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RPX - 9.30.2013 - Form 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): October 29, 2013
 
RPX Corporation
(Exact name of registrant as specified in its charter)
 

 
 
 
 
 
Delaware
 
001-35146
 
26-2990113
(State or other Jurisdiction of Incorporation)
 
(Commission File No.)
 
(IRS Employer Identification No.)
 
One Market Plaza
 
Suite 800
 
San Francisco, CA 94105
 
(Address of principal executive offices, including zip code)
 
(866) 779-7641
 
(Registrant’s telephone number, including area code)
 
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



    


Item 2.02 Results of Operations and Financial Condition.
On October 29, 2013, RPX Corporation issued a press release announcing its financial results for the quarter ended September 30, 2013. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.


Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.
 
Description
99.1
 
Press release issued by RPX Corporation dated October 29, 2013



    



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
RPX Corporation
 
 
 
 
 
By:
/s/ MARTIN E. ROBERTS
 
 
Martin E. Roberts
 
 
General Counsel
 
 
 
Dated: October 29, 2013


    

99.1 Press release issued by RPX Corporation dated October 29, 2013


EXHIBIT 99.1

 

RPX Announces Third Quarter 2013 Financial Results
 
SAN FRANCISCO – October 29, 2013 – RPX Corporation (NASDAQ: RPXC), the leading provider of patent risk management solutions, today announced its financial results for the third quarter ended September 30, 2013.
 
Financial Highlights
 
•
Revenue for the third quarter of fiscal 2013 totaled $58.6 million, up 24% compared to $47.0 million in the prior year period
•
Subscription revenue for the third quarter of fiscal 2013 was $57.8 million, up 23% compared to $47.0 million in the prior year period
•
GAAP net income for the third quarter of fiscal 2013 was $8.4 million or $0.16 per pro forma diluted share[1], up 11% or 14%, respectively, from the prior year period
•
Non-GAAP net income for the third quarter of fiscal 2013 was $11.4 million or $0.21 per pro forma diluted share[1], up 21% or 17%, respectively, from the prior year period

“The Company executed well in the third quarter toward what we expect to be a full year of solid growth and validation of RPX’s business,” said John Amster, Chief Executive Officer of RPX Corporation. “We continued to reduce the costs associated with NPE risk for our growing client network, expanded and deepened our unique database of patent transaction information and market intelligence, and moved forward with the roll out of our insurance offering.”

Summary Results
 
Revenue for the third quarter increased to $58.6 million, compared to $47.0 million in the third quarter of 2012.
 
Net acquisition spend during the quarter totaled $17.6 million, and included nine new acquisitions of patent assets, in addition to the exercise of previously negotiated options to acquire licenses for new clients.
 
GAAP net income for the quarter was $8.4 million or $0.16 per diluted share, compared to $7.6 million or $0.14 per diluted share in the third quarter of 2012. Net income was $0.16 per pro forma diluted share[1] in the third quarter, compared to $0.14 per pro forma diluted share[1] in the third quarter of 2012.

Non-GAAP net income for the quarter, which excludes stock-based compensation and the amortization of acquired intangibles (in each case, net of tax), was $11.4 million or $0.21 per pro forma diluted share[1], compared to $9.4 million or $0.18 per pro forma diluted share[1] in the third quarter of 2012.

As of September 30, 2013, RPX had cash, cash equivalents and short-term investments of $277.6 million.
 

1


Business Outlook
 
This outlook reflects the Company’s current and preliminary view and may be subject to change.  Please see the paragraph regarding “Forward-Looking Statements” at the end of this news release.  

The Company provided the following business outlook for the fourth quarter of fiscal 2013:
Subscription revenue[2]
 
$57.8 - $58.2 million
Fee-related revenue
 
$2.4 million
Total revenue
 
$60.2 - $60.6 million
Net income (non-GAAP)
 
$9.2 - $10.0 million
Effective tax rate (non-GAAP)
 
36%
Pro forma weighted-average diluted shares outstanding
 
54.2 million

The Company provided the following business outlook for the full year 2013:
Subscription revenue[2]
 
$224.6 - $225.0 million
Fee-related revenue
 
$12.8 million
Total revenue
 
$237.4 - $237.8 million
Cost of revenue (non-GAAP)
 
$110.7 - $111.1 million
SG&A (non-GAAP)
 
$44.8 - $45.3 million
Net income (non-GAAP)
 
$52.2 - $53.0 million
Effective tax rate (non-GAAP)
 
36%
Pro forma weighted-average diluted shares outstanding
 
53.6 million
Net acquisition spend
 
$120 - $125 million

The above outlook is forward-looking.  Actual results may differ materially.  Please refer to the information under the caption “Use of Non-GAAP Financial Information” below.
 ————————
[1] Pro forma diluted shares computed to give effect to the shares of restricted stock outstanding as of the original date of issuance.
[2] Subscription revenue is comprised of revenue generated from membership subscription services and premiums earned from insurance policies.

