RPX Announces Fourth Quarter and Fiscal 2016 Financial Results

FREE Breaking News Alerts from StreetInsider.com!

E-mail Address

StreetInsider.com Top Tickers, 9/3/2026

1. SNOW
2. AVGO
3. RARE
4. FIVE
5. HPE
6. VRTS
7. NTAP
8. NTSK
9. CRWD
10. OLLI

February 14, 2017 4:01 PM EST

SAN FRANCISCO, Feb. 14, 2017 /PRNewswire/ -- RPX Corporation (together with its subsidiaries, "RPX", "the Company") (NASDAQ: RPXC), the leading provider of patent risk management and discovery management solutions, today announced its financial results for the fourth quarter and year ended December 31, 2016.

Highlights

  • Revenue for 2016 totaled $333.1 million, up 14% compared to $291.9 million for 2015
  • Discovery services revenue for 2016 totaled $66.1 million
  • Revenue for the fourth quarter of 2016 totaled $81.8 million, up 12% compared to $72.8 million in the prior year period
  • There were 348 clients in RPX's patent risk management network as of December 31, 2016.

"RPX was founded to bring efficiency and transparency to the patent market, and our financial performance in 2016 reflects our continued progress in achieving that goal," said Martin Roberts, Interim CEO and General Counsel of RPX Corporation. "With our increased emphasis on improving execution, generating cash and returning value to shareholders, we enter 2017 as a stronger, more nimble organization and are optimistic about RPX's opportunity to further impact both the patent and eDiscovery markets."

Summary Results

Revenue for the fourth quarter of 2016 was $81.8 million, compared to $72.8 million in the prior year period. Revenue for 2016 was $333.1 million, compared to $291.9 million for 2015.

GAAP net income for the fourth quarter of 2016 was $1.7 million or $0.03 per diluted share, compared to $5.5 million or $0.10 per diluted share in the fourth quarter of 2015. GAAP net income for 2016 was $18.2 million or $0.36 per diluted share, compared to $39.4 million or $0.71 per diluted share for 2015.

Non-GAAP net income for the fourth quarter of 2016, which excludes stock-based compensation, the amortization of acquired intangibles, fair value adjustments on deferred payment obligations, gains on extinguishment of deferred payment obligations, other-than-temporary impairment on short-term investments, realized losses on exchange of short-term investments, and their related tax effects, was $6.2 million or $0.12 per diluted share, compared to $11.7 million or $0.21 per diluted share in the fourth quarter of 2015. Non-GAAP net income for 2016 was $35.7 million or $0.70 per diluted share, compared to $54.7 million or $0.99 per diluted share for 2015.

Non-GAAP adjusted EBITDA less net patent spend, the Company's preferred measure of adjusted pre-tax cash flow, was $9.1 million for the fourth quarter of 2016 and $108.2 million for 2016.

Net patent acquisition spend during the fourth quarter totaled $45.5 million, and included 12 new patent acquisitions. Net patent acquisition spend during the year totaled $117.4 million.

As of December 31, 2016, RPX had cash, cash equivalents, and short-term investments of $191.0 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 first quarter of fiscal 2017:

Subscription and Discovery revenue[1]

$79 - $81 million

Fee-related revenue

$1 million

Total revenue

$80 - $82 million

Operating income (non-GAAP)

$9 - $11 million

Net income (non-GAAP)

$5 - $7 million

Consolidated adjusted EBITDA (non-GAAP)

$51 - $52 million

Effective tax rate (non-GAAP)

37%

Weighted-average diluted shares outstanding

49 million

 

The Company provided the following business outlook for the full year 2017:

Subscription revenue[1]

$240 - $250 million

Discovery revenue

$70 - $79 million

Fee-related revenue

$5 - $15 million

Total revenue

$315 - $344 million

Cost of revenue (non-GAAP)

$193 - $198 million

SG&A (non-GAAP)

$73 - $78 million

Net income (non-GAAP)

$31 - $42 million

Patent risk management adjusted EBITDA (non-GAAP)

$183 - $199 million

Discovery services adjusted EBITDA (non-GAAP)

$19 - $23 million

Consolidated adjusted EBITDA (non-GAAP)

$202 - $222 million

Net patent spend

$110 - $115 million

Consolidated adjusted EBITDA less net patent spend (non-GAAP)

$87 - $112 million

Effective tax rate (non-GAAP)

37%

Weighted-average diluted shares outstanding

50 million

 

The Company provided the following 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

$26 - $29 million

Total amortization of patent assets

$153 - $156 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 first 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.

