Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the Acacia Research First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After managements prepared remarks there will be question and answer session.

I would now like to turn the call over to Rob Fink. Please go ahead.

Rob Fink

thank for and us operator, you, you, joining everyone, today. Thank Interim call Financial Officer; are the Chief Officer. MJ Chief Hosting Interim McNulty, Executive Hoover, and Kirsten

future Before that operation forward-looking or to objectives, Litigation for certain These XXXX. current differ generally that estimates, forecasts, Private and remind current call beginning, Securities projected the about Reform contain as expectations, like future defined of projections the during the relate trends. those and a as may events results are may relating plans, company's and of provided estimates, forward-looking statements to results this you materially future statements on from uncertainties. forward-looking and risks result based I would expectations are Act projections, Actual information to in

everyone may Acacia's discussion see and that the release filed was of described after Form This XX-Q closed. risks Risk that press financial and the under website Factors I quarterly tabs. the also on with News annual SEC. market such on a at afternoon results Events reports disclosing uncertainties, report are the would issued company's acaciaresearch.com For please this the the Form and XX-K like accessed just remind on be to release a in

I With turn the like yours. the said, now all call that MJ, to would is over to call MJ.

MJ McNulty

afternoon. and everyone taking hear for this Rob, update some to lot, thanks to a Thanks our time

place quarter M&A comes processes the ago, the the for pretty team As weeks on in providing just initiative. have first you update X put our we and detailed know, up quickly having a spoken and

just give me you Let those. updates on some

attractive its which that think in the up through numbers. you'll I cost procedures confident began cleaned and operating largely earnest historical we've and last We're with in the we're qualifying pipeline we see the increasing those business frequency processes acquisition building are the from quarter First, then structure, opportunities of second year an And a results. applying and to for seeing identifying, acquisitions sound. executing processes growing of

on business been What public the types of and are of opportunities. assets private focused types improvement we've valuations including of private that universe balance opportunities to relative primarily pockets as we'll given the the the past, markets, also primarily we stories and we're challenged some space. to said see consists good for continue the market to parts similar think sheet opportunities, opportunities in Though cycle. of margin We in remain public in where in the those opportunities, elevated the beginning now see we've of those

We're exceptional actively And opportunities we is, unlocking reason for that There traditionally also opportunities several is from the its pursuing. manifest as out-of-favor are the teams, have full where operating to we've potential continues to attracted which world-class opportunities we're identified with relationships in that we're past, management one to the relationship partners, or of encumbered really industries facile be on business. the and with industries to. work to ability in and in excited we've our sound management said another

sourcing leverage talented leverage component market remain with anticipate as a And our acquisition can and returns our conditions. relationships broad to opportunities believe screening strong we the attractive we for material about Given the executives, don't the platform be of and and deliver our cautious shareholders. note, irrespective our we of system, excessive network, processes our in a

are our we goal. patient this on continually we of side. mention us, towards about the and are goal in though that's to judicious We're population So good where do deals, enthusiastic deals, not to is deals of it's opportunity the do front new we

with we effectively our strategically in meaningful Blue attractive first generated revenue for for quarter, Chip property manage to and opportunities Partners invest intellectual intellectual the property We investment. us to which in also continue and portfolio. future see continue

In addition, we'll we organizations processes, business. excellent And business. our or divisions have value mentioned we where of sticking Printronix of acquisitions executive can the we an large past. as evaluate acquired of similar businesses an with the valuation, to increase the we And enhance in operating attractive working at was the with us believe

I'd over like to now results. first call Kirsten turn to our the discuss to financial quarter

Kirsten Hoover

Thank you, MJ.

the first General onetime to revenue quarter includes quarter which compared year. quarter with The to charges. Let me $XX.X intellectual $XX.X last the $XX.X was the quarter compared $XX.X the same million nonrecurring $X.X same and business during the million in million in year. revenue $X.X other start in compared licensing million and were of Printronix to in first last year. legal in million expenses, in Total expenses IT results. at The segments the was our and quarter $XX.X million million $XX to generated G&A quarter other same last quarter property year. increase last to corporate due compared generated revenues and million administrative industrial

elimination that reminder, XXXX, As an parent at this important million December interest parent annualized in part G&A costs. expect is will cover $X approximately our of ongoing from Acacia's of the key XX, income costs. A rate fixed we run

