RPX Corporation
Oct 27, 2015

RPX Announces Third Quarter 2015 Financial Results

SAN FRANCISCO, Oct. 27, 2015 /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, 2015.

Financial Highlights

  • Subscription revenue for the third quarter of fiscal 2015 was $68.2 million, up 9% compared to $62.7 million in the prior year period
  • There were 245 clients in RPX's network as of September 30, 2015, including 77 insurance policy holders.

"RPX made steady progress in the third quarter," said John Amster, CEO of RPX Corporation. "We continued to quantifiably reduce patent risk for our clients, expanded the sales infrastructure for our insurance offerings, and further strengthened our data and intelligence tools.  Our progress continues to strengthen RPX's position as the de facto clearinghouse for efficiently clearing patent risk without the high costs of litigation." 

Summary Results

Revenue for the third quarter was $68.2 million, compared to $65.4 million in the third quarter of 2014.

Net acquisition spend during the quarter totaled $36.2 million, and included 22 new acquisitions of patent assets.

GAAP net income for the third quarter was $7.8 million or $0.14 per diluted share, compared to $10.8 million or $0.20 per diluted share in the third quarter of 2014.

Non-GAAP net income for the third 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 $10.6 million or $0.19 per diluted share, compared to $14.3 million or $0.26 per diluted share in the third quarter of 2014.

As of September 30, 2015, RPX had cash, cash equivalents and short-term investments of $368.0 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 2015:

Subscription revenue[1]


$67.4 - $68.0 million

Fee-related revenue


$0.0 million

Total revenue


$67.4 - $68.0 million

Net income (non-GAAP)


$7.3 - $8.5 million

Effective tax rate (non-GAAP)


37%

Weighted-average diluted shares outstanding


55.5 million

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

Subscription revenue[1]


$269.4 - $270.0 million

Fee-related revenue


$17.1 million

Total revenue


$286.5 - $287.1 million

Cost of revenue (non-GAAP)


$149.5 - $150.5 million

SG&A (non-GAAP)


$57.0 - $58.0 million

Net income (non-GAAP)


$50.4 - $51.4 million

Effective tax rate (non-GAAP)


37%

Weighted-average diluted shares outstanding


55.6 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 October 27, 2015. Parties in the United States and Canada can access the call by dialing 1-800-723-6604, using conference code 6456662. International parties can access the call by dialing 1-785-830-7977, using conference code 6456662.

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 6456662. International parties should call 1-719-457-0820 and enter conference code 6456662.

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 27, 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 September 30,


Nine Months Ended September 30,


2015


2014


2015


2014

Revenue

$

68,212


$

65,407


$

219,050


$

191,588

Cost of revenue


37,639



30,444



109,383



90,906

Selling, general and administrative expenses


18,773



17,786



57,229



53,620

Gain on sale of patent assets, net




(8)



(592)



(707)

Operating income


11,800



17,185



53,030



47,769

Other income, net


876



73



1,931



266

Income before provision for income taxes


12,676



17,258



54,961



48,035

Provision for income taxes


4,842



6,425



21,066



17,943

Net income

$

7,834


$

10,833


$

33,895


$

30,092













Net income per share:












Basic

$

0.14


$

0.20


$

0.62


$

0.56

Diluted

$

0.14


$

0.20


$

0.61


$

0.55













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












Basic


54,800



53,773



54,491



53,263

Diluted


55,703



55,029



55,547



54,742













 


RPX Corporation

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)






September 30, 2015


December 31, 2014

Assets




Current assets:




Cash and cash equivalents

$

104,568


$

78,019

Short-term investments

263,453


239,514

Restricted cash

651


584

Accounts receivable

10,676


24,793

Prepaid expenses and other current assets

9,217


3,466

Deferred tax assets

4,399


4,400

Total current assets

392,964


350,776

Patent assets, net

242,178


236,349

Property and equipment, net

4,544


4,151

Intangible assets, net

2,232


3,526

Goodwill

19,978


19,978

Restricted cash, less current portion

727


1,091

Deferred tax assets, less current portion


93

Other assets

6,605


26,100

Total assets

$

669,228


$

642,064

Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$

953


$

235

Accrued liabilities

11,041


14,257

Deferred revenue

112,087


133,316

Deferred payment obligations

8,038


Other current liabilities

1,662


640

Total current liabilities

133,781


148,448

Deferred revenue, less current portion

5,344


2,893

Deferred tax liabilities

181


Other liabilities

5,764


5,678

Total liabilities

145,070


157,019

Stockholders' equity:




Common stock

5


5

Additional paid-in capital

341,066


326,280

Retained earnings

183,396


158,868

Accumulated other comprehensive loss

(309)


(108)

Total stockholders' equity

524,158


485,045

Total liabilities and stockholders' equity

$

669,228


$

642,064


















 


RPX Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)








