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ACACIA RESEARCH CORP (ACTG)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a step-function improvement: revenue $124.4M, GAAP net income $24.3M ($0.25 diluted EPS), and Total Company Adjusted EBITDA $50.7M, driven by a $69.9M WiFi-6 IP settlement, first full-quarter Deflecto contribution, and stronger Benchmark energy execution .
  • Versus prior year, revenue rose 412% (from $24.3M), with Energy at a quarterly high ($18.3M) and Manufacturing at $28.5M; Industrial dipped slightly to $7.7M .
  • Pro forma cash, cash equivalents and equity securities reached $338.2M ($3.52/share) after quarter-end IP proceeds; book value per share at quarter-end was $6.00 .
  • Wall Street consensus (S&P Global) for Q1: EPS -$0.05*, revenue $55.0M*; Acacia posted $0.25 GAAP EPS/$0.34 adjusted and $124.4M revenue, a significant beat on both metrics . Values retrieved from S&P Global.
  • Catalyst and narrative: large, uncorrelated IP monetization, expanding operated portfolio (Deflecto, Benchmark) and disciplined capital allocation/hedging underpin visibility; tariffs in transportation unit and securities/derivative marks are watch items .

What Went Well and What Went Wrong

What Went Well

  • IP monetization: “The settlement delivered approximately $69 million in revenue against approximately $21 million of direct costs… for total net proceeds of approximately $48 million” (WiFi-6 portfolio) .
  • Energy resilience and hedging: “We’ve hedged over 70% of our production through the end of 2027, which protects a substantial amount of our cash flow” .
  • Deflecto integration and cash conversion focus: “Organized Deflecto into 3 distinct business units… implementing business systems and working capital initiatives… higher rates of cash conversion over the coming quarters” .

What Went Wrong

  • Tariff-related demand headwinds: “We’ve seen tariff-specific demand headwinds, particularly in Deflecto’s transportation unit” .
  • Securities and derivatives marks: Q1 included $4.8M unrealized losses on equity securities and a $5.0M loss on energy derivatives .
  • Industrial softness: Industrial revenue slipped to $7.7M from $8.8M prior-year; segment Adjusted EBITDA fell to $1.0M from $1.9M .

Financial Results

Core P&L vs prior two quarters

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$23.3 $48.8 $124.4
GAAP Operating Income ($USD Millions)$(10.3) $(15.8) $38.3
GAAP Net Income ($USD Millions)$(14.0) $(13.4) $24.3
GAAP Diluted EPS ($)$(0.14) $(0.14) $0.25

Margins trend (GAAP)

MetricQ3 2024Q4 2024Q1 2025
EBIT Margin %-44.07%*-24.99%*30.79%*
Net Income Margin %-60.04%*-27.49%*19.52%*
EBITDA Margin %-0.62%*-0.00%*39.66%*
Values retrieved from S&P Global.

Segment Revenue

SegmentQ4 2024 ($USD Millions)Q1 2025 ($USD Millions)
Energy Operations (Benchmark)$17.3 $18.3
Industrial Operations (Printronix)$8.2 $7.7
Manufacturing Operations (Deflecto)$23.2 $28.5
Intellectual Property Operations$0.1 $69.9
Total Revenues$48.8 $124.4

Adjusted EBITDA by segment (non-GAAP)

SegmentQ4 2024 ($USD Millions)Q1 2025 ($USD Millions)
Energy Operations$8.4 $7.9
Industrial Operations$1.6 $1.0
Manufacturing Operations$2.4 $2.4
Intellectual Property Operations$(2.7) $43.3
Operated Segment Adjusted EBITDA$9.6 $54.7
Total Company Adjusted EBITDA$4.9 $50.7

KPIs (cash and book value)

KPIQ4 2024Q1 2025
Cash, cash equivalents & equity securities ($USD Millions)$297.0 $290.0; pro forma ~$338.2
Book value per share ($)$5.75 $6.00
Consolidated debt ($USD Millions)$114.0 $108.4 (Benchmark $61.5; Deflecto $46.9)

Free Cash Flow (Q1 2025, non-GAAP)

SegmentNet Cash from Ops ($USD Thousands)Capex ($USD Thousands)FCF ($USD Thousands)
Energy Operations$5,452 $(1,872) $3,580
Industrial Operations$2,530 $(5) $2,525
Manufacturing Operations$1,016 $(213) $803
Intellectual Property Ops$(2,266) —$(2,266)
Parent Costs$(4,307) —$(4,307)
Consolidated Total$2,425 $(2,090) $335

