Q1 2020 Earnings Call

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Greetings and welcome to Acacia research first quarter financial results Conference call. At this time all participants are in listen only mode. A question and answer session will follow the formal presentation. If any what's your acquire operators such as during the conference. Please press Star zero on your telephone keypad. Please note. This conference is being recorded I would now like to turn the conference over to.

Mr. Rob.

Okay.

Thank you you maybe [noise].

[music]. Thank you operator hosting the call today are Clifford Chief Executive Officer, and Al Tobia, Chief Investment Officer.

Before beginning I would like to remind you that the information provided during this call may contain forward looking statements relating to occurred.

<unk> estimates forecasts and projections about future Ben that are forward looking at the fine.

<unk> Litigation Reform Act.

You know you thought.

These forward looking statement generally relate to the company's quiet objective and that's a patient for future operations are based on current estimate and projected future results or trends.

Actual results may differ materially.

Project as a result certain risks uncertainties.

For a discussion of risks and uncertainties, we see the restock or tried to Asia annual report.

Quarterly reports on 10-Q that are filed yet.

I would like to remind everyone that a press release slowed in the Companys financial results issued this morning before the market open.

This release maybe assets.

Web site at Acacia research Dot com under the news cap.

In addition, the company has prepared investor presentation for this call that can also be downloaded Odyssey should website under the events and presentations that.

All that said I'd like turn the call over just a separate Brett I heard the call is yours.

Thank you Raul and good morning.

I recently read all announced relationship but style bauxite.

However, the volatile equity market just kept us very busy.

Accusing against a very broad mandates and reviewing a wide range of investment opportunities strategic committee has been meeting frequently. Unlike other structures, what may face redemptions liquidity or approval constraints, we have permanent capital.

Positioned us well to evaluate an increasing number of compelling opportunities.

We don't believe acacia to be remarkably flexible, but not tied to investments in intellectual property.

Sure. This much in multiple revenue streams, we can do public or private corporate acquisitions World class. It correctly, we believe that together would stop board, we are well positioned to pursue corporate development opportunity is greater scale and flexibility.

With regard to.

Specific maybe IP business, we announced the acquisition of two patent portfolios during.

During the quarter I will describe these purchases lights out.

At this point I think it is important to review a brief history other cases involvement in the IP industry.

How we view our ongoing operations.

We've generally supports the consensus the patent business peaked in 2012.

Well multiple empirical data points come by we reference price.

Yeah, the regulatory environment time shopping that gets up at the implementation of the I have trailing 12.

The Alice decision is trying to 24 to among other changes.

Hi, Mark please rejoin acacia in the second part 2018 conditions were starting to improve.

Mark and his team what cost monetizing Acacia is legacy patent portfolios.

Fourth quarter 20, a change the first quarter Twentytwenty. They were covered approximately 64 million in gross revenues through a combination of various licensing agreements and litigation settlements.

The IP group has worked with management to present, our board with a comprehensive study about patent organization.

But the fish set of eyes, we reviewed patents purchase from 20 trial.

2016 indications core markets a detailed analysis showed favorable returns during the shopping negative macro environment.

With that in mind, we are starting to commit capital in a measured way, where we see an attractive risk adjusted return.

We should not then it cases history as an aggressive litigator, there's a leverageable asset as we increased our focus on licensure.

We see IP a session as a segment of our overall absolute return investment strategy.

We are strategically built the IP portfolio with outcomes diversification in my using licensing revenue as a base with the upside potential of litigation outcomes as well I.

I think these assets started existing portfolio creates an attractive blend.

Licensing and litigation opportunities.

To pursue we expect these additions to begin generating licensing revenues this quarter with significant contributions beginning in 2021.

Now I'll turn the call I have a drought.

Thank you quick.

The first quarter cash and short term investments.

158.1 million at March 31st 2020, compared to 168.3 million at December 31st 2019.

Revenues for the first quarter 20 23.8 million.

More detailed on these results have been made available in the press release issued this morning and also in the upcoming quarterly report on form 10-Q, which we will file with the FCC later today.

Egypt, we remain focused on growing Acacia is booked value.

As we evaluate larger and more diverse corporate development opportunities, we would be working to continue to preserve shareholder value. Our stock is trading at a steep discount to its intrinsic value, which is 342 per share as represented by cash plus invested assets as at March 31st.

Based on our current operating plan, we expect to use no more than 5% of our beginning 2020 cash balance on operating expenses and investment due diligence by the completion of an improved investment where the commencement of our first redemption test period in August 2021.

As outlined in the proxy.

We would note we recently completed a $4 million stock buyback repurchasing approximately 1.7 million shares at an average price of $2.35 per share.

That's clippard reviewed our patent assertion business earlier and the business plan as part of this we have acquired Excalibur IP a portfolio of more than 2500 patents that were spun out at Yahoo. Prior to its still rising these patents cover technologies, including Internet search.

Cloud computing.

Commerce location based services mobile apps media management, and social network. These patents have applicability to a variety of industries, including enterprise software web search and analytics.

Wind shopping in advertising and audio and video streaming services among others.

In addition, we acquired a significant portfolio of nearly 150 patents from L. Three Harris.

These patents cover commercial applications of why fight and I O T technologies.

