Toronto, Canada – May 6, 2021 Quarterhill Inc. (“Quarterhill” or the “Company”) (TSX: QTRH) (OTCQX: QTRHF), announces its financial results for the three-month period ended March 31, 2021. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.
Q1 Fiscal 2021 Highlights
“Our portfolio companies performed well in Q1 with each generating positive Adjusted EBITDA despite the seasonality of our ITS business, a weakening of the U.S. dollar compared to Q1 2020 and the general challenges posed by the ongoing COVID-19 pandemic,” said Paul Hill, CEO at Quarterhill.
“We are also very pleased to have been active in our M&A efforts, having made two acquisitions since the start of the year and we feel that we are just getting started in terms of capital deployment on our M&A strategy. Both Sensor Line and VDS were tuck-ins for IRD, which is an ideal platform for our expansion in ITS. In addition to tuck-ins, we continue to build a pipeline of larger M&A opportunities that could constitute stand-alone entities within Quarterhill and accelerate our growth into ITS.”
“The M&A conditions in ITS are compelling and were given a substantial boost with the recent announcement by the Biden Administration in the U.S. regarding their plans to spend more than US$600 billion on transportation infrastructure over the next eight years. We believe that the combination of massive new infrastructure spending and the need for governments to find new sources of revenue to pay down the debt, means there is no better time to be in ITS.”
Approval of Eligible Dividend
The Board of Directors has declared an eligible quarterly dividend of $0.0125 per common share payable on July 9, 2021, to shareholders of record on June 18, 2021.
Q1 Fiscal 2021 Financial Review
The Interim Condensed Consolidated Financial Statements for the three-month period ended March 31, 2021 and for the respective comparison period have been prepared to reflect continuing operations and therefore exclude results in 2020 during those periods from VIZIYA, which was sold by Quarterhill on May 15, 2020. The 2020 operating results from VIZIYA, up to the date of sale on May 15, 2020, are reported as net loss from discontinued operations in accordance with IFRS 5.
Quarterhill’s revenue is broadly segmented into Licensing, reflecting the WiLAN business, and Intelligent Transportation Systems, reflecting the IRD business. Quarterhill’s Management’s Discussion and Analysis and Interim Condensed Consolidated Financial Statements for the three-month period ended March 31, 2021 are available on the Company’s website www.quarterhill.com and on its profile at SEDAR.
Consolidated revenues for the three-month period ended March 31, 2021 (“Q1 2021”) were $19.3 million, compared to $21.6 million in Q1 2020. The majority of WiLAN’s licenses are 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. WiLAN’s revenue was lower in Q1 2021 due primarily to the completion of a greater volume, and value, of licensing contracts in the prior year period. Revenue at IRD for Q1 2021 was flat when compared with the same period in 2020. The IRD and WiLAN businesses have proven to be resilient and consistent during the COVID-19 pandemic; however, some impact has been felt at IRD with certain contract delays primarily in domestic projects and at WiLAN with the inability to hold in-person meetings causing some delays in the licensing negotiation process.
Gross margin for Q1 2021 was 34%, which was flat compared to 34% in Q1 2020. Gross margin for the licensing business in Q1 2021 was impacted by the factors noted above. Q1 2021 gross margin for the ITS business increased year-over-year reflecting higher profitability on certain projects currently under deployment and a higher proportion of product sales in revenue compared to the same prior year period.
Operating expenses include selling, general and administrative costs (“SG&A”), research and development costs (“R&D”), depreciation and amortization and special charges. Operating expenses for Q1 2021 were $12.5 million compared to $12.6 million in Q1 2020. Operating expenses were lower primarily due to lower R&D and amortization of intangibles.
Consolidated Adjusted EBITDA for Q1 2021 was ($0.4) million compared to $0.2 million in Q1 2020. The licensing business generated $1.2 million of Adjusted EBITDA in Q1 2021, while the ITS business generated $1.4 million.
Cash generated from (used in) continuing operations for Q1 2021 was ($5.9) million compared to $9.1 million in Q1 2020. Excluding changes in non-cash working capital balances, cash used in operations in Q1 2021 was ($0.9) million. Cash and cash equivalents and short-term investments was $132.0 million at March 31, 2021, compared to $141.3 million at December 31, 2020. Working capital at March 31, 2021, was $150.3 million compared to $159.7 million at December 31, 2020.
Conference Call and Webcast
Quarterhill will host a conference call to discuss its financial results today at 10:00 AM Eastern Time. Slides to accompany the call can be viewed via the webcast.
