Acacia Research Corp (ACTG) 2014 Q4 法說會逐字稿

Good afternoon, and welcome, ladies and gentlemen, to the Acacia Research Fourth-Quarter and Year-End Earnings Release conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode.

(Operator Instructions)

I will now turn the conference over to Mr. Matthew Vella. Please go ahead.

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.

In today's call, the terms we, us and our refer to Acacia Research Corporation and its wholly and majority-owned operating subsidiaries, while patent rights acquisition, development, licensing and enforcement activities are conducted solely by certain of Acacia Research Corporation's wholly and majority-owned operating subsidiaries.

With me today is Clayton Haynes, our Chief Financial Officer. Today, Clayton will start our call by taking you through the numbers for this past quarter end year. Clayton?

Thank you, Matt, and thank you to those joining us for today's fourth-quarter and year-end 2014 conference call.

As detailed in our earnings release today, Q4 2014 revenues totaled $31 million, as compared to $15.1 million in the comparable prior-year quarter. Q4 2014 revenues were comprised primarily of 33 new license agreements executed in the quarter, as compared to 24 new license agreements executed in the comparable prior-year quarter. As we have discussed on previous conference calls, license fee revenues continue to be uneven from period to period.

For the fourth quarter of 2014, we reported a GAAP net loss of $16.2 million or $0.34 per share, versus a GAAP net loss of $33.3 million or $0.69 per share for the comparable prior-year quarter. On a non-GAAP or a pro forma basis, we reported net income of $1.6 million or $0.03 per share, as compared to a non-GAAP net loss of $10.6 million or $0.22 per share for the comparable prior-year quarter.

As discussed on previous conference calls, the non-GAAP or pro forma net income or loss excludes the impact of certain non-cash charges and the impact of certain non-cash tax benefits. Please refer to our disclosures regarding the presentation of non-GAAP financial measures in today's earnings release and the 8-K filed with the SEC.

On a combined basis, inventor royalties and contingent legal fees expense increased 80%, primarily due to the 106% increase in related revenues quarter to quarter and on average, a higher percentage of revenues generated in the fourth quarter of 2014 having no inventor royalty obligations. And lower overall average inventor royalty rates for the portfolios generating revenues in the fourth quarter of 2014 as compared to the prior-year quarter. As a result, average margins for the fourth quarter of 2014 were 62%, as compared to 57% in the comparable prior-year quarter.

Litigation and licensing expenses were relatively flat quarter to quarter due primarily to customary and fluctuations in related litigation and strategic patent prosecution activities period to period. These expenses will continue to fluctuate period to period based on future activity levels occurring in those periods.

MG&A expenses, excluding non-cash stock compensation charges, increased quarter to quarter due primarily to an increase in variable performance-based compensation costs, consistent with the increase in revenues quarter to quarter, and an increase in non-recurring employee severance and corporate administrative costs. The increase was partially offset by an overall decrease in personnel costs, due to staff reductions occurring earlier in the year.

Q4 2014 non-cash stock compensation charges decreased to $3 million or 42% due to an overall decrease in the grant date fair value for the shares expensed during the quarter. And a decrease in the number of shares vesting each quarter due to a net decrease in employee headcount, and a decrease in the number of shares vesting for current employees.

Fourth-quarter 2014 non-cash patent amortization expense decreased $3 million or 18%, due primarily to a reduction in patent portfolio and impairment charges. Q4 2014 patent-related upfront advances and scheduled milestone payments totaled $18.2 million, as compared to $14.6 million in the comparable prior-year quarter.

Next I would like to provide a brief summary of full FY14 results. FY14 revenues were $130.9 million, relatively consistent with FY13 revenues which totaled $130.6 million. 2014 revenues included license fees from 88 new license agreements covering 46 of our technology licensing programs as compared to 120 new license agreements covering 53 of our technology licensing programs in 2013.

We reported a FY14 GAAP net loss of $66 million or $1.37 per share, versus a GAAP net loss of $56.4 million or $1.18 per share for FY13. Excluding the impact of $75.4 million in non-cash charges, FY14 non-GAAP net income was $9.3 million or $0.18 per share as compared to a non-GAAP net loss of $1.4 million for FY13, which excludes $55 million of prior-year net non-cash amounts.

