Q2 2024 Acacia Research Corp Earnings Call
Good afternoon, ladies and gentlemen, and thank you for joining us for Acacia research second quarter 2024 earnings Conference call. My name is real I know will be a conference operator today all lines Jack Ramsay on mute to prevent any background noise I would like to remind you remind you that this conference is being recorded today and you should be able to.
Operator: I would like to remind you that this conference is being recorded today and will be available through audio webcasts on the company's website. Following the speakers' 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 I-R, at irakeshires.com. I would now like to turn the conference over to Mr. Brent Anderson of Gagnier Communications. Mr. Anderson, you may begin your conference.
Audio webcast on the company's shop site.
Jack Ramsay: Following the speakers remarks, there will be time for questions analysts and investors are reminded that any additional inquiries can be directed to a key chef Halloween today's call and I are.
I I R. A T shirt as dotcom.
Jack Ramsay: I would now like to turn to conference over to Mr. Brent Anderson have got gum Yea communication. Mr. Anderson you may begin your conference.
Brent Anderson: Thank you for leading today's call or 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 Litig These forward-looking statements generally relate to the company's plans, objectives, and expectations for future operations and are based on current estimates and projections, future results, or trends. However, actual results may differ materially from those projected as a result of certain risks and uncertainty.
Speaker Change: Thank you operator, leading today's call are N J, Mcnulty Acacias, Chief Executive Officer, and Kirsten Hoover Acacias interim Chief Financial Officer.
Speaker Change: Before M. J M curious didn't begin their prepared remarks, please be reminded that information provided during this call may contain forward looking statements relating to the current expectation estimates forecasts and projections about future events that are forward looking as defined in the private Securities Litigation Reform Act of 1995.
Speaker Change: 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.
Speaker Change: Actual results may differ materially from those projected as a result of certain risks and uncertainties.
Speaker Change: For a discussion of such risks and uncertainties. Please see the risk factors described in Acacia and 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 releases section of the Investor Relations tab at Acacia research Dot com the.
Speaker Change: The company also posted a new corporate overview presentation, and Q2 2024 earnings presentation to its website, which can be found under the events and presentations tab I would now like to turn the call over to Acacias, Chief Executive Officer, Mr. MJ Mcnulty over to you.
Brent Anderson: For a discussion of such risks and uncertainties, please see the risk factors described in the report on Form 10K and quarterly reports on Form 10Q 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 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 and presentations tab. I would now like to turn the call over to Acacia's Chief Executive Officer, Mr. MJ McNulty. Okay.
MJ McNulty: Brent, thanks very much, and thank you all for joining us today for our second quarter earnings call. As many of you have heard me say, cases of value-oriented acquisition businesses across both the public and private market require 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, relationships, and expertise to drive continual improvement and operating performance. We've approached this as business owners and operators, rather than purely as financial investors.
MJ McNulty: Right. Thanks, very much and thank you all for joining us today for our second quarter earnings call.
MJ McNulty: As many of you have heard me say Acacia is a value oriented acquire businesses across both the public and private markets.
MJ McNulty: Wire businesses, where we can tap into our deep industry relationships, our significant capital base and transaction expertise to materially improved performance.
MJ McNulty: 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.
MJ McNulty: We approached this as business owners and operators rather than purely as financial investors.
MJ McNulty: This is important, and we believe it's our differentiator for creating long-term value for shareholders. We define value through free cash flow generation, book value appreciation, and stock price growth. These are the pillars of the Acacia story.
MJ McNulty: This is important and we believe it is our differentiator for creating long term value for shareholders.
MJ McNulty: We did find value through free cash flow generation book value appreciation and stock price growth.
MJ McNulty: These are the pillars of the Acacia story.
MJ McNulty: 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 in industrial sector. That raises these points on today's call because I believe in these cases 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, if that's the real spur. Acacia delivered strong financial and operating results in the second quarter.
MJ McNulty: Acacia creates value by building relationships and providing transaction expertise to create acquisition opportunities, where we can meaningfully improve performance.
MJ McNulty: We do so by being focused on opportunities with asymmetric risk reward characteristics within the technology energy and industrial segments.
MJ McNulty: I raised these points on today's call because I believe acacia as 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.
MJ McNulty: Acacia delivered strong financial and operating results in the second quarter, the company generated $25 8 million and consolidated right now.
MJ McNulty: The company generated $25.8 million in consolidated revenue and up to 227% compared to the second quarter of last year and up to 121% compared to the first six months of 2023. This was driven in large part by the completion of our transformative acquisition of operated, producing wells in Western Canada's Gargo Basin through our benchmarks subsidiary. In terms of consolidated revenue, our intellectual property operations increased by 4.9 million year-over-year due to an increase in the number of license agreements executed during the quarter.
MJ McNulty: Ah 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.
MJ McNulty: In terms of consolidated revenue, our intellectual property operations increased by $4 9 million year over year due to increasing the number of license agreements executed during the quarter. Our energy operations delivered revenues of $14 2 million in Q2, including the impact from the acquisition completed in mid April.
