RPX Corporation
Aug 2, 2011

RPX Announces Second Quarter 2011 Financial Results

SAN FRANCISCO, Aug. 2, 2011 (GLOBE NEWSWIRE) -- RPX Corporation (Nasdaq:RPXC) announced today its financial results for the second quarter ended June 30, 2011.

Second Quarter 2011 Highlights

"We are very pleased with our solid second quarter results which reflect expanding adoption of the RPX offering," said John Amster, CEO of RPX Corporation. "We are continuing to execute on our plan. As of the end of the quarter we had deployed over $300 million to acquire patents and patent rights to the benefit of the 96 companies in our client network."

Summary Results                                                                                                                                  

Revenue for the second quarter of 2011 increased 78% to $38.9 million, compared to $21.8 million in the second quarter of 2010. Subscription revenue increased 66% to $35.6 million, compared to $21.4 million in the prior year period. The year-over-year increase in subscription revenue was driven by the growing acceptance of RPX's patent risk management platform. 

Cost of revenue for the quarter was $14.5 million, compared to $10.2 million in the year-ago period. The net book value of RPX's portfolio of patent assets increased to $140 million as of June 30, 2011 from $121 million as of June 30, 2010. Net acquisition spend during the quarter totaled $21.7 million, and included eight new acquisitions of patent assets as well as the exercise of previously negotiated options to acquire licenses for new members.   

Selling, general and administrative expenses were $11.3 million in the second quarter of 2011, compared to $5.2 million in the second quarter of 2010. Non-GAAP selling, general and administration expenses, which exclude stock-based compensation, were $9.4 million in the second quarter of 2011, compared to $5.0 million in the prior year period. The increase in SG&A expenses was primarily due to the hiring of additional personnel and increased professional fees and facilities costs resulting from the growth in RPX's business.  Over the course of the past year, RPX substantially expanded its client relations, corporate development and technology development teams.

GAAP net income for the quarter was $7.7 million or $0.15 per diluted share, compared to $3.3 million or $0.05 per diluted share in the second quarter of 2010. On a pro forma basis giving effect to the restricted stock outstanding and the conversion of all preferred shares into common shares at the beginning of the period, net income was $0.16 per diluted share in the second quarter of 2011, compared to $0.09 per diluted share in the prior year period.  Non-GAAP net income, which excludes stock-based compensation (net of tax), was $8.8 million or $0.18 per diluted share on a pro forma basis in the second quarter of 2011, compared to $3.5 million or $0.09 per diluted share in the prior year period.

As of June 30, 2011, RPX had cash, cash equivalents and short-term investments of $199 million.

Business Outlook

This outlook reflects the Company's current and preliminary view and may be subject to change. Please see the "Forward-Looking Statements" at the end of this press release. The Company provided the following business outlook for the third quarter and full year 2011:

 
  Third Quarter 2011 Full Year 2011
Revenue $37.8 - $38.3 Million $150.5 - $154.0 Million
Non-GAAP Net Income $6.7 - $7.2 Million $28.0 - $32.0 Million
Non-GAAP Effective Tax Rate 40% 40%
Diluted Shares Outstanding (Pro Forma) 54 Million 49 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.

Conference Call                                                                                                                                                             

RPX management will host a conference call and live webcast for analysts and investors at 5:00 p.m. EDT on August 2, 2011.  Parties in the United States and Canada can access the call by dialing 1-877-941-8416, using conference code 4457074. International parties can access the call by dialing 1-480-629-9808, using conference code 4457074.

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 www.rpxcorp.com. The webcast will be archived there for a period of 30 days. An audio replay of the conference call will also be available 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 4457074. International parties should call 1-303-590-3030 and enter conference code 4457074.

About RPX Corporation

RPX Corporation (Nasdaq:RPXC) is a 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

The accompanying news release dated August 2, 2011 contains non-GAAP financial measures. Tables are provided in the news release that reconciles 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 net income, non-GAAP SG&A, non-GAAP effective tax rate and non-GAAP earnings per share. To supplement the Company's 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 believes it is useful to report non-GAAP measures which exclude stock-based compensation expense because it believes investors wish to exclude the effects of stock-based compensation expense in comparing our financial performance with that of other companies. These 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 and trends and performance. Management uses these non-GAAP measures to evaluate the Company's financial results. 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.  Beginning this quarter, the Company is reporting non-GAAP net income that reflects a non-GAAP effective tax rate which excludes the impact of stock-based compensation expense.  

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, the quotations from management in this press release, 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, the Company's ability to effectively manage its growth, 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," "will," "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 its Prospectus related to its initial public offering filed with the Securities and Exchange Commission on May 4, 2011, 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.

