Acacia Research Reports Fourth Quarter and Full-Year 2021 Financial Results and Preliminary First Quarter 2022 Results; Announces $40 Million Expansion of Stock Repurchase Program

Rhea-AI Summary

Acacia Research Corporation (ACTG) reported strong financial results for the full year 2021, generating $149.2 million in net income, equating to $1.91 per diluted share. This performance was fueled by $76.0 million in revenue from its Intellectual Property segment and $116.1 million in realized gains primarily from its Life Sciences Portfolio. The company completed the acquisition of Printronix for $33 million, contributing $12.0 million to revenues. In 2022, it anticipates revenues between $13.0 million and $14.0 million for Q1, with a new $40 million stock repurchase program approved.

Positive

• Generated $149.2 million in net income for 2021, a 37% increase from 2020.
• Intellectual Property revenue rose to $76.0 million from $29.8 million in 2020.
• Completed acquisition of Printronix, contributing $12.0 million in 2021 revenues.
• Approved a new stock repurchase program for up to $40 million.

Negative

• Incurred general and administrative expenses of $35.7 million, up from $24.5 million in 2020, impacting profitability.
• Anticipated operating loss of $8.2 to $9.2 million for Q1 2022 due to increased expenses.

Generated $149.2 Million of Net Income, or $1.91 Per Diluted Share for the Full-Year 2021, Reflecting Significant Realized Gains from the Life Science Portfolio and Contributions from the Intellectual Property Business and Printronix Acquisition

NEW YORK--(BUSINESS WIRE)-- Acacia Research Corporation (Nasdaq: ACTG) (“Acacia” or the “Company”) today reported financial results for the three months and full year ended December 31, 2021. The reported results reflect the contribution of Printronix Holding Corp. (“Printronix”), which was acquired on October 7, 2021. Acacia also reported preliminary results for the first quarter ending March 31, 2022.

Key Business Highlights

• Completed the acquisition of Printronix, a leading manufacturer and distributor of industrial impact printers and related consumables and services. The Printronix business services a diverse group of customers that operate across healthcare, food and beverage, manufacturing and logistics, and other sectors. Acacia paid $33 million in cash for the business, representing approximately 3.6x Adjusted EBITDA generated by Printronix in its prior fiscal year.
• Generated $76.0 million in Intellectual Property revenue (and $41.2 million in operating income) for the full year, up from $29.8 million in revenue and breakeven operating income in 2020.
• Recorded $116.1 million in realized gains for the full year, including $115.0 million from the Life Sciences Portfolio.
• The Company has utilized approximately 40% of its NOLs through the generation of positive net income leaving approximately $172.0 million in net operating loss carryforwards (“NOLs”) at year end.
• Approved a new stock repurchase program for up to $40.0 million of shares of common stock.

Fourth Quarter and Full Year 2021 Financial Highlights
(In millions, except per share data)
		Three Months Ended December 31,														Full Year Ended December 31,
		2021 (unaudited)						2020 (unaudited)									2021						2020
Industrial Revenues		$	12.0					$	—							$	12.0						—
Intellectual property Revenues		$	51.3					$	4.4							$	76.0					$	29.8
Total Revenues		$	63.3					$	4.4							$	88.0					$	29.8
Operating Income (Loss)		$	31.3					$	(6.4	)						$	14.5					$	(19.5	)
Realized Gains		$	63.0					$	11.6							$	116.1					$	7.4
Unrealized Gains (Losses) 1		$	(28.0	)				$	76.7							$	87.5					$	176.2
Non-cash Derivative Liability Gain (Loss) 2		$	163.5					$	(11.6	)						$	(40.4	)				$	(58.2	)
GAAP Net Income		$	204.7					$	78.4							$	149.2					$	109.2
GAAP Diluted Earnings Per Share		$	0.45					$	1.30							$	1.91					$	1.48
1 Unrealized gains and losses are related to the change in fair value of Acacia’s equity securities as of the end of the reported period.
2 The non-cash derivative liability gain (loss) is related to the change in fair value of Acacia’s Series A and B warrants and embedded derivatives.

