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News Release Details

WiLAN Reports Second Quarter 2013 Financial Results

08/08/2013

OTTAWA, CANADA--(Marketwired - Aug. 8, 2013) - Wi-LAN Inc. ("WiLAN" or the "Company") (TSX:WIN)(NASDAQ:WILN) today announced financial results for the second quarter of fiscal year 2013 ended June 30, 2013. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

Second Quarter 2013 Highlights

  • Revenues of $19.9 million, exceeding guidance of $17.5 million.
  • Adjusted earnings amounted to a loss of $762,000, within our guidance range
  • Returned $7.1 million to shareholders in dividend and share buyback payments.
  • Signed license renewal agreement with Samsung Electronics.
  • Held cash and cash equivalents and short-term investments of $159.3 million at June 30, 2013.

"Our second quarter revenues exceeded our guidance and increased sequentially over the first quarter." said Jim Skippen, President & CEO. "Despite unusually high litigation activity targeted at realizing value from our broad portfolio of IP, our business generated $2.1 million from operations during the quarter and returned over $7.1 million to shareholders in dividend and share buyback payments."

Added Skippen, "During the quarter we signed five new licenses including a broad Digital TV and Display portfolio license with Panasonic and an early license renewal with Samsung. We look forward to further strengthening our business relationship with Samsung and seeking opportunities to work together in the building of more valuable patent portfolios."

Eligible Dividend

The Board of Directors has declared an eligible dividend of CDN $0.04 per common share to be paid on October 4, 2013 to shareholders of record on September 13, 2013.

Second Quarter 2013 Revenue Review

In the three month period ended June 30, 2013, WiLAN generated revenues of $19.9 million, as compared to $20.8 million in the three month period ended June 30, 2012. Revenue recognized during the quarter from the license renewal agreement signed with Samsung replaced revenue that WiLAN would have received under the terms of the previous license agreement. For the three month period ended June 30, 2013, the top 10 licensees accounted for 85% of revenues, whereas the top 10 accounted for 86% of revenues in the three month period ended June 30, 2012.

Second Quarter 2013 Operating Expense Review

In the three month period ended June 30, 2013, cost of revenue totaled $22.5 million as compared to $12.8 million in the three month period ended March 31, 2012. The increase in expenses is primarily attributable to an increase in litigation expense.

Three months ended Six months ended
June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Patent licensing $ 1,311 $ 864 $ 2,209 $ 2,156
Litigation 14,582 5,839 26,782 9,697
Amortization of patents 6,323 5,922 12,828 11,851
Stock-based compensation 263 236 421 460
$ 22,479 $ 12,861 $ 42,240 $ 24,164

For the three months ended June 30, 2013, litigation expenses amounted to $14.6 million compared to $5.8 million for the same period last year. The increase in litigation expense over the prior year period is attributable to an increased level of effort in ongoing patent infringement litigations including preparation for multiple claims construction hearings and multiple trials scheduled to take place in 2013.

In the second quarter ended June 30, 2013, MG&A expenses amounted to $3.9 million as compared to $3.3 million in the second quarter ended June 30, 2012. The increase in spending year over year is primarily attributable to increased staffing levels and an increase in public company related expenses.

Three months ended Six months ended
June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Marketing, general and administration costs $ 3,014 $ 2,353 $ 5,144 $ 4,811
Asset write-off related to restructuring - 209 - 209
Depreciation 118 137 242 272
Stock-based compensation 735 646 1,410 1,213
$ 3,867 $ 3,345 $ 6,796 $ 6,505

Second Quarter 2013 Earnings Review

In the second quarter ended June 30, 2013, adjusted earnings amounted to a loss of $0.8 million or 1 cent per share as compared to adjusted earnings of $10.1 million, or 8 cents per share, in the comparative period last year. The decrease in adjusted earnings as compared to last year is primarily attributable to the increase in litigation expenses.

The Company generated a GAAP loss of $7.6 million, or 6 cents per share on a basic level, in the three month period ended June 30, 2013, as compared to a GAAP loss of $0.1 million, or nil per share on a basic level, in the same period last year. In the three month period ended June 30, 2013, the Company recorded an income tax recovery of $2.0 million as compared to an income tax expense of $1.4 million recorded in the same period last year.

