News Release Details

Wi-LAN's Consolidated Revenue Grows 657%

09/28/2000


Strategic Acquisition, New Product Launches and Direct Sales Agreements Provide Substantial Growth

Calgary, Alberta
September 28, 2000

Wi-LAN Inc. (TSE:WIN), a leading innovator of wireless data/Internet communications, today announced financial results for the quarter ending July 31, 2000. 

For the first nine months ended July 31, 2000, Wi-LAN saw an increase in consolidated revenue of 657% to $37.1 million compared with $4.9 million for the previous nine months ending October 31, 1999. This increase can be attributed to:

  • The contribution of US subsidiaries Digital Transmission Systems (DTS) for seven months and Telcor Communications Inc. (Telcor) for four months;
  • An increase in Wi-LAN broadband wireless product sales of 67% to $8.2 million, compared to $4.9 million in the nine months ended October 31, 1999;
  • Initial fees of $1.0 million from the company's licensing agreement with Philips Semiconductors; 
  • One month of revenues from Til-Tek Limited ("Til-Tek") following Wi-LAN's acquisition on June 29, 2000; and
  • $1.5 million in interest and other income. 

"We are very pleased with our progress to date," said Dr. Hatim Zaghloul, Wi-LAN co-founder, chairman and CEO. "Our objective to this point has been to develop cost-effective, leading-edge technologies and products. We have begun to put in place the resources and sales contracts required to gain a significant share of the expanding wireless market." 

Financial Highlights:
Wi-LAN gross product margin, excluding DTS, decreased 12 percentage points to 37% due to a $0.4 million reserve for technological obsolescence of certain raw material components and increased selected discounted pricing for volume customer orders in the third quarter to accelerate market penetration. Sales and marketing expenses increased by $6.8 million to $8.0 million, business development expenses increased $1.3 million to $1.5 million, and product and customer services expenses increased by $4.4 million to $4.9 million in the nine months ended July 31, 2000, compared with the nine months ended October 31, 1999. These increases reflect the addition of Til-Tek, the consolidation of DTS and Telcor expenses and Wi-LAN's continued effort to accelerate product sales and marketing and develop emerging market opportunities. 

The company spent $5.4 million on research and development initiatives during the first nine months of 2000, an increase of $3.2 million over the nine months ended October 31, 1999. These expenditures relate primarily to product development at the parent company level with a goal of providing 'first-to-market' solutions to the wireless industry sector. General and administrative expense increased by $5.5 million to $6.5 million for the nine months ended July 31, 2000, compared to the previous nine months, primarily due the consolidation of DTS and Telcor expenses, the addition of parent company key management personnel and a one time $1.2 million non-cash compensation settlement amount for a former DTS officer. 

The company increased its net loss by 173% from $3.3 million for the nine months ended October 31, 1999 to $9.0 million ($0.41 per share) for the nine months ended July 31, 2000. This increased net loss reflects the losses recognized through the consolidation of DTS and Telcor operations and the increased investment the parent company has made to research and develop new and expanding product lines, accelerate its sales and marketing, expand its management team and infrastructure, and amortize acquired goodwill and intellectual property related to the acquisition of Til-Tek, DTS and Telcor. The operating loss of $18.1 million is partially offset by recognizing the $3.7 million of minority interest share of the DTS loss and a dilution gain of $5.5 million as a result of DTS issuing shares at prices above Wi-LAN's average cost of its DTS shares.

During the third quarter, Wi-LAN acquired all outstanding share capital of Til-Tek, a leading manufacturer of antenna equipment whose customer base includes TRT Lucent Technologies, TELUS Mobility, Rogers Wireless and Waverider Communications Inc. As part of the acquisition, Wi-LAN now owns several U.S. and Canadian antenna patents, research programs and facilities including both an ISO 9001 certified manufacturing plant in Kemptville, Ontario, and a joint venture involving a manufacturing and distribution facility in Brazil. The transaction closed on June 29, 2000, with the purchase price of $24.3 million satisfied by issuing 582,217 Wi-LAN common shares. 

Wi-LAN also maintained its interest in DTS by acquiring approximately 31% of DTS' obligation to two former shareholders of Telcor in the amount of US$6.1 million, paying the two former shareholders US$500,000 in cash and 154,058 common shares of Wi-LAN. As well, the company granted the two former shareholders an option exercisable by August 31, 2000, to sell between US$2.0 million and US$4.0 million of additional merger consideration to Wi-LAN for the issuance of a right to receive Wi-LAN shares of equivalent value based on the market value of Wi-LAN shares at October 30, 2000. Wi-LAN has received notice of the exercise of this option and will be issuing common shares with a total valuation of US$4.0 million, the number of which shall be determined on October 30, 2000. 

