Launches diversification strategy and
achieves record revenue and Adjusted EBITDA
OTTAWA, March 1, 2018 /CNW/ - Quarterhill Inc.
("Quarterhill" or the "Company") (TSX: QTRH) (NASDAQ: QTRH),
announces its financial results for the three and twelve month
periods ended December 31, 2017. All
financial information in this press release is reported in U.S.
dollars, unless otherwise indicated.
Fiscal 2017 Highlights
- Revenue of $134.7 million
representing 45% growth over last year
- Recurring revenues of $13.4
million representing 10% of total revenue
- Adjusted EBITDA* of $64.6
million
- Net income of $10.2 million, or
$0.09 per share
- Operating cash flow was $70.0
million, with an ending cash and cash equivalents and
short-term investments balance of $86.6
million
- Launched diversification strategy; deployed $67.4 million to acquire International Road
Dynamics, VIZIYA Corporation and iCOMS Detections S.A.
- Announced the appointment of Douglas
(Doug) Parker as President and Chief Executive Officer
- Subsequent to year-end, appointed Russ
Stuebing as SVP, Corporate Development, and Neil Urquhart as SVP, Human Resources, to
enhance acquisition capabilities
"Quarterhill delivered record financial results in 2017 while
making tangible progress on its diversification strategy with three
strategic acquisitions and improved recurring revenue streams,"
said Doug Parker, President &
CEO of Quarterhill. "In 2018, we will look to build-on and maintain
this momentum. Already this year we have enhanced our acquisition
capabilities by broadening the target set of companies we are
looking at and by adding experienced technology M&A veterans to
our acquisition team."
"Our acquisition focus is to capitalize on market consolidation
and convergence trends in the following three markets: vertical
market software, intelligent industrial systems, and innovation and
licensing. While remaining committed to growing the businesses we
have acquired and their strategic visions, including related IIoT
elements, we also see good acquisition opportunities in other
target-rich technology niches such as vertical market software,
with its attractive recurring revenue, cash flow and margin
profiles."
"To execute on our plan, we have also recently added two senior
members to our team and established an office in Waterloo, Ontario. Talent is a key component
to building our diversified portfolio and we are focused on
attracting execution-oriented M&A professionals with proven
industry track records of identifying, acquiring and integrating
value enhancing technology acquisitions. Both Russ and Neil fit
this profile admirably and I am delighted that they have joined
Quarterhill."
"With a presence in both of Canada's premier technology hubs, Ottawa and Waterloo, we are well positioned to continue
to attract the top talent needed to execute on, and expand, our
growth potential. I look forward to the busy year ahead of us and I
remain excited about our long-term ability to provide investors
with a profitable growth-oriented investment opportunity that
follows a proven strategy."
Approval of Eligible Dividend
The Board of Directors
has declared an eligible quarterly dividend of CDN $0.0125 per common share payable on April 5, 2018, to shareholders of record on
March 23, 2018.
Business Strategy and Segments
Our acquisition
strategy focuses primarily on financial metrics while remaining
cognizant of broader technology and market trends as we build a
portfolio of businesses that are characterized as having recurring
revenue, free cash flow and profitable growth potential. Driven by
the execution of a proven and disciplined acquisition strategy, we
seek to enable shareholders to benefit from consolidation and
convergence trends in today's technology industry. As of
December 31, 2017, the Company had
investments in three segments: Technology (WiLAN); Mobility (IRD);
and Factory (VIZIYA).
Q4 and Fiscal 2017 Consolidated Financial Review
Quarterhill's consolidated financial results for Fiscal 2017
include a full year contribution from Wi‑LAN Inc. ("WiLAN"), a full
quarter contribution from International Road Dynamics Inc. ("IRD")
and VIZIYA Corp ("VIZIYA") in Q3 2017 and Q4 2017, and a partial
contribution from IRD and VIZIYA in Q2 2017. The 2016 comparative
period information presented represents solely WiLAN's results for
the specified period. Certain comparative information has been
restated to conform to the new basis of presentation.
Consolidated revenues for the three months ended December 31, 2017 were $22.6 million, compared to $30.2 million in the same period last year.
Consolidated revenues for Fiscal 2017 were $134.7 million, an increase of 45% compared to
$92.9 million in Fiscal 2016. The
year-over-year increase was primarily due to strong patent
licensing results from WiLAN and the inclusion of the operations
of IRD and VIZIYA, which were acquired in Q2
2017.
Gross margin for the three months ended December 31, 2017 was $8.7
million, or 38%, compared to $19.3
million, or 64%, in the same period last year. Gross margin
for Fiscal 2017 was $85.4 million, or
63%, compared to $63.0 million, or
67%, in Fiscal 2016. Gross margins for the three and twelve month
periods ended December 31, 2017
reflect contribution from all three businesses, compared to the
same periods last year, which reflect only the operations of
WiLAN.
