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Wi-Lan (NASDAQ:WILN)

Q4 2012 Earnings Call

March 06, 2013 10:00 am ET

Executives

Tyler Burns - Director of Investor Relations

James Douglas Skippen - Chief Executive Officer, President, Chief Legal Officer and Executive Director

Michael Shaun McEwan - Chief Financial Officer

Analysts

Daniel Kim - Paradigm Capital, Inc., Research Division

Mona Nazir - Fraser Mackenzie Limited, Research Division

Timothy Long - BMO Capital Markets U.S.

Justin Kew - Cantor Fitzgerald Canada Corporation, Research Division

Todd Coupland - CIBC World Markets Inc., Research Division

Thomas Astle - Byron Capital Markets Ltd., Research Division

Robert Young - Canaccord Genuity, Research Division

Al P. Nagaraj - Industrial Alliance Securities Inc., Research Division

Operator

Good morning, ladies and gentlemen, and welcome to WiLAN's Fourth Quarter and Fiscal Year 2012 Financial Results Conference Call. [Operator Instructions] I would now like to turn the meeting over to Tyler Burns, Director of Investor Relations.

Tyler Burns

Thank you, operator, and good morning, everyone. Earlier this morning, WiLAN issued a news release announcing its financial results for the fourth quarter and fiscal year ended December 31, 2012. This news release is available on WiLAN's website and will be filed on SEDAR and EDGAR.

On this morning's call, we have Jim Skippen, WiLAN's President and Chief Executive Officer; and Shaun McEwan, WiLAN's Chief Financial Officer. Following prepared remarks by Mr. Skippen and Mr. McEwan, analysts will have the opportunity to ask questions.

Certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect our results are detailed in the company's annual information form and other public filings that are made available on SEDAR and EDGAR. During this conference call we will refer to adjusted earnings. Adjusted earnings does not have any standardized meaning prescribed by U.S. GAAP. Adjusted earnings are defined in our quarterly and annual filings that are made available on SEDAR and EDGAR.

Now, I would like to turn the call over to Jim Skippen. Jim, please go ahead.

James Douglas Skippen

Thanks, Tyler, and good morning to everyone. I first want to touch on a number of fourth quarter highlights. Firstly, recognizing WiLAN's strong financial position and expected strong future earnings, I'm pleased to advise that the Board of Directors has voted to increase WiLAN's annual dividend to CAD 0.16 per common share from CAD 0.14 per common share. A quarterly dividend of CAD 0.04 has been declared for the fourth quarter of 2012 and will be paid on April 5, 2013, to shareholders of record on March 22, 2013. This represents more than a 14% increase to our dividend. I am pleased to advise that our board has also approved a normal course issuer bid or stock buyback. The board has asked us to put this in place as soon as possible, and we expect to commence the buyback within a few days to a week.

During the quarter, WiLAN generated revenues of $21.2 million, exceeding our guidance for the quarter. WiLAN also generated adjusted earnings of $7 million in the quarter, which was within our guidance. During the quarter, WiLAN initiated a number of new litigations against existing and new defendants. Three of the litigations initiated in Q4 already have trials scheduled in the second half 2013.

Now I'd like to take a minute to just review some of the highlights from our fiscal 2012 year. Firstly, we signed 8 new licenses in 2012. We generated revenues of $88 million, approximately. We generated adjusted earnings of $41.8 million. We generated $34 million in positive cash flow from operations and we returned $30.3 million to shareholders in dividend and share buyback payments. We acquired a global portfolio of more than 40 patents and applications from Siemens related to telecommunication network management and mobile media. We also acquired a portfolio of more than 150 patents from Alvarion Ltd. that we believe have broad applicability to wireless infrastructure in handsets. During the year, we bolstered our management team with the hiring of our Chief Operating Officer, Michael Vladescu, and a number of senior business development, licensing and litigation professionals. Finally, we advanced a large number of important litigations.

With that, I would now like to turn my attention to our major patent litigations. First, I will speak to our V-Chip litigation against LG Electronics. On December 11, 2012, the Federal Circuit Court of Appeal issued its ruling on the appeal. The ruling affirmed the lower court ruling that current LG televisions do not infringe our U.S. V-Chip patent. In January, we asked the Federal Court of Appeal to entertain an en banc rehearing of this appeal. An en banc rehearing is rarely granted, so we were not shocked when on February 13, the appeal court denied our request for an en banc rehearing.

