RPX Corporation
Oct 28, 2014

RPX Announces Third Quarter 2014 Financial Results

SAN FRANCISCO, Oct. 28, 2014 /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, 2014.

Financial Highlights

  • Subscription revenue for the third quarter of fiscal 2014 was $62.7 million, up 9% compared to $57.8 million in the prior year period
  • Client count for the third quarter of fiscal 2014 increased by eleven members bringing our total client network to 195 as of September 30, 2014

"We continue to build out the network and reduce patent risk for our clients. We are pleased with the recent developments around the business and look forward to closing out the year with further progress against our goals," said John A. Amster, Chief Executive and Co-founder of RPX Corporation.

Summary Results

Revenue for the third quarter was $65.4 million, compared to $58.6 million in the third quarter of 2013.

Net acquisition spend during the quarter totaled $42.2 million, and included 19 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 third quarter was $10.8 million or $0.20 per diluted share, compared to $8.4 million or $0.16 per diluted share in the third quarter of 2013.

Non-GAAP net income for the third quarter, which excludes stock-based compensation and the amortization of acquired intangibles (in each case, net of tax), was $14.3 million or $0.26 per pro forma diluted share[1], compared to $11.4 million or $0.21 per pro forma diluted share[1] in the third quarter of 2013.

As of September 30, 2014, RPX had cash, cash equivalents and short-term investments of $303.1 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 2014:

Subscription revenue[2]


$62.8 - $63.4 million

Fee-related revenue


$4.2 - $6.2 million

Total revenue


$67.0 - $69.6 million

Net income (non-GAAP)


$12.0 - $13.7 million

Effective tax rate (non-GAAP)


37%

Pro forma weighted-average diluted shares outstanding


55.3 million

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

Subscription revenue[2]


$250.6 - $251.2 million

Fee-related revenue


$8.0 - $10 million

Total revenue


$258.6 - $261.2 million

Cost of revenue (non-GAAP)


$124.5 - $125.5 million

SG&A (non-GAAP)


$52.0 - $52.8 million

Net income (non-GAAP)


$52.0 - $53.7 million

Effective tax rate (non-GAAP)


37%

Pro forma weighted-average diluted shares outstanding


55.0 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.

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 28, 2014. Parties in the United States and Canada can access the call by dialing 1-888-572-7033, using conference code 3976582. International parties can access the call by dialing 1-719-325-2469, using conference code 3976582.

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 1-888-203-1112 and enter conference code 3976582. International parties should call 1-719-457-0820 and enter conference code 3976582.

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 October 28, 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 should not 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 the future financial performance of RPX as well as any statements regarding the Company's strategic and operational plans. The Company's actual results may differ materially from those predicted or implied 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 insurance business and other 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 included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's most recent annual report on Form 10-K and its quarterly reports on Form 10-Q on file and available at the SEC's website at www.sec.gov. 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,



2014


2013


2014


2013

Revenue


$

65,407



$

58,554



$

191,588



$

177,229


Cost of revenue


30,444



29,766



90,906



78,130


Selling, general and administrative expenses


17,786



15,584



53,620



45,793


(Gain) loss on sale of patent assets, net


(8)





(707)



126


Operating income


17,185



13,204



47,769



53,180


Other income, net


73



56



266



170


Income before provision for income taxes


17,258



13,260



48,035



53,350


Provision for income taxes


6,425



4,863



17,943



19,561


Net income


$

10,833



$

8,397



$

30,092



$

33,789















Net income available to common stockholders:


$

10,833



$

8,395



$

30,092



$

33,767


Net income available to common stockholders per common share:













Basic


$

0.20



$

0.16



$

0.56



$

0.65


Diluted


$

0.20



$

0.16



$

0.55



$

0.63


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













Basic


53,773



52,267



53,263



51,751


Diluted


55,029



54,055



54,742



53,415


              

RPX Corporation

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)








September 30, 2014


December 31, 2013

Assets






Current assets:






Cash and cash equivalents

$

83,326



$

100,155


Short-term investments

219,804



190,567


Restricted cash

660



364


Accounts receivable

21,572



38,477


Prepaid expenses and other current assets

17,381



10,546


Deferred tax assets

4,136



3,817


Total current assets

346,879



343,926


Patent assets, net

248,051



219,954


Property and equipment, net

4,214



4,667


Intangible assets, net

3,962



1,718


Goodwill

19,978



16,460


Restricted cash, less current portion

1,091



1,454


Other assets

785



622


Total assets

$

624,960



$

588,801


Liabilities and stockholders' equity






Current liabilities:






Accounts payable

$

596



$

332


Accrued liabilities

10,993



8,784


Deferred revenue

110,874



131,808


Deferred payment obligations



500


Other current liabilities

13,316



1,638


Total current liabilities

135,779



143,062


Deferred revenue, less current portion

1,946



5,935


Deferred tax liabilities

11,846



11,654


Other liabilities

3,043



3,227


Total liabilities

152,614



163,878


Stockholders' equity:






Common stock

5



5


Additional paid-in capital

322,774



305,343


Retained earnings

149,619



119,527


Accumulated other comprehensive income

(52)



