News Column

WiLAN Reports Second Quarter 2014 Financial Results

July 30, 2014

OTTAWA, CANADA--(Marketwired - July 30, 2014) - Wi-LAN Inc. ("WiLAN" or the "Company") (TSX:WIN)(NASDAQ:WILN) today announced financial results for the second quarter of fiscal year 2014 ended June 30, 2014. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

Second Quarter 2014 Highlights

-- Revenues of $25.7 million, exceeding guidance of $19.4 million by 32%. -- Adjusted earnings(i) of $16.6 million, or 14 cents per basic share, exceeding guidance of between $9.4 million and $10.5 million by nearly 60%. -- GAAP earnings of $5.6 million or 5 cents per basic share. -- Announced 25% increase to quarterly dividend. -- Signed license agreements for wireless technology with Nokia Networks and Archos S.A. -- Entered license agreement with Sony Corporation related to television technology. -- Secured license agreements for network management technology with two U.S. wireless carriers. -- Signed significant partnership with industry leading memory company. -- Diversified business with licensing partnerships in the automotive, data networking, irrigation and medical technology markets. -- U.S. Patent Office and U.S. District Court confirm validity of WiLAN's 802 patent, which was at issue in the Apple case. -- Returned $4.3 million to shareholders in dividend payments.



"In the second quarter, we made significant progress in our ongoing efforts to increase the profitability and diversification of our business," said Jim Skippen, President & CEO. "Strong revenues, driven in part by signed license agreements with Nokia Networks and Sony, and the control of litigation expenses, contributed to the third straight quarter of positive GAAP earnings and adjusted earnings exceeding 55 percent of revenue."

Added Skippen, "Licensing partnerships signed recently have established WiLAN in many new markets including the automotive, data networking, medical and semiconductor markets. In particular, we are very excited about the quality and value of a patent portfolio that a WiLAN subsidiary acquired from an industry leading memory company in the second quarter. We are very pleased that the U.S. Patent Office, after conducting reexam proceedings at the urging of certain defendants in our cases, has confirmed the validity of WiLAN's 802 patent. The 802 patent was filed by the founders of WiLAN and has been licensed to many parties."

Eligible Dividend

The Board of Directors has declared an eligible dividend of CDN $0.05 per common share to be paid on October 3, 2014 to shareholders of record on September 12, 2014.

Second Quarter 2014 Revenue Review

In the three month period ended June 30, 2014, WiLAN generated revenues of $25.7 million, as compared to $19.9 million in the three month period ended June 30, 2013. The increase in revenues is primarily attributable to the timing of fixed-payment amounts as a result of the significant license agreements signed during the twelve months ended December 31, 2013 and the six months ended June 30, 2014 for which certain agreements contained higher fixed-payments at the beginning of the license agreement.

Second Quarter 2014 Operating Expense Review

In the three month period ended June 30, 2014, cost of revenue totaled $14.5 million as compared to $24.2 million in the comparative period. The decrease in expenses is primarily attributable to a decrease in litigation expense partially offset by an increase in amortization expense and patent maintenance, prosecution, and evaluation expenses as a result of patent acquisitions completed during fiscal 2013, and compensation and benefits as a result of increased staffing levels.

Three months ended Six months ended ------------------------------------------------ ------------------------------------------------ June 30, June 30, June 30, June 30, 2014 2013 2014 2013 ------------------------------------------------ ------------------------------------------------ Compensation and benefits $ 1,901$ 1,155$ 4,271$ 2,790 Litigation 1,656 14,470 3,365 26,143 Patent maintenance, prosecution, and evaluation 2,073 1,544 3,403 2,685 Amortization of patents 8,332 6,324 16,723 12,829 Stock-based compensation 95 263 453 421 Other 415 416 887 577 ------------------------------------------------ $ 14,472$ 24,172$ 29,102$ 45,445 ------------------------------------------------ ------------------------------------------------



For the three months ended June 30, 2014, litigation expenses amounted to $1.7 million compared to $14.5 million for the same period last year. This decrease in comparison to the same period last year is largely attributable to a decrease in the level of litigation activities and new shared risk fee arrangements entered into with our external counsel. Litigation expenses are expected to vary from period to period due to the variability of litigation activities and any contingent payments that may be required from licenses signed in any particular quarter.

