Marathon Patent's (MARA) CEO Doug Croxall on Q4 2016 Results - Earnings Call Transcript
Mar. 30, 2017 7:58 PM ET| About: Marathon Patent Group, Inc. (MARA)
FY: 03-26-17 Earnings Summary
Press Release News
EPS of $0.49 | Revenue of $36.63M (+ 93.0% Y/Y)
Marathon Patent Group, Inc. (NASDAQ:MARA)
Q4 2016 Earnings Conference Call
March 30, 2017 04:30 PM ET
Executives
Jason Assad - IR
Doug Croxall - Chairman and CEO
Frank Knuettel - CFO
Analysts
Michael Latimore - Northland Capital Markets
William Gibson - ROTH Capital Partners
Jeff Feinberg - Feinberg Investments
Bill Nasgovitz - Heartland Funds
Operator
Hello, and thank you for standing by. Welcome to Marathon Patent Group's 2016 Year-End Financial Results Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded.
At this time, I would like to turn the conference over to Jason Assad, Investor Relations with Marathon Patent Group. Please go ahead.
Jason Assad
Thank you, operator. Good afternoon and welcome to Marathon Patent Group's 2016 year-end results conference call. With us today are Marathon's Founder and Chief Executive Officer, Doug Croxall; and Chief Financial Officer, Frank Knuettel.
Before I turn the call over to management, please remember that certain statements contained in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements contained in this release relate to, among other things, 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.
They are generally identified by words such as believes, may, expects, anticipates, should, and similar expressions; readers should not place undue reliance on such forward-looking statements which are based upon the company's beliefs and assumptions as of the date of this release. The company's actual results could differ materially due to risk factors and other items described in more detail in the Risk Factors section of the company's Annual Reports filed with the SEC, copies of which may be obtained at www.sec.gov.
Subsequent events and developments may cause these forward-looking statements to change. The company specifically disclaims any obligation or intention to update or revise these forward-looking statements as a result of changed events or circumstances that occur after the date of this release, except as required by applicable law.
In addition, certain of the financial information presented in this call references non-GAAP financial measures. The company's earnings release which was issued this afternoon is available on the company's website, presents reconciliations to the appropriate GAAP measure and an explanation of why the company believes such non-GAAP financial measures are useful to investors.
Finally, this conference call is being webcast. The webcast link is available on the Investor Relations section of our website at www.marathonpg.com.
With that, it's now my pleasure to turn over the call to Marathon's Founder and CEO, Doug Croxall. Doug?
Doug Croxall
Thanks, Jason, and thank you everyone for joining us this afternoon to discuss Marathon Patent Group’s 2016 year-end operating results. For 2016, we reported record revenue of $36.6 million, a 93% increase over 2015 revenue of $19 million, generating record non-GAAP earnings of $8 million or $0.53 per weighted average basic share.
While we remain pleased with our year-over-year revenue growth, our fourth quarter revenues, much like our third, were obviously but not unexpectedly light. It is for this very reason I have long suggested the nature of our business blends itself to being evaluated on an annual basis as oppose to quarterly. While potential revenue events existed. We continue to refuse to materially compromise what we believe to believe to be reasonable royalty rate in an effort to impact results in any particular quarter.
As discussed previously, we are keenly aware of investors’ desire to see predictable revenue is for this reason that we are and have been refocusing our revenue generation on license that provide recurring revenue feature. The recurring revenue may take the form of a fixed quarterly or annual payment by licensees to Marathon and should help investors’ better model future potential revenue.
We are also aware of investors’ desire to see more transparency. Although we try to continually provide current investor communications. Much of what happens at Marathon can unfortunately not to be communicated until an outcome has been reached in litigation, which typically involves the settlement and the execution of a license. The entire licensing and litigation process and settlement negotiations are governed by vary strict confidentiality.
However, investors need to be able to assess the state of our business and prospect. I assure you that we are doing our very best to offer you a proper level of transparency while not impeding our ability to generate licensing revenues.