These patents have applicability to a wide variety products and markets, including consumer electronics home and office wireless networking home automation smart metering industrial wireless control systems and remote access systems.

Finally, as we disclosed on our last quarterly call, we acquired a portfolio of over 70 patents originating from fusion Io. These patents cover flash memory management and control technology, and our applicable to flash memory systems, such as solid state drives and controllers.

In summary.

We have the processors cost structure and resources necessary create and sustained value for socket stockholders. We continued to make progress on reinvigorating our patent assertion business.

Focusing our business development efforts on the void that exists between litigation finance and loan on lenders our partnership with Starboards active we were exploring a wide range of opportunities with that I'd now like to called open the call for questions.

Operator.

Thank you at this time will be conducting a question and answer session. If you like to ask questions. Please press star one on your telephone keypad a confirmation so indicate your line is and the question Q.

You mean for start to people that your move your question for the Q.

For participants using speaker equipment, it may be necessary to pick up you had said before person to start keys, what will that piece of meat corporate questions.

Our first question it's in line from Brett Reece with Janney Montgomery Scott. Please proceed with your question.

Hi, Good morning, Cliff had good morning out.

Hi, Brett.

He a 2500 patent portfolio.

Yeah, that's a lot of patent the do you have any.

<unk> plans to segment them and sell off some of them too to start up.

[noise] quit for you want to take that or do you want me to take the question.

Hey, you have been dealing with it.

Brett.

There's details we can do off line, but this is a big portfolio that had already entered into an agreement with RPX. So there's a great deal of the companies are under option RPX.

This is the very very big and broad portfolio. So we're going to it could take a lot of efforts to segmented as you can imagine that many actions and craft licensing campaigns that address sort of the the most productive in most profitable.

Opportunities. So we can take those details offline. If you want it can have you connect you with Mark boot, but I think I take a look at that the RPX deal, there's a big amount that are.

Under license with RPX.

Okay now well we.

Will there be disclose years like next quarter a in the Q what you paid for all of these Pat.

Or are you at liberty to disclose that now.

I cannot answer I can answer that bread weve.

Taking a policy of not disclosing individual acquisition prices or revenues and we'll continue on that basis going forward, but on a quarterly basis, we'll give consolidated provide consolidated information.

Okay, and one last one I'll drop back in Q.

And I appreciate being able to last question.

You know because you really you know.

Taking a more patent portfolios <unk> do you anticipate needing additional staff you know to to cover the patent intake.

No we haven't licensing group in place now that a well capable of handling.

We have purchased today.

Great.

Thank you for taking my question.

Not at all but.

Once again, if you will make does question. Please press star one on your telephone keypad, what's going to feel like that's question. Please press star one on your telephone keypad.

Our next question comes on line of Sam Rebotsky with that's your asset management. Please proceed with your question.

Yeah. Good morning gel one so the or they are do you file an 8-K on the cost of the licensing.

Dollar amount or how does that get reflected well because presumably in the queue. At some point you have to lift the dollar amount that you're paying or licensing for this.

I found that the Capex is disclosed in the case the individual patent acquisitions are not significant enough to acquire and I got it.

Okay, No no I see RPX Corp. announces licensing transaction with Excalibur. This press release was February 26.

And they talk about 2000 patents and.

These are the same patents that all T X that they put the press release out.

ER and Excalibur is a subsidiary of L. Abba is that a private company or.

Without top as a spend now consider liquidation from Yahoo. It how.

A number of assets the principal one of which.

Was yahoos investment in Alibaba.

That ended up with Excalibur, which was a one time very large patent.

Highly valued patent portfolio and in the process of liquidation or they did a transaction multiple transactions RPX and Acacia led to the policies, which they though.

Uh-huh horse in the press release, they say December 31, 2019, RPX invested 2.7 billion to acquire rights to more than 48000, U.S. and international Pat. So this is just a piece of that.

[noise], Sam it's probably not a good idea fast to comment on other companies. The press releases well, let them speak speak for themselves Oh, Okay. Okay. Thank you very much.

You're welcome.

Our next question comes on line, a Wayne County.

Okay, One partners Jude your question.

Hi, there.

Quick question on the patent that you've acquired precisely those might have been gone through a challenge in the patent office, it's an IPO our process.

Any sense of that.

Are you know these all those details because of relate to potential litigation strategies and I don't think.

It's a pretty good for us to get into that in a public forum.

Okay. So some of them might be in litigation at this time.

Well as I said did the specifics of the assertion campaign, we have a strong policy of not commenting on okay, well since underway.

I asked you basically in your press release, I believe said, they expect a reasonable revenue growth or start revenue growth and the second third like in the next two quarters.

Regarding.

From the patents acquired any idea what that range might be in dollar terms or.

<unk>.

No I'm I've, just it's important not that we can put out yet, but I did the important point you wanted to let investors know as we met as we've said in the comments because this is a combination of a licensing Anda litigation strategy here I would you expect the licensing initiatives predicted to produce revenue in the short term.

Okay. Thank you.

Okay.

The star No further questions left in the queue I'd like to turn the call back over to Mr. Al Smith for any closing remarks.

Thank you very much and quit front and I will be available for questions if anyone needs to.

Ask questions offline you can also poll, Rob Fink as well.

This concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

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