Operating expenses include selling, general and administrative
costs, research and development costs, depreciation, amortization
of intangible assets, loss on disposal of intangible asset,
impairment of intangible assets and special charges. Operating
expenses for the three months ended December
31, 2017 were $23.7 million,
compared to $9.4 million in the same
period last year. Operating expenses for Fiscal 2017 were
$75.2 million compared to
$44.0 million in Fiscal 2016.
Operating expenses increased in Fiscal 2017 due to the addition of
the IRD and VIZIYA operations, acquisition-related costs associated
with the purchases of IRD and VIZIYA, and a combined $26.3 million in non-cash charges related to a
loss on disposal of intangible assets and impairment loss on
intangibles.
Adjusted EBITDA for the three months ended December 31, 2017 was $1.5
million, or $0.01 per basic
Common Share, compared to $17.6
million, or $0.14 per basic
Common Share, in the same period last year. For Fiscal 2017,
Adjusted EBITDA was $64.6 million, or
$0.56 per basic Common Share,
compared to $53.8 million, or
$0.45 per basic Common Share, in
Fiscal 2016. The year-over-year increase in Adjusted EBITDA is
primarily due to strong performance in the patent license business
and the inclusion of operations from the businesses acquired during
2017.
Net loss for the three months ended December 31, 2017 was ($12.4) million, or ($0.10) per basic and diluted Common Share,
compared to net income of $8.6
million, or $0.07 per basic
and diluted Common Share, in the same period last year. For Fiscal
2017, net income was $10.2 million,
or $0.09 per basic and diluted Common
Share, compared to net income of $11.1
million, or $0.09 per basic
and diluted Common Share, in Fiscal 2016. Net income for Fiscal
2017 compared to Fiscal 2016, was primarily impacted by the
combined $26.3 million in non-cash
charges related to a loss on disposal of intangible assets and
impairment loss on intangibles.
Cash generated from operations for the three months ended
December 31, 2017 was $49.2 million, compared to $7.6 million in the same period last year. Cash
generated from operations for Fiscal 2017 was $70.0 million compared to $36.8 million in Fiscal 2016. Cash from
operations was positively impacted in Q4 2017 due to the collection
of a significant level of accounts receivable which were
outstanding at the end of Q3 2017.
Cash and cash equivalents and short-term investments amounted to
$86.6 million at December 31, 2017, compared to $107.7 million at December
31, 2016. The decrease is primarily attributable to
$67.4 million spent on the
acquisitions of IRD, VIZIYA and iCOMS, and $19.6 million spent on the repayment of patent
finance obligations, which were partially offset by cash generated
from operations of $70.0 million in
the twelve month period.
The table below highlights financial performance for the
Company's Technology, Mobility and Factory segments. For detailed
results and discussion related to these segments, please refer to
the Management's Discussion and Analysis document, which will be
filed on SEDAR and at www.quarterhill.com in the investor
section.
|
|
For the three months
ended December 31, 2017
|
|
|
Technology
|
|
Mobility
|
|
Factory
|
|
Corporate
|
|
Total
|
Revenues
|
|
$
|
8,427
|
|
$
|
10,820
|
|
$
|
3,378
|
|
$
|
-
|
|
$
|
22,625
|
Cost of revenues
(excluding depreciation and
amortization)
|
|
|
5,834
|
|
|
7,846
|
|
|
289
|
|
|
-
|
|
|
13,969
|
|
|
|
2,593
|
|
|
2,974
|
|
|
3,089
|
|
|
-
|
|
|
8,656
|
Selling, general and
administrative
|
|
|
1,006
|
|
|
2,368
|
|
|
1,529
|
|
|
1,950
|
|
|
6,853
|
Research and
development
|
|
|
-
|
|
|
722
|
|
|
373
|
|
|
-
|
|
|
1,095
|
Depreciation of
property, plant and equipment
|
|
|
78
|
|
|
134
|
|
|
27
|
|
|
1
|
|
|
240
|
Amortization of
intangibles
|
|
|
4,514
|
|
|
984
|
|
|
757
|
|
|
-
|
|
|
6,255
|
Loss on disposal of
intangibles
|
|
|
6,726
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
6,726
|
Impairment losses on
intangible assets
|
|
|
4,350
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,350
|
Special
