WiLAN Reports Second Quarter 2015 Financial Results

Company delivers strong revenue and earnings while executing against business strategy

OTTAWA, Canada – July 29, 2015 – WiLAN (TSX:WIN) (NASD:WILN) today reported financial results for the second quarter 2015 ended June 30, 2015. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

Second Quarter 2015 Highlights

• Revenues of $35.0 million, up 71% from Q1 2015 and up 36% from Q2 2014
• Adjusted earnings* of $24.9 million, or 21 cents per basic share. Adjusted earnings up 264% from Q1 2015 and up 50% from Q2 2014
• GAAP net earnings of $11.0 million, or 9 cents per basic share. GAAP net earnings up from a loss of $4.8 million in Q1 2015 and up 96% from Q2 2014
• Signed nine licenses, including four licenses in newer market segments
• Acquired the Qimonda portfolio of patents from Infineon Technologies
• Signed a license agreement with Samsung for semiconductor technology
• Acquired five portfolios from patent vendors with whom WiLAN will share net licensing revenues, including Japanese company, Funai Electric
• Returned $5.0 million to shareholders in dividend payments
  

“WiLAN delivered strong revenue and earnings in the second quarter,” said Jim Skippen, President & CEO. “We executed against our business strategy, adding quality portfolios and licensing patents to newer market segments while acquiring portfolios from patent vendors who will only receive a portion of net revenues once WiLAN licenses the technology.”

“During the quarter, we acquired the Qimonda portfolio from Infineon Technologies, which has broad relevance to many semiconductor products,” continued Skippen. “We also signed a significant license agreement with Samsung.”

Approval of Dividend
The Board of Directors has declared an eligible quarterly dividend of CDN $0.0525 per common share to be paid on October 6, 2015 to shareholders of record on September 18, 2015.

Second Quarter 2015 Revenue Review
In the three month period ended June 30, 2015, WiLAN generated revenues of $35.0 million, compared with $25.7 million in the three month period ended June 30, 2014. Second quarter 2015 revenue was above WiLAN’s updated guidance provided on June 2, 2015 of approximately $34 million. The increase in revenues is primarily attributable to the license WiLAN signed with Samsung during the quarter.

Second Quarter 2015 Operating Expense Review
Cost of revenue expenses
In the three month period ended June 30, 2015, cost of revenue totaled $16.1 million compared with $14.5 million in the corresponding period last year. The increase in expenses is primarily attributable to an increase in litigation and amortization expense, partially offset by a decrease in patent maintenance, prosecution, and evaluation expenses.

For the three months ended June 30, 2015, litigation expenses amounted to $3.1 million compared with $1.7 million for the same period last year. Second quarter 2015 litigation expenses were 27% below the mid-point of guidance provided in the Company’s first quarter 2015 financial results press release of $3.8 to $4.8 million. The increase in litigation expenses is attributable to an increase in the level of effort in ongoing patent infringement litigation activities. Litigation expenses are expected to vary from period to period due to the variability of litigation activities and any contingent payments that may be required from licenses signed in any particular quarter.

Marketing, general, and administrative expenses
In the second quarter ended June 30, 2015, MG&A expenses amounted to $2.2 million as compared to $2.8 million in the second quarter ended June 30, 2014. The decrease in MG&A spending is primarily attributable 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.

Foreign Exchange
In the second quarter ended June 30, 2015, the Company incurred a nominal foreign exchange loss. Unrealized foreign exchange gains and losses result from the translation of monetary accounts denominated in Canadian dollars to U.S. dollars at year end as well as the revaluation of foreign exchange contracts held at quarter end. At June 30, 2015, WiLAN held foreign exchange forward contracts with a notional value of $7.0 million that mature at various dates through to October 2015.

Second Quarter 2015 Earnings Review
In the second quarter ended June 30, 2015, WiLAN generated adjusted earnings of $24.9 million or 21 cents per basic share as compared to $16.6 million or 14 cents per basic share, in the previous year comparative period. The increase in adjusted earnings for the three months ended
June 30, 2015 is primarily attributable to increased revenues.

