July 30th comments by James Bagnall Shares in patent licensing specialist Wi-LAN Inc. jumped six per cent in early trading Tuesday after the Ottawa firm reported sharply higher revenues and earnings for its second quarter, ended June 30.
Wi-LAN’s revenues surged 29 per cent year-over-year to $25.7 million (all figures U.S.), thanks to the timing of royalty and other payments received in connection with patent deals struck by the firm last year. The second quarter revenue tally also compares very favourably with company guidance of $19.4 million, representing a 32 per cent increase.
The big news for investors was the turnaround in company earnings. Second-quarter net income was $5.6 million or five cents per share compared to a net loss of $7.6 million or six cents per share during the same period a year earlier.
The main explanation for the improvement was a huge drop in the amount Wi-LAN shelled out for lawyers — especially the outside hired guns it uses to wage lawsuits against firms it believes are infringing its patents. Litigation expenses fell all the way to $1.7 million in the second quarter, compared to $14.5 million in the same period a year earlier, when Wi-LAN was waging patent wars against a variety of industry giants, most notably Apple.
Many of the patent battles have ended. Equally important, Wi-LAN has shifted to a model of sharing risks with its outside lawyers — who now receive a 30 per cent cut of future winnings. Wi-LAN typically does not have to pay fees until there is a resolution of the patent fight. Wi-LAN’s chief executive said he expects his quarterly litigation costs in future will be roughly $2 million to $3 million.
Jim Skippen reiterated his pledge to more than double company revenues by 2018, pointing to the growing diversification of Wi-LAN’s patents, which now range from flash memory technologies to point-of-sale products.
Wi-LAN is also generating significant cash through its operations – about $33.2 million during the six months ended June 30. During the same period it spent $16.4 million to buy new patents and shelled out $8.8 million for dividends. The net result on June 30 was a cash pile of $140.1 million.
Wi-LAN increased its quarterly dividend by 25 per cent to five cents per share — representing a very healthy yield of nearly six per cent.