We business to cash also expect flow. free IP monetization and Printronix generate our

operating from last of an Operating due under to absorption of sales to million of due income. in Printronix was same with Printronix loss of $X.X increase the year, compared overhead. contributed operating $X.X loss quarter in the $XXX,XXX cost increased to million

numerator of net per was share million, million $XX.X $X.XX GAAP in diluted used per net attributable share Research per warrant diluted common $X.XX in loss year. to and earnings for $X.X Acacia the or first net to or to GAAP compared income on diluted net a computation adjustments share loss of loss quarter attributable last value embedded the in derivative the share per fair earnings resulting liabilities, stockholders. Diluted the basic adjust

million fair income is related to in $X.X included increase liability The liability the for the of in recognized in the $XX.X related in liabilities. gains XXXX, income to change realized XXXX price price term. decrease holdings. unrealized embedded of million decrease $X.X a compared in and certain and in company Net of XX, primarily million The in December March air decrease the the share losses at shorter to noncash to and warrants XX, due Starboard the derivative value

beginning that we of NOL approximately our the gains. since have sheltered XXXX, And time, of most our effectively At million. totaled $XX.X

We will continue to evaluate the ways most efficient maximize asset. this to

XX, without to million Cash XXXX. to unchanged December fair Equity XX, million determinable equity $XXX interest Viamet. XX, March and from XXXX. interest, XX, noncontrolling ownership Investment XX, of XXXX balance XXXX. at from Turning owns $XX.X to Acacia method already value December equity Viamet payments XX% been received. milestones by tied MalinJX, the and sheet. totaled beneficial in compared at have March million XXXX, of totaled securities value achieved unchanged MalinJX at million amount XX% $X.X representing totaled of have its in securities been at net through in fair was $XXX.X XX, March a readily earned at which All XXXX, December securities investments that resulting

today. press will and report which secured at $XX.X on have the earlier notes detail which Form indebtedness, the we in file March results in made was Starboard XX, issued senior million to been later our Total issued available represents More quarterly the today on SEC release XX-Q, with XXXX. these

book value. of Now for review a our

compared Our December value rights per million was XX, share basic XX, first million to the value or the $XXX.X completed at offering reflects at March book XXXX, $XXX.X XXXX. This was in quarter. or GAAP $X.XX share that $X.XX per

derivative XX, at Total embedded over today warrant stock the as stock sheet, March on convertible value the balance includes all turn, the be price share discussed was reflects the liabilities upon of GAAP and in preferred of of liabilities million preferred eliminated and or changes in convertible impact which, impact for time. our $XX such our all company's book warrants XXXX. and to expiration exercise warrants On

As more these year. exercise preferred book this expiration these upon of these extinguish The or would liabilities to should convertible transactions final Starboard all be useful our the of consider Series QX and with warrants think warrants in the exercise step our stock, value B transaction these extinguished to of being it's instruments converted. convert we be of or

million offering million at per release QX of the in share, proceeds $X.XX rights $X.XX a recently with with ongoing decks includes completion of in In the Starboard. upon face in of common A Starboard process breakdown issued X.X and at our per of The would of total structure preferred new capital purchased XX million how in the stock $XX Series a Acacia's shares our of issued Starboard, earlier result the explanations $XX.X Stockholders. transactions for be Meeting Annual recapitalization of XXXX. our following summary, structure the as and change share XXXX completed shares quarter eliminated of press of stock will today be detailed value capital will first million

early million of QX into million incur The Starboard $XX.X completion recapitalization the expected additional consideration transactions the XX.X warrant QX costs of be be negotiation associated senior $XX invest common will Series XX.X liabilities of million the and incremental recapitalization to common exercise. notes of and related stock attributable of with will a and million convertible shares and equity $XX secured $XXX an of the would B to will the in book cash stock of Starboard the for Series and would per derivative XXXX. be preferred in outstanding. value the XXXX. and would shares A attributable liabilities as to share warrants of transactions. in $XX transaction exercise an and QX QX at Series QX stock preferred be the incremental embedded consummation warrants an XXXX. million and of And eliminated pay impact million Series B Acacia total of $X.XX issued total warrant million would Acacia of in B in of converted

million value outstanding at book completion, forma March shares XX, share in XX.X value pro such per be $XXX.X XXXX. Assuming resulting forma diluted book million, would pro would of be and $X.XX

base. second report mid-August. to months, will by agreed streamlining few the next structure the This the transaction quarter capital in and result of results strengthening of capital we the be complete Over in the our Starboard our our time should with

per is for progress. believe We cash continue to our that important metric share an measuring