charges
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,806)
|
|
|
(1,806)
|
Results from
operations
|
|
|
(14,081)
|
|
|
(1,234)
|
|
|
403
|
|
|
(145)
|
|
|
(15,057)
|
Finance
income
|
|
|
(147)
|
|
|
(2)
|
|
|
-
|
|
|
(9)
|
|
|
(158)
|
Finance
expense
|
|
|
6
|
|
|
59
|
|
|
4
|
|
|
-
|
|
|
69
|
Foreign exchange loss
(gain)
|
|
|
41
|
|
|
134
|
|
|
(1)
|
|
|
94
|
|
|
268
|
Other expense
(income)
|
|
|
-
|
|
|
(90)
|
|
|
-
|
|
|
-
|
|
|
(90)
|
Income (loss) before
taxes
|
|
|
(13,981)
|
|
|
(1,335)
|
|
|
400
|
|
|
(230)
|
|
|
(15,146)
|
Current income tax
expense (recovery)
|
|
|
(55)
|
|
|
(57)
|
|
|
424
|
|
|
-
|
|
|
312
|
Deferred income tax
expense (recovery)
|
|
|
11,591
|
|
|
(841)
|
|
|
(270)
|
|
|
(13,573)
|
|
|
(3,093)
|
Income tax expense
(recovery)
|
|
|
11,536
|
|
|
(898)
|
|
|
154
|
|
|
(13,573)
|
|
|
(2,781)
|
Net income
(loss)
|
|
$
|
(25,517)
|
|
$
|
(437)
|
|
$
|
246
|
|
$
|
13,343
|
|
$
|
(12,365)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
1,586
|
|
|
351
|
|
|
1,361
|
|
|
(1,814)
|
|
|
1,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reconciling
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of deleted
deferred revenue
|
|
|
-
|
|
|
107
|
|
|
174
|
|
|
-
|
|
|
281
|
Increased costs from
inventory step-up
|
|
|
-
|
|
|
108
|
|
|
-
|
|
|
-
|
|
|
108
|
Stock-based
compensation
|
|
|
(1)
|
|
|
76
|
|
|
-
|
|
|
136
|
|
|
211
|
Dividend from joint
venture
|
|
|
-
|
|
|
176
|
|
|
-
|
|
|
-
|
|
|
176
|
|
|
For the year ended
December 31, 2017
|
|
|
Technology
|
|
Mobility
|
|
Factory
|
|
Corporate
|
|
Total
|
Revenues
|
|
$
|
100,645
|
|
$
|
27,023
|
|
$
|
7,043
|
|
$
|
-
|
|
$
|
134,711
|
Cost of revenues
(excluding depreciation and
amortization)
|
|
|
29,478
|
|
|
18,646
|
|
|
1,185
|
|
|
-
|
|
|
49,309
|
|
|
|
71,167
|
|
|
8,377
|
|
|
5,858
|
|
|
-
|
|
|
85,402
|
Selling, general and
administrative
|
|
|
6,490
|
|
|
5,870
|
|
|
3,310
|
|
|
4,300
|
|
|
19,970
|
Research and
development
|
|
|
-
|
|
|
1,883
|
|
|
1,372
|
|
|
-
|
|
|
3,255
|
Depreciation of
property, plant and equipment
|
|
|
339
|
|
|
627
|
|
|
89
|
|
|
2
|
|
|
1,057
|
Amortization of
intangibles
|
|
|
20,611
|
|
|
2,292
|
|
|
2,019
|
|
|
-
|
|
|
24,922
|
Loss on disposal of
intangibles
|
|
|
21,916
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
21,916
|
Impairment losses on
intangible assets
|
|
|
4,350
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,350
|
Special
charges
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(294)
|
|
|
(294)
|
Results from
operations
|
|
|
17,461
|
|
|
(2,295)
|
|
|
(932)
|
|
|
(4,008)
|
|
|
10,226
|
Finance
income
|
|
|
(614)
|
|
|
(3)
|
|
|
-
|
|
|
(86)
|
|
|
(703)
|
Finance
expense
|
|
|
932
|
|
|
113
|
|
|
10
|
|
|
(2)
|
|
|
1,053
|
Foreign exchange loss
(gain)
|
|
|
(475)
|
|
|
829
|
|
|
42
|
|
|
(600)
|
|
|
(204)
|
Other expense
(income)
|
|
|
-
|
|
|
(390)
|
|
|
-
|
|
|
-
|
|
|
(390)
|
Income (loss) before
taxes
|
|
|
17,618
|
|
|
(2,844)
|
|
|
(984)
|
|
|
(3,320)
|
|
|
10,470
|
Current income tax
expense
|
|
|
6,461
|
|
|
276
|
|
|
458
|
|
|
-
|
|
|
7,195
|
Deferred income tax
expense (recovery)
|
|
|
3,722
|
|
|
(1,761)
|
|
|
(755)
|
|
|
(8,157)
|
|
|
(6,951)
|
Income tax expense
(recovery)
|
|
|
10,183
|
|
|
(1,485)
|
|
|
(297)
|
|
|
(8,157)
|
|
|
244
|
Net income
(loss)
|
|
$
|
7,435
|
|
$
|
(1,359)
|
|
$
|
(687)
|
|
$
|
4,837
|
|
$
|
10,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
64,733
|
|
|
1,868
|
|
|
1,884
|
|
|
(3,868)
|
|
|
64,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reconciling
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of deleted
deferred revenue
|
|
|
-
|
|
|
214
|
|
|
708
|
|
|
-
|
|
|
922
|
Increased costs from
inventory step-up
|
|
|
-
|
|
|
689
|
|
|
-
|
|
|
-
|
|
|
689
|
Effect of deleted
prepaid expense
|
|
|
-
|
|
|
(10)
|
|
|
-
|
|
|
-
|
|
|
(10)
|
Stock-based
compensation
|
|
|
56
|
|
|
175
|
|
|
-
|
|
|
432
|
|
|
663
|
Dividend from joint
venture
|
|
|
-
|
|
|
176
|
|
|
-
|
|
|
-
|
|
|
176
|
Conference Call and Webcast
Quarterhill will host a
conference call to discuss its financial results today at
10:00 AM Eastern Time.
