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Wi-Lan (NASDAQ:WILN)

Q4 2013 Earnings Call

January 30, 2014 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

Asha Soares - Cantor Fitzgerald Canada Corporation, Research Division

Daniel Kim - Paradigm Capital, Inc., Research Division

Todd Coupland - CIBC World Markets Inc., Research Division

Eyal Ofir - Clarus Securities Inc., Research Division

Operator

Good morning, ladies and gentlemen, and welcome to WiLAN's Fourth Quarter and Fiscal Year 2013 Financial Results Conference Call. [Operator Instructions] I will now 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, 2013. 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; Shaun McEwan, WiLAN's Chief Financial Officer; and Michael Vladescu, WiLAN's Chief Operating 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 do not have 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'll now speak to the highlights of the fourth quarter. During the quarter, WiLAN generated revenues of $29.2 million, exceeding our guidance. WiLAN generated adjusted earnings of $17.2 million, also exceeding our guidance. Since we began providing quarterly revenue and adjusted earnings guidance, this is the eighth quarter in a row that our financial results have met or exceeded guidance on both the revenue front and the earnings front.

We entered into an important agreement with Panasonic to license over 900 semiconductor patents. I'll discuss this partnership in greater detail later in the call. In the fourth quarter, we signed license agreements with HTC, BlackBerry, Novatel Wireless, Sierra Wireless and others to end litigation. Our Gladios subsidiaries signed 2 licenses on behalf of patent owners.

Finally, the Board of Directors has declared a quarterly dividend of CAD 0.04 per share for the fourth quarter of 2013. This dividend will be paid on April 4, 2014, to shareholders of record on March 21, 2014. The amount of the quarterly dividend is unchanged from last quarter, as changes to our current dividend policy are being considered as part of the ongoing strategic review.

Now I would like to take a minute to review some of the highlights from fiscal 2013. This year, we signed 17 new licenses, bringing the total number of companies licensed to 279. We generated revenues of $88.2 million. We returned $25.5 million to shareholders in dividend and share buyback payments.

Turning now to our litigations. The signing of agreements with various defendants in the third and fourth quarter resulted in the outright dismissal of 7 litigations and reduced the number of defendants in 2 litigations. As a result, our investment in litigation declined significantly in the fourth quarter. In our litigation against remaining defendants, Ericsson and Sony Mobile, with respect to 3GPP and HSPA technologies, earlier this week, the court issued a ruling denying our post-trial motions, including our request for a new trial on infringement. The court also denied the defendant's post-trial motion requesting WiLAN cover their attorney's fees.

We are in discussions with our external counsel and will consider filing an appeal with the Court of Appeals for the Federal Circuit. As this case remains before the court, I will not be able to make further comments at this time. In our case involving the 802 patent, it went to trial against the remaining single defendant, Apple, in the fourth quarter. We were very surprised and disappointed by the outcome of the trial and continue to believe in the merits of our case.

Accordingly, we have brought motions contesting the jury's finding of invalidity and non-infringement. As the case remains before the court, again, I will not be able to make further comments at this time.

Apple is also a defendant in additional upcoming litigations. One of them, related to the infringement of LTE technologies, is currently scheduled to go to trial on November 2014. Subsequent to the end of the quarter, WiLAN reached a license and settlement agreement with Toshiba that resolved all litigation with Toshiba and, thus, avoided the trial that was originally scheduled to begin earlier this month.

Turning to the fiscal year. In 2013, we signed license agreements with 17 companies, bringing the total number of companies licensed to technologies on our portfolio to 279. We are pleased that the license agreements signed in 2013 generated our second-highest annual bookings to date. During the year, we signed an early license renewal with Samsung and our first license to our broad core digital TV and display patent portfolio with Panasonic. We're pleased that these agreements were reached after good-faith negotiations and without litigation.