So what does all this mean? Firstly, we continue to strongly disagree with the court's ruling. But at this point, we must accept it and conclude that this court case with LG on the V-Chip patent is at an end. Next, based on the ruling, we believe that when [indiscernible] tables are updated in the U.S., many millions of already sold LG televisions will infringe our V-Chip patent and we will certainly be back to collect the royalties that are due on those TVs. We believe televisions sold by LG in the U.S. infringe other WiLAN patents, and we will continue our lawsuit on other TV and display patents against LG in Florida. This decision only applies to LG. And there is no reason for other licensees to stop paying us. In fact, revenues from our TV and display licensees continue to be within management's expectations. We do have other options to consider in consultation with our outside counsel, but I can't comment any further publicly on what these options could be, as this could telegraph our next steps.

At this time, WiLAN has many other active patent litigations. Several of these litigations are trials of Markmans, which are rapidly approaching. The trial is scheduled to begin in April 2013 on 3GPP HSPA patents with defendants Alcatel-Lucent, Ericsson, HTC and Sony Mobile Communications, relating to phones and base stations. We have a trial schedule that begins July 2013 against Ericsson involving LTE-related patents. We have a Markman hearing scheduled for August in 2013. And our Florida LTE case against Alcatel, the trial in this case is scheduled to begin April 2014. We also have a Markman hearing in Texas scheduled for March 2013 in our case against Apple, HTC and a number of other defendants. The trial in this case is set to begin on October 2013. We have a trial in our case against Toshiba in Florida on TV technology scheduled for October 2013. And finally, in 2013, we have a trial with Research in Motion for BlackBerry, I guess, in November 2013 on Bluetooth patents. There's a second trial on Bluetooth patents and other phone technologies scheduled with RIM in 2014 -- early 2014. This highlights the important Markmans and trials scheduled for 2013. We do have other litigations, which has trials scheduled later than 2013. And as will be obvious from the volume of activities scheduled for 2013, we will remain extremely busy with all these litigations.

Next, I'd like to provide an update on our licensing partnerships. Going into 2012 for our Gladios business unit, we have signed agreements with 12 partners in total. Litigation involving 1 partner, TreeHouse, was launched in late 2012.

Now I'd like to touch on our research program. Our subsidiary, Cygnus Broadband, continues its work in researching valuable 4G and next-generation 5G wireless technologies. To date, these efforts have yielded over 40 patents and patent applications. Cygnus' research in the quality of service in 4G networks has generated interest from a number of companies, including Ubiquisys, a leading company in small cell deployment of 3G, 4G and Wi-Fi networks. At the Mobile World Congress in 2013, which took place last week in Barcelona, Spain, Cygnus' technology was demonstrated to Ubiquisys customers and partners. In addition, technology contributions by Cygnus and Ubiquisys were highlighted in a white paper that Intel released for the event. Cygnus' sole mandate, despite the interest from third parties in its work, remains the generation of valuable intellectual property for our patent licensing program.

Before concluding my remarks, I wanted to reiterate some of our overall strategy. We believe our ability to build a world-leading technology licensing company begins with our licensing strategy and that this strategy must support long-term sustainable growth. One of the key strategies we employ is that we want multiple core licensing programs in different technology segments. Each core portfolio would be expected to include many and sometimes hundreds or even thousands of valuable patents. We intend to keep adding to each core portfolio, so the value to licensees is always increasing.

The model of the agreement signed into our core programs would typically contemplate payment on a quarterly basis for a fixed term of 5 or so years. At the expiration of the term, the license expires and would be expected that the licensee would renew. We currently have 2 very active core programs, which are TV and display and wireless. We are hoping to build additional core programs, but this will take time. Some of the areas identified for new core programs are medical devices, cloud computing and semiconductor devices. We are actively working on acquiring patents in these areas. The second part of our business is our partnership business, which is carried on by our Gladios business unit. Typically, the portfolios licensed by Gladios unit are owned by our partners, and we use our capital and expertise when licensing programs for our partner. We then share on the revenues that result from licensing these portfolios. We currently have 12 signed partners in this program.

In all cases, we attempt to conclude license agreements with our prospect licensees without litigation. Today, we have signed over 265 license agreements. And the vast majority of these agreements were achieved without litigation. However, we are fully prepared to use litigation if licensing negotiations do not progress adequately. Moreover, it is likely that prospective licensees may face staggard, multiple litigations on multiple patents until the licensee sees the light and focuses on negotiating a fair license agreement rather than fighting and investing in their litigation counsel. We are prepared to be fair in our licensing, and we only expect terms that compensate to the value of our portfolio and enable our business to continue.