Webcast Information
The live audio webcast will be available
at: http://event.on24.com/wcc/r/1600077-1/A298E603919911BC7B8CF45B231A3984.
Dial-in Information
- To access the call from Canada
and U.S., dial 1.888.231.8191 (Toll Free)
- To access the call from other locations, dial 1.647.427.7450
(International)
Replay Information
Webcast replay will be available for 90 days
at: http://event.on24.com/wcc/r/1600077-1/A298E603919911BC7B8CF45B231A3984.
Telephone replay will be available from 1:00 PM ET on March 1, 2018 until
11:59 PM ET on March 8,
2018 at: 1.855.859.2056 (Toll Free)
or 1.416.849.0833 (International).
Non-GAAP Disclosure*
Quarterhill follows U.S. GAAP in preparing its interim and annual
financial statements. We use the term "Adjusted EBITDA" to mean net
income from continuing operations before: (i) income taxes; (ii)
finance expense or income; (iii) amortization and impairment of
intangibles; (iv) special charges and other one-time items; (v)
depreciation of property, plant and equipment; (vi) effects of
deleted deferred revenue; (vii) the effects of fair value step up
in inventory acquired; (viii) stock based compensation; (ix)
foreign exchange (gain) loss; and * equity in earnings and
dividends from joint ventures. Adjusted EBITDA is used by
Quarterhill management to assess our normalized cash generated on a
consolidated basis and in our operating segments. Adjusted EBITDA
is also a performance measure that may be used by investors to
analyze the cash generated by Quarterhill and our operating
segments. ADJUSTED EBITDA IS NOT A MEASURE OF FINANCIAL PERFORMANCE
UNDER U.S. GAAP. IT DOES NOT HAVE ANY STANDARDIZED MEANING
PRESCRIBED BY U.S. GAAP AND IS THEREFORE UNLIKELY TO BE COMPARABLE
TO SIMILARLY TITLED MEASURES USED BY OTHER COMPANIES. ADJUSTED
EBITDA SHOULD NOT BE INTERPRETED AS AN ALTERNATIVE TO NET EARNINGS
AND CASH FLOWS FROM OPERATIONS AS DETERMINED IN ACCORDANCE WITH
U.S. GAAP OR AS A MEASURE OF LIQUIDITY.
About Quarterhill
Quarterhill is focused on the
disciplined acquisition, management and growth of companies in
dedicated technology areas including, vertical market software and
solutions, intelligent industrial systems, and innovation and
licensing. Quarterhill's emphasis is on seeking out acquisition
opportunities at reasonable valuations that provide a foundation
for recurring revenues, predictable cash flows and margins,
profitable growth, intimate customer relationships and dedicated
management teams. Quarterhill is listed on the TSX and NASDAQ
under the symbol QTRH. For more information:
www.quarterhill.com.
Forward-looking Information
This news release
contains forward-looking statements and forward-looking information
within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995 and other United
States and Canadian securities laws. Forward-looking
statements and forward-looking information are based on estimates
and assumptions made by Quarterhill in light of its experience and
its perception of historical trends, current conditions, expected
future developments and the expected effects of new business
strategies, as well as other factors that Quarterhill believes are
appropriate in the circumstances. Many factors could cause
Quarterhill's actual performance or achievements to differ
materially from those expressed or implied by the forward-looking
statements or forward-looking information. Such factors include,
without limitation, the risks described in each of its February 10, 2017 annual information form for the
year ended December 31, 2016 (the
"AIF") and its November 8, 2017
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the 3 and 9 months ended September 30, 2017 and 2016 (the "Q3 MD&A").
Copies of the AIF and the Q3 MD&A may be obtained at
www.sedar.com or www.sec.gov. Quarterhill recommends that readers
review and consider all of these risk factors and notes that
readers should not place undue reliance on any of Quarterhill's
forward-looking statements. Quarterhill has no intention, and
undertakes no obligation, to update or revise any forward-looking
statements or forward-looking information, whether as a result of
new information, future events or otherwise, except as required by
law.
All trademarks and brands mentioned in this release are the
property of their respective
owners.
