Core Insights - The article highlights three stocks under $5 that present significant investment opportunities in the gold industry, healthcare technology, and specialty finance sectors [1][2]. Group 1: Acacia (ACTG) - Acacia's oil and gas subsidiary, Benchmark, has expanded its portfolio through a significant acquisition in Texas and Oklahoma, which is expected to generate approximately $50 million in asset-level cash flow in 2024 [3][4]. - Total sales for Acacia increased from $14.8 million to $24.3 million in Q1 2024, with a notable rise in licensing and other revenue from the intellectual property sector [4]. - Acacia has eliminated non-recourse debt at Benchmark and paid off senior secured notes, resulting in a debt-free parent company and a healthier financial position [4]. Group 2: CareCloud (CCLD) - CareCloud has reduced yearly expenditures by nearly $22 million since October 2023, leading to a Q1 2024 GAAP operational gain of $129,000, a significant improvement from a loss of $223,000 in Q1 2023 [5]. - The company's Q1 2024 GAAP net loss decreased to $241,000 from $401,000, and it reported an adjusted EBITDA of $3.7 million [5]. - CareCloud's free cash flow in Q1 2024 was $2.2 million, up from $2.0 million in Q1 2023, allowing for a reduction in debt commitments [6]. Group 3: New Gold (NGD) - New Gold generated substantial cash from operations amounting to $73 million in Q1 2024, despite reduced sales compared to Q1 2023, maintaining $530 million in total liquidity and $157 million in cash [7]. - The company invested over $35 million in growth capital during Q1, focusing on development initiatives to increase production capacity [7]. - New Gold's safety statistics indicate a commitment to responsible mining, with a total recordable injury frequency rate (TRIFR) of 0.92 in Q1 [8].

Financial Data and Key Metrics Changes - The GAAP book value at March 31, 2024, was $589.6 million or $5.89 per share, compared to $5.90 per share at December 31, 2023 [14][18] - Total revenues for the first quarter were $24.3 million, up from $14.8 million in the same quarter last year, reflecting a significant increase [19] - The net loss attributable to Acacia was $0.2 million or $0.00 per share, compared to a net income of $9.4 million or a loss of $0.07 per diluted share in the first quarter of last year [22] Business Line Data and Key Metrics Changes - The intellectual property business generated $13.6 million in licensing and other revenue during the quarter, compared to $4.2 million in the same quarter last year, indicating strong growth [19] - Printronix generated $8.8 million in revenues during the quarter, down from $10.6 million in the same quarter last year [20] - Benchmark, the energy operations unit, generated $1.9 million in revenue during the quarter, excluding gains on hedging contracts [20] Market Data and Key Metrics Changes - The cash, cash equivalents, and equity securities at fair value totaled $461.7 million at March 31, 2024, compared to $403.2 million at December 31, 2023 [23] - Cash per share stood at $4.39 per share as of March 31, 2024 [24] Company Strategy and Development Direction - The company is focused on two main strategies: growing cash flow and earnings from current businesses and evaluating opportunities to acquire new businesses [5] - The acquisition of Benchmark significantly expands the portfolio, adding approximately 140,000 net acres and 470 operated producing wells [9] - The company aims to deploy capital into new acquisitions across various sectors, including industrials, technology, and healthcare [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the M&A environment, noting a strong pipeline of opportunities in both public and private markets [13] - The company is not reliant on leverage for returns and is seeing traditional banks reemerging, which may allow for opportunistic leverage use [13] - Management indicated that while they are not looking to make macro-related bets, a hard landing could present good buying opportunities [40] Other Important Information - The company has approximately $400 million in capital to deploy into new acquisitions [12] - The Board of Directors nominated Michelle Felman as an independent director, bringing extensive experience in real estate, finance, and investing [15][16] Q&A Session Summary Question: Valuation of Benchmark - The investment in Benchmark is marked at cost, and the book value did not increase due to deal-related expenses [26][27] Question: Expected EBITDA from Benchmark - Benchmark is expected to generate approximately $45 million in EBITDA, with Acacia entitled to 73.5% of that amount [28][30] Question: Acquisition Strategy - The company is looking for acquisitions with a favorable risk/reward profile and is not focused on making acquisitions for the sake of it [37][38] Question: Cash on Balance Sheet - Cash and cash equivalents were reported at $439 million, with the total including equity securities at $460 million [43][44] Question: Stock Buyback Plans - The company has not yet bought back any stock, evaluating opportunities for acquisitions instead [48][50] Question: Income from Liquidity - Interest income for the quarter was reported at $4.9 million [60]

[FORM 10-Q General Information](index=1&type=section&id=FORM%2010-Q%20General%20Information) This Form 10-Q for **Q1 2024** identifies **Acacia Research Corporation** as a **Non-accelerated Filer** with **100 million** shares outstanding - The report is a Quarterly Report on **Form 10-Q** for the period ended **March 31, 2024**[1](index=1&type=chunk) - **Acacia Research Corporation** is classified as a **Non-accelerated Filer** and a **Smaller reporting company**[1](index=1&type=chunk) - As of **May 6, 2024**, the number of shares outstanding of the registrant's common stock was **100,021,951**[1](index=1&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=2&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights forward-looking statements, subject to risks and uncertainties, with no obligation to update them - This Quarterly Report contains forward-looking statements that involve risks and uncertainties, intended to qualify for the safe harbor from liability established by the **Private Securities Litigation Reform Act of 1995**[13](index=13&type=chunk) - Forward-looking statements are subject to **substantial risks and uncertainties**, including inability to acquire/integrate businesses, cybersecurity incidents, patent-related legal expenses, oil and gas price fluctuations, inflationary pressures, and supply chain disruptions[13](index=13&type=chunk) - The company expressly disclaims any intent or obligation to update any forward-looking statements after the date of the report, except as required by applicable law[15](index=15&type=chunk) [PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion for the quarter [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements for **Q1 2024**, including balance sheets, operations, equity, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets provide a snapshot of the company's financial position, detailing assets, liabilities, and equity at quarter-end Total Equity Securities Fair Value | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Total assets | **$631,725** | **$633,545** | | Total liabilities | **$42,121** | **$43,936** | | Total stockholders' equity | **$589,604** | **$589,609** | | Cash and cash equivalents | **$438,762** | **$340,091** | | Equity securities | **$22,918** | **$63,068** | | Accounts receivable, net | **$15,372** | **$80,555** | | Total current assets | **$553,147** | **$554,512** | | Total current liabilities | **$25,846** | **$27,636** | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) This statement outlines the company's revenues, expenses, and net income or loss for the three-month period Unaudited Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Total revenues | **$24,320** | **$14,803** | **$9,517** | **64%** | | Intellectual property operations revenue | **$13,623** | **$4,176** | **$9,447** | **226%** | | Industrial operations revenue | **$8,841** | **$10,627** | **$(1,786)** | **(17%)** | | Energy operations revenue | **$1,856** | **$0** | **$1,856** | N/A | | Total costs and expenses | **$26,407** | **$24,127** | **$2,280** | **9%** | | Operating loss | **$(2,087)** | **$(9,324)** | **$7,237** | **(78%)** | | Change in fair value of equity securities | **$(26,701)** | **$3,343** | **$(30,044)** | **(899%)** | | Gain (loss) on sale of equity securities | **$28,861** | **$(1,361)** | **$30,222** | **(2221%)** | | Legal liability fee | **$(6,243)** | **$0** | **$(6,243)** | N/A | | Net (loss) income attributable to Acacia Research Corporation | **$(186)** | **$9,447** | **$(9,633)** | **(102%)** | | Basic net income per common share | **$0** | **$0.12** | **$(0.12)** | **(100%)** | | Diluted net loss per common share | **$0** | **$(0.07)** | **$0.07** | **(100%)** | [Unaudited Condensed Consolidated Statements of Series A Redeemable Convertible Preferred Stock and Stockholders' Equity](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Series%20A%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders%27%20Equity) This statement details changes in preferred stock and stockholders' equity, including net loss and share-based compensation Unaudited Condensed Consolidated Statements of Series A Redeemable Convertible Preferred Stock and Stockholders' Equity | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------------- | :---------------------------- | :------------------------------- | | Total Stockholders' Equity (End of Period) | **$589,604** | **$589,609** | | Net loss including noncontrolling interests | **$(189)** | N/A | | Compensation expense for share-based awards | **$858** | N/A | | Common Stock Issued (Shares) | **100,021,951** | **99,895,473** | - For the three months ended **March 31, 2023**, key activities included accretion of **Series A Redeemable Convertible Preferred Stock** to redemption value (**$1,554 thousand**) and issuance of common stock from the **Rights Offering** (**15,068,753** shares for **$79,111 thousand**)[27](index=27&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities for the period Unaudited Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :----------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | | Net cash provided by (used in) operating activities | **$54,839** | **$(4,349)** | **$59,188** | | Net cash provided by investing activities | **$42,040** | **$2,783** | **$39,257** | | Net cash provided by financing activities | **$1,826** | **$77,995** | **$(76,169)** | | Increase in cash and cash equivalents | **$98,671** | **$76,441** | **$22,230** | | Cash and cash equivalents, ending | **$438,762** | **$364,227** | **$74,535** | - Operating activities in **Q1 2024** were positively impacted by a **$65,156 thousand** decrease in accounts receivable, compared to a **$451 thousand** decrease in **Q1 2023**[32](index=32&type=chunk) - Investing activities in **Q1 2024** were significantly boosted by **$57,854 thousand** from sales of equity securities, compared to **$8,032 thousand** in **Q1 2023**[32](index=32&type=chunk) - Financing activities in **Q1 2023** included **$79,111 thousand** from the **Rights Offering**, which did not recur in **Q1 2024**[32](index=32&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Description of Business](index=10&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS) This note describes **Acacia Research Corporation's** strategy of acquiring and managing companies across IP, industrial, and energy operations - **Acacia Research Corporation** focuses on acquiring and managing companies across industrial, energy, technology, and healthcare verticals, targeting complex situations and businesses valued under **$2 billion**[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - The strategic relationship with **Starboard Value, LP** (controlling shareholder with ~**61.2%** ownership as of **May 6, 2024**) provides access to industry expertise and assists with sourcing and evaluating acquisition opportunities[38](index=38&type=chunk) - **Intellectual Property Operations** involves investing in, licensing, and enforcing patent portfolios, assuming operational expenses and sharing net licensing revenue with partners[39](index=39&type=chunk) - **Industrial Operations**, through **Printronix** (acquired **October 2021**), manufactures and distributes industrial impact printers and related consumables/services globally[42](index=42&type=chunk) - **Energy Operations**, through **Benchmark** (**50.4%** equity interest acquired **November 2023**), is an oil and gas company focused on acquiring, producing, and developing assets in **Texas and Oklahoma**. Post-**April 2024** acquisition, **Acacia's** interest increased to ~**73.5%**[43](index=43&type=chunk)[45](index=45&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines key accounting principles applied in preparing consolidated financial statements, including revenue recognition - The consolidated financial statements include wholly and majority-owned/controlled subsidiaries, with **Benchmark** being a **consolidated variable interest entity (VIE)**[47](index=47&type=chunk)[49](index=49&type=chunk) - Revenue from **Intellectual Property Operations** is recognized upon transfer of control of bundled IP rights, primarily from **one-time paid-up license fees** or **sales-based recurring agreements**[51](index=51&type=chunk)[54](index=54&type=chunk) Intellectual Property Operations Revenue Breakdown | Type of Revenue | 3 Months Ended March 31, 2024 (in thousands) | 3 Months Ended March 31, 2023 (in thousands) | | :------------------------ | :------------------------------------------- | :------------------------------------------- | | Paid-up license revenue | **$12,365** | **$3,900** | | Recurring license revenue | **$1,258** | **$276** | | **Total** | **$13,623** | **$4,176** | - Revenue from **Industrial Operations** (**Printronix**) is recognized upon transfer of goods/services, with products generally recognized upon shipment and services over time[58](index=58&type=chunk)[63](index=63&type=chunk) Industrial Operations Revenue Breakdown | Type of Revenue | 3 Months Ended March 31, 2024 (in thousands) | 3 Months Ended March 31, 2023 (in thousands) | | :------------------------ | :------------------------------------------- | :------------------------------------------- | | Printers, consumables, parts | **$8,078** | **$9,634** | | Services | **$763** | **$993** | | **Total** | **$8,841** | **$10,627** | - Revenue from **Energy Operations** (**Benchmark**) is recognized from sales of oil and natural gas products upon transfer of control at delivery points, with pricing tied to market indices[67](index=67&type=chunk)[68](index=68&type=chunk) Energy Operations Revenue Breakdown (3 Months Ended March 31, 2024) | Type of Revenue | Amount (in thousands) | | :------------------------ | :-------------------- | | Oil sales | **$661** | | Natural gas sales | **$730** | | Natural gas liquids sales | **$465** | | **Total** | **$1,856** | - **Benchmark's Revolving Credit Facility** had an outstanding balance of **$13.0 million** as of **March 31, 2024**, at an **11%** interest rate. A new **$150 million Revolving Credit Facility** was entered into on **April 17, 2024**, with **$82.7 million** drawn[86](index=86&type=chunk)[88](index=88&type=chunk) - The company's **effective tax rates** were **85%** for **Q1 2024** and **20%** for **Q1 2023**, with a partial valuation allowance against net deferred tax assets[99](index=99&type=chunk) - Management is evaluating the impact of recently issued **ASU 2023-07 (Improvements to Reportable Segment Disclosures)** and **ASU 2023-09 (Improvements to Income Tax Disclosures)**[102](index=102&type=chunk)[105](index=105&type=chunk) [3. Equity Securities](index=21&type=section&id=3.