Our average margin for FY14 was approximately 66% as compared to 58% for FY13. FY14 MG&A, excluding non-cash stock compensation expense, decreased $896,000 or 3% as compared to FY13, due primarily to a net decrease in personnel costs due to staff reductions occurring during FY14.

FY14 non-cash stock compensation expense decreased $9.8 million or 35% as compared to FY13, due to similar factors affecting the quarter-to-quarter variance discussed earlier, and a reduction in CEO retirement related non-cash charges totaling $1.8 million.

2014 litigation and licensing expenses decreased to $1.7 million or 4%, due primarily to a net decrease in litigation support and third-party technical consulting expenses associated with ongoing and new licensing and enforcement programs commenced during FY14. FY14 non-cash patent amortization charges increased $3.6 million or 7%, due primarily to $2.5 million of increased amortization expense related to new patent portfolio investments made since the end of the prior year.

FY14 tax expense reflects the impact of foreign taxes withheld on revenue agreements executed with third-party licensees domiciled in foreign jurisdictions. And the impact of full valuation allowances recorded for a net operating loss carry forward, and foreign withholding tax credit related tax assets generated during FY14. As a result of the valuation allowances recorded for 2014, no tax benefit was recorded in the statement of operations for tax assets generated during FY14.

In 2013, we recorded a net benefit for income taxes totaling $22 million reflecting the realization of foreign tax credit, and net operating loss carry forward related tax benefits generated during 2013, which accounts for the variance in the year-to-year tax expense or benefit reflected in today's earnings release. As of the end of 2014, we estimate that we have approximately $118 million of net operating loss carry forwards and approximately $30 million of foreign tax credits available for use in future periods.

From a cash flow perspective, we ended 2014 with $193 million of cash and investments, versus $256.7 million as of December 31, 2013. FY14 patent-related investment costs totaled $42.7 million, as compared to $25.1 million in FY13. Accrued patent-related investment costs totaled $16.7 million at December 31, 2014.

Cash outflows during 2014 also reflect quarterly cash dividends paid to shareholders totaling $25 million. Looking forward, for FY15, we expect fixed MG&A, excluding non-cash stock compensation charges, to be in the range of $28 million to $30 million. Based on current outstanding grants of restricted stock, we expect scheduled non-cash stock compensation charges for FY15 to be approximately $13 million.

For FY15, we expect patent-related litigation and licensing expenses to be in the range of $35 million to $37 million depending on net patent portfolio litigation, international enforcement and strategic patent prosecution activities occurring in FY15. Excluding 2015 patent portfolio investments, scheduled FY15 patent amortization expense is expected to be approximately $52 million.

Thank you again for joining us today. At this time, I would like to turn call back over to Matt Vella.

Thanks, Clayton.

This year, Acacia continued executing on its mission. Teaming with patent owners and charting for them a path to financial returns for the unauthorized use of their technologies. These patent owners are our customers and to date they have received nearly $665 million licensing dollars by teaming with Acacia.

Over the last year, management has made a concerted effort to consistently communicate to all our stakeholders our evolving strategy and business model. As Acacia hones in on fewer but ultimately more financially rewarding marquee patent portfolios. We feel strongly that these portfolios with highly defensible claims reading on high revenue markets, will be significantly more rewarding for our customers, as well as for Acacia and our shareholders.

While we are in no way satisfied with our recent revenue levels, we are pleased with our improved operating consistency over the last three quarters, along with the improved trend of modestly higher top line revenue when compared with the prior year. As we stated last quarter, while we are not claiming to be out of our recent revenue trough, we think we are emerging from it. And we remain steadfast in our belief that marquee portfolios are the preferred path to scaling revenue, and producing a superior return on invested capital.

As we have make changes to our strategy and business model, two things have remained unchanged. First, we continue to see a growing need for our service, which has kept our marquee portfolio intake pipeline strong. Second, we continue to populate our calendar with marquee portfolio trial dates, which in turn is making our revenue pipeline more resilient. Regarding our pipeline of incoming marquee portfolios, we see no down-tick in the pipeline. The opportunity to source additional portfolios remains excellent. In fact, Acacia added another new marquee portfolio in the fourth quarter, bringing our total marquee count to 12 and reaching our goal for the year.

Significantly, Nokia Siemens is our fourth major patent partner, entrusting us with multiple patent portfolios. Renasas, Rambus and Silicon Image are the others. This is surely an indication of our customers' confidence in our licensing acumen. We expect the intake of marquee patent portfolios to continue, and we are now aiming to have 15 to 17 marquee portfolios by the end of 2015.

