[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) - Forward-looking statements are identified by words such as "anticipate," "believe," "estimate," "expect," "may," "plan," and "will," covering areas including business strategies, acquisitions, financial results, litigation, and regulatory matters[7](index=7&type=chunk) - Substantial risks and uncertainties could cause future results to differ materially, including inability to acquire or integrate businesses, challenges in retaining employees, adverse developments in operating businesses, and various operational, market, and regulatory risks across its segments[7](index=7&type=chunk)[11](index=11&type=chunk) [Part I. Financial Information](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Details the company's consolidated financial statements and notes for periods ending June 30, 2025, and December 31, 2024 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets Highlights (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total Assets | $775,546 | $756,394 | | Cash and cash equivalents | $316,721 | $273,880 | | Total Liabilities | $198,075 | $203,775 | | Total Stockholders' Equity | $577,471 | $552,619 | - Total assets increased by **$19.2 million**, primarily driven by a **$42.8 million** increase in cash and cash equivalents[14](index=14&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations Highlights (In thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Revenues | $51,237 | $25,838 | $175,659 | $50,158 | | Operating Income (Loss) | $(12,385) | $(4,758) | $25,920 | $(6,845) | | Net Income (Loss) attributable to Acacia Research Corporation | $(3,293) | $(8,446) | $20,994 | $(8,632) | | Basic Net Income (Loss) per Common Share | $(0.03) | $(0.08) | $0.22 | $(0.09) | - Total revenues for the six months ended June 30, 2025, increased by **250% year-over-year to $175.7 million**, leading to a net income of **$21.0 million**, a significant improvement from a net loss of **$8.6 million** in the prior year[17](index=17&type=chunk)[56](index=56&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Changes in Stockholders' Equity (In thousands) | Metric | Balance at Dec 31, 2024 | Net Income (6M 2025) | Other Comprehensive Income (6M 2025) | Share-based Awards (Net) | Balance at Jun 30, 2025 | | :----------------------------------- | :---------------------- | :--------------------- | :---------------------------------- | :----------------------- | :---------------------- | | Total Stockholders' Equity | $552,619 | $22,091 | $1,525 | $1,236 | $577,471 | - Total stockholders' equity increased by **$24.8 million** from December 31, 2024, to June 30, 2025, primarily due to net income and other comprehensive income[14](index=14&type=chunk)[20](index=20&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (In thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :------------------------------------------ | :--------------------------- | :--------------------------- | :----- | | Net cash provided by operating activities | $52,545 | $70,977 | $(18,432) | | Net cash used in investing activities | $(451) | $(109,833) | +$109,382 | | Net cash (used in) provided by financing activities | $(10,340) | $85,880 | $(96,220) | | Increase in cash and cash equivalents | $42,841 | $46,897 | $(4,056) | - Net cash provided by operating activities decreased by **$18.4 million**, while net cash used in investing activities significantly decreased by **$109.4 million** due to the absence of large asset acquisitions in 2025[21](index=21&type=chunk)[297](index=297&type=chunk)[302](index=302&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Description of Business](index=11&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS) - Acacia is a value-oriented acquirer and operator of businesses in industrial, energy, and technology sectors, focusing on strong free cash flow generation and scalability[22](index=22&type=chunk)[25](index=25&type=chunk) - The company's strategic relationship with Starboard Value, LP provides access to industry expertise and operating partners for acquisition sourcing and evaluation[26](index=26&type=chunk) - Acacia operates in four segments: Intellectual Property (patent licensing), Industrial (Printronix printers), Energy (Benchmark oil and gas, **73.5% interest**), and Manufacturing (Deflecto specialty products, acquired Oct 2024)[27](index=27&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[36](index=36&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=13&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The consolidated financial statements include Acacia and its wholly and majority-owned subsidiaries, with noncontrolling interests presented separately[39](index=39&type=chunk)[40](index=40&type=chunk) - Revenue recognition varies by segment: IP (granting rights), Industrial (product shipment/service over time), Energy (product control transfer), and Manufacturing (product control transfer)[44](index=44&type=chunk)[55](index=55&type=chunk)[62](index=62&type=chunk)[72](index=72&type=chunk) - The company follows the successful efforts method for oil and natural gas producing activities and evaluates goodwill for impairment annually or on an interim basis[86](index=86&type=chunk)[88](index=88&type=chunk) - New accounting pronouncements (ASU 2023-09 and ASU 2024-03) are expected to enhance disclosures but will not materially impact the company's financial statements[106](index=106&type=chunk)[107](index=107&type=chunk) [Note 3. Acquisitions](index=23&type=section&id=3.%20ACQUISITIONS) - In April 2024, Benchmark acquired upstream assets for **$145 million**, increasing Acacia's interest to **73.5%**[109](index=109&type=chunk) - In October 2024, Acacia acquired Deflecto for **$103.7 million**, funded by a **$48.0 million** secured term loan and cash on hand[112](index=112&type=chunk)[113](index=113&type=chunk) - The Deflecto acquisition resulted in **$16.8 million** in goodwill, which was subsequently decreased by **$3.8 million** due to measurement period adjustments in Q1 2025[114](index=114&type=chunk)[116](index=116&type=chunk) [Note 4. Equity Securities](index=25&type=section&id=4.%20EQUITY%20SECURITIES) Equity Securities Fair Value (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Equity securities - other common stock | $21,467 | $23,135 | - The company fully exited its Arix Bioscience PLC position in January 2024, selling shares for **$57.1 million**[122](index=122&type=chunk) - For the six months ended June 30, 2025, the company reported a net realized and unrealized gain of **$0.95 million** from equity securities, a significant improvement from a **$2.6 million** net loss in the prior year[17](index=17&type=chunk)[278](index=278&type=chunk) [Note 5. Inventories](index=26&type=section&id=5.%20INVENTORIES) Inventories (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Raw materials | $6,737 | $8,575 | | Subassemblies and work in process | $1,171 | $1,481 | | Finished goods | $17,816 | $17,429 | | **Total inventories** | **$25,724** | **$27,485** | - Total inventories decreased by **$1.8 million** from December 31, 2024, to June 30, 2025, primarily due to reductions in raw materials and subassemblies/work in process[124](index=124&type=chunk) [Note 6. Property, Plant and Equipment, Net](index=27&type=section&id=6.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT,%20NET) Property, Plant and Equipment, Net (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total Property, Plant and Equipment | $29,572 | $28,791 | | Accumulated depreciation and amortization | $(6,821) | $(4,926) | | **Property, plant and equipment, net** | **$22,751** | **$23,865** | - Total depreciation and amortization expense for property, plant and equipment increased from **$0.6 million** for the six months ended June 30, 2024, to **$2.5 million** for the same period in 2025, with Manufacturing Operations contributing **$2.1 million**[125](index=125&type=chunk) [Note 7. Oil and Natural Gas Properties, Net](index=27&type=section&id=7.