Oct 23, 2009
Operator
Good afternoon and welcome, ladies and gentlemen, to the Acacia Research Third Quarter 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.
At the request of the company, we will open up the conference for questions and answers after the presentation. I will now turn the conference over to Mr.
Paul Ryan. Please go ahead, sir.
Paul Ryan
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. With us today is Chip Harris, President of Acacia; Dooyong Lee, Executive Vice President; and Clayton Haynes, our Chief Financial Officer.
Today, I will give you an overview of the progress we are making in building the business, and Clayton Haynes will provide you with an analysis of our financial results. We will then open the call for questions.
Acacia Research generated 16.8 million in licensing transactions in the third quarter of 2009, resulting in third quarter license fee revenues of $12.8 million, a decrease of 7% compared to 13.8 million in the year ago period. We also generated deferred revenues of 4 million, which will be recognized in subsequent periods.
Acacia generated third quarter revenues from 36 new licensing agreements covering 16 different technologies, including initial revenues from three new licensing programs. Acacia has now generated revenues from 56 different technologies.
Acacia's trailing 12 month revenues were 58. 8 million, an increase of 40% compared to 42 million in the year ago period.
Acacia Research reported a third quarter net loss of 4.8 million, included non-cash patent amortization and non-cash stock compensation charges totaling $2.7 million. In preparation for a number of trials scheduled for later this year and in 2010, our subsidiaries increased legal expenses by 2.4 million compared to the year ago period.
This included payments for third party exports and for export damage reports that will be used in trials. Our licensing opportunities to continue to grow as we roll our new licensing programs and executing our licensing programs that have just begun to generate revenues.
During the quarter, we acquired control of nine new patent portfolios for future licensing and now control over 125 patent portfolios. Five of these nine in new portfolio acquisitions consists primary of patents issue to major technology companies.
We are seeing a significant increase and opportunities to partner with large companies. These opportunities could lead to a significant expansion of our business.
We attribute this opportunities to Acacia's successful track record as a leader in patent licensing and the increasing interest among large companies to monetize their intellectual property and earn a return on their investment and research. We are also seeing opportunities to invest a portion of the cash we have generated over the past couple of years, which could enable us to increase our margins and earn higher returns.
During the quarter, we invested 8.8 million in acquiring patent portfolios with the contractual guarantees for Acacia to receive a minimum of 5 million in net proceeds, which significantly reduces the risk of these investments. In addition, the majority of the remaining acquisition costs are subject to advanced royalty recovery provisions providing for higher percentage returns for our operating subsidiaries until the advances are fully recovered, and generally provide for higher percentage payments during the full life of these licensing programs, which will increase our margins.
Our current pipeline of new business opportunities is continuing to grow at an accelerated rate. And we expect a growing portion of our future licensing programs to be the result of partnering agreements with large companies who want to generate financial returns on their IP.
We think Acacia is uniquely positioned to benefit from this trend and from the emergence of intellectual property as a new asset class. During the quarter we received calls asking for updates on the post trial motions in the favorable Jury Verdict our subsidiary received against Yahoo.
The current status is that our subsidiary has asked the Court to judgment in the amount of the 6.6 million verdict for enhanced damages based on the local infringement findings, pre-judgment interest, attorney fees, Court cost and for an ongoing royalty. The Court's decision on whether to grant enhanced damages or monetary amounts is pending.
Yahoo has filed a notice of intent to appeal the verdict, which preserves their right to appeal the Court's final decision. We also received calls wanting to know the upcoming trial dates of our subsidiaries.
At the present time, we are at 15 scheduled trial dates over the next 12 months. The next scheduled trial date is December 2 for our DMT subsidiary versus ...
and a total of eight ... in the Eastern Virginia for our subsidiaries patented technology relating to the transmission of digital content to wireless devices.
Other scheduled trials include the following subsidiaries, which I will go through. Often there are multiple defendants in these cases in addition to main defendant.
