ACACIA RESEARCH GROUP LLC ACACIA UNLOCKING RESEARCH patent GROUP, POTENTIAL LLC NASDAQ: ACTG A Subsidiary of Acacia Research Corporation
Forward Looking Statements This presentation contains forward looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements address future events and conditions concerning the company s business plans. Such statements are based on management s current expectations and are subject to a number of factors and uncertainties, such as future economic conditions, changes in consumer demand, legislative, regulatory and competitive developments, and other circumstances affecting anticipated revenues and costs, which may cause actual results to differ materially. The company expressly disclaims any future obligation or undertaking to update or revise any forward looking statement contained herein. CONFIDENTIAL AND PROPRIETARY 2
ACACIA is at the TRANSACTIONAL CENTER of INNOVATION. 3
Unlocking Patent Potential Acacia is the No. 1 outsourced partner for monetizing patented technologies Intermediates transactions between patent owners & patent infringers by partnering with patent owners Facilitates efficiency and delivers monetary rewards to the patent owner Approximately $691M returned to patent partners Key Financial Information NASDAQ Listing ACTG Stock Price* $9.83 Market Capitalization $546M 2014 Revenue $131M Cash and Investments (No Debt) $166M Dividend Yield 4.7% *as of 4/22/2015 CONFIDENTIAL AND PROPRIETARY 4
Investment Highlights Empowering Inventors and Patent Owners Leading outsourced patent licensing company an emerging patent clearinghouse Strategic focus on more consistent, predictable and profitable business model Robust portfolio of diverse licensing programs across multiple industries Accelerating trial calendar 2015 and 2016 more than 20 trials Strong operating leverage with highly scalable business model Deep legal and technology expertise Deep industry knowledge Presently proposed patent reform legislation is good for Acacia CONFIDENTIAL AND PROPRIETARY 5
Rewarding the Idea Makers and the World Changers Acacia is a leading player in the secondary patent market Patent Owners Most patents are owned by entities that do not make products covered by their patents Acacia partners with patent owners to bridge the gap between invention and production, helping patent owners get paid by licensing their patents to the companies that use them Outsourced IP licensing transactions help promote a secondary market for these patents ACACIA (Clearinghouse) Products & Services CONFIDENTIAL AND PROPRIETARY 6
Demand: Needs Driving Patent Holders To Outsource Monetization or Why Do Patent Owners Partner With Acacia? Licensing Expertise Risk Mitigation Complexity of current environment Interdisciplinary experience (Licensing, Business, Engineering) History and track record of success High cost for internal licensing programs Longer time to revenue Scale: Serial vs. Parallel Licensing Liquidity Transforming patents into cash Short term cash flow Long term royalty stream CONFIDENTIAL AND PROPRIETARY 7
Financial Models Split net profit 50/50 with patent owner Partnership Typical partners for Acacia: Major corporations Research labs and universities Individual inventors Protects patent owner from countersuits High margins with upside leverage Patent Diligence 40% Patent Owner 40% Acacia 20% Law Firm Pay legal ACACIA RESEARCH costs GROUP, LLC License patents to corporate users Hybrid Partnership How it works: Up-front capital infusion as an advance on future licensing Acacia receives 100% of return until capital infusion is returned Objectives: Recover capital infusion in 18-24 months Upon return of capital infusion, net profit revenue split with patent partner begins 3x return of capital in 5 years Purpose: Increases Acacia s total addressable market Strong Balance Sheet yields competitive advantage Acquisition Model Acacia buys 100% of the patents for 100% of the profits Typical partners: Distressed Corporations Failed Corporations Controlled by VCs Higher margins with increased upside potential Acacia 70-100% Legal 0-30% CONFIDENTIAL AND PROPRIETARY 8