$X.XX. XXXX, the share our $X.XX. As equity securities of and stood of share phases of at all our pleased assuming equity On With your approximately be a we'd and per proforma take would cash completion cash be securities that, March to per transaction, questions. basis, XX, Starboard

Operator

with proceed Janney Reiss your Please Scott. question. Instructions] [Operator from Brett Montgomery

Your line is live

Brett Reiss

your a right The some feel you deal you're will future? of that deal better distressed approach a trigger is macroeconomic be now result point that discipline may the at of consummation inhibition to in part early and credit on the of innings prices a before we contraction in more that a maintaining in deal, discipline a because pull the in

MJ McNulty

say not question. would appreciate we generally, have So but I this the application, -- inhibitions. is I broad a don't

it's an environment, though that around eye say macro wouldn't So on ball. crystal I terms inhibition the We in have our a of though investing, environment. we do macro have don't

itself And as so looking in think of in we're perform business will at company a we it how and the market. each and

What elements we to where now, a on -- we're there held in those companies. cash that on widely sit right board of and we really said, company with operating we're that sitting the countercyclical outlook outlook. That really, we the can executives do now a or seeing with and very on that with bring cash, the are we're to valuable them. the right us sitting in advise is businesses that And are lot good have position

this making are types how to And not businesses. opportunities of to we we about because for the think interesting are environment, and want will we the macro we so perform when just in want we wait but macro seeing estimates that environment of we those we're irrespective to that think deploy generalizing, that saying do cash,

Brett Reiss

control. say timing are release, when to outside Now -- speed we this you factors of in What space M&A the are you the we're about deal several say in talking talking about? your of factors the bumps deal, one the a there

MJ McNulty

-- look, a I the there effectively it's is Yes. partnership. -- factors mean, this consensual a

It from But deal, we clears. have parties transact is great work willing away the to not comment. love our probably to that's happens, a we probably there can a are when a we a when and that we takes ability I think factor. to that transaction is it's a would unilaterally in But going and say, foremost, that that's business. basis control, where point could to we We take there great the bilateral we're a that part a So through times deal, are other deal and Brett, going key love think a we'll it should and those. our to to is price on do two be and come have done. to -- be together And the get business that first times

Brett Reiss

in because talking if to working team and management buying. and management a it management say substitute you you're we're you consummate that deal, teams? thing more when that you teams the you're we with when comfortable all for with Now Is different why these our bring will envision that we're

MJ McNulty

We could do that.

talking diligence, ownership. of to so the the the executives we the the best business we're on outstanding after then that possible operations viewpoint While is our execution and have

so And most mean businesses day-to-day. the strategic up like end executives we're to that the could more running in teams that actually advisers are with that that probably those or cases, Board looking members working

situations team example, for in natural I there. there to it preference does Or be turnaround we've instances and we into drop apple seen upset of a has to in instances somebody a that say running businesses business operational other inside can not business necessary could are There Acacia. drop and the there true cart run absolutely is businesses future a that in could we would around where the that a running not these increase it's unless in is may need the carve-out, and future, corporate been to where the and new risk and team buying acquire executives because in. likely drop our

business takeaway So want And smart that as augment as way need us we a key industries I can, very for be business is smart to to guess view want key that. the value. who a we to and understand we prepared driver be maximize their a the if in we possibly and people as there somebody we models helps

Brett Reiss

back in If And the small the to many? ultimately we own in companies included balance And in think the equity is equity one how drop and last Do publicly queue. balance one control. of we traded sheet? securities might portion for amounts I'll me, we and sheet so, in that want securities

MJ McNulty

there see to securities securities the in are going in the you're that balance equity legacy There the balance included So are yes, interesting equity done securities. we in that It There is securities. on very sheet that But the in sheet. securities we believe there on fundamental securities acquire section. are that our in positions for have research businesses are will we new model. are

our at to it our what's and ultimately your earlier, It having will be doesn't done business model going mean acquire what's controlling. those that companies. the Brett, companies But of is of securities acquired to every about businesses one question in back fundamental that part out those after research of in we like

Brett Reiss

at say Are XX, have hooks now. possible XX, of fish in pond many of these are do you to X, the right you that liberty how small acquisitions positions X?

