TORONTO, May 12, 2022
/CNW/ - Quarterhill Inc. ("Quarterhill" or the "Company") (TSX:
QTRH) (OTCQX: QTRHF), announces its financial results for the
three-month period ended March 31, 2022. All financial
information in this press release is reported in Canadian dollars,
unless otherwise indicated.
Q1 Fiscal 2022 Highlights
- Consolidated Revenue was $168.5
million
- Consolidated Adjusted EBITDA1 was $79.1 million
- Cash, cash equivalents, and short-term investments were
$60.2 million at March 31, 2022
- Working capital2 was $176.9
million at March 31, 2022
- ITS segment had significant new contract wins totaling
approximately $75.0 million
- We appointed Rusty Lewis and
Pamela Steer to the board in Q1 and
subsequent to quarter end, appointed Kim
Stevenson to the board
- WiLAN signed license agreements with Apple and Kyocera
- Stout hired as lead financial advisor for the WiLAN strategic
review process
"Driven by strong results from WiLAN, our licensing segment,
Quarterhill generated significant revenue and Adjusted EBITDA in
Q1," said Bret Kidd, President and
CEO at Quarterhill. "With a long history of generating cash flow,
WiLAN's results in Q1 will further strengthen our balance sheet and
add substantial capital resources to support our organic and
M&A growth plans."
"The top-line for our ITS business was up significantly
year-over-year led primarily by the addition of ETC, though revenue
and margin results for the quarter were impacted by seasonality in
the IRD business, the timing of the rollout for certain projects
and inflationary pressures. Overall, our outlook for the year is
unchanged at this time and remains favourable. We expect results to
pick up in subsequent quarters as IRD moves into its seasonally
stronger periods and as ITS implementation activity increases."
"On the cost front, we expect expenses to trend down this year
as integration efforts are underway at both the corporate level and
between IRD and ETC. The decline will be modest in 2022 as we still
have three portfolio companies and are running the review process
for WiLAN, but we expect deeper savings to come in 2023. The
broader tailwinds in the ITS industry remain in place and with our
significant financial resources, we believe we are well positioned
to capitalize on the opportunities in our US$4.0 billion sales pipeline and to accelerate
growth via M&A."
Approval of Eligible Dividend
The Board of Directors
has declared an eligible quarterly dividend of $0.0125 per common share payable on July 8, 2022, to shareholders of record on
June 17, 2022.
Q1 Fiscal 2022 Financial Review
Quarterhill's revenue
is broadly segmented into ITS, reflecting the IRD and ETC
businesses, and Licensing, reflecting the WiLAN business. ETC was
acquired September 1, 2021 and as a
result, the comparative financial statements for the three months
ended March 31, 2021 do not include results from ETC.
Quarterhill's Management's Discussion and Analysis and financial
statements for the three months ended March 31, 2022 ("Q1
2022") are available at the Company's website and at its profile at
SEDAR.
Consolidated revenues for Q1 2022 were $168.5 million, compared to $19.3 million in Q1 2021. ITS revenue increased
in Q1 2022 due to the acquistion of VDS Verkehrstechnik GmbH
("VDS") in April 2021 and ETC in
September 2021. WiLAN's revenue
increased significantly in Q1 2022 due to strong license activity
in the quarter. The majority of WiLAN's licenses are generally
one-time in nature and significant fluctuations in revenue, gross
margin, and Adjusted EBITDA can result when the volume or dollar
value of licenses changes from one period to the next.
Gross margin percent2 for Q1 2022 was 55% compared to
34% in Q1 2021. Gross margin increased in Q1 2022 due primarily to
a number of agreements having been completed by the licensing
business. Licensing gross margin rose significantly in the quarter
to 63% compared to 25% in Q1 2021. Licensing gross margin will
fluctuate depending primarily on the level of litigation and
contingent legal and partner costs incurred in a respective period
relative to revenue generated. Gross margin in the ITS segment was
28% in Q1 2022 compared to 40% in Q1 2021. ITS margins reflect the
addition of the ETC business and may fluctuate on a quarterly basis
depending primarily on the nature of projects underway during the
period, their related margin profile and the timing for which
associated costs and revenue are recognized.
