SAN FRANCISCO, Feb. 21,
2018 /PRNewswire/ -- RPX Corporation (together with its
subsidiaries, "RPX", "the Company") (NASDAQ: RPXC), the leading
provider of patent risk and discovery management solutions, today
announced its financial results for the fourth quarter and year
ended December 31, 2017.
Highlights
- Results were in-line or exceeded guidance ranges for Q4 and FY
2017.
- Cash provided by operating activities in 2017 was $181.5 million.
- Generated $73.8 million of free
cash flow in 2017; guiding to $65-85
million of free cash flow in 2018.
- Total revenue for 2017 was $330.5
million, compared to $333.1
million for 2016.
- Recorded non-cash charge of $94.1
million in Q4, primarily related to impairment losses on
discovery services goodwill.
"Our solid results in 2017 reflect RPX's continued success in
bringing efficiency and transparency to the patent market,
including our unique ability to execute licensing transactions that
reduce risk and cost for our network," said Martin Roberts, CEO of RPX Corp. "As the
patent market continues to evolve, RPX is changing along with it to
ensure we remain a key advisor to our clients on their patent
strategy. As such, we continue to pursue new initiatives and
services that reduce the amount clients and prospects spend on all
aspects of their patent portfolio, including licensing, development
and administration."
Summary Results
Revenue for the fourth quarter of 2017 and 2016 was $81.8 million. Revenue for 2017 was $330.5 million, compared to $333.1 million for 2016.
GAAP net loss for the fourth quarter of 2017 was $95.7 million or $1.93 per diluted share, compared to net income
of $1.7 million or $0.03 per diluted share in the fourth quarter of
2016. GAAP net loss for 2017 was $79.1
million or $1.61 per diluted
share, compared to net income of $18.2
million or $0.36 per diluted
share for 2016. In the fourth quarter of 2017, the Company recorded
non-cash impairment losses of $94.1
million relating primarily to its discovery services
goodwill.
Non-GAAP net income for the fourth quarter of 2017, 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,
accelerated debt issuance costs, pre-tax non-cash impairment
losses, their related tax effects, and the one-time tax effect of
the Tax Cuts and Jobs Act relating to the revaluation of deferred
taxes and repatriation toll charges, was $11.1 million or $0.22 per diluted share, compared to $6.2 million or $0.12 per diluted share in the fourth quarter of
2016. Non-GAAP net income for 2017 was $40.7
million or $0.81 per diluted
share, compared to $35.7 million or
$0.70 per diluted share for 2016.
As of December 31, 2017, RPX's patent segment had more than
330 clients, consisting of patent risk management network members
and insurance clients. The Company provides patent risk management
services to 450 companies, including those insured under policies
sold to venture funds and industry trade associations.
The Company's net cash provided by operating activities for the
year ended December 31, 2017 was $181.5
million. The Company generated free cash flow of
$73.8 million during 2017, which it
defines as cash flow from operating activities less capital
expenditures such as property and equipment and patent assets.
Non-GAAP adjusted EBITDA less net patent spend was $1.3 million for the fourth quarter of 2017 and
$113.4 million for 2017.
Net patent acquisition spend during the fourth quarter totaled
$51.4 million, and included 16 new
patent acquisitions. Net patent acquisition spend during the year
totaled $106.0 million. Gross patent
spend during the year, the Company's preferred measure of deal
making activity, totaled $179.9
million.
As of December 31, 2017, RPX had cash, cash equivalents,
and short-term investments of $157.2
million.
Strategic Alternatives Process
Separately, the Company announced that its Board of Directors is
conducting a process to explore and evaluate strategic alternatives
to maximize shareholder value. The Board has not made any decisions
related to any strategic alternatives at this time. No assurances
can be made with regard to the timeline for completion of the
strategic review, or whether the review will result in any
particular outcome. The Company undertakes no obligation to make
further comments on developments related to this review except upon
entry into a definitive transaction agreement or as otherwise
required by law.
"Over the past year, the Company has focused on streamlining its
cost structure and putting into place a management structure that
maximizes the performance of the existing business, and also has
started to develop new initiatives that leverage the Company's
existing competencies to expand RPX's footprint in the patent
space. With this progress, we believe now is an appropriate time to
explore various alternatives available to the Company to maximize
value for its shareholders on the basis of its current operations
and future prospects," said Shelby
Bonnie, Chairman of the Board.
Quarterly Dividend
The Company also announced that its quarterly cash dividend of
$0.05 per share of common stock will
be payable on March 28, 2018 to
stockholders of record on March 14,
2018.
New Revenue Standard
In May 2014, the Financial
Accounting Standards Board issued a new standard related to revenue
recognition, Accounting Standards Codification ("ASC") 606,
Revenue from Contracts with Customers ("ASC 606"), which
became effective for RPX on January 1,
2018. Through December 31,
2017, the Company recognized revenue in accordance with ASC
605, Revenue Recognition ("ASC 605") and related
authoritative guidance. The Company adopted ASC 606 using the full
retrospective method which requires restatement of each prior
reporting period presented.