In the second quarter ended June 30, 2014, MG&A expenses amounted to $2.8 million as compared to $3.6 million in the second quarter ended June 30, 2013. The decrease in spending for the three and six months ended June 30, 2014 is primarily attributable to a decrease in compensation and benefits and stock-based compensation as a result of changes in staffing levels.

Three months ended Six months ended ------------------------------------------------ ------------------------------------------------ June 30, June 30, June 30, June 30, 2014 2013 2014 2013 ------------------------------------------------ ------------------------------------------------ Compensation and benefits $ 1,219$ 1,630$ 1,985$ 2,555 Depreciation 161 118 325 242 Stock-based compensation 331 740 743 1,415 Public company costs 508 527 1,303 954 Facilities 180 137 363 271 Other 411 460 1,023 936 ------------------------------------------------ $ 2,810$ 3,612$ 5,742$ 6,373 ------------------------------------------------ ------------------------------------------------



For the three months ended June 30, 2014, R&D expenses were $660,000 as compared to $692,000 in the same period last year. Although expenses declined slightly quarter over quarter, compensation and benefits increased during the quarter as a result of an increase in staffing levels.

Three months ended Six months ended ------------------------------------------------ ------------------------------------------------ June 30, June 30, June 30, June 30, 2014 2013 2014 2013 ------------------------------------------------ ------------------------------------------------ Compensation and benefits $ 482$ 380$ 1,027$ 854 Depreciation 45 165 106 239 Stock-based compensation 32 75 9 213 Other 101 72 126 193 ------------------------------------------------ $ 660$ 692$ 1,268$ 1,499 ------------------------------------------------ ------------------------------------------------



Second Quarter 2014 Earnings Review

In the second quarter ended June 30, 2014, WiLAN generated adjusted earnings of $16.6 million or 14 cents per basic share as compared to a loss of $762,000 or 1 cent per basic share, in the comparative period. The increase in adjusted earnings for the second quarter of 2014 is primarily attributable to increased revenues and reduced litigation expenses.

The Company's GAAP earnings amounted to earnings of $5.6 million, or 5 cents per share on a basic level, in the second quarter 2014, as compared to a GAAP loss of $7.6 million, or 6 cents per share on a basic level, in the same period last year.

Second Quarter 2014 Balance Sheet and Cash Flow Review

At June 30, 2014, the Company's cash, comprised of cash and cash equivalents and short-term investments, totaled $140.1 million, representing an increase of $8.2 million from the cash position at December 31, 2013. The increase is primarily attributable to $33.2 million of cash generated in operations partially offset by the payment of dividends totaling $8.8 million and payments related to patent acquisitions totaling $10.7 million. The Company's cash equivalents and short-term investments include T-bills, term deposits and GICs.

Third Quarter 2014 Financial Guidance

For the third quarter 2014 ending September 30, 2014, the Company expects revenue to be at least $19.7 million. This revenue guidance does not include the potential impact of any additional reports yet to be received, new agreements that may be signed during the balance of the third quarter of 2014 or the potential impact of any royalties identified in audits conducted by the Company. This guidance is provided prior to the completion of the first month of this fiscal quarter and as such, a number of reports that normally are submitted at or shortly after the month end have yet to be received by the Company.

Operating expenses for the third quarter are expected to be in the range of $9.7 million to $10.4 million of which $2.5 million to $3.2 million is expected to be litigation expense. For the third quarter of 2014, and assuming no additional agreements are signed, adjusted earnings are expected to be in the range of $9.4 million to $10.2 million.

