Acacia Research Reports Record Fourth Quarter and Record Year End Financial Results

  Acacia Research Reports Record Fourth Quarter and Record Year End Financial
  Results

Business Wire

NEWPORT BEACH, Calif. -- February 21, 2013

Acacia Research Corporation^(1) (Nasdaq: ACTG) today reported results for the
three months and year ended December 31, 2012.

Fourth Quarter 2012 Results

  *Revenues in the fourth quarter of 2012 were a record $66,264,000, as
    compared to $20,795,000 in the comparable prior year quarter.
  *GAAP net income in the fourth quarter of 2012 was $9,823,000, or $0.20 per
    diluted share, as compared to a GAAP net loss of $4,189,000, or $0.10 per
    diluted share for the comparable prior year quarter.
  *Non-GAAP net income in the fourth quarter of 2012 was $41,849,000, or
    $0.86 per diluted share, as compared to a Non-GAAP net loss of $221,000,
    or $0.01 per diluted share for the comparable prior year quarter. See
    below for information regarding non-GAAP measures.
  *During the fourth quarter of 2012 we acquired control of 9 patent
    portfolios.

Fiscal Year 2012 Results

  *Revenues in fiscal year 2012 were a record $250,727,000, as compared to
    revenues and other operating income of $184,707,000 in the comparable
    prior year.
  *GAAP net income in 2012 was $59,453,000, or $1.24 per diluted share, as
    compared to $21,106,000, or $0.51 per diluted share for the comparable
    prior year.
  *Non-GAAP net income in 2012 was $137,339,000, or $2.86 per diluted share,
    as compared to $45,013,000, or $1.09 per diluted share for the comparable
    prior year. See below for information regarding non-GAAP measures.
  *Trailing twelve-month revenues, including other operating income, as of
    the end of 2012 increased to $250,727,000, as compared to $184,707,000 as
    of the end of the prior year.
  *During fiscal year 2012 we acquired control of a record 55 patent
    portfolios.

“Acacia generated the second highest revenue quarter in company history in the
4th Quarter of 2012, capping another record year in revenues, profits and new
patent portfolios for future licensing,” commented CEO, Paul Ryan. “These
results reflect Acacia’s growing industry leadership in patent licensing and
are accelerating new opportunities to partner with patent owners.”

Consolidated Financial Results
Overview

Financial highlights and operating activities during the periods presented
included the following:

                                                    
                                 Three Months Ended      Years Ended
                                 December 31,            December 31,
                                 2012      2011         2012       2011
                                                                     
Revenues and other
operating income (in             $ 66,264   $ 20,795     $ 250,727   $ 184,707
thousands)
Net income (loss) (in            $ 9,823    $ (4,189 )   $ 59,453    $ 21,106
thousands)
Non-GAAP net income (loss)       $ 41,849   $ (221   )   $ 137,339   $ 45,013
(in thousands)
Diluted earnings (loss)          $ 0.20     $ (0.10  )   $ 1.24      $ 0.51
per share
Pro forma non-GAAP net
earnings (loss) per common       $ 0.86     $ (0.01  )   $ 2.86      $ 1.09
share - diluted
New revenue agreements             27         37           138         125
Licensing programs                 27         26           68          56
generating revenues
Licensing programs with            9          4            31          21
initial revenues
New patent portfolios              9          15           55          40
                                                                       

As of December 31, 2012, trailing twelve-month revenues and other operating
income were as follows (in thousands):

As of Date:           Trailing Twelve-  % Change 
                         Month Revenues*
                                            
December 31, 2012        $     250,727      22       %
September 30, 2012             205,258      -12      %
June 30, 2012                  233,355      5        %
March 31, 2012                 222,617      21       %
December 31, 2011              184,707      -

______________________________
* Includes “other operating income.”

As of December 31, 2012, on a consolidated basis, we have generated revenues
from 143 technology licensing and enforcement programs, as compared to 112
programs as December 31, 2011.

Summary Financial Results
For the Three Months and Fiscal Years Ended December 31, 2012 and 2011

Revenues and Other Operating Income (in thousands):

                                                    
                                   Three Months Ended    Years Ended
                                   December 31,          December 31,
                                   2012      2011       2012       2011
                                                                     
Revenues                           $ 66,264   $ 20,795   $ 250,727   $ 172,256
Verdict insurance proceeds          -         -         -          12,451
                                   $ 66,264   $ 20,795   $ 250,727   $ 184,707
                                                                     
New revenue agreements               27         37         138         125
Licensing programs                   27         26         68          56
generating revenues
Licensing programs with              9          4          31          21
initial revenues
                                                                       

Fourth Quarter 2012 compared to Fourth Quarter 2011. Revenues in the fourth
quarter of 2012 increased $45,469,000, or 219%, to $66,264,000, as compared to
$20,795,000 in the comparable prior year quarter. In the fourth quarter of
2012, twolicensees individually accounted for 38% and 37% of revenues
recognized, as compared to onelicensee individually accounting for 58% of
revenues recognized during the fourth quarter of 2011.

