Acacia Research (ACTG) Q2 2026 Earnings Call Transcript
Acacia Research (ACTG) Q2 2026 Earnings Call Transcript
Motley Fool Transcribing, The Motley FoolThu, August 13, 2026 at 1:05 PM UTC
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Wednesday, Aug. 5, 2026 at 8:00 a.m. ET
CALL PARTICIPANTS -
Chief Executive Officer - Martin McNulty
Chief Financial Officer - Michael Zambito
Gagnier Communications - Elizabeth Chaconas
TAKEAWAYS -
Total Revenue -- $114.6 million, representing an increase from $51.2 million in the prior year period, primarily driven by a significant licensing settlement in the Intellectual Property segment.
Adjusted Diluted EPS -- $0.13, reflecting the impact of higher licensing revenue and operational improvements across the business units.
GAAP Net Income -- $47,000, which includes a substantial noncash impairment charge related to the company's Life Sciences portfolio.
Cash and Liquidity -- $334.6 million, consisting of cash, equivalents, equity securities, and loans receivable, representing approximately $3.43 per share.
Parent Company Debt -- Zero, as the company maintains no debt at the parent level, providing significant financial flexibility for future acquisitions.
Intellectual Property Revenue -- $60.9 million, driven largely by a licensing settlement with TP-Link within the Wi-Fi 6 portfolio.
Benchmark Energy Revenue -- $20.5 million, marking the strongest revenue quarter for the business since its acquisition in April 2024.
Deflecto Revenue -- $27.1 million, as the segment continues manufacturing optimization and restructuring initiatives to position for future growth.
Printronix Revenue -- $6 million, down from $6.6 million, reflecting the mature nature of the traditional line matrix printer market.
Operated Segment Adjusted EBITDA -- $22.8 million, showing the underlying earnings power of the operational businesses and the IP platform.
Total Company Adjusted EBITDA -- $17.3 million, which includes a $5.5 million offset from parent-level expenses.
Benchmark Adjusted EBITDA -- $9.8 million, supported by production from the recently developed Cherokee unit in the Panhandle region.
Deflecto Adjusted EBITDA -- $1.1 million, reflecting structural operational improvements despite softer conditions in certain end markets.
Intellectual Property Adjusted EBITDA -- $10.9 million, though management noted this figure includes $3.7 million in nonrecurring legal expenses related to a legacy litigation matter.
Impairment Charge -- $30.9 million, recorded to fully write down the company's interest in MalinJ1 and Viamet Pharmaceuticals due to liquidity issues at Mycovia Pharmaceuticals.
Benchmark Free Cash Flow -- $6.5 million, reflecting strong operational performance and efficient capital deployment in drilling activities.
Printronix Free Cash Flow -- $900,000, demonstrating the segment's ability to generate cash through disciplined cost management and consumable sales.
Consolidated Debt -- $90.4 million, comprising $59.5 million of nonrecourse debt at Benchmark and $30.9 million of nonrecourse debt at Deflecto.
Wi-Fi 7 Investment -- $1.8 million, deployed during the quarter to purchase additional interests in the Wi-Fi 7 patent portfolio.
Accounts Receivable -- $86.7 million, an increase from $26.2 million at year end, primarily due to the timing of the TP-Link licensing settlement which was received in early Q3.
Book Value per Share -- $5.71, compared to $5.87 at the end of the previous quarter, impacted by parent expenses and the Life Sciences portfolio write-down.
Capital Expenditures -- $4.7 million, with $4 million allocated to Benchmark for well development and $758,000 for manufacturing equipment at Deflecto.
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RISKS -
McNulty stated, "Mycovia has encountered liquidity issues as the timeline for the FDA readout has been extended, which led us to fully impair the carrying value of our investment in MalinJ1," acknowledging the high risk inherent in biotechnology investments.
McNulty noted, "Although VIVJOA is FDA approved, its current label includes a contraindication that significantly limits the drug's addressable patient population," highlighting the commercial challenges facing the Life Sciences portfolio.
McNulty indicated regarding Printronix, "the traditional line matrix printer market remains mature," suggesting limited growth potential in the segment's core hardware business.
