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News

06 May, 21

Quarterhill Announces First Quarter Fiscal 2021 Financial Results

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

  • Consolidated Revenue was $19.3 million
  • Consolidated Adjusted EBITDA1 was ($0.4) million. IRD generated $1.4 million of positive Adjusted EBITDA and WiLAN generated $1.2 million of positive Adjusted EBITDA
  • Cash, cash equivalents, and short-term investments were $132.0 million at March 31, 2021
  • Working capital was $150.3 million at March 31, 2021
  • Acquired Sensor Line GmbH ("Sensor Line"), a provider of fiber optic traffic sensors for road and rail markets
  • Subsequent to quarter-end, on April 28, 2021, acquired VDS GmbH (“VDS”), a German-based Intelligent Transportation Systems (“ITS”) provider of high precision traffic monitoring devices

“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.

Webcast Information

The live audio webcast will be available at:

https://produceredition.webcasts.com/starthere.jsp?ei=1454081&tp_key=b73fdb2366   

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 365 days at:

https://produceredition.webcasts.com/starthere.jsp?ei=1454081&tp_key=b73fdb2366

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:

Dave Mason

Investor Relations

T: 416.247.9652

E: ir@quarterhill.com 

 

[1]Non-IFRS Disclosure

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.

About Quarterhill

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

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 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.

 

 

Quarterhill Inc.

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,

 

 

2021

 

2020

Revenues

 

 

 

 

Licensing

 

$

7,848 

 

 

$

10,183 

 

Intelligent Transportation Systems

 

11,468 

 

 

11,406 

 

 

 

19,316 

 

 

21,589 

 

Direct cost of revenues

 

 

 

 

Licensing

 

5,869 

 

 

5,767 

 

Intelligent Transportation Systems

 

6,829 

 

 

8,416 

 

 

 

12,698 

 

 

14,183 

 

Gross profit

 

6,618 

 

 

7,406 

 

Operating expenses

 

 

 

 

Depreciation of right-of-use assets

 

279 

 

 

244 

 

Depreciation of property, plant and equipment

 

233 

 

 

224 

 

Amortization of intangible assets

 

4,487 

 

 

4,743 

 

Selling, general and administrative expenses

 

7,056 

 

 

6,293 

 

Research and development expenses

 

394 

 

 

870 

 

Special charges

 

39 

 

 

213 

 

 

 

12,488 

 

 

12,587 

 

Results from operations

 

(5,870)

 

 

(5,181)

 

Finance income

 

(21)

 

 

(222)

 

Finance expense

 

69 

 

 

96 

 

Foreign exchange gain

 

(125)

 

 

(578)

 

Other income

 

(630)

 

 

(378)

 

Loss before taxes

 

(5,163)

 

 

(4,099)

 

Current income tax expense

 

544 

 

 

1,266 

 

Deferred income tax recovery

 

(1,420)

 

 

(433)

 

Income tax (recovery) expense

 

(876)

 

 

833 

 

 

 

 

 

 

Net loss from continuing operations

 

(4,287)

 

 

(4,932)

 

Net loss from discontinued operations

 

— 

 

 

(180)

 

Net loss

 

$

(4,287)

 

 

$

(5,112)

 

 

 

 

 

 

Other comprehensive (loss) income  that may be reclassified subsequently to net loss:

 

 

 

 

Foreign currency translation adjustment

 

$

(3,734)

 

 

$

21,094 

 

 Comprehensive (loss) income

 

$

(8,021)

 

 

$

15,982 

 

 

 

 

 

 

Loss  per share

 

 

 

 

From continuing operations

 

$

(0.04)

 

 

$

(0.04)

 

From discontinued operations

 

— 

 

 

(0.00)

 

Loss per share - Basic

 

$

(0.04)

 

 

$

(0.04)

 

 

 

 

 

 

From continuing operations

 

$

(0.04)

 

 

$

(0.04)

 

From discontinued operations

 

— 

 

 

(0.00)

 

Loss per share - Diluted

 

$

(0.04)

 

 

$

(0.04)

 

 

Quarterhill Inc.

