EX-99.1 2 pressreleaserpxcorp.htm EXHIBIT 99.1 Exhibit



EXHIBIT 99.1

 

RPX Announces Second Quarter 2016 Financial Results
 
SAN FRANCISCO – August 2, 2016 – RPX Corporation (NASDAQ: RPXC), the leading provider of patent risk management and discovery management solutions, today announced its financial results for the second quarter ended June 30, 2016.

"Our strategy of diversifying RPX’s operations is clearly helping the Company navigate a challenging near term patent environment," said John Amster, CEO of RPX Corporation. "In the second quarter the Discovery Services business posted solid results, our patent risk business continued to deliver value to 300+ clients, and we took appropriate operational steps to ensure we achieve our cash generation goals for the year.”

Summary Results for the Second Quarter of 2016

Total revenue was $83.1 million, compared to $67.6 million in the second quarter of 2015.

•
Subscription revenue from patent risk management services - including insurance - was $63.2 million, compared to $67.6 million in the prior year period.
•
Discovery services revenue was $19.3 million.
•
Fee-related revenue was $0.6 million, compared to nil in the prior year period.

GAAP net income for the second quarter was $4.2 million or $0.08 per diluted share, compared to $8.0 million or $0.14 per diluted share in the second quarter of 2015.

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, and realized losses on exchange of short-term investments, and their related tax effects, was $9.1 million or $0.18 per diluted share, compared to $11.2 million or $0.20 per diluted share in the second quarter of 2015.

Non-GAAP Adjusted EBITDA less Net Patent Spend, the Company's preferred measure of adjusted pre-tax free cash flow, was $33.3 million in the second quarter of 2016.

RPX's patent risk management client network included 317 clients, including insurance clients, as of June 30, 2016.

Net patent acquisition spend during the quarter totaled $20.9 million, and included 20 patent transactions.

As of June 30, 2016, RPX had cash, cash equivalents and short-term investments of $199.1 million.

1



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 2016:
Subscription and Discovery revenue[1]
 
$81 - $83 million
Fee-related revenue
 
$6 million
Total revenue
 
$87 - $89 million
Operating income (non-GAAP)
 
$16 - $17 million
Net income (non-GAAP)
 
$10 - $11 million
Total Adjusted EBITDA (non-GAAP)
 
$58 - $59 million
Effective tax rate (non-GAAP)
 
37%
Weighted-average diluted shares outstanding
 
50 million

The Company provided the following business outlook for the full year 2016:
Subscription revenue[1]
 
$255 - $260 million
Discovery revenue
 
$67 - $69 million
Fee-related revenue
 
$8 - $15 million
Total revenue
 
$330 - $344 million
Cost of revenue (non-GAAP)
 
$198 - $200 million
SG&A (non-GAAP)
 
$76 - $78 million
Operating income (non-GAAP)
 
$56 - $66 million
Net income (non-GAAP)
 
$35 - $40 million
 
 
 
RPX adjusted EBITDA (non-GAAP)
 
$198 - $206 million
Discovery adjusted EBITDA (non-GAAP)
 
$19 - $21 million
Total adjusted EBITDA (non-GAAP)
 
$217 - $227 million
Net patent spend
 
$115 - $120 million
Adjusted EBITDA less net patent spend (non-GAAP)
 
$97 - $112 million
 
 
 
Effective tax rate (non-GAAP)
 
37%
Weighted-average diluted shares outstanding
 
51 million

The Company provided the following supplemental information regarding amortization expense for the full year 2016:
Amortization of patent assets acquired through December 31, 2015
 
$136.3 million
Amortization of patent assets to be acquired during fiscal 2016
 
$20.0 - $26.0 million
Total amortization of patent assets
 
$156.3 - $162.3 million
 
 
 
Amortization of Inventus's acquired intangible assets[2]
 
$8.6 - $9.6 million
Other intangible amortization expenses[2]
 
$1.3 million

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 2016 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.

2



 ————————
[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 its 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.

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 2, 2016. Parties in the United States and Canada can access the call by dialing 1-800-896-8445, using conference code 6392847. International parties can access the call by dialing 1-785-830-1916, using conference code 6392847.

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, 2016, RPX had invested over $2 billion to acquire more than 15,500 US and international patent assets and rights on behalf of nearly 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 2, 2016 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 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 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) realized losses on exchange of short-term investments, and (6) 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. 