%20OIL%20AND%20NATURAL%20GAS%20PROPERTIES,%20NET) Oil and Natural Gas Properties, Net (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Proved oil and gas properties | $202,838 | $199,559 | | Unproved oil and gas properties | $4,786 | $4,786 | | Accumulated depletion and depreciation | $(20,529) | $(12,665) | | **Oil and natural gas properties, net** | **$187,095** | **$191,680** | - Total depletion and depreciation expense for oil and natural gas properties increased from **$3.9 million** for the six months ended June 30, 2024, to **$7.9 million** for the same period in 2025, reflecting the full impact of the Revolution Transaction assets[126](index=126&type=chunk) [Note 8. Goodwill and Other Intangible Assets, Net](index=28&type=section&id=8.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS,%20NET) Goodwill (In thousands) | Segment | Beginning Balance (Dec 31, 2024) | Effect of FX Translation | Measurement Period Adjustments | Ending Balance (Jun 30, 2025) | | :----------------------- | :------------------------------- | :----------------------- | :----------------------------- | :----------------------------- | | Industrial Operations | $7,541 | — | — | $7,541 | | Energy Operations | $1,449 | — | — | $1,449 | | Manufacturing Operations | $20,349 | $272 | $(3,829) | $16,792 | | **Total** | **$29,339** | **$272** | **$(3,829)** | **$25,782** | Other Intangible Assets, Net (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Patents | $25,845 | $21,024 | | Customer relationships | $23,885 | $22,785 | | Trade name and trademarks | $10,659 | $10,248 | | Developed technology | $930 | $980 | | Favorable leases | $324 | $392 | | **Total other intangible assets, net** | **$61,643** | **$55,429** | - Total other intangible asset amortization expense increased from **$7.5 million** for the six months ended June 30, 2024, to **$11.7 million** for the same period in 2025[130](index=130&type=chunk) - During the six months ended June 30, 2025, Intellectual Property Operations capitalized **$15.0 million** in patent and patent rights costs by exercising an exclusive option[132](index=132&type=chunk) [Note 9. Accrued Expenses and Other Current Liabilities](index=30&type=section&id=9.%20ACCURRED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Accrued Expenses and Other Current Liabilities (In thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Accrued consulting and other professional fees | $1,367 | $2,602 | | Income taxes payable | $6,069 | $3,832 | | Sales and tax and fees payable | $5,217 | $4,818 | | Interest accrual | $1,585 | $1,162 | | Short-term lease liability | $4,081 | $3,563 | | **Total** | **$22,677** | **$20,575** | - Accrued expenses and other current liabilities increased by **$2.1 million**, primarily due to increases in income taxes payable, sales and tax and fees payable, interest accrual, and short-term lease liability[133](index=133&type=chunk) [Note 10. Asset Retirement Obligations](index=30&type=section&id=10.%20ASSET%20RETIREMENT%20OBLIGATIONS) Asset Retirement Obligations (In thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | | Beginning balance | $32,616 | $294 | | Liabilities acquired | — | $28,713 | | Accretion of discounts | $867 | $254 | | **Ending balance** | **$33,399** | **$29,261** | - Asset retirement obligations increased by **$4.1 million** year-over-year, primarily due to liabilities acquired in 2024 and accretion of discounts[134](index=134&type=chunk) [Note 11. Revolving Credit Facility and Term Loan](index=30&type=section&id=11.%20REVOLVING%20CREDIT%20FACILITY%20AND%20TERM%20LOAN) - Benchmark's Revolving Credit Facility balance decreased to **$58.0 million** at June 30, 2025, from **$66.5 million** at December 31, 2024, following **$8.5 million** in paydowns[135](index=135&type=chunk) - The Deflecto Term Loan balance decreased to **$46.4 million** at June 30, 2025, from **$47.5 million** at December 31, 2024, with **$1.2 million** in paydowns[143](index=143&type=chunk) - Both Benchmark and Deflecto were in compliance with their respective loan covenants as of June 30, 2025[137](index=137&type=chunk)[142](index=142&type=chunk) [Note 12. Starboard Investment](index=32&type=section&id=12.%20STARBOARD%20INVESTMENT) - The Recapitalization Agreement in October 2022 simplified the capital structure, resulting in Starboard owning approximately **61.2%** of common stock as of July 13, 2023[146](index=146&type=chunk) - The Services Agreement with Starboard provides trade execution, research, and due diligence on an expense reimbursement basis, with no reimbursements made during the six months ended June 30, 2025[151](index=151&type=chunk) [Note 13. Fair Value Measurements](index=33&type=section&id=13.%20FAIR%20VALUE%20MEASUREMENTS) - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant observable inputs), and Level 3 (unobservable inputs)[155](index=155&type=chunk) Financial Assets Measured at Fair Value (In thousands) | Asset Type | Level 1 (Jun 30, 2025) | Level 2 (Jun 30, 2025) | Level 3 (Jun 30, 2025) | Total (Jun 30, 2025) | | :-------------------------- | :----------------------- | :----------------------- | :----------------------- | :--------------------- | | Equity securities | $21,467 | — | — | $21,467 | | Commodity derivative instruments | — | $2,902 | — | $2,902 | - Benchmark's commodity derivative activities resulted in a realized gain of **$0.83 million** and an unrealized gain of **$0.79 million** for the six months ended June 30, 2025[157](index=157&type=chunk) [Note 14. Related Party Transactions](index=35&type=section&id=14.%20RELATED%20PARTY%20TRANSACTIONS) - The company has a Loan Facility with a related private portfolio company, with a balance of **$4.3 million** (including interest receivable) at June 30, 2025, bearing an interest rate of **9.5%** per annum[160](index=160&type=chunk) - Interest income from this related party loan was **$0.19 million** for the six months ended June 30, 2025[160](index=160&type=chunk) [Note 15. Commitments and Contingencies](index=35&type=section&id=15.%20COMMITMENTS%20AND%20CONTINGENCIES) - The company is subject to inventor royalties and contingent legal fees based on future net revenues from patent licensing and enforcement activities[162](index=162&type=chunk)[163](index=163&type=chunk) - The AIP Matter, a dispute involving former executives' profit interests, was settled on August 2, 2024, resulting in a **$14.5 million** payment by Acacia during 2024[167](index=167&type=chunk) - The company is involved in ongoing patent enforcement litigation, which consumes significant financial and management resources, with potential for monetary sanctions or attorney's fees[165](index=165&type=chunk)[324](index=324&type=chunk) [Note 16. Stockholders' Equity](index=36&type=section&id=16.%20STOCKHOLDERS'%20EQUITY) - The **$20.0 million** stock repurchase program, approved in November 2023, was completed in 2024 with the purchase of **4,358,361 shares**, and no further repurchases occurred under this program during the six months ended June 30, 2025[171](index=171&type=chunk) [Note 17. Equity-Based Incentive Plans](index=36&type=section&id=17.