Fiscal Year 2012 compared to Fiscal Year 2011. Revenues in fiscal year 2012
increased $66,020,000, or 36%, to $250,727,000, as compared to $184,707,000 in
the prior year. In fiscal year 2012, fourlicensees individually accounted for
21%, 14%, 10% and 10% of revenues recognized, as compared to threelicensees
individually accounting for 26%, 17% and 15% of revenues recognized in fiscal
year 2011.

In fiscal year 2012 $41,247,000 or 16% of revenues were generated from our
patent portfolios in the medical technology industry area, as compared to
$8,772,000 or 5% in fiscal year 2011.

Verdict Insurance Proceeds. In the third quarter of 2011, Creative Internet
Advertising Corporation (“CIAC”), an operating subsidiary of Acacia, received
a $12,451,000 final judgment stemming from its May 2009 trial verdict and
damages award in its patent infringement lawsuit with Yahoo! Inc. Yahoo! Inc.
appealed the verdict, and in April 2011, a three Judge panel of the United
States Court of Appeals for the Federal Circuit reversed the District Court’s
judgment of infringement in a 2 to 1 decision. As a result of the reversal of
the District Court’s judgment, in September 2011, CIAC submitted a claim under
a specific contingency insurance policy previously purchased, and received
$12,451,000 in verdict insurance proceeds.

Cost of Revenues and Other Operating Income (in thousands):

                                                      
                                      Three Months Ended   Years Ended
                                      December 31,         December 31,
                                      2012      2011      2012      2011
                                                                      
Inventor royalties                    $  3,829   $ 6,458   $ 26,028   $ 46,614
Contingent legal fees                    5,463     5,547     24,651     44,247
Verdict insurance proceeds               -         -         -          808
related costs
                                                                        

Fourth Quarter 2012 compared to Fourth Quarter 2011. Fourth quarter 2012
revenues, less inventor royalties expense and contingent legal fees expense
totaled $56,972,000, or 86% of related quarterly revenues, as compared to
$8,790,000 or 42%, in the comparable prior year quarter. The increase in
fourth quarter revenues, less inventor royalties expense and contingent legal
fees expense as a percentage of related quarterly revenues was due primarily
to a higher percentage of revenues generated in the fourth quarter of 2012
having no inventor royalty obligations and lower overall average inventor
royalty and contingent legal fee rates for the portfolios generating revenues
in the fourth quarter of 2012, as compared to the fourth quarter of 2011.

Fiscal Year 2012 compared to Fiscal Year 2011. Fiscal year 2012 revenues, less
inventor royalties expense and contingent legal fees expense totaled
$200,048,000, or 80% of related fiscal year 2012 revenues, as compared to
$93,038,000 or 50% (including verdict insurance proceeds and related costs) in
the prior year. The increase in revenues, less inventor royalties expense and
contingent legal fees expense as a percentage of related fiscal year revenues
was due primarily to a higher percentage of revenues generated in fiscal year
2012 having no inventor royalty obligations, and lower overall average
inventor royalty and contingent legal fee rates for the portfolios generating
revenues in fiscal year 2012, as compared to fiscal year 2011.

The economic terms of the patent portfolio acquisition agreements and
contingent legal fee arrangements, if any, including royalty obligations, if
any, royalty rates, contingent fee rates and other terms and conditions, vary
across the patent portfolios owned or controlled by our operating
subsidiaries. These expenses fluctuate period to period, based on the amount
of revenues recognized each period, the terms and conditions of revenue
agreements executed each period and the mix of specific patent portfolios with
varying economic terms generating revenues each period.

                                                      
                                      Three Months Ended   Years Ended
                                      December 31,         December 31,
                                      2012      2011      2012      2011
                                                                      
Litigation and licensing              $  6,969   $ 2,205   $ 21,591   $ 13,005
expenses - patents
                                                                        

Fourth quarter and fiscal year 2012 litigation and licensing expenses-patents
increased due primarily to higher net levels of patent portfolio prosecution,
litigation support, third-party technical consulting and professional expert
expenses associated with our continued investment in ongoing and new licensing
and enforcement programs commenced since the end of the prior year. We expect
patent-related legal expenses to continue to fluctuate period to period in
connection with our current and future patent acquisition, development,
licensing and enforcement activities.

                                              
                              Three Months Ended   Years Ended
                              December 31,         December 31,
                              2012      2011      2012      2011
                                                              
Amortization of patents       $ 18,088   $ 1,427   $ 39,019   $ 9,745
                                                                

Fourth quarter and fiscal year 2012 non-cash patent amortization charges
increased due primarily to $6,575,000 and $19,930,000, respectively, of
increased amortization expense related to new patent portfolios acquired since
the end of the comparable prior year periods, comprised primarily of non-cash
patent amortization expense related to the patents acquired in connection with
our acquisition of ADAPTIX, Inc. in the first quarter of 2012 and other patent
portfolios acquired in fiscal year 2012. The change also reflects a fourth
quarter 2012 and fiscal year 2012 increase in accelerated amortization related
to recoupable up-front patent portfolio acquisition costs recovered totaling
$10,065,000 and $7,463,000, respectively.

