Good afternoon, ladies and gentlemen, and thank you for joining us for Acacia Research Second Quarter 2024 Earnings Conference Call. My name is Priala, and I’ll be your conference operator today. All lines are currently unmute to prevent any background noise. I would like to remind you that this conference is being recorded today and is available through audio webcast on the company’s website. Following the speaker’s remarks, there will be time for questions. Analysts and investors are reminded that any additional inquiries can be directed to Acacia following today’s call at ir@acaciares.com. I would now like to turn the conference over to Mr. Brent Anderson of Gagnier Communications. Mr. Anderson, you may begin your conference.

Thank you, operator. Leading today’s call are MJ McNulty, Acacia’s Chief Executive Officer; and Kirsten Hoover, Acacia’s Interim Chief Financial Officer. Before MJ and Kirsten begin their prepared remarks, please be reminded that information provided during this call may contain forward-looking statements relating to the 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 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. A press release disclosing the financial results was issued this afternoon. This release may be accessed on the company’s website under the Press Release’s section of the Investor Relations tab at acaciaresearch.com. The company also posted a new corporate overview presentation and Q2 2024 earnings presentation to its website, which can be found under the Events & Presentations tab. I would now like to turn the call over to Acacia’s Chief Executive Officer, Mr. MJ McNulty, over to you.

Brent, thanks very much, and thank you all for joining us today to our second quarter earnings call. As many of you have heard me say, Acacia is a value oriented acquirer of businesses across both the public and private markets. We acquire businesses where we can tap into our deep industry relationships, our significant capital base and transaction expertise to materially improve performance. We’re focused on sourcing execution and improvement and we find unique situations bring a flexible and creative approach to transacting and relationships and expertise to drive continual improvement in operating performance. We approach this as business owners and operators rather than purely as financial investors. This is important and we believe it’s our differentiator for creating long-term value for shareholders and partners. We define value through free cash flow generation, book value appreciation and stock price growth. These are the pillars of the Acacia story. Acacia creates value by building relationships and providing transaction expertise to create acquisition opportunities where we can meaningfully improve performance. We do so by being focused on opportunities with asymmetric risk reward characteristics within the Technology, Energy and Industrial segments. I raise these points on today’s call because I believe Acacia’s efforts to build excellent businesses are paying off, as our second quarter results highlight the evolution, strength and trajectory of the company’s core technology, energy and industry verticals – industrials vertical. Acacia delivered strong financial and operating results in the second quarter. The company generated $25.8 million in consolidated revenue, up by 227% compared to the second quarter of last year and up 121% compared to the first six months of 2023, driven in large part by the completion of our transformative acquisition of operated producing wells in the Western Anadarko Basin through our Benchmark subsidiary. In terms of consolidated…

Thank you, MJ. Our GAAP book value at June 30, 2024 was $596.7 million, or $5.95 per share, excluding the impact of the additional accrual of $12.9 million in the first six months of 2024 related to the AIP Matter that MJ discussed earlier, which has now been settled and closed, our book value per share at June 30, 2024 would have been $6.07 per share. Total revenues were $25.8 million compared to $7.9 million in the same quarter of last year. Our intellectual property business generated $5.3 million in licensing and other revenue during the quarter, up over 200% compared to $0.4 million in the same quarter of last year due to the increased number of license agreements executed quarter-over-quarter and higher average license fees. Our industrial operations business generated $6.3 million in revenues during the quarter, down compared to $7.5 million in the same quarter of last year due to a decrease in printer sales. Benchmark generated $14.2 million in revenues in the quarter. As Acacia’s initial investment in Benchmark closed on November 13, 2023, there is no comparable revenue in the same quarter of last year. As a reminder, in April, we closed Benchmark’s first acquisition following Acacia’s initial investment. Results from this acquisition have been reported as part of our second quarter financial results. General and administrative expenses were approximately $10 million compared to $9.4 million in the same quarter of last year, with the increase due to the increase in G&A for the addition of our energy segment, partially offset by a decrease in parent legal fees and a decrease in Printronix G&A. The company recorded an operating loss of $4.8 million, down 62% compared to an operating loss of $12.5 million in the same quarter of last year due to higher revenues generated. Printronix…

[Audio Gap] our strategic relationship with Starboard expands our sourcing and operating network and resources, providing the company with expanded access to industry expertise and an expanded network of operating partners with whom we evaluate potential acquisition opportunities, which enhances the oversight and value creation of our business. Fourth, we have significant resources and the flexibility to take advantage of uncertain environments and dislocated situations. Fifth, we have cultivated a deep and experienced operating executive network, which supports sourcing evaluation of our acquisition opportunities. And finally, as I know many of you have reminded me, we’re trading below book value, which represents a compelling opportunity for investors. With that, we’d be pleased to take any of your questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Adam Eagleston with Formidable. Please go ahead.

Hey, MJ, how are you today?

Hey, Adam, how are you?

Good, doing well, thank you. So my question was going to be around the share count, didn’t look like that changed. So how are you all thinking about the buyback now?

Well, as you know, it’s authorized. And we are just evaluating the timing of executing on that buyback. So we still very much are enthusiastic about it, as is our board, and it’s just a matter of timing that buyback.

All right, fair enough. Thank you.

Yes.

And your next question comes from the line of Anthony Stoss with Craig-Hallum Capital. Please go ahead.

Hey, MJ and Kirsten, since the second Benchmark purchase was kind of entering quarter, I’m wondering if you can give us a kind of an expected range of revenues that you might think about for your Benchmark assets for the September quarter.

