News Release Details

Wi-LAN ANNOUNCES 2001 FOURTH QUARTER AND ANNUAL RESULTS

01/23/2002


(Calgary, Canada - January 23, 2002) - Wi-LAN Inc. (TSE:WIN), a global innovator of wireless data/Internet communications, today announced financial results for the quarter and year ended October 31, 2001. All financial amounts are expressed in thousands of Canadian dollars unless otherwise noted.

Financial Highlights:

  • Revenue in 2001 showed 55% growth over 2000, in spite of the slowing North American economy, a significant decline in fourth quarter U.S. sales due to the September 11 events, and the deferral of $1.5 million in the fourth quarter.

  • Operating expenses and cash used in operations have shown significant improvement in the fourth quarter as a result of the restructuring decisions made on July 17 and September 14, 2001. The fixed components of cash used in operations have been sharply reduced, while the variable components of cash going forward will only be incurred to support new sales. The full impact of the restructuring actions will be delayed until the three months ended January 31, 2002, once restructuring charges and invoices for prior activities have been accounted for.

  • Wi-LAN sold its controlling equity interest in Digital Transmission Systems (DTS) in a transaction subsequent to the fiscal year end. This transaction has significantly improved the consolidated financial position for Wi-LAN resulting in a clear focus for management and investors on Wi-LAN’s core wireless business.

    Discontinued Operations: On October 30, 2001, Wi-LAN’s Board of Directors resolved to dispose of the Company’s equity ownership of Digital Transmission Systems (DTS) to a DTS Employee Stock Ownership Program (ESOP). The disposal was finalized in December 2001 subsequent to the October 31 fiscal year end. As a result, in 2001 the operations of DTS have been restated as Discontinued Operations and 2000 has been restated to conform with the 2001 presentation


    Revenue: Reported revenue is now 100% from Wi-LAN’s core wireless operations due to the elimination of DTS from Wi-LAN’s revenue, and the inclusion of DTS revenue and expenses in discontinued operations. Wi-LAN’s revenue for the twelve months ended October 31, 2001 was $24,802, approximately 55% greater than revenue of $16,009 for the twelve months ended October 31, 2000.

    Revenue for the three months ended October 31, 2001 was $5,359, which is 79% of the $6,770 reported for the three months ended October 31, 2000, 71% of the $7,574 reported for the three months ended July 31, 2001, and 67% of the guidance for the quarter of $8.0 to $10.0 million. Fourth quarter revenue was less than expected largely because of the decision to defer revenue for the sale of $1,500 of wireless equipment. Additional reasons for the revenue shortfall are the slowing North American economy, which had a negative impact on Wi-LAN’s sales, a condition that was exacerbated by the September 11 terrorist attacks in the United States, and the timing of sales and product exchange transactions near the end of the quarter.


    Gross Product Margin: A $4,750 non-cash writedown of wireless inventory to market value reduced the gross product margin for the twelve months ended October 31, 2001 to 13%, compared to 33% for the twelve months ended October 31, 2000. Wi-LAN’s gross product margin for the twelve months excluding such writedown decreased marginally from 33% to 32%. A portion of the non-cash writedown of wireless inventory in the amount of $771 was included in the three months ended October 31, 2001, causing the gross product margin to decline to 24% compared to 28% for the three months ended October 31, 2000. Wi-LAN’s gross product margin for the three months excluding such writedown increased to 38% compared to 28% for the comparable period in 2000. Changes in gross margin, excluding inventory writedowns, were primarily due to variances in selected discounted pricing for volume and strategic customer broadband equipment orders to accelerate market penetration and increased gross margin contributions of Wi-LAN’s TIL-TEK Antennas division (TIL-TEK) and Wi-LAN’s wholly owned U.S. subsidiary, Wi-LAN Technologies.

    Operating Loss: The Company’s operating loss for the twelve months ended October 31, 2001 was $39,015 compared to $19,447 for the twelve months ended October 31, 2000, an increase of $19,568. The operating loss resulted from the reduced gross product margin described above and an increase in operating expense of $16,982 which included special charges of $5,037, of which $1,109 was a cash charge related to workforce reduction severance payments and the balance of $3,928 was an accrual for the cost of excess space at Wi-LAN’s Calgary office over the life of its long-term lease, pursuant to recent reductions in headcount. The remaining $11,945 increase in Wi-LAN operating expense for the twelve months ended October 31, 2001, excluding special charges, is a 47% increase over the $25,532 operating expense reported the 2000 fiscal year. However, a negative trend in operating expenses during the first nine months, which recorded a $15,928 increase compared to the same period in 2000, was reversed in the final quarter, which recorded a $3,983 decrease in expenditures from $10,901 to $6,918, as the impact of the restructuring actions began reducing costs on a comparable basis to the same period in 2000.