%20EQUITY%20SECURITIES) This note details equity investments, including fair value changes and proceeds from **Life Sciences Portfolio** monetization Total Equity Securities Fair Value | Date | Fair Value (in thousands) | | :--------------- | :------------------------ | | March 31, 2024 | **$22,918** | | December 31, 2023 | **$63,068** | - The **Life Sciences Portfolio**, acquired in **2020** for approximately **$277.5 million**, has generated **$564.1 million** in proceeds through **March 31, 2024**, with a remaining fair value of **$25.7 million**[107](index=107&type=chunk)[108](index=108&type=chunk)[235](index=235&type=chunk) - On **January 19, 2024**, the company completed the sale of its **Arix Bioscience PLC shares** for **$57.1 million**, resulting in a realized gain, and no longer owns any **Arix** shares[109](index=109&type=chunk)[235](index=235&type=chunk) Net Realized and Unrealized Gain (Life Sciences Portfolio) | Metric | 3 Months Ended March 31, 2024 (in thousands) | 3 Months Ended March 31, 2023 (in thousands) | | :----------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Change in fair value of equity securities | **$(28,581)** | **$577** | | Gain on sale of equity securities | **$28,581** | **$0** | | **Net realized and unrealized gain** | **$0** | **$577** | [4. Inventories](index=22&type=section&id=4.%20INVENTORIES) This note provides a breakdown of **Printronix's** inventory components and their carrying amounts Printronix Inventories | Date | Amount (in thousands) | | :--------------- | :-------------------- | | March 31, 2024 | **$9,880** | | December 31, 2023 | **$10,921** | - As of **March 31, 2024**, inventories consisted of **raw materials** (**$3,404k**), **subassemblies and work in process** (**$1,533k**), and **finished goods** (**$5,447k**)[112](index=112&type=chunk) [5. Property, Plant and Equipment, Net](index=23&type=section&id=5.%20PROPERTY%2C%20PLANT%20AND%20EQUIPMENT%2C%20NET) This note presents the net carrying value of property, plant, and equipment, and associated depreciation Property, Plant and Equipment, Net | Date | Amount (in thousands) | | :--------------- | :-------------------- | | March 31, 2024 | **$2,090** | | December 31, 2023 | **$2,356** | - Total **depreciation and amortization expense** was **$280,000** for the three months ended **March 31, 2024**, a decrease from **$347,000** in the comparable prior period[116](index=116&type=chunk) [6. Oil and Natural Gas Properties, Net](index=23&type=section&id=6.%20OIL%20AND%20NATURAL%20GAS%20PROPERTIES%2C%20NET) This note details **Benchmark's** net oil and natural gas properties and related depletion expenses Benchmark's Oil and Natural Gas Properties, Net | Date | Amount (in thousands) | | :--------------- | :-------------------- | | March 31, 2024 | **$24,952** | | December 31, 2023 | **$25,117** | - Total **depletion and depreciation expense** for **Benchmark's** oil and natural gas properties was **$422,000** for the three months ended **March 31, 2024**[117](index=117&type=chunk) - No **impairment** to proved oil and natural gas properties was determined as of **March 31, 2024**[117](index=117&type=chunk) [7. Goodwill and Other Intangible Assets, Net](index=23&type=section&id=7.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS%2C%20NET) This note provides goodwill by segment and other intangible assets, including amortization schedules Goodwill Carrying Amount by Segment | Segment | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------ | :---------------------------- | :------------------------------- | | Industrial Operations | **$7,541** | **$7,541** | | Energy Operations | **$1,449** | **$1,449** | | **Total** | **$8,990** | **$8,990** | Other Intangible Assets, Net | Date | Amount (in thousands) | | :--------------- | :-------------------- | | March 31, 2024 | **$29,690** | | December 31, 2023 | **$33,556** | - Total **other intangible asset amortization expense** was **$3.9 million** for the three months ended **March 31, 2024**, compared to **$3.0 million** for the same period in **2023**[120](index=120&type=chunk) Scheduled Annual Aggregate Amortization Expense | Years Ending December 31, | Amount (in thousands) | | :------------------------ | :-------------------- | | Remainder of 2024 | **$10,964** | | 2025 | **$12,485** | | 2026 | **$3,173** | | 2027 | **$1,734** | | 2028 | **$1,334** | | **Total** | **$29,690** | [8. Accrued Expenses and Other Current Liabilities](index=25&type=section&id=8.%20ACCURRED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) This note details accrued expenses and other current liabilities, primarily due to patent cost payments Accrued Expenses and Other Current Liabilities | Date | Amount (in thousands) | | :--------------- | :-------------------- | | March 31, 2024 | **$3,990** | | December 31, 2023 | **$8,405** | - The decrease in accrued expenses was primarily due to the payment of **$4.0 million** in **accrued patent costs** on **January 31, 2024**[122](index=122&type=chunk)[123](index=123&type=chunk) [9. Starboard Investment](index=25&type=section&id=9.%20STARBOARD%20INVESTMENT) This note describes recapitalization, **Starboard's** ownership, and related transactions including the **Rights Offering** - The company completed a **recapitalization** in **2023** to simplify its capital structure, which included the conversion of **Series A Redeemable Convertible Preferred Stock** and the exercise/cancellation of **Series B Warrants**[126](index=126&type=chunk)[229](index=229&type=chunk) - On **July 13, 2023**, **Starboard** converted **350,000** shares of **Series A Preferred Stock** into **9,616,746 common shares**; no **Series A Preferred Stock** remains outstanding as of **March 31, 2024**[127](index=127&type=chunk)[130](index=130&type=chunk) - On **July 13, 2023**, **Starboard** exercised **Series B Warrants**, resulting in **31,506,849 common shares**, cancellation of **$60.0 million Senior Secured Notes**, and **$55.0 million** gross proceeds to the company; no **Series B Warrants** remain outstanding[127](index=127&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - As of **May 6, 2024**, **Starboard** beneficially owned **61,123,595** shares of **common stock**, representing approximately **61.2%** of the total outstanding **common stock**[38](index=38&type=chunk)[127](index=127&type=chunk)[230](index=230&type=chunk) - A **Rights Offering** in **Q1 2023** generated approximately **$361,000** from public and **$78.8 million** from a concurrent **private offering** (**Starboard**), issuing **15,068,753 common shares**[137](index=137&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk) - A **Services Agreement** with **Starboard** (**December 2023**) provides trade execution, research, and due diligence on an expense reimbursement basis; no reimbursements were made in **Q1 2024**[145](index=145&type=chunk) [10. Fair Value Measurements](index=29&type=section&id=10.%20FAIR%20VALUE%20MEASUREMENTS) This note explains the fair value hierarchy for financial assets and liabilities, including equity and commodity derivatives - The company categorizes **fair value measurements** into a **three-level hierarchy**: **Level 1** (quoted prices), **Level 2** (observable inputs), and **Level 3** (unobservable inputs)[146](index=146&type=chunk) Financial Assets Measured at Fair Value (March 31, 2024) | Instrument | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------- | | Equity securities | **$22,918** | **$0** | **$0** | **$22,918** | | Commodity derivative instruments | **$0** | **$2,094** | **$0** | **$2,094** | | **Total** | **$22,918** | **$2,094** | **$0** | **$25,012** | - As of **March 31, 2024**, there are no **Level 3** liabilities, as **Series B Warrants** and **Series A Embedded Derivatives** were exercised/converted in **2023**, resulting in zero fair value[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - **Benchmark's commodity derivative instruments** had an aggregate fair value of **$2.1 million** (asset) as of **March 31, 2024**[148](index=148&type=chunk) [11. Related Party Transactions](index=31&type=section&id=11.%20RELATED%20PARTY%20TRANSACTIONS) This note discloses related party transactions, including a loan facility and **Starboard Services Agreement** reimbursements - The company had a **Loan Facility** with a private portfolio company with a balance of **$2.6 million** as of **March 31, 2024**, bearing **9.5%** interest per annum[154](index=154&type=chunk) - **Interest income** of **$59,000** was recorded from the **Loan Facility** for the three months ended **March 31, 2024**[154](index=154&type=chunk) - No reimbursements were made to **Starboard** under the **Services Agreement** during the three months ended **March 31, 2024**[145](index=145&type=chunk)[154](index=154&type=chunk) [12. Commitments and Contingencies](index=31&type=section&id=12.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines lease obligations, inventor royalties, and legal contingencies, including an accrued loss for the **AIP Matter** - The company leases office facilities under **operating lease arrangements** expiring through **July 2027**[155](index=155&type=chunk)[156](index=156&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) Future Minimum Lease Payments (March 31, 2024) | Years Ending December 31, | Amount (in thousands) | | :------------------------ | :-------------------- | | Remainder of 2024 | **$825** | | 2025 | **$924** | | 2026 | **$579** | | 2027 | **$243** | | **Total minimum payments**| **$2,571** | - The company is subject to **inventor royalties** and **contingent legal fees** based on future net revenues from patent licensing and enforcement[162](index=162&type=chunk)[163](index=163&type=chunk) - An **accrued loss contingency** of **$8.5 million** as of **March 31, 2024**, includes an additional accrual of **$6.2 million** in **Q1 2024** related to the **AIP Matter** (profit interests for former executives)[167](index=167&type=chunk) - The **Slingshot Technologies, LLC lawsuit**, alleging misappropriation of confidential information, was transferred to **Delaware Superior Court**, with oral arguments on summary judgment held **March 28, 2024**[165](index=165&type=chunk) [13. Stockholders' Equity](index=34&type=section&id=13.%20STOCKHOLDERS%27%20EQUITY) This note details stock repurchase programs and a charter provision designed to protect tax assets - The company has a **stock repurchase program** approved in **November 2023** for up to **$20.0 million** (capped at **5,800,000** shares); no repurchases were made under this program in **Q1 2024**[173](index=173&type=chunk) - A previous **stock repurchase program** (**March 2022**) was completed in **July 2022**, repurchasing **8,453,519** shares for **$40.0 million**[172](index=172&type=chunk) - A **Charter Provision** prohibits **common stock** transfers that could result in an **ownership change**, aiming to protect the company's ability to utilize potential tax assets like **net operating loss carryforwards**[176](index=176&type=chunk) [14. Equity-Based Incentive Plans](index=35&type=section&id=14.