Creating Opportunity Marquee Portfolios + New Industry Verticals Smart Phones, Tablets, PCs and TVs Palmsource mobile computing Adaptix 4/4.5G wireless air interface Nokia Siemens Networks 2G/3G wireless air interface Rambus backlighting units Silicon Image high speed chip interconnects Silicon Image high speed display interfaces VoiceAge high definition voice ST Micro shared memory architectures for application processors Renesas semiconductors Medical Devices and Technology (Launched 2011) Bonutti Skeletal Innovations Boston Scientific stent grafts Automotive (Launched 2013) Automotive Technologies International safety, diagnostics and navigation Telematics Smartphones portfolios, as set out above, (Adaptix, 4/4.5G, Palmsource Mobile Computing etc.) Energy (Launched 2013) Austin Geo 3D subsurface visualization Covertech reflective insulation CONFIDENTIAL AND PROPRIETARY 9
Smart Phone Coverage Rambus 69 Patents LED back lighting Access 125 Patents Sync, Apps, User Interface VoiceAge 274 Patents High Fidelity Voice Codecs Silicon Image 2 10 Patents High Speed Display Interfaces NSN 74 Patents 2G/3G Power Control, Handover, Coding Adaptix 205 Patents 4G/4.5G OFDM, Cooperative Diversity Silicon Image 1 138 Patents High Speed Chip Interconnect ST Micro 13 patents Shared memory architectures for application processors CONFIDENTIAL AND PROPRIETARY 10
Emerging Opportunities Stent Graft and Vena Cava Filter Patent Coverage 1800+ Patents Single largest collection of US patents covering stent graft technology Comprehensive worldwide coverage Portfolios come from leading researchers and corporations Orthopedics and Sports Medicine Over 150 Patents and applications Technologies covered include: Spine, hip, knee, shoulder, biologics and tissue repair CONFIDENTIAL AND PROPRIETARY 11
Emerging Opportunities Automotive & Transportation Industry American Vehicular Sciences 230 patents covering automotive safety, navigation and diagnostics technologies Ranked 1st in research intensity and as 32nd overall innovator in The Patent Board TM January 2012 Automotive & Transportation Industry Scorecard Vehicle Sensing Rambus Automotive Illumination Covering illumination applications including, headlights, taillights, instrumentation, internal & external lighting Rambus Backlighting Units 69 Patents covering LED back lighting for navigation and infotainment displays Palmsource 125 patents covering sync, apps, user interface Driver-Assistance Adaptix 205 Patents covering 4G/4.5G OFDM, cooperative diversity NSN 74 Patents covering 2G/3G power control, handover, coding CONFIDENTIAL AND PROPRIETARY 12
Patents: Apply To A Wide Variety Of Products Mobile Phones & Tablets* Digital Home* Laptops & PCs* Automobiles* Patented Technology* Semiconductors Wireless Air Interfaces Software Displays *Representative sampling only Constant infusion of new technology creates licensing opportunities CONFIDENTIAL AND PROPRIETARY 13
2015 Opportunities Strong Trial Date Calendar Opportunities continue ramping up throughout 2015 Multiple Adaptix trials EDTex and NDCal (Q1-Q2) Adaptix hearings Japan (Ongoing Q1-4) Multiple St. Lawrence (VoiceAge) trials Germany (Q1-2) PUMA (STMicro) trials EDTex (Q4) Lifescreen (Boston Sci) trials DDel (Q4) IDT (Rambus) trials EDTex (Q1) CONFIDENTIAL AND PROPRIETARY 14
2016 and Beyond Trial Dates Set and Continue to Populate 2016 promises to continue the momentum from 2015 CCE (NSN) trials set for 2016 Lifeport (Boston Sci) trials set for 2016 Additional Adaptix trials in 2016 Data Engine (Borland) trials in 2016 Patent portfolios continue to grow Over 90 new litigations filed in Q1-Q3 2014 without Markman or Trial dates yet Trials likely to be set for 2016 and 2017 Trials, Markmans, IPR decisions etc. all present value setting points While dates may change, the revenue opportunities still exist CONFIDENTIAL AND PROPRIETARY 15
FINANCIAL metrics.
Financial Performance The Power of Innovation 2009 (000 s) 2010 (000 s) 2011 (000 s) 2012 (000 s) 2013 (000 s) 2014 (000 s) Q1 2015* (000 s) Revenues $67,340 $131,829 $184,707 $250,727 $130,556 $130,876 $34,210 Non-GAAP Operating Margin Non-GAAP Net Income Pro-forma Non-GAAP EPS.6% 37.5% 24.4% 54.8% (1.1%) 7.1% 9.2% $409 $49,405 $45,013 $137,339 ($1,424) $9,328 $3,155 $.01 $1.46 $1.12 $2.80 ($0.04) $0.18 $0.06 *Q1 2015 financials (Jan 1, 2015 Mar 31, 2015) CONFIDENTIAL AND PROPRIETARY 17
Cumulative Licensing Revenue by Size of Licensee 95% of Licensing Revenue from Companies Generating > $100 Million Annually Licensee Revenue Size Less than $100M $101M - $1B > $1Billion Percent Of Acacia Business 5% 15% 80% Large Licensees Drive Acacia s Business CONFIDENTIAL AND PROPRIETARY 18
returns to PATENT OWNERS 691,000,000 Our partnership with patent owners is the cornerstone of Acacia s corporate strategy. CONFIDENTIAL AND PROPRIETARY 19
ACACIA RESEARCH GROUP LLC ACACIA UNLEASHING RESEARCH patent GROUP, POTENTIAL LLC NASDAQ: ACTG A Subsidiary of Acacia Research Corporation