RPX CORP SAN FRANCISCO, Aug. 1, 2017 /PRNewswire/ -- RPX Corporation (NASDAQ: RPXC), the leading provider of patent risk and discovery management solutions, today announced its financial results for the second quarter ended June 30, 2017.
Highlights
Total revenue was $80.4 million, compared to $83.1 million in the second quarter of 2016.
-- Subscription revenue from patent risk management services--including
insurance--was $61.6 million, compared to $63.2 million in the prior
year period.
-- Discovery services revenue was $18.8 million, compared to $19.3 million
in the prior year period.
"We are pleased that our increased operational focus is already showing positive results, allowing us to exceed our adjusted EBITDA target on in-line revenues," said Marty Roberts, Chief Executive Officer. "At the same time, we continue to develop strategic initiatives and opportunities to expand our service offering."
Summary Results
GAAP net income for the second quarter was $4.2 million or $0.08 per diluted share, compared to $4.2 million or $0.08 per diluted share in the second quarter of 2016.
Non-GAAP net income for the second quarter, which excludes stock-based compensation, the amortization of acquired intangibles, fair value adjustments on deferred payment obligations, gains on extinguishment of deferred payment obligations, realized losses on exchange of short-term investments, and their related tax effects, was $9.2 million or $0.18 per diluted share, compared to $9.1 million or $0.18 per diluted share in the second quarter of 2016.
Non-GAAP adjusted EBITDA was $53.6 million for the second quarter of 2017, less net patent spend of $10.5 million, resulting in non-GAAP adjusted EBITDA less net patent spend, the Company's preferred measure of adjusted pre-tax free cash flow, of $43.1 million for the second quarter of 2017.
As of June 30, 2017, RPX's patent segment had more than 320 clients, consisting of patent risk management network members and insurance clients. The Company provides patent risk management services to more than 400 companies, including those insured under policies sold to venture funds and industry trade associations.
Net patent acquisition spend during the quarter totaled $10.5 million, and included nine patent transactions.
As of June 30, 2017, RPX had cash, cash equivalents and short-term investments of $244.5 million and long-term debt of $91.7 million.
Inventus Management Change
Separately, the Company announced that Trevor Campion, CEO of its Inventus subsidiary, is leaving the Company effective August 1. Paul Mankoo has been promoted to CEO. Mankoo, who is currently President of Inventus, joined the Company as part of its acquisition of Unified in March 2015. Prior to becoming President, Paul headed Inventus's sales effort, so he is the ideal candidate to further the cross-selling program in place, along with managing day-to-day operations.
"We appreciate all of Trevor's efforts during the integration of Inventus into RPX, and we wish him the best in his future endeavors," said Marty Roberts. "I have worked closely with Paul since he was named President in February and I am delighted to partner with him as we continue to explore ways to leverage the strength of the RPX and Inventus combination, identifying ways to bring new cost efficiency to corporations."
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 2017:
Subscription and Discovery revenue[1] $79 - $82 million
Fee-related revenue $2 million
----------
Total revenue $81 - $84 million
Operating income (non-GAAP) $12 - $14 million
Net income (non-GAAP) $7 - $9 million
Consolidated adjusted EBITDA (non-
GAAP) $53 - $55 million
---------------------------------- -----------------
Effective tax rate (non-GAAP) 35%
---------------------------- ---
Weighted-average diluted shares
outstanding 50 million
------------------------------- ----------
The Company provided the following updated business outlook for the full year 2017:
Subscription revenue[1] $243 - $250 million
Discovery revenue $71 - $79 million
----------------- -----------------
Fee-related revenue $5 - $10 million
------------------- ----------------
Total revenue $319 - $339 million
Cost of revenue (non-GAAP) $201 - $204 million
SG&A (non-GAAP) $68 - $71 million
Operating income (non-GAAP) $50 - $59 million
-------------------------- -----------------
Net income (non-GAAP) $32 - $38 million
-------------------- -----------------
Patent risk management adjusted
EBITDA (non-GAAP) $193 - $202 million
------------------
Discovery services adjusted EBITDA
(non-GAAP) $19 - $23 million
-----------------
Total adjusted EBITDA (non-GAAP) $212 - $225 million
------------------
Net patent spend $110 - $115 million
---------------- ------------------
Consolidated adjusted EBITDA less net
patent spend (non-GAAP) $97 - $115 million
------------------
Effective tax rate (non-GAAP) 35%
---------------------------- ---
Weighted-average diluted shares
outstanding 50 million
------------------------------- ----------
The Company provided the following updated supplemental information regarding amortization expense for the full year 2017:
Amortization of patent assets
acquired through December 31, 2016 $127 million
Amortization of patent assets to be
acquired during fiscal 2017 $32 - $34 million
----------------------------------- -----------------
Total amortization of patent assets $159 - $161 million
Amortization of acquired intangible
assets[2] $8 - $9 million
----------------------------------- ---------------
---
[1] Subscription revenue is comprised
of revenue generated from
membership subscription
services, premiums earned, net
of ceding commissions, from
insurance policies, and
management fees related to the
Company's insurance business.