Other Operating Expenses (in thousands):

                                                      
                                      Three Months Ended   Years Ended
                                      December 31,         December 31,
                                      2012      2011      2012      2011
                                                                      
Marketing, general and                $ 8,253    $ 4,974   $ 28,426   $ 22,114
administrative expenses
Non-cash stock compensation            8,282     3,688    25,657    13,579
expense - MG&A
Total marketing, general and          $ 16,535   $ 8,662   $ 54,083   $ 35,693
administrative expenses
                                                                        

Fourth quarter and fiscal year 2012 marketing, general and administrative
expenses increased due primarily to an increase in non-cash stock compensation
charges resulting from an increase in the average grant date fair value of
restricted shares expensed and an increase in restricted shares expensed in
the 2012 periods, as compared to the respective prior year periods, a net
increase in licensing, business development, and engineering personnel costs
since the end of the prior year period and an increase in variable
performance-based compensation costs.

Income Taxes:

The income tax provision for the three months and year ended December 31, 2012
is preliminary and subject to adjustment resulting from finalization of the
income tax provision in connection with the completion of our year end audit
and the filing of our 2012 annual report on form 10-K. We do not expect any
final adjustments to be material to the financial information contained
herein.

                                                 
                               Three Months Ended     Years Ended
                               December 31,           December 31,
                               2012        2011      2012         2011
                                                                    
Benefit from (provision
for) income taxes (in          $ (5,757 )   $ 635     $ (22,060 )   $ (8,708 )
thousands)
Effective tax rate               37     %     13  %     27      %     29     %
                                                                             

Fourth Quarter 2012 compared to Fourth Quarter 2011. The fourth quarter 2012
increase in our effective tax rate primarily reflects the increase in pre-tax
income, as compared to the prior year quarter.

Fiscal Year 2012 compared to Fiscal Year 2011. The effective tax rate for
fiscal 2012 was relatively flat, compared with fiscal 2011.

Tax expense for the periods presented primarily reflects the impact of the
following:

  *For financial reporting purposes, tax expense is calculated without the
    excess tax benefits related to the exercise and vesting of equity-based
    incentive awards. Under U.S. generally accepted accounting principles, if
    a deduction reported on a tax return for an equity-based incentive award
    exceeds the cumulative compensation cost for those instruments recognized
    for financial reporting purposes, any excess tax benefit is recognized as
    a credit to additional paid-in capital, as the expense does not reflect
    cash taxes payable. The deductions related to the exercise and vesting of
    equity-based incentive awards are available to offset taxable income on
    our consolidated tax returns. Accordingly, the noncash tax expense
    calculated without the excess tax benefits, totaling approximately $5.7
    million and ($1.1 million) for the fourth quarter of 2012 and 2011,
    respectively, and $13.2 million and $583,000 for fiscal year 2012 and
    2011, respectively, was credited (debited) to additional paid-in capital,
    not taxes payable.
  *Foreign withholding taxes withheld by the applicable foreign tax authority
    on payments in connection with certain licensing arrangements executed in
    fiscal year 2012 and 2011, totaling $11.9 million and $7.5 million,
    respectively. The tax provisions for the periods presented reflects
    utilization of foreign taxes withheld as a credit against income tax
    expense calculated for financial statement purposes.

Financial Condition (in thousands)

Summary Balance Sheet Information:

                                                             
                                                   December 31,   December 31,
                                                   2012           2011
                                                                  
Cash & cash equivalents and investments            $   311,279    $   323,286
Accounts receivable                                    9,843          2,915
Total assets                                           668,717        352,877
Accounts payable and accrued expenses /                9,485          6,625
costs
Royalties and contingent legal fees payable            12,508         23,508
Total liabilities                                      50,239         30,765
                                                                      

Summary Cash Flow Information:

                                               
                        Three Months Ended          Years Ended
                        December 31,                December 31,
                        2012         2011          2012          2011
                                                                   
Net cash provided
by (used in):
Operating               $ 34,719      $ 16,451      $ 104,949      $ 60,590
activities
Investing                 (57,987 )     (11,893 )     (409,138 )     (23,237 )
activities
Financing                (19,079 )    (488    )    211,260      174,865 
activities
(Decrease)
increase in cash        $ (42,347 )   $ 4,070      $ (92,929  )   $ 212,218 
and cash
equivalents
                                                                             

Patent Acquisition Costs. Patent related acquisition costs in the fourth
quarter of 2012 totaled $113,300,000, as compared to $11,875,000 during the
comparable prior year quarter.

Patent related acquisition costs in fiscal year 2012 totaled $328,260,000
(including the $150,000,000 purchase of ADAPTIX, Inc., net of cash acquired),
as compared to $14,680,000 during the prior year.