Clifford Press, Chief Executive Officer, stated, “Today, Acacia has a differentiated strategy that we are now well equipped to execute. We have created a well-defined process for identifying, evaluating, and completing acquisitions, with a robust team of experienced professionals led by MJ McNulty, our new Chief Operating Officer and Head of M&A, and Wes Golby, recently promoted to Chief Investment Officer. We have a dynamic strategic partnership with Starboard Value LP, to identify and pursue opportunities for value realization.”

Mr. Press continued, “During the fourth quarter, we acquired an operating company, initiated the process to acquire additional companies, increased profitability of our intellectual property business and realized further gains from our life science portfolio. Acacia has access to approximately $1 billion in capital available to a team experienced in complex, multi-factor transactions, unconstrained by a narrow mandate or predefined investment timelines. We use a wide range of transactional and operational capabilities to marshal the intrinsic value in the companies that we acquire, within our target verticals of mature technologies, industrial, healthcare, and consumer businesses. We are encouraged that our process continues to identify opportunities to create meaningful transactional value.”

Mr. Press concluded, “Our Board of Directors approved an additional $40 million in stock repurchases, following the completion of our prior $15 million buyback program in February. We will continue to evaluate opportunities to make acquisitions, and to the extent the market affords us the opportunity, to acquire additional shares when the trading price and market conditions warrant.”

Fourth Quarter 2021 Financial Summary:

• Total revenues were $63.3 million, compared to $4.4 million in the same quarter last year.
  • Printronix contributed $12.0 million in revenue in the quarter subsequent to the completion of the acquisition closed on October 7, 2021.
  • The Intellectual Property business generated $51.3 million in licensing and other revenue during the quarter, compared to $4.4 million in the same quarter last year.
• General and administrative expenses were $12.7 million, compared to $6.4 million in the same quarter of last year due to the inclusion of Printronix operating expenses, as well as increased business development and personnel expenses related to the Company’s acquisition organization. Deal costs are expensed as incurred, and not capitalized.
• Operating income was $31.3 million, compared to a loss of $6.4 million in the same quarter of last year, primarily as a result of the increase in revenue generated from the Intellectual Property business.
  • Printronix contributed $2.5 million in operating income, when excluding approximately $2.5 million of one-time non-cash purchase accounting adjustments.
• GAAP Net Income was $204.7 million, or $0.45 per diluted share, compared to net income of $78.4 million, or $1.30 per diluted share, in the fourth quarter of last year.
  • Net income included $63.0 million in realized gains primarily related to the Life Science Portfolio, partially offset by $28.0 million in unrealized losses, primarily related to the reversal of unrealized gains previously recorded for shares sold or gains realized.
  • The Company recognized non-cash income of $163.5 million related to the decline in the fair value of the Starboard Warrants and embedded derivative liabilities due to the decline in Acacia’s stock price during the quarter.

Full-Year 2021 Financial Summary:

• Total revenues were $88.0 million, compared to $29.8 million last year.
  • Printronix contributed $12.0 million in revenue for the year (subsequent to the completion of the acquisition on October 7, 2021).
  • The Intellectual Property segment generated $76.0 million in revenue, compared to $29.8 million last year primarily related to licensing activity of a recently acquired patent portfolio.
• General and administrative expenses were $35.7 million, compared to $24.5 million last year due to the inclusion of Printronix operating expenses, as well as increased business development and personnel expenses related to the development of the Company’s acquisition organization in furtherance of its strategic objectives. Deal costs are expensed as incurred, and not capitalized.
• Operating income was $14.5 million, compared to a loss of ($19.5) million last year, primarily as a result of the increase in revenue generated by the Intellectual Property business.
• GAAP Net Income was $149.2 million, or $1.91 per diluted share, compared to net income of $109.2 million, or $1.48 per diluted share, last year.
  • Net income included $116.1 million in realized gains primarily related to the Life Science Portfolio, and $87.5 million in unrealized gains.
  • The Company recognized a non-cash expense of $40.4 million related to the increase in the fair value of the Starboard Warrants and embedded derivatives due to the increase in Acacia’s stock price during the year.