Quarterhill
Inc.
|
Consolidated Statements of Operations
|
(in thousands of
United States dollars, except share and per share
amounts)
|
|
|
|
For the three months
ended,
|
|
For the year
ended,
|
|
|
December 31,
2017
|
|
December 31,
2016
|
|
December 31,
2017
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
22,625
|
|
$
|
30,186
|
|
$
|
134,711
|
|
$
|
92,876
|
Cost of revenues
(excluding depreciation and
amortization)
|
|
|
13,969
|
|
|
10,928
|
|
|
49,309
|
|
|
29,868
|
|
|
|
8,656
|
|
|
19,258
|
|
|
85,402
|
|
|
63,008
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
6,853
|
|
|
2,400
|
|
|
19,970
|
|
|
9,386
|
Research and
development
|
|
|
1,095
|
|
|
-
|
|
|
3,255
|
|
|
-
|
Depreciation of
property, plant and equipment
|
|
|
240
|
|
|
92
|
|
|
1,057
|
|
|
409
|
Amortization of
intangibles
|
|
|
6,255
|
|
|
6,905
|
|
|
24,922
|
|
|
34,242
|
Loss on disposal of
intangibles
|
|
|
6,726
|
|
|
-
|
|
|
21,916
|
|
|
-
|
Impairment losses on
intangibles
|
|
|
4,350
|
|
|
-
|
|
|
4,350
|
|
|
-
|
Special
charges
|
|
|
(1,806)
|
|
|
-
|
|
|
(294)
|
|
|
-
|
|
|
|
23,713
|
|
|
9,397
|
|
|
75,176
|
|
|
44,037
|
Results from
operations
|
|
|
(15,057)
|
|
|
9,861
|
|
|
10,226
|
|
|
18,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
|
|
(158)
|
|
|
(172)
|
|
|
(703)
|
|
|
(548)
|
Finance
expense
|
|
|
69
|
|
|
-
|
|
|
1,053
|
|
|
-
|
Foreign exchange
(gain) loss
|
|
|
268
|
|
|
96
|
|
|
(204)
|
|
|
(103)
|
Other
income
|
|
|
(90)
|
|
|
-
|
|
|
(390)
|
|
|
-
|
Income (loss) before
taxes
|
|
|
(15,146)
|
|
|
9,937
|
|
|
10,470
|
|
|
19,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax
expense
|
|
|
312
|
|
|
651
|
|
|
7,195
|
|
|
5,539
|
Deferred income tax
expense (recovery)
|
|
|
(3,093)
|
|
|
659
|
|
|
(6,951)
|
|
|
3,031
|
Income tax expense
(recovery)
|
|
|
(2,781)
|
|
|
1,310
|
|
|
244
|
|
|
8,570
|
Net income
(loss)
|
|
$
|
(12,365)
|
|
$
|
8,627
|
|
$
|
10,226
|
|
$
|
11,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and fully
diluted
|
|
$
|
(0.10)
|
|
$
|
0.07
|
|
$
|
0.09
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
118,642,749
|
|
|
118,555,989
|
|
|
118,607,569
|
|
|
119,245,581
|
|
Fully
diluted
|
|
|
118,642,749
|
|
|
118,555,989
|
|
|
118,615,683
|
|
|
119,245,581
|
Quarterhill
Inc.
|
Supplemental
Consolidated Statement of Operations Information
|
(in thousands of
United States dollars, except share and per share
amounts)
|
|
|
|
For the three months
ended,
|
|
For the year
ended,
|
|
|
December 31,
2017
|
|
December 31,
2016
|
|
December 31,
2017
|
|
December 31,
2016
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
$
|
10,083
|
|
$
|
29,902
|
|
$
|
101,553
|
|
$
|
87,765
|
|
Systems
|
|
|
7,815
|
|
|
-
|
|
|
17,641
|
|
|
-
|
|
Services
|
|
|
592
|
|
|
-
|
|
|
2,086
|
|
|
-
|
|
Recurring
|
|
|
4,135
|
|
|
284
|
|
|
13,431
|
|
|
5,111
|
Total
Revenues
|
|
$
|
22,625
|
|
$
|
30,186
|
|
$
|
134,711
|
|
$
|
92,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
(excluding depreciation and
amortization)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
$
|
5,853
|
|
$
|
10,928
|
|
$
|
29,559
|
|
$
|
29,868
|
|
Systems
|
|
|
5,242
|
|
|
-
|
|
|
11,880
|
|
|
-
|
|
Services
|
|
|
270
|
|
|
-
|
|
|
1,091
|
|
|
-
|
|
Recurring
|
|
|
2,604
|
|
|
-
|
|
|
6,779
|
|
|
-
|
Total cost of
revenues
|
|
$
|
13,969
|
|
$
|
10,928
|
|
$
|
49,309
|
|
$
|
29,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterhill
Inc.
|
Consolidated
Statements of Comprehensive Income
|
(in thousands of
United States dollars, except share and per share
amounts)
|
|
|
|
|
For the three months
ended,
|
|
For the year
ended,
|
|
|
December 31,
2017
|
|
December 31,
2016
|
|
December 31,
2017
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(12,365)
|
|
$
|
8,627
|
|
$
|
10,226
|
|
$
|
11,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
144
|
|
|
-
|
|
|
3,886
|
|
|
-
|
Comprehensive
income
|
|
$
|
(12,221)
|
|
$
|
8,627
|
|
$
|
14,112
|
|
$
|
11,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterhill
Inc.