Our subsidiary diagnostic systems has a trail date with Oracle, location base services with AT&T, IP innovation with Red Hat, performances pricing with Google, IP innovation with Google, fry burger (ph) with Microsoft, fast memory erase was pension, hospital systems with General Electric, web tracking solution with Google, Software Tree with Oracle and Thermal Scalpel with Boston Scientific. If you would like to monitor additions since scheduling changes to the litigation calendar, I would suggest that you identify, there is multiple research reports that are out by analysts following our company, they regularly update and they monitor the publicly available Court documents to Pacer (ph) and also update daily reports, because the company obviously will not be issuing such reports.
We are currently in discussions with a number of departments in these upcoming trials, which could lead additional licensing agreements. In summary, we currently have the largest number of licensing opportunities in our history, and we'll be rolling out a number of additional programs over the next few months.
With that I would like to turn the call over to our Chief Financial Officer, Clayton Haynes.
Clayton J. Haynes
Thank you, Paul, and thank you to everyone joining us for today's third quarter 2009 earnings conference call. As indicated in today's earnings press release on a consolidated basis, third quarter 2009 license fee revenues total 12,831,000 as compared to 13,796,000 in the third quarter of 2008.
In addition, deferred license fee revenues representing upfront license fee payments we received or receivable some license fees at the beginning of the contractual license term, which are deferred in amortized as revenues in the income statement in future periods increased to 69,82,000 as of September 30 2009 compared to 318,000 at December 31, 2008. Including 4 million of additional deferred revenues recorded in the third quarter, third quarter 2009 licensing transactions totaled 16.8 million.
Third quarter 2009 revenues included license fees from 26 new licensing agreements covering 18 of our technology licensing programs as compared to 20 new licensing agreement covering 18 of our technology licensing programs in the third quarter of 2008. License fee revenues continued to fluctuate from period to period based on the various factors discussed on previous earnings conference calls and in our periodic filings with the SEC.
Consolidated trailing 12 months revenues totaled 58.8 million as of the end of third quarter as compared to 59.7 million as of June 30, 2009; 48.2 million as of December 31, 2008; and 42 million at September 30, 2008. Third quarter 2009 revenues included initial license fee revenues for our Lighting Ballast technology, microprocessor technology, and our online promotion technology.
So in summary of additional technology licensing programs generating revenues during the third quarter of 2009, please refer to today's press release in 8-K filled with the SEC. Currently, on a consolidated basis, our operating subsidiaries have generated revenues from 56 of our technology of licensing programs.
Our average margin, defined as gross license fees, less inventor royalties and payments to non-controlling interests and contingent legal fees for the portfolios generating revenues during the period was approximately 41% for the third quarter of 2009 as compared to 40% for the third quarter of 2008. As a remainder, you will need to include the net income attributable to non-controlling interests in operating subsidiaries line item in the income statement to compete the average gross margin for the three and nine months ended September 30, 2009.
Net income attributable to non-controlling interests and operating subsidiaries represents a portion of net proceeds from the licensing and enforcement activities of one of our majority on operating subsidiaries that are distributable to the operating subsidiaries non-controlling interest holders. Average margins continued to fluctuate period-to-period, based on the mix of patent portfolio that generates revenue each period and the related economic associated with the underlying inventor agreements and contingent legal fees arrangements if any.
For the third quarter of 2009, Acacia Research reported a GAAP net loss from operations of 4.8 million or $0.16 a share versus 2.4 million or $0.08 a share in the third quarter of 2008 as illustrated in today's press release and related 8-K filed with the SEC. Excluding the impact of non-cash patent ammonization charges of 1.2 million and non-cash stock compensation charges of 1.5 million, we reported a third quarter 2009 net loss of 2.1 million compared to approximately breakeven excluding non-cash charges of 3.1 million for the third quarter of 2008.
Inventor royalties and payments to non-controlling interests expense for the third quarter of 2009 was 4 million as compared to 4.3 million in the prior year period. Contingent legal fees for the third quarter of 2009 was 3.5 million as compared to 3.9 million in the prior year period.
In the aggregate, inventor royalties and non-controlling interests in operating subsidiaries decreased 7% during the third quarter of 2009 as compared to the third quarter of 2008, consistent with the 7% decrease in license fee revenues recognized for the same periods. Contingent legal fees expenses decrease 12% for the same periods due to certain patent portfolios with lower contingent fee rates generating revenues during the third quarter of 2009 as compared to the patent portfolios generating revenues in the comparable 2008 period.
