

 

11,042

 

 
Total stockholders' equity

 

235,862

 

 

292,529

 

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

$

749,834

 

$

515,520

 

ACACIA RESEARCH CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
 
Three Months EndedNine Months Ended
September 30,September 30,

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

Revenues

$

1,582

 

$

19,466

 

$

24,785

 

$

25,399

 

 
Patent portfolio operations:
Inventor royalties

 

280

 

 

5,772

 

 

823

 

 

6,843

 

Contingent legal fees

 

285

 

 

6,609

 

 

5,735

 

 

6,855

 

Litigation and licensing expenses - patents

 

782

 

 

1,001

 

 

4,881

 

 

3,497

 

Amortization of patents

 

2,612

 

 

1,174

 

 

7,086

 

 

3,522

 

Other patent portfolio income

 

-

 

 

-

 

 

-

 

 

(308

)

Patent portfolio expenses

 

3,959

 

 

14,556

 

 

18,525

 

 

20,409

 

Net patent portfolio (loss) income

 

(2,377

)

 

4,910

 

 

6,260

 

 

4,990

 

General and administrative expenses

 

10,345

 

 

7,692

 

 

23,014

 

 

18,089

 

Operating loss

 

(12,722

)

 

(2,782

)

 

(16,754

)

 

(13,099

)

 
Other income (expense):
Change in fair value of investment, net

 

-

 

 

(3,081

)

 

(2,752

)

 

3,704

 

Gain (loss) on sale of investment

 

-

 

 

-

 

 

3,591

 

 

(2,762

)

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

 

619

 

 

20,672

 

 

(203,866

)

 

(46,612

)

Gain on sale of prepaid investment and derivative

 

-

 

 

2,845

 

 

-

 

 

2,845

 

Change in fair value of equity securities

 

66,502

 

 

20,488

 

 

115,509

 

 

99,449

 

Gain (loss) on sale of equity securities

 

37,688

 

 

2,737

 

 

53,124

 

 

(4,272

)

Earnings on equity investment in joint venture

 

-

 

 

-

 

 

2,737

 

 

-

 

Loss on foreign currency exchange

 

(17

)

 

(48

)

 

(193

)

 

(4,938

)

Interest expense on Senior Secured Notes

 

(2,531

)

 

(2,410

)

 

(5,601

)

 

(3,178

)

Interest income and other

 

76

 

 

10

 

 

135

 

 

811

 

Total other income (expense)

 

102,337

 

 

41,213

 

 

(37,316

)

 

45,047

 

 
Income (loss) before income taxes

 

89,615

 

 

38,431

 

 

(54,070

)

 

31,948

 

 

Income tax (expense) benefit

 

(11

)

 

(83

)

 

(531

)

 

1,257

 

 

 

Net income (loss) including noncontrolling interests in subsidiaries

 

89,604

 

 

38,348

 

 

(54,601

)

 

33,205

 

 

 

Net income attributable to noncontrolling interests in subsidiaries

 

-

 

 

-

 

 

(906

)

 

-

 

 

 

Net income (loss) attributable to Acacia Research Corporation

$

89,604

 

$

38,348

 

$

(55,507

)

$

33,205

 

 

Net income (loss) attributable to common stockholders - Basic

$

72,984

 

$

30,529

 

$

(59,054

)

$

24,838

 

Basic net income (loss) per common share

$

1.49

 

$

0.63

 

$

(1.21

)

$

0.51

 

Weighted average number of shares outstanding - Basic

 

48,949,504

 

 

48,467,885

 

 

48,759,873

 

 

48,949,706

 

 

Net income (loss) attributable to common stockholders - Diluted

$

80,171

 

$

29,204

 

$

(59,054

)

$

21,380

 

Diluted net income (loss) per common share

$

0.86

 

$

0.32

 

$

(1.21

)

$

0.36

 

Weighted average number of shares outstanding - Diluted

 

93,081,502

 

 

90,624,702

 

 

48,759,873

 

 

60,153,773

 

 

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20211115006210/en/

CONTACT: Investor Contact:

Rob Fink

FNK IR

646-809-4048

rob@fnkir.com

KEYWORD: NEW YORK UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: CONSULTING LEGAL PROFESSIONAL SERVICES FINANCE

SOURCE: Acacia Research Corporation

Copyright Business Wire 2021.

PUB: 11/15/2021 04:06 PM/DISC: 11/15/2021 04:06 PM

http://www.businesswire.com/news/home/20211115006210/en