%20EQUITY-BASED%20INCENTIVE%20PLANS) - The 2024 Acacia Research Corporation Stock Incentive Plan is the exclusive plan for granting stock options, restricted stock units (RSUs), and performance-based stock awards (PSUs)[173](index=173&type=chunk) Stock Option Activity Summary | Metric | Outstanding at Dec 31, 2024 | Exercised (6M 2025) | Outstanding at Jun 30, 2025 | | :--------------------------------- | :-------------------------- | :-------------------- | :-------------------------- | | Options | 1,001,520 | (8,333) | 993,187 | | Weighted Average Exercise Price | $4.16 | $3.58 | $4.16 | Compensation Expense for Share-Based Awards (In thousands) | Award Type | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--------------------------------- | :---------------------------- | :---------------------------- | | Options | $149 | $252 | | RSAs | $194 | $242 | | RSUs | $1,093 | $1,255 | | PSUs | $440 | — | | **Total** | **$1,876** | **$1,749** | [Note 18. Income (Loss) Per Share](index=39&type=section&id=18.%20INCOME%20(LOSS)%20PER%20SHARE) Income (Loss) Per Share (Except share data) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :------------------------------------------ | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Basic net income (loss) per common share | $(0.03) | $(0.08) | $0.22 | $(0.09) | | Diluted net income (loss) per common share | $(0.03) | $(0.08) | $0.22 | $(0.09) | - Basic and diluted net income per common share for the six months ended June 30, 2025, was **$0.22**, a significant improvement from a loss of **$0.09** per share in the prior year[188](index=188&type=chunk) [Note 19. Segment Reporting](index=40&type=section&id=19.%20SEGMENT%20REPORTING) - The company operates in four reportable segments: Intellectual Property Operations, Industrial Operations, Energy Operations, and Manufacturing Operations[189](index=189&type=chunk) Segment Revenues (In thousands) | Segment | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------- | :---------------------------- | :---------------------------- | | Intellectual Property | $70,234 | $18,956 | | Industrial | $14,266 | $15,176 | | Energy | $33,623 | $16,026 | | Manufacturing | $57,536 | — | | **Total Revenues** | **$175,659** | **$50,158** | Segment Operating Income (Loss) (In thousands) | Segment | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------- | :---------------------------- | :---------------------------- | | Intellectual Property | $30,895 | $1,029 | | Industrial | $376 | $978 | | Energy | $6,094 | $3,405 | | Manufacturing | $(355) | — | [Note 20. Subsequent Events](index=47&type=section&id=20.%20SUBSEQUENT%20EVENTS) - On July 4, 2025, the "One Big Beautiful Bill Act" (H.R. 1) was enacted, introducing significant amendments to the U.S. tax code with multiple effective dates[208](index=208&type=chunk)[289](index=289&type=chunk) - The company is currently evaluating the impact of this new tax legislation on its consolidated financial statements[208](index=208&type=chunk)[289](index=289&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, results of operations, business strategy, and segment performance [General Business Overview](index=48&type=section&id=General) - Acacia's core strategy is to acquire and operate businesses with strong free cash flow generation and scalability, focusing on unique and complex situations[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) - The company defines value through free cash flow generation, book value appreciation, and stock price growth[211](index=211&type=chunk) - Key differentiators include an experienced management team, a disciplined focus on advantageous acquisitions, a deep operating executive network, and flexibility in transaction structuring and long-term commitment[215](index=215&type=chunk)[217](index=217&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) [Business Segments Overview](index=49&type=section&id=Business%20Segments%20Overview) - Intellectual Property Operations invests in and licenses patented technologies, with over **1,600 license agreements** and **$1.9 billion** in gross licensing revenue as of June 30, 2025[218](index=218&type=chunk)[223](index=223&type=chunk) - Industrial Operations (Printronix) manufactures and distributes industrial impact printers and consumables, aiming to transition to higher-margin consumable sales[226](index=226&type=chunk)[227](index=227&type=chunk) - Energy Operations (Benchmark), **73.5%** owned by Acacia, acquires and develops oil and gas assets in Texas and Oklahoma, expanding significantly with the **$145 million** Revolution Transaction in April 2024[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) - Manufacturing Operations (Deflecto), acquired in October 2024 for **$103.7 million**, is a specialty manufacturer for commercial transportation, HVAC, and office markets[233](index=233&type=chunk) [Recent Business Developments and Trends](index=51&type=section&id=Recent%20Business%20Developments%20and%20Trends) - The company's growth strategy involves acquiring additional operating businesses, energy assets, and intellectual property assets, acknowledging potential costs and risks[235](index=235&type=chunk) - Recent acquisitions include a **50.4%** equity interest in Benchmark Energy II in November 2023, Benchmark's **$145 million** Revolution Transaction in April 2024 (increasing Acacia's interest to **73.5%**), and the **$103.7 million** acquisition of Deflecto in October 2024[236](index=236&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk) - The Life Sciences Portfolio, acquired in June 2020 for **$282.0 million**, has generated **$564.1 million** in proceeds through June 30, 2025, with the Arix Bioscience PLC position fully exited in January 2024 for **$57.1 million**[239](index=239&type=chunk) - Inflation has not historically had a significant impact, but Manufacturing and Industrial Operations may adjust prices, and Energy Operations could face pressures from rising oil/gas prices and supply chain disruptions[240](index=240&type=chunk) - Intellectual Property Operations' revenues fluctuate based on licensing agreements and litigation outcomes; the segment acquired one new patent portfolio (Wi-Fi 7) in Q1 2025 and has three pending patent infringement cases with scheduled trial dates[241](index=241&type=chunk)[242](index=242&type=chunk)[247](index=247&type=chunk) [Operating Activities](index=54&type=section&id=Operating%20Activities) - Intellectual Property Operations revenues historically fluctuate quarterly based on the dollar amount and terms of agreements, litigation outcomes, and external factors, with potential revenues sometimes shifting to subsequent periods[251](index=251&type=chunk)[255](index=255&type=chunk) [Results of Operations](index=55&type=section&id=Results%20of%20Operations) Summary of Results of Operations (In thousands, except percentage change) | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | $ Change | % Change | | :------------------------------------------ | :--------------------------- | :--------------------------- | :------- | :------- | | Total revenues | $175,659 | $50,158 | $125,501 | 250% | | Total costs and expenses | $149,739 | $57,003 | $92,736 | 163% | | Operating income (loss) | $25,920 | $(6,845) | $32,765 | (479%) | | Income (loss) before income taxes | $28,719 | $(17,188) | $45,907 | (267%) | | Net income (loss) attributable to Acacia Research Corporation | $20,994 | $(8,632) | $29,626 | (343%) | - For the three months ended June 30, 2025, total revenues increased by **98% to $51.2 million**, and loss before income taxes improved from **$15.9 million** to **$0.9 million**, driven by new acquisitions and the absence of non-recurring legal expenses[55](index=55&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk) - For the six months ended June 30, 2025, total revenues surged by **250% to $175.7 million**, and income before income