Marketing, general and administrative expenses including non-cash stock compensation charges for the third quarter of 2009 decreased to $5,089,000 from $5,464,000 in the comparable 2008 period, primarily due to a decrease of non-cash stock compensation charges resulting from a reduction in personnel towards the end of the prior year period, and a decrease in the average fare value of equity-based incentive awards expensed in the third quarter of 2009 as compared to the prior year period. The decrease was partially offset by a minor increase in general and administrative expenses related to ongoing operations.
Patent-related legal expenses for the third quarter of 2009 were 3.5 million as compared to 1.1 million in the third quarter of 2008. Patent-related legal expenses include patent-related prosecution and enforcement cost incurred by outside patent-attorneys engaged on an hourly basis and the out-of-pocket expenses incurred by law firms engaged on a contingent fee basis.
Patent-related legal expenses fluctuates from period-to-period based on patent enforcement and prosecution activity associated with ongoing licensing and enforcement programs and the timing of the commencement of new licensing and enforcement programs in each period. The increase in patent-related legal expenses is due to an increase in litigation support related out-of-pocket expenses, third party technical consulting expenses and professional expert expenses incurred in connection with our continued investment in certain of our licensing and enforcement programs, with trial dates scheduled for late 2009 and early 2010, and a net increase in costs related to new licensing and enforcement programs commenced since the end of the prior year period.
We expect patent-related legal expenses to continue to fluctuate period-to-period based on the factors summarized earlier in connection with upcoming scheduled trial dates and our current and future patent acquisitions, development, licensing and enforcement activities. Patent-related research, consulting and other expenses remained relatively flat quarter-over-quarter, totaling $404,000 in the current quarter as compared to $444,000 in the third quarter of 2008.
Patent-related research, consulting and other expenses fluctuate period-to-period, based on patent-related research, licensing and enforcement and maintenance activities in each period. Patent portfolio acquisition cost for the third quarter of 2009 totaled 8.8 million as compared 100,000 during the comparable 2008 period.
During the third quarter, we acquired a total of nine patent portfolios with applications in the digital video enhancement, communications messaging, record to management, power management, biosensors, integrated access, data synchronization between mobile and fixed computer systems and other technology areas. The total number of patents, foreign counterparts and U.S.
applications per portfolio acquired during the third quarter ranged from one to 59. Several of the patent portfolios acquired in the third quarter of 2009 were acquired in connection with partnering arrangements executed with major technology companies, reflecting our continued identification of opportunities to partner not only with individual inventors in small to medium size technology companies, but also major well established technology companies with larger patent portfolios.
Of the 8.8 million in patent acquisition cost incurred during the third quarter of 2009, we have a contractual guarantee to receive a minimum of 5 million in net proceeds, which significantly reduces the risk associated with these initial investments. The majority of the remaining acquisition costs incurred are subject to contractual provisions providing for higher percentage returns to our operating subsidiaries early on in their licensing and enforcement program until such initial upfront acquisition costs are fully recovered.
The higher level of acquisition cost incurred in the current quarter reflects our continued identification of opportunities to partner with major technology companies and negotiate upfront advanced royalty payments to patent owners for a reduced future inventor royalty percentage resulting in potential for higher returns on our investments for our shareholders in connection with future licensing and enforcement activities. Looking forward, for fiscal 2009, we expect MG&A excluding non-cash stock compensation charges to be in the range of 13.5 million to 14 million.
For fiscal 2009, estimated patent-related legal expenses together with patent-related research consulting and other costs are expected to be in the range of 11 million to 12 million. The increase in estimated legal and consulting expenses reflects the impact of the timing of the increase in legal expenses for certain of our licensing and enforcement programs with trail dates schedules for late 2009 and early 2010, as discussed earlier.
From a balance sheet perspective, total assets as of the end of the quarter totaled 76.1 million compared to 73.1 million as of December 31, 2008. As of September 30, 2009, cash and investment balances totaled 45.3 million versus 51.5 million as of December 31, 2008.
