ACACIA RESEARCH CORP Q2 FY2025 earnings call

• Introduced new CFO Mike Zambito, who brings over 30 years of finance, accounting, and M&A expertise.
• Announced partnership with Unchained Capital and Build Asset Management for Bitcoin-related secured lending, initially committing $20 million to acquire a portfolio of fully recourse loans.
• Benchmark paid down $3.5 million in debt in Q2, with hedging strategy mitigating commodity price pressure.
• Deflecto integration efforts ongoing, with progress in optimizing operations despite global trade flow uncertainty.
• Printronix continued to perform ahead of plan, transitioning to higher-margin consumable products.
• IP business quiet post-Q1 settlement, with team open to opportunistic capital commitment in IP space.

Energy (Benchmark): Generated $15.3 million in revenue, adjusted EBITDA of $7 million, with free cash flow of $4.1 million in Q2. Manufacturing (Deflecto): Generated $29 million in revenue, had a GAAP operating loss of $0.6 million, and adjusted EBITDA of $1.3 million. Industrial (Printronix): Generated $6.6 million in revenue, contributed $0.1 million in operating income, and adjusted EBITDA of $0.6 million. Intellectual Property: Generated $0.3 million in licensing and other revenue, down from $5.3 million in the same quarter last year.

• Continue to focus on growing platforms organically and through M&A for long-term value creation.
• Have exciting opportunities in the pipeline and look forward to updating on progress.

• Macro-economic headwinds impacting all businesses.
• Tariffs affecting Deflecto's end markets, particularly Transportation Safety and Consumer Products segments.
• Risks associated with Bitcoin loans, including market volatility and hedging considerations.
• Uncertainty in private equity market affecting M&A opportunities.

Q: Can you share the expected interest range for Bitcoin commercial loans and their risk compared to typical commercial loans?

A: Loans have low teens type rates of return, net to Acacia in excess of 10%, with risk managed through hedging and collateralized by Bitcoin in cold storage.

Q: Any light at the end of the tunnel for Deflecto's Class 8 truck market?

A: Uncertainty around tariffs may resolve, with fleets aging potentially driving better outcomes as macro environment stabilizes.

Q: Plans for Cherokee acreage over next 1-2 years?

A: Evaluating third-party capital partnerships for drilling strategy in Cherokee, past planning stage into implementation.

Q: Risk of 30% unhedged oil and gas production?

A: Theoretically has a breakeven, but exact number not available, with hedges expected to keep cash flow positive.

Q: Private equity market stress affecting deals?

A: B and C quartile assets have more opportunities as bid-ask spread closes, A quartile assets more likely held or in continuation vehicles.

Q: Information disclosure on Legacy Patent business?

A: Difficult to disclose bilateral negotiations, but public cases and extrapolation from market can help with valuation without tipping hand to counterparties