May 5, 2008
Acacia Research Corporation (NASDAQ:ACTG) Q1 2008 Earnings Call Transcript April 24, 2008 4:30 pm ET
Executives
Paul Ryan – Chairman & CEO Clayton Haynes – SVP & CFO Chip Harris – President
Analysts
Bennett Notman – Davenport & Co. Ken Freid – GLT Sean O'Neill – Singular Research Bob Ammann – RK Capital Chris Tamino [ph] – Pfeiffer's Capital Group [ph] Peter Martin [ph] – Mathis Capital Daniel Katz – Apex David Reese [ph] – Private Investor Fred Mack – Mack & Co.
Operator
Good afternoon and welcome, ladies and gentlemen to the Acacia Research First Quarter Earnings Release Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants on a listen-only mode.
At the request of the Company we will open the conference up for questions and answers after the presentation. I will now turn the conference over to Mr.
Paul Ryan. Please go ahead sir.
Paul Ryan
Clayton Haynes
Thank you, Paul. As indicated in today's earnings press release, first quarter 2008 licensing revenues totaled $9,048,000 as compared to $25,185,000 in the first quarter of 2007.
First quarter 2008 license fee revenues included license fees from 12 of our technology licensing programs including initial license fee revenues from our electronic message advertising technology, remote management of imaging devices technology, high quality image processing technology and wireless traffic information technology.
Paul Ryan
Thanks, Clayton. Operator, you can now open up the call for questions and answers.
Operator
Thank you, sir. The question and answer will begin.
(Operator instructions) We will take our first question from Bennett Notman with Davenport.
Bennett Notman – Davenport & Co.
Good afternoon, guys. Paul, could you talk a little bit about sort of a trend in the average deal size?
You guys seem to do a pretty good job of opening up some of the newer portfolios and getting first licensing deals done that I was thinking were going to sort of drive higher average deal sizes. And if you could just talk a little bit about maybe how that plays out over time or just what you are seeing on average deal size?
Paul Ryan
I think over time our average deal size will continue to go up. In the first quarter again there were a number of licenses from some legacy portfolios that have smaller revenue price points.
But some of the newer technologies that we launched, the 4 new programs, some of those licensing deals were certainly at higher average price point. So, I think it's a trend that will continue.
We do have, as you know, when we acquired Global Patents there were 27 patent portfolios and some of those are lower dollar value per deal, but certainly, and incrementally they add to our revenues and we want to fully license those markets. But once we are complete with those, I think you will see our average deal size come up appreciably.
Bennett Notman – Davenport & Co.
But it seemed that average deal size was down a bit this quarter even though you had a lot of contribution from the 4 newer ones. Is that just because they are first deals, they tend to be smaller and that they should ramp as the portfolios mature or how should we think about that?
Paul Ryan
Yes, that plays a role, definitely. Usually your first deals in a portfolio are the smaller and midsize licenses.
Usually the larger licenses take a little longer and you have to gain some momentum in the licensing program. So that's the case with some of them, although you saw we did multiple licenses with two of the new portfolios with a major multinational company which were basically the first licenses for two new programs and it was with a larger company.
So, there's going to be a mix. But I just think over time as we kind of complete the licensing programs from some of the earlier ones we acquired, you will see the average revenue per deal go up.
Bennett Notman – Davenport & Co.
Thanks. And then the legal expense in the quarter was at fairly low level.
Is that something that can be maintained for the next couple of quarters or is that going to have to ramp up a bit due to any oncoming legal activity?
Paul Ryan
It's variable. It will depend.
The second half of the year, we may have a little higher expenses as we potentially get to trials on some of our cases. It depends on certain motions that are pending but in the second half year.
Probably this quarter, the current second quarter, we don't have any exceptionally large third party legal expenses. But it will depend in the third and fourth quarter on whether we get closer to trial dates, which is where those expenses usually go up.
Bennett Notman – Davenport & Co.
And the $1.6 million spent on patent acquisition; can you give us any color on that?
Paul Ryan
It was across a handful of portfolios. Some are new acquisitions and there was one portfolio actually that we bought out the remaining interest of a partner in which improves our economics, so we now have 100% of the economics in that portfolio.
So it was a combination of some newer ones. I think over the last – over the last six months, we have invested a little over $3.5 million in a combination of new portfolios and buying down in interest from our partners in existing portfolios.