taxes dramatically improved from a **$17.2 million** loss to a **$28.7 million** income, primarily due to growth in Intellectual Property, Energy, and new Manufacturing Operations[260](index=260&type=chunk)[261](index=261&type=chunk) - Intellectual Property Operations revenues for the six months ended June 30, 2025, increased by **271% to $70.2 million**, while Energy Operations revenues increased by **110% to $33.6 million**, reflecting the full impact of the Revolution Transaction[260](index=260&type=chunk)[262](index=262&type=chunk)[270](index=270&type=chunk) - Manufacturing Operations, acquired in October 2024, contributed **$57.5 million** in revenues for the six months ended June 30, 2025[260](index=260&type=chunk)[273](index=273&type=chunk) - Total operating expenses increased by **55% to $39.6 million** for the six months ended June 30, 2025, largely due to the inclusion of Manufacturing Operations expenses and increased Energy Operations G&A[275](index=275&type=chunk) - Total other income for the six months ended June 30, 2025, was **$2.8 million**, a significant improvement from a **$10.3 million** expense in the prior year, driven by reduced unrealized losses on equity securities and derivative gains[261](index=261&type=chunk)[264](index=264&type=chunk)[278](index=278&type=chunk) - The company recorded an income tax expense of **$6.6 million** for the six months ended June 30, 2025, compared to a benefit of **$8.2 million** in the prior year, primarily due to year-to-date earnings and foreign withholding taxes[282](index=282&type=chunk)[283](index=283&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) - Primary liquidity sources are cash and cash equivalents and cash generated from operating activities; future acquisitions are expected to be financed through cash on hand or equity/debt financing[293](index=293&type=chunk) - Consolidated cash, cash equivalents, and equity securities increased to **$338.2 million** at June 30, 2025, from **$297.0 million** at December 31, 2024[295](index=295&type=chunk) Net Cash Flows Summary (In thousands) | Activity | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | | Operating activities | $52,545 | $70,977 | | Investing activities | $(451) | $(109,833) | | Financing activities | $(10,340) | $85,880 | | **Increase in cash and cash equivalents** | **$42,841** | **$46,897** | - Net cash provided by operating activities decreased to **$52.5 million**, while net cash used in investing activities significantly decreased to **$0.5 million** due to the absence of large asset acquisitions in 2025[297](index=297&type=chunk)[302](index=302&type=chunk) - Net cash used in financing activities was **$10.3 million**, a shift from an **$85.9 million** inflow in the prior year, primarily due to debt paydowns on the Benchmark Revolving Credit Facility and Deflecto Term Loan[297](index=297&type=chunk)[304](index=304&type=chunk) - Critical accounting estimates include revenue recognition, oil and gas reserves, valuation of long-lived assets, goodwill and other intangibles, and income taxes, with no material changes from the 2024 Annual Report[306](index=306&type=chunk)[308](index=308&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=67&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Discusses market risks from equity investments and foreign currency, highlighting potential impacts of volatility and currency fluctuations - The company is exposed to investment risks from changes in the financial condition of its equity investments and market price volatility[310](index=310&type=chunk) - As of June 30, 2025, the carrying value of equity investments in public and private companies was **$58.2 million**; a hypothetical **10%** adverse change in public equity investments would decrease their value by approximately **$2.1 million**[311](index=311&type=chunk)[312](index=312&type=chunk) - The company is exposed to foreign currency exchange rate fluctuations, primarily between the U.S. dollar and the British Pound, Canadian Dollar, Chinese Yuan, and Euro, related to foreign cash accounts[313](index=313&type=chunk) [Item 4. Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of June 30, 2025, due to a material weakness, with remediation efforts ongoing - Disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness and control deficiencies reported in the 2024 Annual Report[315](index=315&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025, other than planned remediation efforts[316](index=316&type=chunk) - Management acknowledges that control systems provide only reasonable, not absolute, assurance against error or fraud due to inherent limitations and the possibility of controls becoming inadequate over time[318](index=318&type=chunk) [Part II. Other Information](index=69&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) Intellectual Property Operations routinely engages in patent enforcement litigation, which is resource-intensive and carries risks of monetary sanctions or adverse effects - Intellectual Property Operations is often required to engage in litigation to enforce its patents and patent rights[322](index=322&type=chunk) - Litigation matters consume significant financial and management resources, often against large, well-financed companies, and may result in monetary sanctions or attorney's fees[324](index=324&type=chunk) [Item 1A. Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) Investors should consider all risks in this report and prior filings, as no material changes to reported risk factors have occurred - Investors should carefully review all disclosures, including risk factors in this 10-Q, the 2024 Annual Report, and prior 10-Q filings[325](index=325&type=chunk) - No material changes to the risk factors previously reported have occurred[325](index=325&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds occurred[326](index=326&type=chunk) [Item 3. Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report during the period - No defaults upon senior securities occurred[327](index=327&type=chunk) [Item 4. Mine Safety Disclosures](index=70&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the registrant[328](index=328&type=chunk) [Item 5. Other Information](index=70&type=section&id=Item%205.%20Other%20Information) No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q2 2025 - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[329](index=329&type=chunk) [Item 6. Exhibits](index=70&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Quarterly Report, including corporate documents, an employment agreement, officer certifications, and iXBRL financial statements - Exhibits include the Fourth Amended and Restated Certificate of Incorporation, Employment Agreement, officer certifications (Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350), and iXBRL formatted financial statements[330](index=330&type=chunk)