In the third and fourth quarters of 2013, we signed license agreements with Alcatel-Lucent, BlackBerry, HTC, Sierra Wireless and others to end litigation. In 2013, we continued our efforts to expand our core licensing programs. With the acquisition of patents from Cypress Semiconductor and IXYS and the partnership with Panasonic highlighted earlier, WiLAN has laid the foundation of a strong core semiconductor licensing program that we believe has the potential to generate significant revenue in the future.

For all of our successes in 2013, the reality is our financial and operational results were downwardly impacted by high litigation costs and negative litigation outcomes. All things considered, though, we believe our positive achievements in 2013 still position WiLAN for a strong future.

At the same time, though, we do not believe that our current share price accurately reflects the strength of our balance sheet, the value of the license agreements we have signed, the future prospects of our business and the residual value of our intellectual property portfolio.

On October 30, 2013, we announced that WiLAN's Board of Directors had initiated a process to explore and evaluate a broad range of strategic alternatives for the company. We are continuing to work through the strategic review process with the help of our advisors, Cannacord Genuity and Norton Rose Fulbright.

Alternatives being considered may include changes to our dividend policy or other forms of return of capital to shareholders, the acquisition or disposition of assets, joint ventures, sale of WiLAN, alternative operating models or continuing with the current business plan, among other potential alternatives. Please note that WiLAN will comment further regarding the review process when a specific transaction or other alternative is approved by the Board of Directors or when the review process is concluded or it is otherwise determined that further disclosure is appropriate or required by law.

Until such time, we do not intend to make any further comments related to our strategic review process. 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, as Jim outlined already, were $29.2 million, and that exceeded our guidance. Three licensees individually accounted for 24%, 15% and 11%, respectively, of revenues for the fourth quarter, as compared to 2 licensees, each accounting for 24% and 15%, for the 3 months ended December 31, 2012.

Both the fourth quarter of 2013 and 2012, the top 10 licensees accounted for 88% of revenues. For the full year, revenues were $88.2 million, which is essentially flat year-over-year. Two licensees individually accounted for 19% and 14%, respectively, for the 12 months ended December 31, 2013, as compared to 2 licensees accounting for 23% and 14%, respectively, for revenues in the previous year.

For the 12 months ended December 31, the top 10 licensees accounted for 79% of revenues, whereas in the comparable period last year, the top 10 licensees accounted for 83%.

Now I'd like to cover our operating expenses briefly. The cost of revenue expenses for the fourth quarter of fiscal 2013 totaled $16,060,000 or approximately 55% of revenue. Patent licensing and litigation expenses, both cash costs in this category, were $2.4 million and $4.7 million, respectively. Cost of revenue expenses also included, in the quarter, $8.9 million in noncash expenses, which is principally amortization of patents.

Comparably, in the fourth quarter last year, cost of revenue expenses totaled $16,623,000 or approximately 78% of revenues and included licensing expenses of $1.1 million, litigation expense of $8.8 million and noncash expenses totaling $6.8 million.

In the 3-month period ending December 31, 2013, litigation expenses at $4.7 million were substantially better than our guidance for the quarter and were down significantly from the previous quarter due to signing of license agreements with various defendants in the third and fourth quarter, as Jim has already outlined, and they resulted in the outright dismissal of several litigations and reduced the number of defendants in 2 remaining litigations.

Cost of revenue expenses for the full year totaled $82.2 million and included licensing expenses of $6.3 million, litigation expenses of $45.9 million and noncash expenses totaling $30 million. Cost of revenue expenses increased approximately $26.3 million year-over-year, which is primarily attributable to an increase in litigation expense and amortization expense as a result of patent acquisitions completed during fiscal 2012 and 2013.

As I already said, litigation expenses amounted to $45.9 million in 2013, which compares to $25.6 million for 2012. The increase in litigation expenses year-over-year is attributable to an increase in the level of litigation activities in comparison to the same period last year, including preparation for 3 claims construction hearings and 2 trials, which took place in July and October of 2013.

