What to expect from tomorrow’s Wi-LAN earnings

Byron Capital analyst Tom Astle says Wi-LAN’s track record of generating a return from both its purchased IP and litigation is excellent, and this makes him excited for next year.Before the market open tomorrow, Wi-LAN (TSX:WIN) will release its Q3 2012 earnings.

Wi-LAN reported its Q2, 2012 results early in August. Revenue came in at $20.8-million, which was slightly better than company guidance. Adjusted earnings were $10.1-million, or $.08 cents per share. On a GAAP basis, however, the Ottawa-based patent player lost $149,000 as it ramped up litigation expenses.

Byron Capital analyst Tom Astle says Wi-LAN’s Q3 may the calm before storm. Astle, who expects revenue will report $.08 of adjusted earnings on revenue of $21-million, notes that the Ottawa patent player has been tremendously busy of late, and has some major litigation trials approaching next year. Astle says litigation costs could rise to as much as $6.5-million a quarter, but offers that this would be a good sign as it would mean settlements are near. In a research update to clients Friday, Astle reiterated his BUY rating and $7.50 target on Wi-LAN.

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After the thrill ride that was 2009 through part of last year, the time since has been relatively quiet for shareholders of Wi-LAN. Since peaking at more than $9 last summer, shares of the company trickled off, tripping to under $5 this past May. But the company’s trajectory over a longer time frame has been decidedly up. Under the watch of CEO Jim Skippen, Wi-LAN’s revenue has climbed from just over $2 million in fiscal 2006 to the more than $100 million in fiscal 2011. The Ottawa-based company has quietly become one of the world’s top patent acquirers, on par or better than Apple, Google and Samsung in the third quarter of 2011.

Astle says Wi-LAN’s track record of generating a return from both its purchased IP and litigation is excellent, and this makes him excited for next year. For fiscal 2013, Astle is modeling $117 million in revenue and adjusted EPS of $0.55. The Byron analyst’s $7.50 target is derived from applying 14x this adjusted EPS.

At press time, shares of Wi-LAN were down 1.5% to $5.30.

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