WiLAN Reports First Quarter 2010 Financial Results
Company increases guidance
OTTAWA, Canada May 6, 2010 Wi-LAN Inc., a leading technology innovation and licensing company, today announced financial results for the first quarter ended March 31, 2010. All financial amounts are expressed in Canadian dollars.
With the change in fiscal year end from October 31 to December 31 that occurred in 2009, the Companys first quarter of 2010 is the three month period ended March 31, 2010. Financial results for the first quarter ended March 31, 2010 will be compared to the financial results for the three month period ended April 30, 2009.
First Quarter 2010 Highlights:
- Record cash revenues of $16.5 million, an increase of 65% as compared to $10.0 million in the three month period ended April 30, 2009.
- Pro forma earnings* of $7.7 million, or 7 cents per share, as compared to pro forma earnings of $3.3 million, or 4 cents per share, in the three month period ended April 30, 2009.
- GAAP net earnings of $1.1 million, or 1 cent per share, as compared to a GAAP net loss of $1.0 million, or 1 cent per share, in the three month period ended April 30, 2009.
- Signed license agreements with 9 companies during the quarter including 6 for wireless technologies, 2 for V-Chip and 1 for wireline.
- Generated $5.1 million in cash from operations; increased cash and short-term equivalents to $97.0 million at quarter end.
- Declared an eligible dividend of 1.25 cents per common share.
- Increased fiscal 2010 revenue and pro forma earnings guidance.
Our business delivered exceptional financial performance during the quarter, said Jim Skippen, Chairman & CEO. Our record revenues in the first quarter benefited from higher than expected royalty reports from a number of licensees, royalty payments from recently signed agreements and consideration for the sale of certain patent assets. The strong top and bottom line performance during the quarter has resulted in an upward revision in our fiscal 2010 financial guidance.
Skippen added, Our goal is to maximize the revenue generated from our patent assets thereby delivering the greatest long-term value to our shareholders. With over 800 patents in our portfolio there will inevitably be patents that are more valuable to companies that sell specific products or compete in small niche markets than to WiLAN in a licensing program. Expanding our business to include the brokerage of patents to other companies leverages this value premium. In this case, the family of patents that were sold for 2.5 million dollars had a cost to WiLAN of 48 thousand dollars.
The Board of Directors has declared an eligible dividend of 1.25 cents per common share. This dividend will be paid on July 6, 2010 to shareholders of record on June 15, 2010.
In the first quarter ended March 31, 2010, revenues were $16.5 million, consisting of $13.9 million in royalties and $2.5 million of brokerage revenues. Royalty revenues increased 39% over the comparable period last year. In the first quarter ended March 31, 2010, the top ten licensees accounted for slightly more than 89% of royalty revenues as compared to more than 85% of royalty revenues for the three months ended April 30, 2009.
Operating Expense Review In the first quarter of 2010, patent licensing expenses totaled $2.2 million as compared to $980 thousand in the three month period ended April 30, 2009. The sequential increase is due to brokerage fees paid to third parties as a consequence of the sale of a patent asset and third party payments required under revenue share agreements. During the first quarter of 2010, WiLAN signed license agreements with 9 companies of which 6 companies signed licenses for wireless technologies, 2 for V-Chip technologies and one for wireline technologies.
Litigation expenses amounted to $4.0 million in the first quarter of 2010, as compared to $4.1 million in the three month period ended April 30, 2009. Investment in the quarter remained high due to extensive preparations required for the claims construction hearing in the Companys handset, laptop and router litigations, involving U.S. Patent Nos. 5,282,222 (the 222 patent) and RE37802 (the 802 patent). The joint claims construction hearing concerning the 222 and 802 patents was held on March 11, 2010 for all three cases.
In the first quarter of 2010 ended March 31, 2010, depreciation and amortization expense totaled $5.3 million as compared to $4.2 million in the three month period ended April 30, 2009. The increase is due to amortization of patents acquired in fiscal 2009.
At March 31, 2010, the Companys net cash, comprised of cash, cash equivalents and short-term investments totaled $97.0 million, representing an increase of $2.2 million from the net cash position at December 31, 2009. During the first quarter of 2010, the Company generated $5.1 million from operations, of which $3.1 million was invested in patent acquisitions. The Companys cash equivalents and short-term investments include T-bills, term deposits, GICs and other marketable securities.
In the first quarter ended March 31, 2010, WiLAN generated pro forma earnings of $7.7 million or 7 cents per share as compared to $3.3 million, or 4 cents per share, in the 12 month period ended April 30, 2009. The difference in pro forma earnings between the reporting periods is due primarily to increased revenues.
The Company generated net earnings of $1.1 million, or 1 cent per share, in the first quarter ended March 31, 2010, as compared to a net loss of $1.0 million, or 1 cent per share, in the three month fiscal period ended April 30, 2009.
The Company is revising its financial guidance for the 12 month period ending December 31, 2010. Revenues for the fiscal year ended December 31, 2010 are now expected to be within the range of $43.0 million to $47.0 million representing an increase from the previous guidance of $40.0 million to $45.0 million. Operating expenses, excluding stock-based compensation, depreciation & amortization and unrealized gains or losses on foreign exchange contracts, all non-cash charges, are expected to be in the range of $36.0 million to $40.0 million. Pro forma earnings are now expected to be within the range of $8.0 million to $11.0 million up from previous guidance of $5.0 million to $8.0 million.
The above statements are forward-looking and actual results may differ materially. The Forward-looking Information section at the end of this news release provides information on various risks and uncertainties that the Company faces. Additional information identifying risks and uncertainties relating to the Companys business are contained under the heading Risk Factors in WiLANs current Annual Information Form and its other filings with the various Canadian securities regulators which are available online at www.sedar.com. Annual financial guidance for fiscal 2010 is provided to assist investors and other interested parties in understanding WiLANs performance. The reader is cautioned that using this information for any other purpose may be inappropriate.
The Companys revenues result 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. Thus, quarter-to-quarter fluctuations in revenue are normal and should be expected. Management believes that the strength of its business should be measured by annual revenues.
The above guidance for the twelve month period ended December 31, 2010 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 course of the year, losses on asset impairments or realized foreign exchange losses cannot be accurately forecast. Accordingly, we exclude forecasts of such items from our guidance. WiLANs 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 6, 2010 10 AM EDT
WiLAN will conduct a conference call to discuss its financial results today at 10:00 AM Eastern Daylight Savings Time (EDT). WiLAN CEO, Jim Skippen and CFO, Shaun McEwan, will be on the call.
WiLAN, founded in 1992, is a leading technology innovation and licensing company. WiLAN has licensed its intellectual property to over 220 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 cellular handsets, Wi-Fi-enabled laptops, Wi-Fi/DSL routers, xDSL infrastructure equipment, WiMAX base stations and digital television receivers. WiLAN has a large and growing portfolio of more than 800 issued or pending patents. For more information: www.wilan.com.
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