However, the board and I are quite determined not to sign licenses simply to meet short-term pressures unless these agreements are fair to the long-term interests of our company. We do not lose a sale by signing an agreement months or even years after the infringement occurs. However, signing agreements with poor terms might help our short-term results but will kill our long-term success since we may be forced to operate these inferior terms to future licensees.

A lot of investors ask us to forecast when settlements or licenses will be reached. I've learned over the years that it is not very helpful for us to speculate on when a license will be signed since, to some extent, it is beyond our control. An agreement will be signed when licensee signs the agreement with the financial and other terms we consider fair for WiLAN. Until an agreement is signed, though, I can't promise. But we will put more and more pressure on licensees through aggressively prosecuting litigations. I can also assure investors that we do not intend to stop fighting until a license is signed. I will also commit whenever possible to announce a license as soon as it is signed.

To conclude these prepared remarks, I am very positive about our business and firmly believe our strategy will drive WiLAN's future growth. On the licensing front, we are advancing negotiations with many prospective licensees. With a roster of 12 Gladios partners and growing and promising opportunities presenting themselves, our partnership program is gaining more momentum all the time. Our business development team is actively pursuing opportunities, and successfully completing these acquisitions will serve to strengthen endeavors by our business.

With that, I will now turn things over to Shaun to discuss our financial results in more detail. Shaun?

Michael Shaun McEwan

Thank you, Jim, and good morning, everyone. Revenues for the fourth quarter of 2012 were $21,183,000 and that compares to $24,224,000 for the same period last year. This represents an overall decline of 13% year-over-year. For the full quarter, 2 licensees accounted for more than 10% of revenues, which is the same as last year and the top 10 licensees accounted for 88% of revenues from royalties as compared to 83% for the comparable period last year. For the full year, revenues were $88 million as compared to $105.8 million for the prior year, which represents a decrease of 17%.

For the full year, 2 licensees accounted for more than 10% of revenues as compared to only 1 licensee in the same period last year and the top 10 licensees accounted for 83% of revenues from royalties, whereas that would have been 77% for last year. The decline in revenues over the comparison periods for both the fourth quarter and the full year is primarily attributable to the timing of fixed payment amounts as a result of the significant license agreements signed early in 2011, some of which contained more onetime lump sum payments and others contained higher front-end amounts.

Looking at our operating expenses. I will take a special note here to say that the definition of our cost of revenue has changed. We now include patent litigation expenses in our cost of revenue and have adjusted the comparison periods to reflect this reclassification. Previously, we had considered litigation expenses as a component of marketing, general and admin. As a result, the cost of revenue expenses for the fourth quarter of fiscal 2012 totaled $16.6 million. Patent licensing and litigation expenses, both cash costs in this category, were $1 million and $8.8 million, respectively. Cost of revenue expenses in the quarter also included $6.5 million in patent amortization and $256,000 in stock-based compensation, both noncash items.

Comparatively in the fourth quarter of fiscal 2011, cost of revenue expenses totaled $38 million. This included licensing expenses of $1.3 million, litigation expenses of $2.6 million and the accrual of a litigation success fee of approximately $28 million. Cost of revenue expense in the fourth quarter of fiscal 2011 also included patent amortization and stock-based compensation, again both noncash expenses, totaling $6.5 million.

For the 12 months ended December 31, cost of revenue totaled $55,503,000, of which approximately 45% was amortization of patents expense. Cash-related expenses in this classification were $4.2 million related to patent licensing activities. And the lion's share of those costs are staff-based costs and $25.6 million in litigation expense. Total cost of revenue has declined 23% year-over-year, principally as a result of the decline in the total litigation expenses.

For the 3 months ended December 31, 2012, research and development, or R&D, expenses were $2.3 million, or 11% of revenue, as compared to $2.5 million, or 10%, for the same period last year. Our research expense, consisting again principally of staff costs, was just under $500,000 for the quarter, which is less than half of the comparable period last year. This decline in total expenses related to the restructuring we undertook earlier in the year to streamline our research activity. We also spent approximately $1.7 million on the management of our patent portfolio. And these are expenses related to the prosecution and maintenance of our patents. And we consider these expenses to be of development in nature. This expense increased over the comparative period by more than $700,000, given the increase in the size of our portfolio over the same periods. For the 12 months ended December 31, R&D expenses were $8.9 million as compared to $7.8 million for last year. The increase in spending over the year-over-year is primarily attributable to an increase in patent management expenses, as I've already outlined.