Because of our successful patent intake over the past few years, Acacia's trial calendar remains well populated. Notwithstanding the litigation setbacks our Company experienced last month. This bodes well for our return to a much improved revenue outlook, since imminent trial dates have historically correlated with licensing revenue opportunities. So while we had a summary judgment go against us in some of our Adaptix cases last quarter. the overall quality of our trial calendar, and therefore, our confidence in our Company's future has not been fundamentally changed.

For you see, Acacia has amassed a rich and broad set of marquee portfolios, each having a material degree of depth and robustness, and each contributing to one of the deepest, most diverse, and most resilient collections of patents in the industry. We have spent time on prior calls describing the collective strength of these patents by describing the significant ramp in the number of patent cases Acacia has coming to trial in 2015. That information remains available for you to see at the Opportunities page of our website.

A glance at this page shows that our trial calendar and outlook remains strong. This means that even when litigation setbacks and delays occur, as has happened to us in this past month with our Adaptix portfolio, Acacia's business is diverse and resilient enough to absorb such reversals. Acacia is not beholden to any one patent portfolio. A setback impacting a subset of defendants in one portfolio in no way lessens the opportunity regarding other defendants on the same portfolio, let alone, the opportunity for other completely separate portfolios.

The recent aforementioned Adaptix setback, for example, only impacted less than 10% of the trial dates in first half of 2015 alone. And turning to the Adaptix setback itself, as outlined on an analyst call we hosted on January 21, we do not think it will impact the majority of our licensing opportunities for this portfolio.

And even with respect to the defendants involved in the very cases that suffered the setback, we think the licensing opportunities for those defendants have only been delayed and not eliminated or significantly reduced. As a testament to the resilience of each of our Adaptix cases, virtually the same week the litigation setbacks occurred, two more Adaptix patents issued from the US patent office are now the subject of newly filed lawsuits, notwithstanding all the invalidity attacks made against them by the defendants.

In other news, and as we predicted at the New York Investor Day we held last quarter, patent legislation is back in 2015. With the Republicans taking the Senate, we expected the 2014 House version of patent legislation, the Goodlatte bill, to reemerge. And it has. We anticipate that the major components of the 2014 legislation will be encompassed in the new 2015 legislation. As we have said on multiple occasions, the intended legislation is targeting abusive and frivolous patent litigation, that is, the assertion of weak or questionable patents against vulnerable licensees at shakedown prices.

Our stance remains the same with respect to these legislative initiatives. We generally support legislation that will eradicate abusive and frivolous patent litigation, as long as it cuts both ways. And Acacia has always benefited from any initiative whose unintended effect is to increase the complexity, expense and financial risk of patent litigation. As a result of such initiatives, patent owners will choose to derisk, legally and financially, by turning to Acacia as their preferred patent licensing partner.

In conclusion, Acacia remains very well positioned for high-caliber long-term performance and I remain committed to our strategy and to realizing our financial potential. Thank you for your ongoing interest in and support of Acacia. With that, we will take some questions.

(Operator Instructions)

Mark Argento, Lake Street Capital Markets.

Good afternoon.

Hello, Mark.

Maybe we could spend a little bit of time talking about the cost of doing business in the sector here. And in particular, have you have seen any changes in regards to your -- some of your legal relationships in terms of law firms willing to go on contingency?

We've heard some grumblings from some of other people that it seems like the law firms are little bit being a little bit more conservative in terms of what they're willing to take on contingency. Given the environment we're in right now. And maybe juxtapose that relative to some of the relationships that you have right now?

We've seen no change. Generally speaking, when we bring a matter to a law firm or to law firms they want to take it on contingency, and we don't see that changing. I think it is because we're dealing with higher quality assets.

And to the extent the situation has become more complex and risky for plaintiffs, the higher quality of our due diligence of our intake, of ultimately our assets have offset those effects. So short answer, no, no impact.

What you'll see, actually is, -- I think you'll also see us if anything increase the quality of the attorneys we're working with as well. So again, I think there will be a flight to quality. As a result we can still get these portfolios done on a contingency basis. We'll, I think, see higher quality lawyers working for us.

And to the extent we decide to stray little bit away from contingency and move to fixed fee, that will be coming from us more than the law firm. Because we think that in some cases, there's enough revenue and profit where we'll want to cut back the contingency aspect a little bit. And pocket more of the upside.

