ACACIA RESEARCH Q1 2020 Earnings Presentation May 11, 2020 SAFE - - PowerPoint PPT Presentation

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ACACIA RESEARCH Q1 2020 Earnings Presentation May 11, 2020 SAFE - - PowerPoint PPT Presentation

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ACACIA RESEARCH Q1 2020 Earnings Presentation May 11, 2020 SAFE HARBOR T h i s p r e s e n t a t i o n m a y c o n t a i n f o r w a r d - l o o k i n g s t a t e m e n t s w i t h i n t h e m e a n i n g o f t h e s a f e h a r b o r p

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ACACIA RESEARCH

Q1 2020 Earnings Presentation May 11, 2020

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SAFE HARBOR

T h i s p r e s e n t a t i o n m a y c o n t a i n f o r w a r d - l o o k i n g s t a t e m e n t s w i t h i n t h e m e a n i n g

  • f t h e “ s a f e h a r b o r ” p r o v i s i o n s o f t h e P r i v a t e S e c u r i t i e s L i t i g a t i o n R e f o r m A c t
  • f 1 9 9 5 . S u c h s t a t e m e n t s a r e b a s e d u p o n o u r c u r r e n t ex p e c t a t i o n s a n d s p e a k
  • n l y

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  • u r

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  • t h e r S E C f i l i n g s d i s c u s s s o m e o f t h e i m p o r t a n t r i s k f a c t o r s t h a t m a y a f f e c t o u r

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  • b l i g a t i o n t o r e v i s e o r u p d a t e p u b l i c l y a n y f o r w a r d - l o o k i n g s t a t e m e n t s f o r a n y

r e a s o n .

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Q1 SUMMARY

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A dvancing A bsol ute Re turn Strate g y

  • Focus on growing book value and leveraging our substantial NOLs and capital partnership with Starboard.
  • Actively evaluating corporate development opportunities with Starboard
  • Strategic Committee of the board is meeting regularly
  • Recent market volatility has opened many opportunities that are being evaluated
  • Restarted IP Assertion Engine

Enhance d IP P ortfol io with Two A cquisitions

  • Acquired assets offer an attractive blend of licensing and litigation opportunities to pursue
  • Additions expected to begin generating licensing revenues in Q2 with significant contribution beginning in 2021
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A COMMON FRAMEWORK FOR UNIQUE INVESTMENT OPPORTUNITIES

V a l u a b l e A s s e t s + C o m p l e x E x t r a n e o u s I s s u e s = V a l u e D i s l o c a t i o n s

Valuation Engine

Governance Investing Trading Capital Allocation Capital Markets & M&A

Acacia Skill Sets Absolute Return Investment Platform

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IP INVESTMENT APPROACH & BUSINESS UPDATE

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IP INVESTING SUMMARY

  • Current IP team’s leadership has track record for generating positive returns in all

environments

  • Environment now healthier – less capital, litigation backdrop improving
  • Leveraging IP brand equity to be an effective patent licensor
  • Strategy incorporates soft licensing opportunities (more predictable, faster return
  • f capital) with incremental exposure to higher return litigation opportunities
  • Leverage revitalized efforts to drive increased awareness among patent owners

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HISTORICAL PERSPECTIVE: 2000 – 2012

A CLASSIC ASSET BUBBLE CREATED….

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Excess Capital Entered the Market

$6Bn+ in capital raised by IP investment management entities during 2000-2012 Patent sales between 2000 - 2010 were generally @ ~$150-200K/patent

Patent Portfolio Deal Sizes Rose (price / patent)

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HISTORICAL PERSPECTIVE: 2012 – 2013

… BUT THEN IT BURST

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Ch Chang nges s in t n the regulatory latory and nd legal al env nvironm nment nt led to sharp rp reduct uction ions in pa patent nt va valuation uations

  • 2011 -- AIA passed
  • 2012 -- Inter-Partes Review (IPR) process introduced (a new level of post grant review)
  • 2014 --
  • - Alice v. CLS Bank Supreme Court decision constrained patented subject matter
  • 2015

5 – Leadership changes at the USPTO

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PATENT PRICES HAVE BOTTOMED, BUT STILL WELL BELOW PEAK

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P r i c e s f e l l f r o m $ 3 5 0 K / p a t e n t i n 2 0 1 2 t o $ 1 5 0 K / p a t e n t i n 2 0 1 7

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R E G U L A T O R Y / L E G A L E N V I O R N M E N T H A S I M P R O V E D

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F e w e r p a t e n t s a r e r e v i e w e d a t I P R f o r i n v a l i d a t i o n - o f t h o s e r e v i e w e d , a s m a l l e r p e r c e n t a g e a r e i n v a l i d a t e d

F e w e r p a t e n t s r e v i e w e d a t I P R f o r i n v a l i d a t i o n O f t h o s e i n v a l i d a t i o n c l a i m s h a v e d e c l i n e d

Institution rate for each fiscal year is calculated by dividing petitions instituted by decisions on institution (i.e. petitions instituted plus petitions denied). The outcomes

  • f decisions on institution responsive to requests for rehearing are excluded

87% 75% 68% 67% 63% 60% 63% 55% 0% 20% 40% 60% 80% 100% 200 400 600 800 1,000 1,200 1,400 1,600 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Institution Rates (FY13 to FY20: Oct. 1, 2012 to Feb. 29, 2020 Instituted Denied 17% 12% 23% 24% 26%

  • 10%

10% 30% 2,000 4,000 6,000 8,000 10,000 12,000 2014 2015 2016 2017 2018 Determinations of Claims in Final Written Decisions Not unpatentable Unpatentable

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ACACIA's IP Asset base

  • Core IP Team
  • Highly skilled and experienced
  • Very efficient and able to leverage for scale
  • IP expertise can be leveraged to diligence other corporate opportunities
  • Well recognized as an aggressive assertion entity
  • Company is well capitalized
  • Can move quickly on market opportunities
  • Committed to remaining a well-capitalized counterparty

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2020 PORTFOLIO ACQUISTIONS TO DATE

  • 3 Portfolios Acquired – Fusion IO, L3Harris, Excalibur
  • Diversified balance of soft licensing, litigation-driven revenue
  • Soft licensing expected to deliver attractive near-term returns over 6-18 months
  • Litigation provides incremental and outsized returns over long-term

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FINANCIAL SUMMARY & UPDATE

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ACCESS TO CAPITAL

A S O F M A R C H 3 1 , 2 0 2 0 ( I N $ M I L L I O N S )

U N R E S T R I C T E D C A S H , L I Q U I D S E C U R I T I E S 1 5 8 R E S T R I C T E D C A S H ( S T A R B O A R D P R E F E R R E D ) 3 5 N O T E S T O B E I S S U E D T O S T A R T B O A R D

( u p t o )

3 6 5 N O T E S T O B E I S S U E D T O A C T G S H A R E H O L D E R S

( u p t o )

1 0 0 T O T A L A V A I L A B L E C A P I T A L $ 6 5 8

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