WiLAN Reports Third Quarter 2012 Financial Results
OTTAWA, CANADA, Nov 06, 2012 (Menafn - MARKETWIRE via COMTEX) --Wi-LAN Inc. ("WiLAN" or the "Company") WILNtoday announced financial results for the third quarter of fiscalyear 2012 ended September 30, 2012. All financial information in thispress release is reported in U.S. dollars, unless otherwiseindicated.
Third Quarter 2012 Highlights
--Revenues of 21.3 million, exceeding our guidance of 19.9 million.
--Adjusted earnings(i) of 9.3 million, or 8 cents per share.
--Order issued consolidating two litigations involving Apple, HTC and
other parties, beginning of trial proceedings against Apple and other
parties advanced by six months.
--Signed a licensing partnership agreement with SENSIO Technologies Inc.
--Invested 19.0 million to acquire a portfolio of more than 150 patents
and applications, with broad applicability to 4G infrastructure and
handsets, from Alvarion Inc.
--Acquired a portfolio of more than 40 patents and applications from
Siemens AG related to telecommunication network management and mobile
multimedia.
--Returned 4.8 million to shareholders in dividend and share buyback
payments.
--Generated 9.8 million in cash from operations.
--Held cash and cash equivalents and short-term investments of 173.2
million at September 30, 2012.
"WiLAN delivered strong financial performance in the third quarter of2012," said Jim Skippen, President & CEO. "New license agreementssigned in the quarter resulted in our revenue exceeding guidance."
Added Skippen, "We continued to invest in the future of our businesswith the purchase of a portfolio of 4G-related patents from Alvarionthat we believe add significant value to prospective licensees of ourwireless technology portfolio. True to our word that we are preparedto use litigation to encourage prospective licensees to come to thetable for serious negotiations, we stepped up our litigation effortsearly in the fourth quarter with the launching of four newlitigations."
Eligible Dividend
The Board of Directors has declared an eligible dividend of CDN0.035 per common share to be paid on January 7, 2012 to shareholdersof record on December 14, 2012.
Third Quarter 2012 Revenue Review
In the three month period ended September 30, 2012, WiLAN generatedrevenues of 21.3 million, as compared to 27.8 million in the threemonth period ended September 30, 2011. The decrease in revenuecompared to the prior year period is primarily attributable to thetiming of fixed payment amounts as a result of the significantlicense agreements signed during the first quarter of 2011, some ofwhich required payments that were one-time in nature and some ofwhich had more significant upfront payments. For the three monthperiod ended September 30, 2012, the top 10 licensees accounted for86% of revenues, whereas the top 10 accounted for 80% of revenues inthe three month period ended September 30, 2011.
Third Quarter 2012 Operating Expense Review
In the three month period ended September 30, 2012, cost of revenuetotaled 7.7 million as compared to 7.2 million in the three monthperiod ended September 30, 2011. For the nine month period endedSeptember 30, 2012, cost of revenues totaled 22.1 million ascompared to 19.6 million in the same period last year. The increasein expenses for the three and nine months ended September 30, 2012 isprimarily attributable to an increase in compensation costs as aresult of increased staffing levels, and amortization expense as aresult of patent acquisitions we completed during fiscal 2011,partially offset by a decrease in royalties.
Three months endedNine months ended
------------------------------------------------
SeptemberSeptemberSeptemberSeptember
30, 201230, 201130, 201230, 2011
------------------------------------------------
Patent licensing1,0181,5913,1753,335
Amortization of patents6,4135,45618,26415,784
Stock-based compensation224189684482
------------------------------------------------
7,6557,23622,12319,601
------------------------------------------------
Marketing, general and administrative ("MG&A") expenses represent thecost of litigation and all corporate services. For the three monthsended September 30, 2012, MG&A expenses amounted to 10.4 million ascompared to 5.1 million for the three months ended September 30,2011. The increase in spending for the three months ended September30, 2012 is primarily attributable to an increase in litigationexpenses partially offset by a decrease in incentive costs andstock-based compensation.
