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08 Aug, 19

QUARTERHILL ANNOUNCES SECOND QUARTER 2019 FINANCIAL RESULTS

Revenue of $42.4 million, Adjusted EBITDA of $12.9 million
 
Ending cash balance of $88.0 million

KITCHENER, ON, Aug. 8, 2019 /PRNewswire/ - Quarterhill Inc. ("Quarterhill" or the "Company") (TSX: QTRH) (NASDAQ: QTRH), announces its financial results for the three- and six-month periods ended June 30, 2019. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

Second Quarter 2019 Highlights

  • Revenues of $42.4 million, compared to $20.4 million in Q2 last year
  • Recurring revenues of $5.7 million, compared to $6.8 million in Q2 last year
  • Adjusted EBITDA* of $12.9 million, compared to ($4.0) million in Q2 last year
  • Net loss of ($4.5) million, or ($0.04) per basic and diluted common share, compared to net loss of ($7.9) million, or ($0.07) per basic and diluted common share, in Q2 last year
  • Cash and cash equivalents were $88.0 million at June 30, 2019, compared to $67.3 million at December 31, 2018
  • IRD achieved record quarterly revenue of $14.8 million
  • WiLAN generated revenue of $24.7 million and Adjusted EBITDA $12.3 million
  • Subsequent to quarter-end, VIZIYA signed significant software license agreements with two new customers

 

"Q2 saw the positive momentum from the prior two quarters continue with results driven by strong revenue at WiLAN and IRD, as well as positive Adjusted EBITDA from all three portfolio companies," said Doug Parker, President and CEO, Quarterhill. "As we have said in the past, revenue at WiLAN can be variable on a quarter-to-quarter basis and its financial performance should be viewed over a longer time frame. So far in 2019 we have seen the positive side of this variability as WiLAN has posted significant year-over-year gains on both a quarterly and year-to-date basis."

"We are well-capitalized to pursue our M&A-driven diversification strategy as we ended Q2 with just under $90.0 million on the balance sheet. This is a significant increase from year-end and primarily reflects the cash-generating capabilities of WiLAN and to a lesser extent the benefits of our recent restructurings and cost management efforts. While the top-end of our M&A funnel continues to expand, and we are seeing interesting tuck-in opportunities for our existing businesses, the M&A market is arguably at historic valuation highs. In this environment we will continue to remain patient capital allocators and will only buy assets that meet our disciplined acquisition criteria."

"Subsequent to quarter-end, VIZIYA signed two significant software license contracts in July. While revenue from the contracts will be recognized in Q3, the combined size of these deals was large enough to require us to adjust our contingency related to the VIZIYA earn-out in our Q2 statements. As we have spoken about previously, VIZIYA has multiple opportunities in its pipeline with significant revenue potential but that face longer sales cycles. While greater detail will be available with our Q3 reporting, these two transactions demonstrate the positive financial impact that can be felt when one or two of those larger opportunities are realized. Companies in traditional Enterprise Asset Management sectors, such as Mining, Metals and Energy, have faced a challenging business environment for several years, and we believe these agreements are testament to the operational and economical value that VIZIYA's solutions can deliver to its customer base."

Approval of Eligible Dividend
The Board of Directors has declared an eligible quarterly dividend of CDN $0.0125 per common share payable on October 4, 2019, to shareholders of record on September 13, 2019.

Business Strategy and Segments
Quarterhill's acquisition strategy focuses primarily on financial metrics while remaining cognizant of broader technology and market trends as it builds 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, the Company seeks to enable shareholders to benefit from consolidation and convergence trends in today's technology industry.

Q2 and Year-to-Date 2019 Consolidated Financial Review
Consolidated revenues for the three months ended June 30, 2019 ("Q2 2019") were $42.4 million, compared to $20.4 million in Q2 2018, representing growth of 108%. Consolidated revenues for the six months ended June 30, 2019 ("Year-to-Date") were $82.2 million, compared to $32.4 million in the same period last year, representing growth of 154%. For both Q2 2019 and the Year-to-Date period, the increase in revenue is due to growth at WiLAN and IRD, offset in part, by lower revenue at VIZIYA.

