[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)

Financial Data and Key Metrics Changes - GAAP book value at June 30, 2023, was $335.4 million or $5.71 per basic share, compared to $269.3 million or $6.19 per share at December 31, 2022 [11] - Total second quarter revenues were $7.9 million, down from $16.7 million in the same quarter last year [12] - GAAP net loss attributable to Acacia Research was $18.8 million or $0.36 per diluted share, compared to a net loss of $61.5 million or $1.44 per diluted share in the second quarter of last year [13] Business Line Data and Key Metrics Changes - Printronix generated $7.5 million in revenue in the quarter, down from $8.7 million last year [12] - The intellectual property business generated $400,000 in licensing and other revenue during the quarter, down from $8.1 million in the same quarter last year [12] - General and administrative expenses were $9.4 million, down from $10.7 million in the same quarter of last year due to reduced headcount and compensation costs [12] Market Data and Key Metrics Changes - Total liabilities for warrants and convertible preferred stock were $94.9 million at June 30, 2023 [11] - Cash, cash equivalents, and equity securities at fair value totaled $408 million at June 30, 2023, compared to $349.4 million at December 31, 2022 [14] Company Strategy and Development Direction - The company completed a recapitalization transaction with its largest shareholder, signaling a transformation of Acacia [5] - A corporate incentive plan was put in place to align employee incentives with those of shareholders [6] - The company is focused on sourcing, evaluating, and executing potential transactions, with a growing pipeline of opportunities [7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the upcoming trial related to WiFi 6 patents, which could accelerate licensing activity [9] - The company is seeing more attractive valuations in the private market, indicating potential for future acquisitions [23][24] - Management acknowledged the eagerness of shareholders for capital deployment and transaction outcomes [26] Other Important Information - The recapitalization transaction resulted in an incremental $166.8 million increase in book value and an incremental $41.4 million increase in shares outstanding [19] - Cash per share stood at $6.05 as of June 30, 2023, with a pro forma cash per share of approximately $3.44 assuming completion of all phases of the Starboard transaction [19] Q&A Session Summary Question: Inquiry about Wi-Fi 6 licensing and M&A strategy - Management confirmed engagement with multiple parties regarding Wi-Fi 6 licensing and noted ongoing evaluation of attractive public market opportunities [21][22] Question: Request for transparency on patent business - Management acknowledged the strength of the patent team and considered the suggestion to provide a spreadsheet of pending cases and trial dates for shareholders [27][28] Question: Clarification on cash balance post recapitalization - Management provided details on the cash balance adjustment following the payment of $60 million in notes, confirming a post-recap cash balance of $343.4 million [30][31]

[CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights forward-looking statements, their inherent risks, and the safe harbor provisions under the Private Securities Litigation Reform Act of 1995 - 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[14](index=14&type=chunk) - Forward-looking statements cover business, operating, development, investment and finance strategies, relationship with Starboard Value LP, acquisition activities, financial results, intellectual property licensing, capital expenditures, earnings, litigation, regulatory matters, markets, liquidity, and accounting[14](index=14&type=chunk) - Key risks include inability to acquire or integrate businesses, employee retention, cybersecurity incidents, fluctuations in legal expenses, patent invalidity, supply chain disruptions, and external events like political unrest or pandemics[14](index=14&type=chunk) [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Acacia Research Corporation for the three and six months ended June 30, 2023, and 2022, including balance sheets, statements of operations, statements of equity, and cash flows, along with comprehensive notes detailing accounting policies, investments, liabilities, and segment information [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030,%202023%20(Unaudited)%20and%20December%2031,%202022) | Metric | June 30, 2023 (Unaudited) (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------- | :--------------------------------------- | :------------------------------------ | | **ASSETS** | | | | Total current assets | $485,792 | $427,985 | | Total assets | $534,708 | $482,928 | | **LIABILITIES & EQUITY** | | | | Total current liabilities | $77,806 | $87,209 | | Total liabilities | $176,121 | $193,682 | | Total stockholders' equity | $335,433 | $269,322 | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202023%20and%202022) | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $7,904 | $16,717 | $22,707 | $30,224 | | Operating loss | $(12,529) | $(5,670) | $(21,853) | $(14,178) | | Loss before income taxes | $(20,424) | $(47,690) | $(8,494) | $(135,834) | | Net loss attributable to Acacia Research Corporation | $(18,779) | $(61,503) | $(9,332) | $(134,769) | | Basic net loss per common share | $(0.36) | $(1.44) | $(0.26) | $(3.06) | | Diluted net loss per common share | $(0.36) | $(1.44) | $(0.26) | $(3.06) | - Total revenues decreased by **53%** for the three months ended June 30, 2023, and by **25%** for the six months ended June 30, 2023, primarily due to decreases in both Intellectual Property Operations and Industrial Operations revenues[27](index=27&type=chunk)[237](index=237&type=chunk)[246](index=246&type=chunk) - Net loss attributable to Acacia Research Corporation significantly decreased by **69%** for the three months and **93%** for the six months ended June 30, 2023, compared to the prior year, largely driven by changes in fair value of equity securities and warrants[27](index=27&type=chunk)[237](index=237&type=chunk)[246](index=246&type=chunk) [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'%20Equity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202023%20and%202022) | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Series A Redeemable Convertible Preferred Stock | $23,154 | $19,924 | | Common Stock | $58 | $43 | | Treasury Stock | $(98,258) | $(98,258) | | Additional Paid-in Capital | $738,712 | $663,284 | | Accumulated Deficit | $(316,121) | $(306,789) | | Total Stockholders' Equity | $335,433 | $269,322 | - Total stockholders' equity increased from **$269.3 million** at December 31, 2022, to **$335.4 million** at June 30, 2023, primarily due to an increase in additional paid-in capital from the Rights Offering and stock option exercises[22](index=22&type=chunk)[34](index=34&type=chunk) - The accumulated deficit increased from **$(306.8) million** to **$(316.1) million** during the six months ended June 30, 2023, reflecting the net loss for the period[22](index=22&type=chunk)[34](index=34&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030,%202023%20and%202022) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(19,122) | $(17,553) | | Net cash provided by investing activities | $9,218 | $78,547 | | Net cash provided by (used in) financing activities | $77,322 | $(106,410) | | Increase (decrease) in cash and cash equivalents | $67,402 | $(45,416) | | Cash and cash equivalents, ending | $355,188 | $263,945 | - Cash flows from financing activities significantly increased to **$77.3 million** provided in H1 2023, compared to **$106.4 million** used in H1 2022, primarily due to proceeds from the Rights Offering[38](index=38&type=chunk)[286](index=286&type=chunk) - Net cash provided by investing activities decreased from **$78.5 million** in H1 2022 to **$9.2 million** in H1 2023, mainly due to lower net cash inflows from equity securities transactions[38](index=38&type=chunk)[284](index=284&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's significant accounting policies, financial statement components, and related party transactions [1. DESCRIPTION OF BUSINESS](index=11&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS) This note describes the company's opportunistic capital platform strategy, its relationship with Starboard Value, LP, and its two primary business segments - Acacia Research Corporation operates as an opportunistic capital platform, acquiring businesses based on public/private market valuation differentials, focusing on companies with market values under **$2 billion**, particularly **$1 billion** or less[41](index=41&type=chunk) - The company maintains a strategic relationship with Starboard Value, LP, which provides access to industry expertise and assistance in sourcing and evaluating acquisition opportunities[43](index=43&type=chunk) - The company's business segments include Intellectual Property Operations (

Acacia Research Corporation (NASDAQ:ACTG) Q1 2023 Results Conference Call May 11, 2023 4:30 PM ET Company Participants Rob Fink - Managing Partner MJ McNulty - Interim CEO Kirsten Hoover - Interim CFO Conference Call Participants Brett Reiss - Janney Montgomery Scott Adam Eagleston - Formidable AM Operator Good day, and welcome to the Acacia Research First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After managements prepared remarks there will be questio ...

SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ______________ Commission file number: 001-37721 Acacia Research Corporation (Name of registrant as specified in its charter) Delaware 95-4405754 (State or other jurisdi ...

Acquisition Strategy - Acacia Research Corporation focuses on acquiring businesses with market values in the sub-$2 billion range, particularly those valued at $1 billion or less[13]. - The company aims to continue focusing on undervalued operating businesses and strategic assets for future acquisitions[20]. - Acacia's strategic relationship with Starboard Value, LP enhances access to industry expertise and acquisition opportunities[18]. - The company plans to grow by acquiring additional operating businesses and intellectual property assets, but there are risks associated with identifying and integrating these acquisitions[41]. - The company has acquired five noteworthy new patent portfolios for an aggregate consideration of approximately $46.9 million from 2019 to 2022[28]. - Successful acquisitions depend on the ability to combine operations without disrupting existing relationships and achieving operational synergies[42]. - The company may issue shares of common stock for future acquisitions, potentially leading to dilution for existing shareholders[46]. - The company faces risks in acquiring privately held companies due to limited information and potential economic vulnerabilities[55]. Financial Performance - The company has generated gross licensing revenue of approximately $1.7 billion and returned $849.2 million to patent partners as of December 31, 2022[29]. - Total revenues decreased by $28.8 million to $59.2 million for the year ended December 31, 2022, compared to $88.0 million for the year ended December 31, 2021, primarily due to a decrease in Intellectual Property Operations revenues[186]. - Operating loss for the year ended December 31, 2022, was $40.1 million, compared to an operating income of $14.5 million in the prior year, representing a change of $54.6 million[186]. - Loss before income taxes was $127.2 million for the year ended December 31, 2022, compared to income of $174.7 million in the prior year, a decrease of $301.9 million[189]. - Unrealized loss from the change in fair value of equity securities was $263.7 million in 2022, compared to an unrealized gain of $87.5 million in the prior year[193]. - Total revenues decreased by $56.5 million, from $76.0 million to $19.5 million in 2022, representing a 74% decline[198]. Operational Challenges - Integration challenges may include higher-than-expected costs, management distraction, and failure to maintain key customer relationships[42]. - The company faces limitations on utilizing net operating losses due to potential ownership changes, which could restrict future tax benefits[68]. - The company outsources various services, including cloud computing for data storage, which may lead to operational disruptions and reduced control over service quality[66]. - Cybersecurity incidents, such as data breaches, could materially affect the company's business and financial condition, potentially leading to significant legal liabilities and reputational harm[70]. - The company faces risks related to reliance on outsourced providers and suppliers, which could impair its ability to manage operations and generate revenues[116]. Management and Governance - Recent management changes, including the resignation of the CEO and CFO, may disrupt business operations and affect stock performance[60][64]. - The company entered into a Recapitalization Agreement with Starboard, ensuring at least two independent directors on the Board until May 12, 2026[140]. - Following the Recapitalization Agreement, Starboard may own up to 61.3% of the company's common stock, significantly influencing shareholder decisions and governance[81]. - The concentration of voting power with Starboard could delay or prevent changes in control or mergers that other shareholders may favor, potentially affecting stock price[85]. Intellectual Property and Legal Risks - The company's intellectual property business is heavily reliant on the strength of its patent portfolios, which are subject to evolving legislation and regulations[90]. - Patent acquisition and enforcement are costly and time-consuming, with significant uncertainty regarding the outcomes of litigation and the value of patents[91]. - Recent changes in patent law and regulations may weaken the rights of patent owners, affecting the ability to obtain and enforce patents[92]. - The America Invents Act has introduced new avenues for challenging the validity of issued patents, increasing uncertainty for the company's patent portfolio[92]. - The company expects patent-related legal expenses to continue to fluctuate based on various factors, including trial dates and enforcement activities[168]. Employee and Workforce - As of December 31, 2022, Acacia had 263 full-time employees and six contractors, indicating a stable workforce[36]. - The company must attract and retain qualified personnel to execute business plans effectively, with competition for talent being intense[49]. Printronix Operations - Acacia's Industrial Operations Business includes the acquisition of Printronix, a leading manufacturer of industrial impact printers, which supports mission-critical applications[30]. - Printronix's financial performance may be adversely affected by unexpected fluctuations in customer demand or reseller inventory levels[118]. - Printronix expects approximately 48.0% of its revenue for the fiscal year ending March 31, 2023, to be derived from the sale of supplies[121]. - Revenue from international sales is anticipated to comprise approximately 53.3% of Printronix's revenue for the fiscal year ending March 31, 2023[122]. - Printronix's cost of sales for 2022 was $19.4 million, compared to $7.4 million in 2021, reflecting a full year of operations post-acquisition[208].