Nine Months Ended September 30,


2015


2014

Operating activities






Net income

$

33,895


$

30,092

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






Depreciation and amortization


107,026



89,700

Stock-based compensation


13,128



13,353

Excess tax benefit from stock-based compensation


(1,404)



(2,394)

Gain on sale of patent assets, net


(592)



(707)

Amortization of premium on investments


4,838



5,031

Deferred taxes


(376)



(1,797)

Fair value adjustment on deferred payment obligations


(1,317)



Other




(500)

Changes in assets and liabilities, net of business acquired:






Accounts receivable


14,117



17,227

Prepaid expenses and other assets


(9,790)



(8,833)

Accounts payable


718



264

Accrued and other liabilities


(2,833)



1,507

Deferred revenue


(18,878)



(25,023)

Net cash provided by operating activities


138,532



117,920

Investing activities






Purchases of investments


(205,393)



(176,209)

Maturities of investments


182,725



146,225

Business acquisition, net of cash acquired


(425)



(2,286)

Decrease in restricted cash


297



67

Purchases of property and equipment


(1,617)



(1,084)

Acquisitions of patent assets


(84,068)



(103,958)

Proceeds from sale of patent assets


650



1,086

Acquisition of other assets


(2,500)



Net cash used in investing activities


(110,331)



(136,159)

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


4,646



2,864

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


(3,670)



(3,848)

Excess tax benefit from stock-based compensation


1,404



2,394

Repurchase of common stock


(9,367)



Net cash (used in) provided by financing activities


(1,652)



1,410

Net increase (decrease) in cash and cash equivalents


26,549



(16,829)

Cash and cash equivalents at beginning of period


78,019



100,155

Cash and cash equivalents at end of period

$

104,568


$

83,326














 


RPX Corporation

Reconciliation of GAAP to Non-GAAP Net Income Per Share

(in thousands, except per share data)

(unaudited)














Three Months Ended September 30,


Nine Months Ended September 30,


2015


2014


2015


2014

Net income

$

7,834


$

10,833


$

33,895


$

30,092

Stock-based compensation[1]


4,680



4,613



13,482



13,694

Amortization of acquired intangible assets[2]


432



478



1,294



1,040

Fair value adjustment on deferred payment obligations[3]


(612)





(1,317)



Income tax adjustments[4]


(1,688)



(1,648)



(4,388)



(4,890)

Non-GAAP net income

$

10,646


$

14,276


$

42,966


$

39,936

Non-GAAP net income per share:












Basic

$

0.19


$

0.27


$

0.79


$

0.75

Diluted

$

0.19


$

0.26


$

0.77


$

0.73

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












Basic


54,800



53,773



54,491



53,263

Diluted


55,703



55,029



55,547



54,742













 


RPX Corporation

Reconciliation of GAAP to Non-GAAP Cost of Revenue

(in thousands)

(unaudited)














Three Months Ended September 30,


Nine Months Ended September 30,


2015


2014


2015


2014

Cost of revenue

$

37,639


$

30,444


$

109,383


$

90,906

Amortization of acquired intangible assets[2]


(50)



(67)



(150)



(170)

Non-GAAP cost of revenue

$

37,589


$

30,377


$

109,233


$

90,736













 


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,


2015


2014


2015


2014

Selling, general and administrative expenses

$

18,773


$

17,786


$

57,229


$

53,620

Stock-based compensation[1]


(4,680)



(4,613)



(13,482)



(13,694)

Amortization of acquired intangible assets[2]


(382)



(411)



(1,144)



(870)

Non-GAAP selling, general and administrative expenses

$

13,711


$

12,762


$

42,603


$

39,056













 


RPX Corporation

Reconciliation of GAAP to Non-GAAP Other Income, Net

(in thousands)

(unaudited)














Three Months Ended September 30,


Nine Months Ended September 30,


2015


2014


2015


2014

Other income, net

$

876


$

73


$

1,931


$

266

Fair value adjustment on deferred payment obligations[3]


(612)





(1,317)



Non-GAAP other income, net

$

264


$

73


$

614


$

266













 



RPX Corporation

Additional Metrics

(in thousands, except client and headcount data)

(unaudited)










As of and for the Three Months Ended September 30,

Operating Metrics


2015


2014

Number of clients



245



195

 Net additions



20



11

 Trailing four quarters



50



35

Gross acquisition spend


$

36,416


$

59,960

Trailing four quarters


$

1,003,469


$

178,508

Net acquisition spend


$

36,176


$

42,210

Trailing four quarters


$

131,122


$

156,008

Full time equivalent headcount



154



149










As of and for the Three Months Ended September 30,

Financial Metrics


2015


2014

Subscription revenue[5]


$

68,177


$

62,749

Fee-related revenue



35



2,658

 Total revenue


$

68,212


$

65,407

Cash, cash equivalents and short-term investments


$

368,021


$

303,130

Deferred revenue, current and noncurrent


$

117,431


$

112,820



[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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