Operating expenses include selling, general and administrative
costs ("SG&A"), research and development costs ("R&D"),
depreciation and amortization and other charges. Operating expenses
for Q1 2022 were $21.8 million (13%
of revenue) compared to $12.5 million
(65% of revenue) in Q1 2021. Operating expenses have increased
year-over-year due primarily to the addition of expenses from
the ITS companies acquired in 2021 [as well as inflationary
pressures on materials and personnel].
Consolidated Adjusted EBITDA1 for Q1 2022 was
$79.1 million compared to negative
$408 thousand in Q1 2021.
Consolidated Adjusted EBITDA increased due primarily to strong Q1
2022 revenue generated by the licensing segment, offset in part by
higher operating expenses. On a segment basis, in Q1 2022, the ITS
business generated Adjusted EBITDA of $1.0
million and the licensing business generated Adjusted EBITDA
of $81.0 million.
Net income before tax in Q1 2022 was $71.7 million and income tax expense was
$14.8 million, of which $14.2 was deferred income tax expense and
$0.6 million was current income tax
expense. This compares to net loss before tax of $5.2 million and an income tax recovery of
$0.9 million in Q1 2021. Q1 2022 net
income was $56.9 million, or
$0.50 per basic share and
$0.44 per diluted share, compared to
net loss of ($4.3) million, or
($0.04) per basic share and
($0.04) per diluted share in Q1
2021.
Cash used in operations for Q1 2022 was ($9.2) million compared to ($5.9) million in Q1 2021. Cash and cash
equivalents and short-term investments were $60.2 million at March 31, 2022, compared to
$72.6 million at December 31, 2021. Working capital at
March 31, 2022, was $176.9
million compared to $105.1
million at December 31, 2021.
A significant portion of the accounts receivable outstanding at
March 31, 2022, were collected
subsequent to quarter-end.
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:
https://produceredition.webcasts.com/starthere.jsp?ei=1544749&tp_key=0b55de646a
Dial-in Information
- To access the call from Canada
and U.S., dial 1.888.664.6392 (Toll Free)
- To access the call from other locations, dial 1.416.764.8659
(International)
Replay Information
Webcast replay will be
available for 365 days
at:
https://produceredition.webcasts.com/starthere.jsp?ei=1544749&tp_key=0b55de646a
Telephone replay will be available until 11:59 p.m. Eastern Daylight Time on May 19, 2022 at: 1.888.390.0541 (Toll Free North
America) or 1.416.764.8677 (International).The telephone replay
requires the passcode 185837.
Non-IFRS Financial Measures and Non-IFRS
Ratios
Quarterhill uses both IFRS and certain non-IFRS
financial measures to assess performance. Non-IFRS financial
measures are financial measures disclosed by a company that (a)
depict historical or expected future financial performance,
financial position or cash flow of a company, (b) with respect to
their composition, exclude amounts that are included in, or include
amounts that are excluded from the composition of the most directly
comparable financial measure disclosed in the primary financial
statements of the company, (c) are not disclosed in the financial
statements of the company and (d) are not a ratio, fraction,
percentage or similar representation. Non-IFRS ratios are financial
measures disclosed by a company that are in the form of a ratio,
fraction, percentage or similar representation that has a non-IFRS
financial measure as one or more of its components, and that are
not disclosed in the financial statements of the company.
These non-IFRS financial measures and non-IFRS ratios are not
standardized financial measures under IFRS, and, therefore, are
unlikely to be comparable to similar financial measures presented
by other companies. Management believes these non-IFRS financial
measures and non-IFRS ratios provide transparent and useful
supplemental information to help investors evaluate our financial
performance, financial condition, and liquidity using the same
measures as management. These non-IFRS financial measures and
non-IFRS ratios should not be considered as a substitute for, or
superior to, measures of financial performance prepared in
accordance with IFRS.
