Jim Skippen – President and Chief Executive Officer Shaun McEwan – Chief Financial Officer

Daniel Kim – Paradigm Company Doug Taylor – Canaccord Genuity

Good morning, everyone. And thank you for joining us on our Q3, 2016 conference call.

I will open the call with a look at operational highlights for the quarter and then pass it over to Shaun for a closer look at the numbers. Starting with highlights.

Revenues in Q3 was $16.6 million, EBITDA was $9.3 million and cash generated from operations was $6.2 million. Our cash balance stood at $103.2 million at quarter end, which is up $8.6 million since the beginning of the year.

The Board also declared a dividend of CAD0.125 per share, all other numbers are in U.S. The most notable business developments in the quarter relate to new patent litigation commenced in particular those related to the patent portfolio that was acquired from the Stanford Research Institute.

As a reminder, the patents from the Stanford Research Institute cover advances and technology that became the SIRI voice-activated assistance program in Apple devices. Since acquiring those assets we have been busy preparing cases.

This is an in-depth multi-step process where we identify parties that are infringing and how they are infringing and build a case around it. I would like to offer some further thoughts on the revenues this quarter.

As we discussed in our Q2 call there is no question that our business performance can be lumpy quarter to quarter. With Q4 last year and Q1 this year we have back to back quarters of revenues that exceeded expectations.

Now with Q3 we have had back to back quarters slightly below expectations. As we said in the past, this lumpiness is now standard for our industry and one or two significant licenses can result in material swing quarter to quarter.

I can’t confirm that we have a number of large opportunities in the pipeline. But we will continue to resist the temptation to take a deal that is less than it should it be simply to have a better quarter.

We are also pleased that even our revenues were relatively late – we still generated a solid EBITDA margin and GAAP profitability. We will continue to manage and adjust our cost base to match the level of business activity.

Taking a look at some of the license highlights. We had success in Q3 with our North Star portfolio which was acquired from Freescale.

We signed a license with Integrated Silicon Solution Inc. a smaller provider of DRAM integrated circuits.

We also had two signings to our Automation Middleware portfolio, which covers technology, use in manufacturing facilities. Finally we had a wireless renewal in the quarter with ZTE.

Turning to acquisitions this quarter we acquired a portfolio of wireless patents from MLR LLC. These patents cover certain Wi-Fi technology used in a variety of wireless products.

An area where we continue to have technical expertise. The portfolio was acquired under the partner model.

We are happy that Charles Leedom, CEO of MLR publicly stated that MLR is pleased at WiLAN and has agreed to apply its wireless expertise to license MLR’s important portfolio. Multi-mode Wi-Fi patents, which we consider a strong endorsement of our expertise and track record.

Mr. Leedom also said that WiLANs well earned reputation for conducting successful licensing programs on behalf of inventors was a crucial factor in MLR’s decision to partner with WiLAN on this portfolio.

Turing now to litigation, we currently have more than 60 ongoing litigations. Since just the beginning of Q3 we’ve launched a number of different litigations on a variety of different technologies including image processing voice activated assistance, wireless technologies, memory technologies, internet searching, business variable and semi-conductor memory.

In last quarters call we noted that we have recently commenced a litigation against Deutsche Telecom in Germany on network management patents acquired from Siemens. Subsequent to the end of Q3 we commenced additional litigations in Germany against both Amazon and Sony.

We continue to look at other geographies to commence litigations outside the U.S. such as in Canada where we have several ongoing litigations today as well as China and Germany.

And in fact last week, we launched our first Chinese litigation on networking patents against Sony. This quarter the amount paid out in dividends was $1.2 million while the amount returned to shareholders through buybacks was $1.1 million.

So far this year we have paid out $3.4 million in dividends and $4.2 million in share buybacks. Looking forward, the Board has declared a dividend of CAD0.125 per share payable on January 4, 2017.

In closing, with more than 16,000 patents and more than 60 ongoing litigations, we continue to build our pipeline, future licenses and revenue opportunities. Our results in the past two quarters reflect the fact that we are not immune from the variabilities that impacts every business in the patent licensing sector.

While we will occasionally have slower quarters, we believe we must resist the temptation to take deals simply to bolster a quarter if the deal does not represent fair value to WiLAN. We actually expected we would have a stronger Q3 until almost the end of this quarter when final offers failed to meet our minimum thresholds.

I can confirm that turning down offers that could make strong quarter is difficult for management. Because a significant portion of our compensation is tied to the stock price, so every employ feels that if the stock price is affected because of quarter that fails to meets expectations.

However given our patent portfolio, our license pipeline and our financial resources we keep the faith that if we keep adding to our pipeline holding up for fair value that those efforts will be rewarded with long term growth and stronger markets. Over to you Shaun

Thanks Jim and good morning everyone. I’ll start things off with a quick look at revenue.

Revenue in Q3 was $16.6 million compared to $21.4 million in the same period last year. And year to date our revenues of $62.7 million, as compared to $76.8 million for the same period last year.

In this quarter the top 10 licensees accounted for approximately 87% of revenues versus 77% for the same period last year. Cost of revenue expenses were $12.1 million in Q3 down from $16.7 million last year.