Acacia Research(NASDAQ:ACTG) management reported a diversified performance where a significant Intellectual Property settlement drove record total revenue. Energy operations through Benchmark saw their highest revenue under current ownership, while the company executed manufacturing optimization at Deflecto and cost-cutting at Printronix. The company realized a major noncash write-down in its noncore Life Sciences holdings due to regulatory and liquidity constraints at an investee firm. Despite this, the balance sheet remains characterized by high liquidity and a lack of parent-level debt, which management plans to leverage for a growing pipeline of acquisition opportunities in the private and public markets.
CEO McNulty reported that the company is utilizing artificial intelligence to analyze larger data sets to "identify potential Intellectual Property acquisition opportunities more efficiently."
Management noted that the Intellectual Property segment has significantly rationalized its cost structure, aligning expenses with the episodic timing of licensing settlements.
McNulty described a disciplined drilling strategy at Benchmark, focusing on unitization to "drill one well per unit" to create immediate production while preserving future value through offsetting undeveloped units.
CFO Zambito clarified that Intellectual Property revenue does not translate directly to EBITDA because a portion of settlements is shared with "inventors, litigation partners, and outside contingency fee counsel."
Management indicated that public market activity serves as a "toehold" strategy, where the company builds positions in undervalued businesses that may lead to eventual full acquisitions.
McNulty attributed the lag in Deflecto's OEM segment to excess inventory at trucking firms, but noted that high sales volumes at those firms are an "attractive leading indicator" for future orders.
The company disclosed that the $60.9 million licensing settlement with TP-Link involved a higher-than-typical contingency fee because the case proceeded almost entirely through the court system.
INDUSTRY GLOSSARY -
Contingency Fee: A payment structure used in litigation where legal counsel is paid a percentage of the total recovery rather than an hourly rate.
Line Matrix Printer: A specialized industrial printing technology used for high-volume, mission-critical applications like labeling and inventory management.
PDP (Proved Developed Producing): Oil and gas reserves that can be expected to be recovered from existing wells with existing equipment and operating methods.
PUD (Proved Undeveloped): Oil and gas reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for completion.
Wi-Fi 6: The sixth generation of wireless network technology, offering increased speed and capacity over previous standards.
Wi-Fi 7: The upcoming seventh generation of Wi-Fi technology, designed to further improve data throughput and reduce latency.
Full Conference Call Transcript
Operator: Good morning, everyone, and welcome to Acacia Research Corporation's Second Quarter 2026 Earnings Conference Call. My name is Holly, and I will be your conference facilitator today. [Operator Instructions] Please note that today's call is being recorded and is also being webcast through the Investor Relations section of Acacia Research's website. I would now like to turn the conference over to Elizabeth Chaconas of Gagnier Communications. Elizabeth, please go ahead.
Elizabeth Chaconas: Thank you, operator. Joining today's call are MJ McNulty, Acacia's Chief Executive Officer; and Michael Zambito, Acacia's Chief Financial Officer. Before management begins its prepared remarks, I'd like to remind everyone that certain statements made during today's call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations, estimates and projections regarding future events and operating performance and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Please refer to Acacia's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and quarterly reports on Form 10-Q for a discussion of these risks.
Earlier this morning, Acacia issued a press release announcing its second quarter 2026 financial results. That release, together with our earnings presentation, is available on the Investor Relations section of our website. During today's call, management will discuss certain non-GAAP financial measures. Reconciliations are included in this morning's earnings release. With that, I'll turn the call over to Acacia's Chief Executive Officer, MJ McNulty.
Martin McNulty: Thank you, Lizzy, and good morning, everyone. Thank you for joining us today and for your continued support for what we're building here at Acacia. We're pleased with our performance during the second quarter. Our results reflected continued execution across our operating businesses, disciplined capital allocation and the benefits of our diversified business model. Our operating companies continue to perform well and our streamlined Intellectual Property platform generated meaningful licensing revenue. During the quarter, we generated total revenue of $114.6 million, operated segment adjusted EBITDA of $22.8 million and total company adjusted EBITDA of $17.3 million.
