RPX Announces Fourth Quarter and Fiscal 2017 Financial Results

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                  ASC 606           ASC 605                    New                   ASC 606
                                                   Revenue                                                           Revenue
                                                  Standard                                                          Standard
                                                  Adjustment                                                       Adjustment
                                                                                                                                                    ---

    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                  ASC 606                 ASC 605                    New                   ASC 606
                                                       Revenue                                                                 Revenue
                                                      Standard                                                                Standard
                                                      Adjustment                                                             Adjustment
                                                                                                                                                              ---

    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                     $87 million                $103 million

    December 31,
     2017

    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                           Year Ended December 31,
                                                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                                        Year Ended
                                                   December 31,                                      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                                 Cuts
     standard                                and
     adjustments                             Jobs
     related                                 Act[10]
     to
     the
     tax
     effects
     of
     Tax                                         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                                       Year Ended
                                                December 31,                                     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                                   Year Ended
                                                    December 31,                                     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                                  Year Ended
                                  December 31,                                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                                       Year Ended
                                               December 31,                                     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                                        Year Ended
                                         December 31,                                      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