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Acacia Research Corp. Q1 2010 Earnings Call Transcript

Acacia Research Corp. Q1 2010 Earnings Call Transcript

Acacia Research Corp. (ACTG)

Q1 2010 Earnings Call Transcript

April 22, 2010 4:30 pm ET


Paul Ryan – Chairman & CEO

Clayton Haynes – CFO

Chip Harris – President


Mark Argento – Craig-Hallum Capital

Jonathan Skeels – Davenport

Bennett Notman – Wisco

Doug Thomas – JET Investment



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Good afternoon, and welcome, ladies and gentlemen, to the Acacia Research first quarter earnings release conference call. At this time, I would like to inform you 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.

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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/or its wholly owned 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 to up to question – call for questions.

Acacia had a great first quarter. We had record revenues of $39.8 million; record 12-month trailing revenues of $90.2 million; a record 13 new licensing programs that began generating revenues in the quarter; and importantly, a record 11 new patent portfolios for future licensing. Our business development, engineering, and licensing teams all delivered exceptional performance in the quarter.

Today, I would like to highlight two emerging trends that are beginning to accelerate the growth of Acacia's patent licensing business. These inflection points are a direct result of Acacia's building a great track record of patent licensing success and rapidly growing the scale and quality of our patent assets.

The first trend is the growth of our business partnerships with large companies and leading research institutes in the U.S., Europe, and Asia. We are seeing a growing interest by major multinational companies in monetizing their patent assets.

As the number one outsource patent licensing company, we are seeing many new opportunities as large companies seek to generate financial returns on their R&D investments and M&A activities. Our discussions with these companies range from our taking over the licensing of certain non-core patent assets to our participating and identifying potential licensing opportunities within all of their patent portfolios.

Our corporate partners are recognizing that Acacia has built a unique, highly specialized patent-centric company that has multidisciplinary teams that can screen patent portfolios for licensing opportunities, due diligence teams to validate licensing opportunities, broad partnering relationships with leading law firms for enforcement, and licensing teams with a proven track record of generating revenues.

Examples of our new partnering activity are reflected in recent announcements of 120 patents covering wireless and communication technologies from a leading research institute; 49 patents covering storage networks and disk arrays from a major technology company; 97 patents covering DRAM, DSP, microprocessor technologies from a major semiconductor company; patent portfolios covering MEMS and chip-stacking from a leading international research institute; 31 patents for mobile computer synchronization technology, the majority of which that were issued to a major electronics company; and 59 patents covering digital video enhancement technology, which were issued to a major consumer electronics company.

We are increasing our business development efforts by making sure large companies know of our capabilities as the leader in outsource patent licensing. We want to be at the epicenter of this new trend.

The second trend is the growing interest of companies in engaging with us to enable them to simultaneously negotiate multiple licenses to a number of our patent portfolios. This trend is the result of the scale we are building in total patent portfolios, our accelerating growth in new portfolios, and the increasing depth in quality of many of our newer portfolios.

Some companies are deciding that it makes more sense for them to become an ongoing customer rather than a repeat defendant and are beginning to look to Acacia as a clearinghouse for necessary in-licensing activity.

The benefits to companies who enter into theses simultaneous multiple portfolio licenses are to achieve financial budgeting certainty, reduce their internal and external costs associated with these repeat litigations, and eliminate the risk of large court awards. This trend could benefit Acacia and our IP partners by shortening the time to money, reducing legal expenses and other costs of enforcement, and improving the margins for both us and our IP partners.

The combination of these two emerging trends could enable us to both rapidly grow our asset base and bring efficiencies to the licensing process that reduce time to money and improve operating margins.

With that, I would like to turn the call over to our CFO Clayton Haynes for an analysis of the financials for the quarter. Thank you.

Clayton Haynes

Thank you, Paul, and thank you to everyone joining us for today's earnings conference call for the first quarter of 2010. As indicated in today's earnings press release, on a consolidated basis, first quarter 2010 license fee revenues were a record $39,772,000 as compared to $16,957,000 in the first quarter of 2009.

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