ACACIA RESEARCH CORP

Operating Expenses

The operating expenses table above includes the Company’s general and administrative expenses by operation, Printronix’s sales and marketing expenses, and Benchmark’s general and administrative costs. The table also includes Deflecto’s sales and marketing expenses and general and administrative costs for the three months ended March 31, 2025, with no comparable year period information as the Deflecto Transaction closed in October 2024. Refer to Note 2 to the condensed consolidated financial statements elsewhere herein for additional information regarding Printronix’s and Deflecto’s operating expenses.

General and Administrative Expenses

A summary of the main drivers of the increases (decreases) in general and administrative expenses is as follows:

General and administrative expenses include employee compensation and related personnel costs, including variable performance based compensation and compensation expense for share-based awards, office and facilities costs, legal and accounting professional fees, public relations, stock administration, business development, fixed asset depreciation, amortization of Industrial Operations and Manufacturing Operations’ intangible assets, and other corporate costs. The periods presented above include an increase in Energy Operations’ general administrative expenses for the quarter following our acquisition of Revolution in April 2024. The table above also includes our Manufacturing Operations general and administrative expenses for the three months ended March 31, 2025, with no comparable period as the transaction closed in October 2024.

The increase in variable performance-based compensation costs was primarily due to fluctuations in performance-based compensation. The decrease in other general and administrative costs, which relates to our parent company and our Intellectual Property Operations, were primarily due to a decrease in corporate legal fees. The increase in compensation expense for share-based awards was primarily due to compensation expense incurred related to PSUs granted in 2023 based on a probability assessment regarding their vesting performed as of March 31, 2025. Refer to Note 17 to the condensed consolidated financial statements elsewhere herein for additional information regarding compensation expense. The decrease in general and administrative costs of Industrial Operations is due to Printronix’s initiative to reduce costs and operate more efficiently. In addition, our Energy Operations related general and administrative costs contributed an increase of $1.2 million and Manufacturing Operations related general and administrative costs and amortization of intangible assets contributed $5.2 million and $472,000, respectively, in each case driven by the acquisitions of Revolution and Deflecto. Refer to additional general and administrative change explanations above.

Other Income/Expense

Equity Securities Investments

Our equity securities investments, including the Life Sciences Portfolio and trading securities portfolio, are recorded at fair value at each balance sheet date. During the first quarter of 2024, Acacia fully exited its position in Arix. Refer to periodic change explanations above. Refer to Notes 2 and 4 to the consolidated financial statements elsewhere herein for additional information regarding our investment in the Life Sciences Portfolio and other equity securities.

Our results included an unrealized loss from the change in fair value of our equity securities, and included realized gain from the sale of our equity securities. These changes were derived from our Life Sciences Portfolio and trading securities portfolio. The 2024 period unrealized loss and realized gain primarily relates to the sale of Arix shares.

Non-recurring legacy legal expense

During the three months ended March 31, 2024, we recorded $6.2 million in connection with the AIP Matter in other income (expense) in the condensed consolidated statements of operations.

Income Taxes

Our income tax expense for the three months ended March 31, 2025 is primarily attributable to the statutory rate applied to our earnings. Our income tax benefit for the three months ended March 31, 2024 primarily attributable to recognizing an income tax benefit on losses incurred to date offset by foreign withholding taxes.

Our 2025 effective tax rate was slightly lower than the U.S. federal statutory rate primarily due to non-controlling partnership earning allocated to minority shareholders. The effective tax rate may be subject to fluctuations during the year as new information is obtained which may affect the assumptions used to estimate the effective tax rate, including factors such as expected utilization of net operating loss carryforwards, changes in or the interpretation of tax laws in jurisdictions where the Company conducts business, the Company’s expansion into new states or foreign countries, and the amount of valuation allowances against deferred tax assets.

The Company has recorded a partial valuation allowance against our net deferred tax assets as of March 31, 2025 and December 31, 2024 on foreign tax credits and certain state net operating losses. Refer to Note 2 to the condensed consolidated financial statements elsewhere herein for additional income tax information.

Liquidity and Capital Resources

General

Our foreseeable material cash requirements as of March 31, 2025, are recognized as liabilities or generally are otherwise described in Note 15, “Commitments and Contingencies,” to the condensed consolidated financial statements included elsewhere herein. In particular, our facilities lease obligations, guarantees and certain contingent obligations are further described in Note 15 to the accompanying condensed consolidated financial statements. Historically, we have not entered into off-balance sheet financing arrangements. In addition, the obligations of our Energy Operations Business related to the Benchmark Revolving Credit Facility and the obligations of our Manufacturing Operations Business related to the Deflecto Term Loan are further described in Note 11 to the accompanying condensed consolidated financial statements. The obligations of our Energy Operations Business related to the asset retirement obligations are further described in Note 10 to the accompanying condensed consolidated financial statements.

Additional cash requirements are generally derived from our operating and investing activities including expenditures for working capital (discussed below), human capital, business development, investments in equity securities and intellectual property, and business combinations.

Certain of our operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights. In connection with any of our operating subsidiaries’ patent enforcement actions, it is possible that a defendant may request and/or a court may rule that an operating subsidiary has violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions. In such event, a court may issue monetary sanctions against us or our operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material.

At March 31, 2025, our primary sources of liquidity were cash and cash equivalents on hand and cash generated from our operating activities.