MJ McNulty: Our energy operations delivered revenues of 14.2 million in Q2, including the impact from the acquisition completed mid-April of this year. And while our industrial operations revenue decreased a little, by about a million due to the lower number of printers sold, we were pleased that it was accompanied by a lower year over year operating loss, as a result of our continual cost improvement program as we continue to generate cash from this business. In terms of adjusted EBITDA, the intellectual property business generated $8.5 million in adjusted EBITDA during the first six months of 2024.
MJ McNulty: This year.
MJ McNulty: And while our industrial operations revenue decreased a little bye.
MJ McNulty: By about a million two due to lower printer sold we were pleased that it was accompanied by a lower year over year operating loss as a result of our continuous cost improvement program as we continue to generate cash from this business.
MJ McNulty: In terms of adjusted EBITDA in the intellectual property business generated $8 5 million in adjusted EBITDA during the first six months.
MJ McNulty: Printronics generated $2.3 million in adjusted EBITDA during the first six months of the year, and Benchmark generated $8.4 million in adjusted EBITDA during the first six months of the year. Our corporate parent generated an adjusted EBITDA loss of $8.8 million.
MJ McNulty: 2024, <unk> generated $2 3 million and adjusted EBITDA. During the first six months of the year and benchmark generated $8 four and adjusted EBITDA. During the first six months of the year.
Speaker Change: Our corporate parent generated an adjusted EBITDA loss of $8 8 million. However, as we've mentioned in the past.
MJ McNulty: However, as we've mentioned in the past, the expenses at corporate were offset by $10 million in interest income. More detail on our adjustments is provided in our press release and accompanying corporate presentation, which we posted to the website today. Our book value per share on June 30, 2024, will be $5.95 a share compared to $5.90 a share at the end of 2023. Excluding the impact of an additional accrual of $12.9 million related to the AIP matter, which has not been settled and closed and which is discussed in greater detail in our ten cues, our adjusted book value per share on June 30, 2024, would have been $6.7 per share. The AIP Matter relates to a closed legal matter involving a profits interest plan adopted by prior members of management and the board in 2007.
MJ McNulty: The expenses at corporate were offset by $10 million in interest income.
MJ McNulty: More detail on our adjustments are provided in our press release and accompanying corporate presentation, which we posted to the website today.
MJ McNulty: Our book value per share on June 32024, with $5 95, a share compared to $5.90 a share at the end of 2023.
MJ McNulty: Excluding the impact of an additional accrual of $12 9 million related to the AIP matter, which has now been settled and closed and which is discussed in greater detail in our 10-Q, our adjusted book value per share on June 30th would've been $6 seven per share.
MJ McNulty: The AIP matter relates to a closed legal matter involving a profits interest plan adopted by prior members of management and the board in 2017.
MJ McNulty: What value per share as a key metric and as the primary metric by which our teams compensation is based we believe this aligns management and shareholder interests at this stage in our company's life.
MJ McNulty: Well, value for the share is a key metric and is the primary metric by which our team's compensation is based. We believe this aligns management and shareholder interests at this stage in our company's life. Kirsten will cover the additional details of our quarterly results in a few minutes, but first, let me speak briefly about our core verticals, including technology, energy, and industrial. First, on energy. As you know, in November of last year, Acacia acquired a majority stake in benchmark, an independent oil and gas company based in Houston, engaged in the acquisition, production, and development of oil and gas assets in mature resource plays in Texas and Oklahoma.
Speaker Change: <unk> will cover the additional details of our quarterly results in a few minutes, but first let me speak briefly about our core verticals, including technology energy and industrials.
Speaker Change: First on energy.
MJ McNulty: As you know in November of last year, Acacia acquired a majority stake in benchmark and independent oil and gas company based in Austin.
MJ McNulty: Engaged in the acquisition production and development of oil and gas assets immature resource plays in Texas and Oklahoma.
MJ McNulty: In April of this year, Benchmark completed the acquisition of certain liquids-rich, predominantly oil-based, and low decline upstream assets and related facilities in Western Anadarko Bay. Station now owns 73.5% of the Benchmark Energy subsidiary following the recent acquisition of these assets.
MJ McNulty: In April this year benchmark completed the acquisition of certain liquids rich predominantly oil based at low decline upstream assets and related facilities and the western Anadarko basin.
Speaker Change: Vacation now almost 73, 5% of the benchmark energy subsidiary following the recent acquisition of these assets.
MJ McNulty: Following the latest acquisition, our energy business consists of over 150,000 net acres and over 500 operated wells producing approximately 6,500 barrels of oil equivalent per day in the western, or based on it, throughout the Texas Panhandle and Western Oklahoma. Benchmark's recent acquisition brings the company increased geographic density and financial scale. The acquisition included significant undeveloped acreage in the valuable Cherokee and Cleveland formats, which could be monetized through a variety of top-of-the-line solutions.