Gross margin for Q2 2019 was $20.5 million, or 48%, compared to $3.9 million, or 19%, in Q2 2018. Gross margin for the six months ended June 30, 2019 was $40.6 million, or 49%, compared to $4.1 million, or 13%, in the same period last year. For both Q2 2019 and the Year-to-Date period, positive and increased gross margin is due to strong financial results from WiLAN and IRD, offset in part, by financial results at VIZIYA.

Operating expenses include selling, general and administrative costs, research and development costs, depreciation and amortization of intangible assets and special charges. Q2 2019 operating expenses included a special charge of $10.6 million related to the earn-out payment in the VIZIYA acquisition. As a result of the significant licenses signed in July, VIZIYA is now expected to achieve its performance targets and earn more than 100% of the eligible earn-out payment. The Company has therefore revalued the contingent liability associated with the earn-out from $0.9 million to $11.6 million, leading to the $10.6 million special charge in Q2 2019. This liability will be retired no later than October 31, 2019, subject to the terms of the VIZIYA acquisition agreement, through the issuance of 3,647,417 Common Shares and cash consideration in the amount of approximately $7.1 million.

Excluding the $10.6 million special charge, operating expenses for Q2 2019 were $14.0 million, compared to $14.7 million in Q2 2018, and for the Year-to-Date period were $28.7 million, compared to $29.9 million in the same period last year. Operating expenses decreased year-over-year due to the restructurings at IRD and WiLAN that took place in 2018, offset in part by a $0.4 million increase in R&D and a $0.5 million special charge in Q2 2019 related to the non-cash write-off of leasehold improvements resulting from the relocation of WiLAN to smaller, more cost effective facilities.

Adjusted EBITDA for Q2 2019 was $12.9 million compared to ($4.0) million in Q2 2018. Adjusted EBITDA for the six months ended June 30, 2019 was $25.3 million compared to ($11.3) million in the same period last year. Adjusted EBITDA for the three- and six-month periods ended June 30, 2019 reflects higher revenue from WiLAN and IRD, and a positive Adjusted EBITDA contribution from all three portfolio companies.

Net loss for Q2 2019 was ($4.5) million, or ($0.04) per basic and diluted Common Share, compared to net loss of ($7.9) million or ($0.07) per basic and diluted Common Share in Q2 2018. Net loss for the six months ended June 30, 2019 was ($4.4) million, or ($0.04) per basic and diluted Common Share, compared to a net loss of ($19.9) million, or ($0.17) per basic and diluted Common Share, in the same period last year. Excluding the $10.6 million special charge related to the earn-out at VIZIYA, Quarterhill would have generated net income of $6.2 million, or $0.05 per basic and diluted share, and $6.2 million, or $0.05 per basic and diluted share, in the Q2 2019 and Year-to-Date periods, respectively. Year-over-year, the Company's bottom-line improved primarily due to higher revenue at WiLAN and IRD combined with a lower cost base following the restructurings at those two companies in 2018.

Cash generated from operations in Q2 2019 was $34.0 million, compared to cash used in operations of ($2.4) million in Q2 2018. Cash generated from operations for the Year-to-Date period was $21.6 million, compared to cash used in operations of ($9.0) million in the same period last year. Cash from operations in Q2 2019 benefited from the strong performance at WiLAN and IRD as well as the collection of certain receivables tied to revenue generated in Q1 2019.

Cash and cash equivalents and short-term investments amounted to $88.0 million at June 30, 2019, compared to $67.3 million at December 31, 2018.