During fiscal year 2012 we acquired control of 55 patent portfolios. Excluding
the acquisition of ADAPTIX, Inc., portfolios acquisitions were comprised of
the following:

                                                  Portfolios
                                                                      
                                                     2012   %      2011   %
                                                                          
Partnering - Revenue share with upfront cash         25     46 %   8      20 %
advance and preferred returns
Partnering - Revenue share with no upfront           19     35 %   19     48 %
cash advance
Outright purchase                                    10     19 %   13     33 %
                                                     54            40
                                                                          

See “Business Highlights and Recent Developments” below for a summary of
patent portfolio acquisitions during the current quarter.

Refer to the section below entitled “Summary Financial Information” for
additional summary consolidated balance sheet, statements of operations and
cash flow information as of and for the applicable periods presented.

INFORMATION ABOUT NON-GAAP FINANCIAL MEASURES

As used herein, “GAAP” refers to accounting principles generally accepted in
the United States of America. To supplement our consolidated financial
statements prepared and presented in accordance with GAAP, this earnings
release includes financial measures, including (1) non-GAAP net income and (2)
non-GAAP Earnings Per Share (“EPS”), that are considered non-GAAP financial
measures as defined in Rule 101 of Regulation G promulgated by the Securities
and Exchange Commission. Generally, a non-GAAP financial measure is a
numerical measure of a company’s historical or future performance, financial
position, or cash flows that either excludes or includes amounts that are not
normally excluded or included in the most directly comparable measure
calculated and presented in accordance with GAAP. The presentation of this
non-GAAP financial information is not intended to be considered in isolation
or as a substitute for, or superior to, the financial information prepared and
presented in accordance with GAAP.

We use these non-GAAP financial measures for internal financial and
operational decision making purposes and as a means to evaluate
period-to-period comparisons of the performance and results of operations of
our core business. Our management believes that these non-GAAP financial
measures provide meaningful supplemental information regarding the performance
of our core business by excluding non-cash stock compensation charges,
non-cash patent amortization charges and excess benefit related non-cash tax
expense, that may not be indicative of our recurring core business operating
results. These non-GAAP financial measures also facilitate management’s
internal planning and comparisons to our historical performance and liquidity.
We believe these non-GAAP financial measures are useful to investors as they
allow for greater transparency with respect to key metrics used by management
in its financial and operational decision making and are used by our
institutional investors and the analyst community to help them analyze the
performance and operational results of our core business.

Non-GAAP Net income and EPS.We define non-GAAP net income as net income
calculated in accordance with GAAP, plus non-cash stock compensation charges,
non-cash patent amortization charges and excess benefit related non-cash tax
expense. Non-GAAP EPS is defined as non-GAAP net income divided by the
weighted average outstanding shares, on a fully-diluted basis, calculated in
accordance with GAAP, for the respective reporting period.

Due to the inherent volatility in stock prices, the use of estimates and
assumptions in connection with the valuation and expensing of share-based
awards and the variety of award types that companies can issue under FASB ASC
Topic 718, management believes that providing a non-GAAP financial measure
that excludes non-cash stock compensation allows investors to make meaningful
comparisons between our recurring core business operating results and those of
other companies, as well as providing our management with a critical tool for
financial and operational decision making and for evaluating our own
period-to-period recurring core business operating results. Similarly, due to
the variability associated with the timing and amount of patent acquisition
payments and estimates inherent in the capitalization and amortization of
patent acquisition costs, management believes that providing a non-GAAP
financial measure that excludes non-cash patent amortization charges allows
investors to make meaningful comparisons between our recurring core business
operating results and those of other companies, and also provides our
management with a useful tool for financial and operational decision making
and for evaluating our own period-to-period recurring core business operating
results. Lastly, for financial reporting purposes, tax expense is required to
be calculated without the excess tax benefit related to the exercise and
vesting of equity-based incentive awards, however, the deduction related to
the exercise and vesting of equity-based incentive awards is available to
offset taxable income on our consolidated tax returns. Accordingly, the
non-cash tax expense calculated without the excess benefit for financial
statement purposes is credited to additional paid-in capital, not taxes
payable, and does not represent a cash tax obligation. Management believes
that providing a non-GAAP financial measure that excludes excess benefit
related non-cash tax expense allows investors to assess our net results and
the economic impact of income taxes based largely on cash tax obligations,
make more meaningful comparisons between our recurring core business net
results and those of other companies, and also provides our management with a
useful tool for financial and operational decision making and for evaluating
our own period-to-period recurring core business net results.

There are a number of limitations related to the use of non-GAAP net income
and EPS versus net income and EPS calculated in accordance with GAAP. For
example, non-GAAP net income excludes significant non-cash stock compensation
charges, non-cash patent amortization charges and excess benefit related
non-cash tax expense that are recurring, and will continue to be recurring for
the foreseeable future. In addition, non-cash stock compensation is a critical
component of our employee compensation programs and non-cash patent
amortization reflects the cost of certain patent portfolio acquisitions,
amortized on a straight-line basis over the estimated economic useful life of
the respective patent portfolio, and may reflect the acceleration of
amortization related to recoupable up-front patent portfolio acquisition
costs. Management compensates for these limitations by providing specific
information regarding the GAAP amounts excluded from non-GAAP net income and
EPS and evaluating non-GAAP net income and EPS in conjunction with net income
and EPS calculated in accordance with GAAP.