%20EQUITY-BASED%20INCENTIVE%20PLANS) This note describes equity-based compensation plans, including stock options, **RSAs**, and **RSUs**, and associated expenses - The company grants **stock options**, **restricted stock awards (RSAs)**, and **restricted stock units (RSUs)** under the **2016 Acacia Research Corporation Stock Incentive Plan** (the **2013 Plan** expired)[177](index=177&type=chunk)[183](index=183&type=chunk) - As of **March 31, 2024**, there were **1,457,214 shares available for grant** under the **2016 Plan**[184](index=184&type=chunk) Stock Option Activity (3 Months Ended March 31, 2024) | Metric | Options | Weighted Average Exercise Price | | :---------------------- | :-------- | :------------------------------ | | Outstanding (Dec 31, 2023) | **1,108,187** | **$4.18** | | Forfeited/Expired | **(45,000)** | **$5.40** | | Outstanding (Mar 31, 2024) | **1,063,187** | **$4.12** | | Exercisable (Mar 31, 2024) | **556,481** | **$4.16** | Nonvested Restricted Stock Activity (3 Months Ended March 31, 2024) | Metric | RSAs (Shares) | RSUs (Units) | PSUs (Units) | | :---------------------- | :------------ | :----------- | :----------- | | Nonvested (Dec 31, 2023) | **193,665** | **1,408,491** | **1,981,464** | | Vested | **(109,330)** | **(275,244)** | **0** | | Forfeited | **0** | **(30,534)** | **0** | | Nonvested (Mar 31, 2024) | **84,335** | **1,102,713** | **1,981,464** | - Total **unrecognized stock-based compensation expense** as of **March 31, 2024**, was **$4.3 million**, to be amortized over a **weighted average remaining vesting period** of **1.8 years**[189](index=189&type=chunk) Compensation Expense for Share-Based Awards | Metric | 3 Months Ended March 31, 2024 (in thousands) | 3 Months Ended March 31, 2023 (in thousands) | | :----- | :------------------------------------------- | :------------------------------------------- | | Options | **$128** | **$28** | | RSAs | **$106** | **$209** | | RSUs | **$624** | **$240** | | **Total** | **$858** | **$477** | [15. Income/Loss Per Share](index=38&type=section&id=15.%20INCOME%2FLOSS%20PER%20SHARE) This note presents basic and diluted net income or loss per common share and weighted average shares outstanding Net (Loss) Income Attributable to Common Stockholders | Metric | 3 Months Ended March 31, 2024 (in thousands) | 3 Months Ended March 31, 2023 (in thousands) | | :----- | :------------------------------------------- | :------------------------------------------- | | Basic | **$(186)** | **$5,958** | | Diluted | **$(186)** | **$(6,496)** | Weighted Average Shares Outstanding | Metric | 3 Months Ended March 31, 2024 | 3 Months Ended March 31, 2023 | | :----- | :---------------------------- | :---------------------------- | | Basic | **99,745,905** | **47,971,931** | | Diluted | **99,745,905** | **89,067,821** | Per Share Data | Metric | 3 Months Ended March 31, 2024 | 3 Months Ended March 31, 2023 | | :----- | :---------------------------- | :---------------------------- | | Basic EPS | **$0** | **$0.12** | | Diluted EPS | **$0** | **$(0.07)** | - **Anti-dilutive potential common shares** excluded from diluted EPS computation totaled **4,231,699** for the three months ended **March 31, 2024**[192](index=192&type=chunk) [16. Segment Reporting](index=38&type=section&id=16.%20SEGMENT%20REPORTING) This note provides financial information by segment: **Intellectual Property**, **Industrial**, and **Energy Operations** - The company operates in **three reportable segments**: **Intellectual Property Operations**, **Industrial Operations**, and **Energy Operations** (new in **November 2023**)[192](index=192&type=chunk)[196](index=196&type=chunk) Segment Operating Income (3 Months Ended March 31, 2024) | Segment | Operating Income (in thousands) | | :-------------------------- | :------------------------------ | | Intellectual Property Operations | **$3,282** | | Industrial Operations | **$1,212** | | Energy Operations | **$156** | | **Total Segment Operating Income** | **$4,650** | Total Revenues by Segment | Segment | 3 Months Ended March 31, 2024 (in thousands) | 3 Months Ended March 31, 2023 (in thousands) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Intellectual Property Operations | **$13,623** | **$4,176** | | Industrial Operations | **$8,841** | **$10,627** | | Energy Operations | **$1,856** | **$0** | | **Total** | **$24,320** | **$14,803** | Revenues by Geographic Area (3 Months Ended March 31, 2024) | Geographic Area | Intellectual Property Operations (in thousands) | Industrial Operations (in thousands) | Energy Operations (in thousands) | Total (in thousands) | | :-------------------------- | :---------------------------------------------- | :----------------------------------- | :------------------------------- | :------------------- | | United States | **$2,064** | **$3,159** | **$1,856** | **$7,079** | | Asia-Pacific | **$11,558** | **$2,938** | **$0** | **$14,496** | | Europe, Middle East and Africa | **$0** | **$2,478** | **$0** | **$2,478** | | **Total** | **$13,623** | **$8,841** | **$1,856** | **$24,320** | [20. Subsequent Events](index=44&type=section&id=20.%20SUBSEQUENT%20EVENTS) This note discloses significant events after the balance sheet date, including **Benchmark's** upstream asset acquisition - On **April 17, 2024**, **Benchmark** completed the acquisition of certain **upstream assets** and **related facilities** in **Texas and Oklahoma** for **$145 million**, including approximately **140,000 net acres** and an interest in approximately **470 operated producing wells**[44](index=44&type=chunk)[211](index=211&type=chunk) - Following the acquisition, the company's interest in **Benchmark** increased to approximately **73.5%**[45](index=45&type=chunk)[211](index=211&type=chunk) - The acquisition was funded by **$59.9 million** from the company's **cash on hand**, **borrowings** under a **Revolving Credit Facility** (**$82.7 million** drawn), and a **cash contribution from other investors**[45](index=45&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, business strategy, segment operations, recent developments, and **Q1 2024** results [General Business Overview](index=45&type=section&id=General%20Business%20Overview) **Acacia Research Corporation's** investment strategy focuses on acquiring and managing companies across various verticals - **Acacia Research Corporation** focuses on acquiring and managing companies across industrial, energy, technology, and healthcare verticals, targeting complex situations where value is not fully recognized[214](index=214&type=chunk)[215](index=215&type=chunk) - The **business model is differentiated from private equity and hedge funds**, often initiating **strategic block positions** in public companies as a path to **whole company acquisitions**[215](index=215&type=chunk) - The company leverages its **disciplined focus**, willingness to invest in **off-the-run assets**, **strong relationships**, and expertise in **corporate governance** and **operational transformation**[216](index=216&type=chunk) - The strategic relationship with **Starboard Value, LP** provides access to industry expertise and assists with sourcing and evaluating acquisition opportunities[219](index=219&type=chunk) [Segment Overviews](index=46&type=section&id=Segment%20Overviews) This section overviews **Intellectual Property**, **Industrial**, and **Energy Operations** segments, highlighting core activities - **Intellectual Property Operations** invests in and licenses/enforces patent portfolios, having executed **over 1,600 license agreements** and **generated approximately $1.8 billion in gross licensing revenue** to date[220](index=220&type=chunk)[221](index=221&type=chunk) - **Industrial Operations**, through **Printronix**, is a **leading manufacturer and distributor of industrial impact printers** and related consumables and services, acquired in **October 2021**[223](index=223&type=chunk) - **Energy Operations**, through **Benchmark** (**50.4%** equity interest acquired **November 2023**), is an **independent oil and gas company** focused on **acquisition, production, and development** in **Texas and Oklahoma**. Post-**April 2024** acquisition, the company's interest is ~**73.5%**[226](index=226&type=chunk)[227](index=227&type=chunk) [Recent Business Developments and Trends](index=47&type=section&id=Recent%20Business%20Developments%20and%20Trends) This section discusses capital structure simplification, leadership changes, asset monetization, and key acquisitions - A **recapitalization** completed in **2023** simplified the capital structure, resulting in **Starboard** owning approximately **61.2%** of **common stock** and no **Series A Preferred Stock**, **Series B Warrants**, or **Senior Secured Notes** outstanding[229](index=229&type=chunk)[230](index=230&type=chunk) - **Mr. Martin D. McNulty Jr.** was appointed permanent **Chief Executive Officer** and a director in **February 2024**[234](index=234&type=chunk) - The company has received **$564.1 million** in proceeds from monetizing its **Life Sciences Portfolio** through **March 31, 2024**, including the sale of **Arix Bioscience PLC shares** for **$57.1 million** in **January 2024**[235](index=235&type=chunk) - Key acquisitions include **Printronix** (**October 2021**) and **Benchmark** (**November 2023**), with a significant follow-on asset acquisition for **Benchmark** completed in **April 2024** for **$145 million**, increasing the company's interest to ~**73.5%**[236](index=236&type=chunk)[237](index=237&type=chunk) - The business strategy involves growing through additional operating businesses, energy assets, and intellectual property assets, financed by **cash on hand** or external funding[238](index=238&type=chunk) [Inflation](index=49&type=section&id=Inflation) This section addresses inflation's impact on the consolidated enterprise, particularly **Printronix** costs and **Energy Operations** - Historically, inflation has not significantly impacted the consolidated enterprise[239](index=239&type=chunk) - In **Q1 2024**, the **Printronix** subsidiary experienced a small increase in **raw material costs**, leading to price adjustments and cost rationalization measures[239](index=239&type=chunk) - The **Energy Operations Business** may also experience inflationary pressures due to increases in oil and natural gas prices, supply chain disruptions, and labor shortages[239](index=239&type=chunk) [Patent Licensing and Enforcement](index=49&type=section&id=Patent%20Licensing%20and%20Enforcement) This section details patent licensing activities, litigation status, legal expenses, and challenges in patent acquisition - The **Patent Licensing, Enforcement and Technologies Business** has no pending patent infringement cases with scheduled trial dates in the next twelve months[240](index=240&type=chunk) - Patent-related legal expenses are expected to fluctuate based on future trial dates, international enforcement, and strategic patent portfolio activities[241](index=241&type=chunk) - The business depends on identifying and investing in new patents and IP-owning companies, with quality patent intake remaining a significant industry challenge[242](index=242&type=chunk)[244](index=244&type=chunk) - No new patent portfolios were acquired during **Q1 2024**, **2023**, or **2022**[244](index=244&type=chunk) [Industrial Operations Business](index=50&type=section&id=Industrial%20Operations%20Business) **Printronix** is a global leader in industrial impact printing solutions, serving mission-critical applications - **Printronix** is a worldwide leader in multi-technology supply-chain printing solutions, manufacturing industrial impact printers and related consumable products[246](index=246&type=chunk) - Its products are used for mission-critical applications across various industries, including manufacturing, transportation, logistics, healthcare, and banking sectors[246](index=246&type=chunk) - **Printronix** maintains manufacturing, configuration, and distribution sites in **Malaysia, the United States, Singapore, China, and the Netherlands**, supporting a global network[246](index=246&type=chunk) [Energy Operations Business](index=50&type=section&id=Energy%20Operations%20Business) **Benchmark** focuses on acquiring, producing, and developing oil and gas assets in **Texas and Oklahoma** - **Benchmark** is an **independent oil and gas company** engaged in the **acquisition, production, and development** of assets in **mature resource plays** in **Texas and Oklahoma**[247](index=247&type=chunk) - Following the acquisition of **Revolution**, **Benchmark's** assets consist of approximately **153,000 net acres** and an interest in approximately **605 wells**, with **Acacia** owning **73.5%**[247](index=247&type=chunk) - **Benchmark's** strategy focuses on enhancing asset value through **disciplined field optimization**, **robust commodity hedges**, and **low leverage**[247](index=247&type=chunk) [Operating Activities](index=50&type=section&id=Operating%20Activities) This section discusses revenue and operational variability across **Intellectual Property**, **Industrial**, and **Energy** segments - **Intellectual Property Operations revenues** historically **fluctuate significantly** due to factors such as the dollar amount and terms of license agreements, litigation outcomes, and macroeconomic factors; management does **not aim for smooth sequential growth**[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) - **Industrial Operations** (**Printronix**) focuses on **manufacturing and distributing printers** and consumable products[251](index=251&type=chunk) - **Energy Operations** (**Benchmark**) is engaged in the **acquisition, production, and development of oil and natural gas resources**[252](index=252&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) This section analyzes financial performance, including revenues, expenses, operating loss, and net income or loss Summary of Results of Operations (3 Months Ended March 31) | Metric | 2024 (in thousands) | 2023 (in thousands) | $ Change | % Change | | :----------------------------------------- | :------------------ | :------------------ | :------- | :------- | | Total revenues | **$24,320** | **$14,803** | **$9,517** | **64%** | | Total costs and expenses | **$26,407** | **$24,127** | **$2,280** | **9%** | | Operating loss | **$(2,087)** | **$(9,324)** | **$7,237** | **(78%)** | | Total other income | **$789** | **$21,254** | **$(20,465)**| **(96%)** | | (Loss) income before income taxes | **$(1,298)** | **$11,930** | **$(13,228)**| **(111%)** | | Income tax benefit (expense) | **$1,109** | **$(2,483)** | **$3,592** | **(145%)** | | Net (loss) income attributable to Acacia Research Corporation | **$(186)** | **$9,447** | **$(9,633)** | **(102%)** | - **Total