 

 

 

 

Interim Condensed Consolidated Statements of Financial Position (Unaudited)

 

 

(in thousands of Canadian dollars)

 

 

 

 

 

 

 

 

 

As at

 

March 31, 2021

 

December 31, 2020

Current assets

 

 

 

 

Cash and cash equivalents

 

$

126,437 

 

 

$

135,700 

 

Short-term investments

 

5,550 

 

 

5,550 

 

Accounts receivable

 

16,510 

 

 

13,747 

 

Other assets

 

1,886 

 

 

— 

 

Unbilled revenue

 

10,660 

 

 

13,549 

 

Income taxes recoverable

 

58 

 

 

264 

 

Inventories (net of obsolescence)

 

10,262 

 

 

9,068 

 

Prepaid expenses and deposits

 

2,509 

 

 

8,264 

 

 

 

173,872 

 

 

186,142 

 

Non-current assets

 

 

 

 

Accounts receivable

 

488 

 

 

506 

 

Prepaid expenses and deposits

 

300 

 

 

338 

 

Right-of-use assets, net

 

3,332 

 

 

3,780 

 

Property, plant and equipment, net

 

2,715 

 

 

2,783 

 

Intangible assets, net

 

57,192 

 

 

59,261 

 

Investment in joint venture

 

7,192 

 

 

6,704 

 

Deferred income tax assets

 

28,408 

 

 

28,202 

 

Goodwill

 

18,157 

 

 

16,093 

 

 

 

117,784 

 

 

117,667 

 

TOTAL ASSETS

 

$

291,656 

 

 

$

303,809 

 

 

 

 

 

 

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable and accrued liabilities

 

15,347 

 

 

20,038 

 

Income taxes payable

 

786 

 

 

631 

 

Current portion of lease liabilities

 

1,002 

 

 

1,012 

 

Current portion of deferred revenue

 

6,486 

 

 

4,800 

 

 

 

23,621 

 

 

26,481 

 

Non-current liabilities

 

 

 

 

Deferred revenue

 

2,779 

 

 

2,573 

 

Long-term lease liabilities

 

2,352 

 

 

2,747 

 

Deferred income tax liabilities

 

26 

 

 

78 

 

 

 

5,157 

 

 

5,398 

 

TOTAL LIABILITIES

 

28,778 

 

 

31,879 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

Capital stock

 

547,283 

 

 

547,537 

 

Contributed surplus

 

46,905 

 

 

46,250 

 

Accumulated other comprehensive income

 

(153)

 

 

3,581 

 

Deficit

 

(331,157)

 

 

(325,438)

 

 

 

262,878 

 

 

271,930 

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

291,656 

 

 

$

303,809 

 

 

Quarterhill Inc.

Interim Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands of Canadian dollars)

 

 

Three months ended March 31,

 

 

2021

 

2020

Cash used in operations

 

 

 

 

Net loss from continuing operations

 

$

(4,287)

 

 

$

(4,932)

 

Non-cash items

 

 

 

 

Stock-based compensation expense (recovery)

 

424 

 

 

(25)

 

Depreciation of right-of-use assets

 

279 

 

 

244 

 

Interest expense on lease liabilities

 

50 

 

 

56 

 

Depreciation and amortization

 

4,720 

 

 

4,967 

 

Foreign exchange (gain) loss

 

(96)

 

 

284 

 

Equity in earnings from joint venture

 

(630)

 

 

(378)

 

Loss on disposal of intangible assets

 

53 

 

 

— 

 

Gain on disposal of assets

 

— 

 

 

(4)

 

Deferred income tax recovery

 

(1,420)

 

 

(429)

 

Embedded derivatives

 

 

 

(222)

 

Changes in non-cash working capital balances

 

(4,973)

 

 

10,084 

 

Cash generated from (used in) continuing operations

 

(5,874)

 

 

9,645 

 

Net cash flows attributable to discontinuing operations

 

— 

 

 

(597)

 

Net cash (used in) generated from operating activities

 

(5,874)

 

 

9,048 

 

Financing

 

 

 

 

Dividends paid

 

(1,381)

 

 

(1,481)

 

Bank indebtedness

 

— 

 

 

(1,812)

 

Payment of lease liabilities

 

(293)

 

 

(315)

 

Repayment of long-term debt

 

— 

 

 

(107)

 

Repurchase of shares for cancellation

 