The standard has a material effect on the Company's financial
statements due to the identification of multiple performance
obligations from its patent risk management membership subscription
and the timing of recognition for these separable performance
obligations. Specifically, the Company recognizes separate
performance obligations under ASC 606 for certain discrete patent
assets transferred to its membership clients as well as for access
to the Company's patent portfolio which clients obtain when
becoming a member or renewing membership. The revenue from these
additional performance obligations is recognized at a point in
time, whereas formerly the Company generally recognized its patent
risk management subscription fees ratably on a gross basis over the
term of the customer contract. The adoption of ASC 606 may increase
the variability of the revenue recognized from the Company's patent
risk management services from period to period.
Under ASC 606, the Company determines whether revenue should be
treated on a gross basis or net basis which may result in revenue
that was formerly treated on a gross basis to be treated on a net
basis against its patent assets under ASC 606 due to the additional
separable performance obligations. The Company expects the adoption
of ASC 606 to decrease the revenue it recognizes and the patent
assets it capitalizes for this reason.
ASC 606 does not have a material effect on the Company's
discovery services business or patent risk management insurance
offering.
A webcast in which management reviews a slide deck that
discusses the accounting changes in detail will be posted and
available today following the earnings call on the "Investor
Relations" section of the company's website at www.rpxcorp.com.
Below are the Company's consolidated statements of operations
and reconciliation of net income (loss) to non-GAAP adjusted EBITDA
less net patent spend for the years ended December 31, 2017 and 2016 under ASC 605 showing
the adjustments for restatement of each year to ASC 606. These
adjustments for the years ended December 31,
2017 and 2016 are preliminary estimates and subject to
change. These adjustments do not have an impact on the items
excluded for non-GAAP presentation except the one-time tax effects
of the Tax Cuts and Jobs Act relating to the revaluation of
deferred taxes which increases the Company's provision for income
taxes for the fourth quarter and year ended December 31, 2017 by approximately $3.6 million. The Company believes that showing
its historical financial results under ASC 605 and ASC 606 will
provide additional transparency and that providing this additional
disclosure in the short term will help investors and analysts
understand the impact of the change in revenue recognition
standards, especially given the material difference expected in the
timing of revenue recognition for its patent risk management
services as mentioned above. The presentation under ASC 605 is not
a substitute for the new revenue recognition standard, ASC 606,
which was effective for the Company as of January 1, 2018.
RPX
Corporation
|
Consolidated
Statements of Operations
|
Under ASC 605 and
ASC 606
|
(in
thousands)
|
(unaudited)
|
|
|
Year ended
December 31, 2017
|
|
Year ended
December 31, 2016
|
|
ASC
605
|
|
New
Revenue
Standard
Adjustment
|
|
ASC
606
|
|
ASC
605
|
|
New
Revenue
Standard
Adjustment
|
|
ASC
606
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Subscription
revenue
|
$
|
246,845
|
|
|
$
|
(59,997)
|
|
|
$
|
186,848
|
|
|
$
|
255,433
|
|
|
$
|
(62,794)
|
|
|
$
|
192,639
|
|
Fee-related
revenue
|
5,408
|
|
|
23,583
|
|
|
28,991
|
|
|
11,562
|
|
|
39,547
|
|
|
51,109
|
|
Total patent risk
management revenue
|
252,253
|
|
|
(36,414)
|