Conference Call
 
RPX management will host a conference call and live webcast for analysts and investors at 2:00 p.m. PDT/5:00 p.m. EDT on October 29, 2013.  Parties in the United States and Canada can access the call by dialing 1-877-941-0843, using conference code 4644553.  International parties can access the call by dialing 1-480-629-9866, using conference code 4644553.
 
RPX will offer a live webcast of the conference call which can be accessed from the “Investor Relations” section of the Company’s website at http://ir.rpxcorp.com. An audio replay of the conference call will also be available approximately two hours after the call and will be available for 30 days. To hear the replay, parties in the United States and Canada should call 1-800-406-7325 and enter conference code 4644553.  International parties should call 1-303-590-3030 and enter conference code 4644553.
 

2


About RPX Corporation
 
RPX Corporation (NASDAQ: RPXC) is the leading provider of patent risk solutions, offering defensive buying, acquisition syndication, patent intelligence and advisory services.  Since its founding in 2008, RPX has introduced efficiency to the patent market by providing a rational alternative to litigation. The San Francisco-based company’s pioneering approach combines principal capital, deep patent expertise, and client contributions to generate enhanced patent buying power. By acquiring patents, RPX helps to mitigate and manage patent risk for its growing client network.

Use of Non-GAAP Financial Information
 
This news release dated October 29, 2013 contains non-GAAP financial measures.  Tables are provided in this news release that reconcile the non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures include non-GAAP cost of revenue, non-GAAP selling, general and administrative expenses, non-GAAP net income, and non-GAAP net income per share.

To supplement the Company’s condensed consolidated financial statements presented on a GAAP basis, management believes that these non-GAAP measures provide useful information about the Company’s core operating results and thus are appropriate to enhance the overall understanding of the Company’s past financial performance and its prospects for the future. Management is excluding from its non-GAAP operating results stock-based compensation expenses (inclusive of related employer payroll taxes), the amortization of acquired intangible assets and related tax effects. Management uses these non-GAAP measures to evaluate the Company’s financial results, and believes these non-GAAP measures may prove useful to investors who wish to consider the impact of certain items when comparing our financial performance with that of other companies. The adjustments to the Company’s GAAP results are made with the intent of providing both management and investors a more complete understanding of the Company’s underlying operational results, trends and performance. The presentation of additional information is not meant to be considered in isolation or as a substitute for or superior to financial results determined in accordance with GAAP.
 
Forward-Looking Statements
 
This news release and its attachments contain forward-looking statements within the meaning of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  These forward-looking statements include statements regarding RPX’s future financial performance as well as any statements regarding the Company’s strategic and operational plans.  The Company’s actual results may differ materially from those anticipated in these forward-looking statements.  Factors that may contribute to such differences include, among others, the Company’s ability to maintain an adequate rate of growth, the impact of the current economic climate on the Company’s business, and the Company’s ability to attract new clients and retain existing clients.  Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements.  More information about potential factors that could affect the Company’s business and financial results is contained in the Company’s most recent annual report on Form 10-K, its quarterly reports on Form 10-Q, and the Company’s other filings with the SEC.  The Company does not intend, and undertakes no duty, to update any forward-looking statements to reflect future events or circumstances.
 
#     #     #
Contacts:
Investor Relations
Media Relations
JoAnn Horne
Kaustuva Das
Market Street Partners
RPX Corporation
+1-415-445-3233
+1-415-529-3105
ir@rpxcorp.com
media@rpxcorp.com

3


RPX Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Revenue
$
58,554

 
$
47,044

 
$
177,229

 
$
146,131

Cost of revenue
29,766

 
21,980

 
78,130

 
60,508

Selling, general and administrative expenses
15,584

 
13,147

 
45,793

 
39,903

(Gain) loss on sale of patent assets, net
—

 
—

 
126

 
(177
)
Operating income
13,204

 
11,917

 
53,180

 
45,897

Other income, net
56

 
65

 
170

 
92

Income before provision for income taxes
13,260

 
11,982

 
53,350

 
45,989

Provision for income taxes
4,863

 
4,392

 
19,561

 
17,130

Net income
$
8,397

 
$
7,590

 
$
33,789

 
$
28,859

Net income available to common stockholders:
 