RPX Corporation
Consolidated Statements of Operations
(in thousands, except per share data)
         
  Three Months Ended
June 30,
Six Months Ended
June 30,
  2011 2010 2011 2010
   (unaudited) 
         
Revenue  $ 38,850  $ 21,835  $ 73,240  $ 40,047
Cost of revenue  14,528  10,216  28,193  17,949
Selling, general and administrative expenses  11,286  5,191  19,396  9,459
         
Operating income   13,036  6,428  25,651  12,639
         
Interest income  42  67  68  198
Interest expense  (235)  (781)  (634)  (1,752)
         
Income before provision for income taxes  12,843  5,714  25,085  11,085
         
Provision for income taxes  5,177  2,393  10,724  4,644
         
Net income   $ 7,666  $ 3,321  $ 14,361  $ 6,441
         
Less: allocation of net income to participating stockholders  2,952  3,008  8,754  5,879
         
Net income available to common stockholders - basic  $ 4,714  $ 313  $ 5,607  $ 562
         
Undistributed earnings re-allocated to common stockholders  210  72  484  108
         
Net income available to common stockholders - diluted  $ 4,924  $ 385  $ 6,091  $ 670
         
Net income per common share - basic  $ 0.16  $ 0.06  $ 0.31  $ 0.11
         
Net income per common share - diluted  $ 0.15  $ 0.05  $ 0.29  $ 0.11
         
Weighted-average shares used in computing net income per common share - basic  28,941  5,495  18,141  5,153
         
Weighted-average shares used in computing net income per common share - diluted  33,131  7,031  21,187  6,340
 
RPX Corporation
Consolidated Balance Sheets
(in thousands)
  June 30,
2011
December 31,
2010
   (unaudited) 
Assets    
     
Current assets    
Cash and cash equivalents  $ 159,393  $ 46,656
Restricted cash  500  500
Short-term investments  39,304  -- 
Accounts receivable  6,272  12,632
Prepaid expenses and other current assets  4,962  5,987
Deferred tax assets  2,543  2,567
     
Total current assets  212,974  68,342
     
Patent assets, net  139,844  126,508
Property and equipment, net  1,223  623
Goodwill and intangible assets, net  3,576  583
Restricted cash  220  220
Other assets  356  746
     
Total assets  $ 358,193  $ 197,022
     
Liabilities, redeemable convertible preferred stock and stockholders' equity    
     
Current liabilities    
Accounts payable  $ 964  $ 634
Accrued liabilities  4,664  7,281
Deferred revenue, current  75,599  73,235
Notes payable and other obligations, current  6,517  18,527
Other current liabilities  893  3,314
     
Total current liabilities  88,637  102,991
     
Deferred revenue, less current portion  11,975  9,205
Deferred tax liabilities  6,146  6,146
Notes payable and other obligations, less current portion  1,099  5,056
Other liabilities  156  124
     
Total liabilities  108,013  123,522
     
Redeemable convertible preferred stock  --   62,793
     
Stockholders' equity    
     
Common stock  5  1
Additional paid-in capital  225,159  51
Retained earnings  25,016  10,655
     
Total stockholders' equity  250,180  10,707
     
Total liabilities, redeemable convertible preferred stock and stockholders' equity  $ 358,193  $ 197,022
 
RPX Corporation
Consolidated Statements of Cash Flows
(in thousands)
     
  Six Months Ended
June 30,
  2011 2010
   (unaudited) 
     
Cash flows from operating activities    
Net income  $ 14,361  $ 6,441
     
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  28,176  17,771
Stock-based compensation  2,936  349
Excess tax benefit from stock-based compensation  (203)  -- 
Imputed interest on other obligations  436  867
Amortization of premium on investments  195  -- 
Deferred taxes  25  -- 
Other  (4)  2
Changes in assets and liabilities:    
Accounts receivable  6,360  3,451
Prepaid expense and other assets  666  (139)
Accounts payable  330  (679)
Accrued and other liabilities  (3,205)  3,898
Deferred revenue  5,014  42,708
Net cash provided by operating activities  55,087  74,669
     
Cash flows from investing activities    
Purchases of investments classified as available-for-sale securities  (40,100)  -- 
Maturities of investments classified as available-for-sale securities  970  -- 
Business acquisitions  (3,000)  -- 
Purchases of intangible assets  (95)  -- 
Purchases of property and equipment  (706)  (110)
Acquisitions of patent assets  (43,151)  (43,048)
Proceeds from sale of patent assets  80  -- 
Net cash used in investing activities  (86,002)  (43,158)
     