    Cash Used in Operations: During the twelve months ended October 31, 2001 the Company had cash used in operations of $33,903, a $9,298 increase from the $24,605 cash used in operations in the twelve months ended October 31, 2000. The increase in cash used in operations for the twelve months ended October 31, 2001 was largely due to an increase in the Company’s cash net loss. A negative trend in cash used in operations during the first nine months, which recorded a $21,605 increase compared to the same period in 2000, was reversed in the final quarter, which recorded a $12,307 decrease in cash used in operations from $15,083 to $2,776, as the impact of the restructuring actions began improving cash expenditures on a comparable basis to the same period in 2000.Cash used in operations in future periods is expected to continue to be positively impacted by these restructuring actions.

    2001 Fourth Quarter Operationa Highlights
    Wi-LAN accomplished several significant strategic initiatives in the fourth quarter that expected to contribute to the Company’s future growth.

    New Product Launches: Wi-LAN launched several new products as it maintained its product leadership in high-speed wireless point-to-multipoint wide-area networks.

  • Wi-LAN received a US$500,000 purchase order from its master distributor in India, Tropicana Telecom, for its new VIP 110-24 Wireless Ethernet Router, an 11 Mbps wireless Ethernet bridge operating in the 2.4 GHz license-exempt frequency band, which uses the Company’s VINE™ (Versatile Intelligent Networking Environment) technology to deliver the industry’s first "anypoint-to-multipoint" mesh-network architecture.

  • Wi-LAN AWE 120-24 mkII, a version of the Company’s new 12-megabit-per-second advanced wireless Ethernet bridge for use in the 2.4 GHz license-exempt frequency band with features specifically designed for the needs of European markets.

  • Wi-LAN launched the BWS 3500 system, a new addition to its broadband wireless access series for use in the 3.5 GHz licensed frequency band. For service providers offering broadband wireless access, the BWS 3500 offers superior multipath robustness, improved non-line of sight (NLOS) performance and high spectral efficiency using Wi-LAN’s patented W-OFDM (Wide-band Orthogonal Frequency Division Multiplexing) technology.

    Wi-LAN’s new BWS 3500 broadband wireless access system, based on W-OFDM technology, has been certified for use in the 3.5 GHz frequency band in China. This approval was granted by the State Regulatory Radio Commission (SRRC), and is in addition to SRRC certifications granted earlier in the year of the Wi-LAN AWE 120-58 and the AWE 120-24, 12-megabit-per-second advanced wireless Ethernet bridges, for use in the 5.8 GHz and 2.4 GHz frequency bands in China.

    OEM Agreement:Wi-LAN announced the signing of an Original Equipment Manufacturer (OEM) agreement between Wi-LAN’s TIL-TEK Antennas division, and Radiall/Larsen Antenna Technologies, allowing Radiall/Larsen to market, sell, and distribute TIL-TEK antennas worldwide, under private label; allowing both companies to perform joint marketing efforts in certain markets; and allowing for joint development of products, with Radiall/Larsen to manufacture selected TIL-TEK antennas under license. Radiall/Larsen is a subsidiary of RADIALL S.A. a France based, leading worldwide supplier of passive RF components serving the datacom, telecom, commercial avionics and military/aerospace markets, with operating subsidiaries in 13 countries.

    Business Restructuring: On July 17, 2001, Wi-LAN initiated a restructuring plan. The overall expenditure reduction included reducing staff by approximately 70 people, which resulted in a $389 cash charge related to workforce reduction severance payments. On September 14, 2001, Wi-LAN announced further management and structural changes. This initiative included a staff reduction of approximately 65 people, which resulted in a cash charge of $720 related to workforce reduction severance payments. These actions are expected to improve Wi-LAN’s cash used in operations by $2,000 per month, and the full impact on expenditures is expected to be realized in the three months ended January 31, 2002.

    Subsequent Events
    Wi-LAN supported the proposal of the IEEE’s Task Group G, a United States wireless standards setting body, for a new wireless local area network (LAN) standard (IEEE 802.11g) based on OFDM technology that will allow data rates up to 54 Mbps in the 2.4 GHz frequency band. Wi-LAN’s receipt of official certification for its patented W-OFDM technology from the Federal Communications Commission (FCC) on June 5, 2001 paved the way for this IEEE 802.11g standard. To facilitate the initial proposal of broadband OFDM for the 802.11g standard, Wi-LAN offered to make its patented Wide-band Orthogonal Frequency Division Multiplexing (W-OFDM) technology available for licensing on fair, reasonable and non-discriminatory terms.

    Wi-LAN’s new VIP 110-24 wireless Ethernet bridge was certified under the authority of the Federal Communications Commission (FCC), European Telecommunications Standards Institute, (ETSI) and Industry Canada. This new 11 megabit-per-second wireless Ethernet bridge is available and certified for use in the United States, Europe, Canada, and other countries that accept these certifications, in the 2.4 GHz license-exempt frequency band.