All right, that's helpful. So you feel that given the quality of the portfolios, that you are somewhat insulated from any of those trends right now going on?

Yes.

All right. And when you're looking at the overall expense structure of the firm at this point, and Clayton provided some guidance for 2015, overall, I'm assuming your head count is down year-over-year, and in terms of the expense structure, have you taken -- obviously, some costs have come out. Clayton, could you maybe quantify on a fixed cost basis the year-over-year impact to some of the changes that you've made to the personnel or any other types of cost takeouts?

Sure. So with respect to some of the initiatives that we talked about at the Investor Day in New York. For example, with respect to the production and headcount that occurred earlier in 2014, for full FY14 results, including the impact on non-cash stock compensation, that saved us about a net of roughly $5 million in 2014. About $1.1 million of that being the actual salaries and benefits associated with that reduction in the headcount.

If we add up -- so you walked through MG&A, $28 million to $30 million, patent litigation expense of $35 million to $37 million, and the full use of the stock comp and the patent amortization, we won't count those because they're non-cash. But on a hard dollars basis, is your cost structure flat, up or down compared to what the guidance that you provided us?

For example, with respect to the guidance I provided in my prepared remarks, that guidance included a base level estimate of variable performance-based costs and other types of variable costs. Now just looking at the fixed MG&A component of the cost structure, we're looking at roughly $25 million to $26 million, which would reflect a portion of the savings that we are realizing with respect to the reduction in headcount.

All right. So if I take the $30 million, let's go to the high-end of the range for math's sake, $30 million in MG&A and the stock comp of $13 million, that's $43 million. Is that a good apples-to-apples relative to the $48 million and change that you reported for the full year of FY14? So there's that $5 millionish type delta?

And the $48 million being just the addition of the same components?

Yes, reported MG&A, which obviously includes your stock comp.

Yes. That is a good apples-to-apples.

I was going to say. Just at a high level, just looking at it very simplistically, there's $5 million in costs that have been taken out, at least how you're thinking about it for FY15 versus FY14.

Correct. And that includes the non-cash stock compensation component.

Mark, the way we think about it, we have a very scalable business model. The costs will fluctuate a little bit, the costs you said, but we think we can look where we see a chance to bring them down, we'll bring them down. But we're also investing in some other areas.

So what's not reflected in just doing that bottom-line analysis is the fact that we've probably cut more as an absolute than the $5 million, but we've also been making investments. We've added engineering resources to become more proficient at certain technology areas. And we've also increased our investment in Japan, because we see that as a good place to pick up more business.

So there's some fluidity there that goes beyond the numbers, and I think it's important for people to recognize. The main take away, though, is that the fixed costs I think are going to be relatively static in the big picture, and we think we're positioned to really take advantage of the leverage of our model. And as we expect to see revenues go up, certainly are hopeful we see revenues go up, we certainly expect that fixed cost level to remain flat.

Great, I appreciate you peeling the onion there. Congratulations to a decent finish to the year.

Thanks.

Bryan Prohm, Cowen and Company.

Hey, good afternoon. How are you?

Good, Bryan, how are you?

Hey, I'm well, thanks. A lot of snow, but I'm dug out. A couple questions just to clarify on Q4. What's in and what's out, 33 NAEs. If I look at the license agreements, that would mean up through the Microsoft agreement in early January probably comes in in Q4. Do I have that math right?

The Microsoft agreement was a Q4 deal.

Okay, but announced in January?

Yes.

Okay. Second question on Q4. You have two Adaptix deals in the quarter, not to do well on this portfolio because it is, I agree, all about scale and about adding more marquee portfolios. But have you reached 1X ROI on this portfolio, or is that within reach? What's the visibility there?

Yes, well we haven't yet, but it definitely is in reach. We think we're going to hit it. And we're actually really excited about all the Adaptix trial dates coming up in the next couple of quarters.

So I think there's been a lot of attention on that Apple, and I've been calling it a setback, but that's really just one trial. It's really one licensee; if you count HGC, it's two. There's a lot that's going to go forward in we expect the next couple of quarters, and we definitely at a very minimum expect to be 1X, absolutely.

All right. So let's talk about 2015 more generally then, and your plan for marquee intake that will get you to from 12 to 15, 16, 17 marquee portfolios. Do you have a good sense of what those portfolios are and what they might cost?

