OTTAWA, May 4, 2017 /PRNewswire/ - Wi-LAN Inc. ("WiLAN"
or the "Company") (TSX:WIN) (NASD:WILN) today reported financial
results for the three-month period ended March 31, 2017. All financial information in this
press release is reported in U.S. dollars, unless otherwise
indicated.
First Quarter 2017 Highlights
- Generated cash from operations of $8.4
million
- Cash, cash equivalents and short-term investments increased to
$113.6 million
- Paid $1.1 million in
dividends
- Signed 4 license agreements
- Received a favorable Court of Appeals ruling against Ericsson
enabling trial proceedings to begin
"Q1 results reflect the variability, or "lumpiness", inherent in
our business model, which we have discussed in the past," said
Shaun McEwan Interim CEO of WiLAN. "While the unpredictability of
the timing of license signings led to softer results in Q1, the
same unpredictability can lead to positive revenue surprises as
well. For instance, three of the past six quarters have been
stronger than analysts' forecasts due to unexpected signings.
We continue to have a high volume of license activity going on with
60 partner portfolios and more than 60 ongoing litigations, but we
will continue to be patient in our negotiations and will only
settle when we believe we are being offered fair value for our
patents."
"Subsequent to quarter-end, we made several significant
announcements with the goal of augmenting the Company's growth
potential by transitioning the business, via corporate
acquisitions, into a diversified investment holding company that
will be named Quarterhill Inc. We have already made progress on our
new strategy having announced two acquisitions in the past several
weeks. On April 17, we announced our
intention to acquire International Road Dynamics, and today we
announced the acquisition of VIZIYA Corporation. Along with our
patent licensing business, these two entities will become
subsidiaries of Quarterhill as will future acquisitions. We believe
this strategy will better position the Company for long-term growth
and will mitigate the quarterly variability in our results."
Approval of Eligible Dividend
The Board of Directors
has declared an eligible quarterly dividend of
CDN $0.0125 per common share payable on July 5,
2017, to shareholders of record on June 15, 2017.
First Quarter 2017 Revenue Review
In the three-month
period ended March 31, 2017, WiLAN
generated revenues of $7.6 million,
compared with $30.2 million in the
three-month period ended March 31,
2016. The decrease is due to fewer fixed-payment license
agreements signed during the quarter, as well as the completion of
certain quarterly fixed-payment license agreements signed in
previous years.
First Quarter 2017 Operating Expense Review
Cost
of revenue expenses
In the three-month period ended
March 31, 2017, cost of revenue
totaled $12.7 million compared with
$18.0 million in the same period last
year. The decrease in cost of revenue is primarily due to lower
contingent partner and legal fees, amortization expenses, and a
reduction in patent maintenance, prosecution and evaluation
expenses, which were offset in part by an increase in compensation
and benefits and litigation expenses. Certain intangible assets
reached the end of their estimated useful life, which resulted in a
significant decline in amortization expense. Contingent
partner and legal fees have decreased due to lower revenue from
fixed payment license agreements.
|
Three months
ended
|
|
March 31,
2017
|
|
March 31,
2016
|
|
|
|
|
|
|
Compensation
and benefits
|
$
|
2,367
|
|
$
|
1,853
|
Litigation
|
|
1,824
|
|
|
892
|
Patent
maintenance, prosecution, and evaluation
|
|
2,819
|
|
|
3,048
|
Contingent
partner payments and legal fees
|
|
231
|
|
|
1,928
|
Amortization of
patents
|
|
5,303
|
|
|
10,022
|
Stock-based
compensation
|
|
19
|
|
|
90
|
Other
|
|
134
|
|
|
159
|
|
$
|
12,697
|
|
$
|
17,992
|
In the three-month period ended March 31,
2017, litigation expenses amounted to $1.8 million compared with $0.9 million in the same period last year. First
quarter 2017 litigation expenses were below the guidance range
provided in the Company's fourth quarter 2016 financial results
press release of $2.5 to $3.5
million.
