RPX Corporation
Jul 28, 2015

RPX Announces Second Quarter 2015 Financial Results

SAN FRANCISCO, July 28, 2015 /PRNewswire/ -- RPX Corporation (NASDAQ: RPXC), the leading provider of patent risk management solutions, today announced its financial results for the second quarter ended June 30, 2015.

Financial Highlights

  • Subscription revenue for the second quarter of fiscal 2015 was $67.6 million, up 5% compared to $64.3 million in the prior year period
  • There were 225 clients in RPX's network as of June 30, 2015, including 62 insurance policy holders.

"RPX executed successfully against its goals in the second quarter," said John Amster, CEO of RPX Corporation. "We continued to reduce patent risk for our clients, expanded the infrastructure for our insurance offering, and remained on track for our planned growth over the second half of the year."

Summary Results

Revenue for the second quarter was $67.6 million, compared to $64.3 million in the second quarter of 2014.

Net acquisition spend during the quarter totaled $20.5 million, and included 21 new acquisitions of patent assets.

GAAP net income for the second quarter was $8.0 million or $0.14 per diluted share, compared to $9.4 million or $0.17 per diluted share in the second quarter of 2014.

Non-GAAP net income for the second quarter, which excludes stock-based compensation,the amortization of acquired intangibles, and fair value adjustments on deferred payment obligations (in all cases, net of tax), was $11.2 million or $0.20 per diluted share, compared to $12.9 million or $0.24 per diluted share in the second quarter of 2014.

As of June 30, 2015, RPX had cash, cash equivalents and short-term investments of $381.2 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 third quarter of fiscal 2015:

Subscription revenue[1]

$67.7 - $68.2 million

Fee-related revenue

$0.0 million

Total revenue

$67.7 - $68.2 million

Net income (non-GAAP)

$7.8 - $8.5 million

Effective tax rate (non-GAAP)

37%

Weighted-average diluted shares outstanding

56.2 million

The Company provided the following business outlook for the full year 2015:

Subscription revenue[1]

$265.0 - $275.0 million

Fee-related revenue

$20.0 - $25.0 million

Total revenue

$285.0 - $300.0 million

Cost of revenue (non-GAAP)

$145.0 - $150.0 million

SG&A (non-GAAP)

$60.0 - $64.0 million

Net income (non-GAAP)

$50.0 - $54.0 million

Effective tax rate (non-GAAP)

37%

Weighted-average diluted shares outstanding

55.9 million

Net acquisition spend

$170.0 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]

Subscription revenue is comprised of revenue generated from membership subscription services, premiums earned from insurance policies, and management fees.

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 July 28, 2015. Parties in the United States and Canada can access the call by dialing 1-888-428-9490, using conference code 3788526. International parties can access the call by dialing 1-719-325-2215, using conference code 3788526.

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 3788526. International parties should call 1-719-457-0820 and enter conference code 3788526.

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 July 28, 2015 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 other income, net, 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), fair value adjustments on deferred payment obligations, and their 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.


Contacts:



Investor Relations        

Media Relations

JoAnn Horne           

Allan W. Whitescarver

Market Street Partners  

RPX Corporation

+1-415-445-3233            

+1-415-852-3171

ir@rpxcorp.com            

media@rpxcorp.com

 



RPX Corporation

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)



Three Months Ended June 30

Six Months Ended June 30,


2015

2014

2015

2014

Revenue

$        67,551

$        64,293

$      150,838

$      126,181

Cost of revenue

36,985

31,542

71,744

60,462

Selling, general and administrative expenses

18,997

18,579

38,456

35,834

Gain on sale of patent assets, net

(592)

(699)

(592)

(699)

Operating income

12,161

14,871

41,230

30,584

Other income, net

934

94

1,055

193

Income before provision for income taxes

13,095

14,965

42,285

30,777

Provision for income taxes

5,065

5,566

16,224

11,518

Net income

$          8,030

$         9,399

$       26,061

$       19,259






Net income available per share:





Basic

$            0.15

$           0.18

$           0.48

$           0.36

Diluted

$            0.14

$           0.17

$           0.47

$           0.35


Weighted-average shares used in computing net income per share:

Basic

54,490

53,203

54,334

53,004

Diluted

55,687

54,776

55,457

54,622

 

RPX Corporation

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)



June 30,

2015

December 31,

2014

Assets



Current assets:



Cash and cash equivalents

$       101,872

$        78,019

Short-term investments

279,282

239,514

Restricted cash

679

584

Accounts receivable

11,590

24,793

Prepaid expenses and other current assets

11,947

3,466

Deferred tax assets

4,459

4,400

Total current assets

409,829

350,776

Patent assets, net

242,198

236,349

Property and equipment, net

4,417

4,151

Intangible assets, net

2,663

3,526

Goodwill

19,978

19,978

Restricted cash, less current portion

727

1,091

Deferred tax assets, less current portion

93

Other assets

6,359

26,100

Total assets

$       686,171

$      642,064

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$              653

$             235

Accrued liabilities

9,115

14,257

Deferred revenue

137,849

133,316

Deferred payment obligations

8,650

Other current liabilities

502

640

Total current liabilities

156,769

148,448

Deferred revenue, less current portion

4,774

2,893

Deferred tax liabilities

44

Other liabilities

5,783

5,678

Total liabilities

167,370

157,019

Stockholders' equity:



Common stock

5

5

Additional paid-in capital

337,647

326,280

Retained earnings

181,389

158,868

Accumulated other comprehensive loss

(240)

(108)

Total stockholders' equity

518,801

485,045

Total liabilities and stockholders' equity

$       686,171

$      642,064

 