revenues** increased by **64%** to **$24.3 million** in **Q1 2024**, primarily driven by a **226%** increase in **Intellectual Property Operations revenues** and **$1.9 million** from **Energy Operations**, partially offset by a **17%** decrease in **Industrial Operations revenues**[253](index=253&type=chunk) - The company reported a **net loss** of **$(186) thousand** in **Q1 2024**, a significant decline from **$9,447 thousand net income** in **Q1 2023**, mainly due to a **$(6.2) million legal liability fee** and a **$(26.7) million unrealized loss on equity securities**, despite a **$28.9 million realized gain from equity sales**[257](index=257&type=chunk)[258](index=258&type=chunk) - **General and administrative expenses** increased by **$313 thousand** (**3%**) to **$12.4 million**, primarily due to increased **Intellectual Property Operations variable performance-based compensation** and **parent compensation expense for share-based awards**, and **$385 thousand** from **Energy Operations G&A costs**[256](index=256&type=chunk)[273](index=273&type=chunk) - **Interest income and other, net**, increased to **$4.9 million** in **Q1 2024** from **$3.4 million** in **Q1 2023**, mainly due to higher **interest income from cash equivalents**[261](index=261&type=chunk) Income Tax Benefit (Expense) and Effective Tax Rate | Metric | 3 Months Ended March 31, 2024 (in thousands) | 3 Months Ended March 31, 2023 (in thousands) | % Change | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | :------- | | Income tax benefit (expense) | **$1,109** | **$(2,483)** | **(145%)** | | Effective tax rate | **(85%)** | **20%** | **(105) %** | [Liquidity and Capital Resources](index=57&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses liquidity, cash flow activities, and future capital requirements for financial obligations - Primary sources of liquidity are **cash and cash equivalents on hand**, which totaled **$461.7 million** at **March 31, 2024** (up from **$403.2 million** at **Dec 31, 2023**), and **cash generated from operating activities**[281](index=281&type=chunk)[287](index=287&type=chunk) Net Cash Flow Summary (3 Months Ended March 31) | Metric | 2024 (in thousands) | 2023 (in thousands) | | :----------------------------------------------- | :------------------ | :------------------ | | Net cash provided by operating activities | **$54,839** | **$(4,349)** | | Net cash provided by investing activities | **$42,040** | **$2,783** | | Net cash provided by financing activities | **$1,826** | **$77,995** | | Increase in cash and cash equivalents | **$98,671** | **$76,441** | - **Cash provided by operating activities** significantly increased to **$54.8 million** in **Q1 2024** (from **$(4.3) million** used in **Q1 2023**), primarily due to **net inflows from changes in accounts receivable and other working capital items**[293](index=293&type=chunk) - **Cash receipts from Intellectual Property Operations** totaled **$77.5 million** in **Q1 2024**, a substantial increase from **$4.4 million** in **Q1 2023**[292](index=292&type=chunk) - **Cash provided by investing activities** increased to **$42.0 million** in **Q1 2024** (from **$2.8 million** in **Q1 2023**), mainly driven by **net cash inflows from equity securities transactions** and the **sale of Arix shares**[295](index=295&type=chunk) - **Cash provided by financing activities** decreased to **$1.8 million** in **Q1 2024** (from **$78.0 million** in **Q1 2023**), primarily due to the completion of the **Rights Offering and Concurrent Private Rights Offering** in the prior period[298](index=298&type=chunk) - Management believes current **cash and cash equivalents**, along with **cash flows from operations**, will be **sufficient to meet cash requirements for at least the next twelve months**; **future acquisitions** may be financed through **cash on hand** or **equity/debt financing**[283](index=283&type=chunk) [Critical Accounting Estimates](index=60&type=section&id=Critical%20Accounting%20Estimates) This section identifies significant accounting estimates requiring management's judgment, such as revenue recognition and asset valuations - Key **critical accounting estimates** include **revenue recognition**, **estimates of crude oil and natural gas reserves**, **valuation of long-lived assets**, **goodwill and other intangible assets**, and **accounting for income taxes**[300](index=300&type=chunk) - These **critical accounting estimates** have not materially changed from those disclosed in the **Management's Discussion and Analysis of Financial Condition and Results of Operations** included in the **2023 Annual Report**[301](index=301&type=chunk) [Recent Accounting Pronouncements](index=60&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to notes for information on recently adopted and not yet adopted accounting standards - Refer to Note **2** to the consolidated financial statements for information on recently adopted and not yet adopted accounting pronouncements[302](index=302&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces interest rate, investment, and foreign currency risks; a **10%** adverse change in public equity would decrease value by **$2.3 million** - The company's **short-term investment objective** is to **preserve principal** while **maximizing income** from **equity securities** without significantly increasing risk[304](index=304&type=chunk) - Exposure to **investment risks** related to changes in the **underlying financial condition of equity investments** and **market price volatility**[305](index=305&type=chunk) - As of **March 31, 2024**, the **carrying value of equity investments** in **public and private companies** was **$59.7 million**[305](index=305&type=chunk) - A **hypothetical 10% adverse change** in the market price of **publicly traded common stock investments** would result in a decrease of approximately **$2.3 million** as of **March 31, 2024**[306](index=306&type=chunk) - The company is exposed to **foreign currency exchange risk** related to fluctuations between the **U.S. dollar, British Pound, and Euro**, primarily affecting **foreign cash accounts**. No **foreign denominated equity securities** were held as of **March 31, 2024**[307](index=307&type=chunk) [Item 4. Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were effective as of **March 31, 2024**, with no material internal control changes, acknowledging limitations - The **principal executive officer** and **principal financial officer** concluded that the company's **disclosure controls and procedures** were effective as of **March 31, 2024**[308](index=308&type=chunk) - There were no changes in **internal control over financial reporting** that materially affected, or are reasonably likely to materially affect, **internal control over financial reporting** during the three months ended **March 31, 2024**[310](index=310&type=chunk) - Management acknowledges the **inherent limitations of control systems**, stating that they can provide only **reasonable, not absolute, assurance** that objectives will be met[311](index=311&type=chunk) [PART II. OTHER INFORMATION](index=63&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=63&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal actions, including patent enforcement, not expected to materially affect financial position - The company is subject to **claims, counterclaims, and legal actions** arising in the ordinary course of business, including **patent enforcement activities**[313](index=313&type=chunk) - Management believes that the ultimate liability with respect to these **claims and legal actions** will not have a **material adverse effect** on the company's **consolidated financial position, results of operations, or cash flows**[313](index=313&type=chunk) - **Intellectual Property Operations** frequently engages in **litigation to enforce patents**, which can be **costly, consume significant resources**, and may result in **monetary sanctions or adverse outcomes**[314](index=314&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk) - Refer to Note **12** to the consolidated financial statements for additional information regarding certain pending litigation[313](index=313&type=chunk)[316](index=316&type=chunk) [Item 1A. Risk Factors](index=63&type=section&id=Item%201A.%20Risk%20Factors) Investors should review risks in the **2023 Form 10-K** and other filings, noting no material changes - Investors should carefully review and consider the risks and uncertainties detailed in '**Item 1A. Risk Factors**' of the company's **Annual Report on Form 10-K** for the fiscal year ended **December 31, 2023**, and other public filings[317](index=317&type=chunk) - There have been no **material changes to the risk factors** previously reported in the **2023 Annual Report**[317](index=317&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds to report for the period - No **unregistered sales of equity securities and use of proceeds** to report for the period[318](index=318&type=chunk) [Item 3. Defaults Upon Senior Securities](index=63&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities to report for the period - No **defaults upon senior securities** to report for the period[318](index=318&type=chunk) [Item 4. Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) **Mine Safety Disclosures** are not applicable to the company - **Mine Safety Disclosures** are not applicable to the company[320](index=320&type=chunk) [Item 5. Other Information](index=64&type=section&id=Item%205.%20Other%20Information) No director or officer adopted, modified, or terminated a **Rule 10b5-1** trading arrangement in **Q1 2024** - During the three months ended **March 31, 2024**, no director or officer adopted, modified, or terminated a **Rule 10b5-1** or **non-Rule 10b5-1 trading arrangement**[320](index=320&type=chunk) [Item 6. Exhibits](index=64&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the **Form 10-Q**, including agreements, certifications, and **iXBRL financial statements** - Key exhibits include the **Amended and Restated Employment Agreement** for **Martin D. McNulty, Jr.**, the **Purchase and Sale Agreement** for **Benchmark**, the **Loan Agreement** for **BE Anadarko**, **certifications** from the **Principal Executive Officer** and **Principal Financial Officer**, and **iXBRL formatted financial statements**[319](index=319&type=chunk) [SIGNATURES](index=65&type=section&id=SIGNATURES) The Quarterly Report was signed on **May 9, 2024**, by the **CEO** and **Interim CFO** - The Quarterly Report was signed on **May 9, 2024**, by **Martin D. McNulty Jr.**, **Chief Executive Officer**, and **Kirsten Hoover**, **Interim Chief Financial Officer**[324](index=324&type=chunk)

Revenue and Financial Performance - Total revenues for Q1 2024 were $24.3 million, a significant increase from $14.8 million in Q1 2023, driven by $13.6 million from intellectual property operations[2][4] - Total revenues for Q1 2024 were $24,320 thousand, a significant increase from $14,803 thousand in Q1 2023[17] - Intellectual property operations revenue grew to $13,623 thousand in Q1 2024, compared to $4,176 thousand in Q1 2023[17] - Industrial operations revenue decreased to $8,841 thousand in Q1 2024 from $10,627 thousand in Q1 2023[17] - Energy operations generated $1,856 thousand in revenue in Q1 2024, a new segment not present in Q1 2023[17] - Benchmark Energy generated $1.9 million in revenue in Q1 2024, with no comparable revenue in Q1 2023[2][5] Net Income and Loss - GAAP net loss for Q1 2024 was $0.2 million, or $0.00 per share, compared to a net income of $9.4 million in Q1 2023[2][4] - Net loss attributable to Acacia Research Corporation was $186 thousand in Q1 2024, compared to a net income of $9,447 thousand in Q1 2023[17] - Operating loss improved to $2,087 thousand in Q1 2024 from $9,324 thousand in Q1 2023[17] Cash and Investments - Acacia holds $461.7 million in cash, cash equivalents, and equity investments as of March 31, 2024, up from $403.2 million at the end of 2023[8] - The company has $400 million in cash and marketable securities, net of cash deployed in Benchmark's recent acquisition[1] - Cash and cash equivalents increased to $438,762 thousand as of March 31, 2024, up from $340,091 thousand at the end of 2023[16] Asset and Equity Changes - Book value per share at March 31, 2024 was $5.89, or $5.95 excluding a $6.2 million accrual related to the AIP Matter[2][9] - Accounts receivable decreased to $15,372 thousand as of March 31, 2024, down from $80,555 thousand at the end of 2023[16] - Total assets slightly decreased to $631,725 thousand as of March 31, 2024, from $633,545 thousand at the end of 2023[16] - Equity securities investments showed a change in fair value of $26,701 thousand loss in Q1 2024, compared to a $3,343 thousand gain in Q1 2023[17] Acquisitions and Divestitures - The company completed the sale of Arix Bioscience Plc shares for $57.1 million, realizing a gain of $28.6 million[2] - Benchmark's recent acquisition added 140,000 net acres and 470 operated producing wells in the Western Anadarko Basin[2] Expenses - General and administrative expenses increased to $12.4 million in Q1 2024, up from $12.0 million in Q1 2023[5] Life Sciences Portfolio - Acacia's life sciences portfolio has generated $564.1 million in proceeds from sales and royalties, with remaining positions valued at $25.7 million[7]

Acacia Research Corporation (NASDAQ:ACTG) Q4 2023 Earnings Conference Call March 14, 2024 4:30 PM ET Company Participants Rob Fink - FNK, Investor Relations MJ McNulty - Chief Executive Officer Kirsten Hoover - Interim Chief Financial Officer Conference Call Participants Anthony Stoss - Craig-Hallum Brett Reiss - Janney Montgomery Scott Operator Good afternoon, everyone. And welcome to the Acacia Research Fourth Quarter and Year End 2023 Financial Results Call. At this time, all participants are in a listen ...