Our marketing, general and administrative expenses, or MG&A, in the core fourth quarter totaled $3.1 million and included $2.2 million in overhead-related expenses, which are cash-oriented, and $858,000 in noncash charges. Comparatively, in the fourth quarter last year, MG&A expense totaled $10.3 million, which was comprised of $2.3 million in overhead expenses, $7.1 million in incentive buyout costs and noncash charges of $801,000. For the full year, MG&A expenses amounted to $12.9 million as compared to $20.3 million for the same period last year, with the decline principally attributable to the decline in incentives and commission costs, partially offset by the increase in other staff costs in 2012.

For the 3 months ended December 31, 2012, WiLAN recorded a net income tax expense of $1.1 million as compared to a net income tax expense of $409,000 for the previous year. The current income tax expense of $420,000 is related to taxes withheld on royalties received from foreign jurisdictions, for which there is no treaty relief. For the full fiscal year, WiLAN recorded a net income tax recovery of $1.1 million as compared to a net income tax recovery of $8.4 million for the last year. The current income tax expense of $3.5 million is related to taxes, again, withheld on royalties received from foreign jurisdictions for which there is no treaty relief.

As a result of all of the above, WiLAN's GAAP earnings amounted to a loss of $2.1 million, or $0.02 per share on a basic level, for the 3-month period ended December 31, 2012, as compared to a GAAP loss of $5.6 million, or $0.05 on a per share on a basic level, in the same period last year. WiLAN's GAAP earnings for the fiscal year amounted to a loss of $14,520,000, or $0.12 per share on a basic level. It is very important to note, however, that this includes $32.2 million worth of expenses that relate to the debenture financing that we did in late 2011, which we have already discussed in detail in both our filings and on our calls related to the first quarter of this year. Excluding the impact of this mostly noncash charge, WiLAN would have been highly profitable in 2012. For the comparative period last year, we generated GAAP earnings of $31.8 million, or $0.26 per share on a basic level. But all, again, you need to keep in mind that these earnings included a net debenture financing-related gain of $20.7 million and interest expense related to that debenture of $4.2 million.

We believe adjusted earnings, a non-GAAP measure, assists in evaluating the performance of our business by eliminating a lot of these noncash or nonrecurring items. For the fourth quarter, adjusted earnings were $7 million, or $0.06 per share on a basic level, as compared to $17.8 million, or $0.14 per share on a basic level, recorded last year. For the full year, we generated adjusted earnings of $41.8 million, or $0.34 per share, which is approximately 47% of revenues. Adjusted earnings declined approximately $29.8 million over last year, principally as a result in the decline in revenues and an increase in litigation expenses other than the success fee-oriented expenses.

Turning our attention to the balance sheet for a very brief moment. We completed the quarter and the year with $176.9 million in cash, cash equivalents and short-term investments. This represents a decrease of $256.8 million from the net cash position at December 31, 2011. During the year, we generated $34 million from operations and we retired that debenture that was outstanding at last year end with total cash costs of slightly more than $233 million. We returned $30.3 million to shareholders in a combination of dividend and share buyback payments and we acquired patents and other intangibles totaling $25.4 million. During the fourth quarter of 2012, cash flow from operations was $17.2 million, and we returned $4.2 million of that to shareholders through dividend payments.

For the first quarter of 2013, which will end on March 31, 2013, we expect revenue to be at least $18.1 million. I'll remind call listeners that this revenue guidance does not include the potential impact of any additional royalty reports that we receive between now and the end of the quarter and any new agreements that may be signed during the remainder of this quarter.

Operating expenses for the first quarter are expected to be in the range of $18.7 million to $20.4 million, of which $13 million to $14.4 million is expected to be litigation expense. For the first quarter of 2013 and assuming no additional agreements are signed, adjusted earnings are then expected to be between a loss of $2.2 million and a breakeven position.

This concludes my review of the financial results for the fourth quarter and fiscal year ended December 31, 2012. Tyler?

Tyler Burns

Thank you, very much, Shaun. We will now move to the Q&A portion of the conference call. [Operator Instructions] Operator, may we have the first question, please?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Daniel Kim with Paradigm Capital.

Daniel Kim - Paradigm Capital, Inc., Research Division

Gentlemen, or actually Jim and/or Shaun, could you comment please on the litigation expenses? Obviously, bounced around quite a bit quarter-on-quarter, big uptick in Q1 for good reason. Can you give us a sense of how you think this number will evolve going beyond Q1 for the balance of the year?

