News Release Details

Wi-LAN Announces 2004 fIRST QUARTER CONSOLIDATED Results

02/25/2004

Wi-LAN Announces 2004 fIRST QUARTER CONSOLIDATED Results

Revenue, Cash Flow, Gross Margin and Net Income Show Significant Improvement Over 2003 First Quarter CALGARY, Canada - February 25, 2004 - Wi-LAN Inc. (TSX:WIN), a global provider of broadband wireless communications products and technologies, today announced financial results for the three months ended January 31, 2004. In the 2004 first quarter the Company achieved revenue of $6,556, which is 20.2% growth over the 2003 first quarter, and generated cash flow from operations of $(565), a $1,484 improvement over the 2003 first quarter.  Product gross margin was 53.0% for the three months ended January 31, 2004, a 6.5 percentage point improvement from 46.5% in first quarter of 2003.  Net income (loss) was $(511) compared to $(2,788) in the 2003 first quarter, an improvement of $2,277.  Consolidated cash on January 31, 2004 was $26,946 compared with $27,533 on October 31, 2003, a reduction of $(607). Wi-LAN's January 31, 2004 cash balance is expected to provide adequate working capital to sustain the Company's expected growth in existing operations. All financial amounts are expressed in thousands of Canadian dollars unless otherwise noted.

"Wi-LAN's 2004 fiscal year started on a good note; every aspect of our first quarter financial results showed significant improvement over our 2003 first quarter and, with strong product gross margins and 20% revenue growth, we are in a good position to meet our guidance for the 2004 fiscal year," said Dr. Sayed-Amr El-Hamamsy, President and Chief Executive Officer, Wi-LAN Inc.  "We are continuing to improve all elements of our operations, focusing on transforming the company into a sales and marketing force while developing our next generation products. We exceeded our first quarter cash flow guidance while embarking on a series of very ambitious projects to be first to market with WiMAX compliant equipment. Wi-LAN and its partners currently have about 100 engineers working on various Wi-LAN product development projects. Our current customers are leading the way in deploying profitable networks with today's products and will benefit from our CONTINUITY PROGRAMT, which ensures they can continue to expand their existing networks as WiMAX compliant equipment comes on line. Also, we are in discussions with new potential customers who may take advantage of our CONTINUITY PROGRAMT with potentially large rollout plans. We believe that WiMAX compliance will facilitate significantly cost reduced products that will enable a mass market in broadband wireless access."

First Quarter Financial Highlights

Consolidated revenue ($000's)

Consolidated revenue for the three months ended January 31, 2004 increased by $1,100 or 20.2% to $6,556, compared to $5,456 for the three months ended January 31, 2003. This amount exceeds Wi-LAN's revenue guidance of $6,500 for the quarter. The revenue increase was largely due to a $749 or 16.0% increase in the Company's broadband wireless product revenue, from $4,686 in the first quarter of 2003 to $5,435 in the first quarter of 2004, which was mainly attributable to the first quarter of sales of Wi-LAN's new W-OFDM based 5.8 GHz LIBRA 5800 product series.  There was also growth in license, technology and engineering revenue from $nil in the first quarter of 2003 to $291 in the first quarter of 2004, mainly due to recognition of deferred revenue for product development funding from Wi-Comm Communications, a key Certified Gold Channel Partner and distributor of Wi-LAN products in China.  Finally, revenue from the Company's antenna division grew by $60 or 7.8%, from $770 in the first quarter of 2003 to $830 in the first quarter of 2004.

Revenue for the quarter showed a sequential decrease of $(1,372) compared to the prior quarter revenue of $7,928. The sequential decrease was expected and was caused primarily by the worldwide seasonal and religious holidays in December and January.