|
|
215,839
|
|
|
266,995
|
|
|
(23,247)
|
|
|
243,748
|
|
Discovery
revenue
|
78,204
|
|
|
—
|
|
|
78,204
|
|
|
66,112
|
|
|
—
|
|
|
66,112
|
|
Total
revenue
|
330,457
|
|
|
(36,414)
|
|
|
294,043
|
|
|
333,107
|
|
|
(23,247)
|
|
|
309,860
|
|
Cost of
revenue
|
203,709
|
|
|
(27,283)
|
|
|
176,426
|
|
|
197,262
|
|
|
(32,328)
|
|
|
164,934
|
|
Selling, general and
administrative expenses
|
90,507
|
|
|
628
|
|
|
91,135
|
|
|
100,457
|
|
|
(624)
|
|
|
99,833
|
|
Impairment
losses
|
94,051
|
|
|
—
|
|
|
94,051
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Operating income
(loss)
|
(57,810)
|
|
|
(9,759)
|
|
|
(67,569)
|
|
|
35,388
|
|
|
9,705
|
|
|
45,093
|
|
Interest and other
income (expense), net
|
(1,255)
|
|
|
—
|
|
|
(1,255)
|
|
|
(3,079)
|
|
|
—
|
|
|
(3,079)
|
|
Income (loss) before
provision for income taxes
|
(59,065)
|
|
|
(9,759)
|
|
|
(68,824)
|
|
|
32,309
|
|
|
9,705
|
|
|
42,014
|
|
Provision for income
taxes
|
20,078
|
|
|
22
|
|
|
20,100
|
|
|
14,074
|
|
|
3,609
|
|
|
17,683
|
|
Net income
(loss)
|
$
|
(79,143)
|
|
|
$
|
(9,781)
|
|
|
$
|
(88,924)
|
|
|
$
|
18,235
|
|
|
$
|
6,096
|
|
|
$
|
24,331
|
|
RPX
Corporation
|
Reconciliation of
Net Income (Loss) to Non-GAAP Adjusted EBITDA Less Net Patent
Spend
|
Under ASC 605 and
ASC 606
|
(in
thousands)
|
(unaudited)
|
|
|
Year ended
December 31, 2017
|
|
Year ended
December 31, 2016
|
|
ASC
605
|
|
New
Revenue
Standard
Adjustment
|
|
ASC
606
|
|
ASC
605
|
|
New
Revenue
Standard
Adjustment
|
|
ASC
606
|
Net income
(loss)
|
$
|
(79,143)
|
|
|
$
|
(9,781)
|
|
|
$
|
(88,924)
|
|
|
$
|
18,235
|
|
|
$
|
6,096
|
|
|
$
|
24,331
|
|
Provision for income
taxes
|
20,078
|
|
|
22
|
|
|
20,100
|
|
|
14,074
|
|
|
3,609
|
|
|
17,683
|
|
Interest and other
expense, net
|
1,255
|
|
|
—
|
|
|
1,255
|
|
|
3,079
|
|
|
—
|
|
|
3,079
|
|
Impairment
losses[2]
|
94,051
|
|
|
—
|
|
|
94,051
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock-based
compensation[1]
|
14,988
|
|
|
—
|
|
|
14,988
|
|
|
18,568
|
|
|
—
|
|
|
18,568
|
|
Depreciation and
amortization
|
168,143
|
|
|
(27,315)
|
|
|
140,828
|
|
|
171,623
|
|
|
(32,861)
|
|
|
138,762
|
|
Non-GAAP adjusted
EBITDA[3]
|
219,372
|
|
|
(37,074)
|
|
|
182,298
|
|
|
225,579
|
|
|
(23,156)
|
|
|
202,423
|
|
Net patent
spend
|
(106,010)
|
|
|
8,108
|
|
|
(97,902)
|
|
|
(117,429)
|
|
|
16,998
|
|
|
(100,431)
|
|
Non-GAAP adjusted
EBITDA less net patent spend
|
$
|
113,362
|
|
|
$
|
(28,966)
|
|
|
$
|
84,396
|
|
|
$
|
108,150
|
|
|
$
|
(6,158)
|
|
|
$
|
101,992
|
|
_________________
|
[1]
|
RPX excludes
stock-based compensation and related employer payroll taxes from
its non-GAAP financial measures.
|
[2]
|
RPX excludes non-cash
impairment losses from its non-GAAP financial measures.
|
[3]
|
RPX calculates
non-GAAP adjusted EBITDA as GAAP earnings before other income or
expenses, net, provision for income taxes, depreciation,
amortization, non-cash impairment losses, and stock-based
compensation expenses (inclusive of related employer payroll
taxes).
|
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 full
year 2018 under ASC 606, as well as under ASC 605 for illustrative
purposes. The Company has provided this outlook under both ASC 606
and ASC 605 in order to provide additional transparency. The
Company believes that providing this additional disclosure in the
short term will help its investors and analysts understand the
impact of the change in revenue recognition standards, especially
given the material difference expected in the timing of revenue
recognition for its patent risk management services as mentioned
above. The presentation under ASC 605 is not a substitute for the
new revenue recognition standard, ASC 606, which was effective for
the Company as of January 1,
2018.