|
Consolidated Balance
Sheets
|
(in thousands of
United States dollars, except share and per share
amounts)
|
As at
|
|
December 31,
2017
|
|
|
December 31,
2016
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
81,818
|
|
|
$
|
106,553
|
|
Short-term
investments
|
|
|
1,236
|
|
|
|
1,154
|
|
Restricted Short-term
investments
|
|
|
3,500
|
|
|
|
-
|
|
Accounts
receivable
|
|
|
19,298
|
|
|
|
20,357
|
|
Other current
assets
|
|
|
13
|
|
|
|
-
|
|
Unbilled
revenue
|
|
|
3,045
|
|
|
|
-
|
|
Income taxes
receivable
|
|
|
144
|
|
|
|
-
|
|
Inventories
|
|
|
5,083
|
|
|
|
-
|
|
Loans
receivable
|
|
|
-
|
|
|
|
1,766
|
|
Prepaid expenses and
deposits
|
|
|
4,129
|
|
|
|
1,293
|
|
|
|
118,266
|
|
|
|
131,123
|
Non-current
assets
|
|
|
|
|
|
|
|
|
Property Plant and
Equipment
|
|
|
3,801
|
|
|
|
1,240
|
|
Intangible
assets
|
|
|
114,944
|
|
|
|
123,351
|
|
Investment in joint
venture
|
|
|
3,383
|
|
|
|
-
|
|
Deferred income tax
assets
|
|
|
20,195
|
|
|
|
14,646
|
|
Goodwill
|
|
|
42,587
|
|
|
|
12,623
|
TOTAL
ASSETS
|
|
$
|
303,176
|
|
|
$
|
282,983
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Bank
indebtedness
|
|
$
|
3,568
|
|
|
$
|
-
|
|
Accounts payable and
accrued liabilities
|
|
|
20,487
|
|
|
|
15,645
|
|
Income taxes
payable
|
|
|
599
|
|
|
|
-
|
|
Current portion of
patent finance obligation
|
|
|
4,090
|
|
|
|
10,372
|
|
Current portion of
deferred revenue
|
|
|
6,733
|
|
|
|
-
|
|
Current portion of
long-term debt
|
|
|
115
|
|
|
|
|
|
|
|
35,592
|
|
|
|
26,017
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
Contingent
consideration
|
|
|
4,474
|
|
|
|
-
|
|
Patent finance
obligation
|
|
|
-
|
|
|
|
12,775
|
|
Success fee
obligation
|
|
|
-
|
|
|
|
47
|
|
Deferred
revenue
|
|
|
884
|
|
|
|
-
|
|
Long-term
debt
|
|
|
401
|
|
|
|
-
|
|
Deferred income tax
liabilities
|
|
|
7,291
|
|
|
|
-
|
TOTAL
LIABILITIES
|
|
|
48,642
|
|
|
|
38,839
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
418,873
|
|
|
|
419,485
|
|
Additional paid-in
capital
|
|
|
22,489
|
|
|
|
21,036
|
|
Accumulated other
comprehensive income
|
|
|
20,111
|
|
|
|
16,225
|
|
Deficit
|
|
|
(206,939)
|
|
|
|
(212,602)
|
|
|
|
254,534
|
|
|
|
244,144
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
$
|
303,176
|
|
|
$
|
282,983
|
Quarterhill
Inc.
|
Consolidated
Statements of Cash Flows
|
(in thousands of
United States dollars, except share and per share
amounts)
|
|
|
|
For the three months
ended,
|
|
For the year
ended,
|
|
|
December 31,
2017
|
|
December 31,
2016
|
|
December 31,
2017
|
|
December 31,
2016
|
Cash generated from
(used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
(12,365)
|
|
$
|
8,627
|
|
$
|
10,226
|
|
$
|
11,052
|
|
Non-cash
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
211
|
|
|
20
|
|
|
663
|
|
|
217
|
|
|
Depreciation and
amortization
|
|
|
6,495
|
|
|
7,718
|
|
|
25,979
|
|
|
34,651
|
|
|
Foreign exchange
(gain) loss
|
|
|
(101)
|
|
|
90
|
|
|
(267)
|
|
|
(247)
|
|
|
Equity in earnings
from joint venture
|
|
|
(90)
|
|
|
-
|
|
|
(390)
|
|
|
-
|
|
|
Loss on disposal of
intangible
|
|
|
6,726
|
|
|
-
|
|
|
21,916
|
|
|
-
|
|
|
Impairment losses on
intangibles
|
|
|
4,350
|
|
|
-
|
|
|
4,350
|
|
|
-
|
|
|
Contingent
consideration adjustment
|
|
|
(1,976)
|
|
|
-
|
|
|
(1,976)
|
|
|
-
|
|
|
Loss (gain) on
disposal of assets
|
|
|
(4)
|
|
|
-
|
|
|
(9)
|
|
|
13
|
|
|
Deferred income tax
expense (recovery)
|
|
|
(3,093)
|
|
|
659
|
|
|
(6,951)
|
|
|
3,031
|
|
|
Accrued investment
income
|
|
|
1,000
|
|
|
(75)
|
|
|
1,772
|
|
|
(269)
|
|
|
Embedded
derivatives
|
|
|
18
|
|
|
-
|
|
|
39
|
|
|
-
|
|
Changes in non-cash
working capital balances
|
|
|
48,025
|
|
|
(9,461)
|
|
|
14,603
|
|
|
(11,606)
|
Cash generated from
operations
|
|
|
49,196
|
|
|
7,578
|
|
|
69,955
|
|
|
36,842
|
Financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(1,162)
|
|
|
(1,132)
|
|
|
(4,563)
|
|
|
(4,527)
|
|
|
Bank
indebtedness
|
|
|
(576)
|
|
|
-
|
|
|
1,348
|
|
|
-
|
|
|
Repayment of
long-term debt
|
|
|
(38)
|
|
|
-
|
|
|
(434)
|
|
|
-
|
|
|
