RPX Corporation
Nov 1, 2011

RPX Announces Third Quarter 2011 Financial Results

SAN FRANCISCO, Nov. 1, 2011 (GLOBE NEWSWIRE) -- RPX Corporation (Nasdaq:RPXC), a leading provider of patent risk solutions, offering defensive buying, acquisition syndications, patent intelligence and advisory services, today announced its financial results for the third quarter ended September 30, 2011.

Third Quarter 2011 Highlights

"Our third quarter results came in solidly at the high end of our guidance range as we continued to expand our client network," said John Amster, CEO of RPX Corporation. "We added seven clients during the quarter bringing the total to 103 clients in our network, and we deployed approximately $29 million in RPX capital to purchase patents and patent rights on behalf of our clients."

Summary Results                                                                                                                                 

Revenue for the third quarter of 2011 increased 53% to $38.4 million, compared to $25.1 million in the third quarter of 2010.

Cost of revenue for the quarter was $16.5 million, compared to $12.4 million in the year-ago period. Net acquisition spend during the quarter totaled $29.3 million, and included 13 new acquisitions of patent assets, in addition to the exercise of previously negotiated options to acquire licenses for new members. The net book value of RPX's portfolio of patent assets increased to $153.0 million as of September 30, 2011 from $139.8 million as of June 30, 2011.

Selling, general, and administrative expenses were $9.1 million in the third quarter of 2011, compared to $5.9 million in the third quarter of 2010. Non-GAAP selling, general, and administration expenses, which exclude stock-based compensation and the amortization of acquired intangibles, were $7.1 million in the third quarter of 2011, compared to $5.6 million in the prior year period. Both GAAP and non-GAAP expenses reflected the benefit of a $2.1 million recovery of previously expensed costs associated with an incomplete syndicated acquisition effort.

GAAP net income for the quarter was $7.9 million or $0.15 per diluted share, compared to $3.6 million or $0.06 per diluted share in the third 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 $0.15 per pro forma diluted share in the third quarter of 2011, compared to $0.09 per pro forma diluted share in the prior year period.  Non-GAAP net income, which excludes stock-based compensation and the amortization of acquired intangibles (in each case, net of tax), was $9.0 million or $0.17 per pro forma diluted share in the third quarter of 2011, compared to $3.8 million or $0.10 per pro forma diluted share in the prior year period.

The Company completed a secondary offering of its common stock in September 2011, through which it sold 1.4 million newly-issued common shares and raised proceeds of $26.9 million, after underwriting fees and offering expenses. As of September 30, 2011, RPX had cash, cash equivalents and short-term investments of approximately $250.0 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 fourth quarter and full year 2011:

     
 Fourth Quarter 2011Full Year 2011
Revenue $41.9 -- $42.4 Million $153.5 -- $154.0 Million
Non-GAAP Net Income $6.8 -- $7.4 Million $32.6 -- $33.2 Million
Non-GAAP Effective Tax Rate 40% 40%
Diluted Shares Outstanding (Pro
Forma Weighted Average)
53 Million 48 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 2:00 p.m. PDT/5:00 p.m. EDT on November 1, 2011.  Parties in the United States and Canada can access the call by dialing 1-877-941-2068, using conference code 4480549. International parties can access the call by dialing 1-480-629-9712, using conference code 4480549.

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 4480549.  International parties should call 1-303-590-3030 and enter conference code 4480549.

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 November 1, 2011 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 net income, non-GAAP cost of revenue, non-GAAP selling, general, and administrative expense, 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 and the amortization of acquired intangible assets, because it believes investors wish to exclude the effects of stock-based compensation expense and the amortization of acquired intangible assets 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.  

