News Release Details

Wi-LAN ANNOUNCES 2002 FOURTH QUARTER AND ANNUAL CONSOLIDATED RESULTS

01/22/2003

CALGARY, Canada - January 22, 2003 - Wi-LAN Inc. (TSE:WIN), a global provider of broadband wireless communications products and technologies, today announced financial results for the quarter and fiscal year ended October 31, 2002. All financial amounts are expressed in thousands of Canadian dollars unless otherwise noted.

Financial Highlights:

  • Revenue: Revenue for fiscal 2002 was $23.1 million, which met the Company's guidance and is $1.7 million or 7% less than fiscal 2001 revenue of $24.8 million. This decline is due to a reduction of sales from the Company's antenna business. Revenue for the three months ended October 31, 2002 was $6.2 million, which is $0.4 million or 7% more than the $5.8 million for the prior three months ended July 31, 2002, and $0.8 million or 15% more than the $5.4 million for the same period in 2001.
  • Segmented Revenue: The Company's broadband fixed wireless access product revenue grew by $4.8 million or 36%, from $13.4 million in fiscal 2001 to $18.2 million in fiscal 2002. Antenna revenue declined from $11.4 million in fiscal 2001 to $4.9 million in fiscal 2002, driven by a general decline in the demand for cellular and broadcast antennas. Over the same period, competitors in the fixed wireless access sector have typically seen declining revenues. As a result Wi-LAN believes it has significantly increased its market share in this sector. This positions the company well for future growth as telecom carriers begin to divert spending from wireline applications to broadband fixed wireless access.
  • Revenue Guidance: Wi-LAN continues to expect revenue for fiscal 2003 to be in the range of $25 million to $30 million. Achieving or exceeding the upper end of this range depends largely on the timing of events such as the award of additional contracts for 3.5 GHz broadband wireless equipment in various global markets and the closing of additional technology licensing agreements.
  • Gross Margin: Product gross margin before inventory writedowns for fiscal 2002 was 31% compared to 32% for fiscal 2001. Product gross margin is expected to show significant improvement in fiscal 2003 as sales of new, higher margin products continue to grow.
  • Operating Expense: Operating expense was significantly reduced in fiscal 2002, demonstrating the effects of the restructuring decisions made in the second half of 2001. Operating expense for fiscal 2002 was $19.4 million a reduction of $23.1 million or 54% compared to $42.5 million for fiscal 2001.
  • Cash: Net cash used in operations for fiscal 2002 was $4.8 million, an improvement of $29.1 million compared to $33.9 million for fiscal 2001. Net cash used in operations for the three months ended October 31, 2002 was $0.7 million, an improvement of $1.6 million compared to $2.3 million for the three months ended October 31, 2001, and an improvement of $1.2 million compared to $1.9 million for the prior quarter ended July 31, 2002. Wi-LAN's cash balance was $5.6 million on October 31, 2002 and this amount is expected to be adequate to sustain the company's current operations for the 2003 fiscal year.
  • Cash Flow Guidance: Wi-LAN has adjusted its guidance with respect to the timing of positive cash flow from continuing operations to the third quarter of 2003, rather than the first quarter as previously stated. Wi-LAN achieved positive net cash flow of approximately $0.7 million from continuing operations for the month of October 2002, meeting its fiscal 2002 goal of exiting the year with positive cash flow from continuing operations, but seasonally slow sales for the three months ending January 31, 2003 have caused the Company to defer its guidance for a positive cash flow quarter by six months. Slow sales in the first quarter to date are partly attributable to Wi-LAN's lengthening sales cycle as more large volume customers are showing interest in Wi-LAN's products and sales to these larger customers tend to take longer to close. Sales prospects for the remainder of 2003 remain positive. Wi-LAN continues to tighten spending controls, liquidate product inventory and improve product gross margins. These improvements, along with quarterly sales growth, are expected to generate positive cash flow from continuing operations for the three months ending July 31, 2003, Wi-LAN's third quarter.
  • Total Assets: Total assets as of October 31, 2002 were $25,119, a decrease of $26,916 or 52% from $52,035 as of October 31, 2001. This decrease is largely attributable to a reduction in Goodwill and Intangible Assets of $16.1 million, a decrease in inventories of $4.7 million and a reduction in long term investments of $2.0 million. The $16.1 million reduction in Goodwill and Intangible Assets included a $10.3 million writedown of goodwill made in alignment with anticipated changes in generally accepted accounting principles, and $5.8 million amortization of goodwill. The decrease in inventories included a $4.0 million writedown of inventory to its estimated market value. The reduction in long-term investments is due to a writedown of these investments to their estimated market value.


