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RPX Announces Fourth Quarter And Fiscal Year 2012 Financial Results

Stock quotes in this article: RPXC

Use of Non-GAAP Financial Information

This news release dated February 12, 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 for 2011 it is also excluding a payment in lieu of a contingent obligation related to the acquisition of patent assets. 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.

RPX Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
         
  Three Months Ended December 31, Year Ended December 31,
  2012 2011 2012 2011
Revenue  $ 51,557  $ 42,410  $ 197,688  $ 154,044
Cost of revenue 21,815 22,719 82,323 67,371
Selling, general and administrative expenses 13,687 12,128 53,590 40,593
(Gain) on sale of patent assets, net (177)
Operating income 16,055 7,563 61,952 46,080
Other income (expense), net 25 (78) 117 (723)
Income before provision for income taxes 16,080 7,485 62,069 45,357
Provision for income taxes 5,982 566 23,112 16,225
Net income  $ 10,098  $ 6,919  $ 38,957  $ 29,132
Net income available to common stockholders:        
Basic  $ 10,080  $ 6,615  $ 38,455  $ 19,697
Diluted  $ 10,080  $ 6,633  $ 38,474  $ 20,310
Net income per common share:        
Basic  $ 0.20  $ 0.14  $ 0.77  $ 0.61
Diluted  $ 0.19  $ 0.13  $ 0.74  $ 0.57
Weighted-average shares used in computing net income per common share:        
Basic 50,824 46,920 49,766 32,032
Diluted 52,017 50,055 51,802 35,920
 
RPX Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
     
  December 31, 
  2012 2011
Assets    
Current assets:    
Cash and cash equivalents  $ 73,638  $ 106,749
Short-term investments 126,092 126,976
Restricted cash 500
Accounts receivable 25,144 16,160
Other receivables 33,775
Prepaid expenses and other current assets 5,237 12,124
Deferred tax assets 7,658 5,192
Total current assets 271,544 267,701
Patent assets, net 199,314 163,352
Property and equipment, net 3,144 2,317
Intangible assets, net 3,226 1,837
Goodwill 16,460 1,675
Restricted cash, less current portion 147
Deferred tax assets, less current portion 300
Other assets 279 665
Total assets  $ 493,967  $ 437,994
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable  $ 568  $ 821
Accrued liabilities 7,206 7,762
Deferred revenue 101,249 96,513
Deferred payment obligations 500 5,056
Other current liabilities 1,813 2,182
Total current liabilities 111,336 112,334
Deferred revenue, less current portion 3,122 11,762
Deferred tax liabilities 18,108 14,695
Other liabilities 1,142 119
Total liabilities 133,708 138,910
Common stock 5 5
Additional paid-in capital 281,530 259,315
Retained earnings 78,744 39,787
Accumulated other comprehensive loss (20) (23)
Total stockholders' equity 360,259 299,084
Total liabilities and stockholders' equity  $ 493,967  $ 437,994
 
RPX Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
     
  Year Ended December 31,
  2012 2011
Cash flows from operating activities    
Net income  $ 38,957  $ 29,132
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 83,137 63,446
Stock-based compensation 10,334 6,996
Excess tax benefit from stock-based compensation (8,574) (2,302)
Imputed interest on deferred payment obligations 94 727
Gain on sale of patent assets (177)
Amortization of premium on investments 5,131 1,086
Deferred taxes 1,477 5,624
Other 12 8
Changes in assets and liabilities:    
Accounts receivable (8,984) (3,528)
Other receivables (33,775)
Prepaid expenses and other assets 8,667 (12,085)
Accounts payable (253) 332
Accrued and other liabilities (711) 5,198
Deferred revenue (3,958) 25,714
Net cash provided by operating activities 91,377 120,348
Cash flows from investing activities    
Purchases of investments classified as available-for-sale (185,582) (202,430)
Maturities and sale of investments classified as available-for-sale 188,026 78,246
Business acquisition (45,765) (3,345)
Decrease in restricted cash 647 73
Purchases of intangible assets (64) (112)
Purchases of property and equipment (1,726) (1,971)
Acquisitions of patent assets (87,366) (101,170)
Proceeds from sale of patent assets 200 80
Net cash used in investing activities (131,630) (230,629)
Cash flows from financing activities    
Repayments of principal on deferred payment obligations (5,150) (19,254)
Proceeds from other obligations 500
Proceeds from issuance of common stock in initial public offering, net of issuance costs 157,478
Proceeds from issuance of common stock in follow-on offering, net of issuance costs 26,855
Proceeds from exercise of stock options and other common stock issuances 3,218 2,993
Excess tax benefit from stock-based compensation 8,574 2,302
Net cash provided by financing activities 7,142 170,374
Net increase (decrease) in cash and cash equivalents (33,111) 60,093
Cash and cash equivalents at beginning of period 106,749 46,656
Cash and cash equivalents at end of period  $ 73,638  $ 106,749
 
RPX Corporation
Reconciliation of Pro Forma Net Income Per Share
(in thousands, except per share data)
(unaudited)
         