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, 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 secondary offering filed with the Securities and Exchange Commission on September 16, 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)
 (unaudited) 
     
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2011201020112010
         
     
Revenue  $ 38,394  $ 25,131  $ 111,634  $ 65,178
Cost of revenue  16,459  12,401  44,652  30,350
Selling, general and administrative expenses  9,069  5,891  28,465  15,350
Loss on sale of patent assets, net  --  75  --  75
         
Operating income   12,866  6,764  38,517  19,403
         
Interest income  68  53  136  251
Interest expense  (147)  (698)  (781)  (2,450)
         
Income before provision for income taxes  12,787  6,119  37,872  17,204
         
Provision for income taxes  4,935  2,553  15,659  7,197
         
Net income   $ 7,852  $ 3,566  $ 22,213  $ 10,007
         
Less: allocation of net income to participating stockholders  471  3,177  9,355  9,063
         
Net income available to common stockholders - basic  $ 7,381  $ 389  $ 12,858  $ 944
         
Undistributed earnings re-allocated to common stockholders  40  100  660  192
         
Net income available to common stockholders - diluted  $ 7,421  $ 489  $ 13,518  $ 1,136
         
Net income per common share - basic  $ 0.17  $ 0.06  $ 0.48  $ 0.17
         
Net income per common share - diluted  $ 0.15  $ 0.06  $ 0.43  $ 0.16
         
Weighted-average shares used in computing net income per common share - basic  44,473  6,140  27,015  5,485
         
Weighted-average shares used in computing net income per common share - diluted  48,914  8,131  31,125  6,968
 
RPX Corporation
Consolidated Balance Sheets
(in thousands)
(unaudited)
     
 September 30,
2011
December 31,
2010
   
Assets  
     
Current assets  
Cash and cash equivalents  $ 121,684  $ 46,656
Restricted cash  500  500
Short-term investments  128,324  -- 
Accounts receivable  2,046  12,632
Prepaid expenses and other current assets  9,507  5,987
Deferred tax assets  2,469  2,567
     
Total current assets  264,530  68,342
     
Patent assets, net  153,023  126,508
Property and equipment, net  1,399  623
Goodwill and intangible assets, net  3,762  583
Restricted cash  147  220
Other assets  436  746
     
Total assets  $ 423,297  $ 197,022
     
Liabilities, redeemable convertible preferred stock and stockholders' equity    
     
Current liabilities  
Accounts payable  $ 1,133  $ 634
Accrued liabilities  6,581  7,281
Deferred revenue, current  82,680  73,235
Notes payable and other obligations, current  6,063  18,527
Other current liabilities  14,248  3,314
     
Total current liabilities  110,705  102,991
     
Deferred revenue, less current portion  14,855  9,205
Deferred tax liabilities  6,147  6,146
Notes payable and other obligations, less current portion  --   5,056
Other liabilities  146  124
     
Total liabilities  131,853  123,522
     
Redeemable convertible preferred stock  --   62,793
     
Stockholders' equity    
     
Common stock  5  1
Additional paid-in capital  258,571  51
Retained earnings  32,868  10,655
     
Total stockholders' equity  291,444  10,707
     
Total liabilities, redeemable convertible preferred stock and stockholders' equity  $ 423,297  $ 197,022
 
RPX Corporation
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Nine Months Ended
September 30,
 20112010
   
   
Cash flows from operating activities    
Net income  $ 22,213  $ 10,007
     
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  44,651  30,113
Stock-based compensation  4,849  631
Excess tax benefit from stock-based compensation  (4,118)  -- 
Loss on sale of patent assets  --   75
Imputed interest on other obligations  584  1,260
Amortization of premium on investments  404  -- 
Deferred taxes  99  -- 
Other  1  11
Changes in assets and liabilities:    
Accounts receivable  10,586  715
Prepaid expense and other assets  (4,777)  (2,382)
Accounts payable  256  727
Accrued and other liabilities  7,543  6,892
Deferred revenue  14,974  52,780
Net cash provided by operating activities  97,265  100,829
     
Cash flows from investing activities    
Purchases of investments classified as available-for-sale  (142,825)  -- 
Maturities of investments classified as available-for-sale  15,100  -- 
Decrease (increase) in restricted cash  73  (220)
Business acquisitions  (3,345)  -- 
Purchases of intangible assets  (95)  -- 
Purchases of property and equipment  (913)  (381)
Acquisitions of patent assets  (63,815)  (63,192)
Proceeds from sale of patent assets  80  500
Net cash used in investing activities  (195,740)  (63,293)
     
Cash flows from financing activities    
Repayments of principal on notes payable and other obligations  (18,104)  (24,851)
Proceeds from issuance of common stock in initial public offering, net of issuance costs  157,478  -- 
Proceeds from issuance of common stock in secondary public offering, net of issuance costs  27,379  -- 
Proceeds from exercise of stock options and other common stock issuances  2,632  89
Excess tax benefit from stock-based compensation  4,118  -- 
Net cash provided by (used in) financing activities  173,503  (24,762)
     
