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Press release from Marketwire

WiLAN Reports Fiscal Year 2011 Financial Results

Company generates record revenue and earnings Company announces 20% dividend increase

Wednesday, March 07, 2012

WiLAN Reports Fiscal Year 2011 Financial Results06:30 EST Wednesday, March 07, 2012OTTAWA, CANADA--(Marketwire - March 7, 2012) - Wi-LAN Inc. ("WiLAN" or the "Company") (TSX:WIN)(NASDAQ:WILN) today announced financial results for the fiscal year ended December 31, 2011. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.Fiscal Year 2011 HighlightsRecord revenues of $105.8 million, an increase of 115% as compared to $49.2 million in the twelve month period ended December 31, 2010. Record adjusted earnings* of $71.5 million, or 58 cents per share, as compared to adjusted earnings of $4.8 million, or 5 cents per share, in the fiscal year ended December 31, 2010. Record GAAP earnings of $31.8 million, or 26 cents per share on a basic level, as compared to a GAAP loss of $21.6 million, or 21 cents per share on a basic level, in the same period last year. Signed licenses with 19 companies, including Intel Corporation, Broadcom Corporation, and Motorola Mobility, bringing the total number of companies licensed to 258. Signed a renewal license agreement with Cisco Systems. Subsidiary, Gladios IP, signed licensing partnerships with six organizations. More than doubled the Company's patent portfolio to over 3,000 issued and pending patents. Listed its shares on the NASDAQ Global Select Market on June 1, 2011. Returned $13.5 million to shareholders in share buyback and dividend payments. Generated $57.1 million in cash from operations; held cash and cash equivalents and short- term investments of $433.7 million at year end. Doubled annual dividend to CDN $0.10 per common share in February 2011. "Fiscal 2011 was a defining year for WiLAN. Achievements across all areas of our business launched WiLAN into a new league," said Jim Skippen, President & CEO."License agreements signed during the year contributed to the more than doubling of our revenues, to over $105 million, and positioned the Company to generate significant future revenues. Strategic patent acquisitions completed during the year more than doubled the size of our patent portfolio," added Skippen.Skippen continued, "With our large and valuable patent portfolio, expert team, significant backlog and very strong financial position, we are well positioned to deliver strong revenue and earnings in the years to come."Eligible DividendThe Board of Directors has declared an eligible dividend of CDN $0.03 per common share to be paid on April 5, 2012 to shareholders of record on March 23, 2012. This represents a 20% increase over the quarterly dividend rate in 2011.Normal Course Issuer BidWiLAN also announced today that its Board of Directors has approved the adoption of a normal course issuer bid ("NCIB") under which the Company expects to purchase up to 9.5 million issued and outstanding common shares ("Shares") from the day of receipt of regulatory approval until December 13, 2012. The repurchases made under this NCIB will be made, in part, to offset the dilutive effect of Shares expected to be issued upon the exercise of stock options under the Company's stock option plan.The share buyback program is subject to obtaining requisite regulatory approvals including filing notice with the TSX. The actual number of Shares purchased, the timing of purchases and the price at which the Shares are bought will depend on future market conditions and on potential alternative uses for WiLAN's cash resources. Any purchases will be subject to trading restrictions and will be made by WiLAN at the prevailing market price of the Shares at the time of purchase.Fiscal 2011 Revenue ReviewIn the fiscal year ended December 31, 2011, WiLAN generated revenues of $105.8 million, representing an increase of 115% over the comparable period last year. For the twelve month period ended December 31, 2011 the top ten licensees accounted for 77% of revenues, whereas the top ten accounted for more than 75% of revenues for the twelve month period ended December 31, 2010.Fiscal 2011 Operating Expense ReviewIn the twelve month period ended December 31, 2011, cost of revenue expenses totaled $27 million as compared to $26.1 million in the fiscal year ended December 31, 2010. Cost of revenue includes all costs associated with our patent licensing activities including any third-party royalty payments required under royalty arrangements, staff costs and other costs incurred in conducting license negotiations. The Company also includes, as a cost of revenue, any business development costs related to sourcing new patent portfolios or developing new strategic partnerships. In addition, cost of revenue includes stock-based compensation for staff involved in the performance of the above noted activities and amortization of acquired patents, both non-cash expenses.Marketing, general and administration ("MG&A") represent the cost of litigation and corporate services, including stock-based compensation for related staff. Excluding one-time, non-recurring charges and non-cash expenses, MG&A expenses in the twelve month period ended December 31, 2011 amounted to $8.4 million as compared to $5.6 million in same period last year. This increase is due principally to the accrual of variable compensation costs related to employee bonuses and restricted share units of $793, staff cost of $904 and public company related costs of $819 as a