    Wi-LAN announced the sale of its controlling interest in Digital Transmission Systems (DTS) to a DTS Employee Stock Ownership Program (ESOP). On December 31, 2001, the ESOP entered into an agreement to purchase all DTS equity instruments held by Wi-LAN. As a result of the transaction, the ESOP assumes controlling interest in DTS and Wi-LAN relinquishes its DTS Board seats. The transaction with the DTS ESOP will liquidate all Wi-LAN equity holdings in DTS.

    Wi-LAN received a purchase order for over $9 million (US$5.9 million) of Wi-LAN’s W-OFDM based BWS 3500 System from Wi-Comm United Communications (Wi-Comm), a key supplier of Wi-LAN products to the Chinese marketplace, headquartered in Beijing. The purchase order is a commitment from Wi-Comm to purchase US$5.9 million of Wi-LAN’s BWS 3500 system in the 2002 calendar year, in quarterly increments. Wi-Comm is subject to quarterly financial penalties payable to Wi-LAN, for any missed orders.

    Wi-LAN announced its participation in Wi-Comm Communications Co. Ltd. (Wi-Comm), a Chinese joint venture company based in Beijing, China. The joint venture was created to accelerate penetration into the Chinese market by accessing experienced talent to drive Wi-LAN product sales in China. Wi-LAN has granted Wi-Comm a non-exclusive license to manufacture (initially comprised of final assembly of core components) and sell Wi-LAN products in China, in exchange for a 20% equity interest in Wi-Comm and royalties on Wi-Comm’s sales. Any increase in the scope of manufacturing will be based on market demand and subject to the mutual agreement of the parties. Wi-LAN continues to retain exclusive title to and ownership of its patented and proprietary technologies and is the exclusive supplier to Wi-Comm of broadband wireless equipment.

    OFDM Forum News
    The OFDM Forum reported that at the recent meeting of the European Telecommunications Standards Institute (ETSI) Broadband Radio Access Networks (BRAN) group, held in France on December 4 to 7, 2001, the decision was finalized to base the new ETSI HIPERMAN standard on OFDM technology. This technology choice demonstrates OFDM’s technical superiority in delivering high-speed two-way fixed wireless access communications. The HIPERMAN standard is intended to provide an interoperable air interface for Fixed Wireless Access systems in the 2 - 11 GHz bands in Europe and other parts of the world that follow ETSI standards. The HIPERMAN working group will utilize the OFDM sections of the emerging IEEE 802.16a standard as the baseline Physical Layer specification for the ETSI HIPERMAN standard.

    Conference Call Information
    The Wi-LAN fourth quarter conference call will be held on January 24, 2002 at 9:00 a.m. MST (11:00 a.m. EST, 8:00 a.m. PST). The call-in number is 416-695-5806 (Toronto area) or 1-800-273-9672. Participants are advised to call in 10 minutes early. A replay of the call will be available until 10:00 p.m. MST (12 a.m. EST) on January 28 at 416-695-5800 (Toronto area) or 1-800-408-3053 (passcode: 998242). The call will also be audio webcast from the Investors page of Wi-LAN's website (http://www.wilan.com/investors/investor-relations/default.aspx) and will be archived there. A replay of the call will be available until 10:00 p.m. MST (12:00 a.m. EST, 9:00 p.m. PST) on January 28, 2002 at 416-695-5800 (Toronto area) or 1-800-408-3053 (passcode: 998242).

    Financial Statements
    Click to view a PDF document of the financial statements.

    About Wi-LAN Inc.

    Wi-LAN is a global innovator in the field of high-speed wireless data communications, specializing in high-speed Internet access, LAN/WAN extension and broadband wireless access. Wi-LAN is the Chair Company of the OFDM Forum (www.ofdm-forum.com). Wi-LAN believes its W-OFDM patent is necessary for the implementation of devices using the IEEE 802.11a or ETSI BRAN HiperLAN/2 standards. Wi-LAN's products have been sold in more than 50 countries on six continents. Wi-LAN's common shares trade on The Toronto Stock Exchange under the symbol "WIN." Detailed information on Wi-LAN can be found at www.wi-lan.com.

    Forward Looking Information
    Certain statements in this release, other than statements of historical fact, are forward-looking information that involves various risks and uncertainties. These can include, without limitation, statements based on current expectations involving a number of risks and uncertainties related to all aspects of the wireless data communications industry. These risks and uncertainties include, but are not restricted to, continued increased demand for the Company's products, the Company's ability to maintain its technological leadership in the field of high-speed data communications, the Company's ability to attract and maintain key employees, the enforceability of the Company's patents, and the availability of key components. These uncertainties may cause actual results to differ from information contained herein. There can be no assurance that such statements will prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. These and all subsequent written and oral forward-looking statements are based on the estimates and opinions of management on the dates they are made and expressly qualified in their entirety by this notice. The Company assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change.

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