More offence than not the results of our efforts only become tangible upon the execution of a licensing agreement. A tremendous amount of work often results in a single culminating event. While it may outwardly appear that our business is event driven, it is in fact more of a process with predictable milestones. Currently we are working on licensing initiatives designed to promote a recurring and predictable revenue outlook, which will also allow enhanced transparency and predictability.
With this in mind we will continue to initiate licensing champions that may or may not also involve initiating suits. For example, we continue to bring cases like those recently filed by our Munitech IP subsidiary against eight defendants in covering standard essential patents acquired from Siemens AG, as well as cases recently filed by our Magnus IP subsidiary against two defendants.
In addition, we are constantly exploring opportunities that could result in us achieving greater scale and further diversification. I’d like to give you some selected portfolio updates. Signal IP portfolio, the patents related to the automotive and related industries in the areas of occupant restraint safety systems, as well as automotive centric communication methodologies including sensing and detecting detection technologies.
We have two active cases, one against Fiat Chrysler, which is schedule for trial this June in Eastern District of Michigan. The second case is against Toyota and is currently state pending final outcome of the IPR proceedings.
CRFD Research, CRFD Research wireless technology portfolio represents key enabling wireless technologies in two distinct areas. The first, In-Session Handoff in which active sessions on wireless devices were wired in internet connected devices can be handed off to other wireless devices with no loss of session history. And secondly mobile web content transformation, in which web content is transformed into formats compatible with destination devices and is capable of supporting both secure and unsecured connections.
We have four active cases in the District of Delaware against Dish, Hulu, Netflix and Spotify. We have concluded the IPR process and are involved in three -- we have concluded the IPR process, which involve three instituted final decisions, all three are on appeal and before the Federal Circuit with hearings set for April 6th of this year.
Oil and gas, approximately 11,000 patent assets relating to oil and gas equipment and services. Licensing discussions have been initiated and will continue. Munitech IP, the standard essential patents related to WCDMA and GSM cellular technology. Significantly most of the patent families have been declared to be standard essential patents with the European Telecommunications Standard Institute and or the Association of Radio Industries and Businesses related to long-term evolution LTE, Universal Mobile Telecommunication Systems and or General Packet Radio Service.
On February 13, 2017 complaints were filed in the Regional Court of Dusseldorf in Germany against Google, ZTE, Xiaomi, Telecom Deutschland, Vodafone and Telefonica. Magnus IP, this is our Internet of Things portfolio. This portfolio is comprised to standard essential patent directed towards self-healing control network for automation systems. The patents are relevant to wireless mesh or home area network for the use in Internet of Things or connected home devices and enable simple commissioning application level security, simplified bridging and end-to-end IP security.
The technology can support a wide variety of Internet of Things enabled devices including lighting, sensors, appliances and security. Cases were recently filed against Honeywell and Somfy in the Regional Court of Munich in Germany. The first oral hearing has been scheduled for August 3, 2017.
Traverse Technologies, this portfolio pertains to battery anodes and cathodes using nano structure techniques and enables exceptional battery performance and allows for integration of micro systems that enhance overall functionality. The technology utilizes both nano materials and nano structures to enhance battery performance. As preparation for initial fillings is underway, the ongoing prosecution of the portfolio continues with three patents granted in the last 90 days. Licensing discussions have also been initiated.
Motheye, this portfolio covers systems that reduce or eliminate reflection and facets of a semiconductor gain medium as well as suppressing natural longitude of modes. In addition the technology enables more precise wave length control of the light output of a laser. This allows the laser to be used in a dense wavely division multiplexing system. Licensing discussions have also commenced on Motheye just recently.
Dynamic Advances, this portfolio contain patents which relate to systems and method that providing utilize of definitive model of enterprise meta data a design of keywords with simplified complexity, graphical model of logical structure and a branch inbound search algorithm and a case based interaction method to process natural language inputs.
Licensing discussions have been initiated. Again in aggregate, our wholly owned subsidiaries now managed approximately 12,000 patents worldwide. We also continued to explore opportunities for our 3D nano subsidiary.
In summary, we are reacting to market conditions and opportunities and believe that we are well positioned to see continued year-over-year revenue growth. We expect 2017 revenues to be in the range of $40 million to $50 million. Our projected 2017 revenue range is supported by the quality and the size of our managed asset base, which has never being stronger and provides opportunities for more potential revenue than in prior years, including potential for recurring revenues.