Second Quarter 2013 Balance Sheet and Cash Flow Review

At June 30, 2013, the Company's cash, comprised of cash and cash equivalents and short-term investments, totaled $159.3 million, representing a decrease of $17.6 million from the cash position at December 31, 2012. The decrease is primarily attributable to $1.8 million cash utilized in operations, the payment of dividends totaling $9.1 million, the repurchase of common shares totaling $2.9 million and the purchase of patents and other intangibles totaling $3.0 million. The Company's cash equivalents and short-term investments include T-bills, term deposits and GICs.

Third Quarter 2013 Financial Guidance

For the third quarter 2013 ending September 30, 2013, the Company expects revenue to be at least $20.7 million. This revenue guidance does not include the potential impact of any new agreements that may be signed during the balance of the second quarter of 2013 or the potential impact of any royalties identified in audits conducted by the Company. Operating expenses for the third quarter are expected to be in the range of $20.5 million to $21.6 million of which $13.5 million to $14.5 million is expected to be litigation expense. For the third quarter of 2013, and assuming no additional agreements are signed, adjusted earnings are expected to be between a loss of $650,000 and earnings of $500,000.

The above statements are forward-looking and actual results may differ materially. The "Forward- looking Information" section at the end of this press release provides information on various risks and uncertainties that the Company faces. Additional information identifying risks and uncertainties relating to the Company's business are discussed in greater detail in the "Risk Factors" section of WiLAN's annual information form for the 2012 fiscal year dated March 7, 2013 (copies of which may be obtained at www.sedar.com or www.sec.gov). Financial guidance is provided to assist investors and other interested parties in understanding WiLAN's performance. The reader is cautioned that using this information for any other purpose may be inappropriate.

The Company's revenues result primarily from the licensing of intellectual property which, by its very nature, is directly affected by the timing of the closure of license agreements, the nature and extent of specific licenses including actual rates, product sales by licensees which can be subject to seasonality as well as overall market demands and the timeliness of the receipt of licensee royalty reports. In addition, certain revenues may be of a one-time nature.

The above targets for the three month period ended September 30, 2013 reflects our current business indicators and expectations and is subject to fluctuations in foreign currency exchange rates. Due to their nature, certain income and expense items, such as significant settlements from companies involved in current enforcement actions, brokerage opportunities, new significant litigation or defense actions that could arise during the quarter, losses on asset impairments or realized foreign exchange losses cannot be accurately forecast. Accordingly, we exclude forecasts of such items from our guidance. Actual revenues reported may exceed the revenue guidance provided due to the receipt of royalty reports, signing of new license agreements and completion of licensee audits, all after the guidance is provided.

WiLAN's imperative is to negotiate the best possible license as measured over the long-term and accordingly, the timing of actual license signings may vary from that forecasted. Actual results may vary materially from the guidance provided as a consequence of the above noted factors.

Conference Call Information - August 8, 2013 - 10:00 AM ET

WiLAN will conduct a conference call to discuss its financial results today at 10:00 AM Eastern Time (ET). WiLAN CEO, Jim Skippen and CFO, Shaun McEwan will be on the call.

Calling Information

A live audio webcast will be available at http://www.investorcalendar.com/IC/CEPage.asp?ID=171192

  • To access the call from Canada and U.S., dial 1.877.407.0782 (Toll Free)
  • To access the call from other locations, dial 1.201.689.8567 (International)

Replay Information

The call will be available at http://www.investorcalendar.com/IC/CEPage.asp?ID=171192 and accessible by telephone until 11:59 PM ET on November 6, 2013.

Replay Number (Toll Free): 1.877.660.6853
Replay Number (International): 1.201.612.7415
Conference ID #: 417559

About WiLAN

WiLAN, founded in 1992, is a leading technology innovation and licensing company. WiLAN has licensed its intellectual property to over 270 companies worldwide. Inventions in our portfolio have been licensed by companies that manufacture or sell a wide range of communication and consumer electronics products including 3G and 4G handsets, Wi-Fi-enabled laptops, Wi-Fi and broadband routers, xDSL infrastructure equipment, cellular base stations and digital television receivers. WiLAN has a large and growing portfolio of more than 3,000 issued or pending patents. For more information: www.wilan.com.

