Good afternoon, everyone. And welcome to the Acacia Research Fourth Quarter and Year End 2023 Financial Results Call. At this time, all participants are in a listen-only mode and the floor will be open for questions following the presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Rob Fink, Investor Relations. Rob, you may begin.

Thank you, Operator. Thank you everyone for joining us. Hosting the call today are MJ McNulty, 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 operations, 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 that are filed with the SEC. I would also like to remind everyone that a press release disclosing the financial results was issued this afternoon just after the close of market. This release may be accessed on the company’s website under the Press Release section of the Investor Relations tab at acaciaresearch.com. With that said, I would now like to turn the call over to MJ. MJ, the call is yours.

Thanks, Rob, and thanks to everyone for joining our call this afternoon. We’re excited to share the details of 2023 with you all. We have a very active year and 2024 is starting out in the same fashion. While the team focused in the first half of last year on rationalizing our cost structure and maximizing value in our legacy asset base, our focus for the second half was and continues to be on growing our business through acquisitions and identifying opportunistic situations where our research, execution and operating partners can drive earnings and book value for share growth in disciplined and unique ways, both in our existing operating business and non-controlled positions we have on our balance sheet. Let me speak to these achievements. Our new management team acquired our first business and approximately 50% in growing stake in Benchmark Energy. Our Intellectual Property team had meaningful success in its WiFi-6 licensing initiatives. We believe there are still additional opportunities to monetize these portfolios. In the fourth quarter of 2023, we agreed to the sale of our position in Arix Bioscience. We believe we achieved an attractive price for the sale of these shares. And last month, we had sort of oil and gas business Benchmark sign an agreement to acquire a very attractive group of assets, further validating the strategy of partnering with the Benchmark team to build a larger oil and gas platform, which we think is a nice complement to our acquisition initiatives in industrials, technology and healthcare sectors. As a result of Acacia’s recent business activity, we generated $82 million in gross proceeds from our Intellectual Property team’s WiFi-6 licensing initiatives, $57.1 million in cash from the sale of our Arix shares, and additional income from our public markets activities and interest income from our…

Thank you, MJ. We ended 2023 with $340 million of cash and cash equivalents and reported GAAP net income of $67.1 million or $0.58 per diluted share for the year. Our GAAP book value at December 31, 2023 was $589.6 million or $5.90 per share. Our book value reflects the exercise of the Series B warrants through a combination of note cancellation and limited cash exercise, and the conversion of the preferred stock, which occurred on July 13, 2023, as part of the recapitalization transaction. Let me now turn to the fourth quarter results. Total revenues were $92.3 million, compared to $13.1 million in the same quarter last year. Let me break this down. The Intellectual Property business generated $82.8 million in licensing and other revenues during the quarter, compared to $2.5 million in the same quarter last year, reflecting the licenses and subsequent payments MJ has mentioned. Printronix generated $8.6 million in revenue during the quarter, compared to $10.6 million in the same quarter of last year. Benchmark generated $0.8 million in revenue in the quarter, subsequent to the completion of the acquisition, which closed on November 13, 2023. General and administrative expenses were $10.6 million, compared to $15.9 million in the same quarter of last year, with a 33% decrease due to the decrease in costs related to the Starboard recap transaction and a decrease in severance expense. Operating income of $55.9 million, compared to an operating loss of $14.5 million in the same quarter of last year, with the increase due to higher revenues generated. Printronix contributed $0.5 million in operating income, which included $0.7 million of non-cash depreciation and amortization expense. Benchmark contributed $0.1 million operating loss, which included $0.2 million of non-cash depreciation and depletion expense, as well as $0.1 million of other non-cash charges.…

Thank you very much. [Operator Instructions] Thank you. Your first question is coming from Anthony Stoss of Craig-Hallum. Anthony, your line is live.

Thanks. Good afternoon, MJ. The question I get asked from investors the most is, whether or not you guys are still open and actively looking for non-oil and gas-related potential acquisitions, industrial technology or if you’re going to go headlong into oil and gas and then have a couple of follow-ups?