Core Insights - Acacia Research reported a significant 98% year-over-year increase in GAAP revenue, reaching $51.2 million, primarily driven by the acquisition of Deflecto in its manufacturing segment [1][5][10] - Despite strong revenue growth, the company missed analyst expectations for revenue and reported a non-GAAP EPS of $(0.06), worse than the anticipated $(0.05) [1][2][5] Financial Performance - GAAP revenue for Q2 2025 was $51.2 million, compared to $25.8 million in Q2 2024, reflecting a 98.4% increase [2][5] - Non-GAAP EPS was $(0.06), a decline of 500% from $(0.01) in Q2 2024 [2][5] - Total company adjusted EBITDA was $1.9 million, down from $4.1 million in the prior-year period, indicating a 53.7% decrease [2][7] - Free cash flow was reported at $47.9 million, bolstered by earlier IP settlement receipts [2][8] Business Overview and Strategy - Acacia Research focuses on acquiring and managing undervalued businesses across various sectors, including manufacturing, industrial, energy, and intellectual property [3][4] - The company aims to unlock value through operational improvements and emphasizes free cash flow potential [3][4] Segment Performance - The manufacturing segment, bolstered by Deflecto, generated $29.0 million in revenue, making it the largest segment by revenue [5][10] - Energy Operations reported $15.3 million in GAAP revenue, showing modest growth from $14.2 million in Q2 2024 [5][10] - The IP segment experienced a significant decline in revenue, falling to $0.3 million from $5.3 million in Q2 2024 due to a lack of new settlements [5][6] Operational Highlights - The manufacturing unit is in the integration phase, focusing on cost controls and optimizing product offerings [11] - Sales and marketing expenses for industrial and manufacturing operations increased to $3.4 million [7] Cash Position and Debt - Cash, cash equivalents, and equity securities totaled $338.2 million at the end of the period, up from $297.0 million at the end of 2024 [8] - Total consolidated debt was $104.4 million, with no borrowings at the parent company level [8] Future Outlook - Management reaffirmed its acquisition-driven growth strategy but did not provide explicit financial guidance for the remainder of fiscal 2025 [14] - Key areas to watch include revenue sustainability, integration of acquired businesses, margin recovery, and cash flow generation beyond infrequent IP settlements [15]

Financial Data and Key Metrics Changes - The company generated total revenue of $51.2 million in Q2 2025, compared to $51.2 million in the same quarter last year, reflecting stability in revenue generation [21][22] - Adjusted EBITDA for the company was $1.9 million, with free cash flow of $47.9 million, primarily due to cash collection from a previously announced settlement in the IP business [10][22] - The net loss attributable to Acacia was $3.3 million or $0.03 per share, an improvement from a net loss of $8.4 million or $0.08 per share in the prior year [24][25] - Book value per share at the end of Q2 was $5.99, essentially flat compared to the previous quarter [10] Business Line Data and Key Metrics Changes - Energy operations generated $15.3 million in revenue, up from $14.2 million year-over-year [22] - Manufacturing operations generated $29 million in revenue, while industrial operations generated $6.6 million, compared to $6.3 million in the same quarter last year [22] - Intellectual property operations generated $300,000 in licensing and other revenue, down from $5.3 million in the same quarter last year, reflecting the episodic nature of this business [22][19] Market Data and Key Metrics Changes - The company noted a slight sequential improvement in operated production, having lapped significant weather events from Q1 [10] - The Class 8 truck market has seen new orders at their lowest level since 2010, impacting demand in the transportation safety business [16] Company Strategy and Development Direction - The company announced a partnership with Unchained Capital and Build Asset Management to offer secured lending solutions backed by Bitcoin, committing $20 million to acquire a portfolio of fully recourse loans [6][9] - The company is focused on maintaining a strong balance sheet while pursuing value-oriented strategies and evaluating M&A opportunities [10][12] - The company is strategically building around existing assets, particularly in the Cherokee position acquired as part of the Revolution deal [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the inherent value of the company's assets and its ability to execute long-term value creation strategies despite macroeconomic headwinds [27] - The company is optimistic about the potential for the investment in Bitcoin-backed loans to grow over time as Bitcoin institutionalizes [9] - Management acknowledged the challenges posed by tariffs and global trade uncertainties but remains confident in the long-term value of its businesses [14][17] Other Important Information - The company has hedged over 70% of its operated oil and gas production through 2027, protecting a substantial amount of cash flow from downside pricing risk [11] - The company recorded a GAAP operating loss of $12.4 million, primarily due to a revenue decline in the IP business and increased patent amortization [23] Q&A Session Summary Question: Expected interest rates on Bitcoin commercial loans - Management indicated that loans are expected to yield net returns in excess of 10%, with a conservative loan-to-value ratio of 50% [35][36] Question: Outlook for the Class 8 truck market - Management noted that purchasing patterns have changed due to tariffs, but they remain optimistic about future demand as fleets age [37][40] Question: Risk management for Bitcoin loans - Management assured that the Bitcoin market is mature enough for hedging, and they have measures in place to protect against significant price drops [48][54] Question: Potential for private equity deals - Management observed that opportunities are increasing in the B and C quartile assets, while A quartile assets remain stable [60][61] Question: Valuation of the legacy patent business - Management expressed the difficulty in disclosing detailed information without compromising negotiations but acknowledged the need for market clarity [62]

Q2 2025 Earnings Presentation This presentation 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 the current expectations of Acacia Research Corporation ("Acacia" or the "Company") and speak only as of the date hereof. All statements other than statements of historical fact are forward-looking statements and include statements related to estimates and projections with respect to, am ...

[Second Quarter 2025 Financial Results Overview](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results%20Overview) Acacia Research Corporation reported strong Q2 2025 revenue growth, strategic partnerships, and a robust financial position [Key Financial Highlights](index=1&type=section&id=1.1.%20Key%20Financial%20Highlights) Q2 2025 saw total revenue of $51.2 million, a 98% increase, with a GAAP Net Loss of ($3.3) million and $338.2 million in cash and equivalents Second Quarter 2025 Key Financial Highlights | Metric | Value | | :--------------------------------- | :------------------ | | Total Revenue | $51.2 million | | GAAP Net Loss | ($3.3) million | | GAAP Diluted EPS | ($0.03) | | Adjusted Net Loss | ($5.9) million | | Adjusted Diluted EPS | ($0.06) | | Operated Segment Adjusted EBITDA | $6.8 million | | Total Company Adjusted EBITDA | $1.9 million | | Total Cash, Cash Equivalents, and Equity Securities | $338.2 million | | Per Share Cash, Cash Equivalents, and Equity Securities | $3.51 | - Total revenue for the quarter increased by **98%** compared to the prior-year quarter, primarily driven by **$29.0 million** in revenue from Manufacturing Operations[5](index=5&type=chunk) [CEO Statement and Strategic Focus](index=1&type=section&id=1.2.