CALGARY, Canada - September 18, 2002 - Wi-LAN Inc. (TSE:WIN), a global provider of broadband wireless data/Internet communications products and technologies, today announced financial results for the quarter and nine months ended July 31, 2002. All financial amounts are expressed in thousands of Canadian dollars unless otherwise noted.
Financial Highlights: Revenue: Revenue for the three months ended July 31, 2002 was $5,847, which is 6% less than the $6,250 reported for the prior three months ended April 30, 2002, and 23% less than the $7,574 reported for the same three-month period in 2001. Revenue for the nine months ended July 31, 2002 is $16,875, which is 13% less than the $19,443 reported for the same nine-month period in 2001.Revenue guidance: Wi-LAN continues to expect revenue for the 12 months ended October 31, 2002 in the range of $23.1 million to $25.0 million, compared to $24.8 million in fiscal 2001.Gross margin: Product gross margin before inventory writedowns for the three months ended July 31, 2002 was 30% compared to 39% for the three months ended July 31, 2001, and 33% for the prior three months ended April 30, 2002.Operating expense: Operating expense continued to show stability in the third quarter, indicating that the effects of the restructuring decisions made on July 17 and September 14, 2001 have been fully realized. Operating expense for the three months ended July 31, 2002 was $4,615, an improvement of $11,577 compared to $16,192 for the same period in 2001, and an increase of $235 compared to $4,380 for the prior quarter ended April 30, 2002.Cash: Net cash used in operations for the quarter was $1,889, an improvement of $9,113 compared to $11,002 for the same period in 2001, and an increase of $679 compared to $1,210 for the prior quarter ended April 30, 2002. Wi-LAN's cash balance was $6,412 on July 31, 2002 and this amount is expected to be adequate to sustain the company's current operations until cash flow positive operations are achieved.
Financial Summary:
<_o3a_p> | 3 months ended | <_o3a_p> | 9 months ended Jul. 31<_o3a_p> | (In thousands of dollars)<_o3a_p> | Jul. 31, 2002<_o3a_p> | Apr. 30, 2002<_o3a_p> | Jul.31, 2001<_o3a_p> | 2002<_o3a_p> | 2001<_o3a_p> | Revenue<_o3a_p> | <_o3a_p> | <_o3a_p> | <_o3a_p> | <_o3a_p> | <_o3a_p> | - Product<_o3a_p> | $ 5,847 <_o3a_p> | $ 6,250<_o3a_p> | $ 7,556<_o3a_p> | $ 16,875 <_o3a_p> | $ 19,090<_o3a_p> | - License and technology<_o3a_p> | 0<_o3a_p> | 0<_o3a_p> | 18<_o3a_p> | 0<_o3a_p> | 353<_o3a_p> | - Total<_o3a_p> | 5,847<_o3a_p> | 6,250<_o3a_p> | 7,574<_o3a_p> | 16,875<_o3a_p> | 19,443<_o3a_p> | Product gross margin (1)<_o3a_p> | 30% <_o3a_p> | 33%<_o3a_p> | 39%<_o3a_p> | 30% <_o3a_p> | 31%<_o3a_p> | Operating loss<_o3a_p> | $ 3,689<_o3a_p> | $ 2,673<_o3a_p> | $ 17,215<_o3a_p> | $ 11,994 <_o3a_p> | $ 32,630<_o3a_p> | Cash used in operations<_o3a_p> | 1,889<_o3a_p> | 1,210<_o3a_p> | 11,002<_o3a_p> | 4,123<_o3a_p> | 30,081<_o3a_p> | <_o3a_p> | Apr. 30, 2002<_o3a_p> | Apr. 30, 2002<_o3a_p> | Oct. 31, 2001<_o3a_p> | <_o3a_p> | <_o3a_p> | Cash balance<_o3a_p> | $ 6,412<_o3a_p> | $ 8,424<_o3a_p> | $ 5,533<_o3a_p> | <_o3a_p> | <_o3a_p> | Working capital<_o3a_p> | 10,115<_o3a_p> | 13,483<_o3a_p> | 13,663<_o3a_p> | <_o3a_p> | <_o3a_p> | Long term debt<_o3a_p> | 267<_o3a_p> | 267<_o3a_p> | 267<_o3a_p> | <_o3a_p> | <_o3a_p> | Shareholders’ equity<_o3a_p> | 28,748<_o3a_p> | 34,991<_o3a_p> | 15,666<_o3a_p> | <_o3a_p> | <_o3a_p> | Total assets<_o3a_p> | 36,833<_o3a_p> | 42,964<_o3a_p> | 52,035<_o3a_p> | <_o3a_p> | <_o3a_p> |
(1) Before adjusting for non-cash inventory writedowns.<_o3a_p> Financial Details:
<_o3a_p>Revenue: Wi-LAN's product revenue for the three months ended July 31, 2002 was $5,847, compared to $7,556 for the same period in 2001, and $6,250 for the prior three months ended April 30, 2002. North American sales continued to recover, showing 21% sequential quarterly growth, and European sales were up 22% compared to the second quarter, but sales to Asia and other international markets showed a sequential quarterly decline of 33%, mainly due to a delay in the award of additional 3.5 GHz licensed spectrum in China. This delay will cause sales pursuant to a contract from Wi-Comm United Communications Inc. for Wi-LAN's W-OFDM (Wide-band Orthogonal Frequency Division Multiplexing) based BWS 3000 products, announced in January 2002, to be less than the stated $9 million in the 2002 calendar year. License and technology revenue for the three months ended July 31, 2002 was nil, compared to $18 for the same period in 2001 and nil for the prior three months ended April 30, 2002, because the Company's licensing agreement with Philips Semiconductor did not generate any royalties in the quarter.