Litigation expenses are expected to vary from period to period
due to the variability of litigation activities and shared risk fee
arrangements with our law firms. We expect an increase in
litigation expenses in fiscal 2017 due to the expected level of
litigation activities and the corresponding fee arrangements.
Patent maintenance and prosecution expenses decreased over the
same period last year as the Company continues to actively reduce
the number of non-core patents in its portfolio through a
combination of strategic sales, lifetime licenses, and in certain
cases the abandonment of several patents and applications.
Marketing, general, and administration expenses
("MG&A")
In the three-month period ended
March 31, 2017, MG&A expenses
amounted to $2.5 million, or 33% of
revenue, compared with $2.6 million,
or 9% of revenue, in the same period last year. The quarterly
decrease in MG&A spending is primarily attributable to lower
public company costs, offset in part by an increase in compensation
and benefits.
|
Three months
ended
|
|
March 31,
2017
|
|
March 31,
2016
|
|
|
|
|
|
|
Compensation and
benefits
|
$
|
1,405
|
|
$
|
1,302
|
Depreciation
|
|
91
|
|
|
107
|
Stock-based
compensation
|
|
12
|
|
|
17
|
Public company
costs
|
|
394
|
|
|
700
|
Facilities
|
|
156
|
|
|
151
|
Other
|
|
435
|
|
|
370
|
|
$
|
2,493
|
|
$
|
2,647
|
Foreign Exchange
In the three-month period
ended March 31, 2017, the Company had
a foreign exchange gain of $0.3
million compared with a gain of $0.2
million in the same period last year.
Realized and unrealized foreign exchange gains and losses result
from the translation of monetary accounts, primarily cash and cash
equivalents, short-term investments, dividends, and accounts
payable, denominated in Canadian dollars to U.S. dollars.
First Quarter 2017 Earnings Review
In the three-month
period ended March 31, 2017, WiLAN
had negative EBITDA of $1.9 million
or $0.02 per basic share, compared
with positive EBITDA of $19.8 million
or $0.16 per basic share, in the same
period last year.
The Company's GAAP net loss was $7.2
million, or $0.06 per basic
share, in the three-month period ended March
31, 2017 compared with GAAP earnings of $4.9 million, or $0.04 per basic share, in the same period last
year.
The year-over-year change to EBITDA and net income is primarily
due to lower revenue in Q1 2017, which was partially offset by
lower operating expenses.
First Quarter 2017 Balance Sheet and Cash Flow
Review
At March 31, 2017, the
Company's cash, comprised of cash and cash equivalents and
short-term investments totaled $113.6
million, representing an increase of $5.9 million from the cash position at
December 31, 2016. Restricted
short-term investments are amounts held specifically as collateral
for bank guarantees that the Company has entered into for security
against potential procedural costs regarding patent infringement
actions launched in Germany. The
Company's cash equivalents and short-term investments include
T-bills, term deposits and GICs.
Fiscal 2017 Financial Guidance
WiLAN has announced that it will change its name to Quarterhill
Inc. and has announced two corporate acquisitions, all of which are
expected to conclude in the second quarter of 2017. As a
result, operating expense guidance, previously provided for
exclusively the patent licensing business, will no longer be
provided.
Conference Call Information – May 4,
2017 – 10:00 AM ET
WiLAN will conduct a conference call to discuss its financial
results today at 10:00 AM Eastern
Time.
Calling Information
The live audio webcast will be
available at
http://event.on24.com/wcc/r/1413926-1/5C829912FA777D3BDCACA11A1ED9AA43
- To access the call from Canada
and U.S., dial 1.888.231.8191 (Toll Free)
- To access the call from other locations, dial 1.647.427.7450
(International)
Replay Information
A webcast of the call will be
available at
http://event.on24.com/wcc/r/1413926-1/5C829912FA777D3BDCACA11A1ED9AA43
A telephone replay will be available from 1:00 PM ET on May 4,
2017 until 11:59 PM ET on
May 11, 2017 at: 1.855.859.2056 (Toll
Free) or 1.416.849.0833 (International).