48


Total stockholders' equity

472,346



424,923


Total liabilities and stockholders' equity

$

624,960



$

588,801


             

RPX Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)




Nine Months Ended September 30,


2014


2013

Cash flows from operating activities






Net income

$

30,092



$

33,789


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






Depreciation and amortization

89,700



76,767


Stock-based compensation

13,353



12,081


Excess tax benefit from stock-based compensation

(2,394)



(2,752)


(Gain) loss on sale of patent assets

(707)



126


Amortization of premium on investments

5,031



4,496


Deferred taxes

(1,797)



(2,772)


Other

(500)



13


Changes in assets and liabilities, net of business acquired:






Accounts receivable

17,227



5,259


Other receivables



33,775


Prepaid expenses and other assets

(8,833)



(6,392)


Accounts payable

264



143


Accrued and other liabilities

1,507



1,134


Deferred revenue

(25,023)



859


Net cash provided by operating activities

117,920



156,526


Cash flows from investing activities






Purchases of investments classified as available-for-sale

(176,209)



(134,155)


Maturities of investments classified as available-for-sale

146,225



115,122


Sales of investments classified as available-for-sale



1,099


Business acquisition, net of cash

(2,286)




Decrease in restricted cash

67



(1,818)


Purchases of property and equipment

(1,084)



(2,073)


Acquisitions of patent assets

(103,958)



(82,751)


Proceeds from sale of patent assets

1,086



100


Net cash used in investing activities

(136,159)



(104,476)


Cash flows from financing activities






Proceeds from exercise of stock options and other common stock issuances

2,864



4,174


Tax withholdings related to net share settlements of restricted stock units

(3,848)




Excess tax benefit from stock-based compensation

2,394



2,752


Net cash provided by financing activities

1,410



6,926


Net increase in cash and cash equivalents

(16,829)



58,976


Cash and cash equivalents at beginning of period

100,155



73,638


Cash and cash equivalents at end of period

$

83,326



$

132,614


            

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,



2014


2013


2014


2013

Net income


$

10,833



$

8,397



$

30,092



$

33,789


Pro forma net income per share:













Basic


$

0.20



$

0.16



$

0.56



$

0.65


Diluted


$

0.20



$

0.16



$

0.55



$

0.63


Shares used in computing pro forma net income per share:













Basic:













Basic weighted-average common shares


53,773



52,267



53,263



51,751


Add: Restricted stock




13





34


Shares used in computing pro forma basic net income per share


53,773



52,280



53,263



51,785


Diluted:













Diluted weighted-average common shares


55,029



54,055



54,742



53,415


Add: Restricted stock




13





34


Shares used in computing pro forma diluted net income per share


55,029



54,068



54,742



53,449


             

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,



2014


2013


2014


2013

Net income


$

10,833



$

8,397



$

30,092



$

33,789


Stock-based compensation[1]


4,613



4,017



13,694



12,453


Amortization of acquired intangible assets[2]


478



351



1,040



1,069


Income tax adjustments[3]


(1,648)



(1,396)



(4,890)



(4,357)


Non-GAAP net income


$

14,276



$

11,369



$

39,936



$

42,954


Pro forma non-GAAP net income per share:













Basic


$

0.27



$

0.22



$

0.75



$

0.83


Diluted


$

0.26



$

0.21



$

0.73



$

0.80


Shares used in computing pro forma net income per share:













Basic


53,773



52,280



53,263



51,785


Diluted


55,029



54,068



54,742



53,449


           

RPX Corporation

Reconciliation of GAAP to Non-GAAP Cost of Revenue

(in thousands)

(unaudited)








Three Months Ended September 30,


Nine Months Ended September 30,



2014


2013


2014


2013

Cost of revenue


$

30,444



$

29,766



$

90,906



$

78,130


Amortization of acquired intangible assets[2]


(67)



(56)



(170)



(168)


Non-GAAP cost of revenue


$

30,377



$

29,710



$

90,736



$

77,962


           

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,



2014


2013


2014


2013

Selling, general and administrative expenses


$

17,786



$

15,584



$

53,620



$

45,793


Stock-based compensation[1]


(4,613)



(4,017)



(13,694)



(12,453)


Amortization of acquired intangible assets[2]


(411)



(295)



(870)



(901)


Non-GAAP selling, general and administrative expenses


$

12,762



$

11,272



$

39,056



$

32,439


              

RPX Corporation

Additional Metrics

(in thousands, except client and headcount data)

(unaudited)






As of and for the Three Months Ended September 30,

Operating Metrics


2014


2013

Number of clients


195



160


Net additions


11



3


Trailing four quarters


35



32


Gross acquisition spend


$

59,960



$

20,591


Trailing four quarters


$

178,508



$

195,488


Net acquisition spend


$

42,210



$

17,591


Trailing four quarters


$

156,008



$

109,288


Full time equivalent headcount


149



136




As of and for the Three Months Ended September 30,

Financial Metrics


2014


2013

Subscription revenue[4]


$

62,749



$

57,829


Fee-related revenue


2,658



725


Total revenue


$

65,407



$

58,554


Cash, cash equivalents and short-term investments


$

303,130



$

277,607


Deferred revenue, current and noncurrent


$

112,820



$

105,230


    

[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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