Wi-Lan's (WILN) CEO Jim Skippen On Q4 2015 Results - Earnings Call Transcript

| About: Wi-Lan Inc. (WILN)

Wi-Lan Inc. (NASDAQ:WILN)

Q4 2015 Earnings Conference Call

February 4, 2016 10:00 ET

Executives

Jim Skippen - President and Chief Executive Officer

Shaun McEwan - Chief Financial Officer

Analysts

Daniel Kim - Paradigm Capital

Todd Coupland - CIBC

Doug Taylor - Canaccord

Presentation

Operator

Good morning and welcome to WiLAN’s Fourth Quarter and Fiscal Year 2015 Financial Results Conference Call. [Operator Instructions] Earlier this morning, WiLAN issued a news release announcing its financial results for the fourth quarter and fiscal year ended December 31, 2015. 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 an opportunity to ask questions. Certain matters discussed in today’s conference call or answers that maybe given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect 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, WiLAN will refer to adjusted earnings. Adjusted earnings does not have any standardized meanings prescribed by U.S GAAP. Adjusted earnings are defined in the company’s quarterly and annually filings that are made available on SEDAR and EDGAR. Please note that all financial information provided is in U.S dollars, unless otherwise specified.

I would now like to turn the meeting over to President and CEO, Jim Skippen. Please go ahead sir.

Jim Skippen

Thank you and good morning everyone. I would like to start off with some of the highlights for the quarter and the year. Driven by strong kind of license activity during the fourth quarter, we generated revenue of over $26 million, up 18% for Q4 last year. Revenues for the year grew 5% to $102.9 million third straight year of growth. Adjusted earnings for the quarter were $15.7 million or $0.13 per share. This was up 30% from Q4 last year. For the year, adjusted earnings were $59.6 million or $0.49 per share. This was up 2% from last year. We generated $10.7 million of cash from operations in the quarter, returning $4.8 million to shareholders in dividend payments. For the year, we generated $43.5 million of cash from operations returning $20.1 million to shareholders in dividend payments. Major acquisitions in the year, includes the Freescale portfolio of approximately 3,300 patents in Q4 and earlier in the year the Qimonda portfolio consisting of approximately 7,000 patents. The Board has declared a quarterly dividend of CAD$0.0125 per share. This dividend will be paid on April 6, 2016 to shareholders of record on March 22, 2016.

Finally, subject to regulatory approval, the Board has authorized management to implement a normal course issuer bid to purchase the company’s stock in the open market. The buyback will give us the option to purchase up to 10% of our common shares. We thought that buyback was appropriate, because at current levels, the stock price seems disconnected from the inherent value of our company. Illustrate this point considering that the market cap of our company has been floating around the approximate $130 million range recently. When one considers that our backlog and cash alone after netting future patent payment obligations to the third-parties represents between $240 million and $270 million, we feel using some of our cash to purchase our stock represents an extremely compelling use of cash at this time. These two items, namely net backlog and cash represent approximately $2 to $2.25 per share or about CAD$2.80 to CAD$3.15 per share. This is before we attribute any value to our portfolio of over 15,000 patents and the revenue potential of those patents.

Turning now to licensing, during the fourth quarter, we signed 16 license agreements. Q4 licenses signed were in the areas of image sensing for smartphones, wireless, medical technology and semiconductor packaging. Some of these were with large blue-chip companies such as Netflix, Toshiba, Kyocera and NEC. For the year in total, we signed 45 licenses. Other areas that we signed licenses in included networking, allied utilizing, irrigation control, building automation, automotive and various other semiconductor technologies. Some of the other notable names who reached agreements with were Samsung, Xerox, Nikon, [indiscernible] and Olympus. Included in our 2015 license tools were six renewals. These included renewals was Xerox, Gammatech and TrendNet, all were related to wireless technologies. Our [indiscernible] from Q4 carried on into the New Year. In 2016, we have already signed six license agreements, including agreements with Global Foundries, a large semiconductor foundry.