Estimates vs Actuals (Q1 2025)

MetricConsensusActual
Revenue ($USD Millions)$55.0*$124.4
GAAP EPS ($)-$0.05*$0.25
Adjusted EPS ($)—$0.34
# of Estimates (EPS/Revenue)1*/1*—
Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company-level financial guidanceFY/Q2 2025None disclosed None disclosed Maintained (no formal guidance)
Segment-specific guidanceFY/Q2 2025None disclosed None disclosed; qualitative confidence in Energy hedging/Deflecto integration Maintained (qualitative only)
DividendsOngoingNot indicated Not indicated N/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024)Previous Mentions (Q-1: Q4 2024)Current Period (Q1 2025)Trend
IP monetization (WiFi-6)IP revenue subdued; IP Adj. EBITDA $(2.1)M IP revenue minimal; IP Adj. EBITDA $(2.7)M ~$69.9M settlement; ~$48M net proceeds Strong positive inflection
Energy operations & hedgingEnergy revenue/Adj. EBITDA grew to $15.8M/$8.4M; hedges realized gains Energy revenue $17.3M; Adj. EBITDA $8.4M Energy revenue $18.3M; hedged >70% through 2027 Steady growth/visibility
Tariffs/macroNoted macro pressures; repurchases underway Integration of Deflecto; macro noted Tariff-specific demand headwinds in transportation unit Emerging headwind
Deflecto integrationAcquisition completed post-Q3 First-quarter revenue $23.2M; EBITDA $2.4M $28.5M revenue; operating initiatives and cash conversion focus Operational ramp
Capital allocation/share repurchases/tax attributesBuyback $14.0M to Nov-2024 Repurchase program completed $20.0M Monitoring buybacks to protect tax attributes Ongoing discipline

Management Commentary

  • “We’ve hedged over 70% of our production through the end of 2027, which protects a substantial amount of our cash flow” (CEO McNulty) .
  • “The settlement delivered approximately $69 million in revenue… for total net proceeds of approximately $48 million” (CEO McNulty, IP portfolio) .
  • “Organized Deflecto into 3 distinct business units… streamlin[ing] product offering… targeting inventory optimization and sales operations planning… higher rates of cash conversion” .
  • “Pro forma… cash, cash equivalents and equity securities totaled approximately $338.2 million, or $3.52 per share” (CFO Hoover) .

Q&A Highlights

  • IP pipeline: Since Q1’23, ~$178M from WiFi assets; TP-Link case on appeal; focus on standards-essential portfolios over smaller “onesie-twosie” purchases .
  • M&A and sector focus: Priority on Anadarko-based energy deals; willingness to grow Deflecto’s transportation/air distribution units; cautious on office segment .
  • Capital allocation vs tax attributes: Completed $20M buyback; monitoring change-of-control thresholds to preserve tax assets before further repurchases .
  • Potential corporate actions: Management remains open to spin/sale if a business is “worth more to somebody else than it is to us” .

Estimates Context

  • Q1 2025 consensus EPS -$0.05* vs GAAP $0.25 and adjusted $0.34; revenue $55.0M* vs actual $124.4M — a material beat on both (coverage thin: one estimate each)* . Values retrieved from S&P Global.
  • Implication: Street likely revises near-term run-rate assumptions higher for IP monetization and consolidated EBITDA, while normalizing for volatility in marks (securities/derivatives) and tariff demand impacts .

Key Takeaways for Investors

  • Q1 print shows the power of Acacia’s hybrid model: uncorrelated IP monetization alongside improving operated businesses (Benchmark, Deflecto), producing $50.7M Total Company Adjusted EBITDA .
  • Balance sheet strength (~$338.2M pro forma liquidity; parent-level zero debt) provides meaningful dry powder for accretive acquisitions and buy-build initiatives .
  • Energy hedging (>70% through 2027) and diversified hydrocarbon mix support cash flow predictability amid oil price volatility; Benchmark paid down ~$21M since April 2024 .
  • Tariff-related demand headwinds in transportation are a watch item; operational initiatives aim to preserve cash conversion until cycle normalizes .
  • IP pipeline remains active with standards-essential focus; legal outcomes (e.g., TP-Link appeal) could be catalysts for further monetization .
  • Industrial steady but modestly softer; management continues to rationalize costs and drive consumables/hardware mix for cash generation .
  • Near-term trading: Expect sentiment uplift from outsized beats and cash build; medium-term thesis centers on disciplined capital allocation, hedged energy cash flows, and selective IP monetizations to smooth earnings variability .