And I think that's a trend that will continue wherever we can deploy capital accretively for our shareholders, we will continue to do that.
Bennett Notman – Davenport & Co.
So when you talk about buying down interest in existing portfolios, are these some of the ones that have already been delivering revenue therefore margins might be going up or are these new portfolios that have yet to deliver but –
Paul Ryan
No, the ones – well the one that we did in the first quarter is actually a portfolio that has begun generating revenues, yes.
Bennett Notman – Davenport & Co.
Okay. I will cede the floor for now.
Thanks.
Paul Ryan
Okay.
Operator
Thank you. We will go next to Ken Freid [ph] with GLT [ph].
Ken Freid – GLT
Hey, guys. Could you first of all repeat what total SG&A is going to be for 2008?
Clayton Haynes
Sure. Certainly, total MG&A is expected to be between $13 million and $13.5 million for 2008.
Ken Freid – GLT
That's exclusive of stock comp obviously, right?
Clayton Haynes
That is exclusive of stock.
Ken Freid – GLT
What's the total stock compensation expense for the year?
Clayton Haynes
The total stock compensation expense for the year based upon current outstanding awards is going to be in the range of $6.5 million to $7 million total.
Ken Freid – GLT
Okay. Got you.
So on a run rate, the SG&A, obviously, should fall over the rest of the year versus what it was in this quarter.
Clayton Haynes
I guess with respect to one the quarterly amounts –
Ken Freid – GLT
Because your SG&A this quarter at the stock comp was a little over $4 million and you are saying it's going to be a total of – $3 million to $3.5 million for the year.
Clayton Haynes
Yes, exactly. There are certain costs incurred in the current quarter that are included in the MG&A line that I guess are not necessarily going to be recurring in future quarters.
Ken Freid – GLT
Okay. Got you, perfect.
And then, Paul, can you just talk about some of the portfolios going forward that you are most excited about?
Paul Ryan
That would take a long time we are most excited about –
Ken Freid – GLT
What's like the top five or so for the rest of the year? What do we have cooking that could result in significant new revenues from the kind of (inaudible)?
Paul Ryan
Well you can certainly look at some of the new licensing programs that commence in the first quarter and some of the ones that began in the fourth quarter of last year. We are expecting continued revenues from those portfolios.
We did our first license from the high quality image processing during the quarter. We did our first license with a couple of major multinationals, Panasonic and Epson on the remote management of imaging devices.
We are beginning to gain more momentum on the rule based monitoring program as well as the telematics, certainly. We have got a number of these newer medical portfolios that we expect to start generating revenues for us this year.
We have a whole number of those covering medical monitoring and medical image stabilization as well as heated surgical blades. The document generation portfolio we expect to be a significant contributor during the course of the year.
We have also got a number of late stage litigations that we are waiting for motions for summary judgment and if we survive those we can be going to trial. We have one on the computer cash coherency which would be to a trial date with Intel and Geo [ph] which, if that occurred would probably be late third quarter, early fourth quarter.
We have got another one on the multidimensional bar codes that we are awaiting a final quote action which if we survive that we would probably go to trial somewhere three to five months from that decision date with (inaudible) on multidimensional bar codes. So we are expecting over the course of this year, obviously, there were a number of high revenue potential portfolios that we have acquired over the last 18 months.
And as you are aware, we have brought in a number of additional licensing executive who now have had time to get those programs up and running. And they are in discussions with a number of potential lead licensees.
So, obviously, we are pretty optimistic about a lot of these new licensing programs, many of which have very significant revenue potential.
Ken Freid – GLT
That's excellent. And then can you refresh me what's ever happened with CMC?
I believe we appealed some of the earlier (inaudible).
Paul Ryan
Well we haven't really officially appealed. It's been a process in the Northern District Court and we are hoping that sometime by mid to late summer we will reach a final resolution on that process on the claims construction.
Ken Freid – GLT
Yep.
Paul Ryan
Which either will lead to final clarity on the claims construction. And if it doesn't potentially, it could lead to either one side or the other appealing that claims construction to the appellate court for further clarity prior to going to trial.
So that is ongoing. It has taken quite an extensive period of time because of the number of defendants and the different classes of defendants.
