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Press release from Marketwire

WiLAN Reports First Quarter 2012 Financial Results

Wednesday, May 09, 2012

WiLAN Reports First Quarter 2012 Financial Results06:30 EDT Wednesday, May 09, 2012OTTAWA, CANADA--(Marketwire - May 9, 2012) - Wi-LAN Inc. ("WiLAN" or the "Company") (TSX:WIN) )(NASDAQ:WILN) today announced financial results for the first quarter of fiscal year 2012 ended March 31, 2012. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.First Quarter 2012 HighlightsRevenues of $24.7 million, as compared to $26.3 million in the three month period ended March 31, 2011. Adjusted earnings* of $15.4 million, or 13 cents per share, representing an increase of 46% as compared to adjusted earnings of $10.5 million, or 9 cents per share, in the three month period ended March 31, 2011. GAAP earnings, including $31.1 million in expenses related to the 6% extendible convertible unsecured subordinated debentures ("Debentures") financing, amounted to a loss of $14.4 million, or 12 cents per share on a basic level, as compared to GAAP earnings of $19.8 million, or 17 cents per share on a basic level, in the same period last year. Excluding the expenses related to the Debentures, of which $25.2 million was a non-cash expense, net earnings would have been $11.1 million or 9 cents per share on a basic level. Retired the Debentures for $233.2 million. Initiated litigation against Research In Motion Limited and Research In Motion Corporation (collectively "RIM") for patent infringement. Gladios IP partner, 01 Communique, launched litigation against Bomgar Corporation for patent infringement. Hired Michael Vladescu as Chief Operating Officer. Returned $14.5 million to shareholders in dividend and share buyback payments. Generated $6 million in cash from operations; held cash and cash equivalents and short-term investments of $196 million at March 31, 2012. "Our business generated solid financial performance in the first quarter of 2012," said Jim Skippen, President & CEO. "Revenue exceeded our guidance by over 14% as a result of the Company signing an additional license during the quarter. I am very pleased that our business continued to generate positive cash flow during the quarter with adjusted earnings of over $15 million, 46% higher than last year.""We also took important steps to strengthen the Company's ability to deliver growth in the future. Establishing our U.S. headquarters in Miami, Florida will increase WiLAN's ability to attract and retain talented patent licensing professionals. In addition, the hiring of Michael Vladescu as Chief Operating Officer, who brings over 15 years of technology licensing experience, will significantly bolster our ability to develop, acquire and monetize valuable patented technologies. Finally, we stepped up our efforts to secure future revenue with the launching of two new litigations to date in the year," added Skippen.Eligible Dividend The Board of Directors has declared an eligible dividend of CDN $0.03 per common share to be paid on July 6, 2012 to shareholders of record on June 15, 2012. First Quarter 2012 Revenue ReviewIn the three month period ended March 31, 2012, WiLAN generated revenues of $24.7 million, as compared to $26.3 million in the three month period ended March 31, 2011. The increase over guidance is due to the signing of an additional license with a one-time payment. For the three month period ended March 31, 2012, the top 10 licensees accounted for 81% of revenues, whereas the top 10 accounted for more than 85% of revenues in the three month period ended March 31, 2011.First Quarter 2012 Operating Expense Review In the three month period ended March 31, 2012, cost of revenue expenses totaled $7.4 million as compared to $6 million in the three month period ended March 31, 2011. 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, as well as amortization expense related to acquired patents. In addition, any business development costs related to sourcing new patent portfolios or developing new strategic partnerships are considered cost of revenue expenses. The increase in expenses for the three months ended March 31, 2012 is primarily attributable to compensation costs as a result of increased staffing levels, higher third-party royalties and an increase in amortization expense as a result of patent acquisitions that the Company completed during fiscal 2011. Marketing, general and administrative ("MG&A") expenses represent the cost of litigation and corporate services including facilities, executive management, finance, corporate legal, human resources, office administration, marketing and communications, information technology and all costs associated with being a public company. For the three months ended March 31, 2012, MG&A expenses amounted to $7 million or 28% of revenues as compared to $14.1 million or 54% of revenue for the three months ended March 31, 2011. For the three months ended March 31, 2012, litigation expenses amounted to $3.9 million compared to $11.4 