The table below highlights financial performance for the Company's Licensing, Intelligent Systems and Enterprise Software 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 June 30, 2019

 
 

Licensing

   

Intelligent

Systems

   

Enterprise

Software

   

Corporate

   

Total

 

Revenues

$

24,743

   

$

14,786

   

$

2,827

   

$

-

   

$

42,356

 

Cost of revenues (excluding depreciation and amortization)

 

11,987

     

9,488

     

356

     

-

     

21,831

 
   

12,756

     

5,298

     

2,471

     

-

     

20,525

 

Selling, general and administrative expenses

 

465

     

2,584

     

1,444

     

2,157

     

6,650

 

Research and development expenses

 

-

     

617

     

620

     

-

     

1,237

 

Depreciation of property, plant and equipment

 

30

     

292

     

36

     

4

     

362

 

Amortization of intangibles

 

3,516

     

940

     

757

     

-

     

5,213

 

Special charges

 

532

     

-

     

-

     

10,648

     

11,180

 

Results from operations

 

8,213

     

865

     

(386)

     

(12,809)

     

(4,117)

 

Finance income

 

(39)

     

(4)

     

-

     

(248)

     

(291)

 

Finance expense

 

-

     

233

     

1

     

1

     

235

 

Foreign exchange loss (gain)

 

(176)

     

55

     

15

     

186

     

80

 

Other income

 

(3)

     

(177)

     

-

     

-

     

(180)

 

Income (loss) before taxes

 

8,431

     

758

     

(402)

     

(12,748)

     

(3,961)

 

Current income tax expense (recovery)

 

40

     

(49)

     

1

     

-

     

(8)

 

Deferred income tax expense (recovery)

 

1,900

     

(362)

     

(175)

     

(846)

     

517

 

Income tax expense (recovery)

 

1,940

     

(411)

     

(174)

     

(846)

     

509

 

Net income (loss)

$

6,491

   

$

1,169

   

$

(228)

   

$

(11,902)

   

$

(4,470)

 
                                       

Adjusted EBITDA

 

12,302

     

2,124

     

422

     

(1,982)

     

12,866

 
                                       

Other reconciling items:

                                     

Stock-based compensation

 

11

     

27

     

15

     

175

     

228

 

 

 

For the six months ended June 30, 2019

 
 

Licensing

   

Intelligent

Systems

   

Enterprise

Software

   

Corporate

   

Total

 

Revenues

$

52,868

   

$

24,124

   

$

5,202

   

$

-

   

$

82,194

 

Cost of revenues (excluding depreciation and amortization)

 

24,776

     

16,185

     

663

     

-

     

41,624

 
   

28,092

     

7,939

     

4,539

     

-

     

40,570

 

Selling, general and administrative expenses

 

1,025

     

5,090

     

3,018

     

4,104

     

13,237

 

Research and development expenses

 

-

     

1,208

     

1,208

     

-

     

2,416

 

Depreciation of property, plant and equipment

 

71

     

594

     

67

     

8

     

740

 

Amortization of intangibles

 

7,044

     

1,886

     

1,514

     

-

     

10,444

 

Special charges

 

1,829

     

-

     

-

     

10,648

     

12,477

 

Results from operations

 

18,123

     

(839)

     

(1,268)

     

(14,760)

     

1,256

 

Finance income

 

(57)

     

(6)

     

-

     

(430)

     

(493)

 

Finance expense

 

-

     

276

     

2

     

1

     

279

 

Foreign exchange loss (gain)

 

(368)

     

247

     

48

     

395

     

322

 

Other income

 

(3)

     

(251)

     

-

     

-

     

(254)

 

Income (loss) before taxes

 

18,551

     

(1,105)

     

(1,318)

     

(14,726)

     

1,402

 

Current income tax expense

 

3,947

     

85

     

1

     

-

     

4,033

 

Deferred income tax expense (recovery)

 

3,848

     

(957)

     

(503)

     

(578)

     

1,810

 

Income tax expense (recovery)

 

7,795

     

(872)

     

(502)

     

(578)

     

5,843

 

Net income (loss)

$

10,756

   

$

(233)

   

$

(816)

   

$

(14,148)

   

$

(4,441)

 
                                       

Adjusted EBITDA

 

27,057

     

1,698

     

342

     

(3,771)

     

25,326

 
                                       

Other reconciling items:

                                     

Stock-based compensation

 

(10)

     

57

     

29

     

333

     

409

 

 

 

For the three months ended June 30, 2018

 
 

Licensing

   

Intelligent

Systems

   

Enterprise

Software

   

Corporate

   

Total

 