Net cash outflows from operations including payments to non-controlling interests for the third quarter of 2009 totaled 5.4 million versus cash flow breakeven for the third quarter of 2008. Net cash outflows for the current quarter reflects the impact of the timing of cash receipts from license fees and payments to the inventors and contingent law firms quarter-to-quarter.
Net cash inflows from operations for the nine months ended September 30, 2009 totaled 3.7 million versus net cash outflows from operations of 4.2 million for the nine months ended September 30, 2008. Accounts receivable from license fees totaled 6.5 million at September 30, 2009, compared to 7.4 million as of December 31, 2008.
Again thank you for joining us for today's earning conference call and I will now turn the call back over to Mr. Paul Ryan.
Paul Ryan
Thank you, Clayton. Operator, can we open the call for questions please.
Operator
Thank you, sir. The question-and-answers session will begin.
(Operator Instructions). Our first question comes from Bennett Notman with Vasco (ph) Research.
Unidentified Analyst
Good afternoon guys and congratulation on another solid quarter. Can you just talked a little bit about the deferred revenue at the time period over which it will be recognized into the any other new options we should understand from what's going on there?
Paul Ryan
Sure, I'll let Clayton handle that.
Clayton Haynes
Sure. The deferred revenue that came in the third quarter of 2009 relates to a license agreement that has certain terms related to a -- we should be amortizing that over a six quarter period.
Unidentified Analyst
And this is -- it's my another question, this is sort of the second year like this that you guys have done, should we start thinking of these as something that we'll see more often or we store this kind of more like one-offs?
Paul Ryan
I think there will be increase in trend to do that, there's a number of media is in the marketplace and buying clubs that are becoming involved in licensing and we're seeing definitely an increasing trend of that. So, I would expect more of that in the future.
Unidentified Analyst
Then could you just talk a little bit how all these and pending Court dates might be impacting the overall licensing negotiation to be adding with some of the bigger targets that you have as you get closer to pending Court dates. Are we likely to see some bigger deals get done or just sort of -- how does that taking part to impact everything that you're doing?
Paul Ryan
Yeah, often times; obviously as you move closer to trial dates, there is opportunity for negotiations between the parties. And as I indicated in my remarks, we are in discussions with the number of defendants in those trials and each of those trials aren't just the lead defended; many of them have multiple defendants in the trials.
So, certainly it provides an opportunity for our negotiations and probably an enhanced opportunity for getting more licensing deals done.
Unidentified Analyst
And then last one from me. Clayton, I shouldn't quite map up at top of my head, but if you really look at this quarter's legal expenses, its' kind of a little normal given that you are going to be in such a heavy legal calendar going forward.
Clayton Haynes
Well, it's really based on the fact and circumstance and the actual trail dates that are there up and coming. I certainly would expect that as we do move closer to these trail dates, the trend will be to have either some higher or legal expenses.
But it's truly based upon the actual details associated with each of the trails as far as the magnitude of the increase.
Paul Ryan
Yeah, there is a lot of lead time involved. These are -- number of these trials where we're giving the expert expense and so once out next spring.
But you need to line the expert damage opinion and technical experts as far as in advanced. So I would say there might be another quarter or two where it's going to be elevated somewhere between where it used to be and where it's more about.
But we don't expect it go significantly higher than where it is. But as you know, the vast majority of our litigation is being handled on a contingency basis, so basically we only have responsibility in most instances for all our portion of the third party expenses.
Unidentified Analyst
Great. Thank you.
Operator
(Operator Instructions). Our next comes from Bruce Stewart, a private investor.
Please state your question.
Unidentified Analyst
My question is -- I want to congratulate the whole team, you've done a wonderful job.
Paul Ryan
Okay. Well, it's much appreciated.
Unidentified Analyst
That's all I have to say.
Paul Ryan
Okay, for those people on the call who don't know who Bruce Stewart is, Bruce Stewart is the original founder of Acacia Research and went on to find another public company, Arrowhead Research.
