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ACACIA RESEARCH CORP (ACTG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $51.24M, down sharply vs Q1 on IP normalization, and below S&P consensus $55.0M; EPS was GAAP -$0.03 and Adjusted -$0.06, versus consensus -$0.05 (miss) . Revenue grew 98% year over year on the first full contributions from Manufacturing (Deflecto) and stronger Energy; IP revenue was minimal and highly episodic this quarter .
  • Total Company Adjusted EBITDA was $1.87M and Operated Segment Adjusted EBITDA was $6.78M; free cash flow was a strong $47.91M driven by cash collections on the Q1 IP settlement .
  • Balance sheet remains a key asset: cash and equity securities rose to $338.2M; consolidated debt declined to $104.4M; book value per share was $5.99 .
  • Management announced a new Bitcoin‑backed commercial loan partnership; initial $20M commitment targets >10% net returns, supported by 50% LTV, cold-storage collateral and hedging; a potential near-term stock catalyst as investors reassess balance‑sheet yield and risk management .

What Went Well and What Went Wrong

What Went Well

  • Strong free cash flow: consolidated FCF of $47.91M on operating cash inflows across segments and settlement collections; cash and marketable equity securities climbed to $338.2M . “We generated… free cash flow of $47,900,000 reflecting the cash collection around the previously announced settlement in our IP business” .
  • Energy resilience and deleveraging: Energy Adjusted EBITDA $6.95M; Benchmark paid down ~$24M of debt over the last 12 months; >70% of operated production hedged through 2027 for cash flow stability .
  • Strategic expansion: initial $20M allocation to Bitcoin‑collateralized loans with expected net returns >10%, using institutional custody and hedging to mitigate downside risk .

What Went Wrong

  • IP revenue normalization: IP revenue fell to $0.33M from $69.9M in Q1, driving lower consolidated EBITDA and an EPS miss vs consensus .
  • Tariff‑related demand headwinds at Deflecto: weaker Class 8 truck market and China‑sourced consumer product uncertainty pressured volumes; management is reshoring and optimizing operations but near‑term demand remains soft .
  • Higher G&A: consolidated G&A rose to $15.55M (Deflecto added ~$5.1M, including ~$1.5M of D&A), contributing to a GAAP operating loss of $12.39M in the quarter .

Financial Results

Consolidated Trend vs Prior Year and Prior Quarter

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$25.838 $124.422 $51.237
GAAP Net Income ($USD Millions)$(8.446) $24.287 $(3.293)
GAAP Diluted EPS ($USD)$(0.08) $0.25 $(0.03)
Adjusted Net Income ($USD Millions)$(1.371) $33.080 $(5.945)
Adjusted Diluted EPS ($USD)$(0.01) $0.34 $(0.06)
Total Company Adjusted EBITDA ($USD Millions)$4.089 $50.699 $1.873
Operated Segment Adjusted EBITDA ($USD Millions)$8.797 $54.661 $6.784

Segment Revenue Breakdown

Segment Revenue ($USD Millions)Q2 2024Q2 2025
Energy Operations (Benchmark)$14.170 $15.317
Industrial Operations (Printronix)$6.335 $6.590
Manufacturing Operations (Deflecto)— $29.001
Intellectual Property Operations$5.333 $0.329
Total Revenues$25.838 $51.237

Segment Adjusted EBITDA

Segment Adjusted EBITDA ($USD Millions)Q2 2024Q2 2025
Energy Operations$7.039 $6.951
Industrial Operations$0.449 $0.620
Manufacturing Operations— $1.274
Intellectual Property Operations$1.309 $(2.061)
Operated Segment Adjusted EBITDA$8.797 $6.784

Margins and Estimates Comparison

MetricQ2 2024Q1 2025Q2 2025
Net Income Margin %—19.52%*-6.43%*
EBITDA Margin %—39.66%*-0.99%*

Values marked with * retrieved from S&P Global.

Q2 2025 Actuals vs Consensus (S&P Global)

MetricQ2 2025 ConsensusQ2 2025 Actual
Revenue ($USD Millions)$55.0*$51.237
EPS (Primary) ($USD)$(0.05)*GAAP: $(0.03) ; Adjusted: $(0.06)
Revenue - # of Estimates1*—
EPS - # of Estimates1*—

Values marked with * retrieved from S&P Global.

KPIs and Balance Sheet

KPIQ4 2024Q1 2025Q2 2025
Cash, Cash Equivalents, and Equity Securities ($USD Millions)$297.0 $290.0 $338.2
Consolidated Indebtedness ($USD Millions)$114.0 $108.4 $104.4
Book Value per Share ($USD)$5.75 $6.00 $5.99
Free Cash Flow ($USD Millions)Q1 2025Q2 2025
Consolidated FCF$0.335 $47.907

Additional operating metrics:

  • Benchmark debt reduction (TTM) ~$24.0M .
  • Hedged >70% of operated oil & gas production through 2027 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY/Q3 forwardNone issuedNone issuedMaintained (no formal guidance)
MarginsFY/Q3 forwardNone issuedNone issuedMaintained (no formal guidance)
OpExFY/Q3 forwardNone issuedNone issuedMaintained (no formal guidance)
OI&E / Tax RateFY/Q3 forwardNone issuedNone issuedMaintained (no formal guidance)
DividendsFY/Q3 forwardNone issuedNone issuedMaintained (no formal guidance)

