Acacia Research Reports Second Quarter Financial Results and Announces Payment of Quarterly Dividend
Acacia Research Reports Second Quarter Financial Results and Announces Payment of Quarterly Dividend
NEWPORT BEACH, Calif.--(BUSINESS WIRE)-- Acacia Research Corporation(1) (NAS: ACTG) today reported results for the three months ended June 30, 2013.
Revenues in the second quarter of 2013 were $23,110,000, as compared to $50,484,000 in the comparable prior year quarter.
Revenues for the six months ended June 30, 2013 were $99,971,000, as compared to $149,524,000 in the comparable prior year period.
GAAP net loss in the second quarter of 2013 was $12,503,000, or $0.26 per diluted share, as compared to GAAP net income of $6,321,000, or $0.13 per diluted share for the comparable prior year quarter.
Non-GAAP net income in the second quarter of 2013 was $6,481,000, or $0.13 per diluted share, as compared to Non-GAAP net income of $20,953,000, or $0.43 per diluted share for the comparable prior year quarter. See below for information regarding non-GAAP measures.
Trailing twelve-month revenues as of the end of the second quarter of 2013 were $201,174,000, as compared to $233,355,000 as of the end of the prior year quarter.
Approval of Quarterly Dividend. In addition, pursuant to the quarterly cash dividend policy announced on April 23, 2013, Acacia Research Corporation announced today that its Board of Directors has approved a second quarterly cash dividend, payable in the amount of $0.125 per share, which will be paid on August 30, 2013, to shareholders of record at the close of business on August 1, 2013. Future cash dividends are expected to be paid on a quarterly basis and will be at the discretion of the Board of Directors.
Acacia Research Corporation President, Matt Vella commented, "We invite shareholders and analysts to attend our previously announced 2013 Analyst & Investor Day at the New York Palace Hotel from 8:00 AM until 1:30 PM on Wednesday, July 24th."
Consolidated Financial Results - Overview
Financial highlights and operating activities during the periods presented included the following:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
Revenues (in thousands) | $ | 23,110 | $ | 50,484 | $ | 99,971 | $ | 149,524 | |||||||||||||
Net income (loss) (in thousands) | $ | (12,503 | ) | $ | 6,321 | $ | (7,390 | ) | $ | 56,249 | |||||||||||
Non-GAAP net income (in thousands) | $ | 6,481 | $ | 20,953 | $ | 29,191 | $ | 88,708 | |||||||||||||
Diluted earnings (loss) per share | $ | (0.26 | ) | $ | 0.13 | $ | (0.15 | ) | $ | 1.19 | |||||||||||
Pro forma non-GAAP net earnings per common share - diluted | $ | 0.13 | $ | 0.43 | $ | 0.60 | $ | 1.88 | |||||||||||||
New agreements executed | 43 | 38 | 72 | 78 | |||||||||||||||||
Licensing and enforcement programs generating revenues | 28 | 27 | 40 | 45 | |||||||||||||||||
Licensing and enforcement programs with initial revenues | 3 | 7 | 14 | 13 | |||||||||||||||||
New patent portfolios | 7 | 27 | 16 | 32 | |||||||||||||||||
As of June 30, 2013, trailing twelve-month revenues were as follows (in thousands):
As of Date: | Trailing Twelve- | % Change | |||||||||||
June 30, 2013 | $ | 201,174 | (12 | )% | |||||||||
March 31, 2013 | $ | 228,548 | (9 | )% | |||||||||
December 31, 2012 | $ | 250,727 | 22 | % | |||||||||
September 30, 2012 | $ | 205,258 | (12 | )% | |||||||||
June 30, 2012 | $ | 233,355 | — | % | |||||||||
______________________________
* Includes "other operating income."
As of June 30, 2013, on a consolidated basis, we have generated revenues from 157 technology licensing and enforcement programs, as compared to 125 programs as of the end of the prior year quarter.