Revenues

$

3,976

   

$

12,659

   

$

3,762

   

$

-

   

$

20,397

 

Cost of revenues (excluding depreciation and amortization)

 

8,015

     

8,083

     

441

     

-

     

16,539

 
   

(4,039)

     

4,576

     

3,321

     

-

     

3,858

 

Selling, general and administrative expenses

 

607

     

2,713

     

1,733

     

1,983

     

7,036

 

Research and development expenses

 

-

     

510

     

343

     

-

     

853

 

Depreciation of property, plant and equipment

 

72

     

284

     

30

     

2

     

388

 

Amortization of intangibles

 

4,714

     

971

     

757

     

-

     

6,442

 

Results from operations

 

(9,432)

     

98

     

458

     

(1,985)

     

(10,861)

 

Finance income

 

-

     

(6)

     

-

     

(185)

     

(191)

 

Finance expense

 

1

     

36

     

3

     

-

     

40

 

Foreign exchange loss (gain)

 

257

     

(124)

     

28

     

(196)

     

(35)

 

Other income

 

-

     

(387)

     

(192)

     

-

     

(579)

 

Income (loss) before taxes

 

(9,690)

     

579

     

619

     

(1,604)

     

(10,096)

 

Current income tax expense (recovery)

 

121

     

190

     

(95)

     

1

     

217

 

Deferred income tax expense (recovery)

 

(3,422)

     

(66)

     

(247)

     

1,287

     

(2,448)

 

Income tax expense (recovery)

 

(3,301)

     

124

     

(342)

     

1,288

     

(2,231)

 

Net income (loss)

$

(6,389)

   

$

455

   

$

961

   

$

(2,892)

   

$

(7,865)

 
                                       

Adjusted EBITDA

 

(4,641)

     

1,486

     

1,276

     

(2,072)

     

(3,951)

 
                                       

Other reconciling items:

                                     

Effect of deleted deferred revenue

 

-

     

61

     

21

     

-

     

82

 

Stock-based compensation

 

5

     

72

     

10

     

(89)

     

(2)

 

 

 

For the six months ended June 30, 2018

 
 

Licensing

   

Intelligent

Systems

   

Enterprise

Software

   

Corporate

   

Total

 

Revenues

$

5,743

   

$

20,071

   

$

6,592

   

$

-

   

$

32,406

 

Cost of revenues (excluding depreciation and amortization)

 

13,920

     

13,581

     

772

     

-

     

28,273

 
   

(8,177)

     

6,490

     

5,820

     

-

     

4,133

 

Selling, general and administrative expenses

 

1,238

     

5,286

     

3,302

     

4,263

     

14,089

 

Research and development expenses

 

-

     

1,059

     

733

     

-

     

1,792

 

Depreciation of property, plant and equipment

 

147

     

574

     

59

     

3

     

783

 

Amortization of intangibles

 

9,716

     

1,963

     

1,514

     

-

     

13,193

 

Results from operations

 

(19,278)

     

(2,392)

     

212

     

(4,266)

     

(25,724)

 

Finance income

 

-

     

(7)

     

-

     

(375)

     

(382)

 

Finance expense

 

1

     

72

     

6

     

-

     

79

 

Foreign exchange loss (gain)

 

557

     

(272)

     

19

     

(469)

     

(165)

 

Other income

 

-

     

(637)

     

(269)

     

-

     

(906)

 

Income (loss) before taxes

 

(19,836)

     

(1,548)

     

456

     

(3,422)

     

(24,350)

 

Current income tax expense (recovery)

 

225

     

199

     

(529)

     

1

     

(104)

 

Deferred income tax expense (recovery)

 

(4,825)

     

(634)

     

(485)

     

1,608

     

(4,336)

 

Income tax expense (recovery)

 

(4,600)

     

(435)

     

(1,014)

     

1,609

     

(4,440)

 

Net income (loss)

$

(15,236)

   

$

(1,113)

   

$

1,470

   

$

(5,031)

   

$

(19,910)

 
                                       

Adjusted EBITDA

 

(9,404)

     

449

     

1,943

     

(4,276)