[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.
The above outlook is forward-looking. Actual results may differ materially. The Company is not able, at this time, to provide a forward-looking reconciliation to GAAP outlook for the non-GAAP financial metric outlook it has provided above for the third quarter and full year 2017 because of the difficulty of estimating certain items that are excluded from the non-GAAP financial metrics, including those items listed in "Use of Non-GAAP Financial Information" below, the effect of which may be significant. Please refer to the information under the caption "Use of Non-GAAP Financial Information" below.
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 August 1, 2017. Parties in the United States and Canada can access the call by dialing 1-866-564-2842, using conference code 8515327. International parties can access the call by dialing 1-323-794-2130, using conference code 8515327.
The conference call will be webcast and investors will be able to access the webcast and slide presentation from the "Investor Relations" section of the company's website at www.rpxcorp.com. A replay of the webcast will be available online at the aforementioned website following the conclusion of the conference call.
About RPX
RPX Corporation (NASDAQ: RPXC) is the leading provider of patent risk management and discovery management solutions. 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.
As of June 30, 2017, RPX had invested over $2 billion to acquire more than 18,000 US and international patent assets and rights on behalf of over 320 clients in eight key sectors: automotive, consumer electronics and PCs, E-commerce and software, financial services, media content and distribution, mobile communications and devices, networking, and semiconductors.
RPX subsidiary Inventus is a leading international discovery management provider focused on reducing the costs and risks associated with the discovery process through the effective use of technology solutions. Inventus has been providing litigation support services to corporate legal departments, law firms and government agencies since 1991.
Use of Non-GAAP Financial Information
This news release dated August 1, 2017 contains non-GAAP financial measures. Tables are provided in this news release that reconcile the historical 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 operating income, non-GAAP interest and other income (expense), net, non-GAAP net income, non-GAAP adjusted EBITDA, non-GAAP net income per share, and non-GAAP adjusted EBITDA less net patent spend.
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 some or all of its non-GAAP operating results (1) stock-based compensation expenses (inclusive of related employer payroll taxes), (2) the amortization of acquired intangible assets (other than patents), (3) fair value adjustments on deferred payment obligations, (4) gains on extinguishment of deferred payment obligations, (5) other-than-temporary impairment on short-term investments, (6) realized losses on exchange of short-term investments, and (7) their related tax effects.
Management uses these non-GAAP measures to evaluate the Company's financial results and trends, allocate internal resources, prepare and approve our annual budget, develop short- and long-term operating plans, assess the health of our business and determine company-wide incentive compensation. Management 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.
There are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact on our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are adjusted to calculate our non-GAAP financial measures. Management compensates for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures.
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. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure and not to rely on any single financial measure to evaluate our business.
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 the statements by management, 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.
