Greetings, and welcome to the Acacia Research Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Jeff Stanlis of FNK IR. Jeff, you may begin.

Thank you. Hosting the call today are MJ McNulty, Interim Chief Executive Officer; and Kirsten Hoover, Interim Chief Financial Officer. Before beginning, I would like to remind you that the information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives and expectations for future operation and are based on the current estimates and projections, future results or trends. Actual results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see the risk factors described in Acacia's annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC. I'd also like to remind everyone that a press release disclosing financial results was issued this afternoon just after the close of the market. This release may be accessed on the company's website under the Press Releases section of the Investor Relations tab at acaciaresearch.com under the News and Events tab. With all that said, I would now like to turn the call over to MJ McNulty. MJ, the call is yours.

Thanks, Jeff, and thanks to everyone for joining us this afternoon. We've had a highly productive few months here and have several recent developments that I'd like to review on today's call. As you may have seen today, we announced that we acquired a majority stake in Benchmark Energy II LLC. Benchmark is an independent oil and gas company engaged in the acquisition, production and development of long-lived oil and gas assets in mature resource plays in Texas and Oklahoma. I'll speak more about this in a few minutes, but Benchmark is an established entity managed by executives with whom we have a positive history and a team with a demonstrated track record of success across market cycles. We have long lead into invest in oil and gas assets and believe the timing for capital access in the industry, especially in terms of valuation, is ideal. The Benchmark platform specifically gives Acacia access to high-return predictable cash flows while employing a conservative risk management philosophy. We also signed an agreement to sell our stake of approximately 25% in Arix Bioscience plc. This is our last publicly traded life sciences asset as part of the portfolio that we acquired in 2020. And once completed, this sale will result in a significant return on our investment. Moreover, it further augments our capital base, enabling us to reallocate this capital in new ways, more core to our strategy. Our Board has also approved a new share repurchase program. I'll discuss the details later in the call, but we believe that we have sufficient cash to support both our current growth initiatives and the share buyback. Turning to Benchmark. We're enthusiastic about the acquisition announced today, which we believe is a good example of the flexibility of our capital and where we're able to…

Thank you, MJ. Our GAAP book value at September 30, 2023, was $503.6 million or $5.04 per base share. Our book value reflects the exercise of the Series B warrants through a combination of no cancellation and limited cash exercise and the conversion of the preferred stocks, which occurred on July 13, 2023, as part of the recapitalization transaction. As MJ said, interest income has covered Acacia's fixed parent costs in the first 9 months of the year, and we expect this to continue through the rest of this fiscal year. A key part of this was the elimination of approximately $6 million in annualized parent G&A costs compared to the prior fiscal year. We expect Printronix to generate free cash flows on an annual basis. Let me now turn to the third quarter results. Total third quarter revenues were $10.1 million compared to $15.9 million in the same quarter last year. Printronix generated $8.3 million in revenue in the quarter compared to $9.6 million last year. The Intellectual Property business generated $1.8 million in licensing and other revenue during the quarter compared to $6.3 million in the same quarter of last year. As MJ mentioned, given the nature of the Intellectual Property business, we have expected fluctuations in revenue quarter-to-quarter. General and administrative expenses, which includes G&A at IP and Printronix, decreased to $13.9 million compared to $15 million in the same quarter of last year due to a decrease in personnel and compensation costs related to reduced headcount and a reduction in Printronix G&A. Operating loss was $15.4 million compared to an operating loss of $11.4 million in the same quarter of last year with the reduction due to lower revenues. We recognized $2.2 million in earnings, net of non-controlling interest, in our equity investment and joint venture…

[Operator Instructions] And your first question today is coming from Anthony Stoss from Craig-Hallum.

Just a question quickly on Benchmark. It seems like a relatively small investment, $10 million for 50.4%. You talked about pretty decent expected returns. Can you maybe expand on that expectation? And I had probably 2 or 3 follow-ups.

Yes. So it is small. It's the beginning of a platform to take advantage of a market where we think there are incredible opportunities to buy these cash-flowing assets from existing producers that have kind of neglected the assets and from others. So while this initial investment is small, it's really an investment in the existing set of assets, which is about $6 million of LTM cash flow. And then we continue to pursue the strategy, and the team has a pretty good pipeline of incremental opportunities. And in this case, we're really partnering with a family that's been in the oil and gas business for the last 100 years and has a deep, deep set of relationships and a pretty fulsome opportunity set to continue to grow. The beginning of this platform is something much larger.

Got it. Okay. I think you answered my question, but let me just follow up with a second one. With your large cash balance, so it's correct to assume that you could go after a much bigger oil and energy type of assets or it still signifies that you're going to be looking at all industries out there?

We're going to continue to look at the industries that we've indicated that we're going to look at industrials, mature technology, energy, healthcare. I do think that this will be a large part of our holdings, are a good part of our holdings over time pursuing the strategy. But that doesn't mean that we're shifting gears away from the other industries that we've been evaluating. And as I mentioned that we have several things in top or of those -- there are a handful of healthcare-related, technology healthcare-related, industrial businesses in that bucket. So we're not turning ourselves into an oil and gas company. We do think the strategy is very attractive in oil and gas. We think it's very different from the way that others, including private equity and other public companies, are pursuing the industry. So we are very enthusiastic about deploying more capital here, but this is not mutually exclusive from our other areas of focus.