Turning to acquisitions, in Q4, we acquired a portfolio of approximately 3,200 patents as I mentioned earlier from Freescale. This portfolio was acquired on a partnership model in which Freescale will receive the bulk of its consideration only from the successful licensing of the portfolio. We have already got in a dozens of examples of patent use from this portfolio and various companies’ products and we believe this portfolio will be a key driver of future revenues. Another key event for us in 2015 was the Q2 acquisition of Qimonda semiconductors patent portfolio or on the semiconductor patent portfolio from Insignia. Like Freescale, the Qimonda portfolio was an important acquisition due to its magnitude, quality and revenue potential.

As stated in the past, generally our patent acquisitions for IT is focused on partnering with patent owners involving little or no upfront payment for the patents and assuring of any awards. This significantly reduced the cost of patent acquisition for Wi-Lan. However, in unique circumstances like the Qimonda acquisition, we may consider a larger outlay of cash to acquire portfolio. This is particularly attractive with Qimonda portfolio because Samsung took a significant license to the portfolio immediately after we acquired it. Global Foundries also recently took the license of this portfolio as I mentioned.

Also of note in 2015 with the acquisition of a microscopy-related IP portfolio used to produce enhanced images as was acquired from top research institution and was announced in Q2. This IT has potential applications in life sciences, material sciences and semiconductor research among others. We have already signed several licenses related to this portfolio. In total, we signed 11 new partner agreements to acquire new portfolio since 2015. We now have more than 50 partner programs for different portfolios in several industry verticals. As we look to the future, having a large portfolio of quality patents will help drive card volumes of future licenses.

Along those lines, we made great progress growing our patent portfolio in 2015. We currently have a portfolio that is more than 5x larger than it was a year ago. On the litigation front, WiLAN has 60 litigations active at this time involving more than 65 patents. I would remind investors that we intend to focus going forward on announcing licenses rather than wins or setbacks in court along the way. As with our partner’s strategy for patent acquisition, we are also following the strategy of sharing the awards with our litigation fronts. We look to minimize payments during the trial and is sharing the awards when that agreement is reached. This again has the effect of helping to keep our cost control and aligning our litigation [indiscernible] with our own.

In conclusion, 2015 was a building year in the licensing and acquisition front. We made the necessary decisions operationally to strengthen the business for the long-term. In order to remain a strong player in the evolving IP market: one, focus on licensing in appropriate cases selling parts of our patent portfolio; two, we will continue to acquire new high-quality patents; three, we will broaden our deep licensing strength of our team; and four, we will prudently manage our cash flow.

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

Shaun McEwan

Thank you, Jim and good morning everyone. 2015 revenue was $102.9 million representing a 5% growth over 2014. Q4 revenue at $26 million was up 18% year-over-year. As Jim mentioned, the increases were driven by the large number of license agreements signed throughout the year. At December 31, our estimated backlog position was in the range of $175 million to $205 million. Backlog consists of the value of signed licensed agreements, which have fixed periodic payments plus our estimate of revenues to be collected undersigned running royalty license agreements. We expect the majority of these revenues to be collected over the next 3 fiscal years with some license agreements extending to more than 7 years. Our 2015 cost of revenue expenses were $70.4 million or 68% of revenue as compared to $63.2 million or 64% of revenue in 2014, Q4 cost of revenue was up in dollar terms, but lower as a percentage of revenue.

Due to higher level of litigation activities, our litigation expenses were $13.2 million for 2015 versus $9.9 million in 2014. These litigation expenses include any full fee or high-grade fee arrangements with litigation counsel council and any third party expenses related to our litigation. They do not include any contingent litigation fees. These are recorded in the contingent partner payments of legal fees line item within the cost of revenues. For Q4, our litigation expense was $2.1 million, well within the $2 million to $2.5 million range given on our Q3 conference call. Looking out to 2016, we expect litigation expense to be lower than our 2015 level based on our current case load.