|
ASC
606
|
ASC
605[3]
|
Subscription
revenue
|
|
$200 - $210
million
|
Fee
revenue
|
|
$5 - $10
million
|
Total patent risk
management revenue
|
$170 - $195
million
|
$205 - $220
million
|
Discovery
revenue
|
$62 - $71
million
|
$62 - $71
million
|
Total
revenue
|
$232 - $266
million
|
$267 - $291
million
|
Cost of revenue
(non-GAAP)
|
$140 - $149
million
|
$159 - $167
million
|
SG&A
(non-GAAP)
|
$66 - $72
million
|
$66 - $72
million
|
Operating income
(non-GAAP)
|
$27 - $40
million
|
$42 - $52
million
|
Net income
(non-GAAP)
|
$18 - $28
million
|
$30 - $38
million
|
|
|
|
Patent risk
management adjusted EBITDA (non-GAAP)
|
$120 - $140
million
|
$155 - $169
million
|
Discovery services
adjusted EBITDA (non-GAAP)
|
$13 - $17
million
|
$13 - $17
million
|
Consolidated
adjusted EBITDA (non-GAAP)
|
$133 - $157
million
|
$168 - $186
million
|
Net patent
spend
|
$70 - $90
million
|
$80 - $100
million
|
Consolidated
adjusted EBITDA less net patent spend (non-GAAP)
|
$53 - $77
million
|
$78 - $96
million
|
|
|
|
Free cash
flow[1] (non-GAAP)
|
$65 - $85
million
|
$65 - $85
million
|
|
|
|
Gross patent
spend
|
> $150
million
|
> $150
million
|
Effective tax rate
(non-GAAP)
|
32%
|
29%
|
Weighted-average
diluted shares outstanding
|
51 million
|
51 million
|
The Company provided the following supplemental information
regarding amortization expense for the full year 2018 under ASC
606, as well as under ASC 605 for illustrative purposes:
|
ASC
606
|
ASC
605[3]
|
Amortization of
patent assets acquired through
December 31,
2017
|
$87
million
|
$103
million
|
Amortization of
patent assets to be acquired during 2018
|
$18 - $22
million
|
$21 - $25
million
|
Total amortization
of patent assets
|
$105 - $109
million
|
$124 - $128
million
|
|
|
|
Amortization of
acquired intangible assets[2]
|
$8 - $9
million
|
$8 - $9
million
|
_______________
|
[1]
|
Free cash flow is a
non-GAAP financial measure which the Company defines as cash flow
from operating activities less capital expenditures such as
property and equipment and patent assets.
|
[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 recognized
revenue in accordance with ASC 605 during fiscal years 2017 and
prior. Starting January 1, 2018, RPX adopted and began recognizing
revenue in accordance with ASC 606. RPX is providing its full year
2018 forward-looking business outlook using ASC 605 in addition to
its forward-looking business outlook using ASC 606 on a one-time
basis for illustrative purposes. Future business outlooks will be
provided using ASC 606.
|
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 2018 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 an earnings conference call and live
webcast for analysts and investors at 2:00
p.m. PST/5:00 p.m. EST on
February 21, 2018. Parties in the United States and Canada can access the call by dialing
1-866-548-4713, using conference code
8795187. International parties can access the call by
dialing 1-323-794-2093, using conference code 8795187.
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, 2017, RPX had invested $2.4 billion to acquire more than 23,000 US and
international patent assets and rights on behalf of more than 330
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 21, 2018 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 other income
(expense), net, non-GAAP provision for income taxes, non-GAAP net
income, non-GAAP adjusted EBITDA, non-GAAP net income per share,
non-GAAP adjusted EBITDA less net patent spend, and free cash
flow.
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) realized losses on exchange of short-term
investments, (6) acceleration of debt issuance costs from the early
repayment of term debt, (7) non-cash impairment losses, (8) the
related tax effects of these exclusions, and (9) the one-time tax
effects of the Tax Cuts and Jobs Act.
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, including regarding the process to explore and evaluate
