Book Value as of December 31, 2020 Increases to $292.5 Million, or $5.94 Per Share

NEW YORK--(BUSINESS WIRE)-- Acacia Research Corporation (Nasdaq: ACTG) today reported results for the three and 12-month period ended December 31, 2020.

Clifford Press, Chief Executive Officer, stated, “During the year, we completed our first transaction in our strategic partnership with Starboard Value LP (“Starboard”), and acquired a portfolio of late-stage life science assets, increasing our book value by more than $117.5 million. After acquiring this portfolio for $282.3 million, we sold several holdings to recover $188.5 million while retaining assets which were valued at more than $267.4 million as of December 31, 2020. Subsequent to year end, Immunocore, whose securities are included in the portfolio, conducted a successful IPO, following the release of positive clinical data, which increased the value of our holding by $31.9 million as of March 26, 2021. We continue to hold substantial value in the securities of public and private companies remaining in the portfolio.”

Our life sciences portfolio as of December 31, 2020 includes:

Al Tobia, Acacia’s Chief Investment Officer, added, “During 2020 we had gains, realized and unrealized, of approximately $175 million from the life sciences portfolio. During the first quarter of this year, our IP business completed the acquisition of a patent portfolio from Newracom. This portfolio provides a broad range of Wi-Fi IP that covers multiple applications including mobile devices, wearables, digital home, home automation, healthcare, and industrial automation. Our team is actively exploring licensing opportunities for the recently acquired patent families.”

Mr. Press concluded, “We remain active in collaboration with Starboard to evaluate further opportunities within the small-cap value sector with the goal of acquiring operating companies in the mature technology, healthcare, industrial and certain financial services segments.”

Full Year 2020 Financial Summary:

• Cash and short-term investments totaled $274.6 million at December 31, 2020, compared to $168.3 million at December 31, 2019.
• Debt, which represents the Senior Secured Notes issued to Starboard, was $115.0 million at December 31, 2020.
• Book value totaled $292.5 million as of December 31, 2020, compared to $175.0 million at December 31, 2019. Acacia’s current book value reflects issuance of Senior Secured Notes and liabilities associated with the funding of the life science portfolio acquisition, and reflects the public and private values based on U.S. GAAP of assets as of December 31, 2020.
• Gross revenues were $29.8 million.
• General and administrative expenses increased by 49.5% to $24.5 million, compared with $16.4 million last year due to business development and personnel expenses, as we build out our capability to identify, evaluate and execute acquisitions.
• Operating loss was $19.5 million.
• GAAP net income to common stockholders was $88.5 million, or $1.54 per diluted share, compared to a net loss of $(20.4 million), or $(0.40) per diluted share, last year.

Fourth Quarter 2020 Financial Summary:

• Gross revenues were $4.4 million.
• General and administrative expenses for the fourth quarter of 2020 increased by 47.6%, compared with the fourth quarter of 2019, due to business development and personnel expenses.
• Operating loss was $6.4 million.
• GAAP net income to common stockholders was $65.4 million, or $1.33 per diluted share, compared to a net loss of $(2.6 million), or $(0.05) per diluted share, in the fourth quarter last year.
• The fourth quarter of 2020 reflected:
  • A net non-cash benefit of $99.9 million related to the change in the fair value of trading and investment securities; and
  • Expense of $11.6 million related to the change in fair value of warrants and embedded derivatives.

Book Value/Dilution

As of December 31, 2020, book value was $292.5 million and there were 49.2 million diluted shares outstanding in the fourth quarter of 2020, for a book value per share of $5.94.

Starboard Value holds the following securities:

• $35 million of Series A preferred stock, exercisable into 9.6 million shares of common stock (exercisable at $3.65 per share);
• $115 million of Notes, exercisable into 31.5 million shares of common stock through 31.5 million Series B warrants owned (exercisable at $3.65 per share);
• 68.5 million additional Series B warrants exercisable into 68.5 million shares of common stock for $360 million in cash (exercisable at $5.25 per share); and
• 5 million Series A warrants exercisable into 5 million shares of common stock for $18.25 million (exercisable at $3.65 per share)

Book value at December 31, 2020 reflects the impact of the following:

• $115 million of Notes issued to Starboard Value;
• $35 million of Series A preferred stock to Starboard Value; and
• $61.6 million of warrant and additional embedded derivative liabilities associated with all preferred stock and warrants held by Starboard Value, to be eliminated upon exercise or expiration

Assuming Starboard Value converted all preferred stock and exercised all warrants1:

• $115 million of Notes liability would be eliminated, and 31.5 million shares would be issued;
• $35 million of preferred stock would be eliminated, and 9.6 million shares would be issued;
• $61.6 million of warrant and embedded derivative liabilities 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 would be issued

The impact of this would be an incremental $590 million in book value, and an incremental 114.6 million shares outstanding. Pro forma for all of this exercise, book value would be $882.5 million, and diluted shares outstanding would be 163.8 million, for book value per share of $5.39.

Investor Conference Call:

The Company will host a conference call today, Monday, March 29, 2021 at 11 a.m. ET/ 8 a.m. PT to discuss these results and provide a business update.

To access the live call, please dial (877) 407-0778 (U.S. and Canada) or (201) 689-8565 (international). The conference call will also be simultaneously webcasted on the investor relations section of the Company’s website at https://acaciaresearch.com/actg/investor_relations/3413 under the News & Events section. 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 Acacia Research Corporation

Acacia Research (NASDAQ: ACTG) seeks to acquire undervalued businesses and pursues opportunities for value creation. We leverage our (i) access to flexible capital that can be deployed unconditionally, (ii) expertise in corporate governance and operational restructuring, (iii) willingness to invest in out of favor industries and businesses that suffer from a complexity discount and untangle complex, multi-factor situations, and (iv) expertise and relationships in certain sectors, to complete strategic acquisitions of businesses, divisions, and/or assets with a focus on mature technology, healthcare, industrial and certain financial segments. We seek to identify opportunities where we believe we are advantaged buyers, where we can avoid structured sale processes and create the opportunity to purchase businesses, divisions and/or assets of companies at an attractive price due to our unique capabilities, relationships, or expertise, or where we believe the target would be worth more to us than to other buyers. Information about Acacia Research Corporation and its subsidiaries is available at www.acaciaresearch.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

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 our current expectations and speak only as of the date hereof. Our 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 ability to successfully implement our 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 our investments. Our Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and any amendments to the forgoing, and other SEC filings discuss some of the important risk factors that may affect our 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 in the most recent quarter are not necessarily indicative of the results to be achieved by us in any subsequent quarters, as it is currently anticipated that Acacia Research Corporation’s financial results will vary, and may vary significantly, from quarter to quarter. This variance is expected to result from a number of factors, including risk factors affecting our results of operations and financial condition referenced above, and the particular structure of our licensing transactions, which may impact the amount of inventor royalties and contingent legal fees expenses we incur from period to period.

1 Consistent with the Company's NOL preservation policies, the terms of the preferred stock and warrants prevent Starboard Value from converting or exercising such security to the extent such conversion or exercise would cause Starboard Value, together with its affiliates, to beneficially own in excess of 4.89% of the Company's then outstanding shares of common stock following such conversion or exercise.

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Investor Contact:

Rob Fink

FNK IR

646-809-4048

[email protected]

Source: Acacia Research Corporation