Balance Sheet and Capital Structure

• Cash, cash equivalents and equity investments measured at fair value totaled $670.7 million at December 31, 2021, compared to $274.6 million at December 31, 2020.
• Equity securities without readily determinable fair value totaled $5.8 million at December 31, 2021; compared to $143.3 million at December 31, 2020, as two privately held companies completed Initial Public Offerings in 2021.
• Investment securities representing equity method investments totaled $30.9 million (before $11.0 million in noncontrolling interests), compared to $30.7 million (before $11.0 million in noncontrolling interests) at December 31, 2020.
• Total indebtedness, which represents the Senior Secured Notes issued to Starboard Value LP, was $181.2 million at December 31, 2021.
• The Company’s current book value totaled $430.5 million, or $8.80 per share, as of December 31, 2021, compared to $288.3 million, or $5.94 per share, at December 31, 2020. Acacia’s current book value reflects the impact of the increase in the Company’s share price on its outstanding warrant and the embedded derivative liabilities. Assuming full exercise of all issued derivatives, Acacia’s pro forma book value would rise to $1.1 billion, or $6.51 per share, up from $877.8 million, or $5.38 per share, as of December 31, 2020.

Acacia has generated $325 million in proceeds from sales of the Life Science Portfolio as of December 31, 2021, which was purchased for $292 million. The remaining positions in the portfolio were $343.1 million in book value as shown below:

Public Securities
Based on Market Value (at December 31, 2021)
Company		Ticker		Number of Shares		Value
Oxford Nanopore Technologies plc 1		LSE: ONT		27.1 mm		$248.1 mm
Arix Bioscience plc		LSE: ARIX		25.8 mm		$42.7 mm
Immunocore Holdings plc		IMCR		0.68 mm		$23.3 mm
Induction Healthcare Group plc		AIM: INHC		4.2 mm		$3.2 mm
Total Public Holdings						$317.4 mm

Private Securities
Carried at Cost (at December 31, 2021)
Company		Ownership Percentage			Value
Viamet Pharmaceuticals		26%	\
AMO Pharma		24%	}		$25.7 mm
NovaBiotics		4%	/
Total Private Holdings					$25.7 mm

⁽¹⁾ Sold 8.0 mm shares in the fourth quarter of 2021 for approximately $69 million of gross proceeds.

Pro Forma Book Value and Changes to Derivative Valuations

As of December 31, 2021, book value was $430.5 million and there were 48.9 million weighted-average shares of common stock outstanding in the fourth quarter of 2021, for a book value per share of $8.80, up from $5.94 at December 31, 2020. The increase since December 31, 2020 is due to the increase in our assets, primarily cash and marketable securities. Total liabilities for warrants and preferred stock was $105.9 million at December 31, 2021. All of these derivative liabilities would be eliminated upon exercise or expiration of all such warrants and preferred stock.

Under GAAP, book value reflects the impact of the liabilities associated with potential issuance of shares related to the Company’s warrants and convertible preferred stock. As the value of those liabilities varies with fluctuations in the Company’s stock price, we believe a presentation of book value assuming full exercise of all warrants and preferred presents a useful measure of book value for investors. However, this calculation has its limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of book value calculated in accordance with GAAP.

Book value at December 31, 2021 reflects the impact of the following:

• $180 million of face value of Notes issued to Starboard Value LP, $115 million of which may be used to exercise Series B warrants at $3.65 per share;
• $35 million in face value of Series A preferred stock issued to Starboard Value LP; and
• $105.9 million of warrants and embedded derivative liabilities associated with all preferred stock and warrants held by Starboard Value LP, to be eliminated upon exercise or expiration of all such warrants and preferred stock.

