Acacia Research's IP Licensing Business Powers Revenue Rebound
Acacia Research swung to breakeven net income in the second quarter as its Intellectual Property Operations segment generated $60.9 million in revenue, up from just $329,000 a year earlier.
Acacia Research (ACTG) reported total revenue of $114.6 million for the second quarter, up 124% from $51.2 million a year earlier and up 111% sequentially from $54.2 million in the first quarter.
The swing followed an unusually weak first quarter, when revenue had fallen 56% from $124.4 million in the prior-year period. Both moves traced to the same source: Intellectual Property Operations, which generated $60.9 million in the second quarter after collapsing to just $722,000 in the first, versus $329,000 in the second quarter of 2024. The segment's licensing cadence, rather than any change in the company's other operating businesses, has driven the swings in Acacia's consolidated results over the past two quarters.
The rebound carried through to the bottom line. Acacia posted GAAP net income of $47,000, or breakeven on a diluted per-share basis, reversing a first-quarter net loss of $15.7 million, or $(0.16) a share. Adjusted net income turned positive at $12.8 million, or $0.13 a share, from an adjusted net loss of $6.6 million, or $(0.07) a share, in the first quarter. Total company adjusted EBITDA rose to $17.3 million from $1.6 million, in line with the $17.4 million reported in the fourth quarter of 2024, while Operated Segment Adjusted EBITDA climbed to $22.8 million from $6.8 million, roughly matching the fourth quarter's $22.4 million.
Away from the IP segment, results were more mixed. Benchmark Energy, the company's energy operations unit, posted revenue of $20.5 million, its strongest quarter under Acacia ownership and up from a then-record $18.7 million in the first quarter. Manufacturing Operations, which houses Deflecto, continued to soften, with revenue of $27.1 million versus $29.0 million a year earlier and $27.7 million in the first quarter, part of a gradual downward trend over the past several quarters. Industrial Operations, which includes Printronix, also declined to $6.0 million from $6.6 million a year earlier, consistent with a persistent secular decline in demand for that business.
The quarter also brought two new disclosures on the balance sheet. Acacia recorded a $19.9 million non-cash impairment of its equity method investment in MalinJ1, its first such charge, which took equity method investments on the balance sheet to zero from $30.9 million at the end of 2024. The company also booked $934,000 in restructuring expense, following $1.4 million over the first six months, with no comparable charge in the prior-year quarter; the charge appears to follow a facility consolidation at Deflecto recorded in the first quarter.
The surge in IP licensing revenue also reshaped working capital. Accounts receivable rose to $86.7 million at June 30 from $26.2 million at year-end 2024, and royalties and contingent legal fees payable jumped to $52.0 million from $6.8 million over the same period, both consistent with the large licensing revenue recognized in the quarter. Free cash flow came in at a consolidated negative $0.8 million, down sharply from positive $47.9 million a year earlier, when IP Operations generated an outsized $44.0 million operating cash inflow that did not repeat this quarter.
Total cash, equity securities and loans receivable stood at $334.6 million, or $3.43 a share, at quarter-end, down from $339.6 million, or $3.52 a share, at the end of 2024 but up from $329.9 million, or $3.41 a share, at the end of the first quarter.