SEGMENT REPORTING

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

SEGMENT REPORTING

SEGMENT REPORTINGAs of September 30, 2022, the Company operates and reports its results in two reportable segments: Intellectual Property Operations and Industrial Operations. Historically, the Company has managed and reported under a single reporting segment. In October 2021, the Company acquired Printronix, which comprises all of the operations of the Company’s Industrial Operations reportable segment and led to the identification of the additional reporting segment. The Company reports segment information based on the management approach and organizes its businesses based on products and services. The management approach designates the internal reporting used by the chief operating decision maker for

decision making and performance assessment as the basis for determining the Company’s reportable segments. The performance measure of the Company’s reportable segments is primarily income or (loss) from operations. Income or (loss) from operations for each segment includes all revenues, cost of revenues, gross profit and other operating expenses directly attributable to the segment. Other than the Company's equity securities investments, specific asset information is not included in managements review at this time.

The Company’s Intellectual Property Operations segment invests in IP and related absolute return assets, and engages in the licensing and enforcement of patented technologies. Through our Patent Licensing, Enforcement and Technologies Business we are a principal in the licensing and enforcement of patent portfolios, with our operating subsidiaries obtaining the rights in the patent portfolio or purchasing the patent portfolio outright. We assume all responsibility for advancing operational expenses while pursuing a patent licensing and enforcement program, and when applicable, share net licensing revenue with our patent partners as that program matures, on a prearranged and negotiated basis. We may also provide upfront capital to patent owners as an advance against future licensing revenue. Currently, on a consolidated basis, our operating subsidiaries own or control the rights to multiple patent portfolios, which include U.S. patents and certain foreign counterparts, covering technologies used in a variety of industries. We generate revenues and related cash flows from the granting of IP rights for the use of patented technologies that our operating subsidiaries control or own.

The Company’s Industrial Operations segment generates operating income by designing and manufacturing printers and consumable products for various industrial printing applications. Printers consist of hardware and embedded software and may be sold with maintenance service agreements. Consumable products include inked ribbons which are used in Printronix’s printers. Printronix’s products are primarily sold through channel partners, such as dealers and distributors, to end-users. The Industrial Operations reporting segment did not exist prior to the acquisition of Printronix in October 2021. Therefore, for the three and nine months ended September 30, 2021, the consolidated results represented the results of the Company’s single reporting segment.

The Company's segment information is as follows:

	Three Months Ended September 30,
	2022
	Intellectual Property Operations		Industrial Operations		Total
	(In thousands)
Revenues:
License fees	$	6,320	$	—	$	6,320
Printers and parts	—		3,799		3,799
Consumable products	—		4,710		4,710
Services	—		1,049		1,049
Total revenues	6,320		9,558		15,878
Cost of revenues:
Inventor royalties	732		—		732
Contingent legal fees	1,010		—		1,010
Litigation and licensing expenses	939		—		939
Amortization of patents	2,601		—		2,601
Cost of sales	—		4,648		4,648
Total cost of revenues	5,282		4,648		9,930
Segment gross profit	1,038		4,910		5,948
Other operating expenses:
Engineering and development expenses	—		156		156
Sales and marketing expenses	—		2,119		2,119
Amortization of intangible assets	—		433		433
General and administrative expenses	1,527		1,756		3,283
Total other operating expenses	1,527		4,464		5,991
Segment operating (loss) income	$	(489)	$	446	(43)
Parent general and administrative expenses					11,322
Operating loss					(11,365)
Total other income					40,440
Income before income taxes					$	29,075

For comparability purposes, Acacia's three months ended September 30, 2021 general and administrative expenses, as reported in the consolidated statement of operations, were $10.3 million and included parent general and administrative expenses of $8.7 million, which derives a comparative Intellectual Property Operations general and administrative expense amount of approximately $1.6 million.