Adjusted EBITDA - Non-IFRS Financial
Measures
We use the non-IFRS financial measure "Adjusted
EBITDA" to mean net (loss) income adjusted for (i) income taxes,
(ii) finance expense or income; (iii) amortization and impairment
of intangibles; (iv) other charges and other on-time items; (v)
depreciation of right-of-use assets and property, plant and
equipment; (vi) stock-based compensation; (vii) foreign exchange
(gain) loss; and (viii) other income which includes equity in
earnings from joint ventures, and (ix) dividends received from
joint ventures. Adjusted EBITDA is used by our 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 should not
be interpreted as an alternative to net loss and cash flows from
operations as determined in accordance with IFRS or as measure of
liquidity. The most directly comparable IFRS financial measure is
Net (loss) income.
Adjusted EBITDA per share – Non-IFRS ratio
Adjusted
EBITDA per share is calculated as Adjusted EBITDA divided by the
basic weighted average of common shares. Adjusted EBITDA per share
is used by our management and investors to analyze cash generated
by Quarterhill on a per share basis. The most comparable IFRS
measure is earnings per share.
Supplementary Financial Measures
Supplementary
financial measures are financial measures disclosed by a company
that (a) are, or are intended to be, disclosed on a periodic basis
to depict the historical or expected future financial performance,
financial position or cash flow of a company (b) are not disclosed
in the financial statement of the company, (c) are not non-IFRS
financial measures, and (d) are not non-IFRS ratios.
Key supplementary measures disclosed are as follows:
Gross margin %
Calculated as gross profit as a
percentage of revenue.
Working capital
Calculated as total current assets
minus total current liabilities.
About Quarterhill
Quarterhill is a leading provider of
tolling and enforcement solutions in the Intelligent Transportation
System (ITS) industry, as well as, through its Wi-LAN Inc.
subsidiary, a leader in Intellectual Property licensing. Our goal
is global leadership in ITS, via organic growth of the Electronic
Transaction Consultants, LLC (ETC) and International Road Dynamics,
Inc. (IRD) platforms, and by continuing an acquisition-oriented
investment strategy that capitalizes on attractive growth
opportunities within ITS and its adjacent markets. Quarterhill is
listed on the TSX under the symbol QTRH and on the OTCQX Best
Market under the symbol QTRHF. For more information:
www.quarterhill.com
Forward-looking Information
This news release contains
forward-looking statements regarding Quarterhill and its business.
Forward-looking statements 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. The forward-looking events and circumstances
discussed herein may not occur and could differ materially as a
result of known and unknown risk factors and uncertainties
affecting Quarterhill, including: potential risks and uncertainties
relating to the ultimate geographic spread of the novel coronavirus
("COVID-19"); the severity of the disease; the duration of the
COVID-19 outbreak; actions that may be taken by governmental
authorities to contain the COVID-19 outbreak or to treat its
impact; the potential negative impacts of COVID-19 on the global
economy and financial markets and any resulting impact on
Quarterhill and/or its business. Other factors include, without
limitation, the risks described in Quarterhill's March 20, 2022 annual information form for the
year ended December 31, 2021 (the
"AIF"). In addition, readers are also urged to review the
additional risk factors disclosed in our Management's Discussion
and Analysis for our three months and year ended December 31, 2021 and 2020 filed today on
www.sedar.com. 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,
whether as a result of new information, future events or otherwise,
except as required by law.