Cash flows from financing activities    
Repayments of principal on notes payable and other obligations  (16,404)  (20,443)
Proceeds from issuance of common stock in initial public offering, net of issuance costs  157,828  -- 
Proceeds from exercise of stock options and other common stock issuances  2,025  76
Excess tax benefit from stock-based compensation  203  -- 
Net cash provided by (used in) financing activities  143,652  (20,367)
     
Net increase in cash and cash equivalents  112,737  11,144
Cash and cash equivalents at beginning of period  46,656  28,928
Cash and cash equivalents at end of period  $ 159,393  $ 40,072
 
RPX Corporation
Reconciliation of Pro Forma Net Income Per Share
(in thousands, except per share data)
         
  Three Months Ended
June 30, 
Six Months Ended
June 30, 
  2011 2010 2011 2010
  (unaudited)
         
Net income  $ 7,666  $ 3,321  $ 14,361  $ 6,441
         
Pro forma net income per share [1]        
Basic  $ 0.18  $ 0.09  $ 0.35  $ 0.17
Diluted  $ 0.16  $ 0.09  $ 0.33  $ 0.17
         
Shares used in computing pro forma net income per share        
         
Basic:        
Basic weighted-average common shares  13,952  5,495  10,605  5,153
Add: Assumed conversion of redeemable convertible preferred shares  26,230  25,741  26,230  25,741
Add: Restricted stock  3,505  5,865  3,741  6,165
Shares used in computing pro forma basic net income per share   43,687  37,101  40,576  37,059
         
Diluted:         
Diluted weighted-average common shares  18,142  7,031  13,651  6,340
Add: Assumed conversion of redeemable convertible preferred shares  26,230  25,741  26,230  25,741
Add: Restricted stock  3,505  5,865  3,741  6,165
Shares used in computing pro forma diluted net income per share  47,877  38,637  43,622  38,246
         
[1] Pro forma basic and diluted net income per share were computed to give effect to the shares of restricted stock outstanding as of the original date of issuance and the conversion of the Company's redeemable convertible preferred stock into common stock using the as-if converted method as though the conversion had occurred as of January 1, 2010 or the original date of issuance, if later.         
         
RPX Corporation
Reconciliation of GAAP to Pro Forma Non-GAAP Net Income Per Share
(in thousands, except per share data)
         
  Three Months Ended
June 30, 
Six Months Ended
June 30, 
  2011 2010 2011 2010
   (unaudited) 
         
Net income  $ 7,666  $ 3,321  $ 14,361  $ 6,441
Stock-based compensation (net of tax)  1,174  183  2,454  342
         
Non-GAAP net income   $ 8,840  $ 3,504  $ 16,815  $ 6,783
         
         
Pro forma non-GAAP net income per common share - basic  $ 0.20  $ 0.09  $ 0.41  $ 0.18
         
Pro forma non-GAAP net income per common share - diluted  $ 0.18  $ 0.09  $ 0.39  $ 0.18
         
Pro forma weighted-average shares - basic  43,687  37,101  40,576  37,059
         
Pro forma weighted-average shares - diluted  47,877  38,637  43,622  38,246
         
RPX Corporation
Reconciliation of GAAP to Non-GAAP Selling, General, and Administrative Expenses
(in thousands)
     
  Three Months Ended
June 30, 
Six Months Ended
June 30, 
  2011 2010 2011 2010
   (unaudited) 
         
Selling, general and administrative expenses  $ 11,286  $ 5,191  $ 19,396  $ 9,459
Less: Stock-based compensation  (1,888)  (192)  (2,936)  (349)
         
Non-GAAP selling, general and administrative expenses  $ 9,398  $ 4,999  $ 16,460  $ 9,110
 
RPX Corporation
Additional Metrics
     
  Six Months Ended
June 30, 
  2011 2010
  (unaudited)
Operating Metrics    
     
Full time equivalent headcount  81  43
     
Number of clients  96  51
Additions in period  24  28
Trailing 4 quarters   45  37
     
Financial Metrics (in thousands)    
     
Subscription revenue  $ 69,940  $ 39,597
Other revenue  3,300  450
Revenue  $ 73,240  $ 40,047
     
Gross acquisition spend   $ 41,151  $ 103,242
Trailing 4 quarters   $ 84,314  $ 133,489
     
Net acquisition spend  $ 41,151  $ 56,853
Trailing 4 quarters   $ 70,536  $ 72,964
     
Cash, cash equivalents and short-term investments (ending balance)  $ 198,697  $ 40,074
Deferred revenue, current and noncurrent (ending balance)  $ 87,574  $ 67,399
CONTACT: Investor Relations

         Julie Cunningham

         The Blueshirt Group

         +1.415.217.2632

         julie@blueshirtgroup.com

         

         Media Relations

         Greg Spector

         RPX Corporation

         +1.415.717.4666