strategic alternatives to maximize shareholder value. 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 success of the
Company's new initiatives, changes in our subscription fee rates,
changes in the accounting treatment associated with how we
recognize revenue under subscription agreements, the Company's
ability to attract new clients and retain existing clients with
respect to our patent risk management and discovery services, and
factors related to the Company's exploration of strategic
alternatives. No assurances can be made with regard to the timeline
for completion of the strategic review, or whether the review will
result in any transaction. 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
|
Consolidated
Statements of Operations
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenue
|
$
|
81,809
|
|
|
$
|
81,802
|
|
|
$
|
330,457
|
|
|
$
|
333,107
|
|
Cost of
revenue
|
48,987
|
|
|
49,696
|
|
|
203,709
|
|
|
197,262
|
|
Selling, general and
administrative expenses
|
23,745
|
|
|
24,043
|
|
|
90,507
|
|
|
100,457
|
|
Impairment
losses
|
94,051
|
|
|
—
|
|
|
94,051
|
|
|
—
|
|
Operating income
(loss)
|
(84,974)
|
|
|
8,063
|
|
|
(57,810)
|
|
|
35,388
|
|
Interest and other
income (expense), net:
|
|
|
|
|
|
|
|
Interest
income
|
302
|
|
|
158
|
|
|
1,063
|
|
|
506
|
|
Interest
expense
|
(1,702)
|
|
|
(860)
|
|
|
(4,540)
|
|
|
(3,015)
|
|
Other income
(expense), net
|
163
|
|
|
(1,383)
|
|
|
2,222
|
|
|
(570)
|
|
Total interest and
other income (expense), net
|
(1,237)
|
|
|
(2,085)
|
|
|
(1,255)
|
|
|
(3,079)
|
|
Income (loss) before
provision for income taxes
|
(86,211)
|
|
|
5,978
|
|
|
(59,065)
|
|
|
32,309
|
|
Provision for income
taxes
|
9,483
|
|
|
4,245
|
|
|
20,078
|
|
|
14,074
|
|
Net income
(loss)
|
$
|
(95,694)
|
|
|
$
|
1,733
|
|
|
$
|
(79,143)
|
|
|
$
|
18,235
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(1.93)
|
|
|
$
|
0.04
|
|
|
$
|
(1.61)
|
|
|
$
|
0.36
|
|
Diluted
|
$
|
(1.93)
|
|
|
$
|
0.03
|
|
|
$
|
(1.61)
|
|
|
$
|
0.36
|
|
Weighted-average
shares used in computing net income (loss) per share:
|
|
|
|
|
|
|
|
Basic
|
49,573
|
|
|
49,061
|
|
|
49,240
|
|
|
50,462
|
|
Diluted
|
49,573
|
|
|
49,642
|
|
|
49,240
|
|
|
51,001
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
RPX
Corporation
|
Consolidated
Balance Sheets
|
(in
thousands)
|
(unaudited)
|
|
|
December
31,
|
|
2017
|
|
2016
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
138,710
|
|
|
$
|
100,111
|
|
Short-term
investments
|
18,455
|
|
|
90,877
|
|
Restricted
cash
|
249
|
|
|
500
|
|
Accounts receivable,
net
|
51,544
|
|
|
64,395
|
|
Prepaid expenses and
other current assets
|
25,687
|
|
|
4,524
|
|
Total current
assets
|
234,645
|
|
|
260,407
|
|
Patent assets,
net
|
163,048
|
|
|
212,999
|
|
Property and
equipment, net
|
5,090
|
|
|
6,948
|
|
Intangible assets,
net
|
49,087
|
|
|
56,050
|
|
Goodwill
|
70,756
|
|
|
151,322
|
|
Restricted cash, less
current portion
|
968
|
|
|
965
|
|
Other
assets
|
3,664
|
|
|
8,337
|
|
Deferred tax
assets
|
23,572
|
|
|
38,261
|
|
Total
assets
|
$
|
550,830
|
|
|
$
|
735,289
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
2,225
|
|
|
$
|
3,197
|
|
Accrued
liabilities
|
15,736
|
|
|
16,798
|
|
Deferred
revenue
|
105,150
|
|
|
118,856
|
|
Current portion of
long-term debt
|
—
|
|
|
6,474
|
|
Other current
liabilities
|
1,485
|
|
|
1,484
|
|
Total current
liabilities
|
124,596
|
|
|
146,809
|
|
Deferred revenue, less current
portion
|
1,718
|
|
|
11,552
|
|
Deferred tax
liabilities
|
3,657
|
|
|
4,023
|
|
Long-term debt, less
current portion
|
—
|
|
|
88,110
|
|
Other
liabilities
|
11,104
|
|
|
10,514
|
|
Total
liabilities
|
141,075
|
|
|
261,008
|
|
Stockholders'
equity:
|
|
|
|
Common
stock
|
5
|
|
|
5
|
|
Additional paid-in
capital
|
376,793
|
|
|
360,462
|
|
Retained
earnings
|
39,411
|
|
|
130,249
|
|
Accumulated other
comprehensive loss
|
(6,454)
|
|
|
(16,435)
|
|
Total stockholders'
equity
|
409,755
|
|
|
474,281
|
|
Total liabilities and
stockholders' equity
|
$
|
550,830
|
|
|
$
|
735,289
|
|
RPX
Corporation
|
Consolidated