The live audio webcast will be available at:
Webcast replay will be available for 365 days at:
Telephone replay will be available until 11:59 p.m. Eastern Daylight Time on May 13, 2021 at: 1.855.859.2056 (Toll Free North America) or 1.416.849.0833 (International).The telephone replay requires the passcode 2367619.
For media and investor inquiries, please contact:
Quarterhill has historically used a set of metrics when evaluating our operational and financial performance. We continually monitor, evaluate and update these metrics as required to ensure they provide information considered most useful, in the opinion of our management, to any decision-making based on Quarterhill’s performance. This section defines, quantifies and analyzes the key performance indicators used by our management and referred to elsewhere in this press release, which are not recognized under IFRS and have no standardized meaning prescribed by IFRS. These indicators and measures are therefore unlikely to be comparable to similar measures presented by other issuers.
In this press release, we use the Non-IFRS term “Adjusted EBITDA” to mean net income (loss) 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 right-of-use assets and property, plant and equipment; (vi) stock-based compensation; (vii) foreign exchange (gain) loss; and (viii) equity in earnings and dividends 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 income and cash flows from operations as determined in accordance with IFRS or as a measure of liquidity.
Quarterhill is a growth-oriented company in the Intelligent Transportation Systems (ITS) industry as well as a leader in Intellectual Property licensing. Our goal is to execute an investment strategy that capitalizes on attractive growth opportunities within ITS - and its adjacent markets - to become a global leader in that industry. 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
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 11, 2021 annual information form for the year ended December 31, 2020 (the "AIF"). Copies of the AIF may be obtained at 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.
Interim Condensed Consolidated Statements of Loss and Comprehensive (Loss) Income (Unaudited)
(in thousands of Canadian dollars, except share and per share amounts)
Three months ended March 31,
Intelligent Transportation Systems
Direct cost of revenues
Depreciation of right-of-use assets
Depreciation of property, plant and equipment
Amortization of intangible assets
Selling, general and administrative expenses
Research and development expenses
Results from operations
Foreign exchange gain
Loss before taxes
Current income tax expense
Deferred income tax recovery
Income tax (recovery) expense
Net loss from continuing operations
Net loss from discontinued operations
Other comprehensive (loss) income that may be reclassified subsequently to net loss:
Foreign currency translation adjustment
Comprehensive (loss) income
Loss per share
From continuing operations
From discontinued operations
Loss per share - Basic
Loss per share - Diluted
Interim Condensed Consolidated Statements of Financial Position (Unaudited)
(in thousands of Canadian dollars)
March 31, 2021
December 31, 2020
Cash and cash equivalents
Income taxes recoverable
Inventories (net of obsolescence)
Prepaid expenses and deposits
Right-of-use assets, net
Property, plant and equipment, net
Intangible assets, net
Investment in joint venture
Deferred income tax assets
Accounts payable and accrued liabilities
Income taxes payable
Current portion of lease liabilities
Current portion of deferred revenue
Long-term lease liabilities
Deferred income tax liabilities
Accumulated other comprehensive income
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
Interim Condensed Consolidated Statements of Cash Flows (Unaudited)
Cash used in operations
Stock-based compensation expense (recovery)
Interest expense on lease liabilities
Depreciation and amortization
Foreign exchange (gain) loss
Equity in earnings from joint venture
Loss on disposal of intangible assets
Gain on disposal of assets
Changes in non-cash working capital balances
Cash generated from (used in) continuing operations
Net cash flows attributable to discontinuing operations
Net cash (used in) generated from operating activities
Payment of lease liabilities
Repayment of long-term debt
Repurchase of shares for cancellation
Common shares issued for cash on the exercise of options
Cash used in continuing operations
Net cash used in financing activities
Proceeds from sale of property, plant and equipment
Purchase of property and equipment
Purchase of intangible assets
Net cash used in investing activities
Foreign exchange on cash held in foreign currency
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of
Cash and cash equivalents, end of
Interim Condensed Consolidated Statements of Shareholders' Equity (Unaudited)
Total Shareholders' Equity
January 1, 2020
Other comprehensive loss
Stock-based compensation recovery
Common shares issued from performance stock units
March 31, 2020
January 1, 2021
Stock-based compensation expense
Exercise of options
Common shares issued from restricted stock units
Reconciliation of Net loss to Adjusted EBITDA (Unaudited)
Income tax expense (recovery)
Stock based compensation expense (recovery)
Weighted average number of Common Shares
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