Wanted to provide a quick update on the heels of this morning’s patent monetization announcement.
The $75mm patent sale to Intel was a great outcome. The bulk – if not all – of the cash flow will be tax-free based upon the Company’s DTA. Furthermore, it appears the IP sold to Intel is wholly unrelated to Aware’s operating businesses. In any event, the Company continues to retain IP we believe has value that is capable of being monetized; this view is supported by Aware’s statement this morning that it continues “to pursue patent monetization alternatives for certain other patents remaining in our patent portfolio.” Of course, the potential patent litigation value related to Hybrid Audio also remains.
Pro-forma for the patent sale and option exercise Aware will hold ~$136.3mm of cash. Assuming yesterday’s EV of $30mm – which represents roughly 6.5x consolidated EBITDA and ignores ~$12mm of real estate value – the shares should trade for $7.12, inclusive of dilution accruing from 2.8mm options.
The initial cash dividend announced today of $24mm (record date of May 11, 2012) will leave the Company with $25mm cash prior to closing the patent transaction. With the additional $75mm of cash accruing from the patent transaction closing this summer or early fall, we would expect another significant dividend in a few months.