The above statements are forward-looking and actual results may differ materially. The "Forward- looking Information" section at the end of this press release provides information on various risks and uncertainties that the Company faces. Additional information identifying risks and uncertainties relating to the Company's business are discussed in greater detail in the "Risk Factors" section of WiLAN's annual information form for the 2013 fiscal year dated February 3, 2014 (copies of which may be obtained at www.sedar.com or www.sec.gov). Financial guidance is provided to assist investors and other interested parties in understanding WiLAN's performance. The reader is cautioned that using this information for any other purpose may be inappropriate.

The Company's revenues result primarily from the licensing of intellectual property which, by its very nature, is directly affected by the timing of the closure of license agreements, the nature and extent of specific licenses including actual rates, product sales by licensees which can be subject to seasonality as well as overall market demands and the timeliness of the receipt of licensee royalty reports. In addition, certain revenues may be of a one-time nature.

The above targets for the three month period ending September 30, 2014 reflect our current business indicators and expectations and are subject to fluctuations in foreign currency exchange rates. Due to their nature, certain income and expense items, such as significant license agreements with companies, brokerage opportunities, new litigation actions, contingent payments to licensing partners and litigation counsel that may be required from certain licenses signed in any particular quarter, losses on asset impairments or realized foreign exchange losses cannot be accurately forecast. Accordingly, we exclude forecasts of such items from our guidance. Actual revenues reported may exceed the revenue guidance provided due to the receipt of royalty reports, signing of new license agreements and completion of licensee audits, all after the guidance is provided. Actual expenses incurred may exceed the expense guidance provided due, in part, to contingent payments to licensing partners and litigation counsel that may be required from certain licenses signed during the quarter.

WiLAN's imperative is to negotiate the best possible license as measured over the long-term and accordingly, the timing of actual license signings may vary from that forecasted. Actual results may vary materially from the guidance provided as a consequence of the above noted factors.

Conference Call Information - July 30, 2014 - 10:00 AM ET

WiLAN will conduct a conference call to discuss its financial results today 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 at http://www.investorcalendar.com/IC/CEPage.asp?ID=172942 -- 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 at http://www.investorcalendar.com/IC/CEPage.asp?ID=172942 and accessible by telephone until 11:59 PM ET on October 30, 2014.

Replay Number (Toll Free): 1.877.660.6853

Replay Number (International): 1.201.612.7415

Conference ID #: 13585851

About WiLAN

WiLAN, founded in 1992, is a leading technology innovation and licensing company. WiLAN has licensed its intellectual property to over 285 companies worldwide. Inventions in our portfolio have been licensed by companies that manufacture or sell a wide range of communication and consumer electronics products including 3G and 4G handsets, Wi-Fi-enabled laptops, Wi-Fi and broadband routers, xDSL infrastructure equipment, cellular base stations and digital TV receivers. For more information: www.wilan.com.

Note

((i)) WiLAN follows GAAP in preparing its interim and annual financial statements. Adjusted Earnings are earnings from continuing operations before stock-based compensation expense, depreciation and amortization expense, interest expense, unrealized foreign exchange gains or losses, provision for income taxes and certain other non-cash, infrequent charges.

Forward-looking Information

This news release contains forward-looking statements and forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and other United States and Canadian securities laws. The phrases "to increase the profitability and diversification of our business", "are expected to vary", "due to the variability", "contingent payments that may be required from licenses signed in any particular quarter", "expects revenue to be", "potential impact", "yet to be received", "may be signed", "conducted by", "are expected to be", "are signed", "is expected", "may differ", "may be", "can be", "expectations", "subject to", "cannot be accurately forecast", " may exceed", "the receipt", "signing of new license agreements", "completion of", "contingent payments to licensing partners and litigation counsel that may be required from licenses signed during the quarter", "to negotiate", "may vary", "will be", and similar terms and phrases are intended to identify these forward-looking statements. Forward-looking statements and forward-looking information are based on estimates and assumptions made by WiLAN in light of its experience and its perception of historical trends, current conditions and expected future developments and the expected effects of new business strategies, as well as other factors that WiLAN believes are appropriate in the circumstances. Many factors could cause WiLAN's actual performance or achievements to differ materially from those expressed or implied by the forward-looking statements or forward-looking information. Such factors include, without limitation, the risks described in WiLAN's February 3, 2014 annual information form for the year ended December 31, 2013 (the "AIF"). Copies of the AIF may be obtained at www.sedar.com or www.sec.gov. WiLAN recommends that readers review and consider all of these risk factors and notes that readers should not place undue reliance on any of WiLAN's forward-looking statements. WiLAN has no intention and undertakes no obligation to update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