Net increase in cash and cash equivalents  75,028  12,774
Cash and cash equivalents at beginning of period  46,656  28,928
Cash and cash equivalents at end of period  $ 121,684  $ 41,702
 
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,
 2011201020112010
         
     
Net income  $ 7,852  $ 3,566  $ 22,213  $ 10,007
         
Pro forma net income per share [1]        
Basic  $ 0.17  $ 0.10  $ 0.52  $ 0.27
Diluted  $ 0.15  $ 0.09  $ 0.47  $ 0.26
         
Shares used in computing pro forma net income per share        
         
Basic:        
Basic weighted-average common shares  44,473  6,140  13,179  5,485
Add: Assumed conversion of redeemable convertible preferred shares  --   25,741  26,230  25,741
Add: Restricted stock  2,837  5,225  3,437  5,848
Shares used in computing pro forma basic net income per share   47,310  37,106  42,846  37,074
         
Diluted:         
Diluted weighted-average common shares  48,914  8,131  17,289  6,968
Add: Assumed conversion of redeemable convertible preferred shares  --   25,741  26,230  25,741
Add: Restricted stock  2,837  5,225  3,437  5,848
Shares used in computing pro forma diluted net income per share  51,751  39,097  46,956  38,557
         
[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
September 30,
Nine Months Ended
September 30,
 2011201020112010
   (unaudited) 
     
Net income  $ 7,852  $ 3,566  $ 22,213  $ 10,007
Stock-based compensation  1,913  282  4,849  631
Amortization of acquired intangibles  146  --   146  -- 
Income tax adjustments  (930)  (51)  (1,412)  (58)
         
Non-GAAP net income   $ 8,981  $ 3,797  $ 25,796  $ 10,580
         
Pro forma non-GAAP net income per common share - basic  $ 0.19  $ 0.10  $ 0.60  $ 0.29
         
Pro forma non-GAAP net income per common share - diluted  $ 0.17  $ 0.10  $ 0.55  $ 0.27
         
Pro forma weighted-average shares - basic  47,310  37,106  42,846  37,074
         
Pro forma weighted-average shares - diluted  51,751  39,097  46,956  38,557
         
Reconciliation of GAAP to Non-GAAP Cost of Revenue
(in thousands)
         
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2011201020112010
   (unaudited) 
     
Cost of revenue  $ 16,459  $ 12,401  $ 44,652  $ 30,350
Amortization of acquired intangibles  (53)  --   (53)  -- 
Non-GAAP Cost of revenue  $ 16,406  $ 12,401  $ 44,599  $ 30,350
         
Reconciliation of GAAP to Non-GAAP Selling, General and Administrative Expenses
(in thousands)
         
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2011201020112010
   (unaudited) 
     
Selling, general and administrative expenses  $ 9,069  $ 5,891  $ 28,465  $ 15,350
Stock-based compensation  (1,913)  (282)  (4,849)  (631)
Amortization of acquired intangibles  (93)  --   (93)  -- 
Non-GAAP selling, general and administrative expenses  $ 7,063  $ 5,609  $ 23,523  $ 14,719
 
RPX Corporation
Additional Metrics
($ in thousands)
(unaudited)
     
 As of, or for the Three Months
Ended September 30,
Operating Metrics20112010
     
Number of clients at quarter end  103  65
Additions in quarter  7  14
Trailing 4 quarters   38  49
     
Gross acquisition spend in quarter  $ 33,915  $ 21,403
Trailing 4 quarters   96,826  145,780
     
Net acquisition spend in quarter  $ 29,290  $ 20,753
Trailing 4 quarters   79,073  85,182
     
Full time equivalent headcount at quarter end  99  49
     
 As of, or for the Nine Months
Ended September 30,
Financial Metrics20112010
   
Subscription revenue  $ 108,320  $ 64,728
Other revenue  3,314  450
Revenue  $ 111,634  $ 65,178
     
Cash, cash equivalents and short-term investments  $ 250,008  $ 41,702
Deferred revenue, current and noncurrent  $ 97,535  $ 77,471
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

         greg.spector@rpxcorp.com