     

(11,288)

 
                                       

Other reconciling items:

                                     

Effect of deleted deferred revenue

 

-

     

158

     

148

     

-

     

306

 

Stock-based compensation

 

11

     

146

     

10

     

(13)

     

154

 

 

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://event.on24.com/wcc/r/2049478/8C0FE2C7ACF78F8AABA72BDE413DEE14 

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: https://event.on24.com/wcc/r/2049478/8C0FE2C7ACF78F8AABA72BDE413DEE14 

Telephone replay will be available from 1:00 p.m. Eastern Time on August 8, 2019 until 11:59 p.m. Eastern Time on August 15, 2019 at: 1.855.859.2056 (Toll Free) or 1.416.849.0833 (International). The telephone replay requires the passcode 2799096.

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 (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 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 income 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 INCOME 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 Quarterhill's February 28, 2019 annual information form for the year ended December 31, 2018 (the "AIF"). Copies of the AIF may be obtained at www.sedar.com and as part of Quarterhill's Form 40-F for the year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission and available at www.sec.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 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.

 

Condensed Consolidated Interim Statements of Operations

 

(Unaudited)

 

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

 
                               
 

Three months ended June 30,

   

Six months ended June 30,

 
 

2019

   

2018

   

2019

   

2018

 

Revenues

$

42,356

   

$

20,397

   

$

82,194

   

$

32,406

 

Cost of revenues (excluding depreciation and amortization)

 

21,831

     

16,539

     

41,624

     

28,273

 
   

20,525

     

3,858

     

40,570

     

4,133

 

Operating expenses

                             

Selling, general and administrative expenses

 

6,650

     

7,036

     

13,237

     

14,089

 

Research and development expenses

 

1,237

     

853

     

2,416

     

1,792

 

Depreciation of property, plant and equipment

 

362

     

388

     

740

     

783

 

Amortization of intangibles

 

5,213

     

6,442

     

10,444

     

13,193

 

Special charges

 

11,180

     

-

     

12,477

     

-

 
   

24,642

     

14,719

     

39,314

     

29,857

 

Results from operations

 

(4,117)

     

(10,861)

     

1,256

     

(25,724)

 
                               

Finance income

 

(291)

     

(191)

     

(493)

     

(382)

 

Finance expense

 

235

     

40

     

279

     

79

 

Foreign exchange loss (gain)

 

80

     

(35)

     

322

     

(165)

 

Other income

 

(180)

     

(579)

     

(254)

     

(906)

 

Income (loss) before taxes

 

(3,961)

     

(10,096)

     

1,402

     

(24,350)

 
                               

Current income tax expense (recovery)

 

(8)

     

217

     

4,033

     

(104)

 

Deferred income tax expense (recovery)

 

517

     

(2,448)

     

1,810

     

(4,336)

 

Income tax expense (recovery)

 

509

     

(2,231)

     

5,843

     

(4,440)

 

Net loss

$

(4,470)

   

$

(7,865)

   

$

(4,441)

   

$

(19,910)

 
                               

Net loss per share

                             

  Basic and fully diluted

$

(0.04)

   

$

(0.07)

   

$

(0.04)

   

$

(0.17)

 
                               

Weighted average number of common shares

                             

  Basic

 

118,817,466

     

118,779,445

     

118,817,466

     

118,719,182

 

  Fully diluted

 

118,817,466

     

118,779,445

     

118,817,466

     

118,719,182

 

 

Quarterhill Inc.

 

Supplemental Condensed Consolidated Interim Statements of Operations Information

 

(Unaudited)

 

(in thousands of United States dollars)

 
                               
 

Three months ended June 30,

   

Six months ended June 30,

 
 

2019

   

2018

   

2019

   

2018

 

Revenues

                             

  License

$

25,581

   

$

5,643

   

$

53,561

   

$

8,136

 

  Systems

 

10,492

     

7,179

     

16,094

     

11,872

 

  Services

 

547

     

727

     

1,193

     

1,380

 

  Recurring

 

5,736

     

6,848

     

11,346

     

11,018

 

Total revenues

$

42,356

   

$

20,397

   

$

82,194

   

$

32,406

 
                               

Cost of revenues (excluding depreciation and amortization)

                             

  License

$

11,987

   

$

8,069

   

$

24,793

   

$

14,000

 

  Systems

 

6,863

     

4,645

     

10,656

     

8,111

 

  Services

 

356

     

385

     

646

     

690

 

  Recurring

 

2,625

     

3,440

     

5,529

     

5,472

 

Total cost of revenues

$

21,831

   

$

16,539

   

$

41,624

   

$

28,273

 
                               

 

Quarterhill Inc.

