OTTAWA – WiLAN (TSX:WIN) says it will be slashing the company’s dividend by 76 per cent starting in January in response to a difficult environment for the patent-licensing industry — its main source of revenue and profit.
The Ottawa-based company— which lives on fees from licensing intellectual property that’s embedded in many types of consumer electronics — also says it plans to spin off its research and development unit into a separate company.
The restructuring is expected to reduce cash operating expenses between US$8 million and US$10 million a year and the revised dividend policy could trim additional millions from its cash outlay each year.
“We believe these steps are essential to the long-term growth and strength of our business and to our ability to continue delivering healthy profit margins,” WiLAN chief executive Jim Skippen said Wednesday as the company reported its third-quarter results.
Skippen noted that proposed legislation that’s making the rounds in the United States — where WiLAN routinely fights prolonged legal battles with much larger companies — would put the cost of patent litigation on whichever side loses.
“Now that’s never happened to us . . . but to be able to handle a worst-case scenario, and be able to monetize all of these patents, we feel we’ve got to be a little bit more careful with cash than we have been in the past,” he said.
WiLAN currently has about 50 patent cases in various stages of litigation, including a battle with Apple at the U.S. Federal Court of Appeal.
Skippen said WiLAN has acquired “incredibly powerful” patent portfolios “but they need money for us to be able to drive litigations if necessary and extract the value out of them.”
WiLAN will cut its regular dividend, which is paid in Canadian currency, to five cents per share annually from 21 cents per starting in January. However, Skippen left open the possibility of special dividends on top of that.
WiLAN’s revenue for the three months ended Sept. 30 was US$21.4 million, adjusted earnings were US$12.2 million or 10 cents per share and net income under U.S. accounting rules was $829,000.
In the third quarter of 2014, reported in U.S. currency, WiLAN’s revenue was $24.7 million, adjusted earnings were $13.2 million or 11 cents per share and the company had a net loss of $375,000.
WiLAN shares hit a multi-year low of $1.65 at the Toronto Stock Exchange after the announcement. The stock recovered somewhat later in the day but was still down 26 per cent or 66 cents per share at $1.84 in afternoon trade.
— by David Paddon in Toronto
Follow @DavidPaddon in Twitter.
Note to readers: This is a corrected story: An earlier version said WiLAN recorded US$15.2 million in dividend payments in first nine months of 2014, instead of $14.2 million in the first nine months of 2015.