All trademarks and brands mentioned in this release are the property of their respective owners.

Wi-LAN Inc. Condensed Consolidated Statements of Operations (Unaudited) (in thousands of United States dollars, except share and per share amounts) Three months Three months Six months Six months ended ended ended ended June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013 ----------------------------------------------------------- ----------------------------------------------------------- Revenue Royalties $ 25,655$ 19,941$ 51,633$ 38,310 Operating expenses Cost of revenue 14,472 24,172 29,102 45,445 Research and development 660 692 1,268 1,499 Marketing, general and administration 2,810 3,612 5,742 6,373 Foreign exchange (gain) loss (1,112) 1,266 277 2,299 ----------------------------------------------------------- Total operating expenses 16,830 29,742 36,389 55,616 ----------------------------------------------------------- Earnings (loss) from operations 8,825 (9,801) 15,244 (17,306) Investment income 143 188 278 383 ----------------------------------------------------------- Earnings (loss) before income taxes 8,968 (9,613) 15,522 (16,923) Provision for (recovery of) income tax expense Current 1,338 1,293 2,780 2,594 Deferred 2,031 (3,274) 3,174 (5,451) ----------------------------------------------------------- 3,369 (1,981) 5,954 (2,857) ----------------------------------------------------------- Net and comprehensive income (loss) $ 5,599$ (7,632)$ 9,568$ (14,066) ----------------------------------------------------------- ----------------------------------------------------------- Earnings (loss) per share Basic $ 0.05$ (0.06)$ 0.08$ (0.12) Diluted $ 0.05$ (0.06)$ 0.08$ (0.12) Weighted average number of common shares Basic 120,065,465 121,225,490 119,991,276 121,384,394 Diluted 120,335,029 121,225,490 120,297,384 121,384,394 ----------------------------------------------------------- ----------------------------------------------------------- Wi-LAN Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands of United States dollars) As at June 30, December 31, 2014 2013 ---------------------------------- ---------------------------------- Current assets Cash and cash equivalents $ 138,634$ 130,394 Short-term investments 1,453 1,457 Accounts receivable 4,641 11,999 Prepaid expenses and deposits 1,352 592 ---------------------------------- 146,080 144,442 Loan receivable 1,167 1,075 Furniture and equipment, net 2,061 2,159 Patents and other intangibles, net 161,749 150,025 Deferred tax asset 23,702 26,876 Goodwill 12,623 12,623 ---------------------------------- $ 347,382$ 337,200 ---------------------------------- ---------------------------------- Current liabilities Accounts payable and accrued liabilities $ 17,974$ 25,011 Current portion of patent finance obligation 34,593 19,480 ---------------------------------- 52,567 44,491 Patent finance obligation 33,777 32,552 Success fee obligation 5,230 7,048 ---------------------------------- 91,574 84,091 ---------------------------------- Commitments and contingencies Shareholders' equity Capital stock 426,317 425,238 Additional paid-in capital 15,380 14,635 Accumulated other comprehensive income 16,225 16,225 Deficit (202,114) (202,989) ---------------------------------- 255,808 253,109 ---------------------------------- $ 347,382$ 337,200 ---------------------------------- ---------------------------------- Wi-LAN Inc. Condensed Consolidated Statements of Cash Flow (Unaudited) (in thousands of United States dollars) Three months Three months Six months Six months ended ended ended ended June 30, June 30, June 30, June 30, 2014 2013 2014 2013 ---------------------------------------------------- ---------------------------------------------------- Cash