Quarterhill Inc.
|
Interim Condensed
Consolidated Statements of Income (Loss) and Comprehensive Income
(Loss) (Unaudited)
|
(in thousands and in
Canadian dollars, except share and per share amounts)
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
|
|
2022
|
|
2021
|
Revenues
|
|
|
|
|
Licensing
|
|
$
130,738
|
|
$
7,848
|
Intelligent
Transportation Systems
|
|
37,767
|
|
11,468
|
|
|
168,505
|
|
19,316
|
Direct cost of
revenues
|
|
|
|
|
Licensing
|
|
48,703
|
|
5,869
|
Intelligent
Transportation Systems
|
|
27,146
|
|
6,829
|
|
|
75,849
|
|
12,698
|
Gross profit
|
|
92,656
|
|
6,618
|
Operating
expenses
|
|
|
|
|
Depreciation of
right-of-use assets
|
|
568
|
|
279
|
Depreciation of
property, plant and equipment
|
|
529
|
|
233
|
Amortization of
intangible assets
|
|
6,342
|
|
4,487
|
Selling, general and
administrative expenses
|
|
13,647
|
|
7,056
|
Research and
development expenses
|
|
640
|
|
394
|
Other
charges
|
|
96
|
|
39
|
|
|
21,822
|
|
12,488
|
Results from
operations
|
|
70,834
|
|
(5,870)
|
Finance
income
|
|
(404)
|
|
(21)
|
Finance
expense
|
|
3,049
|
|
69
|
Foreign exchange loss
(gain)
|
|
550
|
|
(125)
|
Other income
|
|
(4,021)
|
|
(630)
|
Income (loss) before
taxes
|
|
71,660
|
|
(5,163)
|
|
|
|
|
|
Current income tax
expense
|
|
602
|
|
544
|
Deferred income tax
expense (recovery)
|
|
14,157
|
|
(1,420)
|
Income tax expense
(recovery)
|
|
14,759
|
|
(876)
|
|
|
|
|
|
Net income
(loss)
|
|
$
56,901
|
|
$
(4,287)
|
|
|
|
|
|
Other comprehensive
loss that may be reclassified subsequently to
net income (loss):
|
|
|
|
|
Foreign currency
translation adjustment
|
|
(3,938)
|
|
(3,734)
|
Comprehensive income
(loss)
|
|
$
52,963
|
|
$
(8,021)
|
|
|
|
|
|
Net income (loss)
per share
|
|
|
|
|
Basic
|
|
$
0.50
|
|
$
(0.04)
|
Diluted
|
|
$
0.44
|
|
$
(0.04)
|
Quarterhill
Inc.
|
|
|
|
|
Interim Condensed
Consolidated Statements of Financial Position
(Unaudited)
|
|
|
(in thousands and in
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
As at
|
|
March 31,
2022
|
|
December 31,
2021
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
58,662
|
|
$
70,746
|
Short-term
investments
|
|
1,550
|
|
1,851
|
Restricted
short-term investments
|
|
3,047
|
|
3,095
|
Accounts
receivable
|
|
158,057
|
|
30,176
|
Unbilled
revenue
|
|
28,100
|
|
35,926
|
Income taxes
recoverable
|
|
418
|
|
385
|
Inventories (net
of obsolescence)
|
|
13,508
|
|
13,731
|
Prepaid expenses
and deposits
|
|
5,662
|
|
5,192
|
|
|
269,004
|
|
161,102
|
Non-current
assets
|
|
|
|
|
Accounts
receivable
|
|
497
|
|
505
|
Prepaid expenses
and deposits
|
|
1,263
|
|
945
|
Right-of-use
assets, net
|
|
7,067
|
|
7,761
|
Property, plant
and equipment, net
|
|
5,376
|
|
5,694
|
Intangible
assets, net
|
|
143,276
|
|
151,355
|
Investment in
joint venture
|
|
7,911
|
|
7,458
|
Deferred
compensation asset
|
|
1,501
|
|
1,524
|
Deferred income
tax assets
|
|
22,878
|
|
37,786
|
Goodwill
|
|
52,189
|
|
53,065
|
|
|
241,958
|
|
266,093
|
TOTAL ASSETS
|
|
$
510,962
|
|
$
427,195