James Douglas Skippen

I could, but I'd be guessing. And I think we've decided to give 1 quarter of guidance for good reason. You can see that the volume of litigation activity that we have, it's very, very significant with 6 trials already scheduled in 2013. And so we have to work full out until those -- until the trials happen or they settle. But if they settle, it dramatically reduces that expense. So we, I think, are trying to be conservative in our guidance and assume that nothing settles. So there is some upside, of course, if things settle. But it is somewhat unpredictable, so it could exceed our -- we can't predict exactly what it is, so it's possible that it will be slightly more than we've forecast, but we're trying to be conservative. So I think it would be -- it wouldn't be that helpful for me to try to guess exactly what it will be in future quarters. We'll have a better sense of that when we see whether things are settling or not.

Daniel Kim - Paradigm Capital, Inc., Research Division

Okay, terrific. Moving on to what I'll refer to as the Apple case. Wondering -- given this is what I would view as one of the marquee cases for this year, could you comment at all in terms of perhaps where your confidence sits in this portfolio of patents that you're asserting? If you were to compare that, say, to back in 2010 with the assertion of the Wi-Fi patents against Intel in terms of perhaps level of confidence and/or size of portfolio and addressable market, if you can just give us a sense of how these 2 events would parallel in your mind.

James Douglas Skippen

Well, we remain very confident. There are now 2 cases against Apple. The first case, or I'll call it the HSPA case, is actually on some of the same patents that much of the industry settled on. And Apple -- or took a license on, and Apple remains unlicensed. But we have a Markman already from this court on those patents that we think is a good Markman for us, and we feel very confident. On the LTE case, similarly, we feel extremely confident. We have a large LTE portfolio. I'm very -- I feel very confident that the entire -- all of the handset makers in the world are going to end up taking a license to this portfolio, it's just hard to predict exactly when. So bottom line is we're very confident.

Operator

Our next question comes from the line of Mona Nazir with Fraser Mackenzie.

Mona Nazir - Fraser Mackenzie Limited, Research Division

Just following up on the Apple case, I remember last year, you commented on the Markman hearing in regard to the HSPA and the tone of such. And you believed that interpretations were in favor of WiLAN. Could you offer any commentary on the Markman and the interpretations or commentary from the judge?

James Douglas Skippen

It's difficult for us if the case is -- unless you have some specific language that you want me to address of the judge, for me to make general statements, other than we remain quite confident. Given what the Markman was for this case in 2011, we assume that the Markman is going to be the same, either very similar or exactly the same in this case because it's the same patents. And we feel confident that, that Markman will enable us to prove it of infringement. I don't know if I could say too much more unless you have a specific comment by the judge that you want me to address.

Mona Nazir - Fraser Mackenzie Limited, Research Division

No, that's okay. And just on the LTE, digital TV and 3G HSPA case, I believe the last time we spoke, you were waiting for the case scheduling conference. I was just wondering if there's any update in regard to timeline of next steps, expected key litigation dates or et cetera.

James Douglas Skippen

Well, I guess, we have a trial starting in April against 4 of our -- 4 defendants on 3GPP, HSPA patents. So we know what the schedule on that is. And the judge has just reaffirmed this week that he intends to start the trial in April.

Mona Nazir - Fraser Mackenzie Limited, Research Division

I'm actually referring to the recent press releases that came out in the fall of 2012 in regard to the digital TV and the LTE cases to take place in Florida. I believe that you are in case scheduling conferences in regard to those.

James Douglas Skippen

Okay. Well, let me see if I can try to figure out which case you're referring to. The case against Toshiba, which is on some television patents, that trial is scheduled for October of 2013.

Mona Nazir - Fraser Mackenzie Limited, Research Division

Okay. No, I was referring to the LG digital TV.

James Douglas Skippen

LG digital. We don't yet have a trial date on that one. And it's a bit odd because we've had so many of these cases where we've got very, very quick schedules and very quick trial dates. And that's one of the anomalies that we haven't yet gotten a schedule on that one. So you're clever in asking about that one because that's probably the only one where we don't have a schedule.

Operator

Our next question comes from the line of Tim Long with BMO Capital Markets.

Timothy Long - BMO Capital Markets U.S.

Just 2 of them, if I could. First, outside of the upcoming litigations, if you could just talk about kind of the run rate business. And looking at your guidance into Q1, it looks like another stepdown here in revenues. I think it's about the third one, stepdown, since the big deals were signed in March of '11. So if you could just talk a little bit to why there's a stepdown in kind of run rate. And should we expect another one of those? And then I have a follow-up related to MediaTek after that.