Quarter over Quarter Revenue Growth:
| 3 months ended <_o3a_p> | | (In thousands of dollars)<_o3a_p> | July 31, 2001<_o3a_p> | Oct. 31, 2001<_o3a_p> | Jan. 31, 2002<_o3a_p> | Apr. 30, 2002<_o3a_p> | Jul. 31, 2002<_o3a_p> | Product revenue<_o3a_p> | <_o3a_p> | <_o3a_p> | <_o3a_p> | <_o3a_p> | <_o3a_p> | - North America<_o3a_p> | $ 5,362<_o3a_p> | $ 3,496<_o3a_p> | $ 2,341<_o3a_p> | $ 2,362<_o3a_p> | $ 2,859<_o3a_p> | - Europe<_o3a_p> | 282<_o3a_p> | 163<_o3a_p> | 709<_o3a_p> | 697<_o3a_p> | 847<_o3a_p> | - Asia and other<_o3a_p> | 1,912<_o3a_p> | 1,689<_o3a_p> | 1,728<_o3a_p> | 3,191<_o3a_p> | 2,141<_o3a_p> | - Subtotal<_o3a_p> | 7,556<_o3a_p> | 5,348<_o3a_p> | 4,778<_o3a_p> | 6,250<_o3a_p> | 5,847<_o3a_p> | License and technology revenue<_o3a_p> | 18<_o3a_p> | 11<_o3a_p> | 0<_o3a_p> | 0<_o3a_p> | 0<_o3a_p> | Total revenue<_o3a_p> | 7,574<_o3a_p> | 5,359<_o3a_p> | 4,778<_o3a_p> | 6,250<_o3a_p> | 5,847<_o3a_p> | Quarterly revenue growth<_o3a_p> | 22%<_o3a_p> | -29%<_o3a_p> | -11%<_o3a_p> | 31%<_o3a_p> | -6%<_o3a_p> |
Product Gross Margin: Non-cash writedowns of inventory reduced Wi-LAN's product gross margin by $849 for the three months ended July 31, 2002, compared to inventory writedowns of $3,979 for the same period in 2001 and $379 for the prior three months ended April 30, 2002. The inventory writedowns in the quarter result from application of the Company's accounting policy that provides for an inventory valuation allowance based on a continual review of the composition, quantity, and expected future usage or sales of inventory. Before the inventory writedowns, Wi-LAN's product gross margin for the three months ended July 31, 2002 was 30% compared to 39% for the same period in 2001, and 33% for the prior three months ended April 30, 2002. Reduced product gross margins, before inventory writedowns, were primarily due to sales of previously written-down inventoried products, which have low margins but positive cash flow, offset partially by changes in product mix as new and cost-reduced higher margin products were introduced. After the inventory writedowns, Wi-LAN's product gross margin was 16% for the three months ended July 31, 2002, negative 14% for the same period in 2001 and 27% for the prior three months ended April 30, 2002.Operating Loss: The Company's operating loss for the three months ended July 31, 2002 was $3,689 compared to $17,215 for the same period in 2001, an improvement of $13,526. Improved gross margin after inventory writedowns reduced the quarterly operating loss by $1,949 and a reduction of $11,577 in quarterly operating expense accounted for the rest of the improvement, as the restructuring actions taken in July and September 2001 significantly reduced costs on a comparable basis to the same period in 2001. The Company's operating loss increased sequentially by $1,016 when compared to $2,673 for the prior three months ended April 30, 2002. This increase was due to a reduction of $781 at the gross margin level and an increase of $235 in quarterly operating expense.Cash Used in Operations: During the three months ended July 31, 2002 the Company used $1,889 of cash in operations, compared to $11,002 for the same period in 2001, an improvement of $9,113. This improvement was largely due to a reduction in the Company's net loss from continuing operations, excluding non-cash items, of $9,676, as the impact of the restructuring actions taken in July and September, 2001 reduced cash expenditures on a comparable basis to the same period in 2001. Wi-LAN's cash used in operations in the quarter increased sequentially by $679 when compared to $1,210 for the prior three months ended April 30, 2002, as the net loss from continuing operations, excluding non-cash items, increased by $1,124, partially offset by changes in non-cash working capital.
