Industrial Alliance Securirties

The analyst, Al P. Nagaraj, MS, MBA, was formerly a Special Situations analyst at Byron Capital.

Highlights below:

Rating: Buy

12-Month Target: C$7.70

Q3 Review – Number of Catalysts on the Horizon

EVENT

WiLAN announced Q3/F12 results yesterday.

HIGHLIGHTS

Revenues came at $21.3M, which was slightly better than our $20M forecast and consensus of $21M.
This was down from $27.8M in Q3/FY11, but up from $20.8M in Q2/FY12.

Adj EBITDA came in at $7.9M, above our forecast of $3.7M due to a combination of higher than expected revenues, lower than expected marketing, general and administration,
and higher than expected depreciation.

GAAP EPS came slightly above our forecast of $0.00, at $0.02, down from $0.06 in Q3/FY11. The better than expected GAAP EPS was due to higher than forecasted realized and unrealized foreign exchange gains. Adjusted EPS was $0.08, down from $0.18 in Q3/FY11, but in-line with consensus of $0.08. The lower earnings per share when compared to the same quarter last year was due to the combination of lower revenues and higher investment in litigation for future growth.

COMMENTARY

A significant number of catalysts can drive revenues in the next 12 months including the following.

a. WiLAN strengthened its LTE IP portfolio by purchasing 150 patents and applications from Alvarion this quarter along with another 40 patents and applications from Siemens. This could help WiLAN sign new negotiated revenue agreements with handset and mobile infrastructure manufacturers sooner than expected.

b. It announced the consolidation of lawsuits against Apple and HTC into a single lawsuit, which advances the trial proceedings by a number of months.

c. The two Markman Hearings are scheduled for Feb 2013, and a trial is scheduled for April 2013, potentially triggering large settlements sooner than expected.

We agree with the management view that the current portfolio of around 3,000 patents can easily help them double their revenues in the next few years.