RPX Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)



Six Months Ended June 30,


2015

2014

Operating activities



Net income

$           26,061

$           19,259

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



Depreciation and amortization

69,991

59,289

Stock-based compensation

8,525

8,868

Excess tax benefit from stock-based compensation

(1,195)

(2,006)

Gain on sale of patent assets, net

(592)

(699)

Amortization of premium on investments

3,181

3,380

Deferred taxes

(186)

(978)

Fair value adjustment on deferred payment obligations

(705)

Other

(500)

Changes in assets and liabilities, net of business acquired:                                                                               

Accounts receivable

13,203

26,414

Prepaid expenses and other assets

(12,097)

(5,274)

Accounts payable

418

11

Accrued and other liabilities

(4,850)

(823)

Deferred revenue

6,314

(6,636)

Net cash provided by operating activities

108,068

100,305

Investing activities



Purchases of investments

(137,663)

(106,618)

Maturities of investments

100,548

98,920

Business acquisition, net of cash acquired

(425)

(2,169)

Decrease in restricted cash

269

144

Purchases of property and equipment

(1,134)

(790)

Acquisitions of patent assets

(48,936)

(73,948)

Proceeds from sale of patent assets

650

860

Acquisition of other assets

(2,500)

Net cash used in investing activities

(89,191)

(83,601)

Financing activities



Repayments of principal on deferred payment obligations

(935)

Proceeds from deferred payment obligations

6,270

Proceeds from exercise of stock options and other common stock issuances

4,294

2,399

Taxes paid related to net-share settlements of restricted stock units

(2,307)

(2,675)

Excess tax benefit from stock-based compensation

1,195

2,006

Repurchase of common stock

(3,541)

Net cash provided by financing activities

4,976

1,730

Net increase in cash and cash equivalents

23,853

18,434

Cash and cash equivalents at beginning of period

78,019

100,155

Cash and cash equivalents at end of period

$         101,872

$         118,589

 

RPX Corporation

Reconciliation of GAAP to Non-GAAP Net Income Per Share

(in thousands, except per share data)

(unaudited)




Three Months Ended June 30

Six Months Ended June 30,


2015

2014

2015

2014

Net income

$           8,030

$          9,399

$        26,061

$        19,259

Stock-based compensation[1]

4,810

5,162

8,802

9,081

Amortization of acquired intangible assets[2]

431

257

862

562

Fair value adjustment on deferred payment obligations[3]

(705)

(705)

Income tax adjustments[4]

(1,410)

(1,873)

(2,700)

(3,242)

Non-GAAP net income

$         11,156

$        12,945

$        32,320

$        25,660

Non-GAAP net income per share:





    Basic

$             0.20

$            0.24

$            0.59

$            0.48

    Diluted

$             0.20

$            0.24

$            0.58

$            0.47

Weighted-average shares used in computing net income per share:





    Basic                                                                

54,490

53,203

54,334

53,004

    Diluted

55,687

54,776

55,457

54,622

 

RPX Corporation

Reconciliation of GAAP to Non-GAAP Cost of Revenue 

(in thousands)

(unaudited)



Three Months Ended June 30

Six Months Ended June 30,


2015

2014

2015

2014

Cost of revenue

$        36,985

$        31,542

$        71,744

$        60,462

Amortization of acquired intangible assets[2]

(50)

(47)

(100)

(103)

Non-GAAP cost of revenue

$        36,935

$        31,495

$        71,644

$        60,359

 

RPX Corporation

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

(in thousands)

(unaudited)



Three Months Ended June 30

Six Months Ended June 30,


2015

2014

2015

2014

Selling, general and administrative expenses

$        18,997

$        18,579

$        38,456

$        35,834

Stock-based compensation[1]

(4,810)

(5,162)

(8,802)

(9,081)

Amortization of acquired intangible assets[2]

(381)

(210)

(762)

(459)

Non-GAAP selling, general and administrative expenses

 

$        13,806

 

$        13,207

 

$        28,892

 

$        26,294

 

RPX Corporation

Reconciliation of GAAP to Non-GAAP Other Income, Net

(in thousands)

(unaudited)



Three Months Ended June 30,

Six Months Ended June 30,


2015

2014

2015

2014

Other income, net

$        934

$        94

$        1,055

$        193

Fair value adjustment on deferred payment obligations[3]

(705)

(705)

Non-GAAP other income, net

$        229

$        94

$           350

$        193

 

RPX Corporation

Additional Metrics

(in thousands, except client and headcount data)

(unaudited)



As of and for the Three
Months Ended June 30,

Operating Metrics

2015

2014

Number of clients

225

184

    Net additions

1

6

    Trailing four quarters

41

27

Gross acquisition spend

$        20,575

$        18,795

    Trailing four quarters

$   1,027,013

$      139,162

Net acquisition spend

$        20,500

$        17,795

    Trailing four quarters

$      137,156

$      131,412

Full time equivalent headcount

153

138





As of and for the Three
Months Ended June 30,

Financial Metrics

2015

2014

Subscription revenue[5]

$        67,551

$        64,293

Fee-related revenue

    Total revenue

$        67,551

$        64,293

Cash, cash equivalents and short-term investments

$      381,154

$      317,554

Deferred revenue, current and noncurrent

$      142,623

$      131,207



[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]

RPX excludes fair value adjustments related to its deferred payment obligations from its non-GAAP financial measures

[4]

Amount reflects income taxes associated with the above noted non-GAAP exclusions

[5]

Subscription revenue is comprised of revenue generated from membership subscription services, premiums earned from insurance policies, and management fees

 

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SOURCE RPX Corporation

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