%20CEO%20Statement%20and%20Strategic%20Focus) CEO highlighted strategic acquisitions, operational efficiency, and a new Bitcoin-backed commercial loan partnership, supported by a strong balance sheet - The company's strategy remains focused on acquiring fundamentally strong businesses where management processes can drive incremental value, with a current emphasis on improving efficiencies, strengthening market positioning, and upgrading operational capabilities[2](index=2&type=chunk) - Acacia announced a new partnership with Unchained Capital and Build Asset Management for a Bitcoin-backed commercial loan strategy[1](index=1&type=chunk)[2](index=2&type=chunk) - The company maintains a strong balance sheet with approximately **$338.2 million** in cash, cash equivalents, and equity securities, providing substantial dry powder for business growth and accretive acquisition opportunities[2](index=2&type=chunk) [Detailed Financial Performance](index=2&type=section&id=Detailed%20Financial%20Performance) Detailed Q2 2025 financial performance covers revenue, EBITDA, net income, and free cash flow across all operating segments [Revenue Breakdown by Segment](index=2&type=section&id=2.1.%20Revenue%20Breakdown%20by%20Segment) Q2 2025 total revenue increased to $51.2 million, primarily from Manufacturing Operations, offsetting a decline in Intellectual Property revenue Total Revenues (in thousands) | Period | 2025 | 2024 | YoY Change (%) | | :----------------------- | :------- | :------- | :------------- | | Three Months Ended June 30 | $51,237 | $25,838 | 98.3% | | Six Months Ended June 30 | $175,659 | $50,158 | 250.2% | Revenue by Segment (Three Months Ended June 30, in thousands) | Segment | 2025 | 2024 | YoY Change (%) | | :----------------------- | :------- | :------- | :------------- | | Energy Operations | $15,317 | $14,170 | 8.1% | | Industrial Operations | $6,590 | $6,335 | 4.0% | | Manufacturing Operations | $29,001 | — | N/A | | Intellectual Property Operations | $329 | $5,333 | -93.8% | [Total Company Adjusted EBITDA](index=2&type=section&id=2.2.%20Total%20Company%20Adjusted%20EBITDA) Total Company Adjusted EBITDA decreased to $1.9 million in Q2 2025 but rose significantly to $52.6 million for the six-month period Total Company Adjusted EBITDA (in thousands) | Period | 2025 | 2024 | YoY Change (%) | | :----------------------- | :------- | :------- | :------------- | | Three Months Ended June 30 | $1,873 | $4,089 | -54.2% | | Six Months Ended June 30 | $52,572 | $10,421 | 404.5% | GAAP Net Income (Loss) (in thousands) | Period | 2025 | 2024 | | :----------------------- | :------- | :------- | | Three Months Ended June 30 | $(3,293) | $(8,446) | | Six Months Ended June 30 | $20,994 | $(8,632) | [Operated Segment Adjusted EBITDA](index=3&type=section&id=2.3.%20Operated%20Segment%20Adjusted%20EBITDA) Operated Segment Adjusted EBITDA (excluding IP) increased to $8.8 million, but total decreased to $6.8 million due to a ($2.1) million IP loss Operated Segment Adjusted EBITDA (Three Months Ended June 30, in thousands) | Segment | 2025 | 2024 | YoY Change (%) | | :--------------------------------------- | :------- | :------- | :------------- | | Energy Operations | $6,951 | $7,039 | -1.3% | | Industrial Operations | $620 | $449 | 38.1% | | Manufacturing Operations | $1,274 | — | N/A | | Intellectual Property Operations | $(2,061) | $1,309 | -257.5% | | Operated Segment Adjusted EBITDA (Total) | $6,784 | $8,797 | -22.9% | Operated Segment Adjusted EBITDA (Six Months Ended June 30, in thousands) | Segment | 2025 | 2024 | YoY Change (%) | | :--------------------------------------- | :------- | :------- | :------------- | | Energy Operations | $14,887 | $8,417 | 76.9% | | Industrial Operations | $1,641 | $2,346 | -30.1% | | Manufacturing Operations | $3,713 | — | N/A | | Intellectual Property Operations | $41,204 | $8,469 | 386.5% | | Operated Segment Adjusted EBITDA (Total) | $61,445 | $19,232 | 219.5% | [Adjusted Net Income (Loss) and Diluted EPS](index=3&type=section&id=2.4.%20Adjusted%20Net%20Income%20%28Loss%29%20and%20Diluted%20EPS) Q2 2025 Adjusted Net Loss was ($5.9) million with ($0.06) Adjusted Diluted EPS, while six-month Adjusted Net Income reached $27.1 million Adjusted Net Income (Loss) and Diluted EPS (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | GAAP Net Income (Loss) | $(3,293) | $(8,446) | $20,994 | $(8,632) | | Adjusted Net Income (Loss) | $(5,945) | $(1,371) | $27,135 | $27,088 | | GAAP Diluted EPS | $(0.03) | $(0.08) | $0.22 | $(0.09) | | Adjusted Diluted EPS | $(0.06) | $(0.01) | $0.28 | $0.27 | [Free Cash Flow](index=4&type=section&id=2.5.%20Free%20Cash%20Flow) Consolidated Free Cash Flow for Q2 2025 was $47.9 million, primarily from Intellectual Property, totaling $48.2 million for the six-month period Consolidated Free Cash Flow (in thousands) | Period | 2025 | | :----------------------- | :------- | | Three Months Ended June 30 | $47,907 | | Six Months Ended June 30 | $48,242 | Free Cash Flow by Segment (Three Months Ended June 30, 2025, in thousands) | Segment | FCF | | :----------------------- | :------- | | Energy Operations | $4,051 | | Industrial Operations | $872 | | Manufacturing Operations | $909 | | Intellectual Property Operations | $44,047 | | Parent Costs | $(1,972) | [Financial Position and Capital Structure](index=4&type=section&id=Financial%20Position%20and%20Capital%20Structure) Financial position and capital structure details balance sheet, cash, equity securities, and indebtedness as of June 30, 2025 [Balance Sheet Summary](index=6&type=section&id=3.1.%20Balance%20Sheet%20Summary) As of June 30, 2025, total assets increased to $775.5 million, liabilities decreased, and stockholders' equity rose to $577.5 million Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------- | :------------ | :---------------- | :------- | | Total Assets | $775,546 | $756,394 | $19,152 | | Total Liabilities | $198,075 | $203,775 | $(5,700) | | Total Stockholders' Equity | $577,471 | $552,619 | $24,852 | [Cash, Equity Securities, and Indebtedness](index=4&type=section&id=3.2.%20Cash%2C%20Equity%20Securities%2C%20and%20Indebtedness) Cash, cash equivalents, and equity securities increased to $338.2 million, driven by operating activities, with consolidated indebtedness at $104.4 million - Cash, cash equivalents, and equity securities totaled **$338.2 million** at June 30, 2025, an increase of **$41.2 million** from **$297.0 million** at December 31, 2024[5](index=5&type=chunk)[18](index=18&type=chunk) - The increase in cash was primarily due to **$58.8 million** generated from operating activities across all Operated Segments, plus **$2.6 million** in net proceeds from the purchase and sale of equity securities[18](index=18&type=chunk) - The Parent company's total indebtedness was **zero** at June 30, 2025. On a consolidated basis, total indebtedness was **$104.4 million**, consisting of **$58.0 million** in non-recourse debt at Benchmark and **$46.4 million** in non-recourse debt at Deflecto[18](index=18&type=chunk) - Book value per share was **$5.99** as of June 30, 2025, with **96.4 million** shares of common stock outstanding[17](index=17&type=chunk) [Supplemental Information on Non-GAAP Measures](index=8&type=section&id=Supplemental%20Information%20on%20Non-GAAP%20Measures) This section defines and reconciles Acacia's non-GAAP financial measures, including Adjusted EBITDA metrics and Free Cash Flow [Non-GAAP Financial Measures Definitions](index=8&type=section&id=4.1.