Another significant cost of revenue expense is patent maintenance, prosecution and evaluation, which was $7.7 million for fiscal 2015 and nearly $2 million for the fourth quarter. This expense is proportional to the size of our overall portfolio. And given that we acquired more than 10,000 patent applications in the last half of last year, we would expect this expense to increase significantly in 2016. To manage that, we are working aggressively to reduce any non-core patents in our portfolio and keep that expense and the expenses growth at a minimum.

Finally, contingent partner payments and legal fees at $3.6 million for the year and $2.4 million in the fourth quarter alone are directly related to new agreements signed in that particular quarter. As our revenues from our licensing program continue contingent payment obligations continues to grow, we would expect an increase in this expense item as well. The net effect of the changes in these three significant expense categories is through expected slightly increase in cost of revenue expenses year-over-year starting in 2016.

Due to a decrease in compensation and benefits as well as lower spending in virtually all other categories, marketing, general and administration expenses for 2015 was $7.5 million, almost 30% lower than 2014. Q4 MG&A expense was also well below the Q4 2014 level. Research and development expense was flat through 2015 at $2.4 million. As discussed on our last call, the restructuring activities, which commenced in October of 2015 resulted in the elimination of our R&D activities. Therefore for fiscal 2016, we do not expect to incur any expenses related to R&D.

Regarding this Q4 restructuring, we took a charge of $1.3 million related primarily to the workforce reduction. We do not expect any further charges related to this restructuring. In addition, as part of the restructuring, we terminated certain licensing programs. This resulted in the carrying value of the patent portfolios associated with those licensing programs to become fully impaired. As a result, we reported a non-cash pretax charge for asset impairments of $1.7 million in the three months ended December 31.

Looking now to the bottom line, in 2015 WiLAN reported GAAP net earnings of $10 million or $0.08 per share on both the basic and fully diluted level, compared to $9.7 million or $0.08 per share in 2014. Of note, GAAP earnings in 2015 included the $1.7 million impairment charges just mentioned and the $1.3 million restructuring charge. 2015 adjusted earnings were $59.6 million or $0.49 per share on a basic level, representing approximately 58% of revenues.

Turning our attention to cash flow and our balance sheet, we generated $10.7 million in cash from operations in the fourth quarter and paid $4.8 million to shareholders in dividend payments. We made payments for patents acquired in the current and previous fiscal year in the amount of $6.8 million. For the full year of 2015, we generated $43.5 million in cash from operations. We paid $20.1 million in dividends and $56.1 million in payment for patent acquisitions made in 2015 and previous years. As a result, we ended the year with cash, cash equivalents and short-term investments on the balance sheet of $94.6 million as compared to $127.6 million at the end of 2014.

As Jim mentioned, we announced our intention to implement the share buyback in 2016 subject to regulatory approval. We believe this is an appropriate use of funds for the business while shares trade near these levels. From a capital allocation perspective, we will weigh all opportunities available to the firm and see to the make investments whether it will be buyback, patent acquisition or whatever else makes that we believe provides the best potential for increasing shareholder value.

Lastly, our guidance for the first quarter of 2016 is cash operating expenses are expected to be in the range of $8.5 million to $10 million, of which $1.5 million to $2 million is expected to be litigation expense. And as a reminder, this guidance does not include any contingent payments that may arise as a result of incremental revenues booked in the quarter.

And I will now turn the call over to the operator for our first question.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Daniel Kim with Paradigm Capital. Please proceed with your question.

Daniel Kim

Good morning. Thank you. Jim just wanted to clarify your original comment at the beginning of your opening remarks, if backlog currently sits at $175 million to $205 million, I believe you referenced the number of $240 million to $270 million, is that – sorry is the setback to backlog is 3 years to 5 years, so that other number your referenced, is that for, I believe you said 7 years less contingency fees, so that would be more viewed as a total cash flow undiscounted to WiLAN?

