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News

06 Aug, 20

QUARTERHILL ANNOUNCES SECOND QUARTER 2020 FINANCIAL RESULTS

KITCHENER, ON, Aug. 6, 2020 /PRNewswire/ - Quarterhill Inc. ("Quarterhill" or the "Company") (TSX: QTRH) (OTCQX: QTRHF), announces its financial results for the three- and six-month periods ended June 30, 2020. The Company historically prepared its consolidated financial statements in accordance with U.S. GAAP and in U.S. dollars. Effective January 1, 2020, the Company has adopted IFRS and the Canadian dollar as its reporting currency. The Company has consistently applied the same accounting policies in its opening IFRS statement of financial position at January 1, 2019, and throughout all periods presented as if these policies had always been in effect. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

Second Quarter 2020 Financial Highlights

  • Revenue was $16.8 million, including recurring revenue of $5.6 million
  • Adjusted EBITDA* was ($2.0) million
  • Net income was $9.5 million, or $0.08 per basic and diluted common share, which included a $17.7 million gain on the sale of VIZIYA
  • Cash used in continuing operations was ($4.3) million
  • Cash and equivalents were $143.1 million at June 30, 2020

Second Quarter 2020 Operational Highlights

  • Appointed Mr. Paul Hill as President and CEO of Quarterhill, effective June 1st
  • Completed the sale of VIZIYA for total cash proceeds of $49.4 million
  • A Final Judgment was issued in WiLAN's case against Apple for US$108.98 million
  • Announced a Substantial Issuer Bid and subsequently completed it on July 7th, returning $5.8 million to shareholders via the purchase of 2.7 million common shares
  • Appointed Mr. Paul Hill and Dr. Michel Fattouche to Quarterhill's Board of Directors
  • Appointed Mr. Rish Malhotra as President and CEO of International Road Dynamics ("IRD"), effective June 1st
  • Announced today a Normal Course Issuer Bid to acquire up to 10%, or 11.3 million, of the Company's common shares in the public float for a twelve-month period ending August 9, 2021

"Q2 had several positive operational developments including the previously announced sale of VIZIYA for a significant gain, the Final Judgment in WiLAN's case versus Apple for US$108.98 million, and the return of $5.8 million to shareholders via the Substantial Issuer Bid that was completed in mid-July," said Paul Hill, President & CEO of Quarterhill. "Today we announced the next step in our 'return of capital' commitment to shareholders with the launch of a Normal Course Issuer Bid to purchase up to 11.3 million of our shares over the next twelve months."

"Financial results in the quarter reflect both the steady performance at IRD and the variability in the business model at WiLAN, as well as the impact of COVID-19 on both businesses. At WiLAN, the COVID-19 impact was related to certain court closures in the U.S. as well as the inability to hold face-to-face meetings to conclude agreements. WiLAN's fundamentals remain in place and it continues to advance its pipeline despite the pandemic, although some deals may be delayed as was the case with certain opportunities we had expected to close in Q2 that were pushed out. These are not lost opportunities and they remain in our plan for completion. As we've said in the past, at WiLAN, performance over a longer time frame is a more accurate gauge of its potential compared to its quarterly business results. Case in point, while WiLAN had negative Adjusted EBITDA in Q2, it has had positive Adjusted EBITDA in five of the past seven quarters."

"At IRD, some impact from COVID-19 was felt in the quarter, but overall, the business continues to generate solid margins and results, and its prospects remain strong with both order backlog and order intake high and near record levels. On June 1, we announced Rish Malholtra would be taking over as CEO at IRD in a planned succession. Rish has deep knowledge of the Intelligent Transportation Systems, or ITS, industry and he has led many of the key functions at IRD during his tenure. These are exciting times at IRD and it is expected to play a significant role in our strategy going forward." 

"While not a radical departure from Quarterhill's strategy of recent years, our go-forward strategy has a sharper focus. Foremost, the strategy involves executing on a M&A plan. While the M&A strategy was previously on hold, when I joined in June, we began discussions around how we could leverage the strong cash position of the business and the cash flow generating potential of our portfolio companies to drive long-term shareholder value. Ultimately that discussion coalesced around a strategy intended to drive organic growth from our existing businesses and M&A-related growth focused on the IRD business and the opportunities in the ITS market."

"The ITS market has attractive growth and market dynamics with reasonable valuations and IRD is an established and well-respected player in this market, which helps differentiate us as an acquirer. IRD serves as a well-run growth-oriented platform that acquisitions can be integrated into, which also opens up the prospect of greater revenue and cost synergies. As the broader ITS industry becomes more connected, we also believe there is an opportunity to leverage WiLAN's deep technological expertise; in particular in 5G, which may become a critical enabling technology for ITS in the future."

Mr. Hill concluded: "I will discuss our strategy in more detail on our conference call this morning at 10:00 a.m. EDT. The discussion will include accompanying slides that can be viewed via the webcast." 

Subsequent Event - Normal Course Issuer Bid
In a separate press release issued today, Quarterhill announced that the Toronto Stock Exchange has accepted a notice filed by the Company of its intention to make a new Normal Course Issuer Bid. The notice provides that Quarterhill may, during the 12-month period commencing August 10, 2020 and ending August 9, 2021, purchase on the Toronto Stock Exchange up to 11.3 million common shares in total, being approximately 10% of the outstanding common shares in the public float. For full details regarding the Normal Course Issuer Bid, please see Quarterhill's related press release also issued today.

Approval of Eligible Dividend
The Board of Directors has declared an eligible quarterly dividend of $0.0125 per common share payable on October 9, 2020, to shareholders of record on September 11, 2020.

Q2 2020 and Year-to-date Consolidated Financial Review
Financial statements for the three- and six-month periods ended June 30, 2020 and for the respective comparison periods, have been prepared to reflect continuing operations and therefore exclude results during those periods from VIZIYA, which was sold by Quarterhill on May 15, 2020. The current quarter