As you will remember, our litigation covers not only all the major cable companies, but also the major satellite companies as well as leading internet companies. And in a normal claims construction, it's usually the plaintiff and defendant arguing over the claims construction.
Here we have really got three separate classes of defendants so that's added to the amount of time. But we are nearing the final phases of that at last.
Ken Freid – GLT
Okay. So have we heard anything lately at all?
Paul Ryan
There hasn't been anything of a material nature. Just the standard, there's been a certainly case conferences with the court looking at both sides.
But we are working toward a final resolution on the claims construction.
Ken Freid – GLT
Okay, got you. And then so given the more backend loaded nature of your revenues for this year, particularly as you brought on a big bulge of portfolios in 2006 and 2007 which should start to come to fruition throughout the rest of the year.
Is it reasonable to expect since maybe you did north of $50 million in 2007, is it reasonable to expect continued growth of that to the tune of at least 50% growth is kind of what you have been averaging in the last couple of years from most into '08?
Paul Ryan
Well I think in '06 we were up about 75% was the revenue growth rate and last year we were a little over 50%. We have never qualitatively defined it beyond saying that we expect continued growth.
So we haven't put a percentage number on it. But, certainly both our year end financial release that we put out in February as well as today's is indicative that we think we certainly will have continued revenue growth year over year.
But beyond that we are just not at a stage where we can define it or put a percentage on it.
Ken Freid – GLT
Perfect. Okay.
Thanks, guys. I appreciate it.
Paul Ryan
Okay.
Ken Freid – GLT
Yep.
Operator
(Operator instructions) We will go next to Sean O'Neill with Singular Research.
Sean O'Neill – Singular Research
Yes, well I just have a quick question. Looking on a sequential basis from Q4 to Q1 and even in – there's you add revenue from 4 new portfolios and I am under the impression that most of the portfolios that generate revenue, generate for years and not quarters.
I am just wondering why doesn't revenue sequentially increase if you continually add portfolios that are generating revenue quarter over quarter. Why is there a – like what causes a $3 million decline from fourth quarter to this quarter given that you are adding patent portfolios?
Paul Ryan
Sure. The revenues – it depends on each portfolio, the revenue potential obviously of each individual transaction.
You are right in that a portfolio will generally produce revenues over a three to five year period once we commence the licensing program. But that portfolio may not generate revenues each and every quarter.
The vast majority of our revenues continue to be paid up revenues. So a portfolio may generate 25 revenue events over 3 to 5 years but it may not be generating a revenue event, obviously, every quarter.
So that's why you get the unevenness quarter to quarter. And then, within that it really depends on the appropriateness of the licensing rate in the use of the technology.
So certainly individual licensing agreements can run in the range of a few hundred thousand to several million dollars. So there's a great deal of variability in each licensing agreement based on the use of the technology in the market as well as the importance of the technology to the licensee.
So, that's when you get a great deal of variability. The direct answer is our deals don't have regular recurring revenue.
The portfolios will generate revenue over time but they don't contribute every single quarter.
Sean O'Neill – Singular Research
So then even though if you exclude the 4 new portfolios that generated revenue in Q1 and you compare Q4 to Q1, the portfolios are vastly different as to which generated revenue from quarter to quarter. It's not like 18 or 24 – 20 of the 22 that generated in Q4, all generated in Q1.
There's – it's just been a whole new mix of –
Paul Ryan
Exactly. There's a different mix every quarter.
Well I think the takeaway, if you kind of look at the quarterly revenues and go back and look at the late 3 years, you will see that progressively our low quarter in a given year goes up significantly as you progress, '06, '07. And again our large quarter each year has gone up dramatically.
So while there's unevenness quarter to quarter, certainly our lowest quarter in any given year has gone up significantly. And our largest producing quarter has gone up significantly as well as the overall trend.
So in general, once these programs launch even though each individual patent portfolio doesn't contribute equally per quarter, you can see from our growth rate there's almost a direct correlation in terms of numbers of portfolios that have generated revenue and the revenue growth rate over the last couple years where we have grown 75% year over year in '06 and we have grown 50% year over year in '07.
Sean O'Neill – Singular Research
Okay. All right.
Well, thank you.
Paul Ryan
Sure.
Operator
And we will take a follow up from Bennett Notman with Davenport.