Part I This section outlines Acacia Research Corporation's business, strategic focus, operational structure, and key risks including legal proceedings [Business](index=5&type=section&id=Item%201.%20Business) Acacia Research Corporation focuses on acquiring and managing undervalued companies across industrial, energy, and intellectual property segments, supported by its strategic relationship with Starboard Value LP - The company focuses on acquiring and managing businesses across the industrial, energy, technology, and healthcare sectors, particularly targeting companies with market values of **$1 billion** or less[12](index=12&type=chunk)[14](index=14&type=chunk) - A strategic relationship with controlling shareholder Starboard Value, LP provides access to industry expertise, operating partners, and assistance in sourcing and evaluating acquisition opportunities[17](index=17&type=chunk) - In July 2023, a recapitalization was completed, resulting in Starboard converting its preferred stock and exercising warrants. As of March 11, 2024, Starboard beneficially owns approximately **61.2%** of the company's common stock[19](index=19&type=chunk) [Our Operations](index=8&type=section&id=Our%20Operations) The company's operations are diversified across Intellectual Property, Energy, and Industrial (Printronix) business segments - The Intellectual Property business has generated approximately **$1.8 billion** in gross licensing revenue to date, with over 1,600 license agreements executed[31](index=31&type=chunk) - In November 2023, the company invested **$10.0 million** to acquire a **50.4%** equity interest in Benchmark Energy II, LLC, establishing its Energy Operations business[32](index=32&type=chunk) - In February 2024, Benchmark agreed to acquire certain assets from Revolution Resources for **$145.0 million** in cash, a transaction expected to close in Q2 2024 and increase Acacia's interest in Benchmark to approximately **73.1%**[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - The Industrial Operations business was established through the October 2021 acquisition of Printronix Holding Corp., a leading manufacturer of industrial impact printers[37](index=37&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces various risks including acquisition integration, reliance on Starboard, segment-specific challenges, and cybersecurity threats - The consummation of the Revolution Transaction is subject to conditions and its failure to close could adversely affect the company's business and stock price[50](index=50&type=chunk)[51](index=51&type=chunk) - The company's growth strategy of acquiring operating businesses involves significant risks, including integration difficulties, potential for unknown liabilities, and diversion of management attention[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - Due to Starboard's majority ownership (**approx. 61.2%**), Acacia is a "controlled company" under Nasdaq rules and may rely on exemptions from certain corporate governance requirements, such as having a majority of independent directors[83](index=83&type=chunk)[84](index=84&type=chunk) - The Intellectual Property business is subject to risks from evolving patent laws, fluctuating legal expenses, and the inherent uncertainty of litigation outcomes[89](index=89&type=chunk)[94](index=94&type=chunk)[97](index=97&type=chunk) - The Energy Operations business is exposed to risks from volatile oil and gas prices, inflationary pressures on costs, and potential regulatory changes related to climate change and seismic activity[106](index=106&type=chunk)[110](index=110&type=chunk)[139](index=139&type=chunk) - The Industrial Operations business (Printronix) faces risks from its reliance on a limited number of customers, potential supply chain interruptions for key components, and the need to continuously develop new products[153](index=153&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) [Cybersecurity](index=33&type=section&id=Item%201C.%20Cybersecurity) Acacia integrates cybersecurity risk management into its enterprise framework, overseen by the Audit Committee, with no material incidents to date - The company has integrated cybersecurity risk management into its broader risk framework, aligned with standards from CIS and NIST[175](index=175&type=chunk)[176](index=176&type=chunk) - The Audit Committee of the Board of Directors provides oversight for cybersecurity policies and risks[183](index=183&type=chunk) - To date, no cybersecurity incidents have materially affected the company's business strategy, results of operations, or financial condition[180](index=180&type=chunk) [Properties](index=34&type=section&id=Item%202.%20Properties) The company maintains leased corporate and operational offices, with segment-specific facilities including manufacturing sites and energy assets - The company's corporate headquarters are in a leased space of approximately 8,600 square feet in New York, NY[184](index=184&type=chunk) - The Energy Operations business holds over 13,000 net acres and an interest in over 125 wells, primarily in Texas and Oklahoma[188](index=188&type=chunk) [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) Acacia is subject to various legal actions, particularly in its Intellectual Property segment, including an ongoing lawsuit with Slingshot Technologies - The company is involved in a lawsuit with Slingshot Technologies, LLC, which alleges misappropriation of information related to a patent portfolio acquisition. The case was transferred to the Delaware Superior Court in September 2023[526](index=526&type=chunk) Part II This section covers the company's common stock market, dividend policy, MD&A of financial performance, liquidity, market risk, and internal controls [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Acacia's common stock trades on Nasdaq, with no expected dividends and a recently approved $20 million share repurchase program - The company's common stock trades on The Nasdaq Global Select Market under the symbol "ACTG"[195](index=195&type=chunk) - A stock repurchase program was approved in November 2023, authorizing up to **$20 million** in share buybacks. No shares were repurchased under this program as of December 31, 2023[197](index=197&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's 2023 financial performance, highlighting a 111% revenue increase, net income turnaround, liquidity, and critical accounting estimates [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Total revenues increased 111% to $125.1 million in 2023, driven by Intellectual Property, leading to a significant shift from loss to income before taxes Summary of Results of Operations (2023 vs. 2022) | | Years Ended December 31, | | | | :--- | :--- | :--- | :--- | | (In thousands, except percentage change values) | 2023 | 2022 | $ Change | % Change | | Total revenues | $ 125,102 | $ 59,223 | $ 65,879 | 111 % | | Total costs and expenses | 104,166 | 99,315 | 4,851 | 5 % | | Operating income (loss) | 20,936 | (40,092) | 61,028 | (152 %) | | Total other income (expense) | 46,490 | (87,058) | 133,548 | (153 %) | | Income (loss) before income taxes | 67,426 | (127,150) | 194,576 | (153 %) | | Income tax benefit | 1,504 | 16,211 | (14,707) | (91 %) | | Net income (loss) attributable to Acacia Research Corporation | 67,060 | (125,065) | 192,125 | (154 %) | - Intellectual Property Operations revenues increased by **$69.6 million** (**357%**) in 2023, primarily due to a single patent portfolio generating significant license revenue in the fourth quarter[238](index=238&type=chunk)[247](index=247&type=chunk) - Industrial Operations (Printronix) revenue decreased by **$4.6 million** (**12%**) due to lower sales of printer units[238](index=238&type=chunk)[251](index=251&type=chunk) - There was a significant positive change in the valuation of equity securities, from a **$263.7 million** unrealized loss in 2022 to a **$31.4 million** unrealized gain in 2023[242](index=242&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $403.2 million in cash and equity securities, bolstered by Starboard's warrant exercise, sufficient for future needs - Consolidated cash, cash equivalents, and equity securities totaled **$403.2 million** at December 31, 2023, up from **$349.4 million** at year-end 2022[270](index=270&type=chunk) Cash Flow Summary | | Years Ended December 31, | | :--- | :--- | :--- | | (In thousands) | 2023 | 2022 | | **Net cash provided by (used in):** | | | | Operating activities | $ (22,506) | $ (37,336) | | Investing activities | 16,178 | 184,464 | | Financing activities | 58,632 | (166,137) | | **Increase (decrease) in cash and cash equivalents** | **$ 52,305** | **$ (21,575)** | - The company received approximately **$55.0 million** in gross proceeds and cancelled **$60.0 million** in Senior Secured Notes as part of the Series B Warrants exercise by Starboard in July 2023[265](index=265&type=chunk) [Critical Accounting Estimates](index=52&type=section&id=Critical%20Accounting%20Estimates) Management's critical accounting estimates involve revenue recognition, asset valuation, financial instrument fair value, oil and gas reserves, and income taxes - Key critical accounting estimates include revenue recognition, valuation of assets (long-lived, goodwill, intangibles), valuation of financial instruments (warrants, derivatives), estimation of oil and gas reserves, and accounting for income taxes[280](index=280&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risk from equity investments and foreign currency fluctuations, with potential impacts on its financial position - The company's equity investments in public and private companies had a carrying value of **$99.8 million** as of December 31, 2023[298](index=298&type=chunk) - A hypothetical 10% adverse change in foreign exchange rates would have an approximate **$5.7 million** effect on the company's financial position and results of operations as of December 31, 2023[300](index=300&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management concluded that as of December 31, 2023, the company's disclosure controls and procedures were effective[303](index=303&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023[305](index=305&type=chunk) Part III This section incorporates information on corporate governance, executive compensation, security ownership, and accountant fees by reference from the 2024 proxy statement [Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Accountant Fees](index=58&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information on directors, executive compensation, security ownership, and accountant fees is incorporated by reference from the 2024 proxy statement - Detailed information regarding directors, executive compensation, security ownership, and related party transactions is incorporated by reference from the forthcoming 2024 proxy statement[310](index=310&type=chunk)[312](index=312&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk) Part IV This section contains exhibits and the complete consolidated financial statements, including the independent auditor's report and detailed notes [Exhibits and Financial Statement Schedules](index=59&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This item lists exhibits and includes the full consolidated financial statements with Grant Thornton LLP's unqualified auditor's report [Financial Statements](index=63&type=section&id=Financial%20Statements) Audited consolidated financial statements for 2023 and 2022 are presented, showing total assets of $633.5 million and net income of $67.1 million in 2023 Key Financial Position Data (December 31, 2023) | Metric | Amount (in thousands) | | :--- | :--- | | **Assets** | | | Cash and cash equivalents | $ 340,091 | | Total current assets | $ 554,512 | | Total assets | $ 633,545 | | **Liabilities & Equity** | | | Total current liabilities | $ 27,636 | | Total liabilities | $ 43,936 | | Total stockholders' equity | $ 589,609 | Key Operational & Per-Share Data (Year Ended Dec 31, 2023) | Metric | Amount (in thousands, except per share) | | :--- | :--- | | Total revenues | $ 125,102 | | Operating income | $ 20,936 | | Net income attributable to Acacia | $ 67,060 | | Basic net income per common share | $ 0.73 | | Diluted net income per common share | $ 0.58 | [Notes to Consolidated Financial Statements](index=71&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes provide detailed disclosures on accounting policies, acquisitions, equity, goodwill, Starboard recapitalization, fair value, and segment reporting - Note 10 details the comprehensive recapitalization with Starboard, which resulted in the conversion of all Series A Preferred Stock, exercise/cancellation of all warrants, and cancellation of all Senior Secured Notes, simplifying the capital structure[472](index=472&type=chunk)[473](index=473&type=chunk) - Note 19 provides a breakdown of revenues and operating results by the three segments: Intellectual Property, Industrial, and the newly formed Energy Operations[574](index=574&type=chunk)[579](index=579&type=chunk)[583](index=583&type=chunk) - Note 3 details the acquisition of a **50.4%** interest in Benchmark Energy for **$10.0 million** in November 2023, which established the Energy Operations segment[451](index=451&type=chunk)[452](index=452&type=chunk)

Exhibit 99.1 Acacia Research Reports Fourth Quarter 2023 Financial Results Intellectual Property Licensing and Settlement Agreements Drive Q4 Income; Company Continues to Advance Capital Allocation and Business Strategy, Announced Agreement to Acquire Cash Flow-Generating Oil and Gas Assets with a Goal of Driving Book Value per Share New York, NY, March 14, 2024 - Acacia Research Corporation (Nasdaq: ACTG) (“Acacia” or the “Company”) today reported financial results for the three months and full year ended ...

NEW YORK--(BUSINESS WIRE)--Acacia Research Corporation (Nasdaq: ACTG) today announced an agreement related to its intellectual property business. Atlas Global Technologies LLC (“AGT”), a subsidiary of Acacia Research Group LLC (the patent licensing business of Acacia Research Corporation), entered into licensing and settlement agreements relating to its WiFi-6 patent portfolio during the fourth quarter of 2023, with aggregate payments under such agreements totaling more than $81 million. The details of suc ...

Acacia Research Corporation (NASDAQ:ACTG) Q3 2023 Earnings Conference Call November 13, 2023 4:30 PM ET Company Participants Jeff Stanlis - FNK IR MJ McNulty - Interim Chief Executive Officer Kirsten Hoover - Interim Chief Financial Officer Conference Call Participants Anthony Stoss - Craig-Hallum Capital Group Brett Reiss - Janney Montgomery Scott John Levin - Levin Capital Strategies Operator Greetings, and welcome to the Acacia Research Third Quarter 2023 Financial Results Conference Call. [Operator Inst ...