James Douglas Skippen

Yes. Okay. Well, I guess, the simple or straightforward answer is that there's components in our deals of one-time payments. There are sometimes onetime payment deals and sometimes, there are recurring deals that expire in our roster of 260-plus licenses. So that's the straightforward or the simple answer to why you've seen a little bit of a deterioration in the revenue. But I should add that we don't think that this means at all that our business is deteriorating. We just think this is some of the lumpiness that you sometimes see in patent licensing businesses. And in fact, we think our business has never been stronger. And we sort of think that it's a mistake to focus on these small gyrations in the top line from quarter-to-quarter other than focusing on the incredible strength we have in the patent portfolio that we've developed. And what that likely means. And what we think it means, for instance, is we think every handset vendor in the world is going to have to take a license to this portfolio. And that's going to be significant and it's just a matter of time. So I don't know if that helps you, but that's our take on it.

Timothy Long - BMO Capital Markets U.S.

Okay. Great. And then as for the MediaTek announcement today, they're obviously very large in the phone business and very large in Wi-Fi. I'm assuming that's included in your guidance, but if you could just let us know that. And then maybe if you could just scale for us how meaningful you think that deal is relative to most of the other big Wi-Fi vendors that were signed in early 2011, given the size of MediaTek in the handset market.

James Douglas Skippen

Well, first of all, I think it's in the press release. But that deal is Wi-Fi -- for Wi-Fi and Bluetooth but only in North America and it's only for a 5-year term. So most of MediaTek's Wi-Fi sales are outside of North America. So they're not a huge player in North America, which is where we have the strength in our Wi-Fi patents. So I think that should be taken into account in terms of assessing the deal. We still think it's an important deal, but just given that we have Wi-Fi strength in North America, most of their sales are outside of North America, you need to take that into account in sort of assessing the deal. They were one of the few Wi-Fi vendors that remained unlicensed, so we're pleased to have that dealt with. But they remain completely unlicensed for all our other technologies.

Operator

Our next question is coming from the line of Justin Kew with Cantor Fitzgerald.

Justin Kew - Cantor Fitzgerald Canada Corporation, Research Division

So, Jim, what strikes us here is as we look out into 2013 and the opportunity that we have in front of us, as well as the ramp on the litigation side, this is very similar to where we were kind of Q1 2011. Can you talk about how 2013 could play out that could be kind of different to 2011, just so we can discern how -- as we kind of bump along through here, how things could and could not work out or could not pay out as you saw 2 years ago?

James Douglas Skippen

Well, I'm not going to -- it's hard for me to speculate on all of the range of possibilities. There are many possibilities and there's always uncertainty. I think what we think is that hopefully in 2013 but at some point in the future, hopefully not too distant future, many, many large companies are going to take licenses to our patents and that should significantly boost our top line and improve our bottom line. And certainly, we'd like to see that unfold in 2013 and we're working towards it. But I'm not -- I don't know if I can say much more than that at this point.

Justin Kew - Cantor Fitzgerald Canada Corporation, Research Division

Okay. I mean, I guess, one way to -- another way to look at it would be, 2011, it was a little more concentrated. Would that be fair to say? I mean, do you think that 2013 we could see kind of a more gradual playing out of potential licensees taking up licenses?

James Douglas Skippen

I mean, you have to remember that the 2011 case was really, we had 1 or, arguably, 2 trials on a very limited number of patents. In 2013, we have 6 trials, we have many defendants, many different technologies and some of -- many of these defendants are facing trials on other technologies. So we think that we're actually in many ways in a much stronger position now than we were back in 2011. But this is -- we'll play our game, which is that we'll keep putting pressure. We'll try to be reasonable on the terms that we're willing to accept. But we won't accept terms that will hurt the company. And as soon as the other side sees the light, we'll transact and get a deal done, like we did with MediaTek and like we have done 260 times before, and hopefully like we'll do a lot of in the future. But I don't want to sort of speculate on, "Well, if this happens, this happens. If this happens, this happens." Because we know that there's a lot of variables here. And when the variables become certain, then we'll comment on what that means. But until the time, it's hard to do that.

Justin Kew - Cantor Fitzgerald Canada Corporation, Research Division

Sure. My second question is just following on from Mona's question. Just in terms of trial dates, you're seeing them coming up fast. Is this a trend? Just what you've got, like you said, you kind of alluded that it was anomalous. Is there any additional factors in the environment such that trial dates are coming up sooner? Or do you think this is purely just kind of luck of the draw?

James Douglas Skippen

Well, I'd say a big, big factor is that we located our U.S. headquarters in Florida. And because of that, we're -- when we have a litigation, we're inclined to use the Florida courts. And the Florida courts can move very quickly. And we think that's helpful and positive because in the long run, even though in the short term, it's more expense, in the long run, it's a lot less expense. And it brings the day of reckoning a lot sooner. So we'd like to think that it's been helpful that we've been able to use the Florida courts.