We ended the quarter with $334.6 million of cash, securities and loans receivable, while continuing to maintain no parent company debt, providing us with significant financial flexibility. Our objective has never been to maximize short-term earnings. Instead, we focus on compounding long-term intrinsic value per share through disciplined capital allocation, acquiring businesses at attractive valuations, improving their operations through active ownership and deploying capital where we believe it can generate attractive long-term returns, whether in our existing businesses or by acquiring new platforms. As we discussed during our annual meeting, we continue to evaluate a broad range of acquisition opportunities.
We remain patient and disciplined, pursuing only those opportunities where we believe our operational expertise and investment approach can create value beyond the purchase price. In our view, one of the greatest competitive advantages a capital allocator can have is the ability to wait for the right opportunity rather than feeling compelled to acquire companies under a specific time line. Across our existing portfolio, we continue to execute against our strategic and operational priorities. Benchmark generated strong cash flow while advancing its well development program. Deflecto continued its manufacturing optimization and restructuring initiatives that are shaping the platform for profitable growth. Printronix once again demonstrated the resiliency of its business model through strong cash generation and an improved product mix.
Our Intellectual Property platform also delivered meaningful licensing activity through the Wi-Fi 6 portfolio. As always, licensing activity should be viewed over longer periods given the inherently episodic nature of settlement timing. We've also significantly rationalized the platform's cost structure and streamlined the business to better align expenses with the timing and nature of licensing opportunities. Looking ahead, our acquisition pipeline remains active. We continue to see attractive opportunities across a range of industries, and we believe Acacia's strong balance sheet, disciplined underwriting process and operational capabilities position us well to capitalize on those opportunities as they arise. With that overview, let me turn to our operating businesses, beginning with Benchmark.
Benchmark delivered another record revenue quarter with operating performance and cash flow exceeding our expectations. Benchmark continues to deliver exceptional results, reinforcing our conviction in the quality of the business, the strength of its management team and its long-term value creation potential. Our recently developed drilling inventory continues to demonstrate attractive economics. During the quarter, production from our Cherokee development performed in line with expectations, while we continued evaluating additional drilling opportunities using the same disciplined underwriting framework we've applied since acquiring the business. Benchmark generated revenue of $20.5 million, adjusted EBITDA of $9.8 million and free cash flow of $6.5 million during the quarter. Looking ahead, our priority remains maximizing long-term value rather than simply maximizing near-term production.
We continue to evaluate additional drilling opportunities, potential capital partnerships and other initiatives that we believe can generate attractive risk-adjusted returns while preserving balance sheet flexibility. We also continue to actively manage our commodity hedging program. The objective is straightforward: generate strong free cash flow, reduce earnings volatility and protect downside risk. We do not speculate on commodity prices. As a result, quarterly mark-to-market movements should not be viewed as indicative of the underlying economics of the business. Turning to Deflecto. We're encouraged by the continued progress across the business. Since acquiring Deflecto, we focused on positioning the business for long-term growth through manufacturing optimization, organizational streamlining, disciplined cost management and pricing initiatives.
Revenue for the quarter was $27.1 million, while adjusted EBITDA totaled $1.1 million. Importantly, many of the operational improvements we've implemented are structural in nature. As demand improves, we believe Deflecto is well positioned to benefit from meaningful operating leverage going forward. Turning to Printronix. Printronix continues to generate consistent cash flow while creating opportunities to improve profitability through disciplined operational execution. While the traditional line matrix printer market remains mature, we continue to see attractive opportunities to create value at Printronix. We're leveraging the strength of the installed base and our global distribution network to expand our sales of higher-margin consumable products, introduce complementary products and operate the business with disciplined cost management.
This approach has enabled Printronix to remain a strong cash-generating business while we continue -- while it continues to evolve. During the quarter, Printronix generated revenue of $6 million, adjusted EBITDA of $1 million and free cash flow of $900,000. Turning to our Intellectual Property platform, which we view as a differentiated asset class rather than a traditional operating business. The second quarter produced a strong result driven primarily by a significant licensing settlement within our Wi-Fi 6 portfolio.