Acacia Research Corporation (NASDAQ:ACTG) Q4 2022 Earnings Call Transcript March 16, 2023 11:00 AM ET Company Participants Robert Fink - Investor Relations Martin McNulty - Interim Chief Executive Officer Kirsten Hoover - Interim Chief Financial Officer Conference Call Participants Operator Greetings. Welcome to the Acacia Research Fourth Quarter 2022 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Inst ...

Financial Performance - Total revenues for the nine months ended September 30, 2022, were $29,105 million, compared to $46,102 million for the same period in 2021[16]. - Intellectual property operations revenue for Q3 2022 was $6,320 million, a significant increase from $1,582 million in Q3 2021[16]. - Total costs and expenses for Q3 2022 were $27,243 million, up from $14,304 million in Q3 2021[16]. - Operating loss for Q3 2022 was $(11,365) million, slightly improved from $(12,722) million in Q3 2021[16]. - Net income attributable to Acacia Research Corporation for Q3 2022 was $28,090 million, compared to $89,757 million in Q3 2021[16]. - Basic net income per common share for Q3 2022 was $0.54, down from $1.49 in Q3 2021[16]. - Net loss for the nine months ended September 30, 2022, was $92.36 million, compared to a loss of $54.14 million for the same period in 2021, representing an increase of 70.5%[27]. Assets and Equity - As of September 30, 2022, total assets decreased to $485.3 million from $798.9 million as of December 31, 2021, representing a decline of approximately 39.2%[12]. - Total stockholders' equity decreased to $282.5 million from $430.5 million, reflecting a decline of approximately 34.4%[13]. - Current assets totaled $427.2 million, down from $730.7 million, a decrease of about 41.5%[12]. - Cash and cash equivalents were reported at $241.9 million, down from $308.9 million, a decrease of about 21.6%[12]. - The accumulated deficit increased to $288.4 million from $181.7 million, indicating a rise of approximately 58.7%[13]. - The company reported a significant reduction in equity securities at fair value, which fell to $81.4 million from $361.8 million, a decrease of about 77.5%[12]. Inventories and Assets Management - Inventories increased to $13.8 million from $8.9 million, representing a growth of approximately 55.3%[12]. - Printronix's net inventories increased to $13.8 million as of September 30, 2022, from $8.9 million as of December 31, 2021, representing a 54% increase[131]. - Printronix's equity securities at fair value totaled $81.384 million as of September 30, 2022, down from $361.778 million at December 31, 2021[77]. Cash Flow and Operating Activities - Net cash used in operating activities for the nine months ended September 30, 2022, was $13.60 million, compared to $9.28 million for the same period in 2021, representing an increase of 46.5%[27]. - Cash and cash equivalents at the end of September 30, 2022, were $241.87 million, down from $254.14 million at the end of September 30, 2021, indicating a decrease of 4.8%[27]. Acquisitions and Investments - The company acquired Printronix for approximately $37.0 million, which included an initial cash payment of $33.0 million and a $4.0 million working capital adjustment[36]. - The company is focused on acquiring businesses with market values in the sub-$2 billion range, particularly those valued at $1 billion or less, while remaining opportunistic for larger acquisitions[29]. - As of September 30, 2022, the company has monetized a portion of its Life Sciences Portfolio while retaining interests in several operating businesses, including a controlling interest in one company[30]. Tax and Compliance - The Company has unrecognized tax benefits of approximately $887,000 as of September 30, 2022, which is expected to remain unchanged within the next 12 months[110]. - The Company anticipates receiving a milestone payment of approximately $27.0 million related to FDA approval before year-end 2022[127]. - The Company has not recorded any interest and penalties for unrecognized tax benefits for the periods presented[110]. Leases and Operating Costs - Acacia has leased approximately 8,600 square feet of office space for its corporate headquarters in New York, with a lease term that now extends to February 28, 2025[189]. - Printronix has a total of 73,649 square feet of