Yeah. Hey, Tony. Nice to hear your voice. So, we’re not becoming an oil and gas company. As we’ve always said, we’re opportunistic and we’re seeing a lot of opportunities in oil and gas right now. We really like this revolution acquisition. We think there are a lot of interesting elements. One, it enables the team to do what they do really well is take existing producing reserves and manage them better in order to increase the earnings from those reserves and it’s very similar to the way we look at companies outside of oil and gas. So the team philosophically is aligned. This also has this, I’ll call it, an option that was included with the deal on this Cherokee play, which we think is really interesting. We were very enthusiastic to do this. We will take some portion of our capital and continue to invest it in this strategy where we see really good deals, but not with the intent of necessarily becoming an oil and gas business, but with the intent of being opportunistic. We mentioned we have a really strong pipeline of other opportunities outside of oil and gas. Those include -- we don’t have as much healthcare in there, but we do have a reasonable number of things that we’re spending time on in the industrial space and the technology space. So, we will…

Got it.

… continue to pursue those and hopefully acquire some of those businesses.

And then just one question on oil and gas, and I’ve got another one after that. The new Benchmark investment closes in Q2. What’s an expected either quarterly or kind of annual revenue that you think you can derive off that investment?

I mean, we kind of look at it as cash flow. I think we said 45 at the asset level, which is kind of before G&A. Now, we’re rolling that into the Benchmark platform, which has some G&A against it. I think we need to add a little bit to it, but then there’s not much reinvestment into that business. And so, from a cash flow standpoint, we own -- we consolidate all of it because of our ownership position. We own 73% of it, so I think you could take that number and kind of -- you can -- it’s pretty consistent, so you can kind of divide it by 4 and look at the quarterly number.

And then, on the WiFi-6, congrats on the new license. I think that makes two substantial licensees today. How many more do you have on a list that you could target?

We think -- so we think there’s a lot of opportunity left in that portfolio. The strength that we have coming off of the TP-Link jury award was public and then we’ve had a couple few substantial agreements that, two came subsequent to that. One came early in the life of the portfolio. We still think there’s a material amount of incremental capital that we can generate from that WiFi portfolio. And recall, we own four other portfolios that don’t have the same magnitudes associated with them, but have a very consistent set of settlements and licenses that generate a nice level of base cash flow.

Got it. That’s all for my questions. Best of luck, guys. Thank you.

Yeah. Thanks, Tony.

Thank you very much. Your next question is coming from Brett Reiss of Janney Montgomery Scott. Brett, your line is live.

Yeah. Hi, MJ. Hi, Kirsten.

Hi, Brett.

Good work. Keep it up. Piggybacking on Tony’s questions, to try to get a sense of how much juice is left to be squeezed from the ripe orange of that WiFi-6 portfolio, in the third quarter, you mentioned there were seven trial dates. Are they still on the calendar or did -- or were some of those part of the $82 million settlement?

So, currently...

Yeah. Go…

Oh! I…

Go ahead, Kirsten.

Yeah. Sure. Currently, we have one trial date within the next year. So, bridging from the seven that we reported for the Q3 earnings, some of those were settled in Q4 and some were settled in Q1. But the current number is one.

Okay. Okay.

So, Brett, it’s important…

Yeah.

… to remember there that not all settlements happen in a trial process. There are kind of settlements that happen outside of the legal process as well.

Okay. And the gorilla in the room, Apple, are they still a defendant or they’re part of the settlement?

Yeah. I mean, look, I -- we can’t comment on that, Brett. I appreciate…

Okay.

… the nature of the question. We just can’t comment on that.

Okay. Now, the NOL was $85 million last quarter. Have we -- how much is left now?

It’s around $18 million.

Okay. And I noticed an 8-K was filed. You’ve gone to the protocol of being able to buy back stock on a 10b5, which should increase your flexibility and not having these narrow windows constrict you being able to buy back stock. Is that true?

Yeah. Brett, you’re right. The Board did authorize a buyback, which was press-released and we’re looking at executing on that.

Right. Right. Did you buy back any stock in this last quarter?

No. We didn’t buy any stock in the last quarter.

Okay. The remaining private equity positions from the U.K. biotech portfolio, can you give us just a little bit more color on what remains and could there be any hidden positive surprises that we could enjoy in the near- to intermediate-term future on the remaining portfolio?