Operator
[Operational Instructions]. Your next question is a follow-up from Bennett Notman with Vasco (ph) Research.
Please state your question.
Unidentified Analyst
Yeah. Could you just talk a little bit more about the larger companies that you're doing deals with, are these generally foreign companies, are they domestic companies?
Are they following any particular on some of these technology industry and are there many more behind the one you've already done, I'm just trying to get a feel for -- once you got your foot in the doors end and one group of company speak to a couple others moving to others when sort of --
Paul Ryan
Okay. If I understand the question correctly, you want to know we've done verify any common characteristics amongst these larger companies either geographic or by technology sector that are interested in partnering with us, is that correct?
Unidentified Analyst
Yeah, nevertheless, just now that if you excited or others kind of looking at that as a feel of approval and maybe following in their foot steps?
Paul Ryan
I think there is no question about that. I think we have to built this tract record and we've done it initially, with a lot of smaller company.
And I think based on our -- yeah, many of these companies are actually the companies we have litigated and enforced to get quite frankly. And I think they see the professional team we have, they see the logic of our business strategy and it makes sense for them to outsource our patent licensing either of all or a portion of their patented technologies for us.
And all variety of companies so these are a number of international companies that we're in discussions with, who basically would like us to enforce their intellectual property license in the United States. But we also have lot of meeting with U.S.
companies doing the same thing. I think it's really a result of the financial situation and companies looking at their balance sheet and realizing their tremendous asset values that are eroding in the intellectual property category.
And many of the companies are aware that there are certain U.S. technology companies that generates tremendous amount of revenue from patent licensing and indeed it's very significant portion of their bottom line.
And I think more and more companies are realizing that it's fiduciary obligation to do that. And so we are ideally positioned as an outsource patent licensing company to do that.
So we are very encouraged. We are the major Fortune 100 company -- year yesterdays, I mean, the trend is definitely accelerating and I think there is no question that having done these deals and people in the industry knowing that we are now partnering with larger companies is leading to becoming more acceptable.
Operator
Our next question comes from Paul Burger of Hemic (ph) Investors. Please state your question.
Unidentified Analyst
Hi, it's Paul. Could you give us a little more color on the -- and what that may mean as far as future revenues in the next year or so?
Paul Ryan
All right. You're certainly referring to our original Acacia Media technologies, that we have demand Patent portfolio?
Unidentified Analyst
Correct.
Paul Ryan
Yes, at long last, we have received a motion from the headquarter in the Northern District of California, which essentially will enable us to take after the Federal Circuit and the PO of the initial planes construction, which we think was in air. There are 4 key plants to the patent that we think were ruled about in the Court as being indefinite that we feel are not indefinite and several outside offerings agree with us, so we look forward to appealing that matter to the Federal Circuit.
And if it was successful, then that could certainly shift the dynamics in that case.
Unidentified Analyst
Right. But the way I have read some in language which has come out of it, the way the Court move on, it invalided it, still in the period between the appeal and now, will you still be able to collect on the customers that you have?
Paul Ryan
Yes, our licensing agreements was only divided if they were ultimate in related -- of the Court, so certainly we're very early in that process now, we'll go up to the Federal Circuit on the claims construction. So now, nothing in the current rulings has changed our ability to continue to collect from existing licensees.
Unidentified Analyst
Okay. And one final point on that, can you give us any idea how much quarterly you get from that license?
Paul Ryan
We have not broken that out for a number of years, Paul. I mean, we did when it was very -- it's significant components of our business but we haven't provide at least two years or so.
So, now we have don't those numbers available. It's less than 10% of the total, but --
Unidentified Analyst
Okay. One other thing to make it little easier to track, is there a way that when you announce that you have a new license, or you got a new patent, you can tell us the name of the corporation you are going to put it under?
Clayton Haynes
Usually, we make the announcements on a timely basis, what happens is Acacia patent acquisition does the initial acquisition and then a separate entity then partnership is formed for that patent portfolio, so that our IP partners have total transparency and we can meet the rights and obligations and then we form the standalone subsidiary. So, there's an interim step where initially when we close the transaction that goes into Acacia patent acquisition.
