Tuesday, July 15, 2014

ACTG Q2 2014 Earnings Preview

Acacia (ACTG) announced they will will release Q2 2014 earnings on July 24th, 2014.  The following are developments I have been tracking in Q2.  With 42 case dismissals & settlements found and new actions filed, ACTG should have much to talk about on the conference call being held at 4:30PM EST.

List of Q2 case dismissals, * = likely a larger than average agreement:

Adaptix - Motorola Mobility *

Bonutti Skeletal Innovations - ConMed Corp *, Linvatec Corp *

Body Science LLC - Koninklijke Philips N.V 

Brandywine Communications - CenturyTel Broadband, Qwest Corp, AT&T *

Brilliant Optical Solutions - Fairpoint Communications, Comcast

Cell & Network Selection - Motorola Mobility *, Huawei Technologies *

Criminal Activity Surveillance - Behavioral Recognition Systems

Computer Software Protection - Microsoft *

Dynamic Transmission - Sprint Spectrum

GT Gaming - Digital Chocolate, Crowdstar Int, Electronic Arts *, Funzio, Zynga, Facebook *

Innovative Display Tech - Garmin *

Internal Combustion - Yoshimura

Light Transformation Tech - Feit Electronic

Location Based Services - T-Mobile *

Online News Link - Wayfair LLC

Parking Space Innovations - ABM Industries

Promethean Insulation - Insulation Solutions

Saint Lawrence Communications - Samsung *, Mad Catz, CounterPath, Dialogic. Only Samsung had litigation filed and the other three are royalty bearing.

Smartphone Technologies LLC - Huawei *, ZTE *

Technology Licensing Corp - Ross Video

Unified Messaging Solutions - Wells Fargo, PNC Financial. The rest of the outstanding cases were dismissed starting on 6/13/2014 due to a court ruling on non-infringement. I am not aware yet if Acacia intends to appeal the decision.

Wireless Mobile Devices - ZTE *, T-Mobile *, Verizon Wireless *, Pantech *, Huawei *, LG Electronics *

New actions filed in Q2 that I was able to locate. There very could well be more that I could not connect to Acacia or flat out missed:

Orlando Communications LLC filed suit against a 10 companies on June 26, 2014. Two patents are being alleged in the cases, which originated at The Whitaker Corp in the late 90s. The patents were assigned to Tyco Electronics in 2009 and then were transferred to Harris Corp on August 19, 2013. The targets are:

Motorola Mobility
LG Electronics
AT&T Mobility
Verizon Wireless

Adaptix added the following defendant to their existing monetization efforts in Q2 2014:


Innovative Display Tech continued to file new litigation throughout Q2 2014:

Best Buy

Dynamic 3D Geosolutions LLC filed new litigation against:

LMK Resources
IHS, Inc

Parthenon Unified Memory filed suit against four companies on June 12, 2014. The patents originated from ST Microelectronics. Acacia announced a partnership with an unnamed leading semiconductor on April 15th, 2014.

Motorola Mobility

CeraMedic LLC filed suit against two companies on June 27, 2014. The patents originated from Fraunhofer-Gesellschaft in the late 90s and were transferred to Acacia in February 2014. The patents relate to ceramics used in hip replacements.

Zimmer Holdings

Q3 Activity so far in the first two weeks of July:

ACTG filed suit on July 8th, 2014 with a new subsidiary named In-Depth Test LLC. The patents cover semiconductor testing and were acquired/partnered with a company called Test Advantage Inc, located in Tempe Arizona. They filed suit against three targets:

Intersil Corp
Maxim Integrated Products
Vishay Intertechnology

ACTG filed suit on July 11th, 2014 with a new subsidiary named Nexus Display Technologies. The patents originated from Silicon Image Inc. They filed suit against nine targets:


Analysts are estimating that revenue with a low estimate of $15M and a high estimate of $26M. The average EPS estimate is $.06 with a low of $.00 and a high of $.10. My opinion is the Q2 2014 numbers come out fairly strong, with analysts being asleep at the wheel. I have not seen any coverage or updates from anyone during the quarter. If there is coverage I have missed please send to iphawk@outlook.com . 

I will be on the conference call on July 24th and will try to ask at least one of the following questions if they decide to take my call. If not they will hopefully address these questions in their prepared statements:

Can you provide some color on the RPX agreement announced on May 28th? My understanding these deals are great for both parties. RPX is in the business to secure licenses for their membership and this effectively cuts out the lawyers, reducing legal fees for both parties. RPX can use these licenses to promote and grow their business. Acacia along with receiving revenue from any settlement with an RPX member can divert resources to their marquee portfolios.

What kind of impact have you seen in regards to Inter Partes Reviews? Are they being used as a meaningful negotiating tool for either party? What kind of costs are involved to complete the entire IPR process? Is this something that can be handled in house and possibly develop into a service for other patent owners with IPRs filed against them? Have any pending cases been directly affected with IPRs being instituted, denied, or stays issued on District Court cases?

With patent "macro" issues now out of the way in regards to patent reform and software patent cases, what kind of impact have you seen (if any) on licensing discussions with defendants / potential non-defendant licensees. and deal pipeline?

Saint Lawrence Communications filed suit against Samsung on April 2nd, 2014 and settled the case in two weeks announced on April 16, 2014. SLC subsequently entered into three additional licenses without litigation during Q2. How was this accomplished and is this something we can expect with other current/future portfolios?

Two settlements involved litigation overseas in Germany. Are new partnerships being entered into with a more global monetization campaign being planned? What kind of costs are involved that might be different in overseas litigation from US litigation?

In conclusion, ACTG was very active in Q2 with and I believe they will report an excellent Q2 with much to talk about. With a handful of cases proceeding to trial in 2H 2014 and 1H 2014, I expect business activity to accelerate on a number of fronts.

7/23/2014 Updates:

Cowen is modeling 25 settlements and a $26M Revenue / $0.15 EPS
JPM is modeling 19 settlements and a $41M Revenue / $0.20 EPS
Lake Street is modeling a $15M Revenue Q2

Disclosure: I am long ACTG. I have not been compensated to publish this blog entry by any company discussed. All information is based on publicly available information and all opinions/conclusions are my own. This blog entry is only for informational purposes. Please contact a registered financial agent before making any financial decisions.

Please contact me with any questions, corrections, or more information.

email: iphawk@outlook.com
twitter: @theiphawk

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