We will continue to expand our licensing activities across Europe and Asia, we will continue to attempt to structure all future licenses with fixed period payments to build future booked revenue, which we hope may provide our investors with the better sense of our revenue and earnings potential.
Finally, I believe it’s very important for investors to make note of the following. We heard you a year ago when you stated you wanted to see us reload or asset base following a very successful run of monetization in recent years. I would like to point out and we’ve done precisely that, since this time last year we have increased our managed asset base by nearly 40 times from approximately 300 to approximately 12,000 times. Just one of those assets alone has already proven itself resulting in the $24.9 million license agreement.
Our dramatically increased portfolio of assets is a direct result of investing in our future with this strong and diverse asset base now in place. We have focused the company’s resources squarely on licensing with a goal of now harvesting return on investment.
That concludes my prepaid remarks. With that I would now like to turn the call over to Frank our CFO, for a detailed look at our 2016 year-end financial results. Frank?
Frank Knuettel
Thanks, Doug. Revenue increased approximately 93% to $36.6 million for the year ended December 31, 2016 compared to $19.0 million of revenue for the year ended December 31, 2015. The increase in revenue in 2016 resulted primarily from licenses issued by our Dynamic Advances and Orthophoenix subsidiaries, with the Dynamic Advances settlement occurring shortly before commencement of the scheduled trial.
Revenues from the five largest licenses in 2016 accounted for approximately 97% of company's revenue for the year ended December 31, 2016 and revenues from the five largest licenses in 2015 accounted for approximately 62% of the company's revenue for the year ended December 31, 2015.
Direct costs of revenues for the years ended December 31, 2016 and December 31, 2015 were approximately $19.1 million and $16.6 million, respectively. For the year ended December 31, 2016, this represented an increase of approximately $2.5 million, or 15%.
Direct costs of revenue include contingent payments related to patent enforcement legal costs, patent enforcement advisors and inventors. Direct costs of revenue also includes various non-contingent costs associated with enforcing the company's patent rights and otherwise in developing and entering into settlement and licensing agreements that generate the company's revenue. Such costs generally include legal fees and expenses, consulting fees and data management costs.
Direct costs of revenues for 2016 were higher than in 2015, primarily due to higher revenues and therefore higher contingency payments. While lower on absolute basis direct costs of revenues in 2015 were a higher percentage of revenue than they were in 2016 based on the fixed fee engagement agreement with a law firm that represent one of the company's subsidiaries in two United States trials during the year.
And increase in enforcement activity in Germany and to a lesser extent France and preparation for a significant number of trials in both the United States and Germany in 2015 in the company's Dynamic Advances, Signal IP and TLI subsidiaries.
Other operating expenses increased 18% to approximately $33.1 million in fiscal year 2016 as compared to approximately $28.1 million in fiscal year 2015. This increase in other operating expenses in 2016 compared to 2015 resulted from an increase in patent impairment expenses an approximate amount of $6.2 million in 2016 compared to 2015 and goodwill impairment expenses in 2016 of approximately $4.3 million compared to no goodwill impairment expenses in 2015.
These increases were partially offset by a decrease in patent amortization expenses of $3.3 million, a decrease of consulting and professional fees of $1.1 million and a decline of $0.3 million in other general and administrative expenses.
Operating expenses for the years ended December 31, 2016 and December 31, 2015 include non-cash operating expenses totaling approximately $25.8 million and $28.8 million, respectively.
The results for the year ended December 31, 2016 represent an increase in non-cash operating expenses in amount of $5.0 million or 24% compared to the non-cash operating expenses for the year ended December 31, 2015. The increase in 2016 over 2015 was driven by patent goodwill impairment costs, both of which are non-cash items.
For the year ended December 31, 2016, net income on a non-GAAP basis was $0.53 per weighted average basic common share, compared to net loss per weighted average basic common share on a non-GAAP basis of $0.48 for the year ended December 31, 2015.
