UPDATE: Low share price continues to dog WiLAN during strong Q4

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A strong fourth quarter has Wi-LAN (TSX:WIN) well positioned for 2014 but a low share price held the company back during its recently concluded fiscal year, executives with the Ottawa-based patent licensing firm said Thursday.

WiLAN CEO Jim Skippen. (Photo by Mark Holleron)

By Jacob Serebrin

“For all of our successes in 2013, the reality is our financial and operational results were downwardly impacted by high litigation costs and negative litigation outcomes,” said Jim Skippen, the company’s president and CEO, while speaking to investors on a conference call Thursday morning.

“All things considered though, we believe our positive achievements in 2013 still position WiLAN for a strong future.”

The company reported revenues of $29.2 million for the three-month period that ended on Dec. 31, beating guidance for the quarter and exceeding the $21.2 million it earned in the same period a year earlier.

“This is eighth quarter in a row that our financial results have met or exceeded guidance,” said Mr. Skippen.

WiLAN’s GAAP net earnings were $2.4 million during the quarter, up from a $2.1 million loss it

reported during the same period a year ago.

The return to profitability comes as the company cut its spending on lawsuits in the fourth quarter. On a year-over-year basis, however, the company’s spending on litigation increased.

“The signing of agreements with various defendants in the third and fourth quarter resulted in the outright dismissal of seven litigations and reduced the number of defendants in two litigations,” said Mr. Skippen.

“As a result, our investment in litigation declined significantly in the fourth quarter.”

Despite the fourth quarter profits, the company’s net loss for the year jumped to $18.1 million from $14.5 million a year ago.

Revenues for the fiscal year were essentially flat, increasing to $88.2 million from $88 million the previous year.

The company’s cash on hand decreased to $131.9 million, a drop from $45 million from the same period a year ago.

According to WiLAN CFO Shaun McEwan the drop was due to $25.5 million that was paid out to shareholders through dividends and buybacks, $10.3 million spent on the acquisition of patents and $9.5 million spent on operations due to an increase in accounts receivable.

However Mr. McEwan said that $10 million of the company’s $12 million in accounts receivable has been collected over the past three weeks.

WiLAN is continuing its strategic review, which started after the company’s stock price plunged over the summer when news of it losing a patent battle with Apple emerged.

“We do not believe that our current share price accurately reflects the strength of our balance sheet, the value of the license agreements we have signed, the future prospects of our business and the residual value of our intellectual property portfolio,” said Mr. Skippen.

WiLAN’s stock price was trading at $3.40 on Wednesday afternoon, down from the 52-week high of $4.98.

He said that the options on the table include changes to the company’s dividend policy, the acquisition or sale of assets, joint ventures, selling the company or continuing with the current business plan.

WiLAN is continuing its legal fight with Apple and the company has filed motions with Texas courts in an effort to get that decision overturned.

The decrease in litigation activity is expected to continue.

“We’re going to be a bit more judicious with our litigation,” said Mr. Skippen.

He said that the company is also looking for ways to share risk among the law firms with which it works.

The company only has one trial scheduled for 2014 but a case against Apple in California and other suits and arbitrations are ongoing. A tentative settlement has been reached in a suit that was scheduled to go to trial in early January.

Going forward, the company plans to focus on its semiconductor portfolio after acquiring patents from two companies and signing a partnership with Panasonic.

The company’s guidance for the first quarter of 2014 is for revenues of at least $22.6 million, and adjusted, non-GAAP earnings of between $10.6 and $12.6 million.

Those numbers don’t include any new patent deals. According to Mr. Skippen, “we’ve had licensing meetings with 31 prospective licensees, so there is a lot of activity going on on the licensing front.”

During 2013, the company “signed 17 new licenses, bringing the total number of companies licensed to 279,” he said.

–With files from Mark Brownlee

Organizations: Apple, Panasonic, Sierra Wireless

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