MJ McNulty: Following the latest acquisition our energy business consists of over 150000 net acres and over 500 operated wells producing approximately 6500 barrels.
Speaker Change: Of oil equivalent per day in the Western World.
MJ McNulty: Throughout the Texas Panhandle, and Western Oklahoma.
MJ McNulty: Benchmarks recent acquisition brings to the company increased geographic density and financial scale. The acquisition included significant undeveloped acreage in the valuable Cherokee in Cleveland formations.
MJ McNulty: Which could be monetize through a variety of solutions.
MJ McNulty: As we mentioned before, benchmarked employees of the PDP strategy focused on acquiring predictable and shallow decline, cash flowing, boiling gas problems, with minimal capital intensity that can be enhanced through a field optimization strategy and risk managed through robust commodity hedges and low leverage. Our strategy is to acquire mature, long-lived assets and deploy various field enhancements, including artificial lift optimization, a more active well maintenance program, and reopening previously closed wells to enhance the status quo production profile and pursue our goal of maximizing cash flow for benchmark assets.
Speaker Change: As we mentioned before benchmark deploys a PDP strategy focused on acquiring predictable in a shallow decline cash flowing oil and gas properties with minimal capital intensity that can be enhanced through our field optimization strategy and risk manage through robust commodity hedges and low leverage.
Speaker Change: Our strategy is to acquire mature long lived assets and deploy various field enhancements, including artificial lift optimization or.
Speaker Change: More active well maintenance program and reopening previously closed wells to enhance the status quo production profile in pursuit of our goal of maximizing cash flow per bench marks assets.
MJ McNulty: During the second quarter, the experienced team began implementing its operational improvement plan, a meaningful part of the strategy. In the second quarter, our energy operations delivered consolidated revenues of $14.2 million, including the impact from the acquisition completed on April 17th. Further, in terms of a just citybed dot, Benchmark reported 7 million during the quarter.
Speaker Change: During the second quarter the experienced team began implementing its operational improvement plan a meaningful part of the strategy.
Speaker Change: In the second quarter, our energy operations delivered consolidated revenues of $14 $2 million, including the impact from the acquisition completed on April 17th.
Speaker Change: <unk>.
Speaker Change: Further in terms of adjusted EBITDA benchmark reported $7 million during the quarter again. This reserve represents a partial month of results.
Speaker Change: I would also note that you will now notice the realized and unrealized derivative gains and losses coming through the other income and expense line on our income statement.
Speaker Change: <unk> represents both the mark to market of the hedges on future production, we are seeking to protect through our previously discussed hedging program as well as the realized gains or losses associated with maturing hedges I would note that our hedge book is significantly representing roughly 70% of our net oil and gas production over the next three years and as a result.
MJ McNulty: I would note that our hedge book is significant, representing roughly 70% of our net oil and gas production over the next three years. And as a result of the size of the hedge book, sometimes these movements will be significant.
Speaker Change: The size of the hedge book, sometimes these movements will be significant we continue to disclose the realized versus unrealized component of these accounting figures to help you better understand the cash impact of our hedge book on the enterprise.
MJ McNulty: We continue to disclose the realized versus unrealized component of these accounting figures to help you better understand the cash impact of our hedge book on the enterprise. For new technology verticals, and who are intellectual property businesses generated $5.3 million in licensing and other revenue during the quarter compared to $400,000 in the same quarter last year. These agreements further bolster our position to pursue additional licensing agreements and settlements, and our team is advancing discussions with other potential licensees.
Speaker Change: Turning to our technology vertical where intellectual property business generated $5 $3 million in licensing and other revenue during the quarter compared to four.
Speaker Change: $400000 in the same quarter last year.
Speaker Change: These agreements further bolster our position to pursue additional licensing agreements in settlements and our team is advancing discussions with other potential licensees. The Wi Fi six patent portfolio continues to represent a lucrative opportunity for periodic cash events and we believe there are significant incremental value in these patents. Additionally, we.
MJ McNulty: The Y5-6 Patent Portfolio continues to represent a lucrative opportunity for periodic cash events, and we believe there's significant incremental value in these patents. Additionally, we continue to evaluate potential additional capital investments into this business to acquire new patent portfolios when we believe there are attractive risk-reward opportunities. Now turning to our industrial business. When we committed to the printronics operating business in October of 2021, we believed it represented an attractive price relative to the potential cash flow generation.
Speaker Change: Continue to evaluate potential additional capital investments.
Speaker Change: Into this business to acquire new patent portfolios. When we believe there are attractive risk reward opportunities.
Speaker Change: Now turning to our industrials business.
Speaker Change: When we acquired the <unk> operating business in October of 2021, we believed it represented an attractive price relative to the potential cash flow generation. We also recognize there would be operational strategic restructuring.
Speaker Change: In early 2023, the team began replacing the <unk> management team and brought in and operating advisor to significantly reduce costs and improve efficiency.