Year-to-date cost of revenue expenses were $46.3 million down from $52.3 million in the same period. Year-over-year lower expenses are due to the decrease in litigation expense offset in part for increases to patent maintenance fees and contingent litigation payments.

Our performance so far this year reflects the shift towards more contingency based litigation expense. The expansion of our partner programs as Jim – and the overall growth of the patent portfolio.

Litigation expense was approximately $750,000 in Q3 down from $1.7 million in Q3 last year. Our Q3 litigation expense compares favorably with our guidance, which was for a range of $2.7 million to $3.1 million.

Litigation expense is down significantly year-over-year as well at $2.2 million compared to $11.1 million for the prior year. Lower litigation expense reflects our goals to reach settlement without litigation and to form contingency fee arrangements with our legal partners.

Patent maintenance, prosecution and evaluation expense was $2.7 million in Q3 compared to $3 million last year. Year-to-date this line item was $8.1 million compared to $5.7 million for the same period last year.

This expense is proportional to the size of our overall portfolio, which increased significantly year-over-year. We continue to work to cull the portfolio of certain non-core patents, while we still do expect the expense to be higher overall in 2016.

Finally contingent partner payments and legal fees were affect this quarter by the reversal of some accruals that we had made in previous quarters. And this resulted in a negligible expense this quarter down from $441,000 last year.

Year-to-date contingent partner payments were $2.7 million compared to $1.2 million for the same period last year, as more revenues are derived from our licensing programs that contain contingent payment obligations. We would expect this expense item to track more or less to our revenue levels.

Marketing, general and admin expenses were $1.9 million, compared to $1.4 million for the same period last year. The bulk of this change year-over-year is related actually to a bad debt issue.

This quarter we took a charge for little more than $137,000 related to royalties from foreign operations that were uncollected. And that compares to $287,000 gain we had in the same quarter last year.

So when you add those two numbers together, that’s virtually the entire change in our MG&A. EBITDA in Q3 was $9.3 million, or $0.08 per share, compared to $12 million or $0.10 per share versus the same period last year.

Looking at the bottom line, Q3 GAAP net income was $660,000, or $0.01 per share, compared to $830,000 last year, which was also $0.01 a share. Of note, our Q3 tax provision was $1.9 million compared to $1.4 million last year.

The level of the tax provision is mainly due to withholding taxes in certain jurisdictions where our revenues are derived from and non-cash deferred tax expense related to the geography where our profits are regenerated. Now we’ll turn to cash flow in the balance sheet.

For Q3, we generated $6.2 million in cash from operations, compared to $23.3 million last year. I think it’s much more appropriate to look at the year-to-date here, however, as Q3 last year was positively impacted by the collection of some significant receivables that were outstanding at the end of Q2.

Year-to-date, we generated $29.3 million of cash from operations, compared to $32.9 million for the same period last year. Of note, in Q3 this year, we spent $4.4 million on patent acquisitions, mostly related to acquisitions.

Previous year we spent $4.4 million on patent acquisitions mostly related to acquisitions completed in previous years. And as Jim has outlined, we also returned approximately $2.3 million to share holders through dividends and share buybacks.

We ended Q3 with cash, cash equivalents and short-term investments on our balance sheet of $103.2 million, which represents an $8.6 million increase from the end of last year. Finally, let’s look at guidance for the fourth quarter.

Cash operating expenses are expected to be in the range of $8.1 million to $10.8 million, of which $1.5 million to $3.1 million is expected to be litigation expense. This guidance does not include any contingent payment obligations that may arise as a result of incremental revenues booked throughout the quarter.

This concludes my review of the financial results. And I’ll now turn the call back to the operator for questions.

Operator?

Good morning. Thank you.

Since it was referenced in the press release Jim, I need to ask with regards to the large license opportunities that you’d hoped to close in the quarter. Obviously you can’t quantify, but just to give me a sense, I mean, I think, I have a number in my head with regards to what, I think ZTE might have been worth in the quarter.

Is this the type of quantum you would be looking for from each of these potentially large deals?

Well I think ZTE is separate from the deals I was talking about some of the deals that I was talking about that we were hoping would close in the quarter were – would have larger deals than the ZTE deal.

And in terms of specific numbers is it that were you hoping to close one or two in the quarter, or do you have more than that in terms of potential pipe of near-term large closing?

I don’t want to give those types of specifics. In fact we closed even one though would have been a big difference.

And we were – I thought we were pretty close. So we were disappointed up until almost the end of the quarter we were working at it, but we just felt that may be other side on a feel to sense some weakness and we’re just trying take advantage of it.

And we just can’t become exits for that, I mean we had to hold permit at our position as what we thought was a fair amount. So I don’t want to – I can’t give you the exact amount, except tell you there’s many large licenses in discussions.

We had a few that we thought would close this quarter. I can tell you that.

Okay, great. Am I reading too much into the sequential bump in litigation input inferring that these would be tied to the large deals with the potential or the view to hopefully closing those in Q4.

I’ll ask Shaun to maybe explain that.