	Nine Months Ended September 30,
	2022
	Intellectual Property Operations		Industrial Operations		Total
	(In thousands)
Revenues:
License fees	$	16,997	$	—	$	16,997
Printers and parts	—		11,715		11,715
Consumable products	—		14,308		14,308
Services	—		3,082		3,082
Total revenues	16,997		29,105		46,102
Cost of revenues:
Inventor royalties	1,092		—		1,092
Contingent legal fees	2,314		—		2,314
Litigation and licensing expenses	3,272		—		3,272
Amortization of patents	7,802		—		7,802
Cost of sales	—		13,432		13,432
Total cost of revenues	14,480		13,432		27,912
Segment gross profit	2,517		15,673		18,190
Other operating expenses:
Engineering and development expenses	—		491		491
Sales and marketing expenses	—		6,429		6,429
Amortization of intangible assets	—		1,299		1,299
General and administrative expenses	5,050		6,431		11,481
Total other operating expenses	5,050		14,650		19,700
Segment operating (loss) income	$	(2,533)	$	1,023	(1,510)
Parent general and administrative expenses					24,033
Operating loss					(25,543)
Total other expense					(81,216)
Loss before income taxes					$	(106,759)

For comparability purposes, Acacia's nine months ended September 30, 2021 general and administrative expenses, as reported in the consolidated statement of operations, were $23.0 million and included parent general and administrative expenses of $19.0 million, which derives a comparative Intellectual Property Operations general and administrative expense amount of approximately $4.1 million.

	September 30, 2022		December 31, 2021
	(In thousands)
Equity securities investments:
Equity securities at fair value	$	81,384	$	361,778
Equity securities without readily determinable fair value	5,816		5,816
Investment securities - equity method investments	72,106		30,934
Total parent equity securities investments	159,306		398,528
Other parent assets	103,602		172,726
Segment total assets:
Intellectual property operations	170,421		175,286
Industrial operations	51,940		52,316
Total assets	$	485,269	$	798,856

The Company's revenues and long-lived tangible assets by geographic area are presented below. Intellectual Property Operations revenues are attributed to licensees domiciled in foreign jurisdictions. Printronix's net sales to external customers are attributed to geographic areas based upon the final destination of products shipped. The Company, primarily through its Printronix subsidiary, has identified three global regions for marketing its products and services: Americas, Europe, Middle East and Africa, and Asia-Pacific. Assets are summarized based on the location of held assets.

	Three Months Ended September 30,
	2022
	Intellectual Property Operations		Industrial Operations		Total
	(In thousands)
Revenues by geographic area:
United States	$	6,311	$	3,996	$	10,307
Canada and Latin America	1		217		218
Total Americas	6,312		4,213		10,525
Europe, Middle East and Africa	—		2,282		2,282
China	—		1,403		1,403
India	—		582		582
Asia-Pacific, excluding China and India	8		1,078		1,086
Total Asia-Pacific	8		3,063		3,071
Total revenues	$	6,320	$	9,558	$	15,878

	Nine Months Ended September 30,
	2022
	Intellectual Property Operations		Industrial Operations		Total
	(In thousands)
Revenues by geographic area:
United States	$	16,372	$	11,877	$	28,249
Canada and Latin America	11		769		780
Total Americas	16,383		12,646		29,029
Europe, Middle East and Africa	589		7,088		7,677
China	—		3,627		3,627
India	—		2,563		2,563
Asia-Pacific, excluding China and India	25		3,181		3,206
Total Asia-Pacific	25		9,371		9,396
Total revenues	$	16,997	$	29,105	$	46,102

	September 30, 2022
	Intellectual Property Operations		Industrial Operations		Total
	(In thousands)
Long-lived tangible assets by geographic area:
United States	$	333	$	346	$	679
Malaysia	—		2,780		2,780
Other foreign countries	—		241		241
Total	$	333	$	3,367	$	3,700

	December 31, 2021
	Intellectual Property Operations		Industrial Operations		Total
	(In thousands)
Long-lived tangible assets by geographic area:
United States	$	204	$	473	$	677
Malaysia	—		3,203		3,203
Other foreign countries	—		303		303
Total	$	204	$	3,979	$	4,183