%20Non-GAAP%20Financial%20Measures%20Definitions) This section defines key non-GAAP financial measures including Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Diluted EPS, and Free Cash Flow - Total Company Adjusted EBITDA is defined as net income/(loss) before net income/(loss) attributable to noncontrolling interests, income tax (benefit)/expense, interest expense, interest income, and other expense, net and loss/(gain) on foreign currency exchange, net realized and unrealized (gain)/loss on derivatives, net realized and unrealized loss/(gain) on investments, non-recurring legacy legal expenses, depreciation, depletion and amortization, stock-based compensation, realized hedge gain/(loss), transaction-related costs, and costs related to the legacy items[27](index=27&type=chunk) - Operated Segment Adjusted EBITDA is the aggregate of Energy Operations, Manufacturing Operations, Industrial Operations, and Intellectual Property Operations Adjusted EBITDA[27](index=27&type=chunk) - Adjusted Net Income (Loss) is defined as GAAP Net Income (Loss) excluding costs related to certain legacy matters, stock-based compensation, transaction-related costs, amortization of acquired intangibles, any unrealized (gain)/loss on securities, any unrealized (gain)/loss on hedges, and any (gain)/loss on non-cash derivatives and taking into account the tax effect(s) of those adjustments[35](index=35&type=chunk) - Free Cash Flow (FCF) is defined as net cash provided by (used in) operating activities, less net purchases of property and equipment, oil and gas properties, and patent acquisitions ('Capital Expenditures')[34](index=34&type=chunk) [Segment Adjusted EBITDA Reconciliations](index=9&type=section&id=4.2.%20Segment%20Adjusted%20EBITDA%20Reconciliations) Detailed reconciliations of GAAP Operating Income (Loss) to Adjusted EBITDA are provided for each operating segment and Parent Costs - Detailed reconciliation tables are provided for each segment (Energy, Industrial, Manufacturing, Intellectual Property) and Parent Costs, showing adjustments from GAAP Operating Income (Loss) to Adjusted EBITDA for items such as depreciation, depletion & amortization, stock-based compensation, realized hedge gain (loss), transaction-related costs, legacy matter costs, and severance costs[38](index=38&type=chunk)[39](index=39&type=chunk) [Corporate Information](index=5&type=section&id=Corporate%20Information) Corporate information includes investor conference call details, company overview, safe harbor statement, and investor contact [Investor Conference Call](index=5&type=section&id=5.1.%20Investor%20Conference%20Call) Acacia Research Corporation will host a conference call on August 6, 2025, at 8:00 a.m. ET to discuss financial results - A conference call to discuss financial results will be held on **August 6, 2025**, at **8:00 a.m. Eastern Time**[19](index=19&type=chunk) - Access to the live call is available by dialing **877-545-0523** (U.S. and Canada) or **973-528-0016** (international) with access code '**395103**'. A webcast will also be available on the company's website[19](index=19&type=chunk) [About the Company](index=5&type=section&id=5.2.%20About%20the%20Company) Acacia (Nasdaq: ACTG) acquires and operates businesses in technology, energy, and industrial sectors, leveraging expertise and capital to drive value - Acacia (Nasdaq: **ACTG**) acquires and operates businesses across the mature technology, energy, and industrial/manufacturing sectors[20](index=20&type=chunk) - The company leverages its expertise, significant capital base, and deep industry relationships to drive value, evaluating opportunities based on the attractiveness of underlying cash flows[20](index=20&type=chunk) - Acacia operates its businesses based on three key principles: people, process, and performance[20](index=20&type=chunk) [Safe Harbor Statement](index=5&type=section&id=5.3.%20Safe%20Harbor%20Statement) This section contains forward-looking statements subject to risks and uncertainties, with actual results potentially differing due to various factors - The news release contains forward-looking statements based on current expectations, subject to risks and uncertainties as defined by the Private Securities Litigation Reform Act of 1995[21](index=21&type=chunk) - Factors that could cause actual results to differ materially include the ability to successfully identify, diligence, complete, and integrate strategic acquisitions, performance of businesses, market conditions (e.g., oil and gas, inflation), supply chain disruptions, regulatory changes, and security threats[21](index=21&type=chunk) - The company undertakes no obligation to revise or update publicly any forward-looking statements, except as required by applicable law[21](index=21&type=chunk) [Investor Contact](index=5&type=section&id=5.4.%20Investor%20Contact) Contact information for investor inquiries is provided - Investor contact: Gagnier Communications, **ir@acaciares.com**[22](index=22&type=chunk)

Core Viewpoint - Acacia Research (NASDAQ: ACTG) shares have shown significant recovery following a positive quarterly earnings report released in May [1] Summary by Relevant Sections - **Company Performance** - The company experienced a notable rebound in its stock price due to favorable market reactions to its quarterly earnings release [1]

Acacia Research (ACTG) FY Conference Summary Company Overview - Acacia Research has transitioned from an intellectual property business to a value-based acquirer of companies, focusing on creating a diversified portfolio of assets [2][3] - The company has a book value of approximately $577 million, translating to about $6 per share, with $340 million in cash and public securities [4] Financial Performance - Acacia generated $222 million in revenue and $61 million in EBITDA, with $40 million of EBITDA related to its former intellectual property business [5] - The company operates with no debt, emphasizing a strong financial position [5] Investment Strategy - The management team, led by the CEO with a private equity background, focuses on acquiring undervalued businesses, particularly in contrarian sectors [6][8] - Acacia aims to improve the operational efficiency and profitability of acquired businesses, emphasizing hands-on management rather than passive ownership [10][11] - The company has seen a significant number of acquisition opportunities, evaluating 350 businesses last year and 280 so far this year, but remains selective [9][50] Recent Acquisitions - Acacia has made strategic acquisitions, including Benchmark Energy and Deflecto, to build a scaled oil and gas platform and diversify its portfolio [15][22] - The acquisition of Benchmark was based on identifying dislocation in the oil and gas market, focusing on cash flow generation rather than traditional valuation metrics [17][19] - Deflecto was acquired as a collection of three unrelated businesses, with plans to streamline operations and enhance value through cost-cutting and management alignment [22][24] Operational Focus - The company emphasizes operational improvements and continuous enhancement of acquired businesses, aiming to generate cash flow and increase margins [11][20] - Acacia's approach includes leveraging existing management expertise and operational partners to drive performance in acquired companies [8][26] Market Position and Future Outlook - Acacia is exploring opportunities in specialty lending and insurance, indicating a strategic focus on markets with limited capital flow [51][52] - The company is cautious about entering new markets, preferring to build around existing positions and leverage its team's expertise [54] - Acacia aims to unlock trapped value in its portfolio, with a long-term vision of growing into a formidable public holding company with multiple large businesses [42][43] Conclusion - Acacia Research is positioned as a value-oriented acquirer with a strong financial foundation and a clear strategy for operational improvement and growth through selective acquisitions [34][55]

Core Viewpoint - Acacia Research (NASDAQ: ACTG) has seen volatile share price movements since the last analysis in January, indicating potential fluctuations in investor sentiment and market conditions [1]. Company Summary - The company has maintained a long position in its shares, suggesting confidence in its future performance despite recent price turbulence [1].

