RPX Corporation
Oct 29, 2013

RPX Announces Third Quarter 2013 Financial Results

SAN FRANCISCO, Oct. 29, 2013 /PRNewswire/ -- 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.

(Logo: http://photos.prnewswire.com/prnh/20130730/SF55756LOGO)

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.

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.

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.






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













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





















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







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













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













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.

SOURCE RPX Corporation

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