On a diluted common share basis, net income on a non-GAAP basis for the year ended December 31, 2016 was $0.49 per weighted average diluted common share, compared to a net loss on a non-GAAP basis of $0.48 per weighted average diluted common share for the year ended December 31, 2015.
We ended 2016, with cash totaling approximately $5 million as compared to $2.6 million as of December 31, 2015. As of December 31, 2016, we had approximately 15.2 million weighted average basic shares outstanding and 18.6 million shares in total.
Thank you for all of your attention. Operator you may now open the call for question.
Question-and-Answer Session
Operator
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Mike Latimore with Northland Capital Markets. Please proceed.
Michael Latimore
Hey, thanks a lot. Hi guys. I think you mentioned there was on oral hearing August 3rd for the Magnus portfolio. Is there oral hearing scheduled for the Munich portfolio?
Doug Croxall
No, not yet.
Michael Latimore
Okay. Is that something that sort of first half, second half most likely for an oral hearing there?
Doug Croxall
For Munitech?
Michael Latimore
Yes.
Doug Croxall
So, Munitech is in Dusseldorf and that core actually just have one hearing and that hearing will likely fall sometime in December, but most likely it will get moved into the beginning of 2018 just knowing holiday schedules and the [indiscernible] schedules. But most likely it will be January, could be December, could be February.
Michael Latimore
Got you, okay. And then on the -- you mentioned that both the oil and gas portfolio and the Dynamic Advances are kind of -- you’re in discussions there, at what point do you decide well, we might need to initiate some litigation or is it still like you will stick with the discussions for a while?
Doug Croxall
We’ll initiate litigation when we feel if the soft licensing discussions aren’t progressing at the pace that we would like them too, so far they have been. So, we will continue in that it’s much more profitable for us to settle this outside of litigation. So we will continue with the conversations, because they have been going fairly well.
Michael Latimore
Great. And then I guess just on that topic, roughly what is the -- I guess expected gross margin on a soft licensing revenue event versus one litigated?
Doug Croxall
Well, look we save a tremendous amount of cost because we don’t have out of pocket costs or we don’t have significant legal contingency costs. So it depends on the portfolio, because some portfolios we have a 50-50 percent deal with the previous patent owner, but we still the net revenue absolute number would be higher, the percentage split will be the same, but the absolute number is typically higher, because we have eliminated pretty significant costs. So the margin may not improve, but the absolute number will.
Michael Latimore
Right. And then on Toyota, I know this is hard to predict, but when you think you will kind of get through the final IPR process there and be able to finalize it fairly?
Doug Croxall
Yes the -- I mean trial will likely be in 2018 if it doesn’t settle before. We’ve had claims survive the IPR they are IPR decisions that were in our favor. So the chance on it -- look there is always a chance on appeal that they win it typically doesn't happen. But sometime this summer we should have that appeal finalized and then hopefully the court moves quickly and lift the stay that’s the trial.
Michael Latimore
And then just lastly, what should we think about sort of tax operating cost of being on a quarterly basis there?
Frank Knuettel
Yes, so we've historically run at $1.2 million to $1.4 million range per quarter for all the overhead, the non-cost of revenue expenses. We have consolidated some of our operations and anticipate going forward that we will be spending less than that amount on a quarterly basis to the tune perhaps of $900,000 to $1 million or perhaps even a little bit less than that.
Michael Latimore
Got it. Thanks a lot, good luck this year.
Doug Croxall
Thank you.
Operator
Thank you. Our next question comes from the line of William Gibson with ROTH Capital Partners. Please proceed.
William Gibson
Yes, it was the well actually just one technical question or one bookkeeping, what was the fourth quarter share count? I mean you mentioned 18.6 million now, but…
Frank Knuettel
We had 18.6 million as of 12/31.
William Gibson
12/31 okay.
Frank Knuettel
And 19.3 million as of the filing date.
William Gibson
Good. And was there a negative adjustment on cost of revenue in the fourth quarter? I was just back in my way into that number?
Doug Croxall
No, there is no negative adjustment on cost of revenues. We had some cost of revenues associated with the lawyers that work especially in Europe and Asia where they don't work on a continuously basis, they work on a time or a fixed fee basis. As a side by the fixed fee basis that we do have in Europe is considerably lower than the fixed fee basis engagements we had in the United States in 2015. But there is no negative adjustment or anything in the fourth quarter.