[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) The Quarterly Report contains forward-looking statements subject to inherent risks and uncertainties that could materially alter actual results [Forward-Looking Statements Overview](index=3&type=section&id=Forward-Looking%20Statements%20Overview) The Quarterly Report contains forward-looking statements subject to inherent risks and uncertainties that could materially alter actual results - The report contains forward-looking statements subject to substantial risks and uncertainties, which could cause future results to differ materially from expectations[14](index=14&type=chunk) - Key risks include inability to acquire or integrate new businesses, retention of employees, regulatory changes, cybersecurity incidents, fluctuations in legal expenses, patent invalidity, and supply chain disruptions[14](index=14&type=chunk) - The company disclaims any obligation to update forward-looking statements, except as required by law[17](index=17&type=chunk) [Part I. Financial Information](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, detail the company's financial position [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets show an increase in total assets and stockholders' equity, primarily driven by an increase in cash and cash equivalents and additional paid-in capital, while total liabilities significantly decreased due to the cancellation of Senior Secured Notes and Series A/B warrant liabilities Key Financial Highlights (in thousands) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Total Assets | $529,147 | $482,928 | $46,219 | 9.6% | | Total Liabilities | $25,549 | $193,682 | $(168,133) | -86.8% | | Total Stockholders' Equity | $503,598 | $269,322 | $234,276 | 87.0% | | Cash and Cash Equivalents | $344,733 | $287,786 | $56,947 | 19.8% | | Senior Secured Notes Payable | $— | $60,450 | $(60,450) | -100.0% | | Series A Embedded Derivative Liabilities | $— | $16,835 | $(16,835) | -100.0% | | Series B Warrant Liabilities | $— | $84,780 | $(84,780) | -100.0% | [Unaudited Condensed Consolidated Statements of Operations](index=2&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended September 30, 2023, total revenues decreased significantly, leading to an operating loss. However, substantial other income, primarily from changes in fair value of equity securities, resulted in net income. For the nine months, the company reported a net loss, though significantly reduced compared to the prior year, driven by a large positive swing in equity securities fair value changes Key Financial Highlights (in thousands, except per share data) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenues | $10,084 | $15,878 | $32,791 | $46,102 | | Operating Loss | $(15,420) | $(11,365) | $(37,273) | $(25,543) | | Total Other Income (Expense) | $17,985 | $40,440 | $31,344 | $(81,216) | | Income (Loss) Before Income Taxes | $2,565 | $29,075 | $(5,929) | $(106,759) | | Net Income (Loss) Attributable to Acacia Research Corporation | $1,636 | $28,090 | $(7,696) | $(106,679) | | Basic Net (Loss) Income Per Common Share | $(0.02) | $0.54 | $(0.23) | $(2.63) | | Diluted Net (Loss) Income Per Common Share | $(0.03) | $0.02 | $(0.23) | $(2.63) | [Unaudited Condensed Consolidated Statements of Series A Redeemable Convertible Preferred Stock and Stockholders' Equity](index=2&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Series%20A%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity) The statements reflect significant changes in stockholders' equity, primarily due to the conversion of Series A Redeemable Convertible Preferred Stock to common stock, exercise of Series B warrants, and proceeds from a Rights Offering, which collectively increased common stock outstanding and additional paid-in capital - As of September 30, 2023, no Series A Redeemable Convertible Preferred Stock remains outstanding, following its conversion into **9,616,746 shares of common stock** on July 13, 2023[29](index=29&type=chunk)[35](index=35&type=chunk) - The exercise of Series B warrants resulted in the issuance of **31,506,849 shares of common stock** and contributed **$129.5 million** to additional paid-in capital[29](index=29&type=chunk)[35](index=35&type=chunk) - The Rights Offering led to the issuance of **15,068,753 shares of common stock** and generated **$79.1 million** in proceeds[35](index=35&type=chunk) Key Stockholders' Equity Changes (in thousands) | Metric | Balance at Dec 31, 2022 | Balance at Sep 30, 2023 | Change | | :-------------------------------- | :---------------------- | :---------------------- | :----- | | Common Stock (shares) | 43,484,867 | 99,886,322 | +56,401,455 | | Common Stock (amount) | $43 | $99 | +$56 | | Additional Paid-in Capital | $663,284 | $905,200 | +$241,916 | | Accumulated Deficit | $(306,789) | $(314,485) | $(7,696) | | Total Stockholders' Equity | $269,322 | $503,598 | +$234,276 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=2&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2023, the company experienced net cash used in operating activities, but significant cash provided by financing activities, primarily from the Rights Offering and Series B warrant exercise, led to a substantial increase in cash and cash equivalents Cash Flow Summary (Nine Months Ended September 30, in thousands) | Activity | 2023 | 2022 | | :----------------------- | :---------- | :----------- | | Operating Activities | $(17,962) | $(13,598) | | Investing Activities | $8,617 | $124,253 | | Financing Activities | $66,351 | $(174,607) | | Effect of Exchange Rates | $(59) | $(3,535) | | Net Increase (Decrease) | $56,947 | $(67,487) | | Cash and Cash Equivalents, Ending | $344,733 | $241,874 | - Cash provided by financing activities significantly increased in 2023 due to **$79.1 million** from the Rights Offering and **$49.0 million** from Series B warrant exercises, offsetting the paydown of Senior Secured Notes[37](index=37&type=chunk) - Cash provided by investing activities decreased substantially in 2023, mainly due to lower sales of equity securities compared to the prior year[37](index=37&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on the company's accounting policies, financial instruments, segment information, and significant events, offering context and breakdown for the condensed consolidated financial statements [1. Description of Business](index=11&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS) Acacia Research Corporation operates as an opportunistic capital platform, acquiring businesses based on valuation differentials, focusing on companies under $2 billion. It leverages a strategic relationship with Starboard Value, LP for acquisition sourcing and value creation. The company operates in two segments: Intellectual Property Operations and Industrial Operations (Printronix), and recently completed a significant recapitalization to simplify its capital structure - Acacia Research Corporation is an opportunistic capital platform focused on acquiring businesses, particularly those valued at **$1 billion or less**, to realize intrinsic value[39](index=39&type=chunk) - The company maintains a strategic relationship with Starboard Value, LP, its majority shareholder, for industry expertise, acquisition sourcing, and oversight[41](index=41&type=chunk) - A recapitalization completed on July 13, 2023, simplified the capital structure by converting Series A Preferred Stock and exercising Series B Warrants, resulting in Starboard owning approximately **61.2% of common stock** and no Series A Preferred Stock, Series B Warrants, or Senior Secured Notes remaining outstanding[42](index=42&type=chunk)[44](index=44&type=chunk) - The Intellectual Property Operations segment invests in and licenses patented technologies, while the Industrial Operations segment, through Printronix, manufactures and distributes industrial impact printers[45](index=45&type=chunk)[48](index=48&type=chunk) [2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Key accounting principles, including U.S. GAAP, revenue recognition, impairment, and recent pronouncements, are detailed for both operating segments - Revenue from Intellectual Property Operations is recognized upon the granting of bundled IP rights, typically as one-time, paid-up license fees, or quarterly sales-based recurring license fees[55](index=55&type=chunk)[56](index=56&type=chunk)[58](index=58&type=chunk) - Industrial Operations (Printronix) recognizes revenue upon transfer of control for products (shipment) and over time for services, with variable consideration estimates for returns and rebates[62](index=62&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) - Goodwill is evaluated for impairment annually in the fourth quarter, and other intangible assets (patents, customer relationships, trade names) are amortized over their estimated useful lives (**5-10 years** for IP patents, **7 years** for Industrial assets)[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - The company adopted ASU No. 2016-13 (Credit Losses) and ASU No. 2021-08 (Business Combinations) on January 1, 2023, with no material impact on financial statements[93](index=93&type=chunk)[94](index=94&type=chunk) [3. Equity Securities](index=20&type=section&id=3.%20EQUITY%20SECURITIES) The company's equity securities portfolio, including the Life Sciences Portfolio, increased in fair value. The investment in Arix Bioscience PLC is accounted for under the fair value method, and the majority interest in MalinJ1, which holds an equity method investment in Viamet, generated earnings Equity Securities Fair Value (in thousands) | Security Type | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | Equity securities - Life Sciences Portfolio | $50,373 | $42,696 | | Equity securities - other common stock | $14,138 | $18,912 | | Total | $64,511 | $61,608 | Net Realized and Unrealized Gain (Loss) from Equity Securities (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Change in fair value of equity securities | $8,187 | $(39,008) | $7,677 | $(243,106) | | (Loss) gain on sale of equity securities | $— | $36,397 | $(9,360) | $101,102 | | Net realized and unrealized gain (loss) | $8,187 | $(2,611) | $(1,683) | $(142,004) | - Earnings on equity investment in joint venture (Viamet via MalinJ1) for the nine months ended September 30, 2023, was **$3.4 million**, a significant decrease from **$42.9 million** in the prior year, primarily due to the timing of milestone payments[103](index=103&type=chunk) [4. Inventories](index=21&type=section&id=4.%20INVENTORIES) Printronix's inventories decreased from $14.2 million at December 31, 2022, to $12.4 million at September 30, 2023, with reductions across raw materials, subassemblies, work in process, and finished goods Printronix Inventories (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Raw materials | $4,294 | $4,335 | | Subassemblies and work in process | $2,315 | $3,045 | | Finished goods | $6,232 | $7,340 | | Inventory reserves | $(466) | $(498) | | Total inventories | $12,375 | $14,222 | [5. Property, Plant and Equipment, Net](index=21&type=section&id=5.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT,%20NET) Net property, plant and equipment decreased to $2.6 million at September 30, 2023, from $3.5 million at December 31, 2022, primarily due to accumulated depreciation and amortization Property, Plant and Equipment, Net (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Machinery and equipment | $3,166 | $3,057 | | Furniture and fixtures | $579 | $585 | | Computer hardware and software | $488 | $660 | | Leasehold improvements | $1,018 | $1,025 | | Accumulated depreciation and amortization | $(2,604) | $(1,790) | | Total | $2,647 | $3,537 | - Total depreciation and amortization expense was **$1.1 million** for the nine months ended September 30, 2023, consistent with **$1.0 million** in the prior year[104](index=104&type=chunk) [6. Goodwill and Other Intangible Assets, Net](index=22&type=section&id=6.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS,%20NET) Goodwill remained stable at $7.5 million, allocated entirely to Industrial Operations. Other intangible assets, primarily patents, decreased to $27.6 million from $36.7 million, reflecting ongoing amortization Other Intangible Assets, Net (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | Patents - Intellectual Property Operations | $18,857 | $26,659 | | Patents - Industrial Operations | $2,438 | $2,803 | | Customer relationships - Industrial Operations | $3,801 | $4,369 | | Trade name and trademarks - Industrial Operations | $2,461 | $2,827 | | Total | $27,557 | $36,658 | - Total other intangible asset amortization expense was **$9.1 million** for both the three and nine months ended September 30, 2023 and 2022, respectively[106](index=106&type=chunk) - The company accrued **$9.0 million** for patent costs at December 31, 2022, with three **$3.0 million** installments paid in Q1 and Q2 2023, reducing the accrued balance to zero[107](index=107&type=chunk) [7. Accrued Expenses and Other Current Liabilities](index=23&type=section&id=7.%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Accrued expenses and other current liabilities significantly decreased from $14.1 million at December 31, 2022, to $5.3 million at September 30, 2023, primarily due to the payment of accrued patent costs Accrued Expenses and Other Current Liabilities (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | Accrued consulting and other professional fees | $2,099 | $1,173 | | Income taxes payable | $1,034 | $474 | | Short-term lease liability | $1,190 | $1,559 | | Accrued patent cost | $— | $9,000 | | Other accrued liabilities | $573 | $1,536 | | Total | $5,256 | $14,058 | [8. Starboard Investment](index=23&type=section&id=8.%20STARBOARD%20INVESTMENT) A recapitalization with Starboard simplified the capital structure, converting Series A Preferred Stock and exercising Series B Warrants, increasing Starboard's common stock ownership to **61.2%** - On July 13, 2023, Starboard converted **350,000 shares** of Series A Redeemable Convertible Preferred Stock into **9,616,746 shares of common stock**, including shares for accrued dividends[116](index=116&type=chunk) - Starboard exercised **31,506,849 Series B Warrants**, leading to the cancellation of **$60.0 million** in Senior Secured Notes and **$55.0 million** in cash proceeds to the company[112](index=112&type=chunk)[129](index=129&type=chunk) - A Rights Offering and Concurrent Private Rights Offering resulted in the issuance of **15,068,753 shares of common stock** and aggregate gross proceeds of approximately **$79.1 million**[141](index=141&type=chunk) - Post-recapitalization, Starboard beneficially owned **61.2%** of the common stock, and no Series A Preferred Stock, Series B Warrants, or Senior Secured Notes remain outstanding[112](index=112&type=chunk) [9. Fair Value Measurements](index=29&type=section&id=9.%20FAIR%20VALUE%20MEASUREMENTS) The company measures financial instruments at fair value using a three-level hierarchy. Equity securities are primarily Level 1, while Series B Warrants and Series A embedded derivative liabilities, which are now zero due to exercise and conversion, were previously valued using Level 3 inputs (Black-Scholes model and as-converted value) - Equity securities are primarily valued using Level 1 (quoted prices in active markets) and Level 2 inputs, with a significant equity method investment valued at **$50.4 million** under the fair value method[148](index=148&type=chunk) - Series A embedded derivative liabilities and Series B warrants, previously classified as Level 3 liabilities, had a fair value of **zero** as of September 30, 2023, following their conversion and exercise[151](index=151&type=chunk)[155](index=155&type=chunk) Changes in Level 3 Liabilities (in thousands) | Metric | Balance at Dec 31, 2022 | Exercise/Conversion | Remeasurement to Fair Value | Balance at Sep 30, 2023 | | :------------------------------------ | :---------------------- | :------------------ | :-------------------------- | :---------------------- | | Series A Embedded Derivative Liabilities | $16,835 | $(12,881) | $(3,954) | $— | | Series B Warrant Liabilities | $84,780 | $(82,018) | $(2,762) | $— | | Total | $101,615 | $(94,899) | $(6,716) | $— | [10. Related Party Transactions](index=31&type=section&id=10.%20RELATED%20PARTY%20TRANSACTIONS) Related party transactions included a $1.8 million Loan Facility with a private portfolio company, generating $51,000 in interest income for the nine months ended September 30, 2023. Reimbursements to a former executive officer for legal fees ceased in 2023 - The company entered into a **$1.8 million** Loan Facility with a private portfolio company, bearing **9.5% interest**, and recorded **$51,000** in interest income for the nine months ended September 30, 2023[157](index=157&type=chunk) - No legal fee reimbursements were made to a former executive officer during the nine months ended September 30, 2023, compared to **$46,000** in the prior year[157](index=157&type=chunk) [11. Commitments and Contingencies](index=31&type=section&id=11.