The Company’s GAAP earnings amounted to $11.0 million, or 9 cents per share on a basic level in the three month period ended June 30, 2015 compared with GAAP earnings of $5.6 million, or 5 cents per share on a basic level, in the same period last year.

Second Quarter 2015 Balance Sheet and Cash Flow Review
At June 30, 2015, the Company’s cash, comprised of cash and cash equivalents and short-term investments, totaled $114.1 million, representing a decrease of $13.6 million from the cash position at December 31, 2014. The decrease is primarily attributable to $10.5 million returned to shareholders in dividend and share buyback payments and $13.2 million in payments for patents acquired in the current and previous fiscal years, offset by the generation of $9.6 million from operations. The Company’s cash equivalents and short-term investments include T bills, term deposits and GICs.

The approximately $33 million cash outflow associated with the acquisition of the Qimonda patent portfolio was subsequently paid in July 2015. WiLAN also received a cash payment associated with the Samsung license in July 2015.

Third Quarter 2015 Financial Guidance
As discussed in WiLAN’s first quarter 2015 financial results press release and conference call, the Company will no longer provide revenue and earnings guidance. WiLAN’s business is evolving in that an increasing portion of revenues are generated by one-time payments in each quarter. WiLAN is also now announcing quarterly results earlier each quarter before many quarterly running royalty reports have been received. These factors increasingly make guidance misleading since, virtually every time, actual quarterly revenues are higher than guidance. WiLAN will, however, continue to provide quarterly expense guidance.

Cash operating expenses for the third quarter 2015 are expected to be in the range of $11.8 million to $13.3 million, of which $2.0 million to $2.8 million is expected to be litigation expense.

Conference Call Information – July 29, 2015 – 10:00 AM ET

WiLAN will conduct a conference call to discuss its financial results today at 10:00 AM Eastern Time. WiLAN CEO, Jim Skippen and CFO, Shaun McEwan will be on the call.

Calling Information

A live audio webcast will be available at http://www.investorcalendar.com/IC/CEPage.asp?ID=174064
• To access the call from Canada and U.S., dial 1.877.407.0782 (Toll Free)
• To access the call from other locations, dial 1.201.689.8567 (International)

Replay Information
The call will be available at http://www.investorcalendar.com/IC/CEPage.asp?ID=174064 and accessible by telephone until 11:59 PM ET on October 29, 2015.

Replay Number (Toll Free): 1.877.660.6853
Replay Number (International): 1.201.612.7415
Conference ID #: 13611687

About WiLAN
WiLAN is one of the most successful patent licensing companies in the world and helps companies unlock the value of intellectual property by managing and licensing their patent portfolios. The Company operates in a variety of markets including automotive, digital television, Internet, medical, semiconductor and wireless communication technologies. WiLAN’s wholly-owned subsidiary, WiLAN Labs, develops and commercializes innovative solutions to the challenges facing next generation communication networks. Founded in 1992, WiLAN is listed on the TSX and NASDAQ and is included in the S&P/TSX Dividend and Dividend Aristocrats Indexes. For more information: www.wilan.com.

Non-GAAP Disclosure*
WiLAN follows GAAP in preparing its interim and annual financial statements. We use the term “adjusted earnings” to reference earnings from continuing operations before stock-based compensation expense, depreciation & amortization expense, interest expense, unrealized foreign exchange gains or losses, restructuring charges, incentive buy-out, success fee, transaction costs, investment income, debenture financing costs, provision for income taxes, and certain other charges all as disclosed in the reconciliation of net earnings/loss to adjusted earnings included in this press release. We report adjusted earnings in the belief that it may be useful for certain investors and readers of the financial statements as a measure of our performance. Adjusted earnings is not a measure of financial performance under U.S. GAAP. IT DOES NOT HAVE ANY STANDARDIZED MEANING PRESCRIBED BY U.S. GAAP AND IS THEREFORE UNLIKELY TO BE COMPARABLE TO SIMILARLY TITLED MEASURES USED BY OTHER COMPANIES. Adjusted earnings should not be interpreted as an alternative to net earnings and cash flows from operations as determined in accordance with U.S. GAAP or as a measure of liquidity.