Yes, Tony, I think it’s a great question. I mean, we – I would encourage you to take a look at the investor deck that we put out, because we’ve broken out the revenue. We have the date of the 17th. And so I think you can probably interpolate the revenue estimates for the third quarter based on some of the data that’s out there.

All right, I’ll give it a look. Thank you.

Great. Thanks, Tony.

And your next question comes from the line of Brett Reiss with Janney. Please go ahead.

Hi, MJ. Hi, Kirsten, how are you?

Hey, Brett, how you doing?

Good, good, good. The operating income on Benchmark was like 22.5% of revenues. Is that kind of what the ratio is going to look like going forward?

Yes, so that’s a great question. I think we’ve given some of the reconciliations from operating income to EBITDA, and the way we think about it is the EBITDA related to revenue. And so I think that may be a better metric to look at in terms of how you think about the profitability of that business. But we had previously disclosed some of the metrics around cash flow and price and so on and so forth, and so far, the business is performing how we had underwritten it to perform. Now, it’s early, it’s a little over half a quarter, but the business is performing as expected.

Right, right. MJ with Benchmark, is the increase in revenues going to be driven by drilling more wells on the acreage you have or extracting more oil from existing wells or just bolt-on acquisitions? What’s going to drive increased revenues in that part of the business?

Yes, so we follow a PDP strategy. So we acquired and only paid for producing production at these assets in the Western Anadarko Basin, and for that matter, the initial set of Benchmark wells. They will have a natural curve associated with them, a production curve associated with them. And so that’s kind of the base. The reason we picked, the team that we picked to do this with is because they historically have been very good at reducing the natural curve of reduction for the wells that they own. And so that’s kind of piece one above the base is, what can we do operationally, to your point, to get more oil and gas out of the wells we own. So, as I mentioned, the team has kind of fully implemented its strategy there from a revenue standpoint. Now, remember, there are other things that we can do with the business to optimize the cost structure and take advantage of the scale that we now have with two sets of assets as opposed to one. And so they’re also working on that. That’s not top line. That ends up becoming a reduction in costs. And then the third, and it’s early for this, but I think we have mentioned it is that we did get acreage with the deal in the Cherokee. And that Cherokee acreage could be interesting. I think it’s early, but it could be interesting. And we are not drillers of wells. Our strategy is PDP focus, so we’re not out to drill wells. However, we can partner with folks that can take the drilling risk in that acreage. And we have a very capital light way to potentially create additional revenue in that sort of a structure.

Okay. Now, in the body [ph] the release, there was addition to G&A from the addition of new Energy segment operations. So is a portion of Benchmark’s overhead picked up by us. Could you give us some more color on that?

Yes. So we own 73.5% of Benchmark, and so we own 73.5% of the costs to run the business. There was a little bit of G&A that came along with the new deal, again in the context of what we underwrote and in line with how we were viewing the business and the economics of it. And so because we’re consolidating the Benchmark acquisition and then showing [indiscernible] interest in that deal, it will fully consolidate onto our P&L. And then Kirsten can correct me where I’m wrong. It will be adjusted for the minority interest section of the P&L.

That’s right.

Okay. Different part of the business, what is the trial calendar on the patent portfolio look like over the next couple of quarters?

We don’t talk about that, Brett.

Okay.

We do schedule in the upcoming 12 months, so that is disclosed in our 10-Q. Those upcoming Q.

Okay. I’ll look there. Now, the turnaround that you’re trying to implement in Printronix, if it doesn’t gain traction, how long will you ride the turnaround before you throw in the towel and exit that business?

So first, the turnaround is actually doing quite well. We have a step plan of moving that business towards higher margin consumables that we sell, and continuing to reduce the costs to operate the business on a regular basis. So it’s not as if we said, let’s decide what we want to do, cut some costs and then go back to status quo. We’re continually reducing costs to match what we want the profitability to be on the consumables piece of the business. So we are not thinking about throwing in the towel. We actually are quite pleased with the progress that the team has made on that turnaround over the last little over a year, maybe five quarters here. And so more to come on that, but it’s looking promising.

Right. Great. Thank you for taking my questions, and both of you enjoy the rest of the summer.

Yes, likewise, Brett. Operator, are there any more questions?

[Operator Instructions] Your next question comes from the line of Todd Stelter with 88 Management LLC [ph]. Please go ahead.

Hi, MJ, Kirsten. Quick question, under key business highlights, I see generated $71 million in operating cash flow for the first half of 2024. That seems like such a robust number considering the run rate for Q1 and Q2. How do we get to 71 million?

Yes. So you got to remember, Todd, that we had the patent settlements that we recorded as revenue in Q4 of last year because the deals were struck and agreed to in Q4 four of last year, came through in the first half of this year. And so a lot of that cash came through in the first six months of the year, which is driving a big portion of that.

Got you. Great. Appreciate it. Thank you.

Yes, of course.

And there are no further questions at this time. I would like to turn it back to MJ McNulty for closing remarks.

I appreciate everyone joining. I hope everyone’s having a great summer and enjoys the rest of the summer. Please take a look at our website and see the corporate deck that we put out. I think it answers a lot of questions that we’ve talked about in the past. I think it gives a really good view of who we are and where we’re going. I know a lot of the folks on the call here have followed us, and we appreciate that, but it puts a little bit more meat around the story. So we appreciate you joining. We look forward to talking to you soon.

Thank you. This concludes today’s conference call. You may now disconnect.