Jim Skippen

No. What I am saying is that the $175 million to $205 million that’s the backlog that we currently have. And the reason there are some variabilities, because some of the agreements are running royalties, so we don’t know exactly what they will be. But we have some payment obligations for patents that we have already acquired that we have to pay over a similar term and in some cases, in most cases, it’s actually for the people that are paying us on the backlog. So it’s kind of an offset. So just to be very, very straightforward with the value, we say look, take offset number and that number is $28 million. So take $28 million off from the $175 million and the $205 million and that is pure backlog. There is no – and that’s the only payment obligations the company has other than short-term obligations associated with business. That’s how we are trying to say that when you look at the inherent value and you add the cash and you add that up, it’s so much more than the current stock price that it just speaks to us as being at this fact.

Daniel Kim

I see, okay. Got it, okay. Very good.

Jim Skippen

Outside contingency payment is nothing like that it’s a pure payment obligation that we owe some parties for some of the acquisitions that we have made.

Daniel Kim

Alright. So this will be a direct measure of potentially you are taking your cash flow stream and the current value with that that would be less the obligations?

Jim Skippen

Yes. Exactly.

Daniel Kim

Right. Okay, got it. Okay, rerrific. Just a couple of more questions, if I may, just to clarify, perhaps this should be better suited to Shaun. With regards to contingency partner payments, if we look at that in the quarter $2.4 million, given the guidance for cash – excuse me, cash operating expenses and the view on litigation, if I am doing my math right, it looks like contingency partner payments will probably hold in and around the same level, would that be fair level to use as a forward metric for the balance of 2016?

Shaun McEwan

It’s very difficult to predict, right, because it’s predicated obviously on the revenues we book in the quarter and any of the revenues that are related to partner programs, in particular. So it’s pretty difficult to forecast that quite frankly. But I think it’s probably fair to keep at similar levels.

Daniel Kim

Okay, terrific. And going back to Jim, if I look at the way that revenues had been shaping out with your top customers, by and large, it looks like it’s been pretty steady with your top 10 representing roughly three quarters of your business. My question is, if we look at how the customer mix has changed over time given that there has been some termination of final payments in Q4 how has your customer mix changed over time. I guess my question is I am trying to get a better sense of where your old customers are falling off and how much of that might be being renewed versus what is new and how that overall mix is changing from core wireless business past December than newer patents going forward?

Jim Skippen

Okay. Well, it’s a tough question. I think basically because we keep adding programs, the universe of licensees, the customers generally just keeps growing. So, we don’t want going away is that we are adding new ones all the time. There have been some agreements, certainly wireless agreements that required renewal. By and large, they are getting renewed as I alluded to we signed a number of renewals in the year. But some of the larger wireless deals won’t be renewed until 2017, but we expect that they will be renewed at that time. So, it’s growing as opposed to changing would be the way I would characterize it.

Daniel Kim

Very good. Thank you. And last question I would be remised to ask if this recent news, I am not sure if you saw it this morning, but VirnetX was awarded pretty substantial award against Apple for a case that went back to 2012. Any read through on that implication and this is one of the largest awards we have seen against Apple. There is only a couple of patents which...

Jim Skippen

Yes. I mean, I think the takeaway, which is obvious to me having worked in this industry for many years and run these types of companies for a while is that it is a long game here. People thought VirnetX was out of it. They had some adverse rulings. And they have come back now and gotten a case ruling against Apple. We have many patents that are up in Apple. They have to be that’s over and over again on every patent. And I think – I don’t think they are going to if they keep risking in a quarter. And eventually, we should be getting a ruling that is significant in a court against Apple. It takes a while and I don’t – I hope will have to assume, but we have a lot of patents that Apple infringes. So, that’s the takeaway for me. This is what Apple risks when they continue to fight us. And we have lost [indiscernible] against themselves, I thought it was interesting that’s but not surprising or shocking, but it is a reminder that, that VirnetX will investors start with beyond their luck, certainly turned it pretty fast and all you need is one win. So, that was the takeaway for me.

Daniel Kim

That’s terrific. Thanks so much and I will get back in the queue.

Operator

Thank you. Our next question comes from the line of Todd Coupland with CIBC. Please proceed with your question.

