Acacia Research Corp (ACTG) Q2 2025 Earnings Call Highlights: Navigating Challenges with ...
Adjusted EBITDA: $1.9 million for the company.
Free Cash Flow: $47.9 million, reflecting cash collection from a settlement in the IP business.
Diluted EPS Loss: $0.03 per share; adjusted loss of $0.06 per share.
Book Value Per Share: $5.99; excluding non-controlling interests, $5.58.
Energy Operations Revenue: $15.3 million, up from $14.2 million year-over-year.
Manufacturing Operations Revenue: $29 million for the quarter.
Industrial Operations Revenue: $6.6 million, compared to $6.3 million last year.
Intellectual Property Revenue: $0.3 million, down from $5.3 million last year.
G&A Expenses: $15.5 million, up from $10.1 million last year, with $5.1 million increase due to Deflecto.
Operating Loss: $12.4 million, compared to $4.8 million last year.
Energy Operations Adjusted EBITDA: $7 million.
Manufacturing Operations Adjusted EBITDA: $1.3 million.
Industrial Operations Adjusted EBITDA: $0.6 million.
Net Loss: $3.3 million or $0.03 per share; adjusted net loss of $5.9 million or $0.06 per share.
Cash Equivalents and Equity Securities: $338.2 million as of June 30, 2025.
Total Indebtedness: $104.4 million, with $58 million at Benchmark and $46.4 million at Deflecto.
Warning! GuruFocus has detected 5 Warning Signs with ACTG.
Release Date: August 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Acacia Research Corp (NASDAQ:ACTG) announced a partnership with Unchained Capital to offer secured lending solutions backed by Bitcoin, which could provide attractive risk-adjusted returns.
The company generated total revenue of $51.2 million in the second quarter, with significant contributions from its energy and manufacturing operations.
Acacia's hedging strategy for its energy operations is performing well, with over 70% of oil and gas production hedged through 2027, mitigating downside pricing risks.
The company has made progress in optimizing operations at its Deflecto business, improving accountability, reducing overhead costs, and streamlining product offerings.
Acacia's industrial segment, Printronix, is performing ahead of plan, with a successful transition to higher-margin consumable products and improved free cash flow.
Negative Points
Acacia reported a GAAP operating loss of $12.4 million for the second quarter, primarily due to a decline in revenue from its intellectual property business.
The company experienced demand headwinds in its Deflecto business due to global trade uncertainties and tariffs, impacting its transportation safety and consumer products segments.
The Class A truck market remains weak, with new orders at their lowest level since 2010, affecting Deflecto's transportation safety business.
Acacia's intellectual property operations saw a significant decrease in revenue compared to the previous year, highlighting the episodic nature of this business.
The macroeconomic environment, including potential recessions and declining oil and natural gas prices, poses risks to Acacia's energy operations despite hedging strategies.
Q & A Highlights
Q: Can you share the expected interest rates for the Bitcoin commercial loans and how do you assess their risk compared to typical commercial loans? A: The loans are expected to yield returns in the low teens, exceeding 10% for Acacia. These loans are collateralized by Bitcoin at a 50% loan-to-value ratio, stored in a secure cold storage vault. The risk is considered minimal due to the ability to manage the loan-to-value ratio and liquidate Bitcoin if necessary. Additionally, Acacia plans to hedge against Bitcoin exposure to mitigate risks.
Q: Regarding Deflecto, is there any indication of recovery in the Class A truck market, or do you expect the downturn to continue? A: The tariffs have significantly impacted the market, altering buying patterns. While uncertainty persists, there is optimism that purchasing cycles may return once clarity is achieved. Acacia is implementing strategies like price increases and cost optimization to navigate the situation. The aging fleet suggests potential for market recovery once uncertainties are resolved.
Q: What are Acacia's plans for the Cherokee asset over the next one to two years? A: Acacia is evaluating partnerships with third-party capital to pursue a drilling strategy in Cherokee. The company is in the middle stages of planning and aims to capitalize on the acreage acquired with the PDPs from the revolution. Specific details on the number of wells are not disclosed at this time.
Q: How does Acacia ensure the security of Bitcoin collateral in cold storage, and what measures are in place to protect against regulatory changes? A: The Bitcoin collateral is held in a cold storage unit managed by Unchained, with a multi-signature system requiring two of three key holders to access the Bitcoin. This setup provides high security. The UCC lien is embedded in the Bitcoin's coding, ensuring clear ownership. Acacia is confident in the security and regulatory compliance of this arrangement.
Q: With 70% of the benchmark resolution business hedged, is there a risk of going cash flow negative if oil and natural gas prices decline? A: While nothing is impossible, it is highly improbable for the business to go cash flow negative due to the hedges in place. There is some unhedged exposure, but the hedges have performed as expected, providing confidence in maintaining positive cash flow despite price volatility.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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