Please standby. Good day, ladies and gentlemen. And welcome to your Acacia Research Second Quarter Financial Results Conference. All lines have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation. As a reminder, today’s call is being recorded. At this time, it is my pleasure to turn the floor over to your host, Jeff Stanlis with FNK IR. Sir, the floor is yours.

Thank you, Malinda. Hosting the call today are Clifford Press, Chief Executive Officer; Al Tobia, Chief Investment Officer; and Rich Rosenstein, Chief Financial Officer. Before beginning, I would 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 in 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 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 a discussion of such risks and uncertainties, please see the Risk Factors described in Acacia’s annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the SEC. I’d like to remind everyone that a press release disclosing the company’s 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. Clifford and Al will provide a business update and Rich will review the quarterly financial results. With all that said, I would now like to turn the call over to Clifford Press. Mr. Press, the call is yours.

Thank you, Jeff, and good morning, everyone. At the end of the second quarter, our capital base consisting of cash, private and public investments, and availability pursuant to our partnership with Starboard Value LP stood at $770 million. We continue to pursue acquisitions of operating businesses through a tightly coordinated research process, leveraging our team’s experience in public and private markets. We focus on mature technology Life Sciences, Healthcare and Industrials, and certain segments of Financial Services including Insurance. Our primary opportunity set remains with companies that are sub-$2 billion in equity market cap. As we have said in the past, we view this segment as the least efficient area of the public markets, which favors our primary research approach and permanent capital structure. We have now positioned Acacia in an opportune part of the market. Specifically, we operate at the interface between private and public market valuations, making us an ideal partner for a variety of sellers and investors. We are able to deploy permanent capital to navigate complex multi-factor transactions. We are a corporate acquirer and are positioned to be an attractive counterparty, such as private equity funds and large enterprises. This approach leverages our rigorous investment process with Starboard, strong balance sheet and ready access to committed capital. We have active relationships with private equity investors, who may find underperforming public companies where our involvement can be constructive, and we will continue to build this network. In summary, we remain committed to our strategy, which benefits from the inherent flexibility we have created, enabling us to pursue a range of potential transactions. I will now turn the call over to Al Tobia, our Chief Investment Officer to speak to our existing holdings. Al?

Thank you, Clifford. As we evaluate new opportunities, we continue to maximize the value and return of our existing holdings. Our goal is to monetize our Life Sciences portfolio expeditiously. During the second quarter, we exited our position in Sensign, and to date we have now recovered $212 million of our original $282 million Life Science portfolio investment. As a reminder, immediately following the acquisition of this portfolio, we recovered approximately $145 million through the sale of certain public equities from the portfolio. We have continued to monetize this portfolio, and as of June 30th, we held positions in two public companies, Arix Bioscience and Induction Healthcare Group, and these positions represented approximately $66.7 million in value. Immunocore recently completed an IPO, though our class of shares did not yet trade publicly as of June 30th. Importantly, we continue to hold meaningful positions in four additional private Life Sciences companies, including Oxford Nanopore Technologies. Oxford Nanopore disclosed earlier this year that it started the process of preparing for an IPO and that while the timing of the potential IPO is dependent on market conditions and other matters not fully within its control, Oxford Nanopore expects that the IPO would occur in the second half of 2021 on the London Stock Exchange. In addition to Oxford Nanopore, we remain enthusiastic about the prospects for our other private holdings. With respect to our IP business, investments made over the past year have resulted in a balanced portfolio, including both soft licensing and litigation. We generated more than $17 million in revenue this year, up from $2 million in the second quarter last year. This growth was driven by a few licenses and settlements, including one large settlement. Our policy is not to comment publicly on the specifics of any individual settlement, including identifying counterparties given confidentiality agreements and other considerations. Our team is actively advancing a number of opportunities to monetize our existing IP assets and to acquire additional portfolios. With that, I’d like to turn the call over to Rich Rosenstein, our CFO to discuss the results. Rich?