  • Financial Summary:

    12 months ended Oct.  31

    3 months ended

    (In thousands of dollars)

    2002

    2001

    Oct.  31, 2002

    Jul.  31, 2002

    Oct .31, 2001

    Revenue

    - Product

    $     23,105

    $      24,438

    $     6,230

    $     5,847

    $      5,348

    - License and technology

    0

    364

    0

    0

    11

    - Total

    23,105

    24,802

    6,230

    5,847

    5,359

    Product gross margin (1)

    31%

    32%

    32%

    30%

    38%

    Operating loss

    $     16,299  

    $     39,015

    $     4,305

    $     3,689

    $    6,385

    Cash used in operations

    4,834

    33,903

    711

    1,889

    2,303

    Oct.  31, 2002

    July 31, 2002

    Oct.  31, 2001

    Cash balance

    $      5,586

    $      6,412

    $      5,533

    Working capital

    7,303

    10,115

    13,663

    Long term debt

    0

    267

    267

    Shareholders’ equity

    14,640

    28,748

    15,666

    Total assets

    25,119

    36,833

    52,035

    (1) Before adjusting for non-cash inventory writedowns.

  • Financial Details:

    Product Revenue:
    Product revenue for fiscal 2002 was $23,105, which is $1,333 or 5% less than fiscal 2001 product revenue of $24,438. This decline is largely due to a reduction of sales from the Company's predominantly North American antenna business, partly offset by improved worldwide sales of the Company's broadband fixed wireless access products. Antenna product revenue declined from $11.4 million in fiscal 2001 to $4.9 million in fiscal 2002, a reduction of $6.5 million, driven by a general decline in the demand for cellular and broadcast antennas. The Company's broadband fixed wireless access product revenue grew by $4.8 million or 36%, from $13.4 million in fiscal 2001 to $18.2 million in fiscal 2002. Over the same period, competitors in the fixed wireless access sector typically experienced significantly declining revenues. As a result Wi-LAN believes it has significantly increased its market share in this sector. This positions the Company well for future growth as telecom carriers begin to divert spending from wireline applications to broadband fixed wireless access.
  • License and Technology Revenue: License and technology revenue for fiscal 2002 was nil, compared to $364 for fiscal 2001 because the Company's licensing agreement with Philips Semiconductor did not generate any royalties in fiscal 2002. Wi-LAN's technology licensing strategy is to focus on licensing its technology and patents to major semiconductor companies because a small number of major semiconductor companies account for most of the market. Also, this strategy ensures Wi-LAN's intellectual property will not act as a deterrent against market acceptance of W-OFDM (Wide-Band Frequency Division Multiplexing) technology, since device manufacturers can develop applications with the licensed semiconductor components without having to negotiate a license agreement with Wi-LAN. Wi-LAN signed an ASIC development and technology licensing agreement with Philips Semiconductor in 1999, and signed a second ASIC development and technology license agreement with Fujitsu Microelectronics America, Inc. in the fourth quarter of fiscal 2002.
  • Geographic Revenue: North American revenue for fiscal 2002 was $10,661, which is $5,657 or 35% less than fiscal 2001 North American revenue of $16,318. This decline is due to a general slowdown in the North American economy, which was most significant in the first quarter, but showed signs of quarterly recovery thereafter. The decline in North American revenue in fiscal 2002 is largely offset by increases in revenue from other geographic regions. European revenue for fiscal 2002 was $2,870, which is $1,559 or 119% greater than fiscal 2001 European revenue of $1,311. Revenue from Asia and other geographies, excluding North America and Europe, for fiscal 2002 was $9,574, which is $2,401 or 33% greater than fiscal 2001 Asia and other revenue of $7,173.
  • Quarter over Quarter Revenue Growth:
  •                                            3 months ended

    (In thousands of dollars)

    Oct.  31, 2001

    Jan.  31, 2002

    Apr.  30, 2002

    Jul.  31, 2002

    Oct.  31, 2002

    Product revenue

          - North America

    $     3,496

    $     2,341

    $     2,362

    $     2,859

    $     2,976

          - Europe

    163

    709

    697

    847

    464

          - Asia and other

    1,689

    1,728

    3,191

    2,141

    2,790

          - Subtotal

    5,348

    4,778

    6,250

    5,847

    6,230

    License and technology revenue

    11

    0

    0

    0

    0

    Total revenue

    5,359

    4,778

    6,250

    5,847

    6,230

    Quarterly revenue growth

    -29%

    -11%

    31%

    -6%

    7%

    Product Gross Margin: Non-cash writedowns of inventory reduced Wi-LAN's product gross margin by $3,972 for fiscal 2002, compared to inventory writedowns of $4,750 for fiscal 2001. The inventory writedowns largely 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 fiscal 2002 was 31% compared to 33% for fiscal 2001. 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 13% for fiscal 2002, compared to 14% for fiscal 2001.