Todd Coupland

Yes, good morning everyone. Nice fourth quarter. Great to see the uptick on this. Couple of questions if I could. Housekeeping firstly, off the backlog how much – roughly what percentage of the backlog is in those expiring wireless deals at the end of 2016?

Jim Skippen

The best granularity we are prepared to give on that, Todd, is to suggest that the majority of the backlog rolls out over the next 3 years. Some of that obviously would be the retiring licenses that need to be renewed in ‘17, but not all of that for sure.

Todd Coupland

Welcome. Second housekeeping question, so should we be modeling – what cash tax rate should we be modeling in 2016?

Jim Skippen

Our cash taxes continue to be predicated predominantly on withholding taxes in foreign jurisdictions, right. So, we tend to run between 4% and 5% historically. I don’t see that changing at least in the short-term.

Todd Coupland

Okay, great.

Jim Skippen

Sorry, Todd, we are still sitting on more than $120 million worth of tax pool, only half of which is actually valued on the balance sheet. The other $17 million is in the valuation allowance. So, there is still a substantial amount of tax assets here before we are actually going to pay real cash taxes or withholding taxes.

Todd Coupland

Welcome, thank you. So, you have come through a few months of very active signings and I was wondering if you can give an update is – are you still deep in negotiation with many players in this last couple of months of robust signing range. Do you feel that’s going to continue as we move into ‘16?

Shaun McEwan

I would call it hard to prediction are, Todd, but the best outlets [indiscernible] out of me and if we can get continue to close at the rate that we have been out and we have the negotiations and the parties to do that. We would have pretty good 2016, but there is just a little bit of an unknown. But there is lots of activity and lots of possibility. I mean, for instance, Global Foundries, which we have already signed, that’s not in the backlog, those are significant deals under and that’s just sort of what we think is possible with Qimonda and Freescale which are just sort of launching now. So, we don’t [indiscernible] kind of lot of stuff throughout of the significant amounts.

Todd Coupland

Right. And I know you don’t want to disclose the wireless piece of the backlog, is there any color you can provide on your expectations for renewals with those OEMs?

Jim Skippen

I mean, I said this before, I don’t want to saying this again that we built a 5-year plan and the plan was going to be signed at where things are going. We do expect revenues to grow over that period significantly. And in that, we do plan on removals, but we are planning them for significantly less in the original licenses for signed and notwithstanding that we still think we are going to have a chance of growth. I think, it’s probably less of the backlog than is generally assumes is bank pressure, but hopefully I might provide a little bit of color.

Todd Coupland

Right. Okay, that’s helpful. And then just lastly on capital allocation, so you talked about the buyback. At what level of cash flows above the, let’s say, currently where you are, for example, would you need to be to consider a special dividend?

Jim Skippen

Well, I think that’s a tricky question. I mean, we will have to see what happens. I think the factors that could militate in favor of the special dividend would be; one driven from our shareholders that they would like that; two, a windfall, which could happen. We could have significant deals. It gets closed. We are meeting more and more these days taking more money upfront rather than spreading it out as we have in the past. And if we find ourselves with a lot more cash than our operations require, I think we certainly consider a special dividend. But I can’t prescribe the exact circumstances under which we would consider that, but I can tell it is – we would consider it under the right circumstances.

Todd Coupland

Okay, that’s great. Thank your for the color.

Jim Skippen

Thanks.

Operator

Thank you. Our next question comes from the line of Doug Taylor with Canaccord. Please proceed with your question.

Doug Taylor

Thanks. Good morning. You did a good job detailing the value you have seen in your existing backlog and your cash. What percentage of your OpEx would be required to be maintained to see that you collect all of the current backlog if that was just to amortize the remaining term?

Jim Skippen

Well, it’s difficult to say, but you need of course I guess [indiscernible] and if someone stops paying, you would want someone may be to chase them down, because – but there’s not – it’s a little bit like a bond, by clipping on coupon on a bond as long as you can keep paying, pay according to the bonds. It’s pretty straightforward.