Statements of Cash Flows
|
(in
thousands)
|
(unaudited)
|
|
|
Year Ended
December 31,
|
|
2017
|
|
2016
|
Operating
activities
|
|
|
|
Net income
(loss)
|
$
|
(79,143)
|
|
|
$
|
18,235
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
168,143
|
|
|
171,623
|
|
Stock-based
compensation
|
14,599
|
|
|
18,275
|
|
Excess tax benefit
from stock-based compensation
|
—
|
|
|
(103)
|
|
Amortization of
premium on investments
|
1,273
|
|
|
2,247
|
|
Deferred
taxes
|
14,451
|
|
|
(13,951)
|
|
Unrealized foreign
currency (gain) loss
|
(1,957)
|
|
|
2,689
|
|
Fair value
adjustments on deferred payment obligations
|
—
|
|
|
(1,920)
|
|
Gain on
extinguishment of deferred payment obligation
|
—
|
|
|
(463)
|
|
Impairment
losses
|
94,051
|
|
|
—
|
|
Realized loss on
exchange of short-term investments
|
—
|
|
|
290
|
|
Other
|
1,792
|
|
|
2,457
|
|
Changes in assets and
liabilities, net of business acquired:
|
|
|
|
Accounts
receivable
|
14,136
|
|
|
(39,737)
|
|
Prepaid expenses and
other assets
|
(21,168)
|
|
|
10,344
|
|
Accounts
payable
|
(1,080)
|
|
|
923
|
|
Accrued and other
current liabilities
|
(80)
|
|
|
1,693
|
|
Deferred
revenue
|
(23,539)
|
|
|
14,654
|
|
Net cash provided by
operating activities
|
181,478
|
|
|
187,256
|
|
Investing
activities
|
|
|
|
Purchases of
investments
|
(39,491)
|
|
|
(70,980)
|
|
Maturities of
investments
|
107,115
|
|
|
60,143
|
|
Sales of
investments
|
3,300
|
|
|
145,925
|
|
Business acquisition,
net of cash acquired
|
—
|
|
|
(228,452)
|
|
Decrease in
restricted cash
|
248
|
|
|
298
|
|
Purchases of property
and equipment
|
(1,316)
|
|
|
(3,667)
|
|
Acquisitions of
patent assets
|
(106,343)
|
|
|
(116,742)
|
|
Net cash used in
investing activities
|
(36,487)
|
|
|
(213,475)
|
|
Financing
activities
|
|
|
|
Proceeds from
issuance of term debt
|
—
|
|
|
100,000
|
|
Payment of debt
issuance costs
|
—
|
|
|
(2,003)
|
|
Repayment of
principal on term debt
|
(96,250)
|
|
|
(3,750)
|
|
Deferred acquisition
payment
|
—
|
|
|
(1,320)
|
|
Proceeds from
exercise of stock options
|
5,964
|
|
|
3,766
|
|
Taxes paid related to
net-share settlements of restricted stock units
|
(5,683)
|
|
|
(4,185)
|
|
Excess tax benefit
from stock-based compensation
|
—
|
|
|
103
|
|
Payments of dividends
to stockholders
|
(2,482)
|
|
|
—
|
|
Payments of capital
leases
|
(345)
|
|
|
(461)
|
|
Repurchase of common
stock
|
(8,290)
|
|
|
(60,101)
|
|
Net cash provided by
(used in) financing activities
|
(107,086)
|
|
|
32,049
|
|
Foreign-currency
effect on cash and cash equivalents
|
694
|
|
|
(702)
|
|
Net increase in cash
and cash equivalents
|
38,599
|
|
|
5,128
|
|
Cash and cash
equivalents at beginning of period
|
100,111
|
|
|
94,983
|
|
Cash and cash
equivalents at end of period
|
$
|
138,710
|
|
|
$
|
100,111
|
|
RPX
Corporation
|
Reconciliation of
GAAP to Non-GAAP Net Income Per Share
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income
(loss)
|
$
|
(95,694)
|
|
|
$
|
1,733
|
|
|
$
|
(79,143)
|
|
|
$
|
18,235
|
|
Stock-based
compensation[1]
|
3,777
|
|
|
4,229
|
|
|
14,988
|
|
|
18,568
|
|
Amortization of
acquired intangible assets[2]
|
2,124
|
|
|
2,402
|
|
|
8,908
|
|
|
9,611
|
|
Fair value adjustment
on deferred payment obligations[3]
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,920)
|
|
Gain on
extinguishment of deferred payment
obligations[3]
|
—
|
|
|
—
|
|
|
—
|
|
|
(463)
|
|
Realized loss on
exchange of short-term investments[3]
|
—
|
|
|
—
|
|
|
—
|
|
|
188
|
|
Accelerated debt
issuance costs[3]
|
1,332
|
|
|
—
|
|
|
1,332
|
|
|
—
|
|
Impairment
losses[4]
|
94,051
|
|
|
—
|
|
|
94,051
|
|
|
—
|
|
Income tax
adjustments[5][8]
|
5,479
|
|
|
(2,163)
|
|
|
605
|
|
|
(8,474)
|
|
Non-GAAP net
income
|
$
|
11,069
|
|
|
$
|
6,201
|
|
|
$
|
40,741
|
|
|
$
|
35,745
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.22
|
|
|
$
|
0.13
|
|
|
$
|
0.83
|
|
|
$
|
0.71
|
|
Diluted[11]
|
$
|
0.22
|
|
|
$
|
0.12
|
|
|
$
|
0.81
|
|
|
$
|
0.70
|
|
Weighted-average
shares used in computing non-GAAP net income per share:
|
|
|
|
|
|
|
