Good morning, everyone. Thank you for joining Acacia Research First Quarter 2025 Earnings Conference Call. My name is Jenny, and I'll be your conference facilitator today. [Operator Instructions] I would like to remind you that this conference is being recorded today, and is also available through audio webcast on Acacia's website. [Operator Instructions]. I would now like to turn the conference over to Mr. Brent Anderson of Gagnier Communications. Mr. Anderson, you may begin the 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 certain 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, objective and expectations for future operations and are based on a current estimates and projections, future results and 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 most annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC. Earlier this morning, Acacia issued a press release disclosing its first quarter 2025 financial results. The press release may be accessed on the company's website under the Press Releases section of the Investor Relations tab at acaciaresearch.com. The company also posted its Q1 2025 earnings presentation to its website, which can be found under the Quarterly Results tab. On today's call the team will discuss certain non-GAAP financial measures, including adjusted EBITDA for the company and each of its operating segments. Information regarding the comparable GAAP metrics along with required definitions and reconciliations can be found in the press release disclosing first quarter 2025 results available under the Press Releases section of the Investor Relations tab at acaciaresearch.com. I would now like to turn the call over to Acacia's Chief Executive Officer, MJ McNulty.

Thank you, Brent, and thanks to everyone for joining us for our first quarter 2025 earnings call. Against the backdrop of significant macroeconomic uncertainty, Acacia had a strong start to the year. As you've heard me say, our strategy is founded on acquiring and building businesses with stable long-term cash flow generation and scalability. Combination of our existing businesses and our strong balance sheet enables us to deliver sustainable long-term value for our shareholders. The merits of this strategy are apparent in our first quarter results where our targeted capital allocation strategy and consistent execution enabled us to deliver first quarter revenue and total company adjusted EBITDA of $124.4 million and $50.7 million respectively. This is due in part to our Intellectual Property business, which while less consistent with our target business characteristics, shows the attractive uncorrelated nature of these assets. Book value per share at the end of the quarter was $6 and book value to Acacia excluding noncontrolling interests was $5.62, representing a quarter-over-quarter increase of 4.3% and 4.8% respectively. Strong performance for the quarter was driven primarily by three factors. First, realized gains from our Intellectual Property business, where we saw a large settlement in our Atlas portfolio. Second, the continued integration of the Revolution assets within our Energy segment, where we saw a sequential improvement in revenue compared to the fourth quarter. And third, our first full quarter of contributions from Deflecto. I'd like to discuss each of these factors in more detail, starting with Benchmark. You may recall that in April of 2024, our majority owned subsidiary, Benchmark Energy, acquired an interest in approximately 470 operated producing wells in the Anadarko Basin, as well as a nonoperated interest in the developing Cherokee play. Since that acquisition, Benchmark has generated free cash flow to repay a…

Thank you, MJ. Acacia recorded total revenue of $124.4 million during the first quarter. Our Energy Operations generated $18.3 million in revenue for the quarter, compared to $1.9 million in the same quarter of last year. Manufacturing Operations generated $28.5 million in revenue. Our Industrial Operations generated $7.7 million in revenue during the quarter, a slight decrease compared to $8.8 million in the same quarter of last year. Our Intellectual Property operations generated $69.9 million in licensing and other revenue during the quarter, compared to $13.6 million in the same quarter last year. The year-over-year increase in revenue is primarily due to the Atlas portfolio settlement that MJ previously touched on. Total consolidated G&A expense was $17.3 million during the first quarter, compared to $12.5 million in the same quarter of last year, with the $5.7 million increase related to the addition of the Deflecto as part of the company's new Manufacturing Operations. Of the $5.7 million in Deflecto G&A, approximately $1.5 million is related to depreciation and amortization of intangible assets. Our Energy Operations' G&A expense increased $1.2 million versus the same period last year, while G&A at the parent level decreased by $2 million year-over-year. The company recorded first quarter GAAP operating income of $38.3 million, compared to GAAP operating loss of $2.1 million in the same quarter last year, primarily due to the increase in revenues. Energy Operations contributed $4 million in operating income during the quarter, which included $4 million in noncash depreciation, depletion and amortization expense, and does not reflect a nominal realized hedge loss. Adjusted EBITDA for our Energy Operations was $7.9 million. Manufacturing Operations contributed $0.3 million in operating income during the quarter, which included $1.5 million in noncash depreciation and amortization expense, and $0.4 million in nonrecurring transaction related expenses, and $0.2…

Thanks, Kirsten. I'm proud of the work our team has done this quarter in the face of a very volatile market. We believe that this uncertain, unique period in capital markets presents compelling opportunities for our business. We remain focused on identifying and executing upon strategic acquisitions and organic growth initiatives in our verticals and we have many promising opportunities under active evaluation in both of these categories. With that, I'll hand the call back over to the operator. Jenny?

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

Good morning, team. Really impressive execution, and congrats on the WiFi-6 continued wins, and let me start with that. MJ, can you maybe just detail, I think over the last couple years or total up the winnings from this portfolio, and are there many more left out there? Are there many more companies that you can go after, and then I had a couple follow-ups after that?

Yes. Tony, good to talk to you. Thanks for joining the call. Let us pull the number for the total winnings over the periods. I don't have that handy, but can certainly get that to you. We do think there's more value in the portfolio. We've got, as you all know, you've seen in the press, we've got this TP-Link case that's sitting out there where the courts awarded it and continues to go through some appeal processes, but we feel pretty good about it. And the cases all build on themselves. So the more settlements and winnings we have in court, the stronger the hand we have in executing against the portfolio. In terms of total wins, since the first quarter of '23, we pulled in about $178 million from the WiFi assets.