Three months endedNine months ended
------------------------------------------------
SeptemberSeptemberSeptemberSeptember
30, 201230, 201130, 201230, 2011
------------------------------------------------
Non-litigation related
Marketing, general and
administrative costs2,5462,1137,3566,024
Litigation expense7,0961,23116,79314,873
Incentive costs-557-1,629
Asset write-off related to
restructuring--209-
Depreciation104123376322
Stock-based compensation6371,1031,8502,094
------------------------------------------------
10,3835,12726,58424,942
------------------------------------------------
For the three months ended September 30, 2012, litigation expensesamounted to 7.1 million compared to 1.2 million for the same periodlast year. The increase in litigation expenses over the prior yearperiod is partially attributable to an increased level of effort inthree separate patent infringement litigations in the U.S. DistrictCourt for the Eastern District of Texas ("EDTX"). The increased levelof effort was required in ongoing preparations for two MarkmanHearings that are scheduled to take place in February 2013 andpreparations for a trial that is scheduled to begin in April 2013.The increase in litigation expenses is also due to the conduct ofproceedings in a patent infringement litigation in the U.S. DistrictCourt for the Southern District of Florida that was filed in January2012 and preparation for litigations launched early in the fourthquarter of 2012.
Third Quarter 2012 Earnings Review
In the third quarter ended September 30, 2012, WiLAN generatedadjusted earnings of 9.3 million or 8 cents per share as compared to22.8 million, or 18 cents per share, in the comparative period. Thedecrease in adjusted earnings between the reporting periods isprimarily attributable to lower revenues and higher investment inlitigation, for the purpose of driving future revenue growth.
The Company's GAAP earnings were 2.2 million, or 2 cents per shareon a basic level, in the three month period ended September 30, 2012,as compared to GAAP earnings of 7.3 million, or 6 cents per share ona basic level, in the same period last year.
Third Quarter 2012 Balance Sheet and Cash Flow Review
At September 30, 2012, the Company's net cash, comprised of cash andcash equivalents and short-term investments, totaled 173.2 million,representing a decrease of 260.5 million from the net cash positionat December 30, 2011. The decrease is primarily attributable to theretirement of the Debenture, the acquisition of patents and otherintangibles totaling 24.3 million, the returning of 26.1 million toshareholders in dividend and share buyback payments, offset by 28.1million in cash generated from operations. The Company's cashequivalents and short-term investments include T-bills, term depositsand GICs.
During the third quarter ended September 30, 2012, the Companygenerated 9.8 million of cash from operations and returned 4.8million to shareholders in share buyback and dividend payments.
Fourth Quarter 2012 Financial Guidance
For the fourth quarter 2012 ending December 31, 2012, the Companyexpects revenue to be at least 20.7 million. This revenue guidancedoes not include the potential impact of any new agreements that maybe signed during the balance of the fourth quarter of 2012 or thepotential impact of any royalties identified in audits conducted bythe Company. Operating expenses for the fourth quarter are expectedto be in the range of 12.8 million to 14.5 million of which 7.7million to 8.7 million is expected to be litigation expense. For thefourth quarter of 2012, and assuming no additional agreements aresigned, adjusted earnings are expected to be in the range of 6.2million to 7.9 million.
The above statements are forward-looking and actual results maydiffer materially. The "Forward-looking Information" section at theend of this press release provides information on various risks anduncertainties that the Company faces. Additional informationidentifying risks and uncertainties relating to the Company'sbusiness are discussed in greater detail in the "Risk Factors"section of WiLAN's AIF for the 2011 fiscal year dated March 9, 2012(copies of which may be obtained at www.sedar.com or www.sec.gov).Financial guidance is provided to assist investors and otherinterested parties in understanding WiLAN's performance. The readeris cautioned that using this information for any other purpose may beinappropriate.
The Company's revenues result primarily from the licensing ofintellectual property which, by its very nature, is directly affectedby the timing of the closure of license agreements, the nature andextent of specific licenses including actual rates, product sales bylicensees which can be subject to seasonality as well as overallmarket demands and the timeliness of the receipt of licensee royaltyreports. In addition, certain revenues may be of a one-time nature.