  • Operating Loss: The Company's operating loss for fiscal 2002 was $16,299 compared to $39,015 for fiscal 2001, an improvement of $22,716. Annual operating expense decreased by $23,123 as the restructuring actions taken in July and September 2001 significantly reduced costs on a comparable basis to fiscal 2001. This was partly offset by reduced gross margin, which increased the annual operating loss by $407.
  • Cash Used in Operations: During fiscal 2002 the Company used cash in operations in the amount of $4,834, compared to $33,903 for fiscal 2001, a reduction of $29,069. The decrease in cash used in operations for fiscal 2002 is largely due to a decrease in the Company's cash net loss from continuing operations of $19,436 compared to fiscal 2001. The restructuring actions taken on July 17, 2001 and September 14, 2001 improved cash expenditures on a comparable basis to fiscal 2001. Cash used in operations in future reporting periods is expected to continue to be positively impacted by these restructuring actions, as well as expected product sales growth and improved product gross margins. Changes in non-cash operating working capital balances accounted for the remaining $9,633 of the improvement.


  • Fourth Quarter Operations Highlights
    Several significant strategic initiatives were accomplished in the fourth quarter, including:
  • Collaboration with ETRI on 4G Specifications: Wi-LAN announced an agreement with ETRI, a non-profit Korean government-funded research organization that has been at the forefront of technological excellence for more than 25 years to collaborate to define specifications for future mobile wireless systems beyond International Mobile Telecommunication 2000 (IMT-2000) systems. IMT-2000 Third Generation (3G) systems and 2.5G mobile systems are beginning to be deployed globally. 2.5G mobile systems, such as GPRS, offer data transmission speeds of 64 to 144 kilobits per second (Kbps). IMT-2000 3G mobile systems, such as EDGE, CDMA-2000 and W-CDMA, offer data speeds that range from 384 Kbps to 2,000 Kbps (2 Mbps). While 2.5G and 3G systems are a major improvement over existing 2G mobile systems, which offer data transmission speeds in the single-digit Kbps range, demand for mobile data capacity is expected to drive the need for Fourth Generation (4G) systems, with data capacity in excess of 10,000 Kbps (10 Mbps), over the next several years. ETRI and Wi-LAN are collaborating to define one of the technology specifications for these ultra high-speed mobile wireless systems.
  • Fujitsu ASIC Development and Licensing Agreement: Wi-LAN announced an Application Specific Integrated Circuit (ASIC) development and technology license agreement with Fujitsu Microelectronics America, Inc. (FMA), a major designer and marketer of semiconductors and electronic devices. Under the terms of the non-exclusive agreement, Wi-LAN will combine its expertise in W-OFDM technology with FMA's ASIC design capabilities to integrate embedded processors and mixed signal technology into systems-on-chips (SoCs). This agreement is a key component in Wi-LAN's ongoing strategy of cost-reducing its products and licensing its intellectual property.
  • INS Subcontracting Agreement: Wi-LAN announced a Reciprocal Consulting Services Subcontracting agreement with International Network Services Inc. (INS), a leading provider of network consulting and security services for enterprises. INS (www.ins.com) has completed more than 15,000 consulting engagements over the last decade, and includes more than half of the Fortune 500 among its clients. The agreement defines the terms under which either company may act as the prime contractor in a project and obtain subcontractor services from the other company within the United States and Canada for a period of two years. It gives Wi-LAN access to the tremendous network expertise of INS, and it gives INS access to Wi-LAN's leading edge broadband wireless products for inclusion in its end-to-end network solutions.

  • Product Announcements:

  • - Wi-LAN announced that its broadband wireless products deliver field proven non-line-of-sight (NLOS) performance across several frequency bands. Wi-LAN products can deliver coverage to over 90% of potential customers, compared to 30% to 50% coverage for conventional wireless solutions. Increased coverage is a crucial metric in the fixed wireless business model, which directly translates into an increased subscriber base, increased revenue, lower installation costs, and lower total cost of customer acquisition.

    - Wi-LAN announced that it is acquiring new Fixed Wireless Access customers worldwide with its Ultima3 products. Ultima3 provides high reliability, multi-layered security, modular scalability, long-range coverage, and easy installation, all in a rugged, weatherproof, fully integrated single unit design. As with all Wi-LAN products, the Ultima3 is supported by Wi-LAN applications engineers, with many years of Wi-LAN product experience. It is available globally in the 5.8 GHz license-exempt spectrum and is certified for use in all major telecommunications markets worldwide, having received certification from the USA Federal Communications Commission (FCC), the State Regulatory Radio Commission (SRRC) of the Peoples' Republic of China, Industry Canada (IC), and having recently received the CE Mark indicating the product conforms to the standards of the European Telecommunications Standards Institute (ETSI).