Litigation expenses are expected to vary from period to period due to the variability of litigation activities specifically. And we did say at this time last year that they were expected to increase significantly through 2013, given the level of litigation matters that were active. This year, however, we expect a reduction of litigation expenses through fiscal 2014 as compared to last year as a result of these license agreements that we've talked about and the completion of the related trials.

R&D expenses in the fourth quarter of fiscal 2013 were $2.8 million or approximately 10% of revenue and were consistent with the prior year period. Our research expense, consisting principally of staff cost, was $584,000. We also spent approximately $2 million dollars on the management of our patent portfolio. These expenses, called patent management expenses, increased over the comparative period by slightly more than $280,000, which is consistent with the increase in the size of our overall portfolio.

R&D expenses for the full fiscal year totaled $9.3 million or 11% of revenues and included $1.9 million in research expense and $6.4 million in patent management expense. WiLAN increased the size of its portfolio by approximately 1,000 patents during fiscal 2013, of which just over 900 were added in December as a result of the partnership that we entered into with Panasonic Corporation.

Maintenance fees and prosecution costs, part of our patent management expenses, for these additional 900-plus patents will only commence in early 2014. And accordingly, our patent management costs will be expected to increase throughout this next year.

Our marketing, general and admin expenses in the fourth quarter totaled $2.9 million or approximately 10% of revenue and included $2.1 million in overhead expenses, which are cash oriented, and $759,000 in noncash charges for depreciation and stock-based compensation, all of which remains virtually unchanged from the comparative period.

In the fiscal year ended December 31, 2013, MG&A expense totaled $13.1 million or approximately 15% of revenue. MG&A expenses in that period were comprised of $10.1 million in overhead expenses and noncash charges of $3 million. Comparatively, in the last fiscal year, MG&A expense totaled $12.3 million, which was comprised of $9 million in overhead expenses and noncash charges of $3 million as well. The increase in spending for the 12 months ended December 31, 2013 is primarily attributable to increased staffing levels, as well as increase in consulting costs that are necessary to support our strategic alternatives review, which we announced on October 30.

For the 3 months ended December 31, 2013, WiLAN recorded a net income tax expense of $4.1 million as compared to an income tax expense of $1.1 million for the previous year. Current income tax expense, as we outlined in previous calls and current filings, of $2.1 million booked in this quarter relates to taxes withheld on royalties received from foreign jurisdiction, for the which there is no treaty relief.

In fiscal 2013 year, we recorded a net income tax recovery of $79,000 versus a net income tax recovery of $1.1 million in the same period last year. The increase in current income tax expense year-over-year is attributable to an increase in foreign taxes withheld on royalty revenues received from licensees in foreign tax jurisdictions. Over the year, the composition of our revenues changed to be more weighted to these foreign jurisdictions.

While we booked a $6 million deferred tax recovery for the year, we continued to carry a valuation allowance of approximately $11 million at December 31, 2013, which relates to a portion of our Canadian deferred tax assets and all of our U.S. deferred tax assets. We establish a valuation allowance for any portion of our deferred tax assets for which we believe it's more likely than not that we will be unable to utilize the assets to offset future taxes payable.

In the quarter ended December 31, 2013, the company incurred a foreign exchange loss of $1.1 million, of which $0.8 million was an unrealized foreign exchange loss, which is a noncash item. For the fiscal year ended December 31, the company incurred a foreign exchange loss of $2.5 million, of which $1.7 million was unrealized foreign exchange loss, also a noncash expense.

The unrealized foreign exchange loss recognized in 3 months ended -- year ended December 31 results 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 year end.

I note that the value of the Canadian dollar relative to the U.S. dollar has declined over the past several months and perhaps even more rapidly in the last short while. We report our financial results in U.S. dollars, and we have approximately 16 million of Canadian dollar-denominated operating expenses annually, consisting mostly of salary and facilities costs.