Common shares
repurchased under normal course issuer bid
|
|
|
-
|
|
|
-
|
|
|
(552)
|
|
|
(4,225)
|
|
|
Common shares issued
for cash on the exercise of options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11
|
|
|
Common shares issued
for cash from Employee Share
Purchase Plan
|
|
|
35
|
|
|
37
|
|
|
68
|
|
|
72
|
Cash used in
financing
|
|
|
(1,741)
|
|
|
(1,095)
|
|
|
(4,133)
|
|
|
(8,669)
|
Investing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of
Viziya, net of cash acquired
|
|
|
-
|
|
|
-
|
|
|
(18,521)
|
|
|
-
|
|
|
Acquisition of IRD,
net of cash acquired
|
|
|
-
|
|
|
-
|
|
|
(47,782)
|
|
|
-
|
|
|
Acquisition of iCOMS,
net of cash acquired
|
|
|
-
|
|
|
-
|
|
|
(1,112)
|
|
|
-
|
|
|
Dividends received
from joint venture
|
|
|
176
|
|
|
-
|
|
|
176
|
|
|
-
|
|
|
Purchase of
restricted short-term investments
|
|
|
-
|
|
|
-
|
|
|
(3,500)
|
|
|
-
|
|
|
Proceeds from sale of
property, plant and equipment
|
|
|
13
|
|
|
-
|
|
|
13
|
|
|
-
|
|
|
Purchase of property
and equipment
|
|
|
(143)
|
|
|
(2)
|
|
|
(399)
|
|
|
(48)
|
|
|
Repayment of patent
finance obligations
|
|
|
(1,389)
|
|
|
(1,389)
|
|
|
(19,556)
|
|
|
(5,555)
|
|
|
Purchase of
intangibles
|
|
|
(138)
|
|
|
(510)
|
|
|
(150)
|
|
|
(9,660)
|
Cash used in
investing
|
|
|
(1,481)
|
|
|
(1,901)
|
|
|
(90,831)
|
|
|
(15,263)
|
Foreign exchange loss
(gain) on cash held in foreign currency
|
|
|
27
|
|
|
(63)
|
|
|
274
|
|
|
212
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
46,001
|
|
|
4,519
|
|
|
(24,735)
|
|
|
13,122
|
Cash and cash
equivalents, beginning of period
|
|
|
35,817
|
|
|
102,034
|
|
|
106,553
|
|
|
93,431
|
Cash and cash
equivalents, end of period
|
|
$
|
81,818
|
|
$
|
106,553
|
|
$
|
81,818
|
|
$
|
106,553
|
Quarterhill
Inc.
|
Consolidated
Statements of Shareholders' Equity
|
(in thousands of
United States dollars, except share
and per share amounts)
|
|
|
|
Capital
Stock
|
|
Additional
paid in
Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Deficit
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December
31, 2015
|
|
$
|
427,781
|
|
$
|
16,549
|
|
$
|
16,225
|
|
$
|
(219,177)
|
|
$
|
241,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,052
|
|
|
11,052
|
|
Other Comprehensive
Income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Shares and options
issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
-
|
|
|
217
|
|
|
-
|
|
|
-
|
|
|
217
|
|
Conversion of
deferred stock units to common
shares
|
|
|
116
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
116
|
|
Exercise of stock
options
|
|
|
17
|
|
|
(6)
|
|
|
-
|
|
|
-
|
|
|
11
|
|
Sale of shares under
Employee Share Purchase
Plan
|
|
|
72
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
72
|
|
Shares repurchased
under normal course issuer
bid
|
|
|
(8,501)
|
|
|
4,276
|
|
|
-
|
|
|
-
|
|
|
(4,225)
|
Dividends
declared
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,477)
|
|
|
(4,477)
|
Balance - December
31, 2016
|
|
$
|
419,485
|
|
$
|
21,036
|
|
$
|
16,225
|
|
$
|
(212,602)
|
|
$
|
244,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December
31, 2016
|
|
|
419,485
|
|
|
21,036
|
|
|
16,225
|
|
|
(212,602)
|
|
|
244,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
10,226
|
|
|
10,226
|
|
Other Comprehensive
Income
|
|
|
-
|
|
|
-
|
|
|
3,886
|
|
|
-
|
|
|
3,886
|
Shares and options
issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
-
|
|
|
663
|
|
|
-
|
|
|
-
|
|
|
663
|
|
Shares issued upon
acquisition
|
|
|
662
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
662
|
|
Sale of shares under
Employee Share Purchase
Plan
|
|
|
68
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
68
|
|
Shares repurchased
under normal course issuer
bid
|
|
|
(1,342)
|
|
|
790
|
|
|
-
|
|
|
-
|
|
|
(552)
|
Dividends
declared
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,563)
|
|
|
(4,563)
|
Balance - December
31, 2017
|
|
$
|
418,873
|
|
$
|
22,489
|
|
$
|
20,111
|
|
$
|
(206,939)
|
|
$
|
254,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterhill
Inc.