million for the same period last year. The decrease in litigation expenses is attributable to the various settlements we entered into during fiscal 2011. During the three months ended March 31, 2012, the Company realized an increased level of litigation activities over the three month period ended December 31, 2011 primarily as a result of the launch of patent infringement litigations in the U.S. District Court for the Eastern District of Virginia and the U.S. District Court for the Southern District of Florida for which both of these matters have accelerated schedules and are progressing towards the discovery phase, and extensive preparation for the claims construction hearing in our action against 11 major companies including Alcatel-Lucent USA Inc. and HTC Corporation before the U.S. District Court for the Eastern District of Texas with respect to four of WiLAN's U.S. patents.In the first quarter of 2012 ended March 31, 2012, the Company incurred $31.1 million in costs related to the Debenture financing including an accretion of debt discount, a non-cash expense, of $25.2 million, amortized financing costs, consisting of commissions and professional service fees, of $1.7 million and a foreign exchange loss on retirement of the Debentures of $4.2 million. In addition, the Company incurred cash interest expense, related to the Debentures, of $1.1 million. With the expenses in the first quarter of 2012 and the retirement of the Debenture, the Company's attempt to acquire MOSAID Technologies Inc. ("MOSAID") is complete. For the three months ended March 31, 2012, the Company recorded a deferred income tax recovery of $5.5 million, which is primarily attributable to the recognition of the deferred tax liabilities associated with the Debenture financing. At December 31, 2011, the Company's net cash, comprised of cash and cash equivalents and short-term investments, totaled $196 million, representing a decrease of $237.7 million from the net cash position at December 31, 2011. The majority of the decrease is due to the retirement of the Company's Debenture, on January 31, 2012, totaling $233.2 million. The Company's cash equivalents and short-term investments include T-bills, term deposits and GICs. During the first quarter ended March 31, 2012, the Company generated $6 million of cash from operations and returned $14.5 million to shareholders in share buyback and dividend payments.First Quarter 2012 Earnings ReviewIn the first quarter ended March 31, 2012, WiLAN generated adjusted earnings of $15.4 million or 13 cents per share as compared to $10.5 million, or 9 cents per share, in the comparative period. The increase in adjusted earnings between the reporting periods is primarily attributable to the decrease in litigation expenses, partially offset by an increase in cost of revenue and R&D expenses, and a decrease in revenue.The Company generated a GAAP loss of $14.4 million, or 12 cents per share on a basic level, in the three month period ended March 31, 2012, as compared to GAAP earnings of $19.8 million, or 17 cents per share on a basic level, in the same period last year. The decrease is due, in part, to lower revenues and the Company incurring $31.1 million in expenses related to the Debenture financing. In addition, the Company recorded an income tax recovery of $4.3 million in the first quarter of 2012 compared to an income tax recovery of $12.6 million recorded 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 due January 31, 2012. The Company issued these Debentures in connection with its offer to acquire MOSAID which expired on November 1, 2011. The Company repaid the Debentures, including accrued interest, on January 31, 2012.Second Quarter 2012 Financial GuidanceFor the second quarter 2012 ending June 30, 2012, the Company expects revenue to be at least $19.7 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 2012 or the potential impact of any royalties identified in audits conducted by the Company. Operating expenses for the second quarter are expected to be in the range of $11 million to $13.5 million of which $5 million to $7 million is expected to be litigation expense. For the second quarter of 2012, and assuming no additional agreements are signed, adjusted earnings are expected to be in the range of $6.6 million to $9.1 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 June 30, 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. Actual revenues reported may exceed the 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 - May 9, 2012 - 10:00 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 Information A live audio webcast will be available at http://www.investorcalendar.com/IC/CEPage.asp?ID=168308To 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=168308 and accessible by telephone until 11:59 PM ET on August 9, 2012. Replay Number (Toll Free): 1.877.660.6853 Replay Number (International): 201.612.7415 Replay passcodes (both required for playback)Account #: 286 Conference ID #: 393127 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 