Thank you, Al. Our book value at June 30, 2021, was $147.1 million or $3.02 per basic share, compared to $128.1 million or $2.64 per basic share at March 31st, and $292.5 million or $5.94 per basic share at December 31, 2020. Our book value reflects the impact of the increase in the company’s share price over the last year on our warrant and embedded derivatives liabilities, which stood at $290.2 million at June 30th. As these liabilities would be extinguished upon exercise or expiration of these warrants and prefers, we consider their impact should all derivatives be converted. Assuming full exercise of all issued derivatives, Acacia's pro forma book value would rise to $942.8 million or $5.70 per share, up from $882.5 million or $5.39 per share on the same basis as of December 31, 2020. For the quarter highlights of our financial performance include the following: Revenues for the second quarter of 2021 were $17.4 million, up from $2.1 million a year ago. Operating income was $1.6 million in the quarter, reversing a loss of $6.7 million a year ago. Realized and unrealized gains total $25.8 million in the quarter. Cash and equity securities at fair value totaled $320.6 million at June 30, 2021, compared to $274.6 million at December 31st. Debt was $145.5 million in senior secured notes issued to Starboard Value. More detail on these results have been made available in the press release issued this morning and in our quarterly report on Form 10-Q, which we filed with the SEC this morning. Let me now turn the call back to Clifford for closing comments. Clifford?

Thanks, Rich. In conclusion, Acacia continues to execute on its investment strategy. As always, our focus continues to be on improvement in our book value and executing our acquisition strategy, which we are focused on doing in collaboration with Starboard. As stewards of shareholder capital, we view valuation as one of the important factors, and we will not rush to make an acquisition for expedience. We are now happy to answer questions.

Thank you. And first we go to the line of Anthony Stoss with Craig-Hallum. Please go ahead.

Hi, gentlemen. A couple of quick questions for you. Most recently, you sold a patent litigation with a network equipment supplier. Can you confirm that your June revenues were impacted by the settlement and could we expect some money going forward? Then I have a couple of other questions after that?

Rich, why don’t you take that one?

Yeah. Yeah. I can. So, Tony, as we mentioned, our revenues in the quarter were just over $17 million and did include a number of license agreements and settlements, including one large settlement. And so that will show on our balance sheet as accounts receivable that we would have collected in the beginning of the third quarter.

Do you expect that to continue, Rich, or is it a one-and-done settlement?

As Al had mentioned, we can’t comment on the specifics of individual settlements, but many of our licensing agreements and settlements often involve upfront payments. Some do have recurring revenue characteristics to them, but by and large, our transactions are typically upfront payments.

Okay.

Tony, it’s Clifford. I’ll just add on that, that we’ve got some new portfolios that are coming to realization. We regard that settlement as a great start for that portfolio, and we expect substantial follow-on from that portfolio.

Meaning with other companies, Clifford, or with the same existing…

With other licenses?

Okay. And then shifting gears, your Viamet JV, your partner is valuing their ownership in Viamet at a much higher valuation than you guys are. Can you discuss why and maybe the differences and what they’re currently valued at versus what you are and why you aren’t valuing it more conservatively?

Yeah. There is two...

Yeah. I can…

Well, Rich will describe the GAAP aspect of it first, and I’ll talk about the underlying investment.

Yeah. Thank you, Clifford. So, Tony, you’re right, as we indicated at our press release, we value several of our private company positions, including Viamet Pharmaceuticals, on the basis of cost. We have adopted an approach to valuing our private securities using what’s called the measurement alternative under ASC 321, which involves valuing the privates at initial cost. We then adjust for any impairment that might be - that might have taken place. We will also adjust for any observed transactions, either primary or secondary transactions in the underlying shares, whether they are the same shares that we hold, different class of shares, or different number of shares that we own, we’ll take all of that into consideration. There have been no observed transactions environment per se, and so we continue to carry that at cost. You can see in our release that three of our private positions, Viamet Pharmaceuticals, AMO Pharma, and NovaBiotics, were carried on a GAAP basis at a combined value of $25.4 million. So we have not adopted a fair value approach to each of our private holdings.