Speaker Change: We are pleased with the progress in print products as it transitions as business mix from lower margin printer sales to higher margin consumables products, including ink cartridges and specialty ribbons and believe this dual hardware and consumables business model combined with its streamlined operating structure represents a nice source of cash flow for Acacia.
Speaker Change: Cardtronics generated $6 3 million in revenue during the quarter compared to $7 five in the same quarter last year.
Kirsten Hoover: Despite the lower revenue, we're pleased with the turnaround work that the Printronics team continues to undertake, including a key focus on top line initiatives, and we anticipate Printronics to continue to generate free cash flow on an annual basis. Burning out at M&A. Acacia remains focused on acquiring and building businesses that have stable cash flow generation with an ability to scale while retaining the flexibility to make opportunistic acquisitions with higher risk-adjusted return characteristics.
Speaker Change: The lower revenue we're pleased the turnaround we're pleased with the turnaround work that the <unk> team continues to undertake including in key focus on top line initiatives and we anticipate plantronics to continue to generate free cash flow on any basis.
Speaker Change: Turning now to M&A.
Speaker Change: Acacia remains focused on acquiring and building businesses that have stable cash flow generation with an ability to scale, while retaining the flexibility to make opportunistic acquisitions with higher risk adjusted return characteristics.
Kirsten Hoover: We've been keeping a close eye on the recent volatility in the markets and remain cautious about the current market environment. However, given our long-term approach and disciplined focus, we expect the overall impact of the current market volatility to be negligible for our underlying business. Prior to the recent market volatility, the M&A environment remained constructive with a strong pipeline of potential public and private opportunities. We believe additional opportunities may be created as the volatility works its way through the system.
Speaker Change: We've been keeping a close eye on the recent volatility in the markets and remain cautious about the current market environment. However, given our long term approach and disciplined focus we expect the overall impact of the current market volatility to be negligible to our underlying.
Speaker Change: Businesses.
Speaker Change: Prior to the recent market volatility the M&A environment remained constructive with a strong pipeline of potential public and private opportunities. We believe additional opportunities may be created as the volatility works its way through the system. Our team continues to evaluate opportunities to acquire new businesses, where our research execution and operating partners.
Kirsten Hoover: Our team continues to evaluate opportunities to acquire new businesses where research, execution, and operating partners can drive attractive earnings and book value per share growth. We continue to believe the oil and gas business represents an attractive complement to our position initiatives, and industrials and technology, where we continue to evaluate our operating business as to acquire. I'd now like to turn the call over to Kirsten to discuss our second quarter financial results.
Speaker Change: Can drive attractive earnings and book value per share growth.
Speaker Change: We continue to believe the oil and gas business represents an attractive complement to our acquisition initiatives and industrials and technology, where we continue to evaluate our operating businesses to acquire.
Speaker Change: I'd now like to turn the call over to <unk> to discuss our second quarter financial results.
<unk>: Thank you Jay.
Kirsten Hoover: Her Jeff Brooks 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 $6.7 per share. Total revenues were $25.8 million, compared to $7.9 million in the same quarter of last year.
Speaker Change: Our GAAP book value.
<unk>: 32024 with 596.7.
<unk>: $7 million or $5 95 per share.
M. J: Excluding the impact of the additional accrual of $12 9 million in the first six months of 2024 related to the AIP matter that M. J discussed earlier, which has now been settled and closed our book value per share at June 32024 would have been.
<unk>: The $6.07 per share.
Speaker Change: Total revenues were $25 8 million compared to $7 9 million in the same quarter of last year.
Kirsten Hoover: 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. This is due to an increased number of license agreements executed quarter over quarter and higher average license fees.
Speaker Change: Our intellectual property business generated $5 3 million in licensing and other revenue during the quarter up over 200% compared to <unk> 4 million in the same quarter of last year due to the increased number of license agreements executed quarter over quarter.
Speaker Change: And higher average license fees.
Kirsten Hoover: 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 benchmarks closed on November 13, 2023, there is no comparable revenue in the same quarter of last year.
Speaker Change: 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.
Speaker Change: Benchmark generated $14 2 million in revenues in the quarter.
Speaker Change: <unk> initial investment in benchmark closed on November 13th 2023, there is no comparable revenue in the same quarter of last year.
Kirsten Hoover: 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 an increase in GNA for the addition of our energy segment, partially offset by a decrease in parent legal fees and a decrease in Printronics GNA.
Speaker Change: As a reminder, in April we closed benchmarks first acquisition following Acacia initial investment.
Speaker Change: From this acquisition have been reported as part of our second quarter financial financial results.
Speaker Change: 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.
Speaker Change: Actually offset by a decrease in parent legal fees and a decrease in print Tronox G&A.
Kirsten Hoover: 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. Frantronics contributed 0.2 million in operating losses, which included 0.7 million of non-cash depreciation and amortization expense.
Speaker Change: 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.