Bennett Notman – Davenport & Co.
Yes, Paul, again just focusing on revenue growth for the rest of the year. I mean should we be thinking then that growth is going to come more from an increase in the deal size or just an increase in the number of deals per quarter as we ramp and more technology matures or are we looking for some bigger contributions maybe on the litigation side.
I am just trying to get a feel of what mix of that we should be thinking about.
Paul Ryan
I think you are certainly going to get it on both as a percentage of mix, it's hard to totally predict but probably more on deal size than numbers of deals, I would guess.
Bennett Notman – Davenport & Co.
Yep. Thank you.
Paul Ryan
Okay.
Operator
And we will go next to Bob Ammann with RK Capital
Bob Ammann – RK Capital
Yes, Paul, that trend that you were just talking about where the smallest quarter in any given year tends to increase each year and the largest quarter in a year tends to increase each year. Would you expect that to continue to be the case this year?
Paul Ryan
We certainly hope so. Yes, we have got the potential this year with a number of new portfolios that are just beginning to produce as well as ones that we reasonably expect to produces revenue this year for that to continue.
Bob Ammann – RK Capital
Okay. So that would imply you are probably looking for a $25 million type quarter sometime this year?
Paul Ryan
And the deductive reasoning? You said it.
Yes, exactly. Yes, certainly.
And there's some potential of some very large licenses that we have been in discussions with some parties that obviously take time but certainly it's a reasonable expectation that we can get some of those larger deals done this year.
Bob Ammann – RK Capital
Okay. And then ending head count in the quarter?
Paul Ryan
This quarter we – in the first quarter I think it was, we increased 4 people to 53. We are pretty much absolutely complete.
We may bring on 1 or 2 additional people but we are pretty much built out to grow out the company over the next year to 2 years. We have got the teams in place and probably will add 1 or 2 licensing executives maybe in the second half of the year.
But, as you know, we have grown pretty rapidly on all fronts and you have to stay in front of the –all opportunities with talent when we can recruit them. So, we are pretty much complete.
I think we can grow revenues significantly from here with the existing team with the existing overhead we have.
Bob Ammann – RK Capital
Okay. And then did you have any number of 10% customers in the quarter.
Clayton Haynes
Yes. In the quarter we have one licensee that accounted for 27% and three licensees that individually accounted for 10%.
Bob Ammann – RK Capital
Okay. Thank you.
Operator
And we will go next to Chris Tamino [ph] with Pfeiffer's Capital Group [ph].
Chris Tamino – Pfeiffer's Capital Group
Hi there, gentlemen. I have just a few quick questions.
The first is can you give us any kind of a number over how many licenses you have that are currently active? I just see numbers here for the number that you brought online in Q1.
Paul Ryan
Well I would think of it more in terms as licensing programs than individual licenses. Again there are technologies where we have licensed as many as, I think 60 companies, for instance on credit card fraud technology.
So there are many of these programs that will produce very large numbers of licensees over the life of the licensing program. But, again, the majority of deals are paid up licenses on an individual basis.
Chris Tamino – Pfeiffer's Capital Group
I see. And for the majority of these agreements, are payments received on a quarterly, biannual or an annual basis?
Paul Ryan
Well generally most of our deals we get paid within 30 to 60 days. On some of the recurring on DMT and a handful of the other portfolios, we are paid either on an annual basis and we then amortize those payments quarterly and in some cases, we are paid quarterly.
Chris Tamino – Pfeiffer's Capital Group
I see. And finally, is there any average rate that you have seen different licensing programs going offline quarter to quarter?
Paul Ryan
I am not quite clear on the question.
Chris Tamino – Pfeiffer's Capital Group
Well the life of a portfolio or a licensing program, do a certain number go offline or die each quarter or year. Do you have any expectations for that?
Paul Ryan
It should be fairly modest. Yes, over the last couple years, we have completed a couple of programs, we have finalized.
And again, they were atypical in that when we purchased and merged and bought the 27 portfolios, there were some portfolios within that group that only had a handful of people to license which we have completed. So, but I would say out of that there's probably 3 or 4 portfolios out of the total that we have completed the licensing on.
In the vast majority, if you look at the 32 licensing programs as they begin generating money, I would say that they probably only generated maybe 25% to 30% of the total potential revenue of all those portfolios of the ones that have started. So that we are still at a fairly early stage even on the existing programs.