|
Reconciliations of
GAAP Net Income (Loss) to
Adjusted EBITDA
|
(in thousands of
United States dollars, except share and per share
amounts)
|
|
|
|
For the three months
ended,
|
|
For the year
ended,
|
Adjusted
EBITDA
|
|
December 31,
2017
|
|
December 31,
2016
|
|
December 31,
2017
|
|
December 31,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(12,365)
|
|
$
|
8,627
|
|
$
|
10,226
|
|
$
|
11,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
|
(2,781)
|
|
|
1,310
|
|
|
244
|
|
|
8,570
|
|
Foreign exchange
(gain) loss
|
|
|
268
|
|
|
96
|
|
|
(204)
|
|
|
(103)
|
|
Finance
expense
|
|
|
69
|
|
|
-
|
|
|
1,053
|
|
|
-
|
|
Finance
income
|
|
|
(158)
|
|
|
(172)
|
|
|
(703)
|
|
|
(548)
|
|
Special
charges
|
|
|
(1,806)
|
|
|
-
|
|
|
(294)
|
|
|
-
|
|
Amortization of
intangibles
|
|
|
6,255
|
|
|
7,626
|
|
|
24,922
|
|
|
34,242
|
|
Loss on disposal of
intangibles
|
|
|
6,726
|
|
|
-
|
|
|
21,916
|
|
|
-
|
|
Impairment losses on
intangible assets
|
|
|
4,350
|
|
|
-
|
|
|
4,350
|
|
|
-
|
|
Depreciation of
property, plant and equipment
|
|
|
240
|
|
|
92
|
|
|
1,057
|
|
|
409
|
|
Effect of deleted
deferred revenue
|
|
|
281
|
|
|
-
|
|
|
922
|
|
|
-
|
|
Increased costs from
inventory step-up
|
|
|
108
|
|
|
-
|
|
|
689
|
|
|
-
|
|
Effect of deleted
prepaid expenses
|
|
|
-
|
|
|
-
|
|
|
(10)
|
|
|
-
|
|
Stock-based
compensation
|
|
|
211
|
|
|
22
|
|
|
663
|
|
|
217
|
|
Dividend from joint
venture
|
|
|
176
|
|
|
-
|
|
|
176
|
|
|
-
|
|
Other expense
(income)
|
|
|
(90)
|
|
|
-
|
|
|
(390)
|
|
|
-
|
Adjusted
EBITDA
|
|
$
|
1,484
|
|
$
|
17,601
|
|
$
|
64,617
|
|
$
|
53,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(0.10)
|
|
$
|
0.07
|
|
$
|
0.09
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
|
(0.02)
|
|
|
0.01
|
|
|
-
|
|
|
0.07
|
|
Foreign exchange
(gain) loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Finance
expense
|
|
|
-
|
|
|
-
|
|
|
0.01
|
|
|
-
|
|
Finance
income
|
|
|
-
|
|
|
-
|
|
|
(0.01)
|
|
|
-
|
|
Special
charges
|
|
|
(0.02)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Amortization of
intangibles
|
|
|
0.05
|
|
|
0.06
|
|
|
0.21
|
|
|
0.29
|
|
Loss on disposal of
intangibles
|
|
|
0.06
|
|
|
-
|
|
|
0.18
|
|
|
-
|
|
Impairment losses on
intangible assets
|
|
|
0.04
|
|
|
-
|
|
|
0.04
|
|
|
-
|
|
Depreciation of
property, plant and equipment
|
|
|
-
|
|
|
-
|
|
|
0.01
|
|
|
-
|
|
Effect of deleted
deferred revenue
|
|
|
-
|
|
|
-
|
|
|
0.01
|
|
|
-
|
|
Increased costs from
inventory step-up
|
|
|
-
|
|
|
-
|
|
|
0.01
|
|
|
-
|
|
Effect of deleted
prepaid expenses
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Stock-based
compensation
|
|
|
-
|
|
|
-
|
|
|
0.01
|
|
|
-
|
|
Dividend from joint
venture
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other expense
(income)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Adjusted EBITDA
per share
|
|
$
|
0.01
|
|
$
|
0.14
|
|
$
|
0.56
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
118,642,749
|
|
|
118,555,989
|
|
|
118,607,569
|
|
|
119,245,581
|
SOURCE Quarterhill Inc.