We have are pretty good sense of a -- we have a pool of opportunities, and we have are pretty good sense that about a half to two-thirds are going to come out of that pool. There's always a little bit of the unknown, and our pipeline in some cases our deal pipeline extends out over more than a year.

And sometimes what you'll see happening is opportunities being accelerated and some being decelerated. But I'd say overall, if we look at getting to those target numbers, we probably have a pool of -- actually we definitely have a pool of portfolios in mind from which at least half to two-thirds will be drawn.

Okay. So that's essentially why you're keeping your balance sheet at this level to be able to acquire those when they become available at the right price, right time kind of scenario?

Absolutely.

Okay. Because it sounds like you -- if the Goodlatte Bill is indeed what comes back through a Republican-led Congress, I think we've had this conversation before. It feels like and you sounded pretty clear that it's not something that you are I would say overly concerned with as being anything other than that neutral to slightly positive for the Company?

Yes. It's going to do two things. It's going to increase the quality of intake that we're seeing, and it will have to result in a slight shift in terms of our capital allocations to make sure that we're responsive to some of the fee shifting thing that might be put in there. Even though again, by and large, as long as the fee shifting cuts both ways we expect a benefit from that.

Okay. Last question then. Relative to the scale that you're moving towards and having 15, 16, 17 top tier portfolios, what revenue range is reasonable with that type of portfolio count on an annualized basis?

Well our first objective is going to be to get back to our peak. And that was that $200 million to $250 million level. So we're going to cut this up into two parts, and we think we can get there with what we've got.

And then if you're throwing IP on top of that, you're throwing patents on top of that baseline, we'll obviously expect to be able to get well past those peaks. So the absolute number is going to be a function of what we pull in. And since we don't quite know exactly what we've pulled in, we can't model that as crisply as we'd like, obviously. But, we're certainly looking to, step one, get back to our peak, step two, go right by it.

All right. So maybe I should follow up and say or ask, can you get back to that peak with the current portfolios, with the current marquees that you have?

Yes.

Okay. I've taken up a lot of questions. I'll pass it onto the next guys. Thanks. Take care.

Mike Latimore, Northland Capital Markets.

Hello. This is Jim Fitzgerald sitting in for Mike Latimore. So my first question here, how would you compare the overall legal activity and negotiation levels in the first quarter relative to the fourth quarter? Has it been similar, or maybe a little more or a little bit less? What are you seeing there?

I'd say it depends on which part of the quarter. But, look, overall, we're seeing an upward trend. For us to take a snapshot and say one quarter to the next, I guess I'm so close to it, I'm so at the tree level as opposed to the forest level that I see peaks and valleys in every quarter.

But the overall trend unequivocally is upwards. We're seeing more activity. We're seeing more at bats, so to speak. And we're very excited by that.

Okay. Great. And then has there been any recent case law applicable to your Adaptix cases against Eriksson and Alcatel?

Not against those two. Obviously, I spoke at some length on the 21st of January about unexpected case law that impacted us on Apple. But in terms of those licensees, no. We haven't seen any.

Okay. Great. That's it for me. Thanks. Thanks.

Darrin Peller, Barclays.

Hello. This is James Berkley for Darrin. Thanks for taking my question.

Hello, James.

Just real quick, somebody was touching on this earlier. But just to follow-up, if you could just provide a little bit more detail what you think is driving the strength of your current pipeline versus the past?

And then your thoughts regarding the sustainability of that going forward? While tying in, most importantly, the timing of how we should think about the expenses tied to these different portfolios versus the revenue realization that should come as you guys try to work out of the bottoming in revenue?

So, I think it's strong because two things are happening. One, the environment is getting trickier out there for novices. And two, and it's going to sound a little bit corny but I'm really starting to see the benefit of this, our team is gelling and we just seem to be a lot more efficient in moving through larger volumes of opportunity.

The number one challenge we have is cutting down what we're focusing on, and putting a lot of focus on that cut down piece. That subset that we focus on. Because we are really making a massive commitment prior to pulling anything in. And making sure that it does hit a marquee level if we're going to go out and say that it's in fact a marquee.

So the reason for the strength. One, we're seeing more demand because of the increased complexity and risk of the environment, generally speaking. Two, our team is becoming better at filtering through those opportunities.