Chris Tamino – Pfeiffer's Capital Group
Right. Okay.
Well, thank you. Those are all the questions I have got.
Paul Ryan
Okay. Thank you.
Operator
(Operator instructions) We will go next to Peter Martin [ph] with Mathis Capital.
Peter Martin – Mathis Capital
Hey, Paul. Question on SG&A.
In the last couple years when you look at the first quarter, you have got an outsized kind of marketing G&A number in the first quarter and then it drops in the second and third and then sometimes it picks up in the fourth. Is there a reason why the first quarter is a higher G&A number?
Is it startup on portfolios? Is it deals closing and you are matching the deal to the G&A.
If you could kind of give us some color on that?
Clayton Haynes
Well you mean the fixed MG&A?
Peter Martin – Mathis Capital
I am talking about the fixed number, yes. For the last couple years, your first quarter is an outsized G&A and then it drops and then sometimes it will pick up in the fourth quarter – maybe the third or the fourth.
But the first quarter seems to be the largest quarter that it is booked.
Clayton Haynes
Well I think it's important to keep in mind that the MG&A line in our financial statements includes two components. One is a fixed component and that also includes a variable component which is comprised of various business development and licensing related patent, research and consulting costs.
And so I think what you are seeing is the variability associated with those variable costs that we do include in the MG&A line.
Peter Martin – Mathis Capital
Well and again, I appreciate that but what I am trying to get to is in the variable component, there must be a reason that you are booking a large front part of the variable in the first quarter. Because your second quarter and third quarter except for in the instance – Yes, the second and the third quarter seem to drop except for last year where it was lower in the fourth quarter.
But for some reason again it's – I am not sure if you are trying to be conservative and book it all up front for the year. But it seems to me that first quarter has a larger actual dollar number to it and I am just wondering if that's a pattern we should keep in mind for future years.
Clayton Haynes
No. I would say that the variable costs are fluctuating strictly based upon the activity occurring in that particular quarter.
And it's not that we are able to time the actual recording of various expenses. It really is truly based upon the various types of business development, our licensing research and consulting activity happening in those quarters.
I mean it's to the extent that that's a trend you are seeing, it's not anything that we are necessarily trying to manage. It really is just based upon when those expenses are incurred based upon the actual activity.
Peter Martin – Mathis Capital
Okay. I didn't think you were managing.
I was just trying to get a feel for how it had occurred. So if we have a lot of signed deals in a quarter, then we should see the subsequent expenses related to getting those deals accomplished booked in that quarter?
Clayton Haynes
Yes. I think the words that you used as far as the trends that you are noticing is it's a coincidence that you are just seeing that in the first quarter of each year.
But it's not anything that we can necessarily consider to be a trend that will absolutely happen when you are going forward. It really is just based upon actual activity.
Peter Martin – Mathis Capital
Okay. And then the final question is it's kind of the same trend line on revenue.
You look at licensing revenues in your first quarter, for instance, '05 is – except for in the '07 year in the $25 million booking, is your lowest revenue quarter. Is that because, you are coming off the holidays or new years or during the quarter there's more holidays and legal people are not in a sense, that's not when deals are signed or booked so you expect the back half of every year to be a little bit bigger and keep things to get finished up and paid up?
I am trying to understand the as you say the variability of the numbers and if we should always expect a lower revenue in the first quarter.
Paul Ryan
Peter, this is Paul. I don't think there's any seasonality.
I think the amount of data you are looking at here over a handful of quarters is just simply happens to be the amount of deals that get done in a given quarter. And as you know, we have said, we are not trying to manage to the company for quarter over quarter revenues for every 13 weeks.
We want to get deals done and licensing programs done at the appropriate licensing rates and sometimes they can move into the next quarter. So we are not trying to manage it quarter to quarter and I don't think there's any – there's certainly no seasonal trend in patent licensing and any of the data points that you have to date is just coincidental.
Peter Martin – Mathis Capital
And that's what I was trying to understand. I am looking more at nicks and patterns than I am.
As you would appropriately identify seasonality versus any type of management, so, okay. Thanks, Paul.
Paul Ryan
Okay. Sure.
Operator
We will go next to Daniel Katz with Apex.
Daniel Katz – Apex
Hi.
