Acacia Research Corporation Q2 2009 Earnings Call Transcript

Jul.23.09 | About: Acacia Research (ACTG)

Acacia Research Corporation (NASDAQ:ACTG)

Q2 2009 Earnings Call

23, July 23, 2009 4:30 pm ET

Executives

Paul Ryan - Chairman and Chief Executive Officer

Analysts

Dan Katz - Apex Capital

Harry Haskell

[Call starts abruptly]

...2008. Patent-related research, consulting and other expenses include third-party patent-related research, development, consulting, licensing and enforcement and patent maintenance costs incurred in connection with the development, licensing and enforcement and maintenance of patent portfolios. These costs fluctuate period-to-period based on patent-related research, licensing and enforcement and maintenance activities in each period.

The quarter-to-quarter increase in patent-related research consulting and other expenses is due to expenses incurred in connection with new patent-related licensing and enforcement programs commenced since the end of the prior year period. Looking forward for fiscal 2009, we expect MG&A, excluding non-cash stock compensation charges to be in the range of 13.5 million to 14 million. For fiscal 2009, estimated patent-related legal expenses together with patent-related research consulting and other costs are expected to be in the range of 8.5 million to 9 million.

From a balance sheet perspective, total assets as of June 30 2009, totaled 75.6 million compared to 73.1 million as of December 31, 2008. As of the end of the second quarter, cash and investment balances totaled 59.2 million versus 51.5 million as of December 31, 2008.

Positive net cash inflows from operations for the second quarter of 2009 totaled 6.6 million versus cash flow breakeven for the second quarter of 2008. Net cash inflows from operations for the six months ended June 30, 2009 totaled 9.2 million versus net cash outflows from operations of 3.9 million for the six months ended June 30, 2008.

Accounts receivable from licensees totaled 2.5 million as of the end of the second quarter of 2009 compared to 7.4 million as of December 31, 2008.

Again, thank you for joining us for today’s Earnings Call, and I will now turn the call back over to Paul Ryan.

Paul Ryan

Thank you, Clayton. Operator, can you open up the call for questions, please?

Question-and-Answer Session

Operator

The question-and-answer session will now begin. (Operator Instructions). Please standby for your first question, sir. And our first question is coming in from Dan Katz from Apex Capital. Please go ahead.

Dan Katz - Apex Capital

Hello gentlemen and congrats on continued good business momentum.

Paul Ryan

Thank you.

Dan Katz - Apex Capital

Can you explain why you had such good cash generation in the quarter please?

Paul Ryan

Well, the margins as Clayton said, rather expanded to 48%, I think we’re beginning to get licensing deals done in many cases earlier in the life cycle of the licensing program before we bring in legal action which improves our margins and our partner’s margins. And part of it is just timing, we [inaudible] -- we did some licensing deals towards the end of the quarter and received it. So, part of it’s a timing issue, I bring in the cash and part of its margins.

Dan Katz - Apex Capital

That’s pretty good. And then, in terms of the Yahoo case, can you go through the possible outcomes of that August 3 date, that you referred to and then, you know, would you expect Yahoo to try and negotiate a one-time payment rather than pay that royalty over the remaining nine years of the path?

Paul Ryan

Well, anything is possible. The August 3 hearing is -- yeah we’ve asked the court to enter the verdict for the damages as well as enhanced damages based on the willful infringement, as well as other matters before the court including the usage of the technology from the original November 2008 date to the present.

So, the court will rule on those either before or at the latest by August 3 and that certainly will set any negotiating tone, I would think, it would give additional information to both parties upon which to base their discussions.

The later period, it relates to the royalty rate that the jury awarded and that would also be the discussions, ongoing discussions and that issue really isn’t scheduled to be resolved by the court until September 30.

Yeah, as you know with these particular types of cases Danny, either is a variety of potential solutions including settlements and/or any combination of that and ongoing royalties.

Dan Katz - Apex Capital

Okay. And then, can you give a update on the environment or different jurisdictions, different venues that you’ve chosen, I know at one point you’ve been headed one direction, you sort of diversify that just what’s your strategy and what’s the general environment for that, choosing of those jurisdictions at this stage?

Paul Ryan

It’s really driven by the partners to have the patented technologies often times at their location and where preponderates of the evidence would be. For instance just by way of example, our location based cell phone case in the state of Ohio is based there because our partner was a cell phone company based in Ohio, so it’s just a logical place for it to do.

So, we’re very spread out in I don’t know how many districts now, but probably over 20 different judicial districts based on where it makes sense primarily from where our IP partner is based and where the historical development took place in the operations of that company.

Operator

(Operator Instructions) Please standby for more questions, sir. (Operator Instructions) And we have our next question coming in from Harry Haskell, a private investor. Please go ahead, sir.

Harry Haskell

Hi, Paul. Anything new on Comcast?

Paul Ryan

Well, actually we have a variety of litigation; you are probably referring to our original video on-demand, our digital media transmission case.

Harry Haskell

Yes.

Paul Ryan

That is still in the northern district of California. It’s still in the claims construction phase, which we’re hoping we will get through this year and be able to move into discovery and move the case forward, but it’s -- we’ve had no progress since the last quarter on that case of a fundamental nature, we’re still in the claims construction process.

Operator

Sir, does that conclude your question?

Paul Ryan

Thank you.

Operator

Thank you. (Operator Instructions). This will conclude the question-and-answer session. I will now turn the call back over to Mr. Ryan.

Paul Ryan

Thank you very much. And I want to thank you all for being on the call with us today. If you have additional questions, please feel free to give myself or Rob Stewart, our head of Investor Relations a call with any follow-up questions and we look forward to speaking to you next quarter. Thanks again.

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