 

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

 

(Unaudited)

 

(in thousands of United States dollars)

 
 

Three months ended June 30,

   

Six months ended June 30,

 
 

2019

   

2018

   

2019

   

2018

 

 Net loss

$

(4,470)

   

$

(7,865)

   

$

(4,441)

   

$

(19,910)

 
                               

 Other comprehensive income (loss):

                             

 Foreign currency translation adjustment

 

158

     

(1,481)

     

757

     

(2,271)

 

Comprehensive income (loss)

$

(4,312)

   

$

(9,346)

   

$

(3,684)

   

$

(22,181)

 
                               

 

Quarterhill Inc.

 

Condensed Consolidated Interim Balance Sheets

 

(Unaudited)

 

(in thousands of United States dollars)

 
                       

As at

       

June 30, 2019

   

December 31, 2018

 

Current assets

                     

Cash and cash equivalents

       

$

84,634

   

$

63,929

 

Short-term investments

         

1,181

     

1,139

 

Restricted short-term investments

         

2,200

     

2,200

 

Accounts receivable

         

9,786

     

10,812

 

Other current assets

         

-

     

91

 

Unbilled revenue

         

6,638

     

3,990

 

Income taxes receivable

         

52

     

198

 

Inventories

         

6,100

     

5,960

 

Prepaid expenses and deposits

         

2,368

     

2,332

 
           

112,959

     

90,651

 

Non-current assets

                     

Accounts receivable

         

333

     

415

 

Right-of-use assets

         

3,895

     

-

 

Property, plant and equipment

         

1,886

     

2,655

 

Intangible assets

         

77,669

     

87,425

 

Investment in joint venture

         

4,057

     

3,822

 

Deferred income tax assets

         

23,918

     

27,141

 

Goodwill

         

25,302

     

25,303

 

TOTAL ASSETS

       

$

250,019

   

$

237,412

 
                       

Liabilities

                     

Current liabilities

                     

Bank indebtedness

       

$

4,514

   

$

2,598

 

Accounts payable and accrued liabilities

         

21,612

     

18,103

 

Income taxes payable

         

37

     

-

 

Right-of-use lease liabilities

         

699

     

-

 

Current portion of deferred revenue

         

4,840

     

4,670

 

Current portion of long-term debt

         

61

     

299

 

Contingent consideration

         

11,577

     

929

 
           

43,340

     

26,599

 

Non-current liabilities

                     

Deferred revenue

         

1,144

     

1,435

 

Right-of-use lease liabilities

         

3,059

     

-

 

Long-term debt

         

175

     

173

 

Deferred income tax liabilities

         

2,939

     

4,337

 

TOTAL LIABILITIES

         

50,657

     

32,544

 

Shareholders' equity

                     

Capital stock

         

419,111

     

419,111

 

Additional paid-in capital

         

23,366

     

22,957

 

Accumulated other comprehensive income

         

17,000

     

16,243

 

Deficit

         

(260,115)

     

(253,443)

 
           

199,362

     

204,868

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

       

$

250,019

   

$

237,412

 

 

Quarterhill Inc.