In addition, we return approximately CAD 18 million to shareholders annually through dividend payments at the current quarterly dividend rate. The decrease in the value of the Canadian dollar relative to the U.S. dollar lowers the value of the company's reported operating expenses, decreases the reported amount of dividend payments made to shareholders and lowers the value of our Canadian dollar-denominated cash balances, all when they get expressed in U.S. dollars. It is worthwhile highlighting that we've historically kept a relatively low balance of Canadian dollars, primarily for the purposes of covering Canadian operating expenses and dividend payments.

At December 31, 2013, approximately 11% of our cash, cash equivalents and short-term investments were denominated in Canadian dollars, which is down from approximately 16% at the end of fiscal 2012. At December 31, we held foreign exchange forward contracts totaling approximately $32 million, which mature at various dates through to January 2015.

WiLAN's GAAP earnings were $2,432,000 or $0.02 per share on a basic level in the 3-month period ended December 31, 2013, as compared to a GAAP loss of $2,119,000 or $0.02 per share on a basic level in the same period last year. WiLAN's GAAP earnings for the full year ended December 31 amounted to a loss of $18,093,000 or $0.15 per share as compared to a loss of $14,520,000 or $0.12 per share on a basic level last year.

Adjusted earnings, a non-GAAP measure, as Tyler outlined earlier in the call, that we believe assists our shareholders in evaluating the performance of our business by eliminating noncash, nonrecurring and certain other nonoperating expenses.

For the fourth quarter ended December 31, adjusted earnings were $17.2 million or $0.14 per share on a basic level. In the same period last year, we reported adjusted earnings of $7 million or $0.06 per share. The increase in adjusted earnings year-over-year is principally due to higher revenue and significantly lower litigation expenses. For the full year ended December 31, WiLAN's adjusted earnings were $17.6 million or $0.15 per share on a basic level. Comparatively, adjusted earnings in the same period last year were $41.8 million or $0.34 per share, with the change year-over-year primarily related to higher litigation expenses, as previously pointed out.

Now turning our attention to the balance sheet for a brief moment. We completed fiscal 2013 with $131.9 million in cash, cash equivalents and short-term investments. This represents a decrease of $45 million from the cash position held last year end. The decrease is primarily attributable to 3 things: returning of $25.5 million to shareholders in dividend and share buyback payments; the acquisition of patents totaling $10.3 million; and $9.5 million used by operations. This last charge, $9.5 million, the majority of that relates to an increased accounts receivable position held at year end. And in the past 3 weeks, we have collected approximately $10 million of the $12 million accounts receivable balance, and that should be considered as cash.

During the fiscal year ended December 31, the company acquired certain patents and patent rights for future consideration. The patent finance obligation, as we call it, generally arises from the acquisition of patents or patent rights while entering into a license agreement at the same time with the same counter-party. These future obligations are generally represented on our balance sheet at a discounted value reflecting the terms under which the future payments are to be made and at an appropriate discount rate. The obligations do not have any specific interest rate, nor do they have any covenants associated with them.

The retirement of these obligations will generally flow from cash receipts from the specific counter-party. In accordance with U.S. GAAP, the amounts associated with the liability are recorded immediately upon entering the agreement, but the expected cash receipts used to offset the retirement of the debt, that is, the license agreement that's contracted, does not get recognized until, basically, the cash is received. Accordingly, we have recorded a patent finance obligation totaling $53.1 million as at December 31, of which $32.6 million is considered longterm and $19.5 million is considered current.

Lastly, I will discuss our guidance for the first quarter of 2014, which will end on March 31. For the first quarter, we expect revenue to be at least $22.6 million. This revenue guidance does not include the potential impact of any additional reports yet to be received or new agreements that may be signed during the balance of this first quarter. It should be noted that some of our licensees and, in particular, our running royalty reporters, submit their revenue reports on the last day of the first month of the quarter or shortly thereafter. As is our practice with provisional guidance, the revenue that we've provided earlier today only include the revenues that have been reported up until this morning.

