“The New Acacia” Releases Q4 Earnings, Discloses Recent Patent Acquisitions
- March 13, 2020
Category: Patent Market, Patent Watch, TPLFTag: TPLF
Acacia Research Corporation released its fourth quarter earnings on March 12, also disclosing two recent patent acquisitions, one including assets that originate with Samsung. Its partnership with hedge fund Starboard Value now approved, Acacia has access to up to $500M in new capital and is “well-positioned to pursue opportunities of greater scale and flexibility”, according to Chief Investment Officer Al Tobia Jr.
Recent Patent Acquisitions
“We have built the new Acacia to be remarkably flexible”, said Tobia during Thursday’s earnings call, adding that Acacia is “not a typical publicly traded, undercapitalized, subscale IP monetization company”. Those companies often “lack the balance sheet to be an effective litigant against larger counterparties”, says Tobia, and they typically have a “narrow portfolio of patents with too few options for monetizing them”.
According to currently available USPTO records, Acacia holds over 2,200 US assets, including portfolios acquired last year from Siemens (see here) and Transpacific IP Group Limited (including former Orange S.A. patents now being litigated by an Acacia subsidiary; see here for RPX coverage).
Acacia CEO Clifford Press told investors on Thursday that subsequent to the fourth quarter, Acacia acquired multiple patent portfolios, including two groups of “flash disk drive patents”: one comprising patents developed by Fusion-IO (acquired in 2014 by SanDisk, which was subsequently acquired by Western Digital in 2016); the other including patents that originated with Samsung. Press describes the patents as “relat[ing] to manufacturers of flash drives and flash drive controller ICs”. Acacia reports also having recently acquired “a fundamental patent family related to speech recognition and voice control”, covering “devices and systems that use voice commands to provide configuration and control”.
Press stated that in aggregate, Acacia invested approximately $6M to acquire these new portfolios, which he says contain patents with seven- to ten-year lifespans. These patent acquisitions do not appear to be reflected in USPTO records available as of the publication date of this article.
Acacia reported Q4 2019 gross revenues of $688K, compared to $49.2M during the same period last year, and fiscal 2019 gross revenues of $11.2M, down from $131.5M in 2018. The company’s cash and short-term investments totaled $168.3M as of December 31, 2019, an increase from $165.5M as of December 31, 2018.
During Thursday’s call, Press told an analyst that with regard to the patent portfolios acquired in Q1 2020, there is some expectation of more immediate revenue within the first year, though it “depends on the reactions of the counterparties”. Press also told the analyst that in an effort to bring in additional revenue, Acacia is looking at a “number of significant transactions” in pharmaceuticals.
Press stated during the earnings call that Acacia continues to build out its investment team to increase its ability to “pursue a broad range of public and private transactions”. In August of last year, Acacia purchased a position in Immersion Corporation—which earlier this month announced that it had reached an agreement with hedge fund VIEX Capital Advisors (which holds an 11.5% stake in Immersion), under which it will appoint to its board three directors nominated by the activist investor. For more details, see “Immersion Announces Its Q4 Results, an Agreement with an Activist Investor, and a ‘Sex Tech’ Deal” (March 2020).
Acacia itself has undergone activist investor-led changes in recent years. In 2018, Sidus Investment Management and BLR Partners prevailed in a proxy campaign for changes at Acacia, including the election of their director nominees, Press (cofounder of the investment company Hyde Park Holdings) and Tobia (cofounder of Sidus Investment Management), to the company’s board. Shortly after Press and Tobias joined Acacia’s board in 2018, the executive turnover began, with the ousting of Acacia’s president, CFO, and general counsel, and the eventual departure of each of its remaining directors.
Last year, with a fully reconstituted board of directors, and with Press and Tobia appointed as CEO and CIO of Acacia, respectively, the company announced a strategic shift—additional details about which are available at “A New Dawn at Acacia?” (September 2019).
According to an 8-K filed on March 11, one of the directors appointed to Acacia’s board last year—Luis Rinaldini, CEO of Groton Partners—has resigned. Rinaldini was a member of the board’s audit and governance committees.
A “Reinvigorated” Patent Assertion Business
While Tobia emphasized Acacia’s current flexibility for pursuing investments in revenue streams outside of patent monetization, he also said that the company continues to make progress on “reinvigorating” its patent assertion business, and management is focusing Acacia’s business development efforts on “the void that exists between litigation finance and loan-to-own” lenders. “We are working to partner with businesses to unlock the value hidden in their IP portfolios,” said Tobia.
Acacia markedly ramped up its litigation activity in the wake of an activist investor-led transformation, and a similar acceleration has followed the announcement of the Starboard deal. In 2019, Acacia filed more than a dozen new lawsuits in the US and opened up its first new litigation campaigns since 2015 (see here for a rundown of Acacia’s 2019 litigation activities). So far this year, Acacia has launched three new campaigns: one targeting image sensors; one asserting a patent generally related to semiconductor fabrication; and a networking campaign embroiled in breach of contract claims that involve one of Acacia’s board members, a managing director at the prolific litigation funder Burford Capital.
Shares of Acacia’s stock closed at $2.30 on March 13. With 50.37M shares outstanding, Acacia’s market value stands at $116M, or about $2M less than its cash and cash equivalents minus its liabilities at year-end 2019.