Speaker Change: <unk> contributed <unk> 2 million and operating loss, which included <unk> 7 million of noncash depreciation and amortization expenses.
Kirsten Hoover: Benchmark contributed 3.2 million in operating income, which included 3.5 million of non-cash depreciation and amortization expenses and does not reflect 0.1 million of realized derivatives gain. GapNetLoss attributable to Acacia Research Corporation in the second quarter was 8.4 million, or 8 cents per share, compared to GapNetLoss attributable to Acacia of 18.8 million, or a loss of The net loss for the second quarter of 2024 included 4.7 million in unrealized losses related to the fair value of our remaining equity security.
Speaker Change: Benchmark contributed $3 2 million and operating income, which included $3 5 million of noncash depreciation depletion and amortization expenses and does not reflect <unk> 1 million of realized derivative gains.
Speaker Change: GAAP net loss attributable to Acacia Research Corporation in the second quarter with $8 4 million or eight cents per share compared to GAAP net loss attributable to Acacia at $18 8 million or a loss of 36 cents per share in the second quarter of lag.
Speaker Change: Sure.
Speaker Change: The net loss for the second quarter of 2024 included $4 7 million and unrealized losses related to the fair value of our remaining equity securities.
Kirsten Hoover: The second quarter included $0.8 million in non-recurring general and administrative costs. Excluding the impact of the additional accrual related to the AIP matter, which represented 6th sense of earnings per share, our loss per share for the second quarter of 2024 would have been two cents per share. As of December 31, 2023, our NOL totaled approximately $18 million. We will continue to evaluate the most efficient ways to maximize this asset.
Speaker Change: The second quarter included <unk> 8 million in nonrecurring general and administrative charges.
Speaker Change: Excluding the impact of the additional accrual related to the AIP matter, which represented six cents of earnings per share or loss per share for the second quarter of 2024.
Speaker Change: It has been <unk> <unk> per share.
Speaker Change: As of December 31, 2023, our NOL totaled approximately $18 million, we will continue to evaluate the most efficient ways to maximize this asset.
Kirsten Hoover: Turning to the balance sheet, cash, cash equivalents, and equity securities at fair value totaled 405.2 million at June 30, 2024, compared to 403.2 million at December 31, 2023. The increase in cash was primarily due to the timing of payments received from licensees, offset by $59.9 million paid to acquire the Revolution assets. Equity Securities without a readily-determinable Fair Value totaled 5.8 million at June 30, 2024, unchanged from December 31, 2023. Investment Securities, Representing Equity Method Investments, Net of Non-Controlling Interest, Total 19.9 million at June 30, 2024, unchanged from December 31, 2023.
Speaker Change: Turning to the balance sheet cash cash equivalence and equity securities at fair value totaled $405 2 million at June 32024, compared to $403 2 million at December 31, 2023.
Speaker Change: The increase in cash was primarily due to timing of payments received from licensees offset by $59 9 million paid to acquire the revolution assets.
Speaker Change: Equity securities without readily determinable fair value totaled.
Speaker Change: <unk> totaled $5 8 million at June 32024 unchanged from December 31, 2023.
Speaker Change: Investment Securities representing equity method investments net of Noncontrolling interest totaled $19 9 million at June 32024 unchanged from December 31 2023.
Kirsten Hoover: Acacia owns 64% of Mallen J-1, which results in a 26% ownership stake in ViaNet Pharmaceuticals for Acacia. The parent companies' total indebtedness was zero at June 30, 2024. On a consolidated basis, Acacia's total indebtedness was 82 million in non-recourse debt at Benchmark as of June 30, 2024. We continue to believe that cash per share is an important metric for measuring our progress. As of June 30, 2024, our cash per share stood at $3.86.
Speaker Change: Acacia on 64% of Merlin J, one which results in a 26% ownership stake in Vionnet pharmaceuticals for Acacia.
Speaker Change: The parent company's total indebtedness with zero at June 32024 on a consolidated basis, our cases total indebtedness with $82 million and nonrecourse debt at benchmark as of June 32024.
Speaker Change: We continue to believe that cash per share is an important metric for measuring our progress as of June 32024, our cash per share stood at $3.86.
Kirsten Hoover: For more information on Acacia's second quarter results, please see our press release issued this afternoon and our quarterly report on Form 10-Q, which we will file with the SEC later today. With that, I'd like to turn the call back over to Engine.
Speaker Change: For more information on Acacia second quarter results. Please see our press release issued this afternoon and our quarterly report on Form 10-Q, which we will file with the SEC later today.
Speaker Change: With that I'd like to turn the call back over to Ajay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
MJ McNulty: Our strategic relationship with Starwood 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 in the flexibility to take advantage of uncertain environments and dislocated situations. Fit, we have cultivated a deep and experienced operating executive network, which supports sourcing and evaluation of our acquisition opportunities.
Speaker Change: Our strategic relationship with Starwood expands our sourcing and operating network and resources, providing the company with expanded access to industry expertise.