Yeah. So, when you look at the remaining positions, it’s really, and I think, we’ve disclosed this in the past, it’s AMO, which we’re enthusiastic about, which is a drug for pediatric myotonic dystrophy. There’s some news out there on the drug and some of the developments on that drug, which I’m sure you’ve found. So, we’re enthusiastic about that. And then there’s this ownership share we have in Viamet. And the best way our shareholders usually figure -- kind of get more color on Viamet is Malin Pharmaceuticals, which is an Irish company, actually publishes on this. They’re an owner in the cap table with us as well. We’re enthusiastic about that one as well. So, I -- we can’t make any promises on surprises, but we certainly think that they’re both very attractive businesses and drugs.

Great. Thank you for taking my questions. I’m going to drop back in queue, but good show on the quarter.

Yeah. No. Thanks. We appreciate it, Brett.

Thank you very much. [Operator Instructions] Your next question is coming from Todd Felte [ph] of 88 Management, LLC. Todd, your line is live.

Thank you. Congratulations on a very robust Q4. You made reference…

Thanks, Todd.

… to some settlements on the WiFi patent in Q1. Am I to assume those numbers are not reflected in the $82 million that you referenced for Q4?

Yeah. Sorry, Todd.

Yeah. That’s correct.

The delineation we were trying to make was the settlements that we made in Q4, we received the cash for those in February and early March. So, we just wanted to be clear. The settlement was a 2023 event. The receipt of proceeds from that settlement was a 2024 event.

Gotcha. Gotcha. Just trying to -- someone who’s very involved in this name texted me this question. What makes this company uniquely positioned to create shareholder value and energy? And as a follow-up, what is the market not seeing or believing with this strategy? And I guess it’s because of the somewhat ephemeral bump and the total giveback that we noticed over the last couple of weeks subsequent to the announcement?

Yeah. I will -- I think that’s a two-part question. I’ll take the second part first, which is I don’t want to speculate on that. I think, you may have a view and others that are around the table and shareholders in here may have a view that they can share with your friend. On the first question, our model is to partner with really excellent operating executives and accomplished operating executives to pursue these opportunities and that’s exactly what we’ve done in Benchmark. We partnered with somebody that we’ve known for a long time that has been long-term successful in the oil and gas space, and they are kind of our eyes and ears on the ground in the oil and gas space where we allocate capital. So that’s kind of piece one. Piece two, unlike general oil and gas, we are not pursuing an acquiring land, drilling wells business model, which means we’re looking at harvesting cash flow from these assets and so it’s really operating the wells better than the prior owners had operated them. And the wells and the packages of wells that we’re acquiring with Benchmark are legacy kind of under-loved, under-managed, under-worked fields where the team that we have has very successfully over a long period of time been able to run those wells better on a less expensive basis in order to generate more cash from them and the valuations that we’re buying them at are very attractive.

Great. Last question, sell-side coverage. We appreciate Tony covering this thought. At what point do you think we could start shining a light and trying to attract other analysts or potentially be more aggressive in pursuing the buy side to look at this undervalued, very attractive investment?

Yeah. I think that’s a great question and it’s one that we ask ourselves a lot. We -- for those that have been with us for the last year and been on the earnings calls, we told you what we were going to do, and you said, okay, go do it, and now we’ve started to do it. And so we’re getting to the point where it -- we can start having those conversations about how people view us now that we’re a business that’s executing against a strategy instead of telling you what strategy we’re going to execute against. And so we are reluctant to pound the table and wave our arms in the air for people to cover us until we have earned the right to be covered and for the market to pay attention to us.

Understood. Thank you. Continue the good work.

Thanks, Todd. Appreciate the questions.

Thank you very much. Well, that appears to be the end of our question-and-answer session. I will now hand back over to MJ for any closing comments.

All right. Jenny, thanks very much. Everyone, thank you for joining us this afternoon, following us, believing in us. We look forward to talking to you next quarter.

Thank you very much. And that does conclude today’s conference. You may now disconnect your phone lines and have a wonderful rest of the day. Thank you for your participation.