Acacia Research Corporation

Greetings. Welcome to the Acacia Research fourth quarter 2022 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Robert Fink of FNK-IR. you may begin.

Thank you, operator, and thank you, everyone, for joining us here today. Hosting the call are M.J. McNulty, Interim Chief Executive Officer, and Kirsten Hoover, Interim Chief Financial Officer. Before beginning, I'd like to remind you that the information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts, and projections about future events that are forward-looking as defined and the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives, and expectations for future operation and are based on the current estimates and projections, future results, or trends. Actual results may differ materially from those projected as a result of certain risks and uncertainties. For discussion of such risks and uncertainties, please see the risk factors section described in Acacia's annual report on Form 10-K and on the quarterly reports on Form 10-Q, both of which are filed with the SEC. I would also like to remind everyone that a press release disclosing the financial results was issued this morning before the market opened. This release may be accessed on the company's website at acaciaresearch.com under the news and events tab. With all that said, I'd now like to turn the call over to MJ. MJ, the call is yours.

Rob, thanks. We're glad to have everyone here this morning, and thanks for taking the time to join us. As we conclude Eventful 22, we're also concluding a productive Q1, and we're carrying that momentum into the remainder of 2023. Over the past few months, we've accomplished much, all with the goal of a strong platform. positioned to benefit in all market conditions through the acquisition of operating companies that fit our acquisition criteria. We've streamlined and improved our team, eliminating approximately one-third of our fixed G&A costs while enhancing our capabilities. We bolstered our already strong capital base through a rights offering, which followed a recapitalization with starboard value. As a result, we now have total assets of $562 million, of which $428.5 million are in cash and marketable securities. We formalized our acquisition criteria and process and broadened our relationships, which has substantially increased our funnel of new opportunities and led to increased evaluation activity by our deal team. Notably, we've achieved all of this while navigating change in our C-suite and the unfortunate distractions related to our former CEO. Those issues are now largely resolved. Our former CEO has dropped his suit against us in Delaware and our board of directors has filed a claim in arbitration against Mr. Press. Seeking to recover funds we believe were spent inappropriately, though not material to our financial position. Since I joined Acacia as chief operating officer and head of M&A, and even more so since assuming the interim CEO position, we've made significant progress implementing formal processes for our M&A initiative. We now have an excellent execution team, comprising proven professionals with both public and private equity expertise and experience in both completing transactions and operating businesses. Importantly, our in-house team is complimented by our board with its deep expertise and our expansive network of world-class executives. We're grateful for the enthusiasm of these exceptional individuals. We very much appreciate their contributions and we thank them all. My optimism for 23 is based on this team and the processes and momentum we have built together. I will share that our pipeline is better today, both in terms of quality and quantity of opportunities. And more than one of these opportunities have progressed through our rigorous process. As many of you know, a willing counterparty is an important element of a successful transaction, though because of our unique structure, we can influence this by building a meaningful catalyst position before engaging current ownership or boards of directors. Our intent is to move methodically, but expeditiously, usually quietly, with the goal of working collaboratively in these situations to create value. Collectively, as investors, I think we can all agree it would be disadvantageous for us to discuss any specific opportunities on this call, as it could materially impede our ability to consummate transactions. For some time, we have believed, and Starboard Value agrees, that there is a significant and growing opportunity for an acquisition-driven business such as ours, where we can allocate capital as a corporate acquirer. Acacia is uniquely positioned to address this trend. We've refined and put a point on this approach. We've also expanded our thinking. Under prior management, the primary focus was on, quote, transacting in complex situations, breaking them apart or restructuring them and selling assets to create a one-time return. You may have heard the term applied investment banking in this regard. While we may find such opportunities in the future, it is not our primary focus as it inherently minimizes the interest and focus in acquiring operating companies especially as our goal is to acquire businesses with the eye of owners our vision and that of our board is to build a portfolio of operating companies that can create compounding value over the long term first and foremost it starts with acquiring businesses at a reasonable entry price we are very disciplined in this regard second we think it is important to partner with successful executives and experts identifying experienced business operators who can serve as advisors perhaps board members of acquired businesses or possibly CEOs where necessary. Next, we look at ways we can unlock or create value. This often means enhancing or improving operations in collaboration with the company and our network of experienced executives. We may address the operating structure or acquire additional businesses to combine with our companies to create scale or differentiation. Finally, we are uniquely positioned relative to other institutional acquirers of companies, and that our incentives are aligned to and our shareholders benefit from long-term value creation. Where certain other acquirers of companies typically prefer to hold, quote, portfolio companies for relatively short time horizons, we are able to take a longer-term view of shareholder value creation. This strategy envisions building a diversified group of businesses, improving operations and removing impediments, and either growing these businesses or enabling them to generate consistent cash flow, all to create value for Acacia's shareholders. While we constantly focus on continual improvement, we believe our processes rival those of other world-class acquirers of businesses. We've scaled up and enhanced our process for sourcing potential targets, where we benefit from an excellent network of executive relationships, as well as an institutional-grade sourcing model. We've also clearly defined our screening process and criteria, establishing a clear set of metrics and benchmarks we look at when evaluating potential acquisitions. Finally, we have a sophisticated approach to valuation and due diligence through which all of these potential opportunities are evaluated. A key part of this is our valuation discipline, coupled with our ability to build equity positions and potential targets. Our discipline may impact our ability to consummate transactions, as we may identify an opportunity based on a clear valuation target only to have that stock quote run away from us as the market may begin to recognize the same opportunity we see. In this scenario, we'll not chase the deal, but we'll instead monitor the opportunity to reengage if and when appropriate. While our intent is to acquire these companies, in situations where the company's value increases past our valuation range, We have an opportunity to benefit from an appreciation and the value of our public position effectively being paid for our work in spite of potentially losing an acquisition. This discipline we feel is critical. Beyond acquisitions, we built a team with significant post acquisition capabilities. As we mentioned, we have a network of operating partners with deep expertise, enabling us to identify the merits and considerations of an acquisition quickly and efficiently. In addition, this network helps us drive operational improvements post-closing. We have a great deal of respect and confidence in the professionals within this network. As we've mentioned in the past, current market conditions have our pipeline weighted toward public targets, as valuations in the private markets have been elevated as a result of increased activity from private equity. However, we are beginning to see some interesting opportunities in the private markets. I continue to stress the point that acquisitions are only part of Acacia's proposition. Certainly, it has been and will continue to be a primary area of focus, but our life sciences portfolio, our patent monetization business, and printronics continue to create value. In our life sciences portfolio, we've continued to harvest gains from our public assets, and we maintain significant optimism in our private holdings. During the fourth quarter, we fully exited our Oxford Nanoport position. The ONT investment has been extremely successful for Acacia, and the successful monetization of this investment enabling us to redeploy the capital for other initiatives is an important milestone for us. Next, we continue to effectively manage and invest in our intellectual property portfolio. While continuing to monetize our more traditional intellectual property assets, Mark Booth and his team have grown our, quote, standards essential patent position within the Wi-Fi space. and we continue to see an increasing level of activity around our business development initiatives. We have a very talented team and we continue to believe this business provides attractive uncorrelated returns in an asset class in which our team is uniquely suited to address and has an excellent reputation as a trusted partner. Finally, Printronics was acquired in an attractive valuation. In sticking with our process, we have an excellent executive working with us to enhance this business And we will evaluate similar acquisitions of operating businesses or divisions of larger organizations where we believe we can increase the value of the business. And now I'd like to turn the call over to Kirsten to discuss our fourth quarter and full year results.