Northland lowers revenue estimate on Wi-LAN, maintains $9 target
Northland Capital Partners revised its full year estimates for Wi-LAN (TSX:WIN) slightly lower.
Wi-LAN reported revenue of $21.3 million, compared with Northland’s estimate of $21.9 million, and the consensus estimate of $21.4 million.
Adjusted earnings per share were 8 cents, lower than the 13 cents Northland forecast, and meeting the consensus estimate.
The company said the decrease in earnings was mostly due to lower revenues and higher investment in litigation, “for the purpose of driving future revenue growth”.
“WIN was firing on all cylinders in Q312 with the acquisition of new patent portfolios, partnerships within its Gladios division, filing new patent infringement cases, and preparing for litigation with major events scheduled for H113,” says Northland analyst Ralph Garcea.
“The company continues to focus on its strategic plan to sign partnerships with large companies and OEM players with international patent portfolios. In Q312, WIN acquired a number of patents, adding to its existing portfolio (Q312 investment of ~$23M).”
For the fourth quarter, Wi-LAN said it expects revenue to be at least $20.7 million, excluding the potential impact of any additional royalty agreements.
“We forecast Q412 revenue of $22.6M and higher H113 G&A and litigation costs related to the current cases. Near-term catalysts include oral arguments in the LG appeal in early December; a Markman hearing in February in the Apple/HTC case; a claims construction hearing in the RIM case in February; and the 3GPP HSPA trial in April 2013,” Garcea notes.
“We believe any of these events could lead to settlements before the actual dates.”
At the end of the third quarter, Wi-LAN had $173.2 million in cash and short term investments, versus $191.1 million at the end of the second quarter.
For 2012, Northland revised its estimates for revenue down to $89.5 million from $90.0 million, and earnings per share to 42 cents from 48 cents previously.
The capital markets firm has a “Sector outperform” rating on Wi-LAN, and a price target of C$9.00.