Operator

Our next question comes from the line of Todd Coupland with CIBC.

Todd Coupland - CIBC World Markets Inc., Research Division

Just a question on the guidance, question on the 3G case. Jim, I get your point, you don't want us to focus on quarter-to-quarter results. Fair enough.

James Douglas Skippen

Well, I obviously -- I can't -- I do want you to -- of course, you're going to look at those. But I just think the real story of a WiLAN is the tremendous potential we have in the patent portfolio, which is going to manifest over time, and not as our guidance is a little bit lower this quarter than last quarter.

Todd Coupland - CIBC World Markets Inc., Research Division

And that's fine. I have no issue with that. What I'm, I guess, trying to figure out is if $18 million or $19 million or $20 million is the baseline. And -- has that baseline moved down $1 million or $2 million or is it still going to move up and down based on the collective deals you have in your pocket?

James Douglas Skippen

Well, I understand the question and I understand why you're asking it. We've made a decision, the board and the management collectively, that we were going to give 1 quarter of guidance. So if I were to say to you what the baseline is for more than a quarter, then I'm effectively giving you guidance beyond 1 quarter. And we may at some point do that, but we are not doing that at this time.

Todd Coupland - CIBC World Markets Inc., Research Division

Okay. Second question, in terms of the April trial, HTC is in that, they're in another case. Could you still sign licensing agreements and they either participate or not and they get -- roll up all the cases that they're involved in with a deal now or that potentially gets delayed to other actions you're involved with down the road? How might that play out?

James Douglas Skippen

Well, if I understand your question, it's will a licensee like HTC be more likely to settle and take a broad license that covers everything or will they deal with each litigation on its own? Did I have the question right?

Todd Coupland - CIBC World Markets Inc., Research Division

Yes.

James Douglas Skippen

Yes. And at least my experience in licensing is that licensees typically will want to deal with all the outstanding litigations when they settle. And that's because that's my experience, that's what I expect. And so it's very likely -- HTC is in this trial, it's coming up in a month. And if we were to settle, I would be surprised if we didn't settle all our outstanding disputes.

Todd Coupland - CIBC World Markets Inc., Research Division

Okay. And just conversely, you could sign deals with the other parties and just carry on with HTC...

James Douglas Skippen

Absolutely.

Todd Coupland - CIBC World Markets Inc., Research Division

Only if they didn't want to settle now and they wanted to just sort of wait and let all these play out.

James Douglas Skippen

That's absolutely the case. And in fact, when we settled -- when we had that big litigation a couple of years back, when we settled with Intel, we had no way of knowing whether we'd settle with anybody else. And so we don't know. We're open to settling. And I think that sometimes I think there's a phenomena, where if the court sees that some of the defendants are settling and particularly if the court thinks that the terms are reasonable, the judge may be informally inquiring as to why these other parties aren't settling on these terms. But you never know. And every judge and every court and every defendant and every circumstance is different.

Operator

Our next question comes from the line of Tom Astle with Byron Capital Markets.

Thomas Astle - Byron Capital Markets Ltd., Research Division

Jim, just trial dates don't tend to move around much, right? Markmans tend to be a little flexible. But once a trial date is set, it tends to stick. Is that correct?

James Douglas Skippen

I've never thought about it in those terms. I actually think -- I would probably say if someone asked me -- you are asking me the question. I would probably say they're both as likely to move or both as likely to stick. So I'm not sure I would say that. But I do find myself that particularly in Texas, when they set a trial date, they rarely move it. And our April trial date is in Texas against Alcatel-Lucent, Ericsson and others. And we have an October trial in Texas against Apple and HTC and a number of others. And I'd be surprised if they move. Florida, I'd be surprised if they move, too, but we have a little bit less familiarity here or experience in the Florida courts, so we'll have to see.

Thomas Astle - Byron Capital Markets Ltd., Research Division

Okay. Did you mention you have 6 trials? Because I've counted 3 or 4.

James Douglas Skippen

No, we have 6. I'll go over them for you, because they're important. First one is in April, which is against Alcatel-Lucent, Ericsson, HTC, Sony Mobile. The next trial is in July, and it's against Ericsson again on LTE patents. The next trial is in October, and it is against -- there's one against Toshiba, and that's in Florida on TV patents. But there's also another trial in October in Texas, and that's against Apple, Kyocera, HP, Dell, Novatel and Sierra Wireless. We also have a trial in November, and that's in Florida. And that's against BlackBerry on Bluetooth patents. And we also have another trial in November, which is against Hon Hai, and that relates to Hon Hai underpaying us on our agreement for TVs. So those are the 6 trials that are currently scheduled. And they're either in Florida or in Texas.