Licensing revenue totaled approximately $60.6 million, as we've discussed previously, licensing revenue does not translate directly into adjusted EBITDA or cash flow because a portion of successful recoveries is contractually shared with contingency fee counsel in ventures and when we have them in our deals, partners, which is the case for our Wi-Fi 6 portfolio. Given the episodic nature of licensing activity, we continue to manage the platform aggressively from a cost perspective. Over the past quarter, we've significantly reduced operating expenses, while amortization associated with certain legacy intangible assets has declined significantly relative to 2025 and will continue at the current lower run rate through next year.
We believe these actions should enhance the platform's earnings profile as future licensing opportunities are realized. Second quarter results also included approximately $3.7 million of nonrecurring expense associated with the legacy litigation matter that we believe is substantially complete and not representative of the platform's ongoing cost structure. While we do not take lightly the cost of litigation, we remain optimistic in our ability to obtain a potential recovery that could meaningfully exceed the associated cost, although, the timing and outcome remain uncertain. As a reminder, this expense has not been adjusted in our EBITDA.
Looking ahead, we believe the Wi-Fi 6 portfolio presents additional licensing opportunities, and we remain encouraged by the long-term potential of our R2 portfolio as artificial intelligence drives demand for high-performance computing and data infrastructure. We are also using AI to analyze larger data sets and identify potential Intellectual Property acquisition opportunities more efficiently. Overall, the platform provides Acacia with exposure to a specialized noncorrelated asset class that complements our operating businesses and creates an additional avenue for disciplined capital deployment and shareholder value creation. Turning to our Life Sciences portfolio. We were highly encouraged by AMO Pharma's recently announced regulatory update regarding AM02, its lead therapeutic candidate for congenital myotonic dystrophy.
During the quarter, AMO announced that it had received constructive scientific advice from the FDA, MHRA in the U.K. and Health Canada, supporting the design of its planned registrational clinical study. The agency has provided alignment on key elements of the proposed study, representing an important milestone in establishing a regulatory path toward potential approval. As the second largest shareholder of AMO Pharma, we continue to work closely with the company and its lead shareholder as we evaluate the path. While significant work remains before a registrational study can begin and its successful completion is not assured, the regulatory feedback provides greater clarity regarding the development pathway for AM02.
Our objective is to help position AM02 with the best sources of capital to advance the program through its next stage of development. Turning to our legacy investment in Viamet Pharmaceuticals held through MalinJ1. During the second quarter, we recorded a full write-down following developments impacting Mycovia Pharmaceuticals, the underlying biotechnology company. As a reminder, we acquired this interest as part of our 2020 Life Sciences portfolio acquisition. Through MalinJ1's investment in Viamet, Acacia had an indirect economic interest in potential milestone and royalty payments related to the antifungal drug, VIVJOA, which Mycovia acquired from Viamet 2018. Although VIVJOA is FDA approved, its current label includes a contraindication that significantly limits the drug's addressable patient population.
Mycovia and its sponsor have been working diligently to narrow or remove this contraindication by undertaking the necessary studies and seeking regulatory approval to expand the patient population. However, Mycovia has encountered liquidity issues as the time line for the FDA readout has been extended, which led us to fully impair the carrying value of our investment in MalinJ1. We continue to believe VIVJOA is an attractive drug supported by the compelling safety and efficacy data. Accordingly, we've been actively working with Mycovia to evaluate potential financing alternatives that would allow it to fund operations through certain upcoming FDA milestones.
One potential transaction under consideration would give Acacia a direct ownership interest in Mycovia rather than an indirect economic interest through milestone and royalty rights and provide us with significantly greater participation in any value created if Mycovia achieves its regulatory and monetization objectives. Biotechnology investments are inherently risky, and there can be no assurance that a transaction will be completed or that Mycovia will achieve its regulatory objectives. Nevertheless, Mycovia has invested considerable time and resources to position VIVJOA for the upcoming FDA review, and we believe that a favorable regulatory outcome could create significant value.