Speaker Change: And an expanded network of operating partners, with whom we evaluate potential acquisition opportunities.
Speaker Change: Which enhances the oversight and value creation of our business.
Speaker Change: Fourth we have significant resources and the flexibility to take advantage of uncertain environments and dislocated situations.
Speaker Change: Fifth we have cultivated a deep and experienced operating executive network, which support sourcing and evaluation of our of our acquisition opportunities.
MJ McNulty: And finally, as many of you have reminded me, we're trading at blue 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 if you have dialed in and would like to ask.
Speaker Change: And finally as I know many of you are reminded me, we're trading below book value, which represents a compelling opportunity for investors.
Speaker Change: With that we'd be pleased to take any of your questions.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press the star followed by the number 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press the star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, please press the star 1 to join the queue. Your first question comes from the line of Adam Eagleston: where it's permissible, please go ahead.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we'd like to ask a question. Please press star followed by the number one on your telephone keypad to raise your hand and joined the queue. If you would like to invite your question Cynthia precious time line again, if you are called upon to ask your.
Speaker Change: Cheng and are listening via loud speaker in your device. Please pickup your handset and ensure that your phone is not on mute when asking your question again, Please press star one to join the queue.
Speaker Change: Your first question comes from the line of Adam AGL.
Speaker Change: Wed pardon me to Bob Pease go ahead.
Adam Eagleston: Hey, MJ. How are you today? Hey Adam, how are you?
Speaker Change: Hey, Andy how are you today.
Speaker Change: Hey, Adam how are you.
Andy: Doing well thank you.
Adam AGL: So my question was going to be around the share count didn't look like that change so.
Speaker Change: How are you all thinking about the buyback now.
Andy: Okay.
MJ McNulty: Well, as you know, it's authorized, and we are just evaluating the timing of executing on that by-back. BABB. So we still very much are enthusiastic about it, as is our board, and it's just a matter of timing that by-back. Alright, fair enough, thank you! Yeah.
Speaker Change: Well as you know it's it's authorized.
Speaker Change: And and we are just evaluating the timing of executing on that buyback.
Andy: So we still very much are enthusiastic about it as is our board.
Speaker Change: And it's just a matter of timing that buyback.
Speaker Change: Alright fair enough. Thank you.
Andy: Yeah.
Anthony Stoss: And your next question comes from the line of Anthony Stoss, with Craig Halland Capital. Please go ahead. AMJ and Kirsten, since the, you know, the second benchmark
Speaker Change: And your next question comes from the line of Anthony Stoss with Craig Hallum Capital. Please go ahead.
Anthony Stoss: AMG and Christian.
Anthony Stoss: Since the.
Anthony Stoss: Second benchmark purchase was kind of intra quarter I'm wondering if you can give us kind of an expected range of revenues that you might think about for your benchmark assets for the September quarter.
MJ McNulty: Yeah, 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 17. 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.
Speaker Change: 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.
Speaker Change: Because we broken out the revenue.
Speaker Change: The day, the 17, and so I think you can probably interpolate revenue estimates for the third quarter based on some of the data that's out there.
Speaker Change: Okay.
Tony: I'll give it a look thank you.
Jeff: Great. Thanks, Jeff.
Brett Reiss: and your next question comes from the line of Brett Reiss with Johnny. Please go ahead.
Speaker Change: And your next question comes from the line of Brett Levy with Johnny Please go ahead.
MJ McNulty: I am Jay, I'm Kirsten. How are you? Hey, Brett. How are you doing? Good, good, good. The operating income on the benchmark was like 22 and a half percent of revenues. Is that kind of what the ratio is going to look like, you know, going forward?
Gerry: I am Gerry heart Kirsten how are you.
Brad: Brad How're you doing.
Brett: Good good good.
Speaker Change: The operating income on bench work was like 22.5% of revenues is is that kind of what the ratio is going to look like going forward.
MJ McNulty: Yeah, 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 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, you know, 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 as we had underwritten it to perform. Now, it's early. It's, you know, a little over half a quarter.
Speaker Change: Yeah. So 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.
Speaker Change: And so I think that may be a better metric to look at.
Brad: 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.
MJ McNulty: But the business is performing as expected.
Brad: And in so.
Speaker Change: So far the business is performing how we underwrite written it to perform that's early.
Brad: It's a little over half a quarter, but.
Speaker Change: But the business is performing as expected.
MJ McNulty: Right, right. Now MJ with Benchmark, is the increase in revenues going to be driven by, really? More wells on the acreage you have or extracting more oil from existing wells or just, you know, bolt-on acquisitions. What's going to drive increased revenue in that part of the business? Yeah.
Speaker Change: Right right, right and J wood with benchmark.
J wood: Is the increase in revenue is going to be driven by <unk>.
J wood: Really.
Speaker Change: More wells on the acreage you have or extracting more oil from existing wells or just.
Speaker Change: Bolt on acquisitions, what what's going to drive.
Speaker Change: Increased revenue in that part of the business.