Impressive. And then just following up on your prepared remarks on valuations and M&A, are you seeing prices finally coming in? I would imagine it depends on the sector. Are you still thinking kind of on the industrial side though? In your prepared remarks you mentioned again on energy and maybe even on the Deflecto side of the business. Just any thoughts on valuations and where you're kind of looking would be helpful?

Yes, I mean, so as we've said, we kind of are looking at three verticals. You named two of them energy and industrials, the third being what we call mature technology. I guess taking each of those apart a little bit. On the mature technology side, we've seen some assets and we're looking for B and C quartile assets where we can do what we did with Printronix and what we're doing with Deflecto. We can bring in an operating partner, have a plan, put our business systems processes in place and really improve the business. That's how we're driving value. And on the mature technology side, we've looked at several acquisition opportunities in that space and for one reason or another have walked away from them. We haven't liked them. But we're still hopeful that we're going to be able to find some interesting things there. On the Industrial side, as we look at Deflecto, we've got three separate businesses that that comprises. And then we've got Printronix. So I'll kind of group manufacturing, the manufacturing and industrial segments together. The transportation in particular, we really like that business. We think that the multiple in the market that that business is worth is more than what we bought it for. And we're seeing some opportunities to grow that business. The air distribution piece of the business, it's actually a very attractive business, particularly for private equity buyers right now. So we like that business. And the office business generates cash, and we like it. If you were to ask me, the office is probably not a place we want to allocate capital, air and transportation. I think we're excited to allocate capital there and grow businesses in those two verticals. And we're seeing -- we're actively seeing opportunities in both of those businesses to do that. On the oil and gas, or the energy side of the business, Kirk and his team that run that business are -- they have a great deal of experience and knowledge operating in the Anadarko Basin. I would say broadly we're seeing a lot of oil and gas opportunities. We're shying away from those that aren't based in the Anadarko Basin because we're seeing enough opportunities in that area, both organically and through acquisition, to grow that platform in a basin where the team is really comfortable operating.

Got it. And then, I'm not sure how much you can say on this, but you mentioned the tax attributes versus share buyback and other moves that you can make on capital allocation. If you can, and I think it'd be helpful for investors, what's the calculus on this in terms of losing potentially the tax attributes? And anything you could share, I think would be helpful for investors.

Yes. Look, so we completed the $20 million buyback. We do have significant tax attributes that we'd like to protect. And those are based on some change of control metrics and things like that, which we continually watch to determine when the optimal time to buy back more stock is. And so we monitor it. That's what I can say, Tony.

Got it. Perfect. Thanks, guys. Best of luck.

Yes, thanks, Tony. Really appreciate it.

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

MJ, hi. Kirsten hi. Can you hear me?

Yes. We can hear you Brett. How're you doing?

Great. Tony Stoss asked two of my main questions. In terms of allocating more money to new patent portfolios, you haven't done that the last two or three years, but with my channel checking, prices have kind of come down. Is that something you'll revisit allocating capital to in the future?

Yes. So that's a great question. A couple thoughts there. First is, we weigh capital allocation among all the opportunities we have to allocate capital. And as you know, we have Industrial, Manufacturing, and Energy businesses as well as the IP business. So we're continually looking at the right place to allocate the capital. The second thought is in our Intellectual Property business, we and Mark and his team have taken a very deliberate approach at high-grading that portfolio. And so whereas in the past we may have bought some small portfolios here or there. We are looking at standards-essential central patents. The WiFi patent portfolio is excellent. And so we're looking to grow that piece of the business rather than picking up onesie-twosie patents here and there. We're seeing a handful of things that are similar to the WiFi portfolio that could be attractive. The tail on executing deals in the IP space, with our particular strategy, is a little bit longer tail than allocating capital in industrials or oil and gas, for example.

Okay. Now, at some point, to just kind of attract attention to the Acacia story, would it be too byzantinely complex to, at some point, dividend out or spin-off the patent business when your Industrial and Manufacturing business have achieved greater critical mass?

I mean, I think that's a core question of how we look at the business, and whether it's the patent business or any of our other businesses, when they get to scale, it's a capital allocation question for us. And so I think the broader question is, are any one of our particular current or future businesses worth more to somebody else than they are to us? And we, like everything, we're constantly evaluating that in the capital allocation picture. And if the answer is yes, whether it's selling, spinning, dividending, whatever the mechanical answer is, if the business is worth more to somebody else than it's worth to us, then it's something that we need to pay attention to.

The last one from me. The $37 million judgment we got that is being appealed, does the $69 million settlement, does that put more pressure on the defendant to perhaps settle that sooner rather than later?

So, I can give you my opinion. I wish I were in the head of the defendant, but I don't have that luxury. I don't know is the short answer. I don't know how to guess the answer to that, but I hope the answer is yes, Brett.

Right, right. MJ, thank you for Christmas coming early with the $69 million, and have a good summer.

Thanks, Brett. We'll talk to you soon.

You bet.

Thank you very much. Well we appear to have reached the end of our question-and-answer session. I will now hand back over to MJ for any closing remarks.

Thanks, Jenny. As always, we appreciate everyone joining and taking the time and following the company and engaging with us. We appreciate that engagement and the constructive feedback. So, we'll talk to you next quarter.

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