Conference ID #: 11697747
About WiLAN
WiLAN is one of the most successful patent
licensing companies in the world and helps companies unlock the
value of intellectual property by managing and licensing their
patent portfolios. The Company operates in a variety of
markets including automotive, digital television, Internet,
medical, semiconductor and wireless communication technologies.
Founded in 1992, WiLAN is listed on the TSX and NASDAQ. WiLAN has
announced plans to change its name to Quarterhill Inc. in the
second quarter of 2017 after which, WiLAN, the patent license
business, will become a subsidiary of Quarterhill. For more
information: www.wilan.com.
Non-GAAP Disclosure*
WiLAN follows U.S. GAAP in preparing its interim and annual
financial statements. We use the term "EBITDA" to reference
Earnings Before Interest, Taxes, Depreciation and Amortization.
EBITDA are earnings from continuing operations before interest
income, interest expense, depreciation expense, amortization
expense, and the provision for (recovery of) income taxes as
disclosed in the reconciliation of GAAP net earnings to EBITDA
included in this press release. We report EBITDA in the belief that
it may be useful for certain investors and readers of the financial
statements as a measure of our performance. EBITDA IS NOT A MEASURE
OF FINANCIAL PERFORMANCE UNDER U.S. GAAP. IT DOES NOT HAVE ANY
STANDARDIZED MEANING PRESCRIBED BY U.S. GAAP AND IS THEREFORE
UNLIKELY TO BE COMPARABLE TO SIMILARLY TITLED MEASURES USED BY
OTHER COMPANIES. EBITDA SHOULD NOT BE INTERPRETED AS AN ALTERNATIVE
TO NET EARNINGS AND CASH FLOWS FROM OPERATIONS AS DETERMINED IN
ACCORDANCE WITH U.S. GAAP OR AS A MEASURE OF LIQUIDITY.
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 will remain, we
believe, and this may lead" 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, expected future developments and the expected effects
of new business strategies, 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 February 10, 2017 annual information form for the
year ended December 31, 2016 (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
|
|
|
March 31,
2017
|
|
March 31,
2016
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
7,578
|
|
$
|
30,160
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
|
12,697
|
|
|
17,992
|
|
Marketing, general
and administration
|
|
|
2,493
|
|
|
2,647
|
|
Foreign exchange
(gain) loss
|
|
|
(285)
|
|
|
(163)
|
|
Total operating
expenses
|
|
|
14,905
|
|
|
20,476
|
Earnings
(loss) from operations
|
|
|
(7,327)
|
|
|
9,684
|
|
Interest
income
|
|
|
218
|
|
|
118
|
Earnings (loss)
before income taxes
|
|
|
(7,109)
|
|
|
9,802
|
|
|
|
|
|
|
|
Provision for
(recovery of) income tax expense
|
|
|
|
|
|
|
|
Current
|
|
|
743
|
|
|
3,023
|
|
Deferred
|
|
|
(623)
|
|
|
1,859
|
|
|
|
120
|
|
|
4,882
|
Net earnings
(loss)
|
|
|
(7,229)
|
|
|
4,920
|
|
|
|
|
|
|
|
Net and comprehensive
earnings (loss)
|
|
$
|
(7,229)
|
|
$
|
4,920
|
|
|
|
|
|
|
|
Earnings (loss) per
share
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.06)
|
|
$
|
0.04
|
|
Diluted
|
|
$
|
(0.06)
|
|
$
|
0.04
|
|
|
|
|
|
|
|
Weighted average
number of common shares
|
|
|
|
|
|
|
|
Basic
|
|
|
118,572,181
|
|
|
120,281,998
|
|
Diluted
|
|
|
118,572,181
|
|
|
120,281,998
|
Wi-LAN Inc.