RPX Corporation

Historical Quarterly Information

(in thousands)

(unaudited)

Three Months Ended

March 31,2016

June 30,2016

September 30,2016

December 31,2016

Subscription revenue[1]

$

67,112

$

63,219

$

62,414

$

62,688

Discovery revenue

10,578

19,258

17,987

18,289

Fee-related revenue

2,045

632

8,060

825

Total revenue

$

79,735

$

83,109

$

88,461

$

81,802

Operating Income

$

5,174

$

8,135

$

14,016

$

8,063

Weighted-average diluted shares outstanding

52,616

51,557

50,247

49,642

[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.

 

RPX Corporation

Quarterly Reconciliation of Net Income to Non-GAAP Adjusted EBITDA Less Net Patent Spend

(in thousands)

(unaudited)

Three Months Ended

March 31,2016

June 30,2016

September 30,2016

December 31,2016

Net income

$

4,237

$

4,150

$

8,115

$

1,733

Provision for income taxes

2,742

2,436

4,651

4,245

Interest and other (income) expense, net

(1,805)

1,549

1,250

2,085

Depreciation and amortization

44,555

41,032

43,725

42,311

EBITDA

49,729

49,167

57,741

50,374

Stock-based compensation

5,022

4,976

4,341

4,229

Adjusted EBITDA (non-GAAP)[2]

54,751

54,143

62,082

54,603

Net patent spend

(16,249)

(20,885)

(34,800)

(45,495)

Adjusted EBITDA less net patent spend (non-GAAP)

$

38,502

$

33,258

$

27,282

$

9,108

[2]

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).

 

Conference Call

RPX management will host a conference call and live webcast for analysts and investors at 2:00 p.m. PST/5:00 p.m. EST on February 14, 2017. Parties in the United States and Canada can access the call by dialing 1-877-723-9520, using conference code 2653817.  International parties can access the call by dialing 1-719-325-4893, using conference code 2653817.

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 December 31, 2016, RPX had invested over $2 billion to acquire more than 16,600 US and international patent assets and rights on behalf of nearly 350 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 February 14, 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 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 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, the Company's ability to integrate and manage the acquisition of Inventus Solutions, Inc., 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

[email protected]

[email protected]

 

RPX Corporation

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Three Months EndedDecember 31,

Year Ended December 31,

2016

2015

2016

2015

Revenue

$

81,802

$

72,831

$

333,107

$

291,881

Cost of revenue

49,696

39,475

197,262

148,858

Selling, general and administrative expenses

24,043

20,199

100,457

77,428

Gain on sale of patent assets, net

—

—

—

(592)

Operating income

8,063

13,157

35,388

66,187

Interest and other expense, net:

Interest income

158

225

506

740

Interest expense

(860)

—

(3,015)

—

Other expense, net

(1,383)

(2,844)

(570)

(1,428)

Total interest and other expense, net

(2,085)

(2,619)

(3,079)

(688)

Income before provision for income taxes

5,978

10,538

32,309

65,499

Provision for income taxes

4,245

5,011

14,074

26,077

Net income

$

1,733

$

5,527

$

18,235

$

39,422

Net income per share:

Basic

$

0.04

$

0.10

$

0.36

$

0.72

Diluted

$

0.03

$

0.10

$

0.36

$

0.71

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

Basic

49,061

54,260

50,462

54,432

Diluted

49,642

55,002

51,001

55,410

 

RPX Corporation

Consolidated Balance Sheets

(in thousands)

(unaudited)

December 31,

2016

2015

Assets

Current assets:

Cash and cash equivalents

$

100,111

$

94,983

Short-term investments

90,877

231,015

Restricted cash

500

701

Accounts receivable, net

64,395

13,905

Prepaid expenses and other current assets

4,524

12,643

Total current assets

260,407

353,247

Patent assets, net

212,999

254,560

Property and equipment, net

6,948

4,733

Intangible assets, net

56,050

1,801

Goodwill

151,322

19,978

Restricted cash, less current portion

965

727

Other assets

8,337

6,896

Deferred tax assets

38,261

16,619

Total assets

$

735,289

$

658,561

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

3,197

$

959

Accrued liabilities

16,798

14,842

Deferred revenue

118,856

110,921

Deferred payment obligations

—

2,383

Current portion of long-term debt

6,474

—

Other current liabilities

1,484

467

Total current liabilities

146,809

129,572

Deferred revenue, less current portion

11,552

4,731

Deferred tax liabilities

4,023

—

Long-term debt, less current portion

88,110

—

Other liabilities

10,514

7,779

Total liabilities

261,008

142,082

Stockholders' equity:

Common stock

5

5

Additional paid-in capital

360,462

344,610

Retained earnings

130,249

172,115

Accumulated other comprehensive loss

(16,435)

(251)

Total stockholders' equity

474,281

516,479

Total liabilities and stockholders' equity

$

735,289

$

658,561

 

RPX Corporation

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Year Ended December 31,

2016

2015

Operating activities

Net income

$

18,235

$

39,422

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

Depreciation and amortization

171,623

145,835

Stock-based compensation

18,275

17,594

Excess tax benefit from stock-based compensation

(103)

(1,593)

Gain on sale of patent assets

—

(592)

Amortization of premium on investments

2,247

6,666

Deferred taxes

(13,951)

(13,010)

Unrealized foreign currency loss

2,689

—

Fair value adjustments on deferred payment obligations

 

(1,920)

(3,887)

Gain on extinguishment of deferred payment obligation

(463)

(3,000)

Other-than-temporary impairment of short-term investments

—

5,096

Realized loss on exchange of short-term investments

290

3,444

Other

2,457

(60)

Changes in assets and liabilities, net of business acquired:

Accounts receivable

(39,737)

10,888

Prepaid expenses and other assets

10,344

(17,651)

Accounts payable

923

724

Accrued and other current liabilities

1,693

4,631

Deferred revenue

14,654

(21,284)

Net cash provided by operating activities

187,256

173,223

Investing activities

Purchases of investments

(70,980)

(273,853)

Maturities of investments

60,143

254,360

Sales of investments

145,925

21,650

Business acquisition, net of cash acquired

(228,452)

(425)

Decrease in restricted cash

298

247

Purchases of property and equipment

(3,667)

(2,163)

Acquisitions of patent assets

(116,742)

(132,834)

Proceeds from sale of patent assets

—

650

Acquisition of other assets

—

(2,500)

Net cash used in investing activities

(213,475)

(134,868)

Financing activities

Repayments of principal on deferred payment obligations

—

(2,935)

Proceeds from deferred payment obligations

—

6,270

Proceeds from issuance of term debt

100,000

—

Payment of debt issuance costs

(2,003)

—

Repayment of principal on term debt

(3,750)

—

Deferred acquisition payment

(1,320)

—

Proceeds from exercise of stock options

3,766

4,953

Taxes paid related to net share settlements of restricted stock units

(4,185)

(5,097)

Excess tax benefit from stock-based compensation

103

1,593

Payments of capital leases

(461)

—

Repurchase of common stock

(60,101)

(26,175)

Net cash provided by (used in) financing activities

32,049

(21,391)

Foreign-currency effect on cash and cash equivalents

(702)

—

Net increase in cash and cash equivalents

5,128

16,964

Cash and cash equivalents at beginning of period

94,983

78,019

Cash and cash equivalents at end of period

$

100,111

$

94,983

 

RPX Corporation

Reconciliation of GAAP to Non-GAAP Net Income Per Share

 

(in thousands, except per share data)

(unaudited)

Three Months EndedDecember 31,

Year EndedDecember 31,

2016

2015

2016

2015

Net income

$

1,733

$

5,527

$

18,235

$

39,422

Stock-based compensation[1]

4,229

4,533

18,568

18,015

Amortization of acquired intangible assets[2]

2,402

431

9,611

1,725

Fair value adjustment on deferred payment obligations[3]

—

(655)

(1,920)

(3,887)

Gain on extinguishment of deferred payment obligations[3]

—

(3,000)

(463)

(3,000)

Other-than-temporary impairment on short-term investments[3]