MJ McNulty

question number The answer So we're not that the let that to apart. to question me that working take things of on. is instructive

So we in positions are the there we're things there. on that more number of working have that earnest than out

pipeline for not. I like become So that, marker looks doesn't sure our what want just make that a to it's because

equity over quarter piece portfolio we question XXF. under the for were is, threshold $XXX reporting year, second that our last the size of a given put requirement trading X of million And

but So are what come going I'm out not can to next figure going you they week, it there's so out XXF a to there. you tell now, that's

Operator

from your Instructions] Your is AM. Please coming Adam [Operator question with Formidable question. Eagleston proceed next with

line Your live. is

Adam Eagleston

disconnect structure the got the here. Board down lot the current the price with thoughts the of regard buyback with thinking dilution Any share some a value. the that's of coming about a to and Obviously, The capital and between offsetting that about is from allocation question you've book given pipe.

MJ McNulty

Look, we a that question get lot.

also. are capital. all this evaluating we allocating options allocators, capital for about may understand perspective. and I and have past we in have We're the the so inherently You I the talked

well a also opportunities the attractive We to on of co-efficiency but getting in have them of have very pipeline excess balance success have them as of that we cash that sheet. against the done,

opportunities against And regular we weigh basis. other those on capital -- as rather, allocation and options, so conversation we a or have at opportunities potential that look

Operator

coming Your Management. with next is from Instructions] [Tod [Operator XX question Salter]

Unidentified Analyst

You know the question. what, Adam just asked

a thought MJ's that consideration not stock? you give serious appreciate of just to? have preferred buyback? guys a the response. not pulling given really back buying something trigger to on Was I you you more any guys lot potential MJ, Or So

MJ McNulty

stock. like we that relative Todd, buying sheet. had and year. have a opportunities pretty I of be back said, of what we those amount have outcome with mean, a the it's accretion cash look, the back the of really bought And last we it's reasonable the of fulsome balance in have that's I to a those will think weighting we pipeline -- -- pipeline we following that on we And excess the associated and

And on as it. a fluid And -- way about we're it. do opportunities towards deploy have capital. right -- we We discussions. to But is talk so the we that we are now, do looking deliberate this these

Unidentified Analyst

Reflecting asked. on Brett a question that

of last after in million investments given of week, the know As of just number last your had Did the quarter, million of -- under be are in was light quarter, current in see end reflected in public three target position. on that last types was XX on will potential earnings days $XX $XX was companies I the or mistaken? that end -- aggregate we of I release invested. what still shined a the [Indiscernible] the something those There neighborhood that. I a it in investments no target companies visibility

MJ McNulty

made first the that in outdated. time really the they're names as there -- the up XXF, XXFs is and X was of large by saw point inherently make -- are X reported, that bulk that mean, a up you position in the last point particular I There the time particular portfolio. so a Yes. name they're bulk in

to work continue, portfolio. And as always, the so we

quarters see the few XXF. our I too sunsets the XXFs read it the until you'll much portfolio next $XXX over think million. And what's is below into out in because wouldn't I

Unidentified Analyst

sell-side guys Are situation, conversations out play? there having any you meaningful other undervalued I coverage. to Acacia's understand. One any special analysts question, potentially look with at

MJ McNulty

conversations we we is at us, and Stocks And a basis. Tony have with looking periodic his Well, coverage. on appreciate folks

things I our We've going are And from know I think times. several is. you to when it one a do getting all the you of what answered you that answer deal? question keep is the

board pipeline some the think done. I is to when we to start deals that getting we're have But put good that started the talking a time analysts are to sell-side on showing points we and

And if cover us, to what covering to continues evolve, we want we're are the us. we want show all so them that from to going coverage people to we story much and you should logical conversation. going not going be But do stop and say we're do the to more to then

Unidentified Analyst

about a majority few is just you're Or vehicles buy how play migrate what not perceive that on out be there very And there in that investing team? a finding have a management interest? great the no with might towards undervalued they to side, the

MJ McNulty

I of building we're really seeing that like lot we're say that it. understand investors the and and what a wouldn't we folks conversations here, through would that institutional about we're building, what have register. shareholder you and I other really generalize roll with excited they're

Operator

now the back queue be over to at would closing further to floor appear turn MJ I any questions no There time. for in like to this remarks.

MJ McNulty

this the and to forward call questions talking coming or everyone's coming follow good to conference between. next finishing all in quarter afternoon and here I this the us to Kelly. you and and at continuing quarterly this Thanks, and look time out appreciate quarter

Operator

conference does conclude This today's you. Thank call.

time, for Thank and participation. lines disconnect you may this have your phone You day. your wonderful a at

Acacia Research (ACTG) 11 May 232023 Q1 Earnings call transcript