William Gibson
Okay. And then lastly, could you give us a little color on what might be going on, on the capital front in terms of sources of capital?
Doug Croxall
No, we don't have any plan to do any capital raise, obviously last time I said that proved to be wrong so want to be careful with that. We're operating as we normally have and we expect to generate cash flow from licensing deals, I mean we've been very active over the last two three weeks. But we don't have any -- we have no plans at this point to do a capital raise at all.
William Gibson
Okay, thank you.
Doug Croxall
Sure.
Operator
Thank you. Our next question comes from the line of Jeff Feinberg with Feinberg Investments. Please proceed.
Jeff Feinberg
Thank you very much, can you guys hear me okay?
Doug Croxall
Yes.
Jeff Feinberg
Thank you very much, thanks for the update. I heard the commentary about the dramatic increase in the number of the patents and the press release about the enthusiasm about the success and the focus on collecting on those. Can you please give us some perspective just that you had very nice growth 2016 versus 2015, how we should be thinking about financial goals or aspirations 2017 or beyond?
Doug Croxall
So we expect revenues to fall in the $40 million to $50 million range for the calendar year. Our expectation is that our earnings will be slightly higher than they were in 2016 as well. Beyond 2018 looking at 2019 it's pretty hard to predict going two years out. But if I had to predict, I would guess that we would probably have another up year in revenue and in non-GAAP earnings per share, which is really the most meaningful measurement of our performance.
But at this point, outside of knowing that will be up year on a revenue basis it would be difficult to really narrow that range. What will help us narrow that range and we will be able to narrow the 2018 range probably later maybe our Q2 call in August will be the performance of Dynamic Advances and the performance of our oil and gas portfolio. Those portfolio have licensees that will likely occur in calendar year 2018 and when we see performance in 2017 we can extrapolate in the out year.
Jeff Feinberg
Okay. And can you give us some perspective, if you were to have just the sensitivity of the business model, if you were have $50 million in revenue, which given the growth you just had the past year, just $36 million, $37 million. It seems very conservative, but using that as a base, what type of EBITDA would that equate to for the company?
Doug Croxall
So, as a framework or a benchmark, this year we did operations or cash flow from operations, which is a comparable in the $10.2 million range. Because of the sensitivity in our business and a relatively static overhead, more will fall to the bottom-line. So on $36 million this year we did approximately 33%. I would anticipate if we did $50 million that number would be 38%, 39%, 40% on an operating cash basis.
Jeff Feinberg
Okay. So hypothetically we hit that it looks like if I’m doing the math currently based on market cap of $18 million, $19 million and similar amount of debt, we are turning roughly two times that if I am doing the math correctly?
Doug Croxall
Effectively, yes.
Jeff Feinberg
Okay. Thank you very much.
Doug Croxall
Thank you, Jeff.
Operator
Thank you. Our next question comes from the line Jim Jacob, a Private Investor. Please proceed.
Unidentified Analyst
Good afternoon everyone. My question and I don’t know if you mentioned it or not, but what is the current clarity that we all can have on 3D Nanocolor and what your plans are with that?
Doug Croxall
Hi, Jim. So, we’re actually in discussions right now with some investors to essentially buy that company, the subsidiary from us. I can’t really get into the terms. We are prohibited through the non-disclosure and confidentiality provisions that we have signed. But we have been actively pursuing, we want that to grow, we don’t want to fund the growth. And we think we have a unique set of investors to help us do that.
But at this point we really are limited as to what we can say based on the NDAs that we have already signed.
Unidentified Analyst
Well would that possibly be just an outright sale or could there be a revenue stream going forward like with some sort of a royalty stream?
Doug Croxall
It would be a kind of a combination of both, we believe. But again, we are not through those negotiations. So it’s hard to say what will happen in the future, but that certainly are -- we don’t want to cap our upside let me say that.
Unidentified Analyst
Okay. I mean would you consider this if it was a sale or whatever you do, I understanding that confidentiality, would this be a material item?