MJ McNulty: Yeah, so we follow a PDP strategy, so we acquired and only paid for producing these assets in the Western Anadarko Basin, and for that matter, the initial setup 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 are in. And so that's kind of part one of the base, what can we do operationally to your point to get more oil and gas out of the wells we own. Um...
Speaker Change: Yeah. So.
Speaker Change: So so we follow a PDP strategy, so we acquired and only paid for producing production.
Speaker Change: At these assets in the Western Anadarko basin and for that matter. The initial set of a benchmark wells.
Speaker Change: They they will have a natural curve associated with them our production curve associated with them and so that's kind of the base.
Speaker Change: The reason we picked the team that we picked to do this with us because they they historically have been very good at.
Speaker Change: At reducing that natural curve of reduction for the wells that payout 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.
Speaker Change:
MJ McNulty: So, as I mentioned, the team has kind of fully implemented strategy there from a revenue standpoint. But I 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 just one. And so they're also working on that, that's not the top line, that ends up becoming a reduction in cost, and then the third, and it's early for this, but I think we had mentioned it, is that we did get a Grinch with the deal, the Cherokee, and that Cherokee is a Grinch.
Speaker Change: So as I mentioned the team is kind of fully implemented its strategy. There from a revenue standpoint I remember there are other things that we can do with the business to optimize the cost structure.
Speaker Change: 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 Thats not top line that ends up becoming a reduction in costs.
Speaker Change: And then the third and it's early for this.
Speaker Change: But I think we have mentioned it is that we did get acreage.
Speaker Change: With the deal.
Speaker Change: The Cherokee and that Cherokee acreage could be interesting I think it's early.
MJ McNulty: It could be interesting. I think it's early, but it could be interesting. And we are not drillers of wells, our strategy to PDP is to focus on PDP, so we're not out to drill wells. However, we can partner with folks that can take the drilling risk, doing that acreage, and we have a very capital-light way to potentially earn additional revenue in that sort of a structure.
Speaker Change: But it could be interesting.
Speaker Change: We we are not drillers of wells or our strategy PDP focused so we're not out to drill wells. However, we can partner with folks that can take the drilling risk.
Speaker Change: That acreage and we have a very capital light way to potentially create additional revenue.
Speaker Change: Is that sort of a structure.
MJ McNulty: Okay, now in the body, in the really... There was an addition to DNA from the addition of new energy segment operations. So that's a portion of benchmark. All the heads picked up by us. Could you give us some more color on that? Um, yes, sir.
Speaker Change: Okay now.
Speaker Change: In the <unk>.
Speaker Change: In the body of the release.
Speaker Change: There was a.
Speaker Change: Addition to G&A.
Speaker Change: From the addition of new.
Speaker Change: Energy segment operation, it's always a portion of benchmarks.
Speaker Change: Overhead picked up by us.
Speaker Change: Could you give us some more color on that.
Speaker Change: Okay.
MJ McNulty: Yes, so we are. We own 73.5% of it, and so we own 73.5% of the costs to run the business. There was a little bit of GNA 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 its economics of it. And so, because we're consolidating the benchmark. Acquisition, and then showing him no more 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 PL.
Speaker Change: Yes. So we are we own 73, 5% of benchmark.
Speaker Change: And so we owe and 73, 5% of the cost to run the business there was a little bit of G&A.
Speaker Change: That came along with the new deal again in the context of what we underwrote and check.
Speaker Change: In line with how we were viewing the business and the economics of it.
Speaker Change: So because we're consolidating the benchmark.
Speaker Change: Acquisition, and then showing a minority interest in that deal.
Speaker Change: It will fully consolidated onto our P&L.
Speaker Change: And then.
Speaker Change: Curious, Tim can correct me, where I'm wrong, it will be adjusted for in the minority interest section of the P&L.
Tim: That's right.
Speaker Change: Okay.
Speaker Change:
Kirsten Hoover: Get in part of the business. What does the trial calendar on the patent portfolio look like over the next couple of quarters?
Speaker Change: Different part of the business what is the trial calendar on the patent portfolio look like over the next couple of quarters.
Kirsten Hoover: You know, we don't talk about that, Brett.
Speaker Change: We you know we don't talk about that Brett.
Speaker Change: Okay.
Speaker Change: Schedule in the next in the upcoming 12 months, so that that is disclosed in our 10-Q those upcoming too.
Kirsten Hoover: Okay, we do schedule in the upcoming 12 months. So that is disclosed in our 10-Q, those upcoming two. Okay, I'll look there. Now, the turnaround that you're trying to implement in Printronics, Yeah, if it doesn't gain traction, you know, how long will you drive the turnaround before you, you know, throw in the towel and exit that business?
Speaker Change: Okay I'll look there now.
Speaker Change: The turnaround that you're trying to implement in print products.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: It doesn't gain traction.
Speaker Change: How long will you.
Speaker Change: Drive the turnaround before you.