3




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 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 and discovery management businesses as well as 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
Jen Costa
Market Street Partners
RPX Corporation
+1 415-445-3233
+1 415-852-3180
ir@rpxcorp.com
media@rpxcorp.com

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RPX Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Revenue
 
$
83,109

 
$
67,551

 
$
162,844

 
$
150,838

Cost of revenue
 
49,070

 
36,985

 
96,736

 
71,744

Selling, general and administrative expenses
 
25,904

 
18,997

 
52,799

 
38,456

Gain on sale of patent assets, net
 
—

 
(592
)
 
—

 
(592
)
Operating income
 
8,135

 
12,161

 
13,309

 
41,230

Other income (expense), net
 
(1,549
)
 
934

 
256

 
1,055

Income before provision for income taxes
 
6,586

 
13,095

 
13,565

 
42,285

Provision for income taxes
 
2,436

 
5,065

 
5,178

 
16,224

Net income
 
$
4,150

 
$
8,030

 
$
8,387

 
$
26,061

 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.08

 
$
0.15

 
$
0.16

 
$
0.48

Diluted
 
$
0.08

 
$
0.14

 
$
0.16

 
$
0.47

Weighted-average shares used in computing net income per share:
 
 
 
 
 
 
 
 
Basic
 
51,034

 
54,490

 
51,548

 
54,334

Diluted
 
51,557

 
55,687

 
52,089

 
55,457



5



RPX Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
 
 
 
 
June 30,
2016
 
December 31,
2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
130,040

 
$
94,983

Short-term investments
69,051

 
231,015

Restricted cash
476

 
701

Accounts receivable, net
41,714

 
13,905

Prepaid expenses and other current assets
17,221

 
12,643

Total current assets
258,502

 
353,247

Patent assets, net
212,245

 
254,560

Property and equipment, net
8,033

 
4,733

Intangible assets, net
63,130

 
1,801

Goodwill
160,122

 
19,978

Restricted cash, less current portion
1,062

 
727

Deferred tax assets
25,504

 
6,896

Other assets
8,503

 
16,619

Total assets
$
737,101

 
$
658,561

 
 
 
 
Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
2,964

 
$
959

Accrued liabilities
11,456

 
14,842

Deferred revenue
119,856

 
110,921

Deferred payment obligations
1,301

 
2,383

Current portion of long-term debt
5,224

 
—

Other current liabilities
1,587

 
467

Total current liabilities
142,388

 
129,572

Deferred revenue, less current portion
3,277

 
4,731

Deferred tax liabilities
4,837

 
—

Long-term debt
91,660

 
—

Other liabilities
8,410

 
7,779

Total liabilities
250,572

 
142,082

Stockholders’ equity:
 
 
 
Common stock
5

 
5

Additional paid-in capital
351,577

 
344,610

Retained earnings
141,431

 
172,115

Accumulated other comprehensive loss
(6,484
)
 
(251
)
Total stockholders’ equity
486,529

 
516,479

Total liabilities and stockholders’ equity
$
737,101

 
$
658,561



6



RPX Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
 
Six Months Ended June 30,
 
2016
 
2015
Operating activities
 
 
 
Net income
$
8,387

 
$
26,061

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
85,585

 
69,991

Stock-based compensation
9,828

 
8,525

Excess tax benefit from stock-based compensation
(33
)
 
(1,195
)
Gain on sale of patent assets, net
—

 
(592
)
Amortization of premium on investments
972

 
3,181

Deferred taxes
198

 
(186
)
Unrealized foreign currency loss
1,213

 
—

Fair value adjustment on deferred payment obligations
(1,920
)
 
(705
)
Gain on extinguishment of deferred payment obligation
(463
)
 
—

Realized loss on exchange of short-term investments
290

 
—

Other
169

 
—

Changes in assets and liabilities, net of business acquired:
 
 
 
Accounts receivable, net
(15,207
)
 
13,203

Prepaid expenses and other assets
(1,479
)
 
(12,097
)
Accounts payable
211

 
418

Accrued and other liabilities
(6,097
)
 
(4,850
)
Deferred revenue
7,379

 
6,314

Net cash provided by operating activities
89,033

 
108,068

Investing activities
 

 
 

Purchases of investments
(31,150
)
 
(137,663
)
Maturities of investments
42,590

 
100,548

Sales of investments
145,925

 
—

Business acquisition, net of cash acquired
(228,453
)
 
(425
)
Decrease in restricted cash
225

 
269

Purchases of property and equipment
(2,087
)
 
(1,134
)
Acquisitions of patent assets
(36,546
)
 
(48,936
)
Proceeds from sale of patent assets
—

 
650

Acquisition of other assets
—

 
(2,500
)
Net cash used in investing activities
(109,496
)
 
(89,191
)
Financing activities
 

 
 

Repayment of principal on deferred payment obligations
—

 
(935
)
Proceeds from deferred payment obligations
—

 
6,270

Proceeds from issuance of term debt
100,000

 
—

Payments of debt issuance costs
(2,003
)
 
—

Repayment of principal on term debt
(1,250
)
 
—

Proceeds from exercise of stock options
247

 
4,294

Taxes paid related to net-share settlements of restricted stock units
(2,048
)
 
(2,307
)
Excess tax benefit from stock-based compensation
33

 
1,195

Payments of capital leases
(236
)
 
—

Repurchase of common stock
(39,072
)
 