result of the Company's listing on the NASDAQ Global Select Market. One-time, non-recurring charges in fiscal 2011 included incentives paid to the Chief Executive Officer of $8.7 million, of which $7.1 million was accrued to buy-out the Chief Executive Officer's contracted right to a 2% incentive on gross revenues. The Company completed a detailed review of the accounting treatment for the McKool Smith success fee previously disclosed and determined that it was appropriate to accrue the entire success fee obligation and accordingly a one-time, non-recurring charge of $28 million is included in litigation expenses for the year.At December 31, 2011, the Company's net cash, comprised of cash and cash equivalents and short- term investments, totaled $433.7 million, representing an increase of $324.1 million from the net cash position at December 31, 2010. The Company's cash equivalents and short-term investments include T-bills, term deposits and GICs.During the fiscal year ended December 31, 2011, the Company generated $57.1 million of cash from operations and returned $13.5 million to shareholders in share buyback and dividend payments.Fiscal 2011 Earnings ReviewIn the fiscal year ended December 31, 2011, WiLAN generated adjusted earnings of $71.5 million or 58 cents per share as compared to $4.8 million, or 5 cents per share, in the comparative period. The difference in adjusted earnings between the reporting periods is due to increased revenues, and lower litigation expenses, as a result license agreements reached with major corporations in the first quarter of 2011.The Company generated net GAAP earnings of $31.8 million, or 26 cents per share on a basic level and 25 cents per share on a diluted level, in the twelve month period ended December 31, 2011, as compared to a net loss of $21.6 million, or 21 cents per share on a basic and diluted level, in the same period last year.Extendible Convertible DebentureOn September 8, 2011, the Company issued CDN $230 million in aggregate principal amount of its 6% extendible convertible debentures ("Debentures") due January 31, 2012. The Debentures bore interest at a rate of 6% per year, payable in cash upon repayment on January 31, 2012. The Company issued these Debentures in connection with its offer to acquire MOSAID which expired on November 1, 2011.The Company accrued interest expense, related to carrying the Debenture, of $4.2 million in the twelve month period ended December 31, 2011. The Debenture financing costs, after amortization of accretion of debt discount, a non-cash expense of $41.7 million, extinguishment of the conversion feature, a non-cash gain of $66.7 million and amortization of financing costs, consisting of commissions and professional service fees of $4.2 million, amounted to a net gain of $20.7 million.In the first quarter of 2012 ending March 31, 2012, the Company will incur additional interest expense, related to the debenture, of $1.1 million, an additional accretion of debt discount, a non- cash expense, of $25.0 million and amortized financing costs, consisting of commissions and professional service fees, of $1.7 million.The Company repaid the Debentures, including accrued interest, on January 31, 2012.First Quarter 2012 Financial GuidanceIn connection with our recent listing on NASDAQ, we conducted a detailed review of the financial guidance practices of our peers including Acacia Research Corporation, InterDigital, Inc., Rambus Inc., RPX Corporation and Tessera, Inc., many of which have been traded on the NASDAQ stock exchange for upwards of a decade or longer. WiLAN is adjusting its guidance policy to be in line with our peers.For the first quarter of 2012 ending March 31, 2012, WiLAN expects revenue to be at least $21.6 million. This revenue guidance does not include the potential impact of any new agreements that may be signed during the balance of the first quarter of 2012 or the potential impact of any royalties identified in audits conducted by the Company. Operating expenses for the first quarter are expected to be in the range of $9 million to $12 million of which $4 million to $6 million is expected to be litigation expense. For the first quarter of 2012, adjusted earnings are expected to be in the range of $11 million to $14 million.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 AIF for the 2011 fiscal year dated March 7, 2012 (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 guidance for the three month period ended March 31, 2012 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. 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 - March 7, 2012 - 10 AM ETWiLAN 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 InformationA live audio webcast will be available at http://www.investorcalendar.com/IC/CEPage.asp?ID=167550To 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 InformationThe call will be available at http://www.investorcalendar.com/IC/CEPage.asp?ID=167550 and accessible by telephone until 11:59 PM on June 7, 2012.Replay Number (Toll Free): 1.877.660.6853Replay Number (International): 201.612.7415Replay passcodes (both required for playback)Account #: 286 Conference ID #: 389756 About WiLANWiLAN, founded in 1992, is a leading technology innovation and licensing company. WiLAN has licensed its intellectual property to over 255 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 & 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 InformationThis 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 "will be", "will provide", "to deliver", "Company