Speaker Change: Throwing the towel in exit that business.
MJ McNulty: Also, so first, the turnaround is actually doing quite well. Okay, we have, you know, a step plan of moving the business towards higher margin consumables that we sell and continuing to reduce the cost. A top rate of 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 the status quo." We're continually reducing costs to match what we want the profitability to be on the consumables piece of this.
Speaker Change: Also so first the turnaround is actually.
Speaker Change: Doing quite well.
Speaker Change: Okay.
Speaker Change: We have.
Speaker Change: We have a step plan of moving that business towards higher margin consumables that we sell.
Speaker Change: Brian and continuing to reduce the costs.
Speaker Change: To operate the business on a regular basis. So it's not as if we said.
Speaker Change: 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 the consumables piece of the business.
MJ McNulty: So we are not thinking about throwing in the towel. We are actually 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, it's looking promising.
Speaker Change: So we are not thinking about throwing in the towel.
Speaker Change: 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 its looking.
Speaker Change: It's looking promising.
Speaker Change: Great great.
Speaker Change: Thank you for taking my questions and both of you enjoy the rest of the summer.
Brett Levy: Yeah Likewise Brett.
Speaker Change: Okay.
Speaker Change: Thanks.
Operator: Operator, are there any more questions?
Speaker Change: Operator are there any more questions.
Operator: So once again, if you would like to ask a question, simply press the star, followed by the number one on your telephone keypad. You're an ex-question and comes from the line of thoughts, thoughts, thoughts, or with eight, eight management LLs, EEPs to head.
Speaker Change: So once again, if you would like to ask a question simply press star followed by the number one on your telephone keypad. Your next question comes from the line of Budd <unk> with <unk> management LLC. Please go ahead.
Unknown Attendee: Pay in Jake, Kristen, for questions under key business highlights and C, 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, but how do we get to $71 million?
Budd: Hi, MJ Christine.
Speaker Change: Quick question under key business highlights.
Speaker Change: C generated 71 million in operating cash flow for the first half of 2024.
Budd: That seems like such a robust number considering.
Speaker Change: The run rate for Q1 and Q2.
Speaker Change: How do we get to $71 million.
MJ McNulty: Yeah, 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 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 this year, which is driving a big portion of that. Gotcha!
Budd: Yes, So you got to remember Todd that we had the.
Speaker Change: Patent settlements that were recorded as revenue in Q4 of last year.
Speaker Change: Because the deals were struck and agreed to in Q4 of last year came through in the first half of this year.
Speaker Change: And so a lot of that cash came through.
Todd: In the first six months of the year, which is driving a big portion of that.
Speaker Change: Gotcha.
MJ McNulty: Great. I appreciate it. Thank you. Yeah, of course.
Speaker Change: Great appreciate it thank you.
Speaker Change: Yes of course.
Operator: And there are no further questions at this time. I would like to turn it back to MJ McNulty for closing remarks.
Speaker Change: And there are no further questions at this time I would like to turn it back to you and Jay Mcnulty for closing remarks.
Jay Mcnulty: I appreciate everyone joining I hope everyone is having a great summer and enjoys the rest of this summer.
Jay Mcnulty: 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.
Speaker Change: On the call here have followed us and we appreciate that.
Speaker Change: But it puts a little bit more meat around the story.
Speaker Change: So we appreciate you joining and we look forward to talking to you soon.
Speaker Change: Yes.
Speaker Change: Thank you. This concludes today's conference call you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Okay.
MJ McNulty: Great, great, thank you for taking my questions, and both of you enjoy the rest of the summer. Yeah, likewise, Brett.
MJ McNulty: I appreciate everyone joining us. I hope everyone's having a great summer and enjoying the rest of the summer. Please take a look at our website and see the corporate deck that we put out.
MJ McNulty: Again, this results represents a partial month of results. I would also note that you will now notice the realized and unrealized derivative gains and losses coming through the other income and expense line on our income statement. This line represents both the mark to market of the hedges on future production we are seeking to protect through our previously discussed hedging program, as well as the realized gains and losses associated with maturing hedges.
MJ McNulty: We also recognize there would be operational strategic structuring work. In early 2023, the team began replacing the Printronics management team and brought in an operating advisor to significantly reduce costs and improve efficiency. We're pleased with the progress of Printronics as it transitions its business mix from lower margin printer sales to higher margin consumables products, including ink cartridges and specialty ribbons, and believe this dual hardware and consumables business model, combined with its streamlined operating structure, represents a nice source of cash flow for Acacia. Printronics generated 6.3 million in revenue during the quarter compared to 7.5 million in the same quarter last year.
MJ McNulty: I think it answers a lot of questions that we've talked about in the past. It gives a really good view of who we are and where we're going. I know a lot of the folks on this call here have followed us, and we appreciate that. But it puts a little bit more meat on the story. So we appreciate you joining us. We look forward to talking to you soon.
Operator: Thank you. This concludes today's conference call; you may now disconnect.