Although we will not provide multi-period guidance, we will say that quarterly revenues, based only on signed contracts for the balance of this fiscal 2014, are expected to be moderately below the guidance provided above for the first quarter of 2014.

Operating expenses for the first quarter are expected to be in the range of $10.2 million to $12.2 million, of which $3 million to $5 million is expected to be litigation expense. Accordingly, for the first quarter of 2014, and assuming no additional agreements are signed or additional reports are received, adjusted earnings are expected to be in the range of $10.6 million to $12.6 million.

This concludes my review of the financial results for the fourth quarter and fiscal year ended December 31, 2013, and then I will turn the call over to 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 Asha Soares with Cantor Fitzgerald.

Asha Soares - Cantor Fitzgerald Canada Corporation, Research Division

I just wanted to dig a little deeper onto your revenue outlook here. What does the pipeline look for signing new license deals so far in 2014? And have you seen any changes in licensee willingness to negotiate following the announcement of your strategic review process?

James Douglas Skippen

I'll try to take that. So just to give you a sense of the level of activity, I was just looking at our quarterly month report on what had happened in the quarter, and we had meetings, licensing meetings, with 30 different prospective -- or 31 different prospective licensees. And sometimes, we have multiple meetings with them. So there is a lot of activity going on, on the licensing front. And certainly, it's our expectation that we will sign more licenses. And of course, our guidance doesn't include any revenue from new licenses. In terms of the willingness of licensees to sign, I don't think we've noticed a significant difference as a result of announcing the strategic review. Licensees still understand that they need to consider licensing our patents and -- so I haven't really noticed much of a change.

Operator

Our next question comes from the line of Daniel Kim with Paradigm Capital.

Daniel Kim - Paradigm Capital, Inc., Research Division

Jim, I'm wondering if I can follow on that theme. Wondering if you wouldn't mind highlighting all of the upcoming litigations for this year and next. You've suggested Apple is later this year, but given all the settlements and whatnot, if you could just refresh what exactly...

James Douglas Skippen

Sure. I'll see what I can do. So we've talked about Toshiba, and we've announced that we have a tentative settlement with Toshiba. That's still being -- the final agreement is still being finalized, but we've represented for the court that we've reached a deal in principle. So that one should be gone. Right now, it's kind of on a hiatus. We have a litigation with Hon Hai over V-Chip. And essentially, we've reached a tentative settlement with Hon Hai. And again, that's on sort of ice while we work through the settlement and get it all finalized, but the courts have been advised that we have a tentative settlement with Hon Hai. In terms of the Apple cases, we have the case that we lost in Marshall. We're filing motions on that, or we've already filed them, asking the court to consider -- reconsider the jury verdict. And we have a hearing coming up in March on that. If we don't win those, then we'll consider appealing that to the Federal Circuit. So that would involve some activity this year. We have another case in Southern [ph] California on certain LTE patents with Apple. And that is, I believe, set for a late 2014 trial. I believe that's the only trial we currently have scheduled in 2014.

Daniel Kim - Paradigm Capital, Inc., Research Division

And then just to follow up, then, on the first 2, Toshiba and Hon Hai. Were those baked into Q1 numbers or not?