Doug Croxall
Not immediately, but hopefully overtime it would be.
Unidentified Analyst
Okay. Alright, well thank you for the conference call and being available.
Doug Croxall
Thank you, Jim.
Operator
Thank you. Our next question comes from the line of Matt Rothman, a Private Investor. Please proceed.
Unidentified Analyst
Hey guys. There was talk in the past about extending into China, just want to see if you guys had any color or any updates on the company’s position in China with the network you continue to pursue that territory with respect to patent enforcement and monetization?
Doug Croxall
Yes thanks Matt. As a matter of fact, we are working in China, I mean we’re not physically there, but we’re working through some consultants, some legal consultants in China on a daily basis. A lot of our soft licensing discussion had started four month ago, three, four months ago and are continuing on a daily basis including today.
So, we are already active in China, we have not yet filed suits in China, but we are actively pursuing license outside of litigation and like all conversations that we have both in the U.S. and in Europe, if those soft licensing discussions slowdown or we don’t think are materializing at the pace that we believe they need to be then we always have the ability to file suit.
But so far those conversations have been going at a pace that we believe that obviously we don’t have to file suit, but if that changes then we certainly are prepared and we have a legal team in place and engagement agreements in place to do just that. But so far, we’ve been able to have meaningful conversations and avoid filling litigation.
Unidentified Analyst
Got it. Alright, great thanks. Also I guess same sort of question with respect to trademarks I know we had talked in the past about exploring opportunities with trademarks are we continue to explore those or is the company really now for the short-term laser focused on monetizing the patents we do have rather than exploring kind of new alternative revenue streams?
Doug Croxall
So, through our daily conversations with corporations who are looking to monetize intellectual property, often times the conversation will include trademarks and brands which is another form of intellectual property.
And we had conversations with large companies I guess probably started about a year ago that included a potential brand in trademark sale. That deal kind of slowed down towards the end of the year and then it kind of picked back up again just about 30 days ago.
And while we are not out -- I mean look we are not out aggressively exploring those opportunities, those do come to us and when they come, we will definitely have that conversation. That particular trademark and brand we’re still having that conversation and we’re hopeful that something will conclude, but we’re not quite at the finish line with that one.
And as far as other opportunities when they are brought to us, we definitely take a look at it and if it makes financial sense we will potentially pursue it. But we are not actively pursuing those opportunities like we are with patterns, but we’re certainly open to those opportunity and we think it’s a great -- look there is a lot of similarities in licensing IP whether it’s a pattern or a trademark.
And we think that our skill sets can be transferred from one to the other and as those opportunities present when the right one presents itself and it doesn’t require a large capital outlay, we will move forward with that opportunity.
We just haven’t gotten the one from last year over the finish line albeit we are close and we don’t have anything else really in the queue that is nearly as close to finish as that particular one. And if that does close that would obviously be something that we would announce publically and we’re hopeful that we get there, but nothing to report at this point.
Unidentified Analyst
Great, thanks. Last question, the projected $40 million to $50 million for 2017, do you have a rough number of kind of licenses that company will do to achieve and I guess what I’m getting at is are we looking at a kind of two or three big licenses in the oil and gas and the Dynamic Advances portfolios? Or do you think it’s maybe or 10 to 12 is there any kind of projection you can give us in terms of kind of the number of overall deals that you anticipate doing?
Doug Croxall
So, we can get there are in a number of different ways. I mean we don’t need -- it’s not the bottom of the nine [ph], we need a whole month to win the game, I mean we can get there through a number of different vehicles, we’ve obviously a lot of assets that will help us achieve those numbers.
So, yes, look we could get there with the single license and we can get there with 10 license. And there is combination within those -- between those numbers as well. So, it’s not our path there are multiple paths that can get us to that number -- that range I should say, which gives us the comfort to give you that range.
Unidentified Analyst
All right, great, good luck this year.
Doug Croxall
Thank you.
Operator
Thank you. [Operator Instructions] Our next question comes from line of Hugh Collins [ph] with Applied Financial Research. Please proceed.