The accompanying table provided below provides a reconciliation of the
non-GAAP financial measures presented to the most directly comparable
financial measures prepared in accordance with GAAP.

                ______________________________________________

A conference call is scheduled for today. The Acacia Research presentation and
Q&A will start at 1:30 p.m. Pacific Time (4:30 p.m. Eastern).

To listen to the presentation by phone, dial (888) 646-0797 for domestic
callers and (706) 758-6764 for international callers, both of whom will need
to enter the conference ID 87529890 when prompted. A replay of the audio
presentation will be available for 30 days at (855) 859-2056 for domestic
callers and (404) 537-3406 for international callers, both of whom will need
to enter the Conference ID 87529890 when prompted.

The call is being webcast by CCBN and can be accessed at Acacia’s website at
www.acaciaresearch.com.

ABOUT ACACIA RESEARCH CORPORATION

Acacia Research Corporation’s subsidiaries partner with inventors and patent
owners, license the patents to corporate users, and share the revenue. Acacia
Research Corporation’s subsidiaries control over 250 patent portfolios,
covering technologies used in a wide variety of industries.

Information about Acacia Research Corporation and its subsidiaries is
available at www.acaciaresearchgroup.com and www.acaciaresearch.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995

This news release contains forward-looking statements within the meaning of
the “safe harbor” provisions of the Private Securities Litigation Reform Act
of 1995. These statements are based upon our current expectations and speak
only as of the date hereof. Our ability to become the licensing partner for
companies, and our actual results may differ materially and adversely from
those expressed in any forward-looking statements as a result of various
factors and uncertainties, including the effect of the global economic
downturn on technology companies, the ability to successfully develop
licensing programs and attract new business, rapid technological change in
relevant markets, changes in demand for current and future intellectual
property rights, legislative, regulatory and competitive developments
addressing licensing and enforcement of patents and/or intellectual property
in general and general economic conditions. Our Annual Report on Form 10-K,
recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports
on Forms 8-K and 8-K/A, and other SEC filings discuss some of the important
risk factors that may affect our business, results of operations and financial
condition. We undertake no obligation to revise or update publicly any
forward-looking statements for any reason.

The results achieved in the most recent quarter are not necessarily indicative
of the results to be achieved by us in any subsequent quarters, as it is
currently anticipated that Acacia Research Corporation’s financial results
will vary, and may vary significantly, from quarter to quarter. This variance
is expected to result from a number of factors, including risk factors
affecting our results of operations and financial condition referenced above,
and the particular structure of our licensing transactions, which may impact
the amount of inventor royalties and contingent legal feesexpenses we incur
period to period.

                 
ACACIA RESEARCH CORPORATION
SUMMARY FINANCIAL INFORMATION
(In thousands, except share and per share information)
(Unaudited)
                     
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS^(3)
                     
                     Three Months Ended               Years Ended
                     December 31,                      December 31,
                     2012            2011             2012            2011
                                                                        
Revenues             $ 66,264        $ 20,795        $ 250,727       $ 172,256    
                                                                        
Operating
costs and
expenses:
Cost of
revenues:
Inventor               3,829            6,458            26,028           43,727
royalties
Contingent             5,463            5,547            24,651           40,281
legal fees
Litigation and
licensing              6,969            2,205            21,591           13,005
expenses -
patents
Amortization           18,088           1,427            39,019           9,745
of patents
Verdict
insurance              -                -                -                (12,451    )
proceeds
Verdict
insurance              -                -                -                7,661
proceeds
related costs
Marketing,
general and
administrative
expenses
(including
non-cash stock
compensation
expense of
$8,282 and
$25,657 for
the three
months and             16,535           8,662            54,083           35,693
year ended
December 31,
2012,
respectively,
and $3,688 and
$13,579 for
the three
months and
year ended
December 31,
2011,
respectively)
Research,
consulting and
other expenses        721            1,445          4,943          4,338      
- business
development
                                                                        
Total
operating             51,605         25,744         170,315        141,999    
costs and
expenses
Operating              14,659           (4,949     )     80,412           30,257
income (loss)
Total other           820            18             937            96         
income
Income (loss)
from
operations             15,479           (4,931     )     81,349           30,353
before
provision for
income taxes
Benefit from
(provision            (5,757     )    635            (22,060    )    (8,708     )
for) income
taxes
Net income
(loss)
including
noncontrolling         9,722            (4,296     )     59,289           21,645
interests in
operating
subsidiary
Net (income)
loss
attributable
to                    101            107            164            (539       )
noncontrolling
interests in
operating
subsidiaries
Net income
(loss)
attributable         $ 9,823         $ (4,189     )   $ 59,453        $ 21,106     
to Acacia
Research
Corporation
Net income
(loss) per
common share
attributable
to Acacia
Research
Corporation:
Basic earnings
(loss) per           $ 0.20          $ (0.10      )   $ 1.26          $ 0.53       
share
Diluted
earnings             $ 0.20          $ (0.10      )   $ 1.24          $ 0.51       
(loss) per
share
Weighted
average number
of shares             48,335,865     41,418,470     47,251,061     39,743,433 
outstanding,
basic
Weighted
average number
of shares             48,797,304     41,418,470     48,060,647     41,258,297 
outstanding,
diluted


