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RPX Announces Second Quarter 2013 Financial Results

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SAN FRANCISCO, July 30, 2013 /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, 2013.

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

Financial Highlights

  • Revenue for the second quarter of fiscal 2013 totaled $57.5 million
  • Subscription revenue for the second quarter was $55.0 million, up 20% compared to $45.8 million in the prior year period
  • GAAP net income for the second quarter of fiscal 2013 was $10.7 million, or $0.20 per pro forma diluted share[1]
  • Non-GAAP net income for the second quarter of fiscal 2013 was $14.0 million or $0.26 per pro forma diluted share[1]

"We are very pleased with our results in the second quarter," said John Amster, Chief Executive Officer of RPX Corporation. "We grew our client network to 157 members, wrote eight new insurance policies, and spent over $39 million on patent assets to continue to clear patent risk for our clients."

Summary Results

Revenue for the second quarter increased to $57.5 million, compared to $55.2 million in the second quarter of 2012.

Net acquisition spend during the quarter totaled $39.1 million, and included eight 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 $10.7 million or $0.20 per diluted share, compared to $13.2 million or $0.25 per diluted share in the second quarter of 2012. Net income was $0.20 per pro forma diluted share[1] in the second quarter, compared to $0.25 per pro forma diluted share[1] in the second 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 $14.0 million or $0.26 per pro forma diluted share[1], compared to $15.4 million or $0.29 per pro forma diluted share[1] in the second quarter of 2012.

As of June 30, 2013, RPX had cash, cash equivalents and short-term investments of $259.3 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 2013:

Subscription revenue[2]


$57.2 - $57.7 million

Fee-related revenue


$0.5 million

Total revenue


$57.7 - $58.2 million

Net income (non-GAAP)


$10.6 - $11.1 million

Effective tax rate (non-GAAP)


37%

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]


$219 - $225 million

Fee-related revenue


$10 - $11 million

Total revenue


$229 - $235 million

Cost of revenue (non-GAAP)


$103 - $105 million

SG&A (non-GAAP)


$46 - $48 million

Net income (non-GAAP)


$50 - $53 million

Effective tax rate (non-GAAP)


37%

Pro forma weighted-average diluted shares outstanding


53.7 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 July 30, 2013.  Parties in the United States and Canada can access the call by dialing 1-877-941-9205, using conference code 4628430.  International parties can access the call by dialing 1-480-629-9818, using conference code 4628430.

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 4628430.  International parties should call 1-303-590-3030 and enter conference code 4628430.

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 July 30, 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 investors wish to exclude the effects of such items in 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, the Company's ability to effectively manage its growth and changes in its executive team, 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.

Contact:

Investor Relations
JoAnn Horne
Market Street Partners
+1-415-445-3233
ir@rpxcorp.com

 


RPX Corporation

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


Three Months Ended


Six Months Ended


June 30,


June 30,


2013


2012


2013


2012

Revenue

$

57,481


$

55,238


$

118,675


$

99,087

Cost of revenue

24,694


20,511


48,364


38,528

Selling, general and administrative expenses

15,736


13,533


30,209


26,756

(Gain) loss on sale of patent assets, net

126



126


(177)

Operating income

16,925


21,194


39,976


33,980

Other income, net

63


47


114


27

Income before provision for income taxes

16,988


21,241


40,090


34,007

Provision for income taxes

6,291


8,053


14,698


12,738

Net income

$

10,697


$

13,188


$

25,392


$

21,269

Net income available to common stockholders:








Basic

$

10,691


$

12,976


$

25,370


$

20,782

Diluted

$

10,691


$

12,985


$

25,370


$

20,806

Net income per common share:








Basic

$

0.21


$

0.26


$

0.49


$

0.43

Diluted

$

0.20


$

0.25


$

0.48


$

0.40

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








Basic

51,774


49,454


51,489


48,881

Diluted

53,463


51,787


53,055


51,517


RPX Corporation

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)


June 30,


December 31,


2013


2012

Assets




Current assets:




Cash and cash equivalents

$

99,278


$

73,638

Short-term investments

160,027


126,092

Accounts receivable

24,928


25,144

Other receivables


33,775

Prepaid expenses and other current assets

5,859


5,237

Deferred tax assets

7,954


7,658

    Total current assets

298,046


271,544

Patent assets, net

221,362


199,314

Property and equipment, net

3,639


3,144

Intangible assets, net

2,458


3,226

Goodwill

16,460


16,460

Other assets

838


279

    Total assets

$

542,803


$

493,967

Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$

698


$

568

Accrued liabilities

5,118


7,206

Deferred revenue

111,744


101,249

Deferred payment obligations

500


500

Other current liabilities

1,565


1,813

    Total current liabilities

119,625


111,336

Deferred revenue, less current portion

5,829


3,122

Deferred tax liabilities

17,430


18,108

Other liabilities

2,185


1,142

   Total liabilities

145,069


133,708

Stockholders' equity:




Common stock

5


5

Additional paid-in capital

293,555


281,530

Retained earnings

104,136


78,744

Accumulated other comprehensive income (loss)

38


(20)

    Total stockholders' equity

397,734


360,259

    Total liabilities and stockholders' equity

$

542,803


$

493,967


RPX Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


Six Months Ended June 30,


2013


2012

Cash flows from operating activities




Net income

$

25,392


$

21,269

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




Depreciation and amortization

47,798


38,938

Stock-based compensation

8,186


5,012

Excess tax benefit from stock-based compensation

(2,009)