Paul Ryan
Hi, Danny.
Daniel Katz – Apex
So a number of people have asked this question about the quarters and the rate of growth that you have seen. Now how come you haven't grown revenue at the same rate you have the number of patent portfolios under management?
Paul Ryan
Well there's a lag period, certainly over time there will be a correlation and we have given general guidance although it's not fast and hard guidance. But generally when we bring in a patent portfolio, you can reasonably expect if it's a type of portfolio where you are going to be probably licensing 15 or 20 companies and the revenues are spread over a wider number of companies and, therefore, lower dollar amounts per licensee.
Those tend to get started earlier based on the price points and generally within 18 months, we should start producing revenue. I think we have done it in as short a period of time as 11 months.
And then there are other portfolios that particularly if it's a handful of licensees for a very large licensing fees those typically will go deeper into the litigation process and could take three or four years before we generate revenue.
Daniel Katz – Apex
Is the time to monetize portfolios lengthened of late?
Paul Ryan
No. We don't see that as a trend.
If anything I think as we continue to do multiple licenses with some of the same large companies and get familiar with their processes and they with ours, I think on average the time will come down a little bit.
Daniel Katz – Apex
Okay. So –
Chip Harris
Hey, Danny. This is Chip.
I think to compare apples to apples. If you look back 18 to 24 months ago we were probably over that whatever fiscal year that was, we probably grew our portfolios by 50% and that's what we grew our revenues by last year.
It is more correlated than you think.
Daniel Katz – Apex
I know it's correlated. That's what I am asking, Chip.
So if going back to the third quarter of '05 – your quarters on the low side are 5, 6, 7 and on the high side since then are 12 to 14 and adjusting for Q1 last year for an unusual settlement. It is definitely up and what Paul said about having the smallest quarter each year be bigger is absolutely still true.
But you had 27 portfolios there, then you added 45 prior to '07 and it's not kept up at the same rate so if the time to monetize hasn't changed and you have added plenty of high profile people.
Paul Ryan
I don't have it right here in front of me what was the delta between – what period did you pick, third quarter '05?
Daniel Katz – Apex
Just when you went over $3 million in revenues. I just started there.
Chip Harris
I think the question though was, your revenue is slowing down versus the amount of portfolios you are adding. I will bet if you looked back and said third quarter '04 to third quarter '05 and then took the two years later, the 24 months.
I will bet our – because I have done it and I don't know the numbers right off the top of my head but I have done it. It's almost like a 96% correlation.
Daniel Katz – Apex
Okay. So that's –
Chip Harris
Other than in that time went up by the same amount as the number of portfolios.
Daniel Katz – Apex
So let me ask you differently. And other people have asked a similar kind of question.
If you are adding as many qualified people as you have and you have been able to pick excellent portfolios because you don't have a lot of competition out there, then that correlation if not and you have your yearly basis is fine. But I think that the part people are having trouble putting together is then acquire what you need and it should show up.
So if time goes by and that reams down still quarters at what point will people feel comfortable that you have not met your strategy?
Paul Ryan
Well, Danny, let me point out two things and Chip to make a comment. Anyone can go out on our website, acaciatechnoligies.com, and look at our basic presentation and if you look at slide 7, 8, and 9.
Slide 7 in the quarterly growth in patent portfolios. Slide 8 is the quarterly growth in revenue producing licensing programs and slide 9 is trailing 12 month revenues.
And if you overlay those three metrics which are our key performance metrics, I think you are going to see an incredibly high correlation of 90% plus of growth of patent portfolios and then you do it on a lagging basis of about 18 months, growth to like licensing programs and growth in revenues. So there's an extremely high correlation or there certainly has been over the last 3 years.
Chip Harris
And I think, this year, we will look back and see that big correlation.
Daniel Katz – Apex
Right. What do you plan to do with your cash and how much do you need to maintain from a credibility standpoint?
Paul Ryan
Well I think one of the things we are doing is – we think there's a wonderful opportunity to increase our margins by aggressively deploying some of this cash as we have talked about. It's a little tough to do it after you have already proved out a licensing program and then go back and tell them you want to buy out their interest.
But you can see just in the difference, I think we are almost 48% this quarter. There's an opportunity for us with this cash flow, with this cash to go out and buy larger portions than our traditional which is about a 35% margin.