Operations Highlights
Several significant strategic initiatives were accomplished in the third quarter, including: Motorola Contract: On May 15, 2002 Wi-LAN announced the signing of a Product Supply, License and Distribution agreement with the Commercial, Government and Industrial Solutions Sector (CGISS) of Motorola, Inc. (NYSE: MOT). Under terms of the agreement, Motorola CGISS may purchase and/or license Wi-LAN's high-speed wireless data communications products and resell Wi-LAN's products through CGISS' sales channels. This agreement greatly increases the sales potential of Wi-LAN because Motorola's sales channels have Wi-LAN's full line of high quality products at their disposal.China Supply Contract: On May 30, 2002 Wi-LAN announced a twelve-month purchase order for a minimum of $2.5 million (US$1.65 million) of its new Ultima3 ER (Extended Range) and RD (Rapid Deployment) products from Wi-Comm United Communications Inc. (WCU), a major reseller of Wi-LAN products to the Chinese marketplace, headquartered in Beijing. Monthly product shipments began in June 2002.
New Product Launches:
On May 29, 2002 Wi-LAN launched the AWE 120-58 Ultima3 Fixed Wireless Access products based on its patented MC-DSSS (Multi-Code Direct Sequence Spread Spectrum) technology. The Ultima3 series, the second generation of Wi-LAN's 5.8 GHz product line, provides improved scalability, multi-layered security, automatic power control, tiered network service management, longer range coverage, and a user-friendly network management interface, all in a rugged, weatherproof, single unit design. The Ultima3 series includes Rapid Deployment (RD) and Extended Range (ER) products for point-to point applications, and Access Point (AP) and Customer Premises Equipment (CPE) products for point-to-multipoint applications. The point-to-point systems can deliver a maximum of 12 Mbps with a distance of up to 75 kilometers, and the point-to-multipoint systems can deliver an aggregated throughput of 72 Mbps per cell with a distance up to 16 kilometers based on a six-sector design.
On July 31, 2002 Wi-LAN launched its Wireless T1/E1 Solutions, which convert voice channels into Internet Protocol (IP) for transmission of voice messages over Wi-LAN's fixed wireless access systems. The Wireless T1/E1 Solutions allow transmission of up to 30 voice channels over license-exempt frequency bands to provide a robust, reliable and cost-effective alternative to traditional leased T1 or E1 lines. Wi-LAN's Wireless T1/E1 Solutions consist of Wi-LAN's AWE, VIP and Ultima3 Radios paired with the TEmux T1/E1 multiplexer. They provide easy connectivity to existing T1/E1 networks to deliver broadband wireless voice capability with a range of up to 75 kilometers.Patent Litigation: On July 24, 2002 Wi-LAN announced the commencement of legal action in Canada against a private Canadian company claiming to produce a non-line-of-sight, fixed wireless device utilizing advanced orthogonal frequency division multiplexing (OFDM ) technology. It is Wi-LAN's belief that this device infringes Wi-LAN's Canadian patent number 2,064,975.
Product Improvements and Certifications:
On May 1, 2002 Wi-LAN announced that its VIP 110-24 product, which incorporates its patent-pending VINE technology, now features software that enables service providers to remotely manage their networks. In addition, the State Regulatory Radio Commission (SRRC) of the Peoples' Republic of China has recently certified the VIP 110-24. With this certification, the VIP 110-24 is certified for use in all major telecommunications markets worldwide, having previously received certification from the USA Federal Communications Commission (FCC), Industry Canada (IC) and having received the CE Mark indicating the product conforms to the standards of the European Telecommunications Standards Institute (ETSI).On May 7, 2002 Wi-LAN announced that its market-leading BWS 3000 Series products, based on its patented W-OFDM technology, can now be upgraded to double throughput with Full Duplex capability. Service provid |
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