The above guidance for the three month period ended December 31, 2012reflects our current business indicators and expectations and issubject to fluctuations in foreign currency exchange rates. Due totheir nature, certain income and expense items, such as significantsettlements from companies involved in current enforcement actions,brokerage opportunities, new significant litigation or defenseactions that could arise during the quarter, losses on assetimpairments or realized foreign exchange losses cannot be accuratelyforecast. Accordingly, we exclude forecasts of such items from ourguidance. Actual revenues reported may exceed the guidance provideddue to the receipt of royalty reports, signing of new licenseagreements and completion of licensee audits, all after the guidanceis provided.
WiLAN's imperative is to negotiate the best possible license asmeasured over the long-term and accordingly, the timing of actuallicense signings may vary from that forecasted. Actual results mayvary materially from the guidance provided as a consequence of theabove noted factors.
Conference Call Information - November 6, 2012 - 10:00 AM ET
WiLAN will conduct a conference call to discuss its financial resultstoday at 10:00 AM Eastern Time (ET). WiLAN CEO, Jim Skippen and CFO,Shaun McEwan will be on the call.
Calling Information
A live audio webcast will be available athttp://www.investorcalendar.com/IC/CEPage.asp?ID=169807
--To access the call from Canada and U.S., dial 1.877.407.0782 (Toll Free)
--To access the call from other locations, dial 1.201.689.8567
(International)
Replay Information
The call will be available athttp://www.investorcalendar.com/IC/CEPage.asp?ID=169807 andaccessible by telephone until 11:59 PM ET on February 6, 2013.
--Replay Number (Toll Free): 1.877.660.6853
--Replay Number (International): 1.201.612.7415
--Replay passcode (Conference ID #): 401095
About WiLAN
WiLAN, founded in 1992, is a leading technology innovation andlicensing company. WiLAN has licensed its intellectual property toover 260 companies worldwide. Inventions in our portfolio have beenlicensed by companies that manufacture or sell a wide range ofcommunication and consumer electronics products including 3G and 4Ghandsets, Wi-Fi-enabled laptops, Wi-Fi and broadband routers, xDSLinfrastructure equipment, cellular base stations and digitaltelevision receivers. WiLAN has a large and growing portfolio of morethan 3,000 issued or pending patents. For more information:www.wilan.com.
Note
(i) WiLAN follows GAAP in preparing its interim and annual financialstatements. Adjusted Earnings are earnings from continuing operationsbefore stock-based compensation expense, depreciation andamortization expense, interest expense, unrealized foreign exchangegains or losses, provision for income taxes and certain othernon-cash, one-time, or non-recurring charges.
Forward-looking Information
This news release contains forward-looking statements andforward-looking information within the meaning of the U.S. PrivateSecurities Litigation Reform Act of 1995 and other United States andCanadian securities laws. The phrases "we believe", "Companyexpects", "to be", "potential impact", "may be", "may differ", "areexpected", "is expected", "may exceed", "may vary" and similar termsand phrases are intended to identify these forward-lookingstatements. Forward-looking statements and forward-lookinginformation are based on estimates and assumptions made by WiLAN inlight of its experience and its perception of historical trends,current conditions and expected future developments, as well as otherfactors that WiLAN believes are appropriate in the circumstances.Many factors could cause WiLAN's actual performance or achievementsto differ materially from those expressed or implied by theforward-looking statements or forward-looking information. Suchfactors include, without limitation, the risks described in WiLAN'sMarch 9, 2012 annual information form for the year ended December 31,2011 (the "AIF"). Copies of the AIF may be obtained at www.sedar.comor www.sec.gov. WiLAN recommends that readers review and consider allof these risk factors and notes that readers should not place unduereliance on any of WiLAN's forward-looking statements. WiLAN has nointention and undertakes no obligation to update or revise anyforward-looking statements or forward-looking information, whether asa result of new information, future events or otherwise, except asrequired by law.
All trademarks and brands mentioned in this release are the propertyof their respective owners.