%20COMMITMENTS%20AND%20CONTINGENCIES) The company has operating lease commitments, faces inventor royalties and legal proceedings, and has transferred environmental responsibilities for Printronix Future Minimum Lease Payments (in thousands) | Years Ending December 31, | Amount | | :-------------------------- | :----- | | Remainder of 2023 | $382 | | 2024 | $940 | | 2025 | $631 | | 2026 | $531 | | 2027 | $241 | | Thereafter | $— | | Total minimum payments | $2,725 | | Less: short-term lease liabilities | $(1,190) | | Long-term lease liabilities | $1,535 | - The New York office lease was amended to surrender a portion of the premises by March 31, 2024, and extend the lease for the remaining portion until July 31, 2027[159](index=159&type=chunk) - A lawsuit filed by Slingshot Technologies, LLC against Acacia Entities and others was transferred to Delaware Superior Court, with parties awaiting directions for next steps[169](index=169&type=chunk)[170](index=170&type=chunk) - Printronix's environmental cleanup responsibility for a former facility has been transferred to a prior tenant, with no associated costs incurred by Printronix in 2023[174](index=174&type=chunk) [12. Stockholders' Equity](index=35&type=section&id=12.%20STOCKHOLDERS'%20EQUITY) The Board approved a new stock repurchase program for up to $20.0 million on November 9, 2023, following the completion of previous programs in 2022. No repurchases occurred in the nine months ended September 30, 2023. The company also has a Charter Provision to protect its tax assets by prohibiting transfers that could result in an ownership change - On November 9, 2023, the Board approved a new stock repurchase program for up to **$20.0 million**, subject to a cap of **5,800,000 shares**[178](index=178&type=chunk) - No stock repurchases were made during the nine months ended September 30, 2023[177](index=177&type=chunk) - A Charter Provision is in place to prevent ownership changes that could jeopardize the company's ability to utilize tax assets like net operating loss carryforwards[180](index=180&type=chunk) [13. Equity-Based Incentive Plans](index=35&type=section&id=13.%20EQUITY-BASED%20INCENTIVE%20PLANS) The company grants equity awards under the 2016 Stock Incentive Plan, including stock options, restricted stock awards (RSAs), restricted stock units (RSUs), and performance-based stock units (PSUs). Total stock-based compensation expense for the nine months ended September 30, 2023, was $2.3 million, a decrease from the prior year, primarily due to forfeitures Stock-Based Compensation Expense (in thousands) | Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Options | $126 | $162 | $275 | $464 | | RSAs | $112 | $294 | $507 | $1,165 | | RSUs | $735 | $575 | $1,542 | $1,659 | | Total | $973 | $1,031 | $2,324 | $3,288 | - As of September 30, 2023, **1,355,726 shares** were available for grant under the 2016 Plan[186](index=186&type=chunk) - Unrecognized stock-based compensation expense totaled **$6.2 million** as of September 30, 2023, to be amortized over a weighted average remaining vesting period of **2.1 years**[191](index=191&type=chunk) [14. Income/Loss Per Share](index=39&type=section&id=14.%20INCOME/LOSS%20PER%20SHARE) The basic and diluted net loss per common share for the nine months ended September 30, 2023, was $(0.23), a significant improvement from $(2.63) in the prior year, primarily due to reduced net loss attributable to Acacia Research Corporation Basic and Diluted EPS (Nine Months Ended September 30) | Metric | 2023 | 2022 | | :------------------------------------ | :------ | :------ | | Basic Net (Loss) Income Per Common Share | $(0.23) | $(2.63) | | Diluted Net (Loss) Income Per Common Share | $(0.23) | $(2.63) | - Weighted average shares outstanding (basic) increased to **67,072,835** for the nine months ended September 30, 2023, from **42,830,700** in the prior year, reflecting the recapitalization and warrant exercises[194](index=194&type=chunk) [15. Segment Reporting](index=40&type=section&id=15.%20SEGMENT%20REPORTING) The company operates in two reportable segments: Intellectual Property Operations and Industrial Operations. For the nine months ended September 30, 2023, both segments experienced revenue declines, with Intellectual Property Operations reporting a larger operating loss, while Industrial Operations maintained a positive, albeit reduced, operating income Segment Revenues (Nine Months Ended September 30, in thousands) | Segment | 2023 | 2022 | | :-------------------------- | :---------- | :---------- | | Intellectual Property Operations | $6,330 | $16,997 | | Industrial Operations | $26,461 | $29,105 | | Total Revenues | $32,791 | $46,102 | Segment Operating (Loss) Income (Nine Months Ended September 30, in thousands) | Segment | 2023 | 2022 | | :-------------------------- | :---------- | :---------- | | Intellectual Property Operations | $(14,205) | $(2,533) | | Industrial Operations | $210 | $1,023 | | Total Operating Loss | $(13,995) | $(1,510) | - Long-lived tangible assets are primarily located in Malaysia (**$2.1 million**) and the United States (**$0.4 million**) as of September 30, 2023[211](index=211&type=chunk) [16. Subsequent Events](index=44&type=section&id=16.%20SUBSEQUENT%20EVENTS) Subsequent to September 30, 2023, the company entered into an agreement to sell its shares of Arix for $57.1 million, pending regulatory approval. It also invested $10.0 million to acquire a 50.4% equity interest in Benchmark Energy II, LLC, an oil and gas company - On November 1, 2023, Merton agreed to sell its Arix shares for **$57.1 million**, contingent on UK regulatory approval by March 31, 2024[212](index=212&type=chunk)[213](index=213&type=chunk) - On November 13, 2023, the company invested **$10.0 million** to acquire a **50.4% equity interest** in Benchmark Energy II, LLC, an independent oil and gas company[214](index=214&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations, analyzing business segments, recent developments, revenues, expenses, and cash flows [General](index=46&type=section&id=General) Acacia Research Corporation operates as an opportunistic capital platform, acquiring businesses based on valuation differentials, particularly those under $2 billion. The company leverages its strategic relationship with Starboard Value, LP for acquisition sourcing and value enhancement, focusing on complex situations where value is not fully recognized - Acacia is an opportunistic capital platform that acquires businesses based on public-private market valuation differentials, targeting companies under **$2 billion**[217](index=217&type=chunk)[219](index=219&type=chunk) - The company's strategic relationship with Starboard Value, LP provides access to industry expertise and assists in sourcing and evaluating acquisition opportunities[219](index=219&type=chunk) [Intellectual Property Operations](index=46&type=section&id=Intellectual%20Property%20Operations) The Intellectual Property Operations segment invests in and licenses patented technologies, operating through Acacia Research Group, LLC. It assumes responsibility for operational expenses in patent licensing and enforcement programs, sharing net licensing revenue with patent partners. The segment has a track record of over 1,600 license agreements and $1.8 billion in gross licensing revenue - The Intellectual Property Operations segment invests in and licenses patented technologies, assuming operational expenses and sharing net licensing revenue with partners[220](index=220&type=chunk) - The segment has executed over **1,600 license agreements**, generating approximately **$1.8 billion** in gross licensing revenue and returning **$859.1 million** to patent partners[223](index=223&type=chunk) [Industrial Operations](index=47&type=section&id=Industrial%20Operations) The Industrial Operations segment, primarily through Printronix, is a leading manufacturer and distributor of industrial impact printers and related consumables and services. Acquired in October 2021 for approximately $37.0 million, Printronix serves diverse sectors globally and is focused on cost reduction and strategic partnerships for growth - Printronix, acquired in October 2021 for approximately **$37.0 million**, is a leading manufacturer and distributor of industrial impact printers and related products[224](index=224&type=chunk)[230](index=230&type=chunk) - Printronix serves various industries globally, with manufacturing in Malaysia and configuration sites in the US, Singapore, and Holland, focusing on cost reduction and strategic partnerships[224](index=224&type=chunk) [Recent Business Developments and Trends](index=47&type=section&id=Recent%20Business%20Developments%20and%20Trends) Recent developments include a recapitalization with Starboard, settlement of CEO litigation, the Printronix acquisition, and ongoing challenges in patent portfolio intake - The recapitalization with Starboard was completed on July 13, 2023, resulting in Starboard owning approximately **61.2% of common stock** and the elimination of Series A Preferred Stock, Series B Warrants, and Senior Secured Notes[226](index=226&type=chunk)[227](index=227&type=chunk) - The company amicably settled all claims with its former President and CEO, Clifford Press, involving a payment of **$770,000** plus **$480,000** in counsel fees and expenses[229](index=229&type=chunk) - Printronix experienced some inflation from higher raw material costs but has generally been able to adjust selling prices and implement cost rationalization measures[233](index=233&type=chunk) - No new patent portfolios were acquired during the nine months ended September 30, 2023, or in 2022, highlighting ongoing challenges in quality patent intake[239](index=239&type=chunk) [Operating Activities](index=50&type=section&id=Operating%20Activities) Intellectual Property Operations revenues fluctuate significantly due to factors like agreement terms, licensing negotiations, litigation outcomes, and the maturity of licensing programs. Industrial Operations (Printronix) activities involve designing and manufacturing printers and consumables, with revenues influenced by product sales and service agreements - Intellectual Property Operations revenues are highly variable, influenced by the dollar amount and terms of agreements, timing and results of patent infringement actions, and external factors like regulatory shifts[243](index=243&type=chunk) - Industrial Operations focuses on designing and manufacturing printers and consumable products, primarily sold through channel partners, with revenues also derived from maintenance service agreements[198](index=198&type=chunk)[240](index=240&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) The company's results of operations for the three and nine months ended September 30, 2023, show a decrease in total revenues for both periods. While the three-month period saw net income due to significant other income from equity securities, the nine-month period resulted in a net loss, albeit a substantial improvement from the prior year, driven by favorable changes in equity securities fair value Summary of Results of Operations (in thousands, except percentage change values) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | $ Change | % Change | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | $ Change | % Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :------- | :------- | :-------------------------- | :-------------------------- | :------- | :------- | | Total revenues | $10,084 | $15,878 | $(5,794) | -36% | $32,791 | $46,102 | $(13,311) | -29% | | Operating loss | $(15,420) | $(11,365) | $(4,055) | 36% | $(37,273) | $(25,543) | $(11,730) | 46% | | Total other income (expense) | $17,985 | $40,440 | $(22,455) | -56% | $31,344 | $(81,216) | $112,560 | -139% | | Income (loss) before income taxes | $2,565 | $29,075 | $(26,510) | -91% | $(5,929) | $(106,759) | $100,830 | -94% | | Net income (loss) attributable to Acacia Research Corporation | $1,636 | $28,090 | $(26,454) | -94% | $(7,696) | $(106,679) | $98,983 | -93% | [Results of Operations - three months ended September 30, 2023 compared with the three months ended September 30, 2022](index=51&type=section&id=Results%20of%20Operations%20-%20three%20months%20ended%20September%2030,%202023%20compared%20with%20the%20three%20months%20ended%20September%2030,%202022) Total revenues decreased by $5.8 million, driven by declines in both Intellectual Property and Industrial Operations. Operating loss increased, but a significant swing from unrealized loss to gain in equity securities, coupled with increased earnings on equity investment, led to a net income of $1.6 million, down from $28.1 million in the prior year - Total revenues decreased by **$5.8 million (36%)** to **$10.1 million**, due to a **$4.6 million** decrease in Intellectual Property Operations and a **$1.2 million** decrease in Industrial Operations[247](index=247&type=chunk) - Unrealized gain from equity securities was **$8.8 million** in Q3 2023, a significant improvement from an unrealized loss of **$36.4 million** in Q3 2022[251](index=251&type=chunk) - Earnings on equity investment in joint venture increased by **$2.5 million** to **$3.4 million**, primarily due to the timing of milestones[252](index=252&type=chunk) - Interest expense on Senior Secured Notes decreased by **$942,000** due to the cancellation of outstanding notes[253](index=253&type=chunk) [Results of Operations - nine months ended September 30, 2023 compared with the nine months ended September 30, 2022](index=52&type=section&id=Results%20of%20Operations%20-%20nine%20months%20ended%20September%2030,%202023%20compared%20with%20the%20nine%20months%20ended%20September%2030,%202022) Total revenues decreased by $13.3 million, with Intellectual Property Operations revenues down $10.7 million and Industrial Operations revenues down $2.6 million. Despite an increased operating loss, the net loss before income taxes significantly improved from $(106.8) million to $(5.9) million, primarily driven by a $285.0 million positive swing in the change in fair value of equity securities - Total revenues decreased by **$13.3 million (29%)** to **$32.8 million**, with Intellectual Property Operations revenues decreasing by **$10.7 million** and Industrial Operations revenues by **$2.6 million**[254](index=254&type=chunk) - Unrealized gain from equity securities was **$18.8 million** in 9M 2023, a substantial improvement from an unrealized loss of **$266.2 million** in 9M 2022[259](index=259&type=chunk) - Earnings on equity investment in joint venture decreased by **$39.5 million** to **$3.4 million**, due to fewer milestone payments compared to the prior year[260](index=260&type=chunk) - Interest income and other, net, increased by **$9.1 million** to **$12.2 million**, mainly due to higher interest income from cash equivalents[264](index=264&type=chunk) [Intellectual Property Operations - Revenues](index=54&type=section&id=Intellectual%20Property%20Operations%20-%20Revenues) Intellectual Property Operations revenues decreased significantly for both the three and nine months ended September 30, 2023, primarily due to a decrease in paid-up license revenue agreements and a lower average revenue per agreement Intellectual Property Operations Revenue (in thousands, except percentage change values) | Revenue Type | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | $ Change | % Change | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | $ Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | :-------------------------- | :-------------------------- | :------- | :------- | | Paid-up license revenue agreements | $1,410 | $6,000 | $(4,590) | -77% | $5,385 | $15,553 | $(10,168) | -65% | | Recurring license revenue agreements | $350 | $320 | $30 | 9% | $945 | $1,444 | $(499) | -35% | | Total revenues | $1,760 | $6,320 | $(4,560) | -72% | $6,330 | $16,997 | $(10,667) | -63% | - The number of new license agreements executed increased by **400%** for the three months ended September 30, 2023 (**5 vs 1**), but decreased by **23%** for the nine-month period (**10 vs 13**)[265](index=265&type=chunk) [Intellectual Property Operations - Cost of Revenues](index=54&type=section&id=Intellectual%20Property%20Operations%20-%20Cost%20of%20Revenues) Cost of revenues for Intellectual Property Operations increased slightly for the three-month period but decreased for the nine-month period. This was