Summary Financial Results | |||||||||||||||||||||
For the Three Months Ended June 30, 2013 and 2012 | |||||||||||||||||||||
Revenues (in thousands): | |||||||||||||||||||||
Three Months Ended June 30, | Change | ||||||||||||||||||||
2013 | 2012 | $ | % | ||||||||||||||||||
Revenues | $ | 23,110 | $ | 50,484 | $ | (27,374 | ) | (54 | )% | ||||||||||||
New revenue agreements | 43 | 38 | — | — | |||||||||||||||||
Licensing programs generating revenues | 28 | 27 | — | — | |||||||||||||||||
Licensing programs with initial revenues | 3 | 7 | — | — | |||||||||||||||||
In the second quarter of 2013, three licensees individually accounted for 41%, 20% and 12% of revenues recognized, as compared to one licensee individually accounting for 72% of revenues recognized during the second quarter of 2012.
Cost of Revenues (in thousands): | |||||||||||||||||||||
Three Months Ended June 30, | Change | ||||||||||||||||||||
2013 | 2012 | $ | % | ||||||||||||||||||
Inventor royalties | $ | 5,610 | $ | 9,573 | $ | (3,963 | ) | (41 | )% | ||||||||||||
Contingent legal fees | 4,024 | 6,607 | (2,583 | ) | (39 | )% | |||||||||||||||
Second quarter 2013 total revenues, less inventor royalties expense and contingent legal fees expense was $13,476,000, or 58% of second quarter 2013 revenues, as compared to $34,304,000, or 68% of revenues in the comparable prior year quarter. The decrease in total revenues, less inventor royalties expense and contingent legal fees expense as a percentage of total revenues was primarily due to a significantly higher percentage of revenues recognized during the three months ended June 30, 2012 having lower or no corresponding contingent legal fee obligations, as compared to the revenues recognized during the three months ended June 30, 2013.
The economic terms of the patent portfolio acquisition agreements and contingent legal fee arrangements, if any, including royalty rates, if any, contingent fee rates, if any, and other terms, vary across the patent portfolios owned or controlled by our operating subsidiaries. These expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and characteristics generating revenues each period.
Three Months Ended June 30, | Change | ||||||||||||||||||||
2013 | 2012 | $ | % | ||||||||||||||||||
Litigation and licensing expenses - patents | $ | 9,918 | $ | 5,268 | $ | 4,650 | 88 | % | |||||||||||||
Litigation and licensing expenses-patents in the second quarter 2013 increased due primarily to an increase in strategic patent portfolio prosecution costs, an increase in international enforcement costs, and higher net levels of litigation support and third-party technical consulting expenses associated with our continued investment in ongoing and new licensing and enforcement programs commenced since the end of the comparable prior year quarter. We expect patent-related legal expenses to continue to fluctuate period to period in connection with our current and future patent acquisition, development, licensing and enforcement activities.
Three Months Ended June 30, | Change | ||||||||||||||||||||
2013 | 2012 | $ | % | ||||||||||||||||||
Amortization of patents | $ | 12,578 | $ | 5,393 | $ | 7,185 | 133 | % | |||||||||||||
Second quarter 2013 non-cash patent amortization charges increased due primarily to an increase in amortization expense related to new patent portfolios acquired since the end of the prior year period totaling $3,990,000 and an increase in scheduled patent amortization related to patent portfolios acquired in the latter portion of the prior year quarter totaling $2,097,000.
Other Operating Expenses (in thousands): | |||||||||||||||||||||
Three Months Ended June 30, | Change | ||||||||||||||||||||
2013 | 2012 | $ | % | ||||||||||||||||||
Marketing, general and administrative expenses | $ | 6,916 | $ | 5,903 | $ | 1,013 | 17 | % | |||||||||||||
Non-cash stock compensation expense - MG&A | 6,268 | 6,000 | 268 | 4 | % | ||||||||||||||||
Total marketing, general and administrative expenses | $ | 13,184 | $ | 11,903 | $ | 1,281 | 11 | % | |||||||||||||
Second quarter 2013 marketing, general and administrative expenses increased due primarily to a net increase in licensing, business development, and engineering personnel since the end of the prior year quarter and a net increase in corporate facilities and general and administrative costs.