Product gross margin ($000's)

Product gross margin exceeded the Company's target of 50% due to a combination of factors. Wi-LAN's cost-reduced broadband wireless access products, Ultima3, LIBRA 5800 and VIP 110-24, dominated the sales mix, and sales of previously written down legacy products (AWE 45-24 and AWE 120-24) also increased the margin contribution.  These factors were partly offset by increased sales of lower margin LIBRA 3000 Customer Premise Equipment (CPE's) as some customers filled in their existing networks. Product gross margin for the first quarter of 2004 was 53.0% or $3,319, an improvement of 6.5 percentage points or $783 compared with 46.5% or $2,536 for the 2003 first quarter, and an improvement of 7.5 percentage points when compared with 45.5% for the prior three months ended October 31, 2003.

Cash flow management ($000's)

Cash flow from operations in the first quarter of 2004, including changes in non-cash operating working capital, was $(565), exceeding Wi-LAN's guidance to show cash flow of no less than $(700) in the quarter. This was an improvement of $1,484 compared to $(2,049) in the 2003 first quarter, and a sequential decline of $(1,320) when compared to $755 in the prior three months ended October 31, 2003.

The sequential decline in cash flow from operations in the quarter was a result of seasonally lower revenue and because of the timing of certain non-recurring operating costs that were incurred in the quarter for strategically important product development projects. The projects included the next-generation access point and customer premise equipment for W-LAN's W-OFDM based LIBRA product line, and the development of semiconductor intellectual property (SIP) cores, all of which will form the basis of Wi-LAN's future WiMAX compliant product series.

Cash flow from financing in the first quarter of 2004 was $1,539, primarily due to common share capital issuances of $1,589.

Cash flow from investments in the first quarter of 2004 was $(1,581), primarily due to a deposit made on the purchase of the Company's head office facilities of $(1,525).  

Consolidated cash on January 31, 2004 was $26,946 compared with consolidated cash of $27,553 on October 31, 2003, a reduction of $(607). Wi-LAN's January 31, 2004 cash balance is expected to provide adequate working capital to sustain the Company's expected growth in existing operations.

Net income (loss) ($000's)

Net income (loss)for the first quarter of 2004 was $(511), compared with $(2,788) for the first quarter of 2003, an improvement of $2,277. Approximately 41% of the improvement was due to one-time operations reorganization costs of $(934) included in first quarter of 2003, compared to $nil in the 2004 first quarter.  Of the remaining $1,343 improvement in net income, $1,074 was due to improvements in revenue and cost of product sales.

Financial guidance ($000's)

The Company continues to expect consolidated revenue for its 2004 fiscal year to be in the range of $32,000 to $37,000, which represents a growth rate of 19% to 38% over the $26,811 revenue achieved in the fiscal year ended October 31, 2003. The 20.2% growth that Wi-LAN achieved in the first quarter puts the Company on track to achieving its annual guidance.  Achieving or exceeding the upper end of this range depends largely on the timing of new product introductions and licensing revenue. This guidance does not incorporate potential upside from prospective acquisitions that may be contemplated.

Wi-LAN continues to expect cash flow from operations to be positive for the balance of fiscal 2004 and to be in excess of $2,000 for the fiscal year, due to ongoing improvements in revenue, gross margin and working capital.

The Company continues to expect net income for fiscal 2004 to exceed $500.

Financial summary ($000's)

(In thousands of $Canadian)

3 months ended

Statement of Operations Info.

Jan. 31, 2004

Oct. 31, 2003

July 31, 2003

Apr. 30, 2003

Jan. 31, 2003

Product revenue

         

North America

     2,714

$     2,977

$     3,271

$     2,796

$     2,079

Europe

1,192

1,149

775

492

881

Asia & other international

2,359

3,659

3,451

2.550

2,496

       Subtotal

6,265

7,785

7,497

5,838

5,456

License, technology & engineering

291

143

0

92

0

Total revenue

6,556

7,928

7,497

5,930

5,456

Product gross margin

3,319

3,542

3,722

3,009

2,536

 % of product revenue

53.0%

45.5%

49.7%

51.5%

46.5%

Operating income (loss)

(669)

(620)

198

(850)

(2,684)

Net income (loss)

(511)

(866)

37

(989)

(2,788)

Earnings (loss) per share ($ / share)

$      (0.01)

$     (0.03)

$      0.00

$      (0.03)

$      (0.09)

Cash Flow Information

Jan. 31, 2004

Oct. 31, 2003

July 31, 2003

Apr. 30, 2003

Jan. 31, 2003

Cash flow from operations

$       (565)

$        755

$    1,844

$    (810)

$   (2,049)

Financing

1,539

22,302

25

(54)

(51)

Investments

(1,581)

28

(8)

(18)

3

Change in cash

(607)

23,085

1,861

(882)

(2,097)

Cash, beginning of period

27,553

4,468

2,607

3,489

5,586

Cash, end of period

26,946

27,553

4,468

2,607

3,489

Balance Sheet Information

Jan. 31, 2004

Oct. 31, 2003

July 31, 2003

Apr. 30, 2003

Jan. 31, 2003

Working capital

$     28,522

$     28,607

$     5,926

$     3,932

$   4,845

Long term debt

0

0

0

0

0

Shareholders' equity

36,504

34,880

12,891

10,928

11,887

Total assets

45,511

44,683

21,554

19,566

21,700

First Quarter Operations Highlights

Major Sales Agreements

On December 4, 2003 Wi-LAN and Radionet Oy, the Wi-Fi Hotzone company that specializes in large-scale outdoor broadband wireless networks, announced that Vantaa Energy, a full-service energy company based in Vantaa, Finland, has purchased Wi-LAN's W-OFDM based non-line-of-sight (NLOS) LIBRA fixed wireless access products and Radionet's broadband wireless equipment for deployment of city-wide broadband wireless networks in the cities of Vantaa, Espoo and Helsinki in Finland. The three cities have a combined population of approximately 1 million residents.  Finland and the other Nordic countries are commonly considered the international hot spot for wireless communication, with the highest wireless penetration rates in the world and some of the world's largest wireless equipment manufacturers headquartered there. Vantaa Energy is rolling out broadband wireless networks to customers and Tele2 AB, the leading alternative pan-European telecommunications company, is the

Internet service provider for the networks.  Additional sales of Wi-LAN and Radionet products are expected to follow as Vantaa Energy moves into further phases of its broadband wireless network deployment.  Additional information regarding Vantaa Energy's broadband wireless networks can be found at www.wivanet.com.

On December 10, 2003 Wi-LAN and Micro-Link d.o.o., a Croatian distributor and system integrator of wireless communication systems for digital data transmission, announced Iskon Internet d.d., a leading Internet service provider in Croatia, has purchased Wi-LAN's W-OFDM based LIBRA fixed wireless access products for deployment in Zagreb, Croatia's capital city with a population of approximately 800,000.  Iskon is rolling out its licensed 3.5 GHz  SKYNET broadband wireless network to customers and Iskon is also the Internet service provider for the network. Wi-LAN products are being supplied and installed by Micro-Link.  Additional sales of Wi-LAN products are expected to follow as Iskon Internet moves into further phases of its broadband wireless network deployment in Zagreb and other Croatian cities.

On January 13, 2004 Wi-LAN and Prime Signal Ltd., the broadband wireless company for businesses in British Columbia's lower mainland, announced Prime Signal is using Wi-LAN's broadband wireless access products to earn profits providing high speed commercial internet service to businesses in select locations in  the Vancouver area.  Prime Signal, a wholly owned subsidiary of Delta Cable Communications Ltd., currently services over 200 customers, all with Wi-LAN broadband wireless products.   Additional sales of Wi-LAN products are expected to continue as Prime Signal moves into further phases of its broadband wireless network deployments.

On January 20, 2004 Wi-LAN announced it has received an order to supply its LIBRA 5800 broadband wireless access products for China Telecom Corporation's 5.8 GHz project in the northern China municipality of Tianjin. China Telecom is a fully integrated telecommunications operator with local access networks in 21 provinces in the south and west of the People's Republic of China, and 10 branch corporations in the 10 northern provincial regions where China Netcom owns the local telephone access networks. China Telecom is purchasing the LIBRA 5800 equipment for a point-to-multipoint network that it intends to use as an example for the deployment of other networks in northern China.  Wi-Comm United Communications Inc. (WCU), a key Certified Gold Channel Partner and distributor of Wi-LAN products in China, will supply LIBRA 5800 products to China Telecom. Additional sales of Wi-LAN products are expected to follow once the initial showcase network is established.

New Products and Product Programs

On November 19, 2003 Wi-LAN launched its new Wireless Voice-over-Internet-Protocol (VoIP) Solution, which allows transmission of voice communications over Wi-LAN's broadband wireless access systems with carrier-grade Quality of Service (QoS). The Wireless VoIP Solution provides an extremely competitive economic alternative to traditional wired service for voice traffic, particularly in underserved areas and developing countries, and is an excellent solution to allow competitive local exchange carriers to avoid leased line charges to incumbent carriers. The Wireless VoIP Solution easily integrates with Wi-LAN's Ultima3 Fixed Wireless Access product series and can be engineered to provide cost effective voice services for up to 7,200 customers per base station.

On January 22, 2004 Wi-LAN launched its CONTINUITY PROGRAMTM at the Wireless Communication Association's 10th Annual Technical Symposium and Business Expo in San Jose, California. The core of the CONTINUITY PROGRAMTM is Wi-LAN's commitment that any current LIBRA Customer Premise Equipment (CPE) will operate side by side, in the same network, the same cell and even the same sector with future WiMAX compliant CPE's.  The CONTINUITY PROGRAMTM will minimize network and revenue disruption and protect customers' investment in current technology when networks are transitioned to WiMAX compliant equipment.

New International Resellers

On December 16, 2003 Wi-LAN and EXE Technology, Inc., a Japanese wireless technology company specializing in the development, design and security policy implementation of broadband networks, announces an agreement to join forces to market Wi-LAN's broadband fixed wireless access products in Japan. EXE will offer Wi-LAN's products as cost-effective broadband wireless metropolitan area network solutions for telecommunications companies, Internet service providers (ISPs), local governments, enterprise users and system integrators.

Marketing events

Mr. Gordon Antonello, Wi-LAN Senior Technical Advisor and Chair, 2-11 GHz Technical Working Group, WiMAX Forum, gave a presentation at the Wireless Communication Association's 10th Annual Technical Symposium and Business Expo, January 21 to 23, Fairmont Hotel, San Jose, California.  Mr. Antonello's presentation was entitled "Conformance and WiMAX Certification".  Wi-LAN also rented a booth at the event where the company exhibited its LIBRA 5800 series products.

Executive Appointments

On December 8, 2003 the following executive appointments were announced:

  • Dr. Sayed-Amr (Sisso) El-Hamamsy, formerly President and Chief Operating Officer, has been appointed President and Chief Executive Officer (CEO). The recent promotions of Greg Masuda from Director of Operations to Vice President, Operations, and of Shawn Taylor from Chief Scientist to Vice President, Technology, have made the Chief Operating Officer (COO) position redundant, so the COO position has been eliminated.  The Acting Chief Financial Officer, Keith Bittner, and all Wi-LAN vice presidents will now report directly to Dr. El-Hamamsy.
  • Dr. Hatim Zaghloul, formerly Chairman and CEO, will continue to be actively involved in the new role of Executive Chairman.  In this capacity, Dr. Zaghloul will play an active role in continuing to guide the strategic direction of the Company.  Dr. Zaghloul will focus on strategic matters such as mergers and acquisitions, financings, and protecting Wi-LAN's robust patent portfolio.