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
78,025
|
|
42,008
|
Income taxes
payable
|
|
649
|
|
700
|
Current portion
of lease liabilities
|
|
2,009
|
|
2,166
|
Current portion
of deferred revenue
|
|
8,336
|
|
7,989
|
Current portion
of long-term debt
|
|
3,132
|
|
3,181
|
|
|
92,151
|
|
56,044
|
Non-current
liabilities
|
|
|
|
|
Deferred
revenue
|
|
2,429
|
|
2,839
|
Long-term lease
liabilities
|
|
5,114
|
|
5,626
|
Long-term
debt
|
|
57,332
|
|
58,968
|
Convertible
debentures
|
|
46,597
|
|
45,959
|
Derivative
liability
|
|
6,809
|
|
9,441
|
Deferred
compensation liability
|
|
1,329
|
|
1,350
|
Deferred income
tax liabilities
|
|
5,677
|
|
5,852
|
|
|
125,287
|
|
130,035
|
TOTAL
LIABILITIES
|
|
217,438
|
|
186,079
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Capital
stock
|
|
544,546
|
|
544,345
|
Contributed
surplus
|
|
50,589
|
|
49,937
|
Accumulated
other comprehensive (loss) income
|
|
(3,794)
|
|
144
|
Deficit
|
|
(297,817)
|
|
(353,310)
|
|
|
293,524
|
|
241,116
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
$
510,962
|
|
$
427,195
|
Quarterhill
Inc.
|
|
|
|
|
Interim Condensed
Consolidated Statement of Cash Flows (Unaudited)
|
(in thousands and in
Canadian Dollars)
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
|
|
2022
|
|
2021
|
Cash used in
operations
|
|
|
|
|
Net income
(loss)
|
|
$
56,901
|
|
$
(4,287)
|
Non-cash
items
|
|
|
|
|
Stock-based compensation expense
|
|
729
|
|
424
|
Depreciation of right-of-use assets
|
|
568
|
|
279
|
Interest
expense on lease liabilities
|
|
—
|
|
50
|
Depreciation and amortization
|
|
6,871
|
|
4,720
|
Foreign
exchange loss (gain)
|
|
550
|
|
(96)
|
Other
income
|
|
(1,459)
|
|
(630)
|
Loss on
disposal of intangible assets
|
|
—
|
|
53
|
Loss on
disposal of assets
|
|
70
|
|
—
|
Deferred
income tax expense (recovery)
|
|
14,157
|
|
(1,420)
|
Embedded
derivatives
|
|
(217)
|
|
6
|
Gain from
change in fair value of derivative liability
|
|
(2,632)
|
|
—
|
Changes in
non-cash working capital balances
|
|
(84,740)
|
|
(4,973)
|
Net cash used in
operating activities
|
|
(9,202)
|
|
(5,874)
|
Financing
|
|
|
|
|
Dividends
paid
|
|
(1,408)
|
|
(1,381)
|
Payment of
lease liabilities
|
|
(512)
|
|
(293)
|
Repayment
of long-term debt
|
|
(783)
|
|
—
|
Repurchase
of shares for cancellation
|
|
—
|
|
(324)
|
Common
shares issued for cash on the exercise of options
|
|
124
|
|
177
|
Net cash used in
financing activities
|
|
(2,579)
|
|
(1,821)
|
Investing
|
|
|
|
|
Proceeds from
short-term investments
|
|
301
|
|
—
|
Proceeds from
sale of property, plant and equipment
|
|
211
|
|
—
|
Purchase of
property, plant and equipment
|
|
—
|
|
(37)
|
Purchase of
intangible assets
|
|
(542)
|
|
—
|
Net cash used in
investing activities
|
|
(30)
|
|
(37)
|
Foreign exchange on
cash held in foreign currencies
|
|
(273)
|
|
(1,531)
|
Net decrease in cash
and cash equivalents
|
|
(12,084)
|
|
(9,263)
|
Cash and cash
equivalents, beginning of
|
|
70,746
|
|
135,700
|
Cash and cash
equivalents, end of
|
|
$
58,662
|
|
$
126,437
|
Quarterhill Inc.