leased facilities, with significant leases including 8,662 square feet in Irvine, California, and 52,000 square feet in Johor, Malaysia[190][191]. - Printronix's operating lease costs were $474,000 for the three months ended September 30, 2022, compared to $155,000 for the same period in 2021, reflecting a year-over-year increase of 206.5%[193]. Risks and Uncertainties - The company continues to face substantial risks and uncertainties that could materially affect future financial results, including costly acquisitions and market conditions[6]. - The ongoing COVID-19 pandemic has not had a material impact on the company's operations to date, but potential risks remain[37].

Financial Data and Key Metrics Changes - Acacia's GAAP book value as of September 30 was $282.5 million, or $7.33 per basic share, compared to $268.2 million, or $6.60 per share as of June 30, and $430.5 million, or $8.80 per share at December 31, 2021 [21][22][24] - Pro forma book value will be $520.1 million or $5.22 per share after the completion of the Starboard transactions [19][23] - Cash and equity securities at fair value totaled $323.2 million at September 30, down from $670.7 million at December 31, 2021 [27] Business Line Data and Key Metrics Changes - Revenues for Q3 2022 were $15.9 million, compared to $1.6 million a year ago, with Printronix contributing $9.6 million and the intellectual property business generating $6.3 million [24][25] - General and administrative expenses were $15 million, up from $10.3 million in the same quarter last year [25] - Operating loss was $11.4 million, slightly improved from an operating loss of $12.7 million a year ago [25] Market Data and Key Metrics Changes - The current market conditions have shifted the acquisition pipeline more towards public targets due to elevated valuations in private markets [11] - Acacia expects to have more than $320 million in cash on the balance sheet by the end of the first quarter of 2023 following the initial steps of the Starboard transaction [23] Company Strategy and Development Direction - Acacia aims to establish a hybrid acquisition platform that combines elements of hedge fund activism and private equity [9][13] - The company is focused on acquiring businesses in industrials, healthcare, and mature technology sectors, while remaining open to other opportunities [42][56] - The partnership with Starboard is seen as crucial for accessing capital and enhancing acquisition capabilities [5][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the acquisition pipeline, which is described as the most robust seen to date [11][12] - The company is committed to a disciplined approach to acquisitions, emphasizing the importance of valuation and strategic fit [41][52] - Management highlighted the importance of demonstrating value to shareholders to encourage participation in the upcoming rights offering [50] Other Important Information - The agreement with Starboard will streamline Acacia's capital structure, eliminating complex derivatives and preferred shares [15][20] - Acacia has a strong internal team and a network of advisors to enhance acquisition processes and operational improvements post-acquisition [10][11] Q&A Session Summary Question: How does Acacia plan to monetize its investment in Viamet? - Acacia owns approximately 26% of Viamet and anticipates receiving milestone and royalty payments, with a larger payment expected before year-end [34] Question: What is the expected go-forward rate for operating expenses? - Operating expenses are expected to vary based on business activity, but $17.3 million is a reasonable starting point [35][36] Question: What is the status of the Wi-Fi IP portfolio? - The Wi-Fi IP portfolio has exceeded initial capital expectations and generated significant discussions with potential licensees [38][39] Question: What is the focus of Acacia's acquisition strategy? - Acacia is focused on acquiring businesses that can be improved in partnership with experienced executives, with a current emphasis on industrials, healthcare, and mature technology [41][42][56] Question: Are there conditions that need to be met before making the first acquisition? - There are no specific conditions such as shareholder approval that need to be met before pursuing acquisitions [47] Question: How important is the additional capital from the rights offering? - The rights offering is important for demonstrating value to shareholders, but the company will not rush into acquisitions solely to drive participation [50][52] Question: What criteria does Acacia use for acquisitions? - Acacia has a checklist of criteria for evaluating potential acquisitions, focusing on businesses that can be improved and are aligned with their strategic goals [53][56]

