WiLAN Inc (WILN), the patent licensing company run by CEO Jim Skippen, said its second quarter net income nearly doubled to $11 million on higher revenue from acquisitions and licensing agreements.
The Ottawa, Ontario-based company reported net income of 9 cents a share, compared with net income of $5.6 million, or 5 cents a share, a year earlier.
WiLAN reported adjusted earnings of $24.9 million, or 21 cents a share, compared with $16.6 million, or 14 cents a share, a year ago, because of primarily because of increased revenue. The adjusted earnings of 21 cents were above the average analyst estimate of 16 cents.
Revenue increased 36% to $35 million from $25.7 million. The revenue also beat the average analyst estimate of $34.1 million.
Shares of WiLAN fell 2 cents or 1% to $1.95 in early trading. They've traded between $1.89 and $4.01 over the past year.
"The business appears to be doing well. They're signing deals. People are coming to them with good deals," said Robert Young, an analyst at Canaccord Genuity, who rates WiLAN a hold and has a C$3.25 price target.
"They've been lucky monetizing their new patents recently," Young said, citing a license for heart stent patents. "It is working for them."
WiLAN said it signed nine licenses, including one with Samsung for semiconductor technology and four licenses in newer market segments during the quarter. The company also acquired the Qimonda portfolio of patents from Infineon Technologies for $33 million, as well as acquired five portfolios from patent vendors with whom WiLAN will share net licensing revenues, including Japanese company, Funai Electric. WiLAN also returned $5 million to shareholders in dividend payments.
The "environment in the patent space is not as negative as it was recently," Young said.
"My sense is the stock has bottomed."
During a conference call with analysts, Skippen said he'd be disappointed if the Qimonda portfolio didn't generate more than $100 million of licensing revenue.
Canaccord's Young said $100 million is a conservative figure. He said the company has identified three or four major potential licensees and should be able to find more smaller licensees as well.
In the second quarter, WiLAN’s marketing, general and administrative expenses fell to $2.2 million from $2.8 million due to a decrease in compensation and benefits and stock-based compensation, partially offset by an increase in other expenses as a result of an increase in the allowance for doubtful accounts.
WiLAN said its litigation expenses during the second quarter came in at $3.1 million, compared with $1.7 million , a year ago.
Young said litigation expenses are volatile and can change dramatically quarter to quarter. As such, he said he models about $5 million a quarter for litigation expenses, so anything below that is a positive development.
The company said the increase in litigation expenses was because of an increase in the level of effort in ongoing patent infringement litigation activities. The increased litigation expenses were however lower than the guidance the company previously gave of $3.8 million to $4.8 million.
WiLAN also said its board declared an eligible quarterly dividend of 5.25 Canadian cents per common share to be paid on October 6, to shareholders of record on September 18.
The company ended the quarter with cash and cash equivalents of $112.8 million, down from $126.3 million at year end.
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