—

3,181

—

5,096

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

—

3,336

188

3,336

Income tax adjustments[4]

(2,163)

(1,649)

(8,474)

(6,037)

Non-GAAP net income

$

6,201

$

11,704

$

35,745

$

54,670

Non-GAAP net income per share:

Basic

$

0.13

$

0.22

$

0.71

$

1.00

Diluted

$

0.12

$

0.21

$

0.70

$

0.99

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

Basic

49,061

54,260

50,462

54,432

Diluted

49,642

55,002

51,001

55,410

 

RPX Corporation

Reconciliation of GAAP to Non-GAAP Cost of Revenue

(in thousands)

(unaudited)

Three Months EndedDecember 31,

Year EndedDecember 31,

2016

2015

2016

2015

Cost of revenue

$

49,696

$

39,475

$

197,262

$

148,858

Amortization of acquired intangible assets[2]

(527)

(50)

(2,119)

(200)

Non-GAAP cost of revenue

$

49,169

$

39,425

$

195,143

$

148,658

RPX Corporation

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

(in thousands)

(unaudited)

Three Months EndedDecember 31,

Year EndedDecember 31,

2016

2015

2016

2015

Selling, general and administrative expenses

$

24,043

$

20,199

$

100,457

$

77,428

Stock-based compensation[1]

(4,229)

(4,533)

(18,568)

(18,015)

Amortization of acquired intangible assets[2]

(1,875)

(381)

(7,492)

(1,525)

Non-GAAP selling, general and administrative expenses

$

17,939

$

15,285

$

74,397

$

57,888

 

RPX Corporation

Reconciliation of GAAP to Non-GAAP Interest and Other Income (Expense), Net

(in thousands)

(unaudited)

Three Months EndedDecember 31,

Year EndedDecember 31,

2016

2015

2016

2015

Interest and other expense, net

$

(2,085)

$

(2,619)

$

(3,079)

$

(688)

Fair value adjustment on deferred payment obligations[3]

—

(655)

(1,920)

(3,887)

Gain on extinguishment of deferred payment obligations[3]

—

(3,000)

(463)

(3,000)

Other-than-temporary impairment on short-term investments[3]

—

3,181

—

5,096

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

—

3,336

188

3,336

Non-GAAP interest and other income (expense), net

$

(2,085)

$

243

$

(5,274)

$

857

RPX Corporation

Reconciliation of Net Income to Non-GAAP Adjusted EBITDA Less Net Patent Spend

(in thousands)

(unaudited)

Three Months EndedDecember 31,

Year EndedDecember 31,

2016

2015

2016

2015

Net income

$

1,733

$

5,527

$

18,235

$

39,422

Provision for income taxes

4,245

5,011

14,074

26,077

Interest and other expense, net

2,085

2,619

3,079

688

Stock-based compensation[1]

4,229

4,533

18,568

18,015

Depreciation and amortization

42,311

38,809

171,623

145,835

Non-GAAP adjusted EBITDA[5]

54,603

56,499

225,579

230,037

Net patent spend

(45,495)

(50,353)

(117,429)

(160,665)

Non-GAAP adjusted EBITDA less net patent spend

$

9,108

$

6,146

$

108,150

$

69,372

 

RPX Corporation

Additional Metrics

(in thousands, except client and headcount data)

(unaudited)

As of and for the ThreeMonths Ended December 31,

Operating Metrics

2016

2015

Number of clients[7]

348

255

Net additions[7]

20

10

Gross patent spend

$

48,495

$

137,673

Net patent spend

$

45,495

$

50,353

As of and for the ThreeMonths Ended December 31,

Financial Metrics

2016

2015

Subscription revenue[6]

$

62,688

$

67,701

Discovery revenue

18,289

—

Fee-related revenue

825

5,130

Total revenue

$

81,802

$

72,831

Cash, cash equivalents and short-term investments

$

190,988

$

325,998

Deferred revenue, current and non-current

$

130,408

$

115,652

[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, other-than-temporary impairments to its short-term investments, 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 the Company's insurance business.

[7]

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

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/rpx-announces-fourth-quarter-and-fiscal-2016-financial-results-300407277.html

SOURCE RPX Corporation


Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Press Releases

Related Entities

Earnings, Definitive Agreement