Assuming Starboard Value LP converted all preferred stock and exercised all warrants:

• $115 million of liabilities attributable to the Notes would be eliminated, and 31.5 million shares of common stock would be issued;
• $35 million in face value of preferred stock would be eliminated, and 9.6 million shares of common stock would be issued;
• $105.9 million embedded derivative liabilities attributed to the warrants would be eliminated; and
• $378 million of cash would be added upon exercise of the remaining Series B warrants and Series A warrants, and 73.5 million shares of common stock would be issued.

The expected impact of this would be an incremental $633.7 million in book value, and an incremental 114.6 million shares outstanding. Assuming such conversion and exercise, pro forma book value would be $1,064 million, and diluted shares outstanding would be 163.5 million, for book value per share of $6.51, as compared to $6.29 at September, 30, 2021, and $5.38 at December 31, 2020.

Preliminary First Quarter 2022 Results:

• Total revenues of $13.0 to $14.0 million, reflecting the inclusion of Printronix.
• General and administrative expense of $12.5 to $13.5 million, reflecting development of the Company’s acquisition organization.
• Operating loss of $8.2 to $9.2 million, reflecting increased general and administrative expenses.
• Total cash and marketable securities of $538.7 million based on today’s values.
• Total indebtedness of $168.4 million, reflecting Notes issued to Starboard Value LP.

The preliminary results for the first quarter ending March 31, 2022 are not yet complete and are based on information available to our management team as of the date hereof. These results are preliminary, unaudited, and subject to change as we complete our financial statements as of and for the quarter ending March 31, 2022. These preliminary estimates are not guarantees of actual performance, and are not guarantees of, or indicative of, future performance. Given the timing of these preliminary results, we have not completed our customary financial closing and review procedures. We may identify other items that require material adjustments to these preliminary results as we finalize our financial statement close procedures for the quarter. Accordingly, these preliminary results should not be viewed as a substitute for full financial statements for the quarter ending March 31, 2022 prepared in accordance with accounting principles generally accepted in the United States (GAAP). Final results for the quarter could differ from these preliminary results. These preliminary results are subject to final review by our audit committee and review by our independent registered public accounting firm. Accordingly, our independent registered public accounting firm does not express an opinion or any other form of assurance with respect thereto. Please see the information under the heading “Safe Harbor Statement” for a discussion of certain risks and uncertainties that may impact the preliminary results for the quarter ending March 31, 2022.

Share Repurchase Program

Effective March 31, 2022, the Company’s Board of Directors approved a new stock repurchase program for up to $40.0 million of shares of common stock. The repurchase authorization has no time limit and does not require the repurchase of a minimum number of shares. The common stock may be repurchased on the open market, in block trades, or in privately negotiated transactions, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Exchange Act. The timing and actual number of shares of common stock to be repurchased will depend upon market conditions, eligibility to trade, and other factors.

Investor Conference Call:

The Company will host a conference call today, March 31, 2022 at 11 a.m. ET (8 a.m. PT).

To access the live call, please dial 888-506-0062 (U.S. and Canada) or 973-528-0011 (international). The conference call will also be simultaneously webcasted on the investor relations section of the Company’s website at http://www.acaciaresearch.com under Events & Presentations. Following the conclusion of the live call, a replay of the webcast will be available on the Company's website for at least 30 days.