generated from (used in) Operations Net earnings (loss) $ 5,599$ (7,632)$ 9,568$ (14,066) Non-cash items Stock-based compensation 470 1,168 1,217 2,139 Depreciation and amortization 8,524 6,516 17,141 13,219 Foreign exchange (gain) loss (480) 671 - 1,252 Disposal of assets 3 - 6 - Disposal of patents - - - 46 Deferred income tax expense (recovery) 2,031 (3,274) 3,174 (5,451) Accrued investment income (46) (39) (92) (79) Change in non-cash working capital balances Accounts receivable (2,886) 584 7,358 (4,742) Prepaid expenses and deposits (45) (283) (760) (367) Payments associated with success fee obligation (1,335) (659) (2,409) (2,172) Accounts payable and accrued liabilities (64) 5,023 (2,040) 8,416 ---------------------------------------------------- Cash generated from (used in) operations 11,771 2,075 33,163 (1,805) ---------------------------------------------------- Financing Dividends paid (4,339) (4,867) (8,849) (9,101) Common shares repurchased under normal course issuer bid (125) (2,256) (125) (2,912) Common shares issued for cash on the exercise of options 592 117 643 478 Common shares issued for cash from Employee Share Purchase Plan 89 102 89 102 ---------------------------------------------------- Cash used in financing (3,783) (6,904) (8,242) (11,433) ---------------------------------------------------- Investing Sale of short-term investments (51) 91 4 143 Purchase of furniture and equipment (102) (50) (326) (67) Purchase of patents and other intangibles (10,669) (2,327) (16,359) (3,015) ---------------------------------------------------- Cash used in investing (10,822) (2,286) (16,681) (2,939) ---------------------------------------------------- Foreign exchange gain (loss) on cash held in foreign currency 480 (671) - (1,252) ---------------------------------------------------- Net cash and cash equivalents generated (used) in the period (2,354) (7,786) 8,240 (17,429) Cash and cash equivalents, beginning of period 140,988 165,603 130,394 175,246 ---------------------------------------------------- Cash and cash equivalents, end of period $ 138,634$ 157,817$ 138,634$ 157,817 ---------------------------------------------------- ---------------------------------------------------- Wi-LAN Inc. Reconciliation of GAAP Net Earnings to Adjusted Earnings (in thousands of United States dollars, except share and per share amounts) Three months ended Six months ended -------------------------------------------------------- -------------------------------------------------------- June 30, June 30, June 30, June 30, 2014 2013 2014 2013 -------------------------------------------------------- -------------------------------------------------------- Net earnings (loss) under GAAP $ 5,599$ (7,632)$ 9,568$ (14,066) Adjusted for: Unrealized foreign exchange (gain) loss (1,342) 1,167 (493) 2,111 Depreciation and amortization 8,524 6,516 17,141 13,219 Stock based compensation 470 1,168 1,217 2,139 Loss (gain) on disposal of assets 3 - 6 (7) Income tax expense (recovery) 3,369 (1,981) 5,954 (2,857) -------------------------------------------------------- Adjusted earnings (loss) $ 16,623$ (762)$ 33,393$ 539 -------------------------------------------------------- -------------------------------------------------------- Adjusted earnings (loss) per basic share $ 0.14$ (0.01)$ 0.28$ 0.00 Weighted average number of common shares Basic 120,065,465 121,225,490 119,991,276 121,384,394 FOR FURTHER INFORMATION PLEASE CONTACT: Shaun McEwan Chief Financial Officer O: 613.688.4898 C: 613.697.7159 E: smcewan@wilan.comTyler Burns Director, Investor Relations O: 613.688.4330 C: 613.697.0367 E: tburns@wilan.comwww.wilan.com Source: Wi-LAN Inc.


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