James Douglas Skippen

No. The -- only ones with finalized agreement, so they're not baked in. Yes, there's a few more, Dan, I could go through. So we've got some Ericsson cases, and basically we've -- we've got basically appeals going on, and those are tentative appeals. And we have an arbitration going on in that because they acquired a company called BelAir that was a licensee and there's a dispute over what the BelAir license covers and how much it extends to Ericsson. We don't think it extends at all, and they're trying to claim that it extends significantly. So that's kind of -- the BelAir agreement is required to be arbitrated, and we are moving forward on arbitration. To some extent, the outcome of that arbitration will be relevant to how things work out with Ericsson. We also have appeals -- we have conflicting decisions in Texas and Florida on the effect of an agreement we entered into with Ericsson so that we could use McKool as a law firm. And essentially, we like the Texas ruling. We don't agree with the Florida ruling. And so we've asked the Court of Appeals to resolve the issue. So that's going on with Ericsson, too. And that will be relevant to how things finally play out with Ericsson and Sony -- Sony as well, Sony Mobile, was Sony Ericsson. With LG, we have a dispute going on right now about what the wireless agreement with LG covers, and does it extend to televisions or not, or at least televisions with WiFi. And we've asked for that to be arbitrated, and LG refused, so we've gone to the New York Court to ask them to help us and compel them to get into arbitration. There's a New Jersey case against LG, and it is stayed until the outcome of that arbitration issue. So that gives you a flavor -- I'm sorry, a lot of complex stuff, a lot of moving parts, but that gives you the flavor for the main action that's ongoing right now.

Operator

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

Todd Coupland - CIBC World Markets Inc., Research Division

Jim, I was just wondering what the thought was behind moving the quarterly reporting date up over a month from normal reporting time.

James Douglas Skippen

Well, first of all, I congratulate Shaun and the auditors for being able to accomplish that. I think -- well, I should let Shaun here respond to that because he came to me and said, "I think we can do this, are you okay with it?" And I said, "Sure." So why don't you add to that?

Michael Shaun McEwan

At the beginning of this last fiscal year, Todd, we took a decision internally to accelerate our reporting, not only for year end, but for quarterlies as we go forward, principally because we wanted to get our reports out at a similar time as our peers. For example, Rambus reported 2 nights ago. We're right in the mix at the same kind of reporting time frame. So we made this decision about a year ago and worked towards it for the year.

Todd Coupland - CIBC World Markets Inc., Research Division

Secondly, on the guidance, would we have now seen most of the upfront payments flow into the fourth quarter, so the outlook plus the statement about '14 being a little bit lower but generally consistent with the Q1 outlook, that's about what the run rate is? And it would seem to me to be consistent with an annual number, assuming a duration on the backlog that you've put out there. So I'm just wondering if there's...

James Douglas Skippen

Yes, that's exactly it. And the truth -- the reality is we wanted -- when we get the additional reports in for Q1 that we missed because we did this early, Q1 will be higher, probably, by a couple of million at least, I would think. And so we just want people to understand or investors to understand that, that level is not a run rate. It's a little bit less than that. It's about what we've currently reported, the $22.6 million or moderately less than that, but close to that. So some people have a very good idea of what's in the bag, and everything we sign over and above that, and I certainly expect we are going to sign things, is going to be on top of that. But that's what's in the bag.

Michael Shaun McEwan

Quickly, the only comment that I want to throw in is -- just to properly carry that thought is, remember, a portion of our revenues, historically, it's been in that sort of 10% to 12% range, are running royalties that get reported to us. So when we say it's in the bag, it's a signed contract and we expect it, but we don't know the exact number until they actually report.

James Douglas Skippen

Yes, thanks, Shaun.

Todd Coupland - CIBC World Markets Inc., Research Division

And then just on the strategic review, I know you're not allowed to talk about specifics of that, but I would presume, if the decision is to continue as a standalone entity, there'll be some sort of update on the outlook and potential from the patent book, et cetera, just to really understand, I mean, beyond this list of trials you gave. But it's not really clear in my mind what the outlook beyond the run rate revenue is for the company. So I'm assuming that will come, if necessary. Is that the right way to think about that?

James Douglas Skippen

I think that's a fair -- no, I understand what you're saying, Todd. And we'll sort of take it under advisement and reflect on how we can better convey what we're trying to accomplish. I mean, I think we really -- I think we've given a lot more clarity over the last 2 or 3 months because we came out and we told people what our backlog was. We now told people what our revenue is, based on signed contracts. And I guess what you're saying is, "Gee, I don't have a great feel for what the additional potential is."