Condensed Consolidated Balance
Sheets
(Unaudited)
(in thousands of United States
dollars)
As at
|
|
March 31,
2017
|
|
December 31,
2016
|
Current
assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
108,943
|
|
$
|
106,553
|
|
Short-term
investments
|
|
|
1,165
|
|
|
1,154
|
|
|
Restricted short-term
investments
|
|
|
3,500
|
|
|
-
|
|
Accounts
receivable
|
|
|
140
|
|
|
20,357
|
|
Prepaid expenses and
deposits
|
|
|
1,334
|
|
|
1,293
|
|
|
|
115,082
|
|
|
129,357
|
|
|
|
|
|
|
|
Loan
receivable
|
|
|
1,842
|
|
|
1,766
|
Furniture and
equipment, net
|
|
|
1,156
|
|
|
1,240
|
Patents and other
intangibles, net
|
|
|
118,133
|
|
|
123,351
|
Deferred tax
asset
|
|
|
15,267
|
|
|
14,646
|
Goodwill
|
|
|
12,623
|
|
|
12,623
|
|
|
$
|
264,103
|
|
$
|
282,983
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
6,451
|
|
$
|
15,645
|
|
Current portion of
patent finance obligation
|
|
|
5,302
|
|
|
10,372
|
|
|
|
11,753
|
|
|
26,017
|
|
|
|
|
|
|
|
Patent finance
obligation
|
|
|
16,541
|
|
|
12,775
|
Success fee
obligation
|
|
|
-
|
|
|
47
|
|
|
|
28,294
|
|
|
38,839
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
419,485
|
|
|
419,485
|
|
Additional paid-in
capital
|
|
|
21,068
|
|
|
21,036
|
|
Accumulated other
comprehensive income
|
|
|
16,225
|
|
|
16,225
|
|
Deficit
|
|
|
(220,969)
|
|
|
(212,602)
|
|
|
|
235,809
|
|
|
244,144
|
|
|
$
|
264,103
|
|
$
|
282,983
|
Wi-LAN Inc.
Condensed Consolidated Statements of
Cash Flow
(Unaudited)
(in thousands of United States
dollars)
|
|
Three months
ended
|
|
Three months
ended
|
|
|
March 31,
2017
|
|
March 31,
2016
|
Cash generated from
(used in)
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
Net earnings
(loss)
|
|
$
|
(7,229)
|
|
$
|
4,920
|
|
Non-cash
items
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
32
|
|
|
108
|
|
|
Depreciation and
amortization
|
|
|
5,427
|
|
|
10,130
|
|
|
Foreign exchange
(gain) loss
|
|
|
(47)
|
|
|
(285)
|
|
|
Disposal of
assets
|
|
|
-
|
|
|
13
|
|
|
Deferred income tax
expense (recovery)
|
|
|
(621)
|
|
|
1,859
|
|
|
Accrued investment
income
|
|
|
(76)
|
|
|
(64)
|
|
Change in non-cash
working capital balances
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
20,217
|
|
|
(2,575)
|
|
|
Prepaid expenses and
deposits
|
|
|
(41)
|
|
|
26
|
|
|
Payments associated
with success fee obligation
|
|
|
(445)
|
|
|
(854)
|
|
|
Accounts payable and
accrued liabilities
|
|
|
(8,805)
|
|
|
1,531
|
Cash generated from
operations
|
|
|
8,412
|
|
|
14,809
|
Financing
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(1,129)
|
|
|
(1,091)
|
|
Common shares
repurchased under normal course issuer bid
|
|
|
-
|
|
|
(2,271)
|
Cash used in
financing
|
|
|
(1,129)
|
|
|
(3,362)
|
Investing
|
|
|
|
|
|
|
|
Purchase of
restricted short-term investments
|
|
|
(3,500)
|
|
|
-
|
|
Purchase of furniture
and equipment
|
|
|
(7)
|
|
|
(16)
|
|
Repayment of patent
finance obligations
|
|
|
(1,422)
|
|
|
(1,388)
|
|
Purchase of
patents
|
|
|
-
|
|
|
(3,000)
|
Cash used in
investing
|
|
|
(4,929)
|
|
|
(4,404)
|
Foreign exchange gain
on cash held in foreign currency
|
|
|
36
|
|
|
211
|
|
|
|
|
|
|
|
Net cash and cash
equivalents generated in the period
|
|
|
2,390
|
|
|
7,254
|
Cash and cash
equivalents, beginning of period
|
|
|
106,553
|
|
|
93,431
|
Cash and cash
equivalents, end of period
|
|
$
|
108,943
|
|
$
|
100,685
|
Wi-LAN Inc.