Contacts:
Investor Relations Media Relations
JoAnn Horne Jen Costa
Market Street Partners RPX Corporation
+1 415-445-3233 +1 415-852-3180
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,
2017 2016 2017 2016
---- ---- ---- ----
Revenue $80,434 $83,109 $162,946 $162,844
Cost of revenue 51,142 49,070 102,440 96,736
Selling, general and
administrative expenses 23,124 25,904 44,245 52,799
Operating income 6,168 8,135 16,261 13,309
----- ----- ------ ------
Interest and other income
(expense), net:
Interest income 257 102 422 186
Interest expense (949) (883) (1,857) (1,233
Other income (expense), net 1,119 (768) 1,329 1,303
----- ---- ----- -----
Total interest and other income
(expense), net 427 (1,549) (106) 256
--- ------ ---- ---
Income before provision for
income taxes 6,595 6,586 16,155 13,565
Provision for income taxes 2,403 2,436 5,970 5,178
----- ----- ----- -----
Net income $4,192 $4,150 $10,185 $8,387
====== ====== ======= ======
Net income per share:
Basic $0.09 $0.08 $0.21 $0.16
===== ===== ===== =====
Diluted $0.08 $0.08 $0.20 $0.16
===== ===== ===== =====
Weighted-average shares used
in computing net income per
share:
Basic 49,142 51,034 48,910 51,548
====== ====== ====== ======
Diluted 50,107 51,557 49,690 52,089
====== ====== ====== ======
RPX Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, December 31,
2017 2016
---- ----
Assets
Current assets:
Cash and cash equivalents $189,270 $100,111
Short-term investments 55,271 90,877
Restricted cash 1,102 500
Accounts receivable, net 38,567 64,395
Prepaid expenses and other
current assets 13,935 4,524
Total current assets 298,145 260,407
Patent assets, net 175,009 212,999
Property and equipment, net 6,294 6,948
Intangible assets, net 52,518 56,050
Goodwill 156,337 151,322
Restricted cash, less current
portion 965 965
Deferred tax assets 34,042 38,261
Other assets 10,326 8,337
------ -----
Total assets $733,636 $735,289
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $2,468 $3,197
Accrued liabilities 13,905 16,798
Deferred revenue 108,334 118,856
Current portion of long-term
debt 7,724 6,474
Other current liabilities 1,008 1,484
----- -----
Total current liabilities 133,439 146,809
Deferred revenue, less current
portion 6,227 11,552
Deferred tax liabilities 3,830 4,023
Long-term debt, less current
portion 83,935 88,110
Other liabilities 10,486 10,514
------ ------
Total liabilities 237,917 261,008
------- -------
Stockholders' equity:
Common stock 5 5
Additional paid-in capital 371,566 360,462
Retained earnings 134,730 130,249
Accumulated other
comprehensive loss (10,582) (16,435)
------- -------
Total stockholders' equity 495,719 474,281
------- -------
Total liabilities and
stockholders' equity $733,636 $735,289
======== ========
RPX Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended June 30,
2017 2016
---- ----
Operating activities
Net
income $10,185 $8,387
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation
and
amortization 85,855 85,585
Stock-
based
compensation 7,077 9,828
Excess
tax
benefit
from
stock-
based
compensation - (33)
Amortization
of
premium
on
investments 890 972
Deferred
income
taxes 4,299 198
Unrealized
foreign
currency
(gain)
loss (1,047) 1,213
Fair
value
adjustment
on
deferred
payment
obligations - (1,920)
Gain on
extinguishment
of
deferred
payment
obligation - (463)
Realized
loss
on
exchange
of
short-
term
investments - 290
Other 43 169
Changes in assets and
liabilities, net of
business acquired:
Accounts
receivable 26,761 (15,207)
Prepaid
expenses
and
other
assets (11,342) (1,281)
Accounts
payable (961) 211
Accrued
and
other
liabilities (3,015) (6,097)
Deferred
revenue (15,847) 7,379
------- -----
Net
cash
provided
by
operating
activities 102,898 89,231
------- ------
Investing activities
Purchases
of
investments (25,071) (31,150)
Maturities
of
investments 59,820 42,393
Sales
of
investments - 145,925
Business
acquisition,
net of
cash
acquired - (228,453)
Decrease
(Increase)
in
restricted
cash (602) 225
Purchases
of
property
and
equipment (730) (2,087)
Acquisitions
of
patent
assets (41,918) (36,546)
Net
cash
used
in
investing
activities (8,501) (109,693)
------ --------
Financing activities
Proceeds
from
issuance
of
term
debt - 100,000
Payments
of
debt
issuance
costs - (2,003)
Repayment
of
principal
on
term
debt (3,125) (1,250)
Proceeds
from
exercise
of
stock
options 5,894 247
Taxes
paid
related
to
net-
share
settlements
of
restricted
stock
units (3,291) (2,048)
Excess
tax
benefit
from
stock-
based
compensation - 33
Payments
of
capital
leases (209) (236)
Repurchase
of
common
stock (4,783) (39,072)
------ -------
Net
cash
provided
by
(used
in)
financing
activities (5,514) 55,671
------ ------
Foreign-
currency
effect
on
cash
and
cash
equivalents 276 (152)