Furthermore, we intend to grow our company by acquiring additional operating businesses and intellectual property assets. We expect to finance such acquisitions through cash on hand or by engaging in equity or debt financing.

Our management believes that our cash and cash equivalent balances and cash flows from operations will be sufficient to meet our cash requirements through at least twelve months from the date of this Quarterly Report and for the foreseeable future. We may, however, encounter unforeseen difficulties that may deplete our capital resources more rapidly than anticipated, including those set forth under Item 1A, “Risk Factors” in our 2024 Annual Report. Any efforts to seek additional funding could be made through issuances of equity or debt, or other external financing. However, additional funding may not be available to us on favorable terms, or at all. The capital and credit markets have experienced extreme volatility and disruption in recent years, and the volatility and impact of the disruption may continue. At times during this period, the volatility and disruption has reached unprecedented levels. In several cases, the markets have exerted downward pressure on stock prices and credit capacity for certain issuers, and the commercial paper markets may not be a reliable source of short-term financing for us. If we fail to obtain additional financing when needed, we may not be able to execute our business plans and our business, conducted by our operating subsidiaries, may suffer.

Cash, Cash Equivalents and Investments

Our consolidated cash, cash equivalents and equity securities totaled $290.0 million at March 31, 2025, compared to $297.0 million at December 31, 2024.

The Benchmark Revolving Credit Facility and Deflecto Revolving Credit Facility include covenants potentially limiting our borrowing capacity as determined by a leverage ratio. As of March 31, 2025, we were in compliance with all financial covenants applicable to our debt agreements. Refer to Note 11 to the accompanying condensed consolidated financial statements for additional information.

Cash Flows Summary

The net change in cash and cash equivalents for the periods presented was comprised of the following:

Cash Flows from Operating Activities

Cash flows from operating activities were comprised of the following for the periods presented:

Cash receipts from ARG’s licensees totaled $1.0 million and $77.5 million for the three months ended March 31, 2025 and 2024, respectively. Cash receipts from Printronix's customers totaled $8.1 million and $8.5 million for the three months ended March 31, 2025 and 2024, respectively. Cash receipts from Benchmark’s customers totaled $18.7 million and $1.3 million for the three months ended March 31, 2025 and 2024, respectively. Cash receipts from Deflecto’s customers totaled $27.8 million for the three months ended March 31, 2025. The fluctuations in cash receipts for the periods presented primarily reflects the corresponding fluctuations in revenues recognized during the same periods, as described above, and the related timing of payments received from licensees and customers.

Our reported cash provided by operations for the three months ended was $2.4 million, compared to $54.8 million in the comparable prior year period. The decrease in cash provided by operations was primarily due to net inflows from the total changes in assets and liabilities (refer to Working Capital discussion below), increase in accounts receivable, decrease in inventories, decrease in prepaid expense and other assets, increase in accounts payable, increase in royalties and contingent legal fees payable and by the total change in net income (described above) and related noncash adjustments.

Working Capital

Our working capital related to cash flows from operating activities at March 31, 2025 increased to $62.4 million, compared to $36.7 million at December 31, 2024, which was comprised of the changes in assets and liabilities presented above. The increase is primarily due to change in accounts receivable and royalties and contingent legal fees payable, which is related to the timing of the cash receipts related to Intellectual Property Operations Business. The increase in working capital is offset by a decrease in prepaid expenses.

Cash Flows from Investing Activities

Cash flows from investing activities were comprised of the following for the periods presented:

Cash inflows from investing activities for the three months ended March 31, 2025 was $1.0 million, as compared to cash inflows of $42.0 million in the prior year, primarily due to the net cash inflows from our trading securities portfolio equity securities transactions and sale of Arix shares. Refer to “Other Income/Expense –Equity Securities Investments” above and Note 4 to the condensed consolidated financial statements elsewhere herein for additional information related to Life Sciences Portfolio.

Cash Flows from Financing Activities

Cash flows from financing activities included the following for the periods presented:

Cash outflows from financing activities for the three months ended March 31, 2025 increased to $6.1 million, as compared to cash inflows of $1.8 million in the prior year, primarily due to paydowns on the Benchmark Revolving Credit Facility and Deflecto Term Loan. Refer to Notes 11 to the condensed consolidated financial statements elsewhere herein for additional information regarding the Benchmark Revolving Credit Facility and Deflecto Term Loan.

Critical Accounting Estimates

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing these financial statements, we make assumptions, judgments and estimates that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates and make changes accordingly.

We believe that of the significant accounting policies discussed in Note 2 included in our 2024 Annual Report, the following accounting policies require our most difficult, subjective or complex assumptions, judgments and estimates:

•revenue recognition;

•estimates of crude oil and natural gas reserves;

•valuation of long-lived assets, goodwill and other intangible assets; and

•accounting for income taxes.

Our critical accounting estimates have not changed materially from those disclosed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2024 Annual Report. For further information on the significant accounting policies related to the revenue recognition, estimates of crude oil and natural gas reserves, valuation of long-lived assets, goodwill and other intangible assets and income taxes, refer to Note 2 to the consolidated financial statements and other related significant account policies included in our 2024 Annual Report.

Recent Accounting Pronouncements

The effects of accounting standards adopted in 2024 and the potential effects of accounting standards to be adopted in the future are described in Note 2 to condensed consolidated financial statements included elsewhere herein.