Acacia Research Corp. (



Q4 2010 Earnings Conference Call

February 24, 2011, 4:30 pm ET


Paul Ryan – Chairman & CEO

Clayton Haynes – CFO


Mark Argento – Craig-Hallum Capital

Jonathan Skeels – Davenport

Stephen Koffler – Con Brio

Daniel Bretthauer – MDC Financial

Walter Ramsley – Walrus Partners



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Good afternoon, and welcome ladies and gentlemen to the Acacia Research fourth quarter earnings release conference call. At this time, I would like to inform that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers after the presentation. I will now turn the conference over to Mr. Paul Ryan, please go ahead sir.

Paul Ryan

Thank you for being with us today. Today’s call may involve what the SEC considers to be forward-looking statements. Please refer to our 8-K which was filed with the SEC today for our forward-looking statement disclaimer.

In today's call, the terms we, us, and our refer to Acacia Research Corporation and its wholly and majority-owned operating subsidiaries. All intellectual property acquisitions, development, licensing and enforcement activities are conducted solely by certain of Acacia Research Corporation’s wholly and majority-owned operating subsidiaries.

With us today are Chip Harris, President of Acacia; Dooyong Lee, Executive Vice President, and Clayton Haynes, our Chief Financial Officer.

Today, I will give you an overview of the progress we are making in building the business. Clayton Haynes will provide you with an analysis of our financial results. And we will then open the call for questions.

Acacia had another record year in 2010. It was our best year so far as we continue to build the leading patent licensing company. We nearly doubled our performance from the prior year in most of our key metrics. In 2010, Acacia generated record annual licensing revenues of $132 million, compared to $67 million in the prior year, an increase of 96%

Our growth was driven by 221 new licensing agreements, compared to a 117 in the prior year, an increase of 89%. We generated revenue from 58 different licensing programs, compared to 30 in the prior year, an increase of 93%. We generated initial revenue from 31 new licensing programs during the year, compared to 12 in the prior year an increase of 158%.

We increased our cash and investments to $104 million from $54 million at the end of the prior year, an increase of 94%. And importantly, we achieved this exceptional growth with virtually no increase in headcount and generated record GAAP net income of $34 million. I thank all of the talented and dedicated people at Acacia for another outstanding year as we continue to build Acacia’s reputation as the premier patent licensing company.

Acacia also had a record year in acquiring control of 36 new patent portfolios for future licensing, which continues to increase the potential for future revenue growth. Based on our successful track record and increasing number of companies are selecting Acacia as their partner for patent licensing.

Turning to the fourth quarter, we generated revenues of $13.1 million compared to $19.9 million last year; revenues were generated from 41 new licensing agreements. We generated revenue from 25 different licensing programs including four programs generating initial revenues.

We also acquired nine new portfolios for future licensing and ended the year with over 170 patent portfolios. Clayton Haynes our CFO will provide more detail on the fourth quarter results following my comments. Going forward, Acacia is beginning to demonstrate the value we have created in building the leading outsource patent licensing company.

The scale of our asset base over 170 patent portfolios and growing and the experience we have gained in successfully negotiating over 960 licensing agreements, covering 91 different technologies, places Acacia at the forefront of this emerging industry. We are seeing a rapidly growing interest in patents of the new asset classes from both corporations and the investment community and think Acacia is extremely well positioned to continue playing a leadership role.

Acacia is also beginning to benefit from two major trends which are impacting our business. The first theme is the rapidly growing interest of large companies in the US, Europe, and Asia and generating revenues from their patent portfolios to earn a return on investment from their R&D and M&A activities.

Even companies who historically have not generated any revenues from their patent assets are now beginning to consider generating revenue base if only to offset their patent payment obligations to other companies. As more and more companies realize they have a fiduciary obligation to generate returns from the use of their valuable assets by others, companies are starting to focus on their IP balance of payments.

As the number one outsource patent licensing company, we are seeing many new opportunities, as large companies seek to generate financial returns. Acacia’s business model is very attractive to companies who want to generate returns without having to make any additional investments of capital or human resources to earn those returns.

Acacia’s corporate IP partners are recognizing that we have built a highly specialized company for patent licensing and that there are significant advantages to outsourcing this activity to us. They increasingly recognize the value of our multi-disciplinary teams of engineers, patent attorneys and licensing executives who can screen large patent portfolios for licensing opportunities.

Our due diligence teams that can validate licensing opportunities, our broad partnering relationships with leading law firms for enforcement and the proven track record of our licensing teams in generating revenues. A good example of this is our recent strategic patent licensing alliance with Renesas Electronics, the world’s third largest semiconductor company, which has a portfolio of over 40,000 patents. Renesas Electronics is a Tokyo Stock Exchange company with over $14 billion in annual sales, which has been formed by Hitachi, Mitsubishi and NEC.

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