(5,423)

Imputed interest on deferred payment obligations


93

(Gain) loss on sale of patent assets

126


(177)

Amortization of premium on investments

2,995


2,473

Deferred taxes

(1,906)


588

Other

13


(11)

Changes in assets and liabilities:




    Accounts receivable

216


2,617

    Other receivables

33,775


    Prepaid expenses and other assets

(3,348)


3,745

    Accounts payable

130


(226)

    Accrued and other liabilities

(1,191)


(3,987)

    Deferred revenue

13,202


(2,349)

        Net cash provided by operating activities

123,379


62,562

Cash flows from investing activities




Purchases of investments classified as available-for-sale

(98,950)


(127,932)

Maturities of investments classified as available-for-sale

65,787


105,887

Sales of investments classified as available-for-sale

1,099


Business acquisition


(45,765)

Decrease in restricted cash


647

Purchases of intangible assets


(52)

Purchases of property and equipment

(874)


(1,400)

Acquisitions of patent assets

(69,637)


(36,730)

Proceeds from sale of patent assets

100


200

Net cash used in investing activities

(102,475)


(105,145)

Cash flows from financing activities




Repayments of principal on deferred payment obligations


(4,050)

Proceeds from exercise of stock options and other common stock issuances

2,727


2,520

Excess tax benefit from stock-based compensation

2,009


5,423

Net cash provided by financing activities

4,736


3,893

Net increase (decrease) in cash and cash equivalents

25,640


(38,690)

Cash and cash equivalents at beginning of period

73,638


106,749

Cash and cash equivalents at end of period

$

99,278


$

68,059


RPX Corporation

Reconciliation of Pro Forma Net Income Per Share

(in thousands, except per share data)

(unaudited)


Three Months Ended


Six Months Ended


June 30,


June 30,


2013


2012


2013


2012

Net income

$

10,697


$

13,188


$

25,392


$

21,269

Pro forma net income per share:







Basic

$

0.21


$

0.26


$

0.49


$

0.43

Diluted

$

0.20


$

0.25


$

0.48


$

0.40

Shares used in computing pro forma net income per share:








Basic:








    Basic weighted-average common shares

51,774


49,454


51,489


48,881

    Add: Restricted stock

31


809


45


1,146

Shares used in computing pro forma basic net income per share

51,805


50,263


51,534


50,027

Diluted:







    Diluted weighted-average common shares

53,463


51,787


53,055


51,517

    Add: Restricted stock

31


809


45


1,146

Shares used in computing pro forma diluted net income per share

53,494


52,596


53,100


52,663


RPX Corporation

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

(in thousands, except per share data)

(unaudited)


Three Months Ended


Six Months Ended


June 30,


June 30,


2013


2012


2013


2012

Net income

$

10,697


$

13,188


$

25,392


$

21,269

Stock-based compensation[1]

4,658


2,608


8,436


5,281

Amortization of acquired intangible assets[2]

358


321


718


471

Income tax adjustments[3]

(1,676)


(747)


(2,961)


(1,635)

Non-GAAP net income

$

14,037


$

15,370


$

31,585


$

25,386

Pro forma non-GAAP net income per share:








Basic

$

0.27


$

0.31


$

0.61


$

0.51

Diluted

$

0.26


$

0.29


$

0.59


$

0.48

Pro forma weighted-average shares:








Basic

51,805


50,263


51,534


50,027

Diluted

53,494


52,596


53,100


52,663

 


RPX Corporation

Reconciliation of GAAP to Non-GAAP Cost of Revenue

(in thousands)

(unaudited)


Three Months Ended


Six Months Ended


June 30,


June 30,


2013


2012


2013


2012

Cost of revenue

$

24,694


$

20,511


$

48,364


$

38,528

Amortization of acquired intangible assets[2]

(56)


(56)


(112)


(112)

Non-GAAP cost of revenue

$

24,638


$

20,455


$

48,252


$

38,416

 


RPX Corporation

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

(in thousands)

(unaudited)


Three Months Ended


Six Months Ended


June 30,


June 30,


2013


2012


2013


2012

Selling, general and administrative expenses

$

15,736


$

13,533


$

30,209


$

26,756

Stock-based compensation[1]

(4,658)


(2,608)


(8,436)


(5,281)

Amortization of acquired intangible assets[2]

(302)


(265)


(606)


(359)

Non-GAAP selling, general and administrative expenses

$

10,776


$

10,660


$

21,167


$

21,116

 

 



RPX Corporation

Additional Metrics

(in thousands, except client and headcount data)

(unaudited)



As of and for the Three Months
Ended June 30,

Operating Metrics


2013


2012

Number of clients


157


120

Net additions


11


4

Trailing four quarters


37


24

Gross acquisition spend


$

41,100


$

107,684

Trailing four quarters


$

201,273


$

183,709

Net acquisition spend


$

39,100


$

53,454

Trailing four quarters


$

118,073


$

124,854

Full time equivalent headcount


123


126



As of and for the Three Months
Ended June 30,

Financial Metrics


2013


2012

Subscription revenue[4]


$

54,979


$

45,813

Fee-related revenue


2,502


9,425

Revenue


$

57,481


$

55,238

Cash, cash equivalents and short-term investments


$

259,305


$

219,876

Deferred revenue, current and noncurrent


$

117,573


$

105,980








[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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