 

Condensed Consolidated Interim Statements of Cash Flows

 

(Unaudited)

 

(in thousands of United States dollars)

 
                               
 

Three months ended June 30,

   

Six months ended June 30,

 
 

2019

   

2018

   

2019

   

2018

 

Cash generated from (used in):

                             

Operations

                             

Net loss

$

(4,470)

   

$

(7,865)

   

$

(4,441)

   

$

(19,910)

 

Non-cash items

                             

Stock-based compensation

 

228

     

(2)

     

409

     

154

 

Depreciation and amortization

 

5,575

     

6,830

     

11,184

     

13,976

 

Foreign exchange (gain) loss

 

(34)

     

84

     

(96)

     

162

 

Equity in income from joint venture

 

(177)

     

(388)

     

(251)

     

(638)

 

Loss on disposal of assets

 

587

     

-

     

587

     

1

 

Deferred income tax expense (recovery)

 

517

     

(2,448)

     

1,810

     

(4,336)

 

Embedded derivatives

 

29

     

(3)

     

99

     

(1)

 

Contingent consideration adjustment

 

10,648

     

-

     

10,648

     

-

 

Changes in non-cash working capital balances

 

21,124

     

1,362

     

1,686

     

1,623

 

Cash generated from (used in) operations

 

34,027

     

(2,430)

     

21,635

     

(8,969)

 

Financing

                             

      Accounts receivable - non current (net)

 

18

     

-

     

82

     

-

 

Dividends paid

 

(1,101)

     

(1,155)

     

(2,231)

     

(2,326)

 

Bank indebtedness

 

1,844

     

3,170

     

1,916

     

1,113

 

Repayment of long-term debt

 

(212)

     

(60)

     

(236)

     

(75)

 

Common shares issued for cash from Employee
Share Purchase Plan

 

-

     

27

     

-

     

27

 

Cash generated from (used in) financing

 

549

     

1,982

     

(469)

     

(1,261)

 

Investing

                             

Proceeds from sale of property, plant and equipment

 

-

     

-

     

-

     

11

 

Purchase of property and equipment

 

(308)

     

(43)

     

(466)

     

(166)

 

Repayment of patent finance obligations

 

-

     

(1,389)

     

-

     

(2,778)

 

Purchase of intangibles

 

(73)

     

(48)

     

(93)

     

(89)

 

Cash used in investing

 

(381)

     

(1,480)

     

(559)

     

(3,022)

 

Foreign exchange gain (loss) on cash held in foreign currency

 

33

     

(76)

     

98

     

(151)

 

Net increase (decrease) in cash and cash equivalents

 

34,228

     

(2,004)

     

20,705

     

(13,403)

 

Cash and cash equivalents, beginning of period

 

50,406

     

70,419

     

63,929

     

81,818

 

Cash and cash equivalents, end of period

$

84,634

   

$

68,415

   

$

84,634

   

$

68,415

 

 

Quarterhill Inc.

 

Condensed Consolidated Interim Statements of Shareholders' Equity

 

(Unaudited)

 

(in thousands of United States dollars)

 
 

Capital Stock

   

Additional
Paid-in Capital

   

Accumulated
Other
Comprehensive
Income

   

Deficit

   

Total Equity

 

Balance - January 1, 2018

$

418,873

   

$

22,489

   

$

20,111

   

$

(199,718)

   

$

261,755

 

For the three months ended March 31, 2018

                                     

Net loss

 

-

     

-

     

-

     

(12,045)

     

(12,045)

 

Other comprehensive loss

 

-

     

-

     

(790)

     

-

     

(790)

 

Stock-based compensation expense

 

-

     

156

     

-

     

-

     

156

 

Dividends declared

 

-

     

-

     

-

     

(1,171)

     

(1,171)

 

Balance March 31, 2018

 

418,873

     

22,645

     

19,321

     

(212,934)

     

247,905

 

For the three months ended June 30, 2018

                                     

Net loss

 

-

     

-

     

-

     

(7,865)

     

(7,865)

 

Other comprehensive loss

 

-

     

-

     

(1,481)

     

-

     

(1,481)

 

Stock-based compensation expense

 

-

     

(2)

     

-

     

-

     

(2)

 

Conversion of deferred stock units to common shares

 

211

     

-

     

-

     

-

     

211

 

Shares issued under Employee Share Purchase Plan

 

27

     

-

     

-

     

-

     

27

 

Dividends declared

 

-

     

-

     

-

     

(1,155)

     

(1,155)

 

