Acacia Research Corp (ACTG) 2004 Q3 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen to the Acacia Research third quarter earnings release conference call.

[Operator Instructions].

I will now turn the conference over to Mr. Paul Ryan.

Please go ahead, sir.

Thank you for being with us today.

Today's call may involve what the SEC considers to be forward-looking statements.

Please refer to our 8-K, which was filed with the SEC today for our forward-looking statement disclaimer.

Today I will first update you on our licensing activities in the third quarter.

Next I will give you an update on the roll-out of services that utilize our DMT technology.

And lastly, I will give you a brief overview of the markets for our Internet Access Redirection Technology.

I will then open up the call for questions.

Earlier today we reported financial results for the third quarter.

Acacia Technologies Group revenues for the quarter were 2.24 million consisting of the recognition of 1.5 million in deferred revenues from the licensing program television V-chip and $740,000 in licensing revenues from our digital media transmission or DMT technology.

We entered into 41 new licensing agreements for our DMT technology in the third quarter, making it by far our most productive quarter this year in terms of new licensing agreements.

Most importantly, we completed our first six cable TV licenses.

In the last three weeks since the end of the quarter, we have signed an additional seven cable TV licenses and are gaining momentum in this important market which represents our largest revenue opportunity.

With the new cable TV licenses we now have a total of 188 licensing agreements.

During the third quarter, we also entered into a number of significant licenses covering online news, entertainment and movies, including licenses with Bloomberg, a global provider of financial news and information, World Wrestling Entertainment, a New York Stock Exchange company with over 200 entertainment websites, and iFilm, a leading entertainment destination, which is one of the top streaming companies on the Internet.

We also gained significant momentum in licensing major corporations for use of our DMT technology on their corporate websites.

New licensees in the quarter included Callaway Golf, Herman Miller, Harley-Davidson, Revlon, Sunoco, Travelers, Wachovia, Wendys and Xerox Corporation.

With third quarter revenues of $740,000, we are now at approximately 3 million in annualized revenues from our DMT licensing program without assuming any organic growth from current licensees.

Based on our estimate of future use of our DMT technology and all licensing categories including wireless, fiber optic and satellite TV, as well as the Internet and cable TV markets we have already begun to license, we have now licensed approximately 2 to 3% of the total market.

So we certainly have a lot of opportunities ahead of us in our DMT licensing program.

The adoption of digital media is growing rapidly as we are seeing the roll-out of video-on-demand by cable TV companies, announced plans by the Telcos to provide digital media directly to the home via fiber-optics and plans by wireless providers to deliver digital content.

The rollout of video-on-demand by cable TV companies continues to accelerate.

Last week the industry leader, Comcast, announced that 60% of their 21.5 million subscribers now have access to video-on-demand.

They also reported that their subscribers viewed 50 million on-demand movies and programs in the month of September.

Comcast also reported that in Philadelphia markets on average each digital cable customer views 23 video on-demand titles per month.

These numbers certainly indicate that video-on-demand is becoming a very important service for cable TV companies and that customers are confirming the value of our DMT technology by the rapid adoption and high usage rates.

In addition, cable TV companies are also deploying digital ad insertion services which utilize our DMT technology.

An article in yesterday's Wall Street Journal indicated that advertisers are willing to pay huge premiums for TV ads tailored to specific viewer groups.

A Merrill Lynch research report has estimated that cable TV companies using digital ad insertion technology could generate an additional $2 billion in annual revenues or $55 per subscriber per year.

This would indicate the use of our DMT technology for digital advertising insertion should generate increased revenues and profits for cable TV companies.

On the Telco front SBC announced last week that it will dramatically accelerate its plan to build a new fiber-optics network providing 18 million homes with high speed data and video services in the next 2 to 3 years.

Verizon has also begun an aggressive program to deliver digital services over optical fiber directly to the home and expects to pass 1 million homes by year-end and an additional 2 million homes next year.

