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 230 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
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Dividend paying growth stock: $0.05 annual eligible dividend.
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Solid business growth: Cash revenue increased from $2.1M in FY06 to $35.4M in FY09 (103% CAGR); Over 150 companies licensed since the beginning of FY07.
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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).
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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.
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Valuable and growing patent portfolio: Over 850 issued and pending patents covering technologies in large markets, portfolio has grown more than 15X since the beginning of FY07.
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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. |
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All financial amounts in Canadian dollars, unless otherwise specified.