Thomas Astle - Byron Capital Markets Ltd., Research Division

Yes. And I think just one last question, any update on the potential for the large OEM relationship for patent assertion?

James Douglas Skippen

Yes. We definitely continue to work at those, and we're -- all I can tell you is we're working towards it. We're hopeful to have something to announce before too long. But until the deal's done, it's not done. And you'll know very soon after I know once we've concluded the deal.

Operator

Our next question comes from the line of Robert Young with Canaccord Genuity.

Robert Young - Canaccord Genuity, Research Division

I have a question about the Siemens patent acquisition. In your monologue, Jim, you talked about some new areas in medical, cloud, semiconductor. But I didn't hear anything about the -- I think Siemens was network management and mobile media. I was wondering, is that going to be a new revenue line potentially? Or is that going to get wrapped into the existing patents portfolios now?

James Douglas Skippen

Actually, I kind of think of it when I'm quickly thinking about it as being part of what I call the wireless core portfolio. But actually, you're right. It is a slightly different program. And that program is being worked up. And we've started licensing discussions with people. So we'll wait and see and see where that goes. But we do think those are valuable patents and important patents, and we're hopeful that we'll have some news on that before too long.

Robert Young - Canaccord Genuity, Research Division

Okay. And my second question, with the guidance range that you gave for the litigation expense for this quarter, you're a little bit north of it. And I know that you'd said that sometimes that does happen. But I was wondering if you could talk about what might have driven that. Would that be the LG case not playing out as expected? Is there anything else that you can...

James Douglas Skippen

What happened was that -- and it's actually good news for WiLAN, believe it or not. But what happened was we sued a number of parties in December, and we got trial dates 6 months later. So Ericsson is a good example, where we brought a suit against Ericsson late -- in October 2012 on LTE patents. We already have a trial date in July. Well, that's great. We love that because we think that puts a lot of -- we want a quick trial date because we believe in our patents and in our case. And the quicker we get to trial, the quicker we think we're going to get paid our fair share. But in the short term, it does drive up expenses. Now we've got a large cash hoard. We're cash flow-positive. We're not at all concerned. We can easily afford this, so it's actually good news even though it does create a little bit of short-term havoc on -- or pressure on our results. But in the long term, it's all positive.

Operator

Our last question comes from the line of Al Nagaraj with Industrial Alliance.

Al P. Nagaraj - Industrial Alliance Securities Inc., Research Division

My question is about you briefly touched on small cell. So I know the big player in that is Qualcomm. They've been at it for a while. Help me understand what your angle is, if you can, at least at a high level, please.

James Douglas Skippen

Just so I understand the question, are you talking about our research efforts with Cygnus?

Al P. Nagaraj - Industrial Alliance Securities Inc., Research Division

Yes. The small -- you talked about small cell in the world mobile forum in Barcelona.

James Douglas Skippen

Well, Cygnus has focused on solutions to improve quality of service, and it's quite remarkable. When you see their technology, when you watch our signal being broadcast over LTE [indiscernible] video, and you see it with their technology, it dramatically improves the video quality. And they've filed a lot of patents around this. They've got very good patent protection. But their technology really applies -- they started out working in the small cell area, but they quickly realized it actually applies in the large cell area just as well. And so we're seeing interest on what they're doing both from the small cell people but also from the large cell people.

Al P. Nagaraj - Industrial Alliance Securities Inc., Research Division

Yes. The reason I asked the question is because small cell technology intimately involves Wi-Fi. I was kind of wondering what the direction is when you have the Wi-Fi CDMA handover? Can you talk about that?

James Douglas Skippen

Maybe we can take that offline and get it a little bit more -- a better answer for you. And Ken Stanwood, the head of Cygnus, isn't here. But he'd be able to handle that question probably a lot better than I would and I can help get the information to him.

Operator

This brings us to the end of our Q&A session. I would now like to turn the floor back over to Tyler Burns for closing remarks.

Tyler Burns

This concludes WiLAN's Fourth Quarter and Fiscal Year 2012 Financial Results Conference Call. A replay of this call will be available until 11:59 p.m. on May 8, 2013. Instructions for accessing the replay of this conference call can be found on the news release that was issued earlier today and on the WiLAN website. Thank you very much for attending.

Operator

This does conclude today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.

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