You were also asking about how we see the stability of that intake. Well as long as folks keep trying to make things more complex, which definitely seems to be the trend on patent holders, we expect increased stability, I guess. If that makes any sense.

We expect more demand certainly. And I think that as we start to again, in my expectation put up better numbers and show that our performance is something that we can objectively point to as a success, we'll also see more demand coming in. And that will also increase demand for our service.

The final part of your question was relating to expenses. The expenses, there's always going to be a certain lag between what we invest, when we invest, and what we're pulling out when we pull it out. And the distance, if you will, or the time between when we're making the investment and when we're pulling money out, is something that has fluctuated for us over the years.

My expectation is that as we again return back to the levels that we've enjoyed near our peak, we'd see that gap shrink again. I think there is something to the adage in licensing circles that licensing is a momentum business, and that one part of the business doing well can in some sense pull up other parts of the business.

So I would hope we can pull that timing in between when we're making the investments and when we're pulling revenue up. Because certainly, the last couple of years, it's been stretched compared to where we were when we were peaking. So again, with increased success, with increased density, if you will, of portfolios we're pulling in, we expect and we certainly hope that that gap is going to shrink, that timing gap.

Are you able to quantify that gap, like where you'd like to be versus where you were before and where you are now? Just put some -- put a few numbers around it?

Yes, just historically, and again in my mind, I think we've seen the gap get down to as low as 18 months. Sometimes in very limited cases, it's been a month. At times, right?

And so we've seen it really at times be short. And at times like with Adaptix, it's obviously been longer than that, it can get out to two or three years. But now on Adaptix mind you, we recovered about two-thirds of our capital roughly.

So it hasn't been like we haven't been doing anything the last two or three years, but we certainly haven't gotten back to 1X. And we certainly thought we would be there by this time.

So those to me seem to be the two extremes. And I certainly want to push things more towards the former than the latter.

Okay, that make sense. I appreciate the color. Just turning to capital allocation really quick.

I know on the January 21 Adaptix call, I believe, given the drop in the share price you had said that you could potentially be open to buy backs going forward. Just trying to think about the balance sheet.

There was a time back in the first quarter of 2012 where you had cash equivalents and short term investments up around $450 million. That's since come down to about $200 million or so. What do you think is the optimal amount of cash that you want to hold onto? How are you thinking about potential buybacks going forward?

Do you want to wait and see on the marquee strategy, and how that plays out before you really commit to anything? Or do you feel pretty strongly about that given where the share price is now? How should we think about that? All those moving parts?

One, there's lots of moving parts, and we're always revisiting them. The Board and myself are always looking, and we stand ready to take action on a relatively short order if and when we think the conditions demand action.

The second thing is, as you alluded to in the very question you've asked, there is a certain amount of I'm not going to say uncertainty but there's a certain amount of the unknown about what's going to happen on the legislative front. Especially with the fee shifting.

So obviously, we can't commit to a capital structure until we know some basic cost inputs and what they're going to look like. Again, we don't think it impacts our business at the end of the day, but it certainly impacts what we think about capital. Because if you have more stringent, let's call it, plaintiff unfriendly legislation coming through, that will certainly mean that we don't have to allocate as much capital towards patent acquisitions.

But it will also mean that we have to have a bit more of a cushion because of things like fee shifting, fro example. Whereas if the Congress holds true, then your capital structure has to change and you have to have a reversal over the sorts of allocated changes I've just hinted at.

The final thing is, we have enough cash to run our business. We're happy with our cash levels. We're happy with the prospects of acquisitions out there, and when we think of our cash vis-a-vis those prospects, we don't see any issues.

So overall, a lot of it is wait and seeing. Wait and see what's happening on the legislative front, wait and see what's happening on certain transactions that we're contemplating. But most of all, wait and see, and I think in this case, we're certainly expecting this to happen. We expect to generate a heck of a lot more cash from our licensing operations, and that will certainly have an impact on how we look at this as well.

Okay, great. Thank you very much, and I'll turn it over. Appreciate it.

Thank you. This will conclude the question-and-answer session. I would now like to turn the call back to Mr. Vella.

Again, thanks for your interest. Thanks for supporting the Company, and thanks for listening to the call today. We stand on the cusp of some very interesting events, and we look forward to touching base with you again in about three months time. So thank you very much.

Thank you. Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 888-203-1112 or 719-457-0820, with confirmation code 752-0198.

This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.