primarily driven by a decrease in inventor royalties and contingent legal fees, offset by an increase in litigation and licensing expenses Intellectual Property Operations Cost of Revenues (in thousands, except percentage change values) | Cost Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | $ Change | % Change | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | $ Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | :-------------------------- | :-------------------------- | :------- | :------- | | Inventor royalties | $497 | $732 | $(235) | -32% | $863 | $1,092 | $(229) | -21% | | Contingent legal fees | $346 | $1,010 | $(664) | -66% | $890 | $2,314 | $(1,424) | -62% | | Litigation and licensing expenses | $2,026 | $939 | $1,087 | 116% | $5,663 | $3,272 | $2,391 | 73% | | Amortization of patents | $2,601 | $2,601 | $— | 0% | $7,802 | $7,802 | $— | 0% | | Total | $5,470 | $5,282 | $188 | 4% | $15,218 | $14,480 | $738 | 5% | - The increase in litigation and licensing expenses is primarily due to a net increase in litigation support and third-party technical consulting expenses associated with ongoing litigation[249](index=249&type=chunk)[257](index=257&type=chunk) [Industrial Operations - Revenues](index=55&type=section&id=Industrial%20Operations%20-%20Revenues) Industrial Operations revenues decreased for both the three and nine months ended September 30, 2023, primarily due to lower units of printers sold Industrial Operations Net Revenues (in thousands, except percentage change values) | Revenue Type | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | $ Change | % Change | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | $ Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | :-------------------------- | :-------------------------- | :------- | :------- | | Printers and parts | $2,852 | $3,799 | $(947) | -25% | $9,640 | $11,715 | $(2,075) | -18% | | Consumable products | $4,576 | $4,710 | $(134) | -3% | $14,074 | $14,308 | $(234) | -2% | | Services | $896 | $1,049 | $(153) | -15% | $2,747 | $3,082 | $(335) | -11% | | Total | $8,324 | $9,558 | $(1,234) | -13% | $26,461 | $29,105 | $(2,644) | -9% | - The decrease in printers and parts revenue is directly attributed to a reduction in the number of printer units sold[272](index=272&type=chunk) [Industrial Operations - Cost of Revenues](index=55&type=section&id=Industrial%20Operations%20-%20Cost%20of%20Revenues) Industrial Operations cost of revenues decreased for the three-month period but slightly increased for the nine-month period, primarily due to under absorption of overhead costs Industrial Operations Cost of Revenues (in thousands, except percentage change values) | Cost Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | $ Change | % Change | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | $ Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | :-------------------------- | :-------------------------- | :------- | :------- | | Cost of revenues - industrial operations | $4,377 | $4,648 | $(271) | -6% | $13,530 | $13,432 | $98 | 1% | - The slight increase in cost of sales for the nine months ended September 30, 2023, is attributed to under absorption of overhead costs[273](index=273&type=chunk) [Operating Expenses](index=56&type=section&id=Operating%20Expenses) Total operating expenses decreased for both the three and nine months ended September 30, 2023, primarily driven by reductions in sales and marketing expenses for Industrial Operations and lower parent company general and administrative expenses Operating Expenses (in thousands, except percentage change values) | Expense Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | $ Change | % Change | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | $ Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | :-------------------------- | :-------------------------- | :------- | :------- | | Engineering and development expenses - industrial operations | $172 | $156 | $16 | 10% | $593 | $491 | $102 | 21% | | Sales and marketing expenses - industrial operations | $1,613 | $2,119 | $(506) | -24% | $5,385 | $6,429 | $(1,044) | -16% | | General and administrative expenses | $13,872 | $15,038 | $(1,166) | -8% | $35,338 | $36,813 | $(1,475) | -4% | | Total | $15,657 | $17,313 | $(1,656) | -10% | $41,316 | $43,733 | $(2,417) | -6% | [General and Administrative Expenses](index=56&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses decreased due to lower personnel and compensation costs, partially offset by increased consulting fees and a one-time bad debt expense Drivers of Change in General and Administrative Expenses (in thousands) | Driver | 3 Months Ended Sep 30, 2023 vs. 2022 | 9 Months Ended Sep 30, 2023 vs. 2022 | | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Personnel costs and board fees | $(364) | $(839) | | Variable performance-based compensation costs | $(315) | $(1,163) | | Other general and administrative costs | $768 | $3,144 | | General and administrative costs - industrial operations | $(189) | $(987) | | Compensation expense for share-based awards | $(58) | $(964) | | Non-recurring employee severance costs | $(1,007) | $(666) | | Total change | $(1,166) | $(1,475) | - The decrease in personnel and compensation costs was due to reduced headcount, while increases in other G&A were driven by consulting and legal fees related to the former CEO's termination and SEC matters, and a **$2.3 million** bad debt expense[250](index=250&type=chunk)[258](index=258&type=chunk)[278](index=278&type=chunk) [Other Income/Expense - Equity Securities Investments](index=57&type=section&id=Other%20Income/Expense%20-%20Equity%20Securities%20Investments) The company experienced a significant positive swing in equity securities investments, moving from substantial unrealized losses in the prior year to gains in 2023. Realized gains on sales were lower in 2023, and earnings from equity investment in a joint venture decreased due to milestone timing Equity Securities Investments (in thousands, except percentage change values) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | $ Change | % Change | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | $ Change | % Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :------- | :------- | :-------------------------- | :-------------------------- | :------- | :------- | | Change in fair value of equity securities | $8,823 | $(36,352) | $45,175 | -124% | $18,783 | $(266,202) | $284,985 | -107% | | (Loss) gain on sale of equity securities | $— | $36,060 | $(36,060) | -100% | $(9,360) | $114,434 | $(123,794) | -108% | | Earnings on equity investment in joint venture | $3,375 | $850 | $2,525 | 297% | $3,375 | $42,935 | $(39,500) | -92% | | Total net realized and unrealized gain (loss) | $12,198 | $558 | $11,640 | 2,086% | $12,798 | $(108,833) | $121,691 | -112% | - The current period's unrealized gain in equity securities primarily relates to one Life Sciences Portfolio and trading securities portfolio[281](index=281&type=chunk) - The decrease in earnings from equity investment in joint venture for the nine-month period is due to the timing of milestone payments[260](index=260&type=chunk)[282](index=282&type=chunk) [Other Income/Expense - Income Taxes](index=57&type=section&id=Other%20Income/Expense%20-%20Income%20Taxes) The company recognized an income tax benefit for the three months ended September 30, 2023, primarily from losses in jurisdictions without valuation allowances. For the nine-month period, an income tax expense was recorded due to foreign and state income taxes. Effective tax rates fluctuated significantly year-over-year due to foreign tax credits, valuation allowance changes, and non-deductible items Income Tax Benefit (Expense) and Effective Tax Rate (in thousands, except percentage change values) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | $ Change | % Change | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | $ Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | :-------------------------- | :-------------------------- | :------- | :------- | | Income tax benefit (expense) | $197 | $(679) | $876 | -129% | $(641) | $14,399 | $(15,040) | -104% | | Effective tax rate | -8% | 2% | n/a | -10% | 11% | -13% | n/a | 24% | - The 2023 effective tax rate was lower than the U.S. federal statutory rate due to expiration of foreign tax credits, changes in valuation allowance, and non-deductible items[284](index=284&type=chunk) - A partial valuation allowance was recorded against net deferred tax assets as of September 30, 2023, primarily for foreign tax credits and net operating loss carryforwards[285](index=285&type=chunk) [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is strong, with $409.2 million in cash, cash equivalents, and equity securities as of September 30, 2023. The recapitalization with Starboard significantly impacted financing activities, providing $66.4 million in cash inflows for the nine-month period. Management believes current liquidity is sufficient for the foreseeable future, with future acquisitions potentially financed through cash on hand or equity/debt - As of September 30, 2023, consolidated cash, cash equivalents, and equity securities totaled **$409.2 million**, up from **$349.4 million** at December 31, 2022[291](index=291&type=chunk) - The company's primary sources of liquidity are cash on hand and cash generated from operating activities, supplemented by proceeds from the Rights Offering and Concurrent Private Rights Offering[289](index=289&type=chunk) Cash Flows from Financing Activities (Nine Months Ended September 30, in thousands) | Activity | 2023 | 2022 | | :------------------------------------ | :---------- | :----------- | | Paydown of Senior Secured Notes | $(60,000) | $(120,000) | | Proceeds from Rights Offering | $79,111 | $— | | Proceeds from exercise of Series B warrants | $49,000 | $— | | Net cash provided by (used in) financing activities | $66,351 | $(174,607) | - Management believes current cash and cash equivalent balances and cash flows from operations are sufficient for at least the next twelve months[290](index=290&type=chunk) [Critical Accounting Estimates](index=61&type=section&id=Critical%20Accounting%20Estimates) The company's critical accounting estimates, which involve significant judgment and estimation uncertainty, include revenue recognition, valuation of long-lived assets, goodwill and other intangible assets, and accounting for income taxes. These estimates have not materially changed from those disclosed in the prior Annual Report on Form 10-K - Key critical accounting estimates include revenue recognition, valuation of long-lived assets, goodwill and other intangible assets, and accounting for income taxes[302](index=302&type=chunk) - These estimates involve significant judgment and estimation uncertainty and have not materially changed from the prior Annual Report on Form 10-K[301](index=301&type=chunk)[303](index=303&type=chunk) [Recent Accounting Pronouncements](index=61&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted ASU No. 2016-13 (Credit Losses) and ASU No. 2021-08 (Business Combinations) on January 1, 2023, with no material impact. It is currently evaluating the impact of ASU No. 2020-06 (Convertible Instruments) which becomes effective on January 1, 2024 - ASU No. 2016-13 (Credit Losses) and ASU No. 2021-08 (Business Combinations) were adopted on January 1, 2023, with no material impact[93](index=93&type=chunk)[94](index=94&type=chunk) - The company is evaluating ASU No. 2020-06 (Convertible Instruments), effective January 1, 2024, for its potential impact on consolidated financial statements[95](index=95&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=62&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to investment risks from changes in securities markets and underlying financial conditions of equity investments, as well as foreign currency exchange risk. A hypothetical 10% adverse change in publicly traded equity investments would decrease their value by approximately $6.5 million, and a similar change in foreign exchange rates could impact financial position by $5.0 million - The company is exposed to investment risks from changes in securities markets and the financial condition of its equity investments[307](index=307&type=chunk) - A hypothetical **10% adverse change** in the market price of publicly traded equity investments would result in an approximate **$6.5 million** decrease in value[308](index=308&type=chunk) - Foreign currency exchange risk, primarily related to the British Pound and Euro, could result in a **$5.0 million** effect on financial position for a hypothetical **10% change** in exchange rates[309](index=309&type=chunk) [Item 4. Controls and Procedures](index=62&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of September 30, 2023. There were no material changes in internal control over financial reporting during the quarter, and management acknowledges the inherent limitations of any control system - Disclosure controls and procedures were deemed effective as of September 30, 2023, ensuring timely and accurate information communication[310](index=310&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2023[312](index=312&type=chunk) - Management acknowledges that control systems provide reasonable, not absolute, assurance and have inherent limitations[313](index=313&type=chunk) [Part II. Other Information](index=61&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and other disclosures [Item 1. Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions, including patent enforcement litigation, which are considered part of the ordinary course of business. Management believes that the ultimate liability from these actions will not materially affect its financial position, but acknowledges that litigation can be costly, resource-intensive, and may not always result in favorable outcomes - The company is subject to claims and legal actions, including patent infringement cases, in the ordinary course of business[315](index=315&type=chunk) - Management believes that the ultimate liability from these legal actions will not have a material adverse effect on the company's consolidated financial position, results of operations, or cash flows[315](index=315&type=chunk) - Patent enforcement litigation can be costly, consume significant financial and management resources, and may not always result in favorable outcomes[317](index=317&type=chunk) [Item 1A. Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors) Investors are directed to the Annual Report on Form 10-K and Q2 2023 Form 10-Q for a comprehensive discussion of risk factors - Investors should carefully consider the risks and uncertainties outlined in the Annual Report on Form 10-K for 2022 and the Quarterly Report on Form 10-Q for Q2 2023[318](index=318&type=chunk) - No changes to the previously reported Risk Factors have occurred, except as described in the Q2 2023 10-Q[318](index=318&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&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 for the period - No unregistered sales of equity securities or use of proceeds occurred during the period[319](index=319&type=chunk) [Item 3. Defaults Upon Senior Securities](index=64&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - No defaults upon senior securities occurred during the period[319](index=319&type=chunk) [Item 4. Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[319](index=319&type=chunk) [Item 5. Other Information](index=65&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - No other information is reported for the period[320](index=320&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) All exhibits filed with the Quarterly Report are listed, including corporate governance documents, equity awards, and certifications - Exhibits include corporate governance documents (Certificate of Designations, Bylaws), equity award agreements, and certifications from principal executive and financial officers[320](index=320&type=chunk) - Financial statements and cover page interactive data are provided in iXBRL format[320](index=320&type=chunk) [Signatures](index=66&type=section&id=SIGNATURES) This section contains the signatures of the company's authorized executive and financial officers [Signatures of Authorized Officers](index=66&type=section&id=Signatures%20of%20Authorized%20Officers) The Quarterly Report is duly signed on behalf of Acacia Research Corporation by Martin D. McNulty Jr., Interim Chief Executive Officer, and Kirsten Hoover, Interim Chief Financial Officer, as of November 13, 2023 - The Quarterly Report was signed by Martin D. McNulty Jr., Interim Chief Executive Officer, and Kirsten Hoover, Interim Chief Financial Officer, on November 13, 2023[324](index=324&type=chunk)