Okay. And then, shifting gears…

And I will say - just to finish on your question about the difference in evaluation, while we do not disagree with the Melan valuation, that product is a pretty significant advance for women's health, that drug, and we do think that Melan has a viable basis for recording their valuation.

Okay. And Clifford, I have a bigger picture one, and I know you and I applaud the fact that you don’t want to rush into just any acquisition, but the partnership with Starboard going on almost a year and a half, with no acquisitions to show yet. I know you guys have been working hard. Any color could be provided if you’ve been outbid or you’re very active now or you think you’re getting closer now would be helpful, because I continue to get lots of calls from shareholders wondering, after a year and a half, why we still don’t have anything to show yet?

Sure. It’s a legitimate question, and the way we really like to answer it is with some transactions, which we’re getting close to. In terms of where we’ve been so far, Starboard was extremely instrumental in doing the Woodford portfolio acquisition, and we’ve recently spent substantial time in due diligence on a public company of significant size and decided at the end, it still did not meet our criteria. However, we have a very robust pipeline of late-stage prospects at the moment, and I’d be surprised, as I’ve said before, if we don’t have some significant transactions completed by the end of the day.

Okay. Thanks for that. Thanks, guys.

Thank you.

And next we go to the line of Brett Reiss with Janney. Please go ahead.

Good morning, gentlemen.

Hello, Brett.

First question is it still the company’s aspiration to generate $3 to $4 of revenue on the $42.4 million patent net of accumulated amortization?

Not sure where we got those numbers from, Brett. We don’t generally refer to that type of investment in terms of revenue. We refer to it in terms of where we expect to build book value over time, and we will continue to emphasize that.

Okay.

Brett, I think, maybe when you’re referring to that, I think that may be if we decide to partner with someone, and there’s a back end, when you look at some of these transactions, there’s a larger kind of revenue component and then there’s a profit share. Maybe that’s where the $3 to $4 came from. But to Clifford’s point, each one of these deals has its own criteria. So we’re not that prescriptive on $3 to $4 per book value. We look at things in terms of their ability to generate a targeted return that we believe is acceptable.

Okay. There are all sorts of estimates all over the map on what the IPO value of Oxford Nanopore might be? What do you think the IPO value of Oxford Nanopore is going to be?

Brett, I don’t think it’ll surprise you if I tell you that it’s an active IPO. We’re a top five shareholder and it just would not be appropriate for us to make any comment whatsoever in that regard.

Okay. Fair enough. One last one and it’s really just asking the question, again, from the prior color, in terms of on a scale of 1 to 10, 10 being metaphysical certainty and one being it’s just not going to happen. What is the probability of a deal being consummated on an operating company before calendar year 2021 is up?

Brett, you have been around for a long time and you know deals? So, I think it’s - nobody would feel comfortable predicting with certainty any transaction until it’s happened. But what we can tell you with certainty is that we’re working very hard. We have a tremendous research collaboration with Starboard and there are a number of transactions that we’re looking at very closely.

Thank you for taking my questions.

Next we go to the line of Kevin Sami with Sami Capital. Please go ahead.

Good morning. Thanks for taking my question. I just had one on your ownership stake in Oxford Nanopore. Your stake has been 6% since you last disclosed it at year end 2020, and yet they’ve raised capital; has your stake been diluted by that raise?

No. No.

No.

We’ve not been diluted.

Okay. So you’ve participated in the raise?

Yes.

Okay. Can you add some color to what hasn’t been disclosed to my knowledge? What would be…

I think considering the company's position during its IPO, the transaction was structured in a way that allowed existing shareholders to retain their shares, and we did.

Understood. Thank you.

This concludes our question-and-answer session. We turn to Clifford Press for closing remarks.

Thank you, everyone, for your participation on today’s call. We very much look forward to our next earnings call, and hopefully, we’ll have further news to report at that time.

Thank you. This does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.