Note: Neither the press release nor the call provided quantitative forward guidance; management emphasized balance‐sheet strength, hedging, and operational initiatives .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Energy hedging & cash flow resilience~70% hedged; focus on Mid‑Con assets and optional markets Hedged >70% through 2027; workovers offset decline; deleveraging Hedging continues to mitigate commodity volatility; Benchmark paid down ~$24M debt LTM Stable execution; continuous deleveraging
Deflecto operations & tariffsIntegration and divisionalization; operational improvements Organized into three units; streamlined offerings; reshoring and sourcing optionality Tariff‑specific demand headwinds; Class 8 orders at lows; reshoring mitigation ongoing Macro headwinds intensify; operational countermeasures
IP business episodic natureQ4 IP minimal revenue; adjusted EBITDA loss Large Wi‑Fi6 settlement drove $69.9M revenue and $43.3M EBITDA Quiet quarter; cash collection boosted FCF; minimal IP revenue Mean‑reversion after Q1 spike
Cherokee play monetizationUpside potential noted (Cherokee/Cleveland formations) Evaluating monetization avenues; no drilling commitments Planning alternative capital partnerships; high‑grading wells Advancing toward monetization
Balance‑sheet capital allocationCash ~$274M; buybacks; optionality in M&A Cash ~$290M, rising to ~$338M pro forma settlement; deliberate capital allocation Cash $338.2M; debt $104.4M; focus on accretive deals Strengthening balance sheet
Bitcoin‑backed loan strategy——New $20M commitment; >10% net returns; 50% LTV; hedging; cold storage custody New initiative; potential yield enhancer

Management Commentary

  • “We continued to execute our strategy of building businesses with stable cash flow generation and scalability… cash, cash equivalents, and equity securities was approximately $338.2 million, or $3.51 per share.” — CEO MJ McNulty .
  • “The loans are originated at… low teens type rates… think about it… in excess of 10% net to Acacia… at a 50% loan to value ratio collateralized by Bitcoin… we’re going to hedge…” — CEO MJ McNulty on Bitcoin‑backed loans .
  • “As a reminder, we’ve hedged over 70% of our operated oil and gas production through 2027, which protects a substantial amount of our cash flow from downside pricing risk.” — CEO MJ McNulty .
  • “Total consolidated G&A expenses were $15,500,000… with $5,100,000 of the increase related to the addition of Deflecto… approximately $1,500,000 is related to depreciation and amortization of intangible assets.” — CFO Michael Zambito .
  • “We did feel the effects of tariff specific demand headwinds… Class eight orders are now at their lowest level since 2010…” — CEO MJ McNulty .

Q&A Highlights

  • Bitcoin‑backed loans: Expected net returns >10%, hedged exposure; cold‑storage, 2‑of‑3 keys custody; UCC lien logic embedded with clarity of senior claim; management views risk as “very minimal” relative to ABL .
  • Deflecto demand outlook: Tariff uncertainty driving purchasing delays in consumer and transportation safety; management pursuing pricing actions, cost rationalization, and reshoring; expects normalization as uncertainty clears .
  • Cherokee development: Actively evaluating third‑party capital partnerships to finance targeted drilling; high‑graded well program; progressing beyond planning stage .
  • Energy downside protection: With ~70% hedged, management views cash‑flow negative scenarios as “highly improbable” even in recession; some unhedged exposure remains .
  • Private markets/M&A: Bid‑ask spread narrowing; more opportunities in B/C‑quartile assets where Acacia can drive operational improvements; disciplined on valuations .

Estimates Context

  • Q2 2025: Revenue $51.24M vs consensus $55.0M (miss); EPS GAAP -$0.03 and Adjusted -$0.06 vs consensus -$0.05 (miss). Coverage is thin (1 estimate each), reducing reliability of consensus signals . Values marked with * retrieved from S&P Global.
  • The miss was driven by the episodic IP business reverting to minimal revenue in Q2 after the large Q1 settlement, while Manufacturing and Energy helped offset but did not bridge the gap .
  • Prior quarter context: Q1 2025 revenue ($124.42M) and EPS ($0.25 GAAP; $0.34 adjusted) were far above consensus due to the IP settlement; estimates likely need recalibration to reflect IP cyclicality . Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Cash‑rich, hedged platform: $338.2M in cash/equity securities and ~$104.4M consolidated non‑recourse debt, with >70% of operated production hedged through 2027 supports defensive positioning and opportunistic M&A .
  • Earnings variability persists due to IP: After a massive Q1, IP revenue normalized to $0.33M in Q2; model expectations should reflect episodic outcomes and focus on Operated Segment cash generation .
  • Manufacturing and Industrial provide stability: Deflecto and Printronix added $35.6M of Q2 revenue; management is executing operational improvements to blunt tariff and macro impacts .
  • Free cash flow strength: Q2 consolidated FCF of $47.9M buoyed liquidity and optionality; expect continued focus on cash conversion across segments .
  • New yield initiative: Bitcoin‑backed loan strategy introduces a potentially attractive, risk‑managed credit sleeve (>10% net returns target), a near‑term narrative driver for the stock .
  • Deleveraging continues: Benchmark paid down ~$24M over the last 12 months, reducing consolidated debt and enhancing resilience .
  • Watch catalysts: Tariff developments (transportation/consumer), Cherokee monetization path, additional accretive tuck‑ins in Mid‑Con energy and targeted manufacturing verticals; limited sell‑side coverage may amplify surprise risk .

Values marked with * retrieved from S&P Global.