So there isn't a name immediately, sometimes it can take fewer weeks for us to set up the special operating subsidiary.
Unidentified Analyst
All right. There's some parts on the website that you can maybe set it up, because once we have the name of the corporation doing it, it's a little easier to track the legal filings?
Paul Ryan
Yeah, that's something we can consider doing that we haven't done in the past. We basically we just outline the names of the technologies and we identify that with a press release, but that's something we'll consider.
Unidentified Analyst
Okay. Thank you.
Paul Ryan
Okay.
Operator
Our next question comes from Jonathan Skill of Davenport. Please state your question.
Jonathan Skill
Hi, just a couple of quick questions. The first one, the 8.8 million invested in acquiring portfolios in the quarter, is that primarily related to the portfolios acquired from large companies?
Paul Ryan
Primarily, yes.
Jonathan Skill
And I guess, when can we kind of expect in a revenue generation from some of those portfolios? Is that more the standard time that you've seen in the past with portfolios or is there a potential that it will be quicker sense -- some of these portfolios may have already generated revenue?
Paul Ryan
Yes. There may be some opportunities to start the monetization earlier than normal because a number of these have had early licensing activities or geographic licensing activities.
And generally when there is that history it enables our licensing executives to start generating new deals more quickly.
Jonathan Skill
And can you quantify at all maybe the, any percentage of royalties or percent of licensing that has already been accomplished in some of these portfolios are, your opportunities still pretty large with some of these?
Paul Ryan
Yeah at all of there, I would say opportunities probably still at least 80 to 90% of the markets. So probably the ones that have been done its probably 10-20% in the markets been license.
Jonathan Skill
And can you provide any detail on the early revenues the way they're sharing from these portfolios between you and the large company?
Paul Ryan
Well I would say only in general terms because obviously the transactions of subject to confidentiality but I say if you look at them overall, probably are normal splits are 50-50. And I would say if you look at these in the overall context that probably moves our percentages from 50 up to 60 to 65%.
And with an acceleration on early revenues coming back to recoup our advances with even higher percentages no matter we told we recoup the totals.
Jonathan Skill
Okay, great.
Paul Ryan
We think, you know given the pedigree of these patterns and the depth of the patent portfolios and the early licensing activities that are surely modest risk given the -- in most cases, licensing opportunities of these to recover initial capital.
Jonathan Skill
And then can you maybe talk a little bit about the acceleration you're seeing in times of first revenue from some of the other portfolios you've been acquiring in the past. First revenue has been kind of 18 months from the time you bring in a portfolio, is that still roughly the average time or is that time coming down?
Paul Ryan
I would say that still roughly the average time, it may have come down 10 or 15%. I think usually when we're getting earlier deals done, we have a number of licensees now that we have done multiple licensing deals with and there are some large companies who have indicated us that they would like to do earlier licensing deals.
So off the times if we bring in a new portfolio, we can go to some of those companies who have indicated that they want those types of transactions and get early deals done. So I think its more of a result of our growing history of relationships of licensing to certain large companies that are enabling us to do early licensing of these new portfolios as they come into those companies.
Jonathan Skill
And then, just two more quick ones. The increase in legal expanses in the quarter, was that the result of any case in particular or was it just a combination of the legal dates you have on the calendar?
Paul Ryan
It's a combination of a wide variety of legal dates. As you know later this year and certainly in the first quarter of next year, we've got a number of major cases.
So and usually these legal expenses that are going to occur, yeah there are three to six months in front of the trial date.
Jonathan Skill
And then on those, the trial dates there's the one that you mentioned with the D&T case in early December. Is the trial date for the E-911 case still firm for December or that would be more of a 2010 and then, I think there's two separate dates?
Paul Ryan
Yeah, it's going to be a 2010 event. There's actually three separate litigations, there's two different districts, Ohio and in Texas.
The AT&T case and Akron is still and I believe for February. Don't hold make of this I don't have the notes in front of me.
There has been the defendant in the first scheduled trials spread. There was originally scheduled in December filed a re-examination request.