Although our life sciences investments are noncore and represent a modest portion of Acacia's overall value, we'll continue to manage them actively and with discipline, seeking to maximize value and pursue monetization opportunities when appropriate. While we're not traditional biotech investors, situations like Mycovia and our ability to potentially create an opportunity is an example of what Acacia is uniquely positioned to execute. Lastly, turning to our public securities portfolio. We continue to see compelling opportunities in the small-cap public markets. Market volatility, limited research coverage and constrained access to capital can create meaningful gaps between market prices and the underlying value of high-quality businesses. Our public market activity is closely connected to our broader acquisition strategy.
When we identify a business that could be an attractive fit for the Acacia platform, we may establish an initial toehold position while we deepen our diligence, engage with management where appropriate and evaluate the potential for a broader strategic transaction. Importantly, we remain flexible and focused on generating the best risk-adjusted return while avoiding value traps. A public market investment may lead to an acquisition or other strategic transaction. but that's not the only path to value creation. When market developments cause a position to be more -- to more fully reflect or exceed our assessment of its value, we will actively and decisively trim or exit our investment and redeploy the capital into more attractive opportunities.
During the quarter, this strategy contributed meaningfully to our results. One of our public company investments announced an agreement to be acquired, resulting in a significant increase in the value of our position. We subsequently exited the investment and realized an attractive return. Although, we do not intend to discuss individual positions unless appropriate, this outcome demonstrates our ability to identify undervalued businesses, build positions with discipline and monetize those investments when the risk reward becomes compelling. We remain highly selective and valuation-driven.
We believe our flexible mandate, long-term capital base and transaction experience allow us to pursue opportunities across the public and private markets and to choose the path that we believe will create the greatest long-term value for Acacia shareholders. With that, I'll turn the call over to Mike to review our financial results in greater detail.
Michael Zambito: Thank you, MJ. As MJ discussed, we believe the second quarter showcased continued disciplined execution across our operating businesses and the benefits of Acacia's diversified business model. Strong operating performance, combined with meaningful licensing activity within our Intellectual Property segment contributed to another robust earnings quarter. Before reviewing the financial statements in more detail, I'd like to highlight a few key financial takeaways. Total company revenue was $114.6 million, Total operating segment revenue, excluding Intellectual Property, was $53.6 million. Total company adjusted EBITDA was $17.3 million, while operated segment adjusted EBITDA totaled $22.8 million. We ended the quarter with $334.6 million of cash, equity securities and loans receivable while continuing to maintain no parent company debt.
Turning to our income statement. Total revenue for the quarter was $114.6 million compared to $51.2 million in the prior year period. Energy operations generated revenue of $20.5 million. Manufacturing operations generated revenue of $27.1 million Industrial operations generated revenue of $6 million, while our Intellectual Property business generated licensing and related revenue of $60.9 million. As we've discussed previously, licensing activity is inherently episodic and quarterly results can vary significantly depending on the timing of settlements. Accordingly, we believe the platform is best evaluated over longer periods. Turning to expenses. Consolidated G&A expense for the quarter totaled $19.6 million. Across our operating businesses, we continue to emphasize disciplined cost management and operational efficiency.
Deflecto's restructuring and manufacturing initiatives continue to improve the business' go-forward cost structure, while Printronix continues to benefit from disciplined expense management and an improved product mix. Additionally, as MJ mentioned, we have recently reduced costs at our IP business to better align expenses with licensing opportunities. Operating income for the quarter was $8.5 million and total company adjusted EBITDA was $17.3 million. We believe adjusted EBITDA remains a useful supplemental measure of operating performance because it helps investors evaluate the underlying earnings power of our businesses by excluding certain noncash and nonrecurring events. Turning to our operating segments.
Benchmark generated adjusted EBITDA of $9.8 million and free cash flow of $6.5 million for the quarter, while continuing to invest in attractive development opportunities consistent with our disciplined capital allocation framework. Deflecto generated adjusted EBITDA of $1.1 million, while focusing on continued operational improvement despite softer conditions in certain end markets. Printronix generated adjusted EBITDA of $1 million and continued to produce strong free cash flow. Within our Intellectual Property segment, adjusted EBITDA totaled $10.9 million. As MJ noted earlier, licensing activity was particularly strong during the quarter.