 
 

 
 
 
 
Basic
$
8,395

 
$
7,556

 
$
33,767

 
$
28,378

Diluted
$
8,395

 
$
7,557

 
$
33,767

 
$
28,399

Net income available to common stockholders per common share:
 

 
 

 
 
 
 
Basic
$
0.16

 
$
0.15

 
$
0.65

 
$
0.57

Diluted
$
0.16

 
$
0.14

 
$
0.63

 
$
0.55

Weighted-average shares used in computing net income available to common stockholders per common share:
 

 
 

 
 
 
 
Basic
52,267

 
50,457

 
51,751

 
49,410

Diluted
54,055

 
52,127

 
53,415

 
51,711



4


RPX Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
September 30,
2013
 
December 31,
2012
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
132,614

 
$
73,638

Short-term investments
144,993

 
126,092

Restricted cash
364

 
—

Accounts receivable
19,885

 
25,144

Other receivables
—

 
33,775

Prepaid expenses and other current assets
9,733

 
5,237

Deferred tax assets
8,824

 
7,658

Total current assets
316,413

 
271,544

Patent assets, net
210,658

 
199,314

Property and equipment, net
4,790

 
3,144

Intangible assets, net
2,088

 
3,226

Goodwill
16,460

 
16,460

Restricted cash, less current portion
1,454

 
—

Other assets
774

 
279

Total assets
$
552,637

 
$
493,967

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
711

 
$
568

Accrued liabilities
7,050

 
7,206

Deferred revenue
101,801

 
101,249

Deferred payment obligations
500

 
500

Other current liabilities
6,322

 
1,813

Total current liabilities
116,384

 
111,336

Deferred revenue, less current portion
3,429

 
3,122

Deferred tax liabilities
17,091

 
18,108

Other liabilities
3,142

 
1,142

Total liabilities
140,046

 
133,708

Stockholders’ equity:
 
 
 
Common stock
5

 
5

Additional paid-in capital
299,995

 
281,530

Retained earnings
112,533

 
78,744

Accumulated other comprehensive income (loss)
58

 
(20
)
Total stockholders’ equity
412,591

 
360,259

Total liabilities and stockholders’ equity
$
552,637

 
$
493,967



5


RPX Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
2013
 
2012
Cash flows from operating activities
 
 
 
Net income
$
33,789

 
$
28,859

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
76,767

 
61,208

Stock-based compensation
12,081

 
7,493

Excess tax benefit from stock-based compensation
(2,752
)
 
(5,796
)
Imputed interest on deferred payment obligations
—

 
94

(Gain) loss on sale of patent assets
126

 
(177
)
Amortization of premium on investments
4,496

 
3,773

Deferred taxes
(2,772
)
 
(1,534
)
Other
13

 
(19
)
Changes in assets and liabilities:
 
 
 
Accounts receivable
5,259

 
3,163

Other receivables
33,775

 
—

Prepaid expenses and other assets
(6,392
)
 
5,874

Deposit
—

 
(10,000
)
Accounts payable
143

 
225

Accrued and other liabilities
1,134

 
(2,856
)
Deferred revenue
859

 
(9,642
)
Net cash provided by operating activities
156,526

 
80,665

Cash flows from investing activities
 

 
 

Purchases of investments classified as available-for-sale
(134,155
)
 
(150,227
)
Maturities of investments classified as available-for-sale
115,122

 
153,920

Sales of investments classified as available-for-sale
1,099

 
—

Business acquisition
—

 
(45,765
)
(Increase) decrease in restricted cash
(1,818
)
 
647

Purchases of intangible assets
—

 
(52
)
Purchases of property and equipment
(2,073
)
 
(1,626
)
Acquisitions of patent assets
(82,751
)
 
(65,056
)
Proceeds from sale of patent assets
100

 
200

Net cash used in investing activities
(104,476
)
 
(107,959
)
Cash flows from financing activities
 

 
 

Repayments of principal on deferred payment obligations
—

 
(5,150
)
Proceeds from other obligations
—

 
500

Proceeds from exercise of stock options and other common stock issuances
4,174

 
2,839

Excess tax benefit from stock-based compensation
2,752

 
5,796

Net cash provided by financing activities
6,926

 
3,985

Net increase (decrease) in cash and cash equivalents
58,976

 
(23,309
)
Cash and cash equivalents at beginning of period
73,638

 
106,749

Cash and cash equivalents at end of period
$
132,614

 
$
83,440



6


RPX Corporation
Reconciliation of Pro Forma Net Income Per Share
(in thousands, except per share data)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Net income
$
8,397