Subsequent Events

The following events happened after the January 31 end of the first quarter:

Head Office Purchase

On February 19, 2004 Wi-LAN announced an agreement to purchase its head office building in Calgary. The purchase of the 91,070 square foot state-of-the-art facility, which Wi-LAN has been leasing since construction was completed in June 2001, will provide Wi-LAN with additional operating flexibility and is expected to contribute at least $0.3 million annually to Wi-LAN's net income, when compared to the prior ten-year lease arrangements. Wi-LAN is purchasing the building for $13.35 million and is financing the purchase with an $8 million mortgage and $5.35 million cash to be paid on or before March 31, 2004.

The purchase of the building is an operating decision that improves Wi-LAN's earnings by about $0.3 million per year, gives the Company the flexibility to achieve further cost reductions by allowing it to sublease the remainder of the building's excess space, and gives Wi-LAN the option to sell the building in the future when conditions are right. By purchasing the building Wi-LAN has added a high quality long-term asset to its balance sheet with mortgage payments that are significantly lower than the prior lease payments. The building is in a prime location in Calgary, one of the fastest growing cities in Canada, and its value is expected to appreciate, adding value to the option of a future sale of the building.  The majority of the $5.35 million cash used for the purchase has been offset by about $3 million from the exercise of warrants from the February 2002 financing, which expired on February 17.

Wi-LAN announced plans to move to its current facility in September 2000 in order to improve efficiencies by locating its administrative, product design and testing, and R&D efforts in one building. Construction was completed in June 2001 and Wi-LAN moved shortly thereafter. Wi-LAN currently occupies approximately one-third of the facility, subleases about one-third of the building and intends to sublease the remaining one-third. The building, 2891 Sunridge Way N.E., is located in Calgary's technology-based northeast sector in the Sunridge Business Park near the intersection of 16th Avenue (Trans-Canada Highway) and Barlow Trail N.E.

Conference Call Information

Wi-LAN will hold a conference call to discuss the consolidated results on February 25, 2004 (today) at 5:00 p.m. EST (3:00 p.m. MST, 2:00 p.m. PST).  The call-in number will be 1-800-419-9873 (North America) or 703-464-5614 (outside North America).  The confirmation code is 937215.  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 11:59 p.m. EST (9:59 p.m. MST, 8:59 p.m. PST) on March 3, 2004 by calling 1-888-266-2081 (North America) or 703-925-2533 (outside North America). The access code for the replay is 937215.

Wi-LAN participants will be:

  • Dr. Sayed-Amr El-Hamamsy - President and Chief Executive Officer
  • Mr. Keith Bittner - Acting Chief Financial Officer
  • Mr. Ken Wetherell - Vice President, Corporate Communications & Investor Relations

 

About Wi-LAN Inc.

Wi-LAN is a global provider of broadband wireless communications products and technologies, offering businesses, including telecom service providers, and government enterprises effective, economic and secure wireless high-speed communications solutions. Wi-LAN specializes in high-speed Internet access, data network extension, and wireless data and telephony backhaul, utilizing its high quality products and industry-leading technologies. Wi-LAN believes its W-OFDM patents are necessary for the implementation of devices using the IEEE 802.16 WirelessMAN Standard * and the ETSI BRAN HiperMAN* standard (the WiMAX* standards), the IEEE standards 802.11a and 802.11g (the 2nd generation Wi-Fi* standards), and the ETSI BRAN HiperLAN/2* standard. 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) and an active member of the WiMAX* Forum (www.wimaxforum.org). 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, may include forward-looking information that involves various risks and uncertainties.  These may include, without limitation, statements based on current expectations involving a number of risks and uncertainties related to all aspects of the wireless communications industry and the global economy.  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 wireless communications, the Company's ability to attract and retain key employees, the enforceability of the Company's patents, the availability of key components and changes in currency exchange rates. 

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.

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

For more information, please contact:

Wi-LAN Inc.
Corporate Communications and Investor Relations
Ken Wetherell
Ph: (403) 207-6329
E-mail: kwetherell@wi-lan.com                             

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Non-GAAP Information

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