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 "to strengthen", "will provide", "to deliver", "will increase", "to attract", "retain", "will significantly", "to develop", "to secure", "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 achievements to 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 May 8, 2011 management's discussion and analysis of financial condition and results of operations relating to its three months ended March 31, 2012 (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.Condensed Consolidated Statements of Operations(Unaudited)(in thousands of United States dollars, except share and per share amounts)Three months endedThree months endedMarch 31, 2012March 31, 2011RevenueRoyalties$24,693$26,345Brokerage--Total Revenue$24,693$26,345Operating expensesCost of revenue7,4465,992Research and development2,7711,463Marketing, general and administration7,01714,124Realized foreign exchange loss6340Unrealized foreign exchange gain(5,376)(2,489)Total operating expenses11,86419,430Earnings from operations12,8296,915Investment income722317Interest expense(1,126)-Debenture financing, net(31,138)-Earnings (loss) before income taxes(18,713)7,232Provision for (recovery of) income tax expenseCurrent1,2251,007Deferred(5,527)(13,574)(4,302)(12,567)Net earnings (loss)(14,411)19,799Other comprehensive incomeCumulative translation adjustment-(9,830)Comprehensive income (loss)$(14,411)$9,969Earnings (loss) per shareBasic$(0.12)$0.17Diluted$(0.12)$0.17Weighted average number of common sharesBasic121,816,678117,081,518Diluted121,816,678119,875,722Wi-LAN Inc.Condensed Consolidated Balance Sheets(Unaudited)(in thousands of United States dollars)As atMarch 31, 2012December 31, 2011Current assetsCash and cash equivalents$194,433$432,186Short-term investments1,5941,524Accounts receivable2,7892,153Prepaid expenses and deposits952290Deferred financing costs-1,716Deferred tax asset4,587-204,355437,869Furniture and equipment, net1,6391,769Patents and other intangibles, net112,808118,645Deferred tax asset17,17518,086Goodwill12,62312,623$348,600$588,992Current liabilitiesAccounts payable and accrued liabilities$23,902$22,169Due to related party-7,102Current portion of patent finance obligation2,4882,458Deferred tax liability-1,851Debentures-203,85526,390237,435Patent finance obligation4,5635,189Success fee obligation13,97715,21244,930257,836Shareholders' equityCapital stock430,691436,606Additional paid-in capital10,58014,061Accumulated other comprehensive income16,22516,225Deficit(153,826)(135,736)303,670331,156$348,600$588,992Wi-LAN Inc.Condensed Consolidated Statements of Cash Flow(Unaudited)(in thousands of United States dollars)Three months endedThree months endedMarch 31, 2012March 31, 2011Cash generated from (used in)OperationsNet earnings (loss)$(14,411)$19,799Non-cash itemsStock-based compensation1,055686Depreciation and amortization6,1675,120Foreign exchange (gain) loss333(2,679)Deferred financing costs1,746-Accretion of debt discount25,175-Deferred income tax recovery(5,527)(13,574)14,5389,352Change in non-cash working capital balancesAccounts receivable(636)(758)Prepaid expenses and deposits(662)(277)Accounts payable and accrued liabilities(140)627Due to related party(7,102)-Cash generated from operations5,9988,944FinancingProceeds on sale of common shares, net-72,035Dividends paid(3,041)(1,299)Repayment of convertible debentures(233,247)-Common shares repurchased under normal course issuer bid(11,467)-Common shares issued for cash on the exercise of options1,0162,106Cash (used in) generated from financing(246,739)72,842InvestingPurchase of short-term investments(70)(516)Purchase of furniture and equipment(109)(508)Purchase of patents(687)(679)Cash used in investing(866)(1,703)Foreign exchange gain on cash held in foreign currency3,8542,679Net cash and cash equivalents (used in) generated in the period(237,753)82,762Cash and cash equivalents, beginning of period432,18682,636Cash and cash equivalents, end of period$194,433$165,398Wi-LAN Inc.Reconciliation of GAAP Net Earnings to Adjusted Earnings(Unaudited)(in thousands of United States dollars, except share and per share amounts)Three months endedThree months endedMarch 31, 2012March 31, 2011Net earnings (loss) under GAAP$(14,411)$19,799Adjusted for:Unrealized foreign exchange gain(5,376)(2,489)Depreciation and amortization6,1675,120Stock-based compensation1,055686Interest expense1,126-Debenture financing, net31,138-Income tax recovery(4,302)(12,567)Adjusted earnings$15,397$10,549Adjusted earnings per basic share$0.13$0.09Weighted average number of common sharesBasic121,816,678117,081,518Diluted121,816,678119,875,722FOR FURTHER INFORMATION PLEASE CONTACT: Kathryn HughesFor Media inquiries, please contact:Director, Marketing & CommunicationsO: 613.688.4897C: 613.898.6781E: khughes@wilan.comORShaun McEwanFor Investor inquiries, please contact:Chief Financial OfficerO: 613.688.4898C: 613.697.7159E: smcewan@wilan.comORDirector, Investor RelationsTyler BurnsO: 613.688.4330C: 613.697.0367E: tburns@wilan.com