Reconciliation of GAAP Net Income (Loss) and EPS to Non-GAAP Net Income (Loss) and
EPS
(In thousands, except share and per share data)

                    Three Months Ended             Years Ended
                       December 31,                    December 31,
                       2012          2011             2012          2011
                                                                      
GAAP net income        $ 9,823        $ (4,189     )   $ 59,453       $ 21,106
(loss)
                                                                        
Non-cash stock           8,282          3,688            25,657         13,579
compensation
Non-cash patent          18,088         1,427            39,019         9,745
amortization
Excess tax
benefits related        5,656         (1,147     )    13,210        583
non-cash tax
expense
Non-GAAP net           $ 41,849       $ (221       )   $ 137,339      $ 45,013
income (loss)
                                                                        
Pro forma
non-GAAP net
earnings (loss)        $ 0.87         $ (0.01      )   $ 2.91         $ 1.13
per common share
— basic
Pro forma
non-GAAP net
earnings (loss)        $ 0.86         $ (0.01      )   $ 2.86         $ 1.09
per common share
— diluted
GAAP
weighted-average        48,335,865    41,418,470     47,251,061    39,743,433
shares — basic
GAAP
weighted-average        48,797,304    41,418,470     48,060,647    41,258,297
shares — diluted
                                                                        


ACACIA RESEARCH CORPORATION
SUMMARY FINANCIAL INFORMATION, (CONTINUED)
(In thousands)
(Unaudited)

CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION

                                                December 31,  December 31,
                                                   2012           2011
                                                                  
ASSETS
                                                                  
Current assets:
Cash and cash equivalents                          $   221,804    $   314,733
Short-term investments                                 89,475         6,597
Accounts receivable                                    9,843          2,915
Prepaid expenses and other current assets             3,441         803
Total current assets                                   324,563        325,048
                                                                  
Property and equipment, net of accumulated             339            220
depreciation and amortization
Patents, net of accumulated amortization               313,529        25,188
Goodwill                                               30,149         -
Investments - noncurrent                               -              1,956
Other assets                                          137           465
                                                                  
                                                   $   668,717    $   352,877
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                  
Current liabilities:
Accounts payable and accrued expenses /            $   9,485      $   6,625
costs
Royalties and contingent legal fees payable           12,508        23,508
Total current liabilities                              21,993         30,133
                                                                  
Deferred income taxes                                  27,831         -
Other liabilities                                     415           632
Total liabilities                                      50,239         30,765
Total stockholders' equity                            618,478       322,112
                                                   $   668,717    $   352,877
                                                                      


ACACIA RESEARCH CORPORATION
SUMMARY FINANCIAL INFORMATION, (CONTINUED)
(In thousands)
(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

                      Three Months Ended          Years Ended
                         December 31,                 December 31,
                         2012          2011          2012          2011
Cash flows from
operating
activities:
Net income (loss)
including
noncontrolling           $ 9,722        $ (4,296  )   $ 59,289      $ 21,645
interests in
operating
subsidiary
Adjustments to
reconcile net
income (loss)
including
noncontrolling
interests in
operating
subsidiary to net
cash provided by
operating
activities :
Depreciation and           18,134         1,457         39,168        9,850
amortization
Non-cash stock             8,282          3,688         25,657        13,579
compensation
Change in
valuation                  (121     )     -             (10,358  )    -
allowance
Other                      451            -             941           (15     )
                                                                    
Changes in assets
and liabilities:
Accounts                   6,792          29,645        (6,928   )    5,072
receivable
Prepaid expenses           191            126           (1,294   )    1,075
and other assets
Accounts payable
and accrued                238            (627    )     2,928         (1,364  )
expenses / costs
Royalties and
contingent legal           (8,970   )     (13,542 )     (11,000  )    10,748
fees payable
Deferred income           -            -           6,546       -       
tax
                                                                    
Net cash provided
by operating              34,719       16,451      104,949     60,590  
activities
                                                                    
Cash flows from
investing
activities:
Purchase of
property and               (68      )     (18     )     (268     )    (190    )
equipment
Purchase of
available-for-sale         (97,493  )     -             (402,500 )    (8,427  )
investments
Maturities and
sales of                   152,874        -             321,890       60
available-for-sale
investments
Purchase of
ADAPTIX, Inc., net         -              -             (150,000 )    -
of cash acquired
Patent acquisition        (113,300 )    (11,875 )    (178,260 )   (14,680 )
costs
                                                                    