So I think that's an area that's hugely accretive for our shareholders to use that and very frankly, we are kind of moving up to the types of portfolios that we are looking at where there are people in this economy that are not as enticed by what might happen two or three years down the road with opportunities on back ends and try to take advantage of this dislocation in the marketplace and take a larger percentage of those patents, the patent revenue and buy it for ourselves and share with our shareholders.
Daniel Katz – Apex
So you have spent more money recently but it's still in the low single digit millions, right?
Paul Ryan
Yes, it's still modest, absolutely.
Clayton Haynes
The last six months it's a little over $3.5 million.
Daniel Katz – Apex
So the second part of the question about how much do you need to maintain in order to be able to take people to court and know that you have got the backing to do that?
Chip Harris
Originally we always kind of had about a $25 million on there but a couple years ago we had maybe 10 or 15 lawsuits at any one time. I don't know what the latest number is but it's probably well over 40, 45.
So you can see we are asserting aggressively more portfolios and there's probably some qualitative analysis that says if you are in X number of assertions you need to have more even though it may be a little bit less per lawsuit. You know, I would say right now probably $35 million to $40 million.
Okay?
Daniel Katz – Apex
And then lastly I remember hearing that based on the November court case that Acacia did not win, yet there was some signings that got maybe pushed out as people tried to bend your arm about your own situation. Did some of those fall in Q1?
Paul Ryan
We have been asked that question a million times obviously. It wasn't from the lack of our winning that case.
I think it was more of a result of the shareholder pressure on the share price.
Chip Harris
That more than anything else. When you get a binary event and you are trying to close a deal and they say, boy, you guys have a $6.00 stock price.
We came back and said, "Well hold it." In the 15 months ago, nobody knew about the potential data on the lawsuit with Microsoft and we had 50 portfolios and trailing 12 month revenue of $33 million.
Now we have it a $52 million and 90 lawsuits, you assume that the share price would be higher. So I think if anything, we battle not only from a perception, trying to hire people.
It's more expensive to hire people. You have to give them higher awards.
Paul Ryan
Now from a licensing standpoint or at least the negotiating pushback with some companies we were in negotiations with, Chip is right, it was more about our stock price than about whether we lost or won because they know it's 50/50 amongst large companies. But they were trying to use that to their advantage, the significant decline in the stock prices.
Chip Harris
I would much rather have won but the fact that we finally went through a final lawsuit made it clear to anybody out there we were going to aggressively defend and assert our and our partners patent rights.
Daniel Katz – Apex
And is your lower stock price currently impacting your business in any way?
Paul Ryan
Well it doesn't help. I mean I don't think that it's correlated to anything but Yes, I mean it's you have to manage your people more aggressively.
People get frustrated when they have a lot of stock based compensation as we have tried to align ourselves with our shareholders and they get frustrated. You guys are money managers, you know what happens when you have a couple down months.
You know the result of having the perception of not doing as well. But we manage through it.
I mean this is a fluid environment. And put it this way.
We are more aggressive and more opportunistic and more excited about our portfolios and our opportunities than we ever have been. We still want to drive this to be the public market licensing company and see no reason why we can't have $1 billion in value for our shareholders.
Daniel Katz – Apex
Thank you, gentlemen.
Operator
Hold on next to David Reese [ph], a private investor.
David Reese
Yes. Good afternoon, Paul.
Paul Ryan
Hi, David.
David Reese
And to Chip too as well. I was just curious.
I see where your cash dropped by about $6 million over the last quarter if I am correct.
Paul Ryan
Yes. Part of that – about $3 million of it was just we did a number of deals late in the quarter.
So I think if you look at our financial, our balance sheet, you will see that our receivables were up a little over $3 million. And then we used about $1.5 million for patent acquisitions in the quarter.
David Reese
That's what I thought primarily was due to some portfolio acquisitions that you purchased.
Paul Ryan
No. It's more actually due to our receivables.
We did a number of deals in the last 30 days of the quarter and we hadn't collected the cash yet.
David Reese
Oh, I got you. I got you.
Paul Ryan
It's basically just a route in receivables.
David Reese
I got you. I see.
Okay. That explains it.
Are you still considering any kind of joint ventures with other people who might put some money into this?
