RPX Corporation
Apr 29, 2014

RPX Announces First Quarter 2014 Financial Results

SAN FRANCISCO, April 29, 2014 /PRNewswire/ -- RPX Corporation (NASDAQ: RPXC), the leading provider of patent risk management solutions, today announced its financial results for the first quarter ended March 31, 2014.

Financial Highlights

  • Subscription revenue for the first quarter of fiscal 2014 was $60.8 million, up 13% compared to $54.0 million in the prior year period
  • Client count for the first quarter of fiscal 2014 increased by 10 members bringing our total client network to 178 as of March 31, 2014

"RPX had a solid first quarter," said John A. Amster, Chief Executive Officer and Co-founder of RPX Corporation. "We continued to expand our client network, kept our renewal rate strong, cleared risk and reduced the costs of NPE litigation for our clients. We also strengthened the RPX insurance offering, gaining approval as a coverholder at Lloyd's, and made encouraging progress with several new initiatives."

Summary Results

Revenue for the first quarter of fiscal 2014 was $61.9 million, compared to $61.2 million in the prior year period.

Net acquisition spend during the quarter totaled $55.7 million, and included 16 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 first quarter was $9.9 million or $0.18 per diluted share, compared to $14.7 million or $0.28 per diluted share in the first quarter of 2013.

Non-GAAP net income for the first quarter, which excludes stock-based compensation and the amortization of acquired intangibles (in each case, net of tax), was $12.7 million or $0.23 per pro forma diluted share[1], compared to $17.5 million or $0.33 per pro forma diluted share[1] in the first quarter of 2013.

As of March 31, 2014, RPX had cash, cash equivalents and short-term investments of $302.7 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 second quarter of fiscal 2014:

Subscription revenue[2]


$63.3 - $63.9 million

Fee-related revenue


--

Total revenue


$63.3 - $63.9 million

Net income (non-GAAP)


$11.4 - $12.0 million

Effective tax rate (non-GAAP)


37%

Pro forma weighted-average diluted shares outstanding


54.6 million

The Company provided the following business outlook for the full year 2014:

Subscription revenue[2]


$246 - $258 million

Fee-related revenue


$8 - $10 million

Total revenue


$254 - $268 million

Cost of revenue (non-GAAP)


$120 - $124 million

SG&A (non-GAAP)


$51 - $55 million

Net income (non-GAAP)


$53 - $57 million

Effective tax rate (non-GAAP)


37%

Pro forma weighted-average diluted shares outstanding


54.6 million

Net acquisition spend


$135 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.

Additionally, RPX appointed Frank E. Dangeard to its Board of Directors effective April 24, 2014. Mr. Dangeard brings more than 20 years of experience as a senior executive in the technology and business services industries. Mr. Dangeard serves on the Board of Directors of Symantec, Atari, and Telenor, and is currently the Managing Partner of Harcourt. From September 2004 to February 2008, he was Chairman and Chief Executive Officer of Thomson. From September 2002 to September 2004, he was Deputy CEO of France Telecom. Mr. Dangeard joined Thomson Multimedia and Thomson S.A. in 1997 as Deputy CEO, and was appointed Deputy Chairman of Thomas Multimedia in 1999. Prior to joining Thomson Multimedia and Thomson S.A., Mr. Dangeard was Managing Director of SG Warburg. Before joining SG Warburg, Mr. Dangeard was a lawyer with Sullivan & Cromwell LLP in New York and London.

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 April 29, 2014. Parties in the United States and Canada can access the call by dialing 1-877-941-0843, using conference code 4678520. International parties can access the call by dialing 1-480-629-9866, using conference code 4678520.

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 4678520. International parties should call 1-303-590-3030 and enter conference code 4678520.

About RPX Corporation

RPX Corporation (NASDAQ: RPXC) is the leading provider of patent risk solutions, offering defensive buying, acquisition syndication, patent intelligence, insurance services 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 and patent rights, RPX helps to mitigate and manage patent risk for its growing client network.

Use of Non-GAAP Financial Information

This news release dated April 29, 2014 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 (other than patents) 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 the Company's 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 success of the Company's new initiatives, 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 March 31,



2014


2013

Revenue


$

61,888



$

61,194


Cost of revenue


28,920



23,670


Selling, general and administrative expenses


17,255



14,473


Operating income


15,713



23,051


Other income, net


99



51


Income before provision for income taxes


15,812



23,102


Provision for income taxes


5,952



8,407


Net income


$

9,860



$

14,695









Net income available to common stockholders:


$

9,860



$

14,678


Net income available to common stockholders per common share:







Basic


$

0.19



$

0.29


Diluted


$

0.18



$

0.28


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







Basic


52,803



51,201


Diluted


54,443



52,653


 

 

 

RPX Corporation

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)


March 31,

 2014


December 31,

 2013

Assets




Current assets:




Cash and cash equivalents

$

120,898



$

100,155


Short-term investments

181,816



190,567


Restricted cash

364



364


Accounts receivable

13,071



38,477


Prepaid expenses and other current assets

9,030



10,546


Deferred tax assets

4,343



3,817


Total current assets

329,522



343,926


Patent assets, net

247,962



219,954


Property and equipment, net

4,506



4,667


Intangible assets, net

1,402



1,718


Goodwill

16,460



16,460


Restricted cash, less current portion

1,454



1,454


Other assets

618



622


Total assets

$

601,924



$

588,801


Liabilities and stockholders' equity






Current liabilities:






Accounts payable

$

633



$

332


Accrued liabilities

6,317



8,784


Deferred revenue

138,684



131,808


Deferred payment obligations



500


Other current liabilities

1,060



1,638


Total current liabilities

146,694



143,062


Deferred revenue, less current portion

1,850



5,935


Deferred tax liabilities

11,315



11,654


Other liabilities

3,106



3,227


Total liabilities

162,965



163,878


Stockholders' equity:






Common stock

5



5


Additional paid-in capital

309,537



305,343


Retained earnings

129,387



119,527


Accumulated other comprehensive income

30



48


Total stockholders' equity

438,959



424,923


Total liabilities and stockholders' equity

$

601,924



$

588,801


 

 

 

RPX Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


Three Months Ended March 31,


2014


2013

Cash flows from operating activities




Net income

$

9,860



$

14,695


Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation and amortization

28,418



23,325


Stock-based compensation

3,802



3,708


Excess tax benefit from stock-based compensation

(694)



(968)


Amortization of premium on investments

1,608



1,270


Deferred taxes

(893)



(1,153)


Other

(500)



6


Changes in assets and liabilities:






Accounts receivable

25,406



11,978


Other receivables



33,775


Prepaid expenses and other assets

463



1,801


Accounts payable

467



(68)


Accrued and other liabilities

(2,601)



(1,978)


Deferred revenue

2,791



13,806


Net cash provided by operating activities

68,127



100,197


Cash flows from investing activities




Purchases of investments classified as available-for-sale

(51,125)



(58,030)


Maturities of investments classified as available-for-sale

59,945



37,811


Purchases of property and equipment

(426)



(421)


Acquisitions of patent assets

(56,153)



(19,437)


Net cash used in investing activities

(47,759)



(40,077)


Cash flows from financing activities




Proceeds from exercise of stock options and other common stock issuances

582



1,019


Tax withholdings related to net share settlements of restricted stock units

(901)




Excess tax benefit from stock-based compensation

694



968


Net cash provided by financing activities

375



1,987


Net increase in cash and cash equivalents

20,743



62,107


Cash and cash equivalents at beginning of period

100,155



73,638


Cash and cash equivalents at end of period

$

120,898



$

135,745


 

 

 

RPX Corporation

Reconciliation of Pro Forma Net Income Per Share

(in thousands, except per share data)

(unaudited)



Three Months Ended March 31,



2014


2013

Net income


$

9,860



$

14,695


Pro forma net income per share:







Basic


$

0.19



$

0.29


Diluted


$

0.18



$

0.28


Shares used in computing pro forma net income per share:







Basic:







Basic weighted-average common shares


52,803



51,201


Add: Restricted stock




59


Shares used in computing pro forma basic net income per share


52,803



51,260


Diluted:







Diluted weighted-average common shares


54,443



52,653


Add: Restricted stock




59


Shares used in computing pro forma diluted net income per share


54,443



52,712


 

 

 

RPX Corporation

Reconciliation of GAAP to Pro Forma Non-GAAP Net Income Per Share

(in thousands, except per share data)

(unaudited)



Three Months Ended March 31,



2014


2013

Net income


$

9,860



$

14,695


Stock-based compensation[1]


3,919



3,778


Amortization of acquired intangible assets[2]


305



360


Income tax adjustments[3]


(1,369)



(1,285)


Non-GAAP net income


$

12,715



$

17,548


Pro forma non-GAAP net income per share:







Basic


$

0.24



$

0.34


Diluted


$

0.23



$

0.33


Shares used in computing pro forma net income per share:







Basic


52,803



51,260


Diluted


54,443



52,712


 

 

 

RPX Corporation

Reconciliation of GAAP to Non-GAAP Cost of Revenue

(in thousands)

(unaudited)



Three Months Ended March 31,



2014


2013

Cost of revenue


$

28,920



$

23,670


Amortization of acquired intangible assets[2]


(56)



(56)


Non-GAAP cost of revenue


$

28,864



$

23,614


 

 


 

RPX Corporation

Reconciliation of GAAP to Non-GAAP Selling, General and Administrative Expenses

(in thousands)

(unaudited)



Three Months Ended March 31,



2014


2013

Selling, general and administrative expenses


$

17,255



$

14,473


Stock-based compensation[1]


(3,919)



(3,778)


Amortization of acquired intangible assets[2]


(249)



(304)


Non-GAAP selling, general and administrative expenses


$

13,087



$

10,391


 

 

 

RPX Corporation

Additional Metrics

(in thousands, except client and headcount data)

(unaudited)



As of and for the Three Months

 Ended March 31,

Operating Metrics


2014


2013

Number of clients


178



146


Net additions


10



6


Trailing four quarters


32



30


Gross acquisition spend


$

58,653



$

29,437


Trailing four quarters


$

161,467



$

267,857


Net acquisition spend


$

55,653



$

29,437


Trailing four quarters


$

152,717



$

132,427


Full time equivalent headcount


133



125




As of and for the Three Months

 Ended March 31,

Financial Metrics


2014


2013

Subscription revenue[4]


$

60,788



$

54,024


Fee-related revenue


1,100



7,170


Total revenue


$

61,888



$

61,194


Cash, cash equivalents and short-term investments


$

302,714



$

283,422


Deferred revenue, current and noncurrent


$

140,534



$

118,177




[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.

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SOURCE RPX Corporation

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