Wi-LAN Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands of United States dollars, except share and per share amounts)
ThreeThree
monthsmonthsNine monthsNine months
endedendedendedended
SeptemberSeptemberSeptemberSeptember 30,
30, 201230, 201130, 20122011
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Revenue
Royalties21,29326,82566,77780,589
Brokerage-996-996
-------------- -------------- -------------- --------------
Total Revenue21,29327,82166,77781,585
Operating
expenses
Cost of revenue7,6557,23622,12319,601
Research and
development1,8732,1686,6245,268
Marketing,
general and
administration10,3835,12726,58424,942
Realized
foreign
exchange gain(72)(1,706)(92)(1,302)
Unrealized
foreign
exchange
(gain) loss(1,189)12,692(5,460)9,830
Restructuring
charges--418-
-------------- -------------- -------------- --------------
Total operating
expenses18,65025,51750,19758,339
-------------- -------------- -------------- --------------
Earnings from
operations2,6432,30416,58023,246
Investment
income1612,2461,0653,028
Interest
expense-(808)(1,126)(808)
Transaction
costs-(1,245)-(1,245)
Debenture
financing, net-4,344(31,138)4,344
-------------- -------------- -------------- --------------
Earnings (loss)
before income
taxes2,8046,841(14,619)28,565
Provision for
(recovery of)
income tax
expense
Current1,1389083,0602,632
Deferred(493)(1,384)(5,278)(11,482)
-------------- -------------- -------------- --------------
645(476)(2,218)(8,850)
-------------- -------------- -------------- --------------
Net earnings
(loss)2,1597,317(12,401)37,415
Other
comprehensive
income
Cumulative
translation
adjustment---(9,830)
-------------- -------------- -------------- --------------
Comprehensive
income (loss)2,1597,317(12,401)27,585
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Earnings (loss)
per share
Basic0.020.06(0.10)0.31
Diluted0.020.06(0.10)0.30
Weighted average
number of
common shares
Basic121,225,793123,443,900121,459,574120,994,489
Diluted122,086,343125,618,973121,459,574123,488,133
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Wi-LAN Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands of United States dollars)
September 30,December 31,
As at20122011
------------------------------------
------------------------------------
Current assets
Cash and cash equivalents171,553432,186
Short-term investments1,6171,524
Accounts receivable2,6562,153
Prepaid expenses and deposits1,020290
Deferred financing costs-1,716
------------------------------------
176,846437,869
Furniture and equipment, net1,2331,769
Patents and other intangibles, net122,910118,645
Deferred tax asset21,51218,086
Goodwill12,62312,623
------------------------------------
335,124588,992
------------------------------------
------------------------------------
Current liabilities
Accounts payable and accrued
liabilities20,34222,169
Due to related party-7,102
Current portion of patent finance
obligation2,5472,458
Deferred tax liability-1,851
Debentures-203,855
------------------------------------
22,889237,435
Patent finance obligation3,2885,189
Success fee obligation11,86415,212
------------------------------------
38,041257,836
------------------------------------
Commitments and contingencies
Shareholders' equity
Capital stock430,207436,606
Additional paid-in capital10,36414,061
Accumulated other comprehensive
income16,22516,225
Deficit(159,713)(135,736)
------------------------------------
297,083331,156
------------------------------------
335,124588,992
------------------------------------
------------------------------------
Wi-LAN Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(in thousands of United States dollars)
ThreeThreeNineNine
monthsmonthsmonthsmonths
endedendedendedended
SeptemberSeptemberSeptemberSeptember
30, 201230, 201130, 201230, 2011
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Cash generated from
(used in)
Operations
Net earnings (loss)2,1597,317(12,401)37,415
Non-cash items
Stock-based
compensation1,0241,5152,9553,046
Depreciation and
amortization6,6215,66718,95916,269