During the third quarter, Wi-LAN was included in the TSE 300 Composite Index in the Technology/Hardware group, the TSE 200 Index, and the S&P/TSE Canadian Small Cap Index in the Information Technology sector. This recognition further validates the company's strides in the broadband wireless market segment and increases demand for the company's common shares.

Financial Outlook:
Fourth quarter 2000 broadband wireless revenue is anticipated to be approximately three times greater than fourth quarter 1999 revenue of $1.4 million. The Federal Communications Commission (FCC)'s notification that it does not intend to certify OFDM systems for use in the unlicensed 2.4 GHz frequency band in the United States, which Wi-LAN is appealing, is not expected to affect the company's current and projected broadband wireless revenue growth. This revenue is driven by products currently available and in development in licensed and unlicensed frequency bands throughout the world. 

These products address customer demands, including the company's recently announced preferred supplier agreements with two European broadband wireless access service providers, Tele2 (UK) and Sweden's Telia GlobalCast Internetworking AB, as well as Wi-LAN's distributor agreement with Wireless Matrix AB, also of Sweden, and purchase commitments from U.S. broadband service providers AIR2LAN and Northwest Telephone. In addition, sales to 4G Network Technologies have commenced with the early stages of their rollout in Texas, the SkyberNet network rollout is moving from a trial stage to deployment, and the recently announced joint marketing agreement with Ericsson Canada has potential for significant revenue contribution.

As well, the ongoing integration of Til-Tek's antenna business will generate increased broadband equipment revenue as Til-Tek's business grows and we capitalize on opportunities created by the acquisition.

Operational Highlights:
In addition to the revenue growth achieved by Wi-LAN during the third quarter of 2000, the company achieved several operational milestones.

On June 5, Wi-LAN released the results of a legal review indicating that any implementation of the IEEE standard 802.11 (1999), as supplemented by 802.11a (1999), or any implementation of ETSI BRAN HiperLAN/2 infringes on one or more claims under Wi-LAN's United States Patents No. 5,282,222 and 5,555,268 and Canadian patent no. 2,064,975. Verifying the company's opinion with respect to its patents, this legal review solidifies Wi-LAN's technology, products and leadership position in the wireless broadband access market.

The company also announced several new contracts during the third quarter, including:

  • A multi-year preferred supplier agreement with Tele2 (U.K.), who will use Wi-LAN's I.WiLL(tm) products to expand commercial operations and provide high-speed wireless Internet access in the United Kingdom. This agreement is forecasted to return revenues in excess of $6 million through to December 2001 and is renewable annually thereafter;
  • A US$31 million 18-month purchase order with 4G Network Technologies (4GNT) as part of a 56-month agreement that will see 4GNT construct a national US and international high-speed broadband wireless network. 4GNT will initially ues Wi-LAN's Hopper Plus(tm) 4.5 and 12 megabit per second (Mbps) 2.4 GHz products and will later incorporate Wi-LAN's 5 GHz W-OFDM-based I.WiLL family.
  • A five-year supply and distribution agreement with SkyberNet International BV, who will use Wi-LAN's 4.5 Mbps and 12 Mbps 2.4 GHz Hopper Plus product line and will then incorporate the company's I.WiLL product line to develop a wireless broadband access network in the Netherlands, Belgium and Luxembourg. This agreement has a total value of US$45.5 million including US$6 million in the first 18 months. 

Wi-LAN also made significant new product announcements during the third quarter. On May 3, 2000, Wi-LAN announced its new Hopper Plus(tm) 45-36 wireless Ethernet bridge. Designed to deliver high data rates, scalability and adjustable area coverage to address the exponential growth of the Internet, this product provides a raw data rate of 4.5 Mbps and operates in the 3.6 to 3.9 GHz licensed radio frequency for use in either point-to-point or point-to-multipoint applications.

As well, Wi-LAN announced its Hopper Plus 120-24 wireless Ethernet bridge. Offering the highest effective data rates at the lowest cost per megabit currently available among competing products (US$317 per megabit), this product delivers a raw data rate of 12 Mbps. Operating in the license-exempt 2.4 GHz ISM radio frequency band for wireless connections with no radio licensing requirements, the Hopper Plus 120-24 is an ideal solution for point-to-point and point-to-multipoint architectures.

In June 2000, Wi-LAN announced its 2000 product plans and launched the world's first customer premises equipment designed for broadband access using W-OFDM technology, the I.WiLL System. The second generation of Wi-LAN products using the company's patented technology, this product line will include the first W-OFDM technology-based wireless customer premises product priced below US$500 in volume. These products are ideal for service providers looking to deploy a base-station-to-remote architecture in the MMDS, MCS, UNII and WLL34 frequency bands on a mass-market basis. The new products for point-to-multipoint networks offer 32 Mbps in 10 MHz of bandwidth.

With our Interactive Analyst Center (IAC), historical financial data, both quarterly and annual, is available in an easy to access spreadsheet format. View and export our financial statements, non-GAAP reconciliations as well as share information.

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