You got to remember our litigation is related to any kind of arrangements we’ve got on fixed fee or partial fix fee arrangement. So to the extent that they are higher or lower it’s related to level of activity that goes on in a particular quarter.

Fairly our litigation in my view is in some will like this statement, some may not but it’s really a tool in our kit bag to get the licensees to the table. So to the extent that we convince them to take license without it, it’s obviously going to be lower than we’re otherwise forecasting.

All right. Okay, okay.

Very good. And final point on the cash flow statement, when I look at the patent acquisitions which were $3 million, I believe in the quarter.

And I believe from last conservations that number should tail-off. Is that the remaining – forgive me I should know this but I think it was the Freescale and that should tail-off in 2017.

Is that right?

We can tell you that there is two lines on the cash allowances one for $1.4 million roughly and one for the $3 million. Right.

Both of them are related to patent acquisitions that have completed in previous years. The $3 million one is now complete, it won’t repeat, we’ve paid that one off.

But the $1.4 million roughly goes until Q3 of 2018. And that’s related retiring the deferred patent finance obligations, that are on our balance sheet.

Okay. Great.

That’s all for me for now. I get back in the queue.

Thank you.

Well, thank you.

Thank you. Good morning, gentlemen.

First question from me. I think you’d mentioned some details that slipped in the last quarter as well.

Would these be the same deals that continues to slip a quarter out or did you close those and this is a new start of potential license closings, that slipped out to the other quarter?

Both of us Doug are looking at each other not recalling that, they felt that different last quarter I mean we had an ongoing negotiations. I don’t think we were – as close to closing some stuff as we were this quarter.

So I don’t – I think they’re different deals.

Okay. I guess…

We do have always a lot of lots of irons in the fire. We have 60 litigations we have a lot of negotiations that are going on with companies in litigation, we have many negotiation going on with companies that are not in litigation.

And there are – we’re often making progress on those but they're still a gap. So I might have been talking more generally – but we might have been talking more generally about that type of situation.

We this quarter, we really thought we had some big deals that were – that should close through gap seemed to us would not be so wide, but we couldn’t close it and just in the end like I said they failed to our minimum threshold. We had to make the difficult decision not to do it and it’s different than it was last quarter.

I understand so I guess maybe you can help us understand whether the level of revenues generated in the last two quarters I mean should be that that be thought of kind of like a baseline or I want to say worst case scenario because in light of the cost cutting that you've done it. I mean the profit you're generating out of that is still pretty strong.

So I just want to understand whether that's kind of the baseline and then you signed some of these deals you are talking about you get upside from that I think it would help us all to start thinking about the valuation of these levels. Can you give me some color there?

Yes I mean the way – thank you for recognizing that the profit in the cash flow was very strong on even revenues that were lighter than we had hoped. And yes, absolutely, if we had signed one or two larger deals it would have dramatically improved not just the top line but the bottom line.

And most of the majority of revenue this quarter for sure was backlog. So was part of that baseline.

I will caution you that over time backlog if it’s not replenished, will diminish. But at this point, yes, most of this quarter was our baseliner backlog.

This quarter was our baseliner backlog.

Okay. So what I take from that you mean, you've talked about your renewals with ZTE.

But your overall backlog as you expect at the beginning of the year continues to amortize down overtime or have you been successful in replenishing some of that as you grab some renewals as we look towards the end of the year and maybe we will get an update on that overall backlog figure at some point? And you talked about the process in the renewal process and how that is going?

Yes. We signed agreements, there's typically a mix of – what we call episodic payments or it’s one time and payments overtime.

We don't usually get into the details on any specific deal in most quarters that’s the cases. And what we think is likely to happen is a – what we think is likely to happen in is some companies that are renewed will pay us over a period of time and only quarterly payment and some will pay a onetime payment and as we get it more into it.

We will have this think that we’re likely to characterize exactly the deal was [indiscernible] other licenses this quarter but that’s generally how it happens.

Okay. Last question from me in the last few weeks and months we're seeing an uptick in M&A activity particularly in the semi space.

Can you just provide a view on how that kind of activity I mean I know these things are a long time from closing can and typically does impact your business and your licensing activity? After that I'll pass the line.

Well. I would say that we have a sizable cash balance and it's – sorry is that [indiscernible].

Doug are you talking about licensees merging.

That's right.

In semiconductor spacing…

There has been a lot of activity in that space.

Yes. We have seen – I mean some of our important licensees, I guess it's true it have been involved in mergers.

So we've got for instance Freescale in NXT and Qualcomm and Broadcom and Avago and so SanDisk and Western Digital. So it does I mean we're dealing with – we’re actually – we’re usually dealing with the same people but the name of the company is different.

But it doesn't – it hasn’t affected us that much usually our agreements don't extend to an acquirer. So in a way if a company A buys company B.

And company B have license it doesn’t extend to company A and it's just a part of the business that the company B have. And so it doesn't it's unusual that it would it would dramatically affect us but we're dealing maybe with different companies and maybe with different issues.

Does that answer the question.

Yes. It did.

I'll pass the line. Thank you.

Thank you.