It's important to remember that a portion of licensing proceeds is contractually shared with inventors, litigation partners and outside contingency fee counsel under customary commercial arrangements. and therefore, reported revenue should not be viewed as directly translating into retained earnings. The IT business also incurred certain legal expenses associated with a legacy matter that is now substantially complete. We do not see these costs as an ongoing component of the cost structure of the business. Turning to earnings. GAAP net income attributable to Acacia Research Corporation was $47,000 or $0.00 per diluted share. Adjusted net income attributable to Acacia Research Corporation was $12.8 million or $0.13 per diluted share.
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A reconciliation of GAAP and non-GAAP results is included in this morning's earnings release. Turning to the balance sheet. At quarter end, cash, cash equivalents, equity securities measured at fair value and loans receivable totaled $334.6 million, an increase of approximately $4.7 million during the quarter. We continue to maintain no parent company debt. On a consolidated basis, total gross indebtedness was $90.4 million, consisting of $59.5 million of nonrecourse debt at Benchmark and $30.9 million of nonrecourse debt at Deflecto. Book value at quarter end was $557 million or $5.71 per common share compared to $567.2 million or $5.87 per share at prior quarter end.
Increases to book value were primarily driven by $15.9 million in operating income from our operating segments and $9.4 million in gains from our public equity portfolio. These increases were offset by parent expenses and the write-off of our investment in MalinJ1 discussed earlier. Overall, we believe our balance sheet remains one of Acacia's key competitive advantages. Our liquidity, conservative capital structure and strong cash generation provide meaningful flexibility to continue investing in our existing businesses while evaluating new investment opportunities. I'll now turn the call back to MJ.
Martin McNulty: Thanks, Mike. As you've heard today, Acacia delivered another quarter of strong execution across our portfolio. Our operating businesses continue to perform well. Our Intellectual Property platform generated meaningful licensing activity, and we maintain the financial flexibility that continues to differentiate Acacia. Our strategy remains straightforward and unchanged. We seek to acquire businesses at discounts to what we believe is intrinsic value, fundamentally improve them through active ownership and build them into market leaders for their niches. We believe allocating capital with this discipline will compound Acacia's intrinsic value per share over the long term.
The current market environment is creating significant dislocation in both privately owned and public businesses, and we believe there is an increased number of opportunities for disciplined buyers. Our balance sheet remains a meaningful strategic advantage. $334.6 million of cash, securities and loans receivable, no parent company debt and operating businesses that continue to generate strong free cash flow, we believe Acacia is well positioned to capitalize on attractive opportunities while maintaining financial discipline that has defined our investment approach. Operator, we'd now be happy to take questions.
Operator:[Operator Instructions] Your first question for today is from Brett Reiss with Janney Montgomery Scott.
Brett Reiss: I got a couple of questions. First on the Benchmark. The free cash flow and EBITDA, is that including a full quarter's contribution from your wholly owned operated well?
Martin McNulty: Yes. So that's a good question. It does. We opened that well right at the beginning of the second quarter. If you remember, it was drilled and completed at the end of the first quarter and started producing a few days, maybe a week into Q2.
Brett Reiss: Okay. And because things are doing well there, it's my understanding you're thinking of investing in other similar wells. How many and will the metrics on these additional wells be better, less better of this existing well?
Martin McNulty: Yes. So I think we mentioned this before, but the Benchmark team, this acreage that we got with the Revolution acquisition in the Cherokee created a pretty strategic angle for us in the Panhandle in Texas and Oklahoma. The team had spent post acquisition a good amount of time turning the blocks of land that we have into units and the unit is the pieces of land you put together, continuous pieces of land you put together that then you can drill a well on. And we have several units at this point that we are looking to continue to drill wells on. You can usually drill 2 wells per unit.
What we're trying to do is drill 1 well per unit, so we create a producing well in the form of PDPs and then we have an offsetting well in the form of a PUD that creates value. And so the team's work on creating several units to go drill is pretty well advanced. In terms of well performance, each well is independent of one another, but we're underwriting to type curves in future wells that look similar to the performance of the Cherokee well that we drilled in Q1.
