Acacia Research's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Acacia Research Corporation (ACTG)

Q1 2012 Earnings Call

April 19, 2012 4:30 pm ET

Executives

Paul Ryan – Chief Executive Officer and President

Clayton J. Haynes – Chief Financial Officer

Matthew Vella – Executive Vice President.

Edward J. Treska – Senior Vice President, General Counsel and Secretary

Dooyong Lee – Executive Vice President

Analysts

Mark N. Argento – Craig-Hallum Capital Group LLC

Timothy Quillin – Stephens Inc.

Paul Coster – JPMorgan Securities LLC

Jonathaon Skeels – Davenport & Company LLC

Daniel Gelbtuch – Cantor Fitzgerald

Walter Ramsley – Walrus Partners

Presentation

Operator

Good afternoon, and welcome ladies and gentlemen to the Acacia Research First Quarter Earnings Release Conference Call. At this time, I would like to remind you that this conference is being recorded and all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers after the presentation.

I’ll 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 it’s wholly and majority-owned operating subsidiaries. All intellectual property acquisition, development, licensing, and enforcement activities are conducted solely by certain of Acacia Research Corporation’s wholly and majority-owned operating subsidiaries.

With me today are Chief Financial Officer, Clayton Haynes; General Counsel, Ed Treska; and Executive Vice Presidents, Dooyong Lee and Matt Vella.

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

Acacia continues to build its leadership position in patent licensing; and during the first quarter, generated record revenues of $99 million, an increase of 62% over last year’s first quarter. Acacia also improve its key performance of metric of trailing 12-month revenues to a record $223 million. Acacia invested $152 million in new patent portfolios during the quarter and finished the quarter with $452 million in cash and investments.

We generated the $99 million in first quarter revenues from 40 new revenue agreements covering 32 different licensing programs including five new licensing programs generating initial revenue. We have now generated revenues from 117 different licensing programs.

During the quarter, we licensed technology patents to Amazon.com, Hitachi, IBM, Microsoft, Nokia Siemens, SK hynix and Samsung. We also licensed automotive patents to BMW; industrial patents to Stanley Black & Decker; and medical technology patents to Abbott Labs and Philips Electronics.

During the quarter, Acacia acquired control of five new patent portfolios including the 100% acquisition of ADAPTIX, a pioneering company in the development of 4G technologies for wireless systems, which owns 230 4G patents. We also acquired new patent portfolios covering online user registration technology, optical networking technology, catheter ablation technology and a portfolio of over 300 patents for automotive safety, navigation and diagnostics technologies, from Automotive Technologies International. We continue to increase future shareholder value by acquiring control of significant patent portfolios that now control 212 different patent portfolios.

Acacia established business by partnering with patent owners taking control of licensing activities and splitting the licensing revenues 50/50. Our successful track record in generating revenues for patent owners has accelerated new business opportunities. We are fortune to have built a market leadership position in patent licensing at a time when patents are rapidly becoming a new asset class.

There are two major market trends which are accelerating our business opportunities. The first trend is the growing number of companies worldwide who are deciding to generate revenues from their patent portfolio. There is a rapidly increasing awareness in boardrooms across the world that their managements need to generate returns on investment from shareholder capital that has been invested in R&D.

The recent sale AOL’s patent portfolio to Microsoft for a $1 billion; and last year’s sales of Nortel patent portfolio for $4.5 billion; and Google’s $12.5 billion acquisition of Motorola Mobility have served as wake up calls to all companies, and is accelerating this new trend.

We are also observing that large companies are becoming focused on their IT balance and payments and realize they need to generate financial returns from their own R&D investments to offset their growing IT payment obligations to other companies. As a result of this trend, we’re seeing significant increase in partnering opportunities with large companies. Acacia’s partnering model is very attractive to companies who want to generate financial returns from their patent without having to create a distraction to their core business, be involved in litigation or having to make additional investments of capital and human resources to earn those returns. Our corporate partners recognize that we have built a highly specialized company for patent licensing and have build a proven track record in generating revenues.

The second major trend which is accelerating our business is the growing complexity and cost that is required for small entities, such as individual inventors, research centers, universities and small companies to be able to license (inaudible) patent on their own. As a result of a number of recent court ruling and the recently passed patent legislation, we’re seeing increased partnering opportunities with these small entities who need an expert partner to generate licensing revenues from their patents. We have delivered great results for many of these small entities over the past few years and our reputation for generating revenues even after their own efforts were unsuccessful has repeatedly demonstrated our value to these partners.

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