Investment Summary – High margin business model with large revenue potential promises strong future earnings growth.
Business Overview – Elements of WiLAN's business that should be understood by investors include:
WiLAN generates revenues from licensing technology intellectual property.
Inventions in our portfolio are 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, WiMAX base stations, Bluetooth-enabled devices and digital television receivers.
Over 250 companies, including Cisco, Nokia, Panasonic, Samsung, RIM, Infineon, Fujitsu, Sharp, Sony and Toshiba, have licensed WiLAN technologies.
The amount paid by a licensee generally depends on the volume of products sold by the licensee and the royalty rate applicable to each product.
Most license agreements call for the payment of quarterly running royalties which generate long-term recurring revenue. Agreement terms typically vary from 5 - 10 yrs.
WiLAN provides annual revenue, operating expense and pro forma earnings guidance.
Revenue guidance considers revenue that is expected to be collected in the fiscal year from both signed agreements and agreements that are expected to be signed during the fiscal year.
WiLAN will, from time-to-time, use litigation to pursue compensation from companies that profit from the use of our technologies but which refuse to negotiate a reasonable license agreement.
Investment in a given litigation, which typically spans multiple years, can generate a considerable return, however, as in all litigation there are risks. These risks are described in WiLAN’s current Annual Information Form which is available at www.sedar.com.
Cash generated by operations typically funds the required investment in litigation.
WiLAN believes that maintaining a strong balance sheet, is desirable to fund technology acquisitions and as an insurance that WiLAN can defend its rights in court, if necessary.
Investment Highlights
Dividend paying growth stock: $0.10 annual eligible dividend.
Solid business growth: Cash revenue increased from $2.1M in FY06 to $50.7M in FY10 (184% CAGR); Over 250 companies licensed.
High margin business model: Low overhead business can enjoy high margins; Operations can generate significant cash flow (FY08: $26.6M in revenue, $12.2M generated by operations).
Significant future revenue potential: Large markets to be licensed; 4 patent families have generated the majority of revenues to date, Over 35 families have recently been added to licensing program.
Valuable and growing patent portfolio: Over 1300 issued and pending patents covering technologies in large markets, portfolio has grown more than 20X since the beginning of FY07.
Robust growth strategy: Examine portfolio to identify new licensing programs; Generate additional revenues through licensing partnerships, acquire patent portfolios with existing revenue streams or ones capable of generating revenue in short-term; Broker non-strategic assets; Research and development supports future licensing programs.
All financial amounts in Canadian dollars, unless otherwise specified.
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