About the Company

Acacia is a permanent capital platform with a strategy to purchase businesses based on the differentials between public and private market valuations. Acacia leverages its (i) access to flexible capital that can be deployed opportunistically as a result of its strategic partnership with Starboard Value LP, (ii) disciplined focus on identifying opportunities where it can be an advantaged buyer, initiate a transaction opportunity spontaneously, avoid a traditional sale process and complete the purchase of a business, division or other asset at an attractive price, (iii) willingness to invest across industries and in off-the-run, often misunderstood assets that suffer from a complexity or multi-factor discount, (iv) relationships and partnership abilities across functions and sectors, and (v) strong expertise in corporate governance and operational transformation. Acacia seeks to identify opportunities where it believes it is an advantaged buyer, where it can avoid structured sale processes and create the opportunity to purchase businesses, divisions and/or assets of companies at an attractive price due to Acacia’s unique capabilities, relationships or expertise, or Acacia believes the target would be worth more to it than to other buyers. Additional information about Acacia and its subsidiaries is available at www.acaciaresearch.com.

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon the Company’s current expectations and speak only as of the date hereof. The Company’s actual results may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including the Company’s ability to successfully implement its strategic plan, the ability to successfully identify and complete strategic acquisitions of businesses, divisions, and/or assets, the ability to successfully develop licensing programs and attract new business, changes in demand for current and future intellectual property rights, legislative, regulatory and competitive developments addressing licensing and enforcement of patents and/or intellectual property in general, general economic conditions, including the impact of the COVID-19 pandemic and the success of the Company’s investments. The Company’s Annual Report on Form 10-K, and other SEC filings discuss some of the important risks and uncertainties that may affect the Company’s business, results of operations and financial condition. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

The results achieved by the Company in prior periods are not necessarily indicative of the results to be achieved by us in any subsequent periods. It is currently anticipated that the Company’s financial results will vary, and may vary significantly, from quarter to quarter.

ACACIA RESEARCH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
		December 31,
			2021				2020
ASSETS
Current assets:
Cash and cash equivalents		$	308,943			$	165,546
Equity securities at fair value			361,778				109,103
Equity securities without readily determinable fair value			5,816				143,257
Investment securities - equity method investments			30,934				30,673
Investment at fair value			—				2,752
Accounts receivable, net			9,517				506
Inventories			8,930				—
Prepaid expenses and other current assets			4,764				5,832
Total current assets			730,682				457,669
Long-term restricted cash			418				35,000
Property, plant and equipment, net			4,183				270
Goodwill			7,470				—
Patents, net			—				—
Other intangible assets, net			48,793				16,912
Leased right-of-use assets			2,027				951
Deferred income tax assets, net			—				—
Other non-current assets			5,283				505
Total assets		$	798,856			$	511,307
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	5,440			$	1,019
Accrued expenses and other current liabilities			5,789				3,707
Accrued compensation			4,136				2,265
Royalties and contingent legal fees payable			2,463				2,162
Accrued patent investment costs			—				—
Deferred revenue			1,114				—
Senior Secured Notes Payable			181,248				115,663
Total current liabilities			200,190				124,816
Deferred revenue, net of current portion			581				—
Series A warrant liabilities			11,291				6,640
Series A embedded derivative liabilities			18,448				26,728
Series B warrant liabilities			96,378				52,341
Long-term lease liabilities			2,027				951
Deferred income tax liabilities, net			18,552				—
Other long-term liabilities			6,161				591
Total liabilities			353,628				212,067
Commitments and contingencies
Series A redeemable convertible preferred stock, par value $0.001 per share; stated value $100 per share; 350,000 shares authorized, issued and outstanding as of December 31, 2021 and 2020; aggregate liquidation preference of $35,000 as of December 31, 2021 and 2020			14,753				10,924
Stockholders' equity:
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; no shares issued or outstanding			—				—
Common stock, par value $0.001 per share; 300,000,000 shares authorized; 48,807,748 and 49,279,453 shares issued and outstanding as of December 31, 2021 and 2020, respectively			49				49
Treasury stock, at cost, 5,388,469 and 4,604,365 shares as of December 31, 2021 and 2020, respectively			(47,281	)			(43,270	)
Additional paid-in capital			648,389				651,416
Accumulated deficit			(181,724	)			(330,921	)
Total Acacia Research Corporation stockholders' equity			419,433				277,274
Noncontrolling interests			11,042				11,042
Total stockholders' equity			430,475				288,316
Total liabilities, redeemable convertible preferred stock, and stockholders' equity		$	798,856			$	511,307