And the court granted them a temporary stay. The Patent Office which only about 5% of the time, do they deny a re-exam request, denied their request based on the fact that they didn't feel there is any prior or significant enough to grant the re-exam request, which is a good sign for us.
As the court rescheduled the date, and then the plaintiff filed an appeal with the Patent Office to appeal the denial of their re-exam, which generally are not granted for some interest but we can't predict that. So the case has been temporarily stayed, we are expecting a resolution from the Patent Office and that appeal of the denial of their re-exam request shortly.
And we would expect that the trial date would be delayed the approximate amount of time, if this appeal has gone on. So that would probably push that one into the February-March timeframe as well.
Jonathan Skill
Okay. And one final question on the D&T case, has that technology been licensed in the past?
Paul Ryan
I really don't know, I can't recall, not that I'm aware of. There may have been some licensing that not have been...
Jonathan Skill
Okay.
Paul Ryan
I think there has been one -- one license.
Jonathan Skill
Okay, thank you.
Paul Ryan
I think it was prior to us becoming a partner.
Jonathan Skill
Okay.
Operator
Our next question comes from Bill Jones of Singular Research. Please state your question.
William Jones
Hi, guys.
Paul Ryan
Hi.
William Jones
I was wondering if you could elaborate on the highlights in recent development section as regarding financial systems innovation, there is the settlement with the several retailers?
Paul Ryan
Well, to begin with a little history the credit card fraud technology, sort of those histories where we have -- deserve when we push partner, the vendor had tried to various law firms license their technology, I think it was a decade....
Clayton Haynes
15 years.
Paul Ryan
15 years the young retailers may, we took it out and as you probably recall back in '06, '07 probably licensed 70 or 80 companies. One of the strategies of the defendants was modeled for re-exam request, they got to get back in the head office, we kept prevailing.
And it went in three different times and emerged all three times, with no changes. And the patent actually has expired now, so when we announce deals...
So that was a program that people will attest to decide and would never going to go away, we've partnered with someone, we're going to license the entire market, regardless of whatever strategies are employed.
Operator
Okay. Our next question comes from Brett Johnson of Rocket Capital.
Please state your question.
Brett Johnson
Hey great quarter guys.
Paul Ryan
Thank you.
Brett Johnson
I have a couple of questions. The first one is as you mentioned, you had a decrease in personnel over last year.
Can you talk about that a little bit?
Paul Ryan
We saw a 48% drop. Not anything significant.
Brett Johnson
Are you planning on ramping that up anytime in the near future?
Paul Ryan
We really don't see a need to. We can really leverage the teams we have as you know we have many legal partners and we have lots of outsiders those who are consultants.
So we're leveraging and quite frankly we think we can take this to much higher revenue levels with basically the same cost structure.
Brett Johnson
Great, great. And another question regards to the new larger deals, are you going to have kind of the same profitability profiles that your other portfolios have or they going to be a little bit different?
Paul Ryan
The transactions we've done on average I would say are probably going to be similar to the ones we've done historically around 59%. Its generally if we can use some capital of which we feel there is a fairly modest risk of recovery, that's how by advancing monies you can get larger puts on the back end, but typically our deals with those small and large companies are 50-50 split.
Brett Johnson
I know that you mentioned was kind of guaranteed is that going to account for -- in the balance sheet at all or is that just....
Paul Ryan
No, it's not accounted for in the balance sheet, it's just contractual of balance-sheet, in the quarter or?
Brett Johnson
In the quarter or today, yeah?
Clayton Haynes
Yes. That number is 18.
Brett Johnson
18, okay great. And then what's the year-to-date number?
Clayton Haynes
56 we're at in total.
Paul Ryan
We don't have a year-to-date number. The total amount of programs that are...
Operator
This will conclude the question and the answer session. I will now turn the call back to Mr.
Ryan.
Paul Ryan
Well I want to thank you all for being with us. If you have follow up questions you can give me a call or Rob Steward, our Senior VP of Investor Relations.
And look forward to you on the next call. Thanks.
Operator
0706-645-9291 with confirmation code 29015115. This concludes our conference for today.
Thank you all for participating and have a nice day. All parties may now disconnect.