Unidentified Analyst
Hey, guys. Thanks for taking my call. Can I talk to you little bit about the $40 million to $50 million in revenue? You’ve mentioned that you are going -- you’re changing, how you are doing business, you are going to a recurring revenue scheme. How much of that do you think is going to be in the recurring nature?
Doug Croxall
It’s really hard to predict Hue, I mean our goal would be for a majority of that number to be recurring, but at the end of the day the recurring element could still be within the calendar year, it could be on a quarterly basis. So, it’s tough to give you guidance on that, I mean my expectation is that about maybe 50% maybe slightly more will be recurring in nature, which helps us set up obviously for the next calendar year. But again, it's difficult to give you guidance beyond the 50% to 60% range.
Unidentified Analyst
So really where I'm getting at is the contracts that you anticipate signing will likely be a lot more than $40 million to $50 million?
Doug Croxall
That's correct.
Unidentified Analyst
And do you have any estimate of what the total contract would be, because it doesn't seem that be all that difficult for to be twice that number.
Doug Croxall
That would be correct.
Unidentified Analyst
So you're really talking about a very conservative number, when you say $40 million to $50 million in revenue this year when these contracts are multi-year?
Doug Croxall
It depends on, I mean, look I want to be careful here, because we haven't signed multi-year contracts. I think we had one that we've done in the past, and that was really on a parts per piece or per parts made basis. So yes, but you're right, we think that the booked revenue versus revenue obviously is going to be higher. How much higher depends on whether we're stretching that out over multiple years or whether we're stretching that out over multiple quarters.
Unidentified Analyst
And for accounting purposes, you're not counting the revenue until you actually receive it not when you sign the contract?
Doug Croxall
That's correct.
Unidentified Analyst
Okay. So really your announcement today is lot more than just what you're saying is what really it strikes me to be. So it really is the substantial announcement. Where are we on cash today?
Doug Croxall
So we ended the year at $5 million in cash versus $2.6 million in the prior year.
Unidentified Analyst
And do you have any idea where we are right now?
Doug Croxall
I do, we haven't announced it. We'll be announcing it this week with the 10-Q. But we do anticipate as a base or a framework that cash flow from operations and existing cash on hand will suffice to make it through the year.
Unidentified Analyst
Okay. Now the company has a line of credit doesn't it?
Doug Croxall
It does.
Unidentified Analyst
And does that provide -- do we have access to it? What's going on with that?
Doug Croxall
On the line of credits with Fortress and we talk to them on a weekly basis. But, look our goal is not to -- my goal is not to bring on any more debt, my goal is to simply operate the company and generate cash flow to pay down the debt. So, look if we see great opportunities and we fully want to close on something, we'll figure out a way to finance it. But at this point, we have filled our coffers with patent, we have a lot of opportunities ahead of us.
And frankly, there was a comment made earlier today and that I said that it is time to harvest what we have. And so we are buckling down and we're focused on licensing and generating revenues through those license and generating free cash flow through our operations. But yes, we do have a line of credit with Fortress.
Unidentified Analyst
And in the event that you needed it that would be a lifeline if the company should need it.
Doug Croxall
It's one lifeline that we have access to correct.
Unidentified Analyst
In previous call you were asked to compare the Siemens portfolio, the GE portfolio and I think you said you preferred that Siemens but you hadn’t had a good chance to look at it. Is that still your feeling?
Doug Croxall
I don't think I said that if I did, I like all of our portfolios equally for different reasons. So I'm not sure anybody can really draw a comparison between two portfolios, if you think about it those patents are very unique from one another they wouldn't be a patent.
So it's tough to really compare they're very different. One has got obvious mass with it the other has standard essential portfolios that read on very specific products. So it's hard to really compare. And when you think about the two companies that actually innovated and invented those assets, I mean Siemens is a 100 year plus company as is GE. So you can't -- I mean, it’s just really difficult to compare between those two.
Unidentified Analyst
Okay. One last question, all of these patents that you have, the Dynamic patent, the Signal patent just to name two that you've start off. You put them into different portfolios and to some different subsidiaries why is that?
Doug Croxall
Now there is tax reasons, accounting reasons, legal reasons. There is ease of tracking who gets what payment based on settlement. There is reasons for settlement discussions when you have defendants that might sue from one or multiple portfolios. There is a platter of reasons for doing that. And there is no reason not to do it any other way.