Brett Reiss: All right. That sounds good. Pivoting to Deflecto. I was a little disappointed. There seem to be tailwinds with Class A trucking some of the firms that released earnings. They were good. It just still hasn't been reflected in Deflecto's numbers yet?
Martin McNulty: Yes. I mean, we look at that as an attractive leading indicator for Deflecto. If you recall, if you wind the tape back, a lot of those firms you're talking about, Brett, had built significant inventory in advance of what was a further decline in that market associated with Liberation Day. And so their numbers are very good, and we're very encouraged by those numbers. I think a lot of the sales are sales of existing, not newly manufactured OEM inventory. And so as that works through the system, we think that Deflecto will be a beneficiary of those incremental volumes.
Brett Reiss: Okay. A question on potential deal flow. Since interest rates have remained higher for longer and as time passes, the tenor of the investments in private equity and credit pass on. Has that resulted in a level of stress so that any potential deals you're looking to do with private equity and private credit might be closer to the finish line?
Martin McNulty: So we're certainly encouraged by that. Our friends in private equity have been investing as they always do through up cycles and down cycles. which is their remit -- a lot of the acquisitions that were done in the COVID era, call it, end of '20, '21, '22 are, as you point out, Brett, now starting to mature into longer hold assets inside these private equity funds. Our deal flow has never been stronger actually.
And we have been talking to folks that are in the position where they have on the -- to address your point on the private credit side, have private credit lenders that want out of those businesses and don't want to or not necessarily well situated to take the keys. So we have a handful of conversations going on there. And then in private equity, we see a lot of opportunities are not reluctant to engage in those, but we don't want to engage in situations where there are broad auction processes.
And we're one of 100 people that get a confidential information memorandum and then submit an indication of interest, meet management, spend money, time, so on and so forth. So we're really focused on the acute situations in the private equity world. And right now, we're seeing a lot of things that are not private equity owned that we think are really attractive and themes that we've liked over time and have studied and developed strong thesis on over time, where it's a bilateral discussion, and it's not a process and certainty of outcome is related to our diligence and not a potential competitive buyer that's willing to pay another $10, $50 a share for a business.
So we're actually pretty encouraged by the deal flow. We continue to see a lot of deal flow. We are sitting kind of in the center of almost if not all, of the deal flow that fits into our purview, but the quality of that deal flow, both from a company perspective, an operating model perspective, but as well as the ability to get something done as opposed to wasting time is very encouraging right now.
Brett Reiss: Right. One last one for me. The EBITDA on the Intellectual Property business was $10.9 million. Is that a rough back of the envelope what you net from the $60 million after paying the lawyers, investors and inventors -- and is the cash that came in from what you booked in the IP portfolio included in the second quarter cash number?
Martin McNulty: Yes. So on the first question, the EBITDA is not the best proxy for that particular deal. And as we close licensing settlements in the IP business, in the Wi-Fi 6 portfolio, we have a partner in that, that is in -- that has earned into the splits of their share. We also have -- we do all of our litigation on a contingency fee basis to be conservative with cash and potential downside cases. The settlement that came in was TP-Link. And as everyone knows, that's been sitting out there for a long time.
The cost of the contingency fee grows as the case goes farther and farther through the court system and TP-Link went almost all the way through the court system. So it's a higher contingency rate than what we typically see. And then in terms of EBITDA being a metric for cash on that settlement, you got to remember, there were $3.7 million of legal expenses in that EBITDA that we don't anticipate spending again related to a legacy a legacy litigation matter that we think we hope we have an ability to recover in excess of that $3.7 million on and their operating expenses that go against that cash amount.
On your question around cash being booked, the cash for the settlement was received in Q3, but it's booked as AR at the end of Q2. Sorry, just to finish that out, it's not in the cash number on the balance sheet at the end of the quarter, but it has been added to our balance sheet subsequent to the end of the quarter.
Operator:[Operator Instructions] We have reached the end of the question-and-answer session and conference call. Thank you for participating. You may now disconnect.
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