Doug Taylor

Right. But yes, I am there, I mean I was – I would think that if you guys were to just imply in that argument is if you guys were to stop working on getting new licenses, do you think you have the probability of collecting that would decrease as people would see view you as potentially less likely to come after in one other things?

Jim Skippen

Well, I don’t know it’s again, what’s the basis that some would have, I mean do not pay us. I mean they have a contract where they have agreed to pay us. In most cases, there are not circumstances that would alleviate that obligation. So now it’s the correct obligation to pay, it’s not even tied to patents in the vast majority of cases. So I don’t know what basis they would have do not pay. Now, if no one is willing to afford us, if they decide to stop paying, I guess that’s the possibility. But I don’t see why the company would not enforce it.

Doug Taylor

Fair enough. With the wireless patent portfolio in backlog that, I mean as you are renewing the ones that you have renewed recently, I mean are you willing to comment on where – how those renewal discussions have happened and the relative value on annual basis of each patent versus what it was when you originally signed it, anything to help us with that…?

Jim Skippen

We have – I mean Cisco renewed the license, Samsung renewed the license. Those were some bigger ones. The ones that we have had come up this year for renewal have been smaller, but I can tell you the rates are the same, they haven’t changed. And what’s compelling, I think to the license fees is just the tier size and scope of our portfolio. They are used to having as a percentage that we pay for our [indiscernible] cost of materials for their products. And so they are open to continuing. And in some cases, they contact us and is calling us up to renewal time and tell us they want to renew without us even approaching them. But they have been smaller, but I can’t tell you the bringing answer to the same.

Doug Taylor

So as we have lapsed the large period of renewals which you are expecting in the next couple of years, you would expect your backlog all the people to re-inflate just by virtue of you renewing existing term patent licenses?

Jim Skippen

Yes. I do think that is likely, I mean it’s – there are accounting changes that are being proposed, it’s possible that we would lean more towards just getting paid upfront, because we may have to recognize our revenues anyways, so there is no advantage. We will have to see how it plays out. But if we spread out payments, we anticipate that we would have growing backlog at those times.

Doug Taylor

Okay. And then I mean in all of these different circumstances, you would expect the proportion of your revenue that’s coming from either upfront payments that have a more of a contingent litigation to increase as a proportion of your revenue going forward. So I mean the variability in your revenues is likely to increase as that trend continues?

Jim Skippen

Variability, I mean it’s hard to say. I mean if you look at our revenue profile over the last 9 years, it’s been relatively steady growth. Will that change, I don’t know, it’s hard to say. But I don’t – while fluctuations, we will have to see. I mean we hasn’t worked out that way so far. Quarter-on-quarter, I guess it is possible that we might see some fluctuations. I think on a yearly basis, hopefully we won’t see that much. I guess the other thing, you sort of [indiscernible] the contingent payment. I mean, the contingent payments affect revenue. They affect the bottom line much more. And even though we are moving more and more in that direction, we still – the majority of our patents are still basically owned out right by us. Without – you see they are very small renewal contingency payment. So we were not – all our revenues are impacted by contingency payments at this point, it would be many years before that’s the case.

Doug Taylor

Great. And the last question for me I will just further set there as this is somebody usually does, I mean just from your seat can you – I mean we talked about [indiscernible], could you comment on the just the overall backdrop in the U.S. for patent litigation and how you see that has changed recently?

Jim Skippen

Well, I mean there is – you have been looking under the [indiscernible] to understand the environment has been very, very tough. I actually was approached by a guy who writes a lot of articles in this space this week. And he told me that he was writing an article that you think the volume of the market should reach and we are starting to read now aiming of that decision is the indication of that it’s hard to say. We have kind of things that existing in that environment really the whole most of balance life and if the environment has got tougher and tougher. And notwithstanding that, we have managed the continued revenues, earnings that generate significant cash flow. So we think that we are okay if the environment seems tough – to be tough. And certainly if it improves, which is a distant possibility, we are very well-positioned in that too, so that’s all, I can tell you. Maybe a little bit more color, the legislation in the U.S. is still getting batted around. The biggest issue in that is that there could be – if right now in the U.S. unlike Canada, if you litigate a case what’s being proposed loser when have to pay the other side’s legal costs. What’s being proposed is that allusive of what happens maybe other side of legal costs. Now that’s the big change. And really for a well-capitalized company like ours, we think we can deal with that change in that risk, because the risk applies equally on the other side. A number of other people in the patent games just don’t have enough resources to handle [indiscernible] and it may affect the lower end of the market, which actually in a strange way helped us. So we think we will no matter what happens, but there are some signs that maybe the partnership.