On the wireless front AT&T, Verizon and Cingular have announced that they will be offering full motion video-on-demand with the new 3-G technology.

Wireless delivery of digital video could become one of our largest licensing opportunities as 155 million wireless subscribers in the U.S. alone.

We are obviously very enthusiastic regarding the licensing opportunities for our DMT technology given the rapid roll of video-on-demand and digital ad insertion services by cable TV companies and the planned development of on-demand digital media by the Telcos and wireless providers.

We will, of course, continue to license Internet usage covering corporate websites and movie, news, sports and entertainment sites as well as E-learning.

We also commenced the licensing program for our Internet access redirection or IAR technology at the end of the quarter as we have previously indicated.

The IAR technology covers redirected Internet registrations commonly used at wireless hot-spots and hotels.

The market for Internet connects through wireless hot-spots is expected to grow from approximately 22 million connects this year to over 200 million connects in 2007.

This represents a large and rapidly growing market for this new licensing program.

During the quarter we also continued to build our licensing and engineering teams.

We added Dr. Jeffrey Schoenewald who has broad technical experience and positions with Texas Instruments, Teledyne, Blackwell and Boeing including patent search and due diligence.

We also added Julia Feldman who prior to joining us was a licensing attorney with Pioneer Electronics licensing subsidiary.

We also continue to expand the pipeline of patented technologies that we are evaluating for acquisition.

That completes our update, and I would now like to open up the call for questions.

So, operator, if you can do that?

Thank you.

[Operator Instructions].

We'll go now to Tom Wonderlic (ph) with (inaudible) investments.

Hello.

Yes.

Is the Combi conference call going to be following this one?

Yea, it will be at 2:00 on the same phone number.

So you can either stay on this call or call back in at 2 o'clock.

Okay.

Was that stated in a press release to be at a different time?

Yes.

Okay.

I'll call back.

Thanks.

We'll now go to Virginia Daley (ph).

Hi, Paul, I just real quick, can you give some clarification on your cable member is it now at 13 you have additional seven after your six that you did in the quarter?

Yes, till the first three weeks of the quarter, we now have 13.

We've done seven additional cable TV deals since the end of the third quarter.

Can you comment at all?

I don't know if you can with regard to the acceleration that you're seeing there?

Well, we have sent out licensing offers to a number of companies.

And we have also offered some rate protection based on some deadlines.

So hopefully that will accelerate licensing agreements coming in from the cable companies.

These are all with, you know, smaller companies obviously, we've not made stand-alone announcements that we would for large cable companies.

The largest, I believe, in terms of subscribers is Seren.

So we're gaining traction in the area, and we've got 13 done at the time.

Thank you very much.

Okay.

[Operator Instructions].

We have Paul Berker with the PLA Associates.

Hey, Paul.

Just to help clarify the people that are following it on your website.

Is there a possibility on your licensing site that, one, you can date it when it was last updated and also put the total number of licensees by area the way you have it separated?

No.

We've done, as you know, there's a presentation on our website that does list some representative licensees but we are not in the - are going to provide a completely list obviously of all licensees.

I'm not asking to you provide a complete list but just put the total in each area on there?

We don't have any plans to do that, in terms of specific licensing areas within categories.

I mean cable TV we will break out as we start licensing new categories to give the investment community a feel for the number of agreements in each category, but we don't plan on a long-term basis to break out the exact number of agreements by each subcategory.

Okay.

Could you at least date the time that it's updated?

Yeah.

We try to keep it -- we will update it after our conference call.

What we generally do is update the presentation website after we make each announcement where we typically do state the amount of total licensees at that time.

So if there are any updates, we do it after we've made a public statement.

Okay.

Thanks.

Surely.

[Operator Instructions].

And now I have no further questions at this time.

Okay.

Well, I thank you, operator.

I want to thank you for participating in today's call.

We look forward to continuing to update you on our progress and momentum.

And for those people who want to stay on for the 2 o'clock portion of the call of CombiMatrix you can stay on the line or call back in.

So thank you again.