Net
increase
in
cash
and
cash
equivalents 89,159 35,057
Cash
and
cash
equivalents
at
beginning
of
period 100,111 94,983
------- ------
Cash
and
cash
equivalents
at end
of
period $189,270 $130,040
======== ========
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,
2017 2016 2017 2016
---- ---- ---- ----
Net income $4,192 $4,150 $10,185 $8,387
Stock-based compensation[1] 4,479 4,976 7,354 9,998
Amortization of acquired intangible
assets[2] 2,326 2,585 4,674 4,752
Fair value adjustment on deferred
payment obligations[3] - - - (1,920)
Gain on extinguishment of deferred
payment obligations[3] - (463) - (463)
Realized loss on exchange of short-
term investments[3] - 188 - 188
Income tax adjustments[4] (1,764) (2,383) (3,403) (4,095)
------ ------ ------ ------
Non-GAAP net income $9,233 $9,053 $18,810 $16,847
====== ====== ======= =======
Non-GAAP net income per share:
Basic $0.19 $0.18 $0.38 $0.33
===== ===== ===== =====
Diluted $0.18 $0.18 $0.38 $0.32
===== ===== ===== =====
Weighted-average shares used in
computing non-GAAP net income per
share:
Basic 49,142 51,034 48,910 51,548
====== ====== ====== ======
Diluted 50,107 51,557 49,690 52,089
====== ====== ====== ======
RPX Corporation
Reconciliation of GAAP to Non-GAAP Cost of Revenue
(in thousands)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
Cost of revenue $51,142 $49,070 $102,440 $96,736
Stock-based compensation[1] (126) - (221) -
Amortization of acquired intangible
assets[2] (531) (586) (1,056) (1,044
Non-GAAP cost of revenue $50,485 $48,484 $101,163 $95,692
======= ======= ======== =======
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,
2017 2016 2017 2016
---- ---- ---- ----
Selling, general and administrative
expenses $23,124 $25,904 $44,245 $52,799
Stock-based compensation[1] (4,353) (4,976) (7,133) (9,998
Amortization of acquired intangible
assets[2] (1,795) (1,999) (3,618) (3,708
Non-GAAP selling, general and
administrative expenses $16,976 $18,929 $33,494 $39,093
======= ======= ======= =======
RPX Corporation
Reconciliation of GAAP to Non-GAAP Interest and Other Income (Expense), Net
(in thousands)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
Interest and other income (expense),
net $427 $(1,549) $(106) $256
Fair value adjustment on deferred
payment obligation[3] - - - (1,920)
Gain on extinguishment of deferred
payment obligations[3] - (463) - (463)
Realized loss on exchange of short-
term investments[3] - 188 - 188
Non-GAAP interest and other income
(expense), net $427 $(1,824) $(106) $(1,939)
==== ======= ===== =======
RPX Corporation
Reconciliation of Net Income to Non-GAAP Adjusted EBITDA Less Net Patent Spend
(in thousands)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
---- ---- ---- ----
Net income $4,192 $4,150 $10,185 $8,387
Provision for income taxes 2,403 2,436 5,970 5,178
Interest and other (income)
expense, net (427) 1,549 106 (256)
Stock-based compensation[1] 4,479 4,976 7,354 9,998
Depreciation and
amortization 42,926 41,030 85,855 85,585
------ ------ ------ ------
Non-GAAP adjusted EBITDA[5] 53,573 54,141 109,470 108,892
Net patent spend (10,455) (20,885) (41,585) (37,134)
------- ------- ------- -------
Non-GAAP adjusted EBITDA
less net patent spend $43,118 $33,256 $67,885 $71,758
======= ======= ======= =======
RPX Corporation
Additional Metrics
(in thousands, except client data)
(unaudited)
Three Months Ended June 30,
Operating Metrics 2017 2016
----------------- ---- ----
Gross patent
spend $10,455 $21,115
Net patent spend $10,455 $20,885
As of and for the Three Months
Ended June 30,
Financial Metrics 2017 2016
----------------- ---- ----
Subscription
revenue[6] $61,583 $63,219
Discovery revenue 18,819 19,258
Fee-related
revenue 32 632
--- ---
Total revenue $80,434 $83,109
======= =======
Cash, cash
equivalents and
short-term
investments $244,541 $199,091
Deferred revenue,
current and non-
current $114,561 $123,133
[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
and gains on extinguishment related
to its deferred payment obligations
and realized losses on exchanges of
short-term investments from its
non-GAAP financial measures.
[4] Amount reflects income taxes
associated with the above noted
non-GAAP exclusions.
[5] RPX calculates non-GAAP adjusted
EBITDA as GAAP earnings before
other income or expenses, net,
provision for income taxes,
depreciation, amortization, and
stock-based compensation expenses
(inclusive of related employer
payroll taxes).
[6] Subscription revenue is comprised of
revenue generated from membership
subscription services, premiums
earned, net of ceding commissions,
from insurance policies, and
management fees related to its
insurance business.
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SOURCE RPX Corporation