expects ", "are expected", "may be", "potential impact" 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 achievementsto differ materially from those expressed or implied by the forward-looking statements or forward-looking information. Such factors include, without limitation, (1) the risks described in WiLAN's November 8, 2011 management's discussion and analysis of financial condition and results of operations relating to its 3 and 9 months ended December 31, 2011 (the "MD&A") starting at page 32 of the MD&A and (2) the risks described in WiLAN's March 1, 2011 annual information form for the year ended December 31, 2011 (the "AIF") starting at page 13 of the AIF.Copies of each of the MD&A and 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.Consolidated Statements of Operations(in thousands of United States dollars, except share and per share amounts)Year endedYear endedDecember 31,December 31,20112010RevenueRoyalties$104,813$ 45,557Brokerage9963,679Total Revenue$105,809$ 49,236Operating expensesCost of revenue27,01226,103Research and development7,7923,965Marketing, general and administration65,74937,462Realized foreign exchange (gain) loss(1,958)230Unrealized foreign exchange (gain) loss2,9974Transaction costs3,044-Restructuring charges-726Total operating expenses104,63668,490Earnings (loss) from operations1,173(19,254)Investment income5,654683Interest expense(4,218)-Debenture financing, net20,747-Earnings (loss) before income taxes23,356(18,571)Provision for (recovery of) income tax expenseCurrent3,2753,041Deferred(11,716)-(8,441)3,041Net earnings (loss)31,797(21,612)Other comprehensive incomeCumulative translation adjustment(9,830)12,713Comprehensive income (loss)$21,967$(8,899)Earnings (loss) per shareBasic$0.26$(0.21)Diluted$0.25$(0.21)Weighted average number of common sharesBasic122,741,326103,289,548Diluted124,999,644103,289,548Wi-LAN Inc.Consolidated Balance Sheets(in thousands of United States dollars)December 31,December 31,As at20112010Current assetsCash and cash equivalents$ 432,186$ 82,636Short-term investments1,52426,971Accounts receivable2,1532,238Prepaid expenses and deposits290213Deferred financing costs1,716-437,869112,058Furniture and equipment, net1,769568Patents and other intangibles, net118,645126,069Deferred tax asset18,086-Goodwill12,62313,522$ 588,992$ 252,217Current liabilitiesAccounts payable and accrued liabilities$ 22,169$ 11,804Due to related party7,102-Current portion of patent finance obligation2,458-Deferred tax liability1,851-Debentures203,855-237,43511,804Patent finance obligation5,189-Success fee obligation15,212-257,83611,804Shareholders' equityCommon shares436,606355,709Additional paid-in capital14,06113,786Accumulated other comprehensive income16,22526,055Deficit(135,736)(155,137)331,156240,413$ 588,992$ 252,217Wi-LAN Inc.Consolidated Statements of Cash Flow(in thousands of United States dollars)Year endedYear endedDecember 31, 2011December 31, 2010Cash generated from (used in)OperationsNet earnings (loss)$ 31,797$(21,612)Non-cash itemsStock-based compensation4,2281,835Depreciation and amortization22,78520,796Extinguishment of conversion feature of convertible debentures(66,679)-Foreign exchange gain(5,175)-Deferred financing costs4,195-Accretion of debt discount41,737-Disposal of patents70480Deferred income tax recovery(11,716)-Accrued interest4,218-Long-term portion of success fee15,212-41,3061,099Change in non-cash working capital balancesAccounts receivable85(1,777)Prepaid expenses and deposits(77)(71)Assets held for sale-2,082Accounts payable and accrued liabilities15,7852,912 Cash generated from operations57,0994,245 FinancingProceeds on sale of common shares, net71,99220,673Dividends paid(10,668)(4,750)Proceeds from issuance of convertible debentures, net226,749-Debentures repurchased under normal course issuer bid(1,535)-Common shares repurchased under normal course issuer bid(2,871)-Common shares issued for cash on the exercise of options6,0864,122Common shares issued for cash from Employee Share Purchase Plan182151Cash generated from financing289,93520,196InvestingPurchase of short-term investments25,473(6,015)Purchase of furniture and equipment(1,907)(411)Purchase of patents(19,753)(9,998)Cash used in investing3,813(16,424)Foreign exchange gain (loss) on cash held in foreign currency(1,297)5,387Net cash and cash equivalents generated in the period349,55013,404Cash and cash equivalents, beginning of period82,63669,232Cash and cash equivalents, end of period$ 432,186 $ 82,636Wi-LAN Inc.Reconciliation of GAAP Net Earnings to Adjusted Earnings(Unaudited)(in thousands of United States dollars, except share and per share amounts)Year ended December 31, 2011Year ended December 31, 2010Net earnings (loss) under GAAP$ 31,797$ (21,612)Adjusted for:Unrealized foreign exchange loss2,9974Depreciation and amortization22,78520,796Stock-based compensation4,2281,835Restructuring-726Incentive buy-out7,102-Success fee27,986-Other285-Interest expense4,218-Transaction costs3,044-Investment income(3,733)-Debenture financing, net(20,747)-Income tax (recovery) expense(8,441)3,041Adjusted earnings$ 71,521$ 4,790Adjusted earnings per share$ 0.58$ 0.05Weighted average number of common sharesBasic122,741,326103,289,548Diluted124,999,644103,289,548FOR FURTHER INFORMATION PLEASE CONTACT: Kathryn HughesFor Media inquiries, please contact:Director, Marketing & Communications613.688.4897C: 613.898.6781khughes@wilan.comORTyler BurnsFor Investor inquiries, please contact:Director, Investor Relations613.688.4330C: 613.697.0367tburns@wilan.com