Unidentified Analyst
Would it provide any protections to the company in the event of a bankruptcy?
Doug Croxall
I don’t.
Frank Knuettel
At the subsidiary level, yes, theoretically. We maintain corporate standards for each of the subs, separate bank account all sort of things. So to the extent there were truly adverse ruling in one of them it is designed and would reasonably be expected to provide protection to the rest of the subsidiaries and the parent company. But if the parent were bankrupt I don’t know how that would necessarily provide any protection.
Unidentified Analyst
Thanks. That’s it, appreciate it.
Doug Croxall
Thank you.
Operator
Thank you. Our next question comes from the line of Jeff Feinberg with Feinberg Investments. Please proceed.
Jeff Feinberg
Thank you very much. Just a couple of follow-up questions. I know going back a few years ago at the initiation of the entity there was a perspective given in terms of cumulative revenues obviously the portfolio has grown dramatically since then. Do we have any perspective upon some cumulative revenues at this point in time?
Doug Croxall
Yes phone like your summer is windy. We haven’t really looked at it on a cumulative basis Jeff, I mean we are looking obviously one and maybe two years out. It’s hard, I mean and here is the reason is that, for example natural language processing, three years ago when we started the suit against Apple, there wasn’t a lot of companies in the space.
And if you look at the growth of some of the products and some of the companies that are now in whether they call themselves artificial intelligence or whatever the term is that they are using to market themselves. That industry has grown tremendously, not just from a handset and the consumer standpoint, but also into industry supply chain customer relations management software systems. I mean it’s starting to really pervade multiple industries.
So it’s hard for us to sit here and say we think our assets will generate X millions of dollars over Y years, because we don’t know how far that -- we don’t know how big the industries can grow to become. But I feel comfortable in saying that we’re certainly going to be -- we certainly think over the next three years, four years, we should be generating $200 million $250 million in the cumulative revenue, just based off where we think industries are growing.
So -- but we don’t really sit here and say okay let’s project and predict the growth of oil and services or the growth of Internet of Things or the growth of artificial intelligence, the natural language processing it’s very hard to do. I mean I know Gartner and other company is out there make a living doing that. But I am not sure I can -- I am not sure I am smarter than they are frankly.
And for us, we really -- we don’t look -- we don’t take the top down approach, we really take the bottom up approach, we look at a specific patent, we look at specific products that are using our invention. And we figure out what a royalty rate is and a damages model and of their settlement value is from the ground up, it’s much easier way to manage the business then to really kind of take a top down approach. But, I mean we think…
Jeff Feinberg
That’s very helpful. You have obviously displayed the magnitude of growth that you have been very conservative in your estimates here.
Doug Croxall
Correct.
Jeff Feinberg
Okay. Well you got some extraordinary partners in GE and Siemens, lot of the people who have come to support you in the past, there is timing discomforts like myself I am very excited and looking forward to doing so prospectively.
Doug Croxall
Thank you, Jeff.
Jeff Feinberg
Thank you.
Operator
Thank you. Our next question comes from the line of Bill Nasgovitz with Heartland Funds. Please proceed.
Bill Nasgovitz
Hi there. What’s your NOL and exactly how many shares do you have outstanding?
Frank Knuettel
We have 19.3 million shares outstanding. And the answer to your NOL questions is twofold, book and tax. So for the year ended 12/31/2016 we took a full valuation allowance against the NOL for a book purposes. To the extent that booking tax differ as it does in this instance the tax NOL is in the $15 million range.
Bill Nasgovitz
Okay.
Operator
[Operator Instructions] Thank you, we have reached the end of our Q&A session. I'd now like to turn the floor over to Doug Croxall for closing remarks.
Doug Croxall
Well I’d just like to say thank you to everybody who has stood by the company over the years. We're really proud of what we did in 2016. We look forward to delivering even better results in 2017. And we will hopefully be speaking to everybody in matter of six to seven weeks on our Q1 conference call sometime in mid-May. Thank you.
Operator
Thank you. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
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