Q3 Fiscal 2011 Financial Highlights
-- Q3 revenues of $20.2 million, up 14% from $17.7 million in Q3 fiscal 2010 -- Q3 pro forma net income of $9.4 million, up 29% from $7.3 million in Q3 fiscal 2010. Pro forma diluted EPS of $0.78, compared to $0.70 per diluted share in Q3 fiscal 2010 -- Q3 GAAP net income of $7.4 million, up 231% from $2.2 million in Q3 fiscal 2010. GAAP diluted EPS of $0.61, compared to $0.21 per diluted share in Q3 fiscal 2010"The Company delivered excellent results during the third quarter," said John Lindgren, President and CEO, MOSAID. "Revenue growth reflected an increase in running royalty payments, while pro forma net income exceeded guidance due primarily to lower than expected operating expenses. The Company continued to generate strong cash flow from operations. As a result, we are raising annual guidance for pro forma net income."
"During the quarter, we settled our patent litigation suit against IBM, resulting in a favorable patent licensing agreement," said Lindgren. "We strengthened the patent portfolio with the purchase of patents and applications related to optical communications, wireless communications, sensor networks, storage systems, and power management systems. We also continued to file patents on our own inventions. As well, we introduced the MOSAID Dividend Reinvestment Plan, a cost- effective way for shareholders to accumulate shares in the Company."
MOSAID had cash and marketable securities of $118.9 million at the end of the third quarter of fiscal 2011, compared to $110.6 million at the end of the second quarter of fiscal 2011. In Q3 fiscal 2011, MOSAID returned $3.0 million to shareholders in quarterly dividend payments.
On March 3, 2011, MOSAID declared a quarterly dividend of $0.25 per share. The dividend, which is an eligible dividend, is payable on April 20, 2011 to shareholders of record as of April 6, 2011.
A reconciliation of pro forma net income to Canadian generally accepted accounting principles (GAAP) net income included is in the pro forma financial statements accompanying this press release.
Third Quarter Operational Highlights
Patent portfolio: MOSAID had 2,647 patents and applications at the end of Q3 fiscal 2011, up from 2,381 patents and applications at the end of Q2 fiscal 2011, and up from 1,915 patents and applications one year ago. During the quarter, MOSAID purchased for an undisclosed sum more than 200 optical communications patents and applications from PGT-Photonics S.p.A. of Italy. The Company also acquired patents related to sensor networks, and patents related to Hierarchical Storage Management computing systems and Power Management Systems. Subsequent to quarter end, the Company acquired wireless communications patents and applications related to handsets. There are no revenue sharing arrangements related to any of these acquisitions.
Litigation update: On Dec. 16, 2010, MOSAID entered into a patent license agreement with IBM Corporation. Under the terms of the non-exclusive worldwide patent license agreement, IBM received a five-year license to certain of MOSAID's patents. IBM will make a series of fixed payments to MOSAID during the term of the agreement. A separate settlement agreement ended the pending litigation between MOSAID and IBM.
Concerning the Complaint for Declaratory Judgment filed by Cisco Systems against MOSAID, during the third quarter, Cisco filed an Amended Complaint and MOSAID filed its Answer. A case management conference has yet to be scheduled.
Concerning MOSAID's Breach of Contract Complaint against LSI Corporation and Agere Systems, during the third quarter a case status conference was held, and it is expected that a trial date will soon be set.
Corporate developments: MOSAID established a Dividend Reinvestment Plan that allows qualified shareholders to acquire additional MOSAID shares by reinvesting any cash dividends paid on their respective shareholdings, without payment of brokerage or administration fees. The Company also announced changes to the Board of Directors. Jerry Mills, an acclaimed patent litigation attorney, technology entrepreneur and investor was appointed to the Board. Rob Kramer, Managing Partner of Altitude Capital Partners, stepped down from the Board due to other commitments. The Board thanks him for his many contributions.
Q4 and Fiscal 2011 Financial Guidance
Management offers the following guidance for the fourth quarter of fiscal 2011:
-- Q4 revenues of $20.2 million to $21.3 million -- Q4 pro forma net income of $6.2 million to $6.9 million, or $0.51 to $0.57 per diluted share, based on 12.1 million diluted sharesThe Company is updating its guidance for fiscal 2011:
-- Fiscal 2011 revenues are now expected to be in the range of $78.9 million to $80.0 million, compared to $77.0 million to $80.0 million previously -- Fiscal 2011 pro forma net income is now expected to be in the range of $33.5 million to $34.2 million, or $2.79 to $2.85 per diluted share, based on 12.0 million diluted shares, compared to the previous guidance of $31.2 million to $32.6 million, or $2.62 to $2.74 per diluted share, based on 11.9 million diluted sharesThe above information is considered material forward-looking information. Financial guidance is provided to assist investors and other interested parties in understanding the Company's business. The reader is cautioned that using this information for any other purpose may be inappropriate.
MOSAID's revenues result primarily from intellectual property agreements, which by their nature may actually close on dates other than those projected. MOSAID's priority and focus is on obtaining the best terms possible under its agreements, rather than on the particular timing of agreement closure. MOSAID's revenues depend upon, among other items, the continued ability of its licensees to pay amounts as they become due. The Company takes steps, including monitoring the creditworthiness of its licensees, in order to manage this risk.
Due to the nature of the expense, patent licensing and litigation expense can vary significantly quarter-to-quarter.
The "Forward-Looking Information" section of this document provides information on various risks and uncertainties faced by the Company.
Conference Call and Webcast
Management will hold a conference call and webcast on Thursday, March 3, 2011 at 5:00 p.m. ET. The webcast will be live at www.mosaid.com and may also be accessed by dialing 1-800-446- 1671. Please provide confirmation number 29045992. The webcast will be available on mosaid.com for 90 days following the event.
MOSAID Technologies Inc. is one of the world's leading intellectual property companies. MOSAID licenses patented intellectual property in the areas of semiconductors and communications technologies and develops semiconductor memory technology. MOSAID counts many of the world's largest technology companies among its licensees. Founded in 1975, MOSAID is based in Ottawa, Ontario, Canada. Visit www.mosaid.com and InvestorChannel.mosaid.com for more information.
Pro forma net income, a non-GAAP measure, is GAAP net income adjusted for stock-based compensation, patent amortization and imputed interest, foreign exchange gains and losses on "Other long-term liabilities," and any other non-recurring items. The Company uses pro forma measures internally to evaluate and manage operating performance, and to forecast and plan. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers.
This document and certain other public documents incorporated by reference in this document, contain forward-looking statements to the extent they relate to MOSAID or its management, including those identified by the expressions "anticipate," "believe," "could," "estimate," "expect," "foresee," "intend," "may," "plan," "will," "would" and similar expressions. Similarly, statements in this document that describe MOSAID's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. These forward-looking statements are not historical facts, but rather reflect MOSAID's current expectations regarding future events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results, performance or achievements to differ materially from those in such forward-looking statements. Assumptions made in preparing forward-looking statements and financial guidance include, but are not limited to, the following: MOSAID's continued expansion of its patent portfolio and of its opportunities for future patent licensing revenue as a result of MOSAID's acquisition of patents from third parties and from development of new inventions; semiconductor and telecommunications product vendors continuing to infringe MOSAID's patents; the timing and amount of MOSAID's litigation expenses; MOSAID's ability to sign new patent licensees; current assumptions as to the identification of products that are unlicensed to MOSAID's wireless patents; and the timing and amount of MOSAID's Research & Development expenses.