(3,541
)
Net cash provided by financing activities
55,671

 
4,976

Foreign-currency effect on cash and cash equivalents
(151
)
 
—

Net increase in cash and cash equivalents
35,057

 
23,853

Cash and cash equivalents at beginning of period
94,983

 
78,019

Cash and cash equivalents at end of period
$
130,040

 
$
101,872


7



RPX Corporation
Reconciliation to Non-GAAP Net Income Per Share
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Revenue
$
83,109

 
$
67,551

 
$
162,844

 
$
150,838

 
 
 
 
 
 
 
 
Cost of revenue
49,070

 
36,985

 
96,736

 
71,744

Amortization of acquired intangible assets[2]
(586
)
 
(50
)
 
(1,044
)
 
(100
)
Non-GAAP cost of revenue
48,484

 
36,935

 
95,692

 
71,644

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
25,904

 
18,997

 
52,799

 
38,456

Stock-based compensation[1]
(4,976
)
 
(4,810
)
 
(9,998
)
 
(8,802
)
Amortization of acquired intangible assets[2]
(1,999
)
 
(381
)
 
(3,708
)
 
(762
)
Non-GAAP selling, general and administrative expenses
18,929

 
13,806

 
39,093

 
28,892

 
 
 
 
 
 
 
 
Gain on sale of patent assets, net
—

 
(592
)
 
—

 
(592
)
Non-GAAP operating income
15,696

 
17,402

 
28,059

 
50,894

 
 
 
 
 
 
 
 
Other income (expense), net
(1,549
)
 
934

 
256

 
1,055

Fair value adjustment on deferred payment obligation[3]
—

 
(705
)
 
(1,920
)
 
(705
)
Gain on extinguishment of deferred payment obligations[3]
(463
)
 
—

 
(463
)
 
—

Realized loss on exchange of short-term investments[3]
188

 
—

 
188

 
—

Non-GAAP other income (expense), net
(1,824
)
 
229

 
(1,939
)
 
350

 
 
 
 
 
 
 
 
Non-GAAP income before provision for income taxes
13,872

 
17,631

 
26,120

 
51,244

 
 
 
 
 
 
 
 
Provision for income taxes
2,436

 
5,065

 
5,178

 
16,224

Income tax adjustments[4]
2,383

 
1,410

 
4,095

 
2,700

Non-GAAP provision for income taxes
4,819

 
6,475

 
9,273

 
18,924

Non-GAAP net income
$
9,053

 
$
11,156

 
$
16,847

 
$
32,320

 
 
 
 
 
 
 
 
Non-GAAP net income per share:
 
 
 
 
 
 
 
Basic
$
0.18

 
$
0.20

 
$
0.33

 
$
0.59

Diluted
$
0.18

 
$
0.20

 
$
0.33

 
$
0.58

Weighted-average shares used in computing non-GAAP net income per share:
 
 
 
 
 
 
 
Basic
51,034

 
54,490

 
51,548

 
54,334

Diluted
51,557

 
55,687

 
52,089

 
55,457



8



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,
 
2016
 
2015
 
2016
 
2015
Net income
$
4,150

 
$
8,030

 
$
8,387

 
$
26,061

Provision for income taxes
2,436

 
5,065

 
5,178

 
16,224

Other (income) expense, net
1,549

 
(934
)
 
(256
)
 
(1,055
)
Stock-based compensation[1]
4,976

 
4,810

 
9,998

 
8,802

Depreciation and amortization
41,032

 
35,978

 
85,587

 
69,988

Non-GAAP adjusted EBITDA[5]
54,143

 
52,949

 
108,894

 
120,020

Net patent spend
(20,885
)
 
(20,500
)
 
(37,134
)
 
(74,136
)
Non-GAAP adjusted EBITDA less net patent spend
$
33,258

 
$
32,449

 
$
71,760

 
$
45,884

RPX Corporation
Additional Metrics
(in thousands, except client data)
(unaudited)
 
 
 
 
 
As of and for the Three Months Ended June 30,
Operating Metrics
 
2016
 
2015
Number of clients[7]
 
317

 
225

Net additions[7]
 
31

 
1

Gross patent spend
 
$
21,115

 
$
20,575

Net patent spend
 
$
20,885

 
$
20,500

 
 
 
 
 
 
 
As of and for the Three Months Ended June 30,
Financial Metrics
 
2016
 
2015
Subscription revenue[6]
 
$
63,219

 
$
67,551

Discovery revenue
 
19,258

 
—

Fee-related revenue
 
632

 
—

Total revenue
 
$
83,109

 
$
67,551

Cash, cash equivalents and short-term investments
 
$
199,091

 
$
381,154

Deferred revenue, current and non-current
 
$
123,133

 
$
142,623


[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, 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.
[7] Represents clients receiving RPX's patent risk management services only; does not include RPX's discovery services clients.

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