(324)

 

 

— 

 

Common shares issued for cash on the exercise of options

 

177 

 

 

— 

 

Cash used in continuing operations

 

(1,821)

 

 

(3,715)

 

Net cash flows attributable to discontinuing operations

 

— 

 

 

— 

 

Net cash used in financing activities

 

(1,821)

 

 

(3,715)

 

Investing

 

 

 

 

Proceeds from sale of property, plant and equipment

 

— 

 

 

 

Purchase of property and equipment

 

(37)

 

 

(301)

 

Purchase of intangible assets

 

— 

 

 

(17)

 

Cash used in continuing operations

 

(37)

 

 

(314)

 

Net cash flows attributable to discontinuing operations

 

— 

 

 

(70)

 

Net cash used in investing activities

 

(37)

 

 

(384)

 

Foreign exchange on cash held in foreign currency

 

(1,531)

 

 

8,777 

 

Net (decrease) increase in cash and cash equivalents

 

(9,263)

 

 

13,726 

 

Cash and cash equivalents, beginning of

 

135,700 

 

 

87,870 

 

Cash and cash equivalents, end of

 

$

126,437 

 

 

$

101,596 

 

 

 

Quarterhill Inc.

 

 

 

 

 

 

Interim Condensed Consolidated Statements of Shareholders' Equity (Unaudited)

(in thousands of Canadian dollars)

 

 

 

 

 

 

 

 

Capital Stock

 

Contributed Surplus

 

Accumulated
Other
Comprehensive
Income

 

Deficit

 

Total Shareholders' Equity

January 1, 2020

 

$

570,553 

 

  

$

32,011 

 

  

$

10,936 

 

  

$

(338,297)

 

 

$

275,203 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

— 

 

 

— 

 

 

— 

 

 

(5,112)

 

 

(5,112)

 

Other comprehensive loss

 

— 

 

 

— 

 

 

21,094 

 

 

— 

 

 

21,094 

 

Stock-based compensation recovery

 

— 

 

 

(25)

 

 

— 

 

 

— 

 

 

(25)

 

Common shares issued from performance stock units

 

24 

 

 

— 

 

 

— 

 

 

— 

 

 

24 

 

Dividends declared

 

— 

 

 

— 

 

 

— 

 

 

(1,481)

 

 

(1,481)

 

March 31, 2020

 

$

570,577 

 

  

$

31,986 

 

  

$

32,030 

 

  

$

(344,890)

 

 

$

289,703 

 

 

 

 

 

 

 

 

 

 

 

 

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 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterhill Inc.

 

 

 

 

 

 

Reconciliation of Net loss  to Adjusted EBITDA (Unaudited)

(in thousands of Canadian dollars, except share and per share amounts)

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

2021

 

2020

 

 

$

Per Share

 

$

Per Share

Net loss from continuing operations

 

$

(4,287)

 

$

(0.04)

 

 

$

(4,932)

 

$

(0.04)

 

Adjusted for:

 

 

 

 

 

 

Income tax expense (recovery)

 

(876)

 

(0.01)

 

 

833 

 

0.01 

 

Foreign exchange gain

 

(125)

 

— 

 

 

(578)

 

(0.01)

 

Finance expense

 

69 

 

— 

 

 

96 

 

— 

 

Finance income

 

(21)

 

— 

 

 

(222)

 

— 

 

Special charges

 

39 

 

— 

 

 

213 

 

 

Amortization of intangible assets

 

4,487 

 

0.05 

 

 

4,743 

 

0.05 

 

Depreciation of property, plant and equipment

 

233 

 

— 

 

 

224 

 

— 

 

Depreciation of right-of-use assets

 

279 

 

— 

 

 

244 

 

— 

 

Stock based compensation expense (recovery)

 

424 

 

0.01 

 

 

(25)

 

— 

 

Other income

 

(630)

 

(0.01)

 

 

(378)

 

(0.01)

 

Adjusted EBITDA

 

$

(408)

 

$

(0.00)

 

 

$

218 

 

$

0.00 

 

 

 

 

 

 

 

 

Weighted average number of Common Shares

 

 

 

 

 

 

Basic

 

 

114,408,320 

 

 

 

118,857,433 

 

 

 

[1]

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