Unrealized foreign
exchange gain on
debenture-(17,285)-(17,285)
Foreign exchange
(gain) loss(1,000)22,45413025,659
Deferred financing
costs-3,6491,7463,649
Accretion of debt
discount-53725,175537
Disposal of assets-703209703
Deferred income
tax recovery(493)(1,384)(5,278)(11,482)
------------- ------------- ------------- -------------
8,31123,17331,49558,511
Change in non-cash
working capital
balances
Accounts
receivable(1,547)(3,656)(503)(5,394)
Prepaid expenses
and deposits485210(730)(289)
Accounts payable
and accrued
liabilities2,585(905)4,9861,682
Due to related
party--(7,102)-
------------- ------------- ------------- -------------
Cash generated from
operations9,83418,82228,14654,510
------------- ------------- ------------- -------------
Financing
Proceeds on sale of
common shares, net-(87)-71,948
Dividends paid(3,663)(3,148)(10,383)(7,555)
Success fee
obligation(1,609)-(11,354)-
Proceeds from
issuance
(repayment) of
convertible
debentures-220,565(233,247)220,565
Internally
restricted cash-(220,565)-(220,565)
Common shares
repurchased under
normal course
issuer bid(1,092)-(15,729)-
Common shares
issued for cash on
the exercise of
options5687322,5625,702
Common shares
issued for cash
from Employee
Share Purchase
Plan--11687
------------- ------------- ------------- -------------
Cash (used in)
generated from
financing(5,796)(2,503)(268,035)70,182
------------- ------------- ------------- -------------
Investing
Sale (purchase) of
short-term
investments(55)21,018(93)18,172
Purchase of
furniture and
equipment(38)(660)(369)(1,614)
Purchase of patents
and other
intangibles(22,963)(689)(24,340)(10,054)
------------- ------------- ------------- -------------
Cash (used in)
generated from
investing(23,056)19,669(24,802)6,504
------------- ------------- ------------- -------------
Foreign exchange
gain (loss) on cash
held in foreign
currency1,000(22,454)4,058(25,659)
------------- ------------- ------------- -------------
Net cash and cash
equivalents (used
in) generated in
the period(18,018)13,534(260,633)105,537
Cash and cash
equivalents,
beginning of period189,571174,639432,18682,636
------------- ------------- ------------- -------------
Cash and cash
equivalents, end of
period171,553188,173171,553188,173
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Wi-LAN Inc.
Reconciliation of GAAP Net Earnings to Adjusted Earnings
(Unaudited)
(in thousands of United States dollars, except share and per share amounts)
ThreeThree
monthsmonthsNine monthsNine months
endedendedendedended
SeptemberSeptemberSeptemberSeptember
30, 201230, 201130, 201230, 2011
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net earnings
(loss) under
GAAP2,1597,317(12,401)37,415
Adjusted for:
Unrealized
foreign
exchange
(gain) loss(1,189)12,692(5,460)9,830
Depreciation
and
amortization6,6215,66718,95916,269
Stock based
compensation1,0241,5152,9553,046
Restructuring
and other one
time charges-285418285
Asset write-
off related
to
restructuring--209-
Interest
expense-8081,126808
Transaction
costs-1,245-1,245
Investment
income-(1,940)-(2,073)
Debenture
financing,
net-(4,344)31,138(4,344)
Income tax
expense
(recovery)645(476)(2,218)(8,850)
-------------- -------------- -------------- --------------
Adjusted
earnings9,26022,76934,72653,631
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Adjusted
earnings per
basic share0.080.180.290.44
Weighted average
number of
common shares
Basic121,225,793123,443,900121,459,574120,994,489
Diluted122,086,343125,618,973121,459,574123,488,133
-------------- -------------- -------------- --------------
Contacts:
Media inquiries:
Kathryn Hughes
Director, Marketing & Communications
O: 613.688.4897
C: 613.898.6781
khughes@wilan.com
Investor inquiries:
Shaun McEwan
Chief Financial Officer
O: 613.688.4898
C: 613.697.7159
smcewan@wilan.com
Tyler Burns
Director, Investor Relations
O: 613.688.4330
C: 613.697.0367
tburns@wilan.com
SOURCE: Wi-LAN Inc.
mailto:khughes@wilan.com
mailto:smcewan@wilan.com
mailto:tburns@wilan.com
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