Financial Data and Key Metrics Changes - GAAP book value at June 30, 2022, was $268.2 million or $6.60 per basic share, down from $345.5 million or $7.42 per basic share at March 31, and $430.5 million or $8.80 per share as of December 31, 2021 [9] - Pro forma book value assuming full exercise of all issued derivatives was $911.3 million or $5.87 per share, down from $952.2 million or $5.91 per share as of March 31, 2022, and $1.1 billion or $6.51 per share as of December 31, 2021 [10] - Revenues for Q2 2022 were $16.7 million compared to $17.4 million a year ago [11] - GAAP net loss was $61.5 million or $1.44 per diluted share compared to net income of $19.7 million or $0.23 per diluted share in Q2 last year [13] Business Line Data and Key Metrics Changes - Printronix contributed $8.7 million in revenue in the quarter, with no contribution in the comparable period last year [11] - Intellectual Property Business generated $8.1 million of revenue related to patent assertion, down from $17.4 million in the second quarter last year [11] - Operating loss was $5.7 million in the quarter compared to operating income of $1.6 million a year ago, with Printronix contributing $1.1 million in operating loss [12] Market Data and Key Metrics Changes - Cash and securities at fair value totaled $390.3 million at June 30, down from $670.7 million at December 31, 2021 [15] - Debt was $115.8 million in senior secured notes issued to Starboard Value, down from $181.2 million at December 31 [15] Company Strategy and Development Direction - The company is actively expanding its M&A program and pipeline of potential opportunities, focusing on transactions that can unlock value [7] - The partnership with Starboard has been strategic, and the company is working on simplifying the ownership structure to better position for future development [5][6] - The company aims to direct its investment strategy towards opportunities with embedded value realization potential [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the decline in share prices of security holdings as a primary reason for the decrease in book value year-to-date [11] - The company is optimistic about the potential for significant transactions in the near future, particularly in light of reduced valuations in the market [23] - Management emphasized the importance of the Starboard relationship and the potential for future developments [20] Other Important Information - The company repurchased 6.1 million shares at an average price of $4.64 per share, completing a $40 million buyback program [8] - The company has generated $408 million of cash proceeds from the monetization of the Life Sciences portfolio [7] Q&A Session Summary Question: Update on Starboard relationship and capital access - Management clarified that the Starboard relationship remains strategic and that they are working on simplifying the capital structure while maintaining access to significant capital [19][21] Question: Opportunities in WiFi patent portfolio and transaction speed - Management noted that they are looking at larger portfolios and believe there are attractive opportunities available, with a focus on completing significant transactions soon [22][23] Question: Balance between public and private market opportunities - Management indicated that they are competitive in both markets, with a preference for public situations where they are not in auction scenarios [26] Question: Buyback plans and restructuring of Starboard financing - Management stated that there are currently no plans for additional buybacks and emphasized the complexity of restructuring the Starboard financing [27][30] Question: Pending litigation and potential licensing strategies - Management confirmed ongoing litigations in various jurisdictions and discussed the potential for future licensing agreements [34][36]