|
Basic
|
49,573
|
|
|
49,061
|
|
|
49,240
|
|
|
50,462
|
|
Diluted[11]
|
50,318
|
|
|
49,642
|
|
|
49,989
|
|
|
51,001
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
RPX
Corporation
|
Reconciliation of
Non-GAAP Net Income to Non-GAAP Net Income, As Adjusted for ASC
606
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
Year Ended
December 31,
|
|
2017
|
|
2016
|
Non-GAAP net
income
|
$
|
40,741
|
|
|
$
|
35,745
|
|
New revenue standard
adjustments[10]
|
(9,781)
|
|
|
6,096
|
|
New revenue standard
adjustments related to the tax effects of Tax Cuts and Jobs
Act[10]
|
3,619
|
|
|
—
|
|
Non-GAAP net income,
as adjusted for ASC 606
|
$
|
34,579
|
|
|
$
|
41,841
|
|
RPX
Corporation
|
Reconciliation of
GAAP to Non-GAAP Cost of Revenue and Non-GAAP Cost of Revenue, As
Adjusted for ASC 606
|
(in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Cost of
revenue
|
$
|
48,987
|
|
|
$
|
49,696
|
|
|
$
|
203,709
|
|
|
$
|
197,262
|
|
Stock-based
compensation[1]
|
(127)
|
|
|
—
|
|
|
(474)
|
|
|
—
|
|
Amortization of
acquired intangible assets[2]
|
(503)
|
|
|
(527)
|
|
|
(2,056)
|
|
|
(2,119)
|
|
Non-GAAP cost of
revenue
|
$
|
48,357
|
|
|
$
|
49,169
|
|
|
201,179
|
|
|
195,143
|
|
New revenue standard
adjustments[10]
|
|
|
|
|
(27,283)
|
|
|
(32,328)
|
|
Non-GAAP cost of
revenue, as adjusted for ASC 606
|
|
|
|
|
$
|
173,896
|
|
|
$
|
162,815
|
|
RPX
Corporation
|
Reconciliation of
GAAP to Non-GAAP Selling, General and Administrative
Expenses,
As Adjusted for
ASC 606
|
(in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Selling, general and
administrative expenses
|
$
|
23,745
|
|
|
$
|
24,043
|
|
|
$
|
90,507
|
|
|
$
|
100,457
|
|
Stock-based
compensation[1]
|
(3,650)
|
|
|
(4,229)
|
|
|
(14,514)
|
|
|
(18,568)
|
|
Amortization of
acquired intangible assets[2]
|
(1,621)
|
|
|
(1,875)
|
|
|
(6,852)
|
|
|
(7,492)
|
|
Non-GAAP selling,
general and administrative expenses
|
$
|
18,474
|
|
|
$
|
17,939
|
|
|
69,141
|
|
|
74,397
|
|
New revenue standard
adjustments[10]
|
|
|
|
|
628
|
|
|
(624)
|
|
Non-GAAP selling,
general and administrative expenses, as adjusted for ASC
606
|
|
|
|
|
$
|
69,769
|
|
|
$
|
73,773
|
|
RPX
Corporation
|
Reconciliation of
GAAP to Non-GAAP Interest and Other Income (Expense),
Net
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Interest and other
income (expense), net
|
$
|
(1,237)
|
|
|
$
|
(2,085)
|
|
|
$
|
(1,255)
|
|
|
$
|
(3,079)
|
|
Fair value adjustment
on deferred payment obligations[3]
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,920)
|
|
Gain on
extinguishment of deferred payment
obligations[3]
|
—
|
|
|
—
|
|
|
—
|
|
|
(463)
|
|
Realized loss on
exchange of short-term investments[3]
|
—
|
|
|
—
|
|
|
—
|
|
|
188
|
|
Accelerated debt
issuance costs[3]
|
1,332
|
|
|
—
|
|
|
1,332
|
|
|
—
|
|
Non-GAAP interest and
other income (expense), net
|
$
|
95
|
|
|
$
|
(2,085)
|
|
|
$
|
77
|
|
|
$
|
(5,274)
|
|
RPX
Corporation
|
Reconciliation of
GAAP to Non-GAAP Provision for Income Taxes, As Adjusted for ASC
606
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Provision for income
taxes
|
$
|
9,483
|
|
|
$
|
4,245
|
|
|
$
|
20,078
|
|
|
$
|
14,074
|
|
Tax effects of other
non-GAAP exclusions[5]
|
9,078
|
|
|
2,163
|
|
|
13,952
|
|
|
8,474
|
|
Tax effects of Tax
Cuts and Jobs Act[8]
|
(14,557)
|
|
|
—
|
|
|
(14,557)
|
|
|
—
|
|
Non-GAAP provision
for income taxes
|
$
|
4,004
|
|
|
$
|
6,408
|
|
|
19,473
|
|
|
22,548
|
|
New revenue standard
adjustments[10]
|
|
|
|
|
22
|
|
|
3,609
|
|
New revenue standard
adjustments related to the tax effects of Tax Cuts and Jobs
Act[10]
|
|
|
|
|
(3,619)
|
|
|
—
|
|
Non-GAAP provision
for income taxes, as adjusted for ASC 606
|
|
|
|
|
$
|
15,876
|
|
|
$
|
26,157
|
|
RPX
Corporation
|
Reconciliation of
Net Income (Loss) to Non-GAAP Adjusted EBITDA Less Net Patent
Spend
|
(in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income
(loss)
|
$
|
(95,694)
|
|
|
$
|
1,733
|
|
|
$
|
(79,143)
|
|
|
$
|
18,235
|
|
Provision for income
taxes
|
9,483
|
|
|
4,245
|