Todd Coupland - CIBC World Markets Inc., Research Division

That's exactly it. Yes.

James Douglas Skippen

And so it's difficult for us to come right down and say that because it's so hard to predict the timing of settlements and licenses and invariably, we get ourselves into trouble because if we come out and say, "Well, this is the potential," and we say it publicly, the other side knows we said that and can use it against us, sometimes, to extract a better deal. And in a way, it's problematic for the business to be guessing when we're going to enter into these licenses or settlements. On the other hand, I do understand the problem you have or the dilemma or that you want more clarity on what the potential upside is. And so I take the point, and I can assure you that we'll consider if the time comes and it's necessary to do so.

Operator

[Operator Instructions] Our next question comes from the line of Eyal Ofir with Clarus Securities.

Eyal Ofir - Clarus Securities Inc., Research Division

I just wanted to touch a little bit more on your Panasonic agreement. I'm trying to understand, is this going to be handled separately from the other semiconductor patents you've actually acquired, or is it going to be lumped together, and you're going out full-heartedly in terms of creating a licensing program there?

James Douglas Skippen

Well, I think it will be separated, to some extent, because there's a revenue share element to it and so we have to somehow be able to identify the revenue that's associated with that portfolio as compared to patents that we own or patents where we have other similar revenue share arrangement. However, in the event that a licensee wants to negotiate a deal that covers everything, then that's still possible, but we'll have to allocate the revenue so that we can make the calculation of what the revenue share should be on the Panasonic deal.

Eyal Ofir - Clarus Securities Inc., Research Division

Okay. And then can you just maybe break out how much -- how many semiconductor patents you guys currently own, and then where are you at in the process of creating that program? And also, how long do you think it'll take the Panasonic joint venture to ramp up and to go to market with either specific targets or potential litigations, as well?

James Douglas Skippen

Sure. We -- this is a rough number, but it's a little over 1,000 semiconductor patents. And the ramp-up...

Eyal Ofir - Clarus Securities Inc., Research Division

That's inclusive of the Panasonic patents or excluding?

James Douglas Skippen

No. That's inclusive of. And I know that we are planning for revenue from the semiconductor area this year towards the end of the year in our internal plan, so that's not a guarantee, but that's what we're working towards, that revenue starts at least by the end of the year. It could be sooner, it might take longer, but that's -- you know what I'm aiming for.

Eyal Ofir - Clarus Securities Inc., Research Division

That's perfect. And just looking out in litigation, you gave a nice update into what's going on right now. You also discussed your pipeline of 31 companies that you've actually spoken to in the last quarter. Should we anticipate more litigations getting started, or are you guys, because you're going through the strategic review, are kind of more -- I guess, will be a little bit more strategic in terms of how you actually handle litigations during this period?

James Douglas Skippen

Well, I mean, it's mostly business as usual in WiLAN. We just can't stop our business because we're going through this exercise of looking at strategic alternatives. Now I will say that I think our strategy, our thoughts are that we will be a little bit more judicious with litigation. There will still be litigation, but I don't think it's going to be at the level that we've seen it over the last couple of years. The other thing is that we will be insistent with our law firms that we have better predictability and more of a risk-sharing on any litigation we engage in, so that will positively impact expenses while we're conducting litigation. So I do think it's possible there will be additional litigations but not at the level that we've seen. And I don't -- I think if we think that it's necessary for the business to launch a litigation, then regardless of whether we're in a strategic review or not, we would launch it.

Operator

At this time, I'll turn the call to Mr. Burns for any concluding remarks.

Tyler Burns

This concludes WiLAN's Fourth Quarter and Fiscal Year 2013 Financial Results Conference Call. A replay of this conference call will be available until 11:59 p.m. on April 30 of this year. Instructions for accessing the replay of this conference call can be found on the news release that was issued today and on our website. Thank you very much for attending.

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Source: Wi-Lan Management Discusses Q4 2013 Results - Earnings Call Transcript
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