Net cash used in
investing                 (57,987  )    (11,893 )    (409,138 )   (23,237 )
activities
                                                                    
Cash flows from
financing
activities:
Proceeds from sale
of common stock,           (22      )     (3      )     218,961       175,229
net of issuance
costs
Repurchase of              (26,732  )     -             (26,732  )    -
common stock
Distributions to
noncontrolling
interests in               -              -             (312     )    (2,897  )
operating
subsidiary
Contributions from
noncontrolling
interests in               1,953          662           5,793         1,539
operating
subsidiary
Excess tax
benefits from              5,656          (1,147  )     13,210        583
stock-based
compensation
Proceeds from the
exercise of stock         66           -           340         411     
options
                                                                    
Net cash provided
by (used in)              (19,079  )    (488    )    211,260     174,865 
financing
activities
                                                                    
(Decrease)
increase in cash           (42,347  )     4,070         (92,929  )    212,218
and cash
equivalents
                                                                    
Cash and cash
equivalents,              264,151      310,663     314,733     102,515 
beginning
                                                                    
Cash and cash
equivalents,             $ 221,804     $ 314,733    $ 221,804    $ 314,733 
ending
                                                                              

Business Highlights and Recent Developments^(2)

Business highlights of the fourth quarter of 2012 and recent developments
include the following:

Revenues for the three months ended December 31, 2012 included fees from the
following technology licensing and enforcement programs:

Technology Portfolios



  *4G Wireless technology
  *Automotive Safety, Navigation and        Medical Technology Portfolios
    Diagnostics technology*
  *Camera Support technology                
  *DMT® technology
  *Document Assembly Technology for           *Bone Graft Harvesting
    Printers*                                    technology
  *Enhanced Mobile Communications             *Bone Spacer Devices*
    technology*                                *Bone Wedge technology*
  *Facilities Operation Management System    *Hearing Aid technology
    technology                                 *Medical Image Manipulation
  *Information Portal Software technology       technology
  *Lighting Ballast technology                *Minimally Invasive Surgery*
  *Location Based Services technology         *Radiation Therapy technology*
  *Messaging technology                       *Suture Anchors technology
  *Online Auction Guarantee technology        *Surgical Access technology
  *Online Gaming technology                   *Unicondylar Knee Replacement
  *Pop-up Internet Advertising technology       technology*
  *Targeted Content Delivery & Network
    File Transfer technology
  *Telematics technology
  *Video Analytics for Security
    technology*

________________________
^(*) Initial license fees were recorded for these licensing programs in the
fourth quarter of 2012.

  *Acacia Research Group LLC and its subsidiaries Advanced Skeletal
    Innovations LLC, BSI LLC, and Bolt MRI LLC, have entered into a
    licenseagreement with a major medical device company.
  *Adaptive Sonics LLC entered into a settlement agreement with Cochlear
    Limited and Cochlear Americas Corporation. The settlement agreement
    resolved litigation that was pending in the United States District Court
    for the Eastern District of Texas.
  *ADAPTIX, Inc. entered into a licensing agreement with Nokia-Siemens
    Networks.
  *Advanced Printing Solutions LLC reached an agreement that resolved, and
    the parties dismissed with prejudice, the patent litigation action filed
    against Zebra Technologies Corporation, Civil Action No. 12-cv-3544, which
    was pending in the United States District Court for the Northern District
    of Illinois.
  *American Vehicular Sciences (“AVS”) and Gentex Corporation (“Gentex”) have
    settled all pending patent litigation between them and Gentex has obtained
    a multi-year license to AVS’s patent portfolio. Pursuant to the license,
    Gentex will make a series of fixed cash payments to AVS. Other terms of
    the license are confidential. As a result of this settlement, civil
    actions Civil Action No. 6:12-CV-406, Civil Action No. 6:12-CV-410, Civil
    Action No. 6:12-CV-413 and Civil Action No. 6:12-CV-415 filed by AVS
    against Gentex in the U.S. District Court for the Eastern District of
    Texas will be dismissed.
  *Brain Life LLC entered into a settlement and license agreement with
    Medtronic, Inc. The agreement resolved litigation that was pending in the
    United States District Court for the Southern District of California.
  *Content Delivery Solutions LLC entered into a settlement and license
    agreement with SAVVIS. The settlement and license agreement resolved
    patent litigation, Civil Action No. 1:11-cv-00216-LY that was pending in
    the United States District Court, Western District of Texas.
  *Criminal Activity Surveillance LLC entered into a settlement agreement
    with Siemens Industry, Inc. covering a patent directed to video analytics
    used in the field of security. This agreement resolved litigation that was
    pending in the United States District Court for the Eastern District of
    Texas.
  *Criminal Activity Surveillance, LLC entered into license and settlement
    agreements with the following licensees that resolved litigation that was
    pending.

  *UDP Americas, Inc.          *Mango DSP, Inc.

  *Gametek LLC entered into license and settlement agreements with the
    following licensees that resolved litigation that was pending in the
    United States District Court for the Southern District of California.