Paul Ryan
Yes. We are engaged in discussions with potential financial partners for portfolios, yes.
David Reese
Okay. Well those were two questions I had right now.
Paul Ryan
Okay.
David Reese
Well thanks very much.
Operator
We will go next to Fred Mack with the Mack & Company.
Fred Mack – Mack & Co.
Yes, hi, guys. I have been following your company now for about 2 years and I am starting to get a little worried that with your revenue run rate, you are going to run out of money before you can get to profitability.
So, honestly, how long do you guys think it's going to take before your can see positive cash flow?
Paul Ryan
Actually if you look at our – we generated positive cash flow over the last year. So that's really not an issue.
We have actually increased our cash. If you look back over the last couple of years, I think we have gone $38 million to around $50 million this quarter again because we had some payables or receivables out at the end of the quarter but Clayton can give you a definitive answer but I think certainly our cash balances have been going up during the last couple years.
Fred Mack – Mack & Co.
But those are balances, not operating income.
Clayton Haynes
Well I think was your question though we are going to run out of cash?
Fred Mack – Mack & Co.
Yes.
Clayton Haynes
Yes, well like I said we – last time –
Paul Ryan
We were in positive – significant cash flow positive so that would speak, fly directly in the face of your concern.
Fred Mack – Mack & Co.
Okay. How about this?
When will revenues outpace expenses quarter by quarter.
Paul Ryan
Well on a consistent basis it's hard to predict, certainly we have already had quarters that have been profitable from a GAAP basis. As you know we have $10 million or $11 million in noncash charges.
So we have had a number of quarters where basically on a GAAP basis we have shown a loss but on a cash operating basis we have generated cash. So again, back to your basic primary question, if you look back over the last couple years we have actually through operations without going out – we haven't gone out and sold any stock at the marketplace.
Our cash has grown from like $38 million to $50 million so we don't anticipate that as being an issue.
Fred Mack – Mack & Co.
Well with your stock price being as low as it is and with no prospect of any kind of real appreciation, aren't you really looking at more difficult times in the next two quarters?
Paul Ryan
Not at all. Our business we are looking at very good times and the prospects for stocks we don't opine on but they go up and down as everybody knows.
Fred Mack – Mack & Co.
(inaudible) That's a bottom line situation that you guys have to address this. It's a fiduciary responsibility.
Chip Harris
Dave, we manage our business, we don't try to manage our stock price. And our business is better than it's ever been.
There's probably a lot of experts on the call who can opine on as to why stocks move up and down but that's one area we know we don't know anything about.
Operator
We will take a follow up from Bennett Notman from Davenport.
Bennett Notman – Davenport & Co.
Yes, Clayton, could you just tell us a little bit about the option rate security position and how we should think about what we will hear on that?
Clayton Haynes
Sure. Sure.
We have done about as of the end of the quarter about S6 million in option rate securities. As of today about $5.7 million with about 450,000 of those scheduled for redemption in the next 45 to 60 days.
They are of two types. One of the types about half of it relates to closed end investment funds and the other half relates to option rate securities backed by student loan portfolios.
All of which are AAA credit quality because of the current pressures in the credit market as we are all aware of but the options for those particular securities have broken down. We have seen some good traction since the issue began in mid February with respect to either sales of some of them or having those redeemed.
We are currently working with our auditors to finalize our thoughts on the fair value of some of these option rate securities as of the end of the quarter. But we will continue to monitor the situation and work with our broker in an effort to try to get out from under these things as quickly as possible.
Bennett Notman – Davenport & Co.
And you continue to receive interest on them at this point?
Clayton Haynes
Yes. All our option rate securities continue to pay interest in accordance with the National Securities.
From our standpoint it is a liquidity issue and not a credit worthiness or default issue.
Bennett Notman – Davenport & Co.
Thank you.
Operator
And due to time constraints, that concludes the question and answer session. I would like to turn things back to Mr.
Ryan for any closing remarks.
Paul Ryan
Okay. Thank you, operator.
I want to thank you all for being with us. Look forward to speaking with you next quarter and in the meantime if you have any specific questions, you can certainly either give me a call or Rob Stewart, who's our head of Investor Relations.
And thank you for being on the call.
Operator
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 4191671.
This concludes our conference call for today. Thank you all for participating and have a nice day.
All parties may now disconnect.