Condensed Consolidated Statement of
Shareholders' Equity
(Unaudited)
(in thousands of United States
dollars)
|
|
Capital
Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Deficit
|
|
Total
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December
31, 2015
|
|
$
|
427,781
|
|
$
|
16,549
|
|
$
|
16,225
|
|
$
|
(219,177)
|
|
$
|
241,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,920
|
|
|
4,920
|
Shares and options
issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
-
|
|
|
108
|
|
|
-
|
|
|
-
|
|
|
108
|
|
Shares repurchased
under normal course issuer bid
|
|
|
(5,069)
|
|
|
2,798
|
|
|
-
|
|
|
-
|
|
|
(2,271)
|
Dividends
declared
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,069)
|
|
|
(1,069)
|
Balance - March 31,
2016
|
|
$
|
422,712
|
|
$
|
19,455
|
|
$
|
16,225
|
|
$
|
(215,326)
|
|
$
|
243,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December
31, 2016
|
|
$
|
419,485
|
|
$
|
21,036
|
|
$
|
16,225
|
|
$
|
(212,602)
|
|
$
|
244,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7,229)
|
|
|
(7,229)
|
Shares and options
issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
-
|
|
|
32
|
|
|
-
|
|
|
-
|
|
|
32
|
Dividends
declared
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,138)
|
|
|
(1,138)
|
Balance - March 31,
2017
|
|
$
|
419,485
|
|
$
|
21,068
|
|
$
|
16,225
|
|
$
|
(220,969)
|
|
$
|
235,809
|
Wi-LAN Inc.
Reconciliation of GAAP Net Earnings to
EBITDA
(in thousands of United
States dollars, except share and per share amounts)
|
|
Three months
ended
|
|
|
March 31, 2017
|
|
March 31, 2016
|
Net earnings (loss)
under GAAP
|
|
$
|
(7,229)
|
|
$
|
4,920
|
|
|
|
|
|
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
Interest
income
|
|
|
(218)
|
|
|
(118)
|
|
Depreciation and
amortization
|
|
|
5,395
|
|
|
10,130
|
|
Income tax
expense
|
|
|
120
|
|
|
4,882
|
EBITDA
|
|
$
|
(1,932)
|
|
$
|
19,814
|
|
|
|
|
|
|
|
Weighted average
number of common shares (1)
|
|
|
|
|
|
|
|
Basic
|
|
|
118,572,181
|
|
|
120,281,998
|
|
|
|
|
|
|
|
Earnings (loss) per
basic share under GAAP
|
|
$
|
(0.06)
|
|
$
|
0.04
|
|
|
|
|
|
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
Interest
income
|
|
|
(0.00)
|
|
|
(0.00)
|
|
Depreciation and
amortization
|
|
|
0.04
|
|
|
0.08
|
|
Income tax expense
(recovery)
|
|
|
0.00
|
|
|
0.04
|
EBITDA per basic
share
|
|
$
|
(0.02)
|
|
$
|
0.16
|
|
|
|
|
|
|
|
1. Weighted average
number of common shares used in the calculation of EBITDA per basic
share and earnings per basic share under GAAP.
|
SOURCE Wi-LAN Inc.