  *NHN USA, Inc., NHN Corporation,             *The Playforge, LLC,
    IJJI                                          Playforge Games LLC,
    Games, LLC, Aeria Games &                Playforge Games II LLC,
    Entertainment, Inc. and Red                   Saban Brands LLC
    Duck Inc.                                     and Saban Properties LLC

  *Mobile Enhancement Solutions LLC and Apple, Inc. entered into an agreement
    that resolved the dispute between the parties currently pending in the
    United States District Court for the Northern District of Texas, Civil
    Action No. 3:12-cv-795.
  *Portal Technologies LLC entered into a settlement agreement with
    IAC/INTERACTIVE CORP. The agreement resolved litigation that was pending
    in the United States District Court for the Eastern District of Texas.
  *Radiation Stabilization Solutions LLC entered into a settlement agreement
    with Varian Medical Systems, Inc. The agreement resolved litigation that
    was pending in the United States District Court for the Northern District
    of Illinois.
  *Radiation Stabilization Solutions LLC entered into a Settlement and Patent
    License Agreement with Accuray, Incorporated, Cancer Treatment Centers of
    America, Inc., and Midwestern Regional Medical Center, Inc. The agreement
    resolved lawsuits pending in the United States District Court, Northern
    District of Illinois, case numbers 11-cv-6462 and 11-cv-7700.
  *Telematics Corporation entered into a settlement and license agreement
    with CarrierWeb, L.L.C. This agreement resolved patent litigation that was
    pending in the United States District Court for the Northern District of
    Georgia.
  *Unified Messaging Solutions LLC entered into license and settlement
    agreements with the following licensees that resolved litigation that was
    pending.

  *Avalanche, LLC                           *Doostang, Inc. UBS Financial
  *Avid Life Media, Inc                       Services, Inc.
  *Comcast Cable Communications        *Plentyoffish Media Inc.
    LLC                                      *Where Are You Now? Ltd.
  *Discover Financial Service

  *Unified Messaging Solutions LLC and Etsy, Inc. entered into a settlement
    agreement which resolved the dispute between the parties currently pending
    in the United States District Court for the Southern District of New York,
    Case No. 1:12-cv-03829 and pending in the United States District Court for
    the Northern District of Illinois, Case No. 12-cv-06286.
  *Unified Messaging Solutions LLC entered into agreements with the following
    licensees which resolved all disputes between the parties currently
    pending in the United States District Court for the Northern District of
    Illinois, Case No. 12C6286.

  *Facebook, Inc.          *AOL Inc.

  *Acacia Research Group LLC and its affiliates continued their patent and
    patent rights acquisition activities, acquiring a total of 9 new patent
    portfolios in the fourth quarter of 2012, including the following:

       *In December 2012, acquired patents for Micro-Location Technology.
       *In December 2012, acquired patents for Wireless Infrastructure and
         User Equipment Technology from Nokia Siemens Networks relating to
         second (2G), third (3G) and fourth (4G) generation wireless
         technologies.
       *In December 2012, acquired rights to patents in the orthopedic
         technology sector.
       *In December 2012, TeleCommunication Systems, Inc. (“TCS”) and a
         subsidiary of Acacia entered into a patent licensing alliance,
         whereby the Acacia subsidiary has acquired the rights to a portion of
         TCS’ wireless data synchronization & data transfer patent portfolio.
       *In December 2012, acquired patents covering broadband communications
         technologies such as digital subscriber line (DSL) modems and
         voice-over-internet-protocol (VoIP) phones.

    _______________________

^(1) As used herein, “Acacia Research Corporation,” “we,” “us,” and “our”
refer to Acacia Research Corporation and/or its wholly and majority-owned
operating subsidiaries. All intellectual property acquisition, development,
licensing and enforcement activities are conducted solely by certain of Acacia
Research Corporation’s wholly and majority-owned operating subsidiaries.

^(2) Acacia Research Group LLC, Adaptive Sonics LLC, ADAPTIX, Inc., Advanced
Printing Solutions LLC, Advanced Skeletal Innovations LLC, American Vehicular
Sciences LLC, BSI LLC, Bolt MRI LLC, Brain Life LLC, Content Delivery
Solutions LLC, Criminal Activity Surveillance LLC, Gametek LLC, Mobile
Enhancement Solutions LLC, Portal Technologies LLC, Radiation Stabilization
Solutions LLC, Telematics Corporation and Unified Messaging Solutions LLC are
wholly and majority-owned operating subsidiaries of Acacia Research
Corporation.

^(3) The income tax provision for the three months and year ended December 31,
2012 is preliminary and subject to adjustment resulting from finalization of
the income tax provision in connection with the completion of our year end
audit and the filing of our 2012 annual report on form 10-K. We do not expect
any final adjustments to be material to the financial information contained
herein.

Contact:

Acacia Research Corporation
Rob Stewart
Investor Relations
Tel 949-480-8300
Fax 949-480-8301
or
SpecOps Communications
Adam Handelsman
President & Founder
212-518-7721
adam@specopscomm.com