Financial Performance - Total revenues for Q1 2025 reached $124.4 million, a significant increase of 412% compared to $24.3 million in Q1 2024[16] - Operating income for Q1 2025 was $38.3 million, compared to an operating loss of $2.1 million in Q1 2024[16] - Net income attributable to Acacia Research Corporation for Q1 2025 was $24.3 million, a turnaround from a net loss of $0.2 million in Q1 2024[16] - The company reported a basic net income per common share of $0.25 for Q1 2025, compared to no earnings per share in Q1 2024[16] - For the three months ended March 31, 2025, Acacia Research Corporation reported a net income of $23,528,000, a significant increase from a net loss of $189,000 in the same period of 2024[19] - Acacia's net income attributable to common stockholders for the three months ended March 31, 2025, was $24.287 million, compared to a loss of $186,000 in the same period of 2024[186] Cash and Assets - Cash and cash equivalents as of March 31, 2025, were $272.0 million, slightly down from $273.9 million at the end of 2024[14] - Total assets increased to $801.6 million as of March 31, 2025, up from $756.4 million at the end of 2024[14] - The company’s total stockholders' equity increased to $577.3 million as of March 31, 2025, from $552.6 million at the end of 2024[14] - Acacia's cash and cash equivalents decreased to $271,964,000 at the end of Q1 2025, down from $438,762,000 at the end of Q1 2024, reflecting a decline of 38%[19] Liabilities and Equity - Total liabilities rose to $224.3 million as of March 31, 2025, compared to $203.8 million at the end of 2024[14] - The company recorded total unrecognized tax benefits of approximately $935,000 as of March 31, 2025[103] - The effective tax rate for the company was slightly lower than the U.S. federal statutory rate due to non-controlling partnership earnings allocated to minority shareholders[102] Revenue Sources - The company is focusing on expanding its intellectual property operations, which generated $69.9 million in revenue for Q1 2025, compared to $13.6 million in Q1 2024[16] - Acacia's total license revenue for the three months ended March 31, 2025, was $69,905,000, a significant increase from $13,623,000 in the same period of 2024, representing a growth of approximately 413%[49] - Paid-up license revenue agreements contributed $69,490,000 to total revenue in Q1 2025, compared to $12,365,000 in Q1 2024, indicating a growth of about 463%[49] Acquisitions and Investments - Acacia invested $10 million to acquire a 50.4% equity interest in Benchmark Energy II, LLC, which operates in the oil and gas sector[31] - The company completed the acquisition of Deflecto Acquisition, Inc. for $103.7 million, funded by a combination of a $48 million secured term loan and cash[34] - The identifiable net assets acquired in the Deflecto transaction were valued at $80.965 million, resulting in goodwill of $16.798 million[111] Operational Highlights - The company aims to acquire businesses with total enterprise values of $1 billion or less, focusing on those with stable cash flow generation and scalability[23] - The company operates in four reportable segments: Intellectual Property Operations, Industrial Operations, Energy Operations, and Manufacturing Operations[187] - The Manufacturing Operations segment was established following the acquisition of Deflecto in October 2024, focusing on specialty plastics[193] Segment Performance - The segment gross profit for intellectual property operations was $41,993,000, while the total segment operating income was $43,082,000 for the three months ended March 31, 2025[197] - Benchmark's total revenue for the three months ended March 31, 2025, was $18,306,000, a substantial increase from $1,856,000 in Q1 2024, marking a growth of approximately 884%[67] Debt and Financing - The Benchmark Revolving Credit Facility has a maximum credit amount of $150 million, with an outstanding balance of $61.5 million as of March 31, 2025, down from $66.5 million at the end of 2024[132] - The interest rate on the Deflecto Term Loan was 8% as of March 31, 2025, with an outstanding balance of $46.9 million[140] Stock and Compensation - The total compensation expense for share-based awards recognized in general and administrative expenses for the three months ended March 31, 2025, was $922,000, an increase from $858,000 in 2024[184] - As of March 31, 2025, there were 15,999,789 shares of common stock reserved for issuance under the Plans[179] Strategic Initiatives - Acacia's relationship with Starboard Value, LP enhances its access to industry expertise and acquisition opportunities, contributing to its strategic growth initiatives[24] - The company emphasizes a disciplined approach to identifying acquisition opportunities, avoiding traditional sale processes to secure attractive pricing[209] - The company’s approach to transactions is as business owners rather than purely financial investors, aiming for long-term value creation for shareholders[205]

Financial Data and Key Metrics Changes - Acacia recorded total revenue of $124.4 million during the first quarter, a significant increase compared to the previous year [21] - The company reported first quarter GAAP operating income of $38.3 million, compared to a GAAP operating loss of $2.1 million in the same quarter last year [24] - GAAP net income attributable to Acacia was $24.3 million or $0.25 per share, compared to a net loss of $200,000 or $0 per share in the prior year period [25] Business Line Data and Key Metrics Changes - Energy operations generated $18.3 million in revenue for the quarter, compared to $1.9 million in the same quarter last year [21] - Manufacturing operations generated $28.5 million in revenue, while industrial operations generated $7.7 million, a slight decrease from $8.8 million in the same quarter last year [22] - Intellectual property operations generated $69.9 million in licensing and other revenue, compared to $13.6 million in the same quarter last year, primarily due to a large settlement [23] Market Data and Key Metrics Changes - The company has hedged over 70% of its production through the end of 2027, providing price protection and greater cash flow predictability [11] - Approximately 51% of Benchmark's last twelve months revenue and 78% of production was driven by gas and natural gas liquids, which have remained resilient despite recent market volatility [11] Company Strategy and Development Direction - Acacia's strategy focuses on acquiring and building businesses with stable long-term cash flow generation and scalability [6] - The company is actively exploring strategic acquisitions and organic growth initiatives across its verticals, particularly in energy and industrial sectors [28] - Management is evaluating opportunities in the mature technology sector, aiming to enhance the value of its intellectual property portfolio [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in Acacia's resilience amid macroeconomic uncertainties and believes the current environment presents compelling opportunities [28] - The company is optimistic about the long-term growth potential of its Deflecto business and is implementing initiatives to optimize operations [15] - Management highlighted the importance of disciplined cost management and operational excellence in navigating volatile market conditions [16] Other Important Information - Total consolidated G&A expense was $17.3 million during the first quarter, an increase from $12.5 million in the same quarter last year, primarily due to the addition of Deflecto [23] - Cash, cash equivalents, and equity securities at fair value totaled $290 million as of March 31, 2025, compared to $297 million at December 31, 2024 [26] Q&A Session Summary Question: Can you detail the total winnings from the WiFi portfolio? - Management indicated that since Q1 2023, approximately $178 million has been generated from the WiFi assets, with more value expected in the portfolio [33] Question: Are you seeing prices coming down in M&A? - Management confirmed they are looking at opportunities in energy, industrials, and mature technology, with a focus on assets that can be improved through operational efficiencies [35][36] Question: What is the calculus on protecting tax attributes versus share buybacks? - Management completed a $20 million buyback and is monitoring tax attributes to determine the optimal time for further buybacks [41] Question: Will the recent settlement pressure the defendant in the $37 million judgment case to settle sooner? - Management expressed hope that the recent settlement would encourage a quicker resolution, but could not provide a definitive answer [50]