Got it. By the way, congrats on the Arix deal. That's wonderful for Acacia. One of the shareholders, it looks like, in Arix is kind of disputing the fact that you guys are getting cash, and others are getting stock. I'm curious if you can share your thoughts on that.

Yes. I mean we saw that news, too. I think they're a small broker that shouldn't take away from the value of their opinion. We are getting cash, and other shareholders are getting gig stock. Other shareholders have a say in the way that the deal ultimately happens. We did have a sizable position, and so we got a premium in terms of the consideration being cash instead of stock because of that position.

Got it. By the way, thanks for the conversion of Starboard. I mean it definitely cleans up the model, makes everything a lot more clear. Thank you. Best of luck.

Yes, of course. Thanks, Tony. Good to talk to you.

[Operator Instructions] And your next question today is coming from Brett Reiss from Janney Montgomery Scott.

There are a lot of credit opportunities now making all sorts of loans because the banks have kind of pulled back from that type of lending. Are we looking at any of those type of opportunities with the big cash hoard we're building?

Yes. So that's a great question, Brett. It's something we certainly talk about a lot. Our primary business is to acquire operating entities and have them under Acacia's umbrella. And we do have some capacity to do things like that. I think we're cautiously evaluating it. Our team is not in the business of originating and syndicating loans. So we would have to build out an effort to do that. We've certainly seen individual companies where we could put structured securities into them with returns that are kind of commensurate with what you're suggesting. We've also seen loans that we could acquire and control fulcrum securities. What I would say is those are very interesting to us. Our primary objective here is to acquire operating businesses and have them in Acacia stable companies, but that doesn't preclude us from evaluating some of these credit structure opportunities.

Okay. In terms of the thought process to go with a share buyback rather than declaring a dividend as a way to get the stock price up as potential currency for other deals, why did you go with the buyback versus declaring a dividend if you could share with me some of the thought process there?

Yes. I mean look, we -- you can do either. I think from a tax perspective and from an optimization perspective, we think the buyback is attractive. And at the valuation of our stock today, I think it's beneficial to our shareholders to own more of that stock. And so ultimately, our Board landed on a buyback as opposed to a dividend to accomplish stock hold.

Okay. On a scale of 1 to 10, 10 being metaphysical certainty, what would you -- the Arix deal closing, what do you think it is, a 7, 8, 9?

I love it, Brett, when you ask me to put things on a scale. What I will tell you is that there is one condition to the closing of our, Acacia's Arix shares to RTW. And that is approval from the Financial Conduct Authority in the United Kingdom for the transaction. I will say that the entity within Arix that triggered this approval requirement is currently FCA-approved or certified as is RTW. So I don't want to handicap it, but we're being advised that this is a routine approval process by the FCA. Now it's -- there are things that are out of our control, but that's what we're being advised.

Okay. Pivoting to the patent business, the jury award that we recently got, do you know when we'll know whether the defendant will elect to appeal or just penny up and pay? What's the timelines on that?

We do not have a specific timeline on that. The award in and of itself, the defendants have an opportunity to appeal that. They have an opportunity to settle that. That's a process that we can't comment anymore on. As I did mention, it has created some other productive conversations around that portfolio, and we'll see how those play out.

Right. Right. And one last one on the patents. Do you know what the court calendar for firm trial dates with other defendants in the Wi-Fi 6 portfolio are over, let's say, the next 6 to 9 months?

Do know in our -- sorry, MJ.

Go ahead, Kirsten.

I was just going to say, we do disclose all trials, not just Atlas within the next 12 months, and that's at 7. That is publicly disclosed in our 10-Q.

So in the 10-Q, there are 7 trial dates from 7 different defendants?

Yes.

Your next question is coming from John Levin from Levin Capital.

Can you hear me?

We can hear you.

You can hear me?

Yes.

Okay. So it follows that question. So I think the award is $27 million. Is an inference -- same kind of question of percentage. Inference of that, that is less than half of what you might ultimately obtain or a 1/4? What's the potential magnitude here that this could produce because we know it's significant?

Yes. John, just quickly on the numbers, the jury award was $37.5 million.

Yes. My bad. I was [wondering] everything you say. Go ahead.

That's okay. I don't want to handicap what the total value of the portfolio is, but it's substantial. When you look at the end market for Wi-Fi 6 and the total number of products that use Wi-Fi, the market opportunity there is very large. So I'm not going to estimate that it's half or 1/4 or 3/4 or 100%. What I would say is that the market is very large for products that use the Wi-Fi technology that we have a patent on. And Mark and his team are continuing to execute very aggressively on taking advantage of that opportunity.

There are no further questions in queue at this time. I would now like to turn the floor back to management for closing remarks.

Thanks, Tom. Thanks, everyone, for joining the call. We're really enthusiastic about the forward motion here. We're very enthusiastic about Benchmark and our partnership with McArron and Kirk and the team at Benchmark. And we appreciate everyone joining the call. Thanks very much.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.