ACACIA RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
		Three Months Ended December 31,								Years Ended December 31,
		2021 (unaudited)				2020 (unaudited)					2021				2020
Revenues:
Intellectual property operations		$	51,258			$	4,383			$	76,043			$	29,782
Industrial operations			12,004				—				12,004				—
Total revenues			63,262				4,383				88,047				29,782
Costs and expenses:
Cost of revenues - intellectual property operations			10,166				4,415				28,691				24,824
Cost of sales - industrial operations			7,407				—				7,407				—
Engineering and development expenses - industrial operations			200				—				200				—
Sales and marketing expenses - industrial operations			1,538				—				1,538				—
General and administrative expenses			12,652				6,387				35,666				24,476
Total costs and expenses			31,963				10,802				73,502				49,300
Operating income (loss)			31,299				(6,419	)			14,545				(19,518	)
Other income (expense):
Equity securities investments:
Change in fair value of equity securities			(27,982	)			76,724				87,527				176,173
Gain on sale of equity securities			63,005				11,624				116,129				7,352
Earnings on equity investment in joint venture			793				—				3,530				—
Net realized and unrealized gain			35,816				88,348				207,186				183,525
Gain on sale of prepaid investment and derivative			—				—				—				2,845
Change in fair value of investment			—				1,770				(2,752	)			5,474
Gain on sale of investment			—				10,949				3,591				8,187
Change in fair value of the Series A and B warrants and embedded derivatives			163,458				(11,626	)			(40,408	)			(58,238	)
Loss on foreign currency exchange			104				33				(89	)			(4,905	)
Interest expense on Senior Secured Notes			(2,321	)			(4,591	)			(7,922	)			(10,136	)
Interest income and other			366				27				501				838
Total other income			197,423				84,910				160,107				127,590
Income before income taxes			228,722				78,491				174,652				108,072
Income tax (expense) benefit			(23,756	)			(98	)			(24,287	)			1,159
Net income including noncontrolling interests in subsidiaries			204,966				78,393				150,365				109,231
Net income attributable to noncontrolling interests in subsidiaries			(262	)			—				(1,168	)			—
Net income attributable to Acacia Research Corporation		$	204,704			$	78,393			$	149,197			$	109,231
Income per share:
Net income attributable to common stockholders - Basic		$	167,832			$	63,660			$	118,804			$	86,846
Weighted average number of shares outstanding - Basic			48,909,769				48,508,903				48,797,290				48,840,829
Basic net income per common share		$	3.43			$	1.31			$	2.43			$	1.78
Net income attributable to common stockholders - Diluted		$	42,419			$	63,829			$	188,224			$	84,894
Weighted average number of shares outstanding - Diluted			93,975,760				49,244,141				98,470,870				57,435,128
Diluted net income per common share		$	0.45			$	1.30			$	1.91			$	1.48

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220331005431/en/

Investor Contact:

FNK IR

Rob Fink, 646-809-4048

rob@fnkir.com

Media Contact:

Longacre Square Partners

Greg Marose, 646-386-0091

gmarose@longacresquare.com

Source: Acacia Research Corporation

FAQ

What were Acacia Research's 2021 earnings results?

Acacia Research reported net income of $149.2 million, or $1.91 per diluted share for 2021.

How much revenue did Acacia generate from Intellectual Property in 2021?

Acacia generated $76.0 million in Intellectual Property revenue in 2021.

What is the stock symbol for Acacia Research?

The stock symbol for Acacia Research is ACTG.

What is Acacia's future outlook for Q1 2022?

For Q1 2022, Acacia anticipates revenues between $13.0 million and $14.0 million.

How much did Acacia pay for the acquisition of Printronix?

Acacia paid $33 million for the acquisition of Printronix.