Balance - June 30, 2018

$

419,111

   

$

22,643

   

$

17,840

   

$

(221,954)

   

$

237,640

 
                                       

Balance - January 1, 2019

$

419,111

   

$

22,957

   

$

16,243

   

$

(253,443)

   

$

204,868

 

For the three months ended March 31, 2019

                                     

Net income

 

-

     

-

     

-

     

29

     

29

 

Other comprehensive income

 

-

     

-

     

599

     

-

     

599

 

Stock-based compensation expense

 

-

     

181

     

-

     

-

     

181

 

Dividends declared

 

-

     

-

     

-

     

(1,130)

     

(1,130)

 

Balance - March 31, 2019

$

419,111

   

$

23,138

   

$

16,842

   

$

(254,544)

   

$

204,547

 

For the three months ended June 30, 2019

                                     

Net income

 

-

     

-

     

-

     

(4,470)

     

(4,470)

 

Other comprehensive income

 

-

     

-

     

158

     

-

     

158

 

Stock-based compensation expense

 

-

     

228

     

-

     

-

     

228

 

Dividends declared

 

-

     

-

     

-

     

(1,101)

     

(1,101)

 

Balance - June 30, 2019

$

419,111

   

$

23,366

   

$

17,000

   

$

(260,115)

   

$

199,362

 

 

 

Quarterhill Inc.

 

Reconciliations of GAAP Net Income (Loss) to Adjusted EBITDA

 

(Unaudited)

 

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

 
                               
 

Three months ended June 30,

   

Six months ended June 30,

 

Adjusted EBITDA

2019

   

2018

   

2019

   

2018

 

Net loss

$

(4,470)

   

$

(7,865)

   

$

(4,441)

   

$

(19,910)

 
                               

Adjusted for:

                             

Income tax expense (recovery)

 

509

     

(2,231)

     

5,843

     

(4,440)

 

Foreign exchange loss (gain)

 

80

     

(35)

     

322

     

(165)

 

Finance expense

 

235

     

40

     

279

     

79

 

Finance income

 

(291)

     

(191)

     

(493)

     

(382)

 

Special charges

 

11,180

     

-

     

12,477

     

-

 

Amortization of intangibles

 

5,213

     

6,442

     

10,444

     

13,193

 

Depreciation of property, plant and equipment

 

362

     

388

     

740

     

783

 

Effect of deleted deferred revenue

 

-

     

82

     

-

     

306

 

Stock-based compensation

 

228

     

(2)

     

409

     

154

 

Other income

 

(180)

     

(579)

     

(254)

     

(906)

 

Adjusted EBITDA

$

12,866

   

$

(3,951)

   

$

25,326

   

$

(11,288)

 
                               

Adjusted EBITDA per share

                             

Net loss

$

(0.04)

   

$

(0.07)

   

$

(0.04)

   

$

(0.17)

 
                               

Adjusted for:

                             

Income tax expense (recovery)

 

-

     

(0.02)

     

0.04

     

(0.04)

 

Foreign exchange loss (gain)

 

-

     

-

     

-

     

-

 

Finance expense

 

-

     

-

     

-

     

-

 

Finance income

 

-

     

-

     

-

     

-

 

Special charges

 

0.09

     

-

     

0.10

     

-

 

Amortization of intangibles

 

0.04

     

0.05

     

0.08

     

0.11

 

Depreciation of property, plant and equipment

 

-

     

-

     

-

     

-

 

Effect of deleted deferred revenue

 

-

     

-

     

-

     

-

 

Stock-based compensation

 

-

     

-

     

-

     

-

 

Other income

 

-

     

-

     

-

     

-

 

Adjusted EBITDA per share

$

0.09

   

$

(0.04)

   

$

0.18

   

$

(0.10)

 
                               

Weighted average number of Common Shares

                             

  Basic

 

118,817,466

     

118,779,445

     

118,817,466

     

118,719,182

 

 

Cision View original content:http://www.prnewswire.com/news-releases/quarterhill-announces-second-quarter-2019-financial-results-300898686.html

SOURCE Quarterhill Inc.

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