  Three Months Ended December 31, Year Ended December 31,
  2012 2011 2012 2011
Net income  $ 10,098  $ 6,919  $ 38,957  $ 29,132
Pro forma net income per share:        
Basic  $ 0.20  $ 0.14  $ 0.77  $ 0.66
Diluted  $ 0.19  $ 0.13  $ 0.74  $ 0.60
Shares used in computing pro forma net income per share:        
Basic:        
Basic weighted-average common shares 50,824 46,920 49,766 32,032
Less: Conversion of redeemable convertible preferred shares (16,960)
Add: Assumed conversion of redeemable convertible preferred shares 26,230
Add: Restricted stock 91 2,158 649 3,114
Shares used in computing pro forma basic net income per share 50,915 49,078 50,415 44,416
Diluted:        
Diluted weighted-average common shares 52,017 50,055 51,802 35,920
Less: Conversion of redeemable convertible preferred shares (16,960)
Add: Assumed conversion of redeemable convertible preferred shares 26,230
Add: Restricted stock 91 2,158 649 3,114
Shares used in computing pro forma diluted net income per share 52,108 52,213 52,451 48,304
         
RPX Corporation
Reconciliation of GAAP to Pro Forma Non-GAAP Net Income Per Share
(in thousands, except per share data)
(unaudited)
         
  Three Months Ended December 31, Year Ended December 31,
  2012 2011 2012 2011
Net income  $ 10,098  $ 6,919  $ 38,957  $ 29,132
Stock-based compensation [1] 2,873 2,166 10,683 7,015
Amortization of acquired intangible assets [2] 360 146 1,192 292
Payment in lieu of contingent obligation [3] 4,000 4,000
Income tax adjustments [4] (1,061) (1,944) (3,750) (3,356)
Non-GAAP net income  $ 12,270  $ 11,287  $ 47,082  $ 37,083
Pro forma non-GAAP net income per share:        
Basic  $ 0.24  $ 0.23  $ 0.93  $ 0.83
Diluted  $ 0.24  $ 0.22  $ 0.90  $ 0.77
Pro forma weighted-average shares:        
Basic 50,915 49,078 50,415 44,416
Diluted 52,108 52,213 52,451 48,304
 
RPX Corporation
Reconciliation of GAAP to Non-GAAP Cost of Revenue
(in thousands)
(unaudited)
         
  Three Months Ended December 31, Year Ended December 31,
  2012 2011 2012 2011
Cost of revenue  $ 21,815  $ 22,719  $ 82,323  $ 67,371
Payment in lieu of contingent obligation [3] (4,000) (4,000)
Amortization of acquired intangible assets [2] (55) (51) (223) (104)
Non-GAAP cost of revenue  $ 21,760  $ 18,668  $ 82,100  $ 63,267
         
RPX Corporation
Reconciliation of GAAP to Non-GAAP Selling, General and Administrative Expenses
(in thousands)
(unaudited)
         
  Three Months Ended December 31, Year Ended December 31,
  2012 2011 2012 2011
Selling, general and administrative expenses  $ 13,687  $ 12,128  $ 53,590  $ 40,593
Stock-based compensation [1] (2,873) (2,166) (10,683) (7,015)
Amortization of acquired intangible assets [2] (305) (95) (969) (188)
Non-GAAP selling, general and administrative expenses  $ 10,509  $ 9,867  $ 41,938  $ 33,390
         
[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] In 2008, RPX entered into an agreement to purchase patent assets with an unaffiliated third party which stipulated that RPX make a one-time payment of $5.0 million in the event RPX earned $170.0 million of subscription revenue in any calendar year. In 2011, RPX agreed to pay $4.0 million in lieu of the $5.0 million contingent payment.
[4] Amount reflects income taxes associated with the above noted non-GAAP exclusions.        
 
RPX Corporation
Additional Metrics
($ in thousands)
(unaudited)
     
  As of and for the Three Months Ended December 31,
Operating Metrics 2012 2011
Number of clients 140 112
Net additions 12 9
Trailing four quarters 28 40
Gross acquisition spend  $ 104,360  $ 28,730
Trailing four quarters  $ 251,800  $ 103,796
Net acquisition spend  $ 23,160  $ 28,730
Trailing four quarters  $ 116,370  $ 99,171
Full time equivalent headcount 125 110
  As of and for the Year Ended December 31,
Financial Metrics 2012 2011
Subscription revenue [1]  $ 185,609  $ 150,721
Advisory fees 2,000
Other revenue 10,079 3,323
Revenue  $ 197,688  $ 154,044
Cash, cash equivalents and short-term investments  $ 199,730  $ 233,725
Deferred revenue, current and noncurrent  $ 104,371  $ 108,275
     
[1] Subscription revenue is comprised of revenue generated from membership subscription services and premiums earned from insurance policies.
CONTACT: Investor Relations
         JoAnn Horne
         Market Street Partners
         +1-415-445-3233
         ir@rpxcorp.com
         
         Media Relations
         Kaustuva Das
         RPX Corporation
         +1-415-529-3105
         media@rpxcorp.com

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