ACACIA RESEARCH CORP Q3 FY2024 earnings call

• Acacia is a value-oriented acquirer and operator of businesses across industrial, energy, and technology sectors, focusing on stable cash flow generation and scaling. - The acquisition of Deflecto, a leading specialty manufacturer, aligns with the long-term strategy, with Deflecto having strong market share in its segments. - Energy operations: Acquired Benchmark in November 2023, with over 150,000 net acres and over 500 operated wells, generating revenues and adjusted EBITDA. - Industrials segment: Printronix is transitioning to higher-margin consumables, with revenue increase. - Intellectual property operations: Revenue is volatile, with ongoing monetization efforts and litigation activities such as the TPLink appeal. - Book value per share was $5.85 on September 30, 2024, down from $5.95 on June 30, but excluding nonrecurring legacy legal matters, it would be $6 per share.

In the third quarter of 2024, Acacia Research's energy operations generated $15.8 million in revenues, with adjusted EBITDA of $8.4 million. The industrials segment recorded $7 million in revenues and $0.5 million in adjusted EBITDA. The intellectual property operations brought in $0.5 million in revenue but had an EBITDA loss of $2.1 million. For the 9 months ended September 30, energy operations had adjusted EBITDA of $16.9 million, industrials had $2.9 million, and intellectual property had an EBITDA gain of $6.3 million. Energy revenues excluded realized hedge gains, and industrials' revenue increase was attributed to higher printer and consumable sales, while IP revenue dropped due to no paid-up licensing agreements being executed in the quarter.

• Deflecto is expected to generate revenues in the range of $128 million to $136 million and EBITDA of $17.5 million to $19.5 million in 2024. - Continues to evaluate new platforms, particularly for the technology vertical. - A $20 million Board-approved stock repurchase program is in place to repurchase up to 5.8 million shares, with plans to opportunistically complete repurchases in the fourth quarter of 2024 and into 2025.

• Actual results may materially differ from forward-looking statements due to certain risks and uncertainties, as detailed in Acacia's annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the SEC. - Risks related to market conditions, integration of acquisitions, and performance of acquired businesses.

Q: Love to hear more on Deflecto, including margin profile and synergy plans, and on Benchmark's performance.

A: Deflecto has three business segments with strong market share, mid-teens EBITDA margins with opportunities for improvement through cost rationalization, product expansion, and acquisition. Benchmark's acquisition is playing out as expected, with revenue and adjusted EBITDA in line with expectations, and ongoing operational enhancement.

Q: Questions on Deflecto's past transformation and focus on segments.

A: Deflecto was a pared-down business from a larger one, with all 3 segments having attractive characteristics, and two (transportation and HVAC) having paths to be platforms for growth through acquisition.

Q: Sentiment on cash management and potential crypto entry.

A: Fascinated by crypto but cautious due to volatility, not having spent much time on cash management with crypto, but the new administration's pro-crypto stance warrants evaluation.