|
|
|
|
|
|
Interim Condensed
Consolidated Statement of Equity (Unaudited)
|
(in thousands and in
Canadian dollars)
|
|
|
|
|
|
|
|
Capital
Stock
|
Contributed
Surplus
|
Accumulated
Other
Comprehensive
Loss
|
Deficit
|
Total
Shareholders'
Equity
|
January 1,
2021
|
$
547,537
|
$
46,250
|
$
3,581
|
$
(325,438)
|
$
271,930
|
|
|
|
|
|
|
Net loss
|
—
|
—
|
—
|
(4,287)
|
(4,287)
|
Repurchase of shares
for cancellation
|
(641)
|
317
|
—
|
—
|
(324)
|
Other comprehensive
loss
|
—
|
—
|
(3,734)
|
—
|
(3,734)
|
Stock-based
compensation expense
|
—
|
424
|
—
|
—
|
424
|
Exercise of
options
|
251
|
(74)
|
—
|
—
|
177
|
Common shares issued
from restricted stock units
|
124
|
—
|
—
|
—
|
124
|
Common shares issued
from performance stock units
|
12
|
(12)
|
—
|
—
|
—
|
Dividends
declared
|
—
|
—
|
—
|
(1,432)
|
(1,432)
|
March 31,
2021
|
$
547,283
|
$
46,905
|
$
(153)
|
$
(331,157)
|
$
262,878
|
|
|
|
|
|
|
January 1,
2022
|
$
544,345
|
$
49,937
|
$
144
|
$
(353,310)
|
$
241,116
|
|
|
|
|
|
|
Net income
|
—
|
—
|
—
|
56,901
|
56,901
|
Other comprehensive
loss
|
—
|
—
|
(3,938)
|
—
|
(3,938)
|
Stock-based
compensation expense
|
—
|
729
|
—
|
—
|
729
|
Exercise of stock
options
|
201
|
(77)
|
—
|
—
|
124
|
Dividends
declared
|
—
|
—
|
—
|
(1,408)
|
(1,408)
|
March 31,
2022
|
$
544,546
|
$
50,589
|
$
(3,794)
|
$
(297,817)
|
$
293,524
|
Quarterhill
Inc.
|
|
|
|
|
|
|
|
Reconciliation of Net
loss to Adjusted EBITDA (Unaudited)
|
|
|
(in thousands and in
Canadian dollars, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
|
|
|
2022
|
|
2021
|
|
|
|
$
|
Per
Share
|
|
$
|
Per Share
|
|
|
Net (loss) income from
continuing operations
|
$
56,901
|
$
0.50
|
|
$
(4,287)
|
$
(0.04)
|
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
Income tax
(recovery) expense
|
14,759
|
0.13
|
|
(876)
|
(0.01)
|
|
|
Foreign exchange
(gain) loss
|
550
|
—
|
|
(125)
|
—
|
|
|
Finance expense,
net
|
2,645
|
0.03
|
|
48
|
—
|
|
|
Other
charges
|
96
|
—
|
|
39
|
—
|
|
|
Depreciation and
amortization
|
7,439
|
0.06
|
|
4,999
|
0.05
|
|
|
Stock based
compensation expense
|
729
|
0.01
|
|
424
|
0.01
|
|
|
Other
income
|
(4,021)
|
(0.04)
|
|
(630)
|
(0.01)
|
|
|
Adjusted
EBITDA
|
$
79,098
|
$
0.69
|
|
$
(408)
|
$
0.00
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of Common Shares
|
|
|
|
|
|
|
|
Basic
|
|
113,915,298
|
|
|
114,408,320
|
|
|
1 Please refer to the
Adjusted EBITDA Non- IFRS Financial Measures section for further
information.
2 Please refer to the Supplementary Financial Measures for further
information.
|
View original
content:https://www.prnewswire.com/news-releases/quarterhill-announces-q1-fiscal-2022-financial-results-301545708.html
SOURCE Quarterhill Inc.