  • Litigation: Wi-LAN Inc. was served with two statements of claim. The lawsuits allege that Wi-LAN, Wi-Com Technologies Inc. (a private Alberta company) and Dr. Hatim Zaghloul, Chairman, President and CEO of Wi-LAN, among others, are liable for failing to deliver certain common share certificates of Cell-Loc Inc. in a timely manner to the claimants. The claimants are former shareholders of Wi-Com Technologies Inc. Wi-LAN believes that any claim against Wi-LAN is without merit.


  • Subsequent Events
    The following events were announced after the October 31 end of the third quarter:
  • New Product Launch: On November 13, 2002, Wi-LAN launched LIBRA, the latest in its series of Non-Line-of-Sight (NLOS) Fixed Wireless Access products. The LIBRA product series is the third generation of Wi-LAN's highly reliable, field-proven, commercial W-OFDM products, which have been deployed in networks in more than 20 countries. LIBRA provides NLOS capability that increases fixed wireless access subscriber coverage, from conventional levels of 50% or less, to levels that can exceed 90%. LIBRA's flexible architecture supports full or half duplex operation, is fully redundant, supports T1 and E1 voice networks, and has tiered service management and user-friendly network management, all in an easy to install, weatherproof, single unit design.
  • Product Awards:
  • - On November 26, 2002, Wi-LAN announced that its Ultima3 RD product outperformed competing products in various categories of a 5 GHz product comparison conducted by Network Computing magazine. The Ultima3 RD (Rapid Deployment) was ranked first for range, advanced features and functionality, and monitoring and management capabilities were the best of any system tested.

    - On January 10, 2003, Wi-LAN announced a Wireless Communications Association (WCA) International "Wemmie" Award. The award is for the Banco Del Pichincha non-line-of-sight network in Ecuador. This is Wi-LAN's second Wemmie Award.

  • TIL-TEK QMS Upgrade: On November 29, 2002 Wi-LAN announced that its TIL-TEK Antennas Division met the requirements for upgrading its Quality Management System (QMS) from the ISO (International Standards Organization) 9001:1994 standard to the ISO 9001:2000 standard. The new ISO 9001:2000 standard creates a basis for a higher level of senior management involvement in an organization's QMS. It ensures that TIL-TEK's QMS is aligned around its business objectives and is designed to ensure that ultimately improved customer satisfaction and increased profitability is achieved.


  • Conference Call Information

    With Wi-LAN's first quarter ending on January 31, 2003, Wi-LAN is currently in a "quiet period" with respect to its first quarter results, so no conference call will be held on January 23. A conference call with respect to the fiscal 2003 revenue and cash results was held on November 7, 2002 and a transcript of that call is available on Wi-LAN's website at www.wi-lan.com/investors/index.html (link at bottom of page).

    Wi-LAN will hold a conference call on February 13, 2003 after releasing revenue results for the three months ending January 31, 2003 on February 12. The conference call will be held at 9:00 a.m. MST (11:00 a.m. EST, 8:00 a.m. PST). The call-in number is 1-800-650-8824 (North America) or 703-736-7228. The confirmation number is 6390012. Participants are advised to call in 10 minutes early. The call will be audio webcast from Wi-LAN's website at www.wi-lan.com and will be archived there. A replay of the call will be available until 9:59 p.m. MST (11:59 p.m. EST, 8:59 p.m. PST) on February 20, 2003 at 1-888-266-2081 (North America) or 703-925-2533 (passcode: 6390012).

    About Wi-LAN Inc.
    Wi-LAN is a global provider of broadband wireless communications products and technologies, specializing in high-speed Internet access, LAN/WAN extension and broadband wireless access. Wi-LAN's broadband wireless access products are known worldwide for their high quality and industry-leading technology. Wi-LAN believes its W-OFDM patent is necessary for the implementation of devices using the IEEE 802.11a, IEEE 802.11g or ETSI BRAN HiperLAN/2 standards as well as the current drafts of the IEEE802.16a and ETSI BRAN HiperMAN proposed standards. Wi-LAN licenses its W-OFDM technology and has executed non-exclusive W-OFDM license agreements with semiconductor companies. Wi-LAN is the Chair Company of the OFDM Forum (www.ofdm-forum.com). 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.wilan.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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