|
|
20,078
|
|
|
14,074
|
|
Interest and other
income (expense), net
|
1,237
|
|
|
2,085
|
|
|
1,255
|
|
|
3,079
|
|
Impairment
losses[4]
|
94,051
|
|
|
—
|
|
|
94,051
|
|
|
—
|
|
Stock-based
compensation[1]
|
3,777
|
|
|
4,229
|
|
|
14,988
|
|
|
18,568
|
|
Depreciation and
amortization
|
39,865
|
|
|
42,311
|
|
|
168,143
|
|
|
171,623
|
|
Non-GAAP adjusted
EBITDA[6]
|
52,719
|
|
|
54,603
|
|
|
219,372
|
|
|
225,579
|
|
Net patent
spend
|
(51,435)
|
|
|
(45,495)
|
|
|
(106,010)
|
|
|
(117,429)
|
|
Non-GAAP adjusted
EBITDA less net patent spend
|
$
|
1,284
|
|
|
$
|
9,108
|
|
|
$
|
113,362
|
|
|
$
|
108,150
|
|
RPX
Corporation
|
Reconciliation of
Cash Provided by Operating Activities to Free Cash
Flow
|
(in
thousands)
|
(unaudited)
|
|
|
Year Ended
December 31,
|
|
2017
|
|
2016
|
Net cash provided by
operating activities
|
$
|
181,478
|
|
|
$
|
187,256
|
|
Purchases of property
and equipment
|
(1,316)
|
|
|
(3,667)
|
|
Acquisitions of patent
assets
|
(106,343)
|
|
|
(116,742)
|
|
Free cash
flow[9]
|
$
|
73,819
|
|
|
$
|
66,847
|
|
RPX
Corporation
|
Additional
Metrics
|
(in
thousands)
|
(unaudited)
|
|
|
|
As of and for the
Three
Months Ended December 31,
|
Operating
Metrics
|
|
2017
|
|
2016
|
Gross patent
spend
|
|
$
|
65,125
|
|
|
$
|
48,495
|
|
Trailing four
quarters
|
|
179,865
|
|
|
184,314
|
|
Net patent
spend
|
|
51,435
|
|
|
45,495
|
|
Trailing four
quarters
|
|
106,010
|
|
|
117,429
|
|
|
|
|
|
|
|
|
As of and for the
Three
Months Ended December 31,
|
Financial
Metrics
|
|
2017
|
|
2016
|
Subscription
revenue[7]
|
|
$
|
59,549
|
|
|
$
|
62,688
|
|
Discovery
revenue
|
|
20,279
|
|
|
18,289
|
|
Fee-related
revenue
|
|
1,981
|
|
|
825
|
|
Total
revenue
|
|
$
|
81,809
|
|
|
$
|
81,802
|
|
Cash, cash
equivalents and short-term investments
|
|
$
|
157,165
|
|
|
$
|
190,988
|
|
Deferred revenue,
current and non-current
|
|
106,868
|
|
|
130,408
|
|
|
|
[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, realized losses on exchanges of
short-term investments, and acceleration of debt issuance costs
from the early repayment of term debt from its non-GAAP financial
measures.
|
[4]
|
RPX excludes non-cash
impairment losses from its non-GAAP financial measures.
|
[5]
|
Amount reflects
income taxes associated with the above noted non-GAAP
exclusions.
|
[6]
|
RPX calculates
non-GAAP adjusted EBITDA as GAAP earnings before other income or
expenses, net, provision for income taxes, depreciation,
amortization, non-cash impairment losses, and stock-based
compensation expenses (inclusive of related employer payroll
taxes).
|
[7]
|
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.
|
[8]
|
RPX excludes one-time
impacts of the Tax Cuts and Jobs Act from its non-GAAP financial
measures, specifically as it relates to the revaluation of deferred
taxes and repatriation toll charges.
|
[9]
|
Free cash flow is a
non-GAAP financial measure which the Company defines as cash flow
from operating activities less capital expenditures such as
property and equipment and patent assets.
|
[10]
|
The Company is
providing annual adjustments from ASC 605 to ASC 606 for additional
transparency. These adjustments for the years ended December 31,
2017 and 2016 are preliminary estimates and subject to change.
These adjustments do not have an impact on the items excluded for
non-GAAP presentation except the one-time tax effects of the Tax
Cuts and Jobs Act relating to the revaluation of deferred taxes for
the fourth quarter and year ended December 31, 2017 which increases
the Company's provision for income taxes by $3.6
million.
|
[11]
|
The Company excludes
the anti-dilutive effects of stock options and restricted stock
units using the treasury-stock method of 0.7 million shares from
its computation of net loss per share for the three months and year
ended December 31, 2017. However, these are included when
calculating non-GAAP net income per share as the effect is dilutive
in these periods.
|
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SOURCE RPX Corporation