 
$
7,590

 
$
33,789

 
$
28,859

Pro forma net income per share:
 
 
 
 
 
 
 
Basic
$
0.16

 
$
0.15

 
$
0.65

 
$
0.57

Diluted
$
0.16

 
$
0.14

 
$
0.63

 
$
0.55

Shares used in computing pro forma net income per share:
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Basic weighted-average common shares
52,267

 
50,457

 
51,751

 
49,410

Add: Restricted stock
13

 
227

 
34

 
838

Shares used in computing pro forma basic net income per share
52,280

 
50,684

 
51,785

 
50,248

Diluted:
 
 
 
 
 
 
 
Diluted weighted-average common shares
54,055

 
52,127

 
53,415

 
51,711

Add: Restricted stock
13

 
227

 
34

 
838

Shares used in computing pro forma diluted net income per share
54,068

 
52,354

 
53,449

 
52,549


RPX Corporation
Reconciliation of GAAP to Pro Forma Non-GAAP Net Income Per Share
(in thousands, except per share data)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Net income
$
8,397

 
$
7,590

 
$
33,789

 
$
28,859

Stock-based compensation[1]
4,017

 
2,529

 
12,453

 
7,810

Amortization of acquired intangible assets[2]
351

 
361

 
1,069

 
832

Income tax adjustments[3]
(1,396
)
 
(1,054
)
 
(4,357
)
 
(2,689
)
Non-GAAP net income
$
11,369

 
$
9,426

 
$
42,954

 
$
34,812

Pro forma non-GAAP net income per share:
 
 
 
 
 
 
 
Basic
$
0.22

 
$
0.19

 
$
0.83

 
$
0.69

Diluted
$
0.21

 
$
0.18

 
$
0.80

 
$
0.66

Pro forma weighted-average shares:
 
 
 
 
 
 
 
Basic
52,280

 
50,684

 
51,785

 
50,248

Diluted
54,068

 
52,354

 
53,449

 
52,549


 

7


RPX Corporation
Reconciliation of GAAP to Non-GAAP Cost of Revenue
(in thousands)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Cost of revenue
$
29,766

 
$
21,980

 
$
78,130

 
$
60,508

Amortization of acquired intangible assets[2]
(56
)
 
(56
)
 
(168
)
 
(168
)
Non-GAAP cost of revenue
$
29,710

 
$
21,924

 
$
77,962

 
$
60,340


 
RPX Corporation
Reconciliation of GAAP to Non-GAAP Selling, General and Administrative Expenses
(in thousands)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Selling, general and administrative expenses
$
15,584

 
$
13,147

 
$
45,793

 
$
39,903

Stock-based compensation[1]
(4,017
)
 
(2,529
)
 
(12,453
)
 
(7,810
)
Amortization of acquired intangible assets[2]
(295
)
 
(305
)
 
(901
)
 
(664
)
Non-GAAP selling, general and administrative expenses
$
11,272

 
$
10,313

 
$
32,439

 
$
31,429




8




RPX Corporation
Additional Metrics
(in thousands, except client and headcount data)
(unaudited)
 
 
As of and for the Three Months Ended September 30,
Operating Metrics
 
2013
 
2012
Number of clients
 
160

 
128

Net additions
 
3

 
8

Trailing four quarters
 
32

 
25

Gross acquisition spend
 
$
20,591

 
$
26,376

Trailing four quarters
 
$
195,488

 
$
176,170

Net acquisition spend
 
$
17,591

 
$
26,376

Trailing four quarters
 
$
109,288

 
$
121,940

Full time equivalent headcount
 
136

 
126

 
 
As of and for the Three Months Ended September 30,
Financial Metrics
 
2013
 
2012
Subscription revenue[4]
 
$
57,829

 
$
47,011

Fee-related revenue
 
725

 
33

Total revenue
 
$
58,554

 
$
47,044

Cash, cash equivalents and short-term investments
 
$
277,607

 
$
208,637

Deferred revenue, current and noncurrent
 
$
105,230

 
$
98,687


[1] RPX excludes stock-based compensation and related employer payroll taxes from its non-GAAP financial measures.
[2] RPX excludes amortization expense related to intangible assets (other than patents) acquired in conjunction with the acquisition of businesses from its non-GAAP financial measures.
[3] Amount reflects income taxes associated with the above noted non-GAAP exclusions.
[4] Subscription revenue is comprised of revenue generated from membership subscription services and premiums earned from insurance policies.



9