Income Taxes: | |||||||||||||||||||||
Three Months Ended June 30, | Change | ||||||||||||||||||||
2013 | 2012 | $ | % | ||||||||||||||||||
Benefit from (provision for) income taxes (in thousands) | $ | 9,050 | $ | (3,494 | ) | $ | 12,544 | (359 | )% | ||||||||||||
Effective tax rate | 40 | % | 35 | % | |||||||||||||||||
The tax benefit (provision) for the second quarter of 2013, as compared to the prior year quarter, included the impact of the following:
A tax benefit for the second quarter of 2013 which reflects the application of an estimated annual effective tax rate of approximately 40% to the GAAP pre-tax net loss reported for the second quarter of 2013.
$1.5 million of foreign withholding taxes withheld by the applicable foreign tax authority on revenue agreements executed with third party licensees domiciled in certain foreign jurisdictions. The 2013 tax provision contemplates utilization of the foreign taxes withheld in 2013 as a credit against income tax expense calculated for financial statement purposes.
Noncash tax expense calculated without the excess benefit related to the exercise and vesting of equity-based incentive awards, which was credited to additional paid-in capital, not taxes payable, totaling $138,000 and $3.2 million for the second quarter of 2013 and 2012, respectively.
Financial Condition (in thousands) | |||||||||||||
Summary Balance Sheet Information: | |||||||||||||
June 30, 2013 | December 31, 2012 | ||||||||||||
Cash and cash equivalents and investments | $ | 320,125 | $ | 311,279 | |||||||||
Accounts receivable | 16,781 | 9,843 | |||||||||||
Total assets | 680,592 | 668,717 | |||||||||||
Accounts payable and accrued expenses | 15,593 | 9,235 | |||||||||||
Royalties and contingent legal fees payable | 19,986 | 12,508 | |||||||||||
Accrued patent acquisition costs | 8,507 | 500 | |||||||||||
Total liabilities | 61,688 | 50,239 | |||||||||||
Summary Cash Flow Information: | ||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||||||
Operating activities | $ | 1,279 | $ | 14,453 | $ | 18,104 | $ | 63,405 | ||||||||||||||||
Investing activities | (39,644 | ) | (36,227 | ) | (87,858 | ) | (313,113 | ) | ||||||||||||||||
Financing activities | (5,887 | ) | 3,142 | (3,141 | ) | 231,841 | ||||||||||||||||||
Patent Acquisition Costs. Patent related acquisition costs paid in the second quarter of 2013 totaled $2,250,000, as compared to $38,335,000 during the comparable prior year quarter. As of June 30, 2013 and June 30, 2012, accrued patent acquisition costs related to patent portfolios acquired during the second quarter of 2013 and 2012 totaled $8,507,000 and $10,200,000, respectively.
Quarterly Dividends Paid. Cash outflows from financing activities for the second quarter of 2013 included the quarterly cash dividend of $0.125 per share, paid on May 30, 2013 to shareholders of record at close of business on May 3, 2013, totaling $6,149,000.
See "Business Highlights and Recent Developments" below for a summary of patent portfolio acquisitions during the current quarter.
Refer to the section below entitled "Summary Financial Information" for additional summary consolidated balance sheet, statements of operations and cash flow information as of and for the applicable periods presented.
INFORMATION ABOUT NON-GAAP FINANCIAL MEASURES
As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America. To supplement our consolidated financial statements prepared and presented in accordance with GAAP, this earnings release includes financial measures, including (1) non-GAAP net income and (2) non-GAAP Earnings Per Share ("EPS"), that are considered non-GAAP financial measures as defined in Rule 101 of Regulation G promulgated by the Securities and Exchange Commission. Generally, a non-GAAP financial measure is a numerical measure of a company's historical or future performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use these non-GAAP financial measures for internal financial and operational decision making purposes and as a means to evaluate period-to-period comparisons of the performance and results of operations of our core business. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the performance of our core business by excluding non-cash stock compensation charges, non-cash patent amortization charges and excess benefit related non-cash tax expense, that may not be indicative of our recurring core business operating results. These non-GAAP financial measures also facilitate management's internal planning and comparisons to our historical performance and liquidity. We believe these non-GAAP financial measures are useful to investors as they allow for greater tran