Doug Taylor

That’s helpful. Thanks. I will pass the line.

Jim Skippen

Okay, thanks.

Operator

[Operator Instructions] Our next question comes from the line of Daniel Kim with Paradigm Capital. Please proceed with your question.

Daniel Kim

Thank you. Jim since you suggested it, I need to ask backlog, can you guess where it stands today given that you did not account some of the big deals that were announced in the quarter?

Jim Skippen

I am reluctant to do that, but obviously it’s we burn through some during the quarter, but it’s going up because of the new licenses we have signed. But we are not going to give that at this time. We don’t want to vary from our typical way of doing it. We will just be giving it as of the end of the quarter.

Daniel Kim

Okay, fair enough.

Jim Skippen

[Indiscernible] because if we give it every quarter, it does make it very easy for other people to know what people paid and it could become a problem for our license fees, because believe it or not, next year how much they pay, the disclosure of the amount or even the disclosure of patent license can be really, really sensitive to them and to be in a patent to get the licenses signed, we have to balance that against the desire to give our investors the fullest disclosure we can. So that’s the situation.

Daniel Kim

Of course, understood. But I need it to ask to get the answer. Two last housekeeping questions, if I may, can you discuss what the CapEx on acquisition for patents might be for 2016 and 2017, understanding that Freescale payments will be carrying off, I presume this number is going to be coming down pretty dramatically versus 2015?

Shaun McEwan

I can tell you Daniel, our internal budgeting is in the $6 million range, on an annualized basis, it used to be around $10 million, historically subject to finding the Qimonda’s in the Freescale in a row. And we have been generally either below that other than these one-time big deals. I think, our current budget, we have taken down given the higher reliance on the partner side of the business on a go-forward basis, so it might be in the $6 million or lower range.

Daniel Kim

$6 million for all of 2016?

Shaun McEwan

Yes.

Daniel Kim

And that’s including the tail for Freescale?

Shaun McEwan

No. That would be net new acquisitions, right.

Daniel Kim

The net new, okay. And so the gross new number, then?

Shaun McEwan

While there is $9 million in our accounts payable, that will be – that’s related to patent acquisitions that we paid out over the year. There is another $5 million or so that will come up of our patent finance obligations, right. This is a debt that Jim talked about at the very beginning. So we had those two numbers together plus that $6 million, so I could see the upside being in that kind of $20 million ish range at max.

Daniel Kim

Great. And then, I believe Freescale then falls off for 2017, is that right?

Shaun McEwan

Yes.

Daniel Kim

I apologize…

Shaun McEwan

Yes. It will be retired in all [Technical Difficulty].

Daniel Kim

Great, very good. And just last question, there is a reference to potential asset sales. Jim, is it something that we should be monitoring closely in terms of how material this might be to your cash?

Jim Skippen

Well, a patent sale would be accretive to the cash. The way we view it is sort of an opportunistic basis. And we are looking at some – we are in discussions with some parties, with some non-core assets that we might be interested in selling. And we will just have to see where that goes. So I think lastly just treated as something that may be opportunistic and sort of a windfall when it happens.

Daniel Kim

Okay, perfect. Thanks so much.

Jim Skippen

Okay.

Operator

Thank you. This concludes Wi-Lan’s fourth quarter and fiscal 2015 financial results conference call. I will now turn the call back to Mr. Skippen for final remarks.

Jim Skippen

Thank you for attending Wi-Lan’s 2015 Financial Results Conference Call. Please feel – welcome to reach us if you have any questions. Goodbye.

Operator

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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