Note

(*) WiLAN follows GAAP in preparing its interim and annual financial statements. Adjusted Earnings are earnings from continuing operations before stock-based compensation expense, depreciation and amortization expense, interest expense, unrealized foreign exchange gains or losses, provision for income taxes and certain other non-cash, one-time, or non-recurring charges.

Forward-looking Information

This news release contains forward-looking statements and forward-looking information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and other United States and Canadian securities laws. The phrases "we believe", "will generated", "will strengthen", "to work", "to be", "potential impact", "may be", "are expected", "may differ", "can be", "may exceed", "to negotiate", "may vary" and similar terms and phrases are intended to identify these forward-looking statements. Forward-looking statements and forward-looking information are based on estimates and assumptions made by WiLAN in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that WiLAN believes are appropriate in the circumstances. Many factors could cause WiLAN's actual performance or achievements to differ materially from those expressed or implied by the forward-looking statements or forward-looking information. Such factors include, without limitation, the risks described in WiLAN's March 7, 2013 annual information form for the year ended December 31, 2012 (the "AIF"). Copies of the AIF may be obtained at www.sedar.com or www.sec.gov. WiLAN recommends that readers review and consider all of these risk factors and notes that readers should not place undue reliance on any of WiLAN's forward-looking statements. WiLAN has no intention and undertakes no obligation to update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

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

Wi-LAN Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands of United States dollars, except share and per share amounts)
Three months ended Three months ended Six months ended Six months ended
June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Revenue
Royalties $ 19,941 $ 20,791 $ 38,310 $ 45,484
Operating expenses
Cost of revenue 22,479 12,861 42,240 24,164
Research and development 2,130 1,980 4,281 4,751
Marketing, general and administration 3,867 3,345 6,796 6,505
Realized foreign exchange loss (gain) 99 (26 ) 188 (20 )
Unrealized foreign exchange loss (gain) 1,167 1,105 2,111 (4,271 )
Restructuring charges - 418 - 418
Total operating expenses 29,742 19,683 55,616 31,547
Earnings (loss) from operations (9,801 ) 1,108 (17,306 ) 13,937
Investment income 188 182 383 904
Interest expense - - - (1,126 )
Debenture financing, net - - - (31,138 )
Loss before income taxes (9,613 ) 1,290 (16,923 ) (17,423 )
Provision for (recovery of) income tax expense
Current 1,293 697 2,594 1,922
Deferred (3,274 ) 742 (5,451 ) (4,785 )
(1,981 ) 1,439 (2,857 ) (2,863 )
Net and comprehensive loss $ (7,632 ) $ (149 ) $ (14,066 ) $ (14,560 )
Loss per share
Basic $ (0.06 ) $ (0.00 ) $ (0.12 ) $ (0.12 )
Diluted $ (0.06 ) $ (0.00 ) $ (0.12 ) $ (0.12 )
Weighted average number of common shares
Basic 121,225,490 121,338,319 121,384,394 121,577,498
Diluted 121,225,490 121,338,319 121,384,394 121,577,498
Wi-LAN Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands of United States dollars)
As at June 30, 2013 December 31, 2012
Current assets
Cash and cash equivalents $ 157,817 $ 175,246
Short-term investments 1,474 1,617
Accounts receivable 5,881 1,139
Prepaid expenses and deposits 1,132 314
166,304 178,316
Loan receivable 989 911
Furniture and equipment, net 948 1,272
Patents and other intangibles, net 132,151 116,846
Deferred tax asset 26,268 20,817
Goodwill 12,623 12,623
$ 339,283 $ 330,785
Current liabilities
Accounts payable and accrued liabilities $ 31,477 $ 22,406
Current portion of patent and licensing rights finance obligation 16,010 2,547
47,487 24,953
Patent and licensing rights finance obligation 14,368 2,670
Success fee obligation 8,974 10,900
70,829 38,523
Shareholders' equity
Capital stock 429,372 431,067
Additional paid-in capital 12,576 11,074
Accumulated other comprehensive income 16,225 16,225
Deficit (189,719 ) (166,104 )
268,454 292,262
$ 339,283 $ 330,785
Wi-LAN Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(in thousands of United States dollars)
Three months

ended
Three months

ended
Six months

ended
Six months

ended
June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Cash generated from (used in)
Operations
Net loss $ (7,632 ) $ (149 ) $ (14,066 ) $ (14,560 )
Non-cash items
Stock-based compensation 1,168 876 2,139 1,932
Depreciation and amortization 6,516 6,171 13,218 12,337
Foreign exchange loss 671 798 1,252 1,131
Deferred financing costs - - - 1,746
Accretion of debt discount - - - 25,175
Disposal of assets - 209 - 209
Disposal of patents - - 46 -
Deferred income tax recovery (3,274 ) 742 (5,451 ) (4,785 )
Accrued investment income (39 ) - (79 ) -
(2,590 ) 8,647 (2,941 ) 23,185
Change in non-cash working capital balances
Accounts receivable 584 1,680 (4,742 ) 1,044
Prepaid expenses and deposits (283 ) (553 ) (367 ) (1,215 )
Payments associated with success fee obligation (659 ) (9,745 ) (2,172 ) (9,745 )
Due to related party - - - (7,102 )
Accounts payable and accrued liabilities 5,023 2,542 8,416 2,402
Cash (used in) generated from operations 2,075 2,571 (1,806 ) 8,569
Financing
Dividends paid (4,867 ) (3,679 ) (9,101 ) (6,720 )
Repayment of convertible debentures - - - (233,247 )
Common shares repurchased under normal course issuer bid (2,256 ) (3,171 ) (2,912 ) (14,638 )
Common shares issued for cash on the exercise of options 117 979 478 1,994
Common shares issued for cash from Employee Share Purchase Plan 102 116 102 116
Cash used in financing (6,904 ) (5,755 ) (11,433 ) (252,495 )
Investing
Sale (purchase) of short-term investments 91 32 143 (38 )
Purchase of furniture and equipment (50 ) (222 ) (67 ) (331 )
Purchase of patents and other intangibles (2,327 ) (690 ) (3,014 ) (1,376 )
Cash used in investing (2,286 ) (880 ) (2,938 ) (1,745 )
Foreign exchange gain (loss) on cash held in foreign currency (671 ) (798 ) (1,252 ) 3,056
Net cash and cash equivalents used in the period (7,786 ) (4,862 ) (17,429 ) (242,615 )
Cash and cash equivalents, beginning of period 165,603 194,433 175,246 432,186
Cash and cash equivalents, end of period $ 157,817 $ 189,571 $ 157,817 $ 189,571
Wi-LAN Inc.
Reconciliation of GAAP Net Earnings to Adjusted Earnings
(Unaudited)
(in thousands of United States dollars, except share and per share amounts)
Three months

ended
Three months

ended
Six months

ended
Six months

ended
June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Net loss under GAAP $ (7,632 ) $ (149 ) $ (14,066 ) $ (14,560 )
Adjusted for:
Unrealized foreign exchange (gain) loss 1,167 1,105 2,111 (4,271 )
Depreciation and amortization 6,516 6,171 13,219 12,338
Stock based compensation 1,168 876 2,139 1,931
Restructuring and other one time charges - 418 - 418
Gain of disposal of assets - - (7 ) -
Asset write-off related to restructuring - 209 - 209
Interest expense - - - 1,126
Debenture financing, net - - - 31,138
Income tax expense (recovery) (1,981 ) 1,439 (2,857 ) (2,863 )
Adjusted earnings (loss) $ (762 ) $ 10,069 $ 539 $ 25,466
Adjusted earnings (loss) per basic share $ (0.01 ) $ 0.08 $ 0.00 $ 0.21
Weighted average number of common shares
Basic 121,225,490 121,338,319 121,384,394 121,577,498
Contact Information:

Shaun McEwan

Chief Financial Officer

O: 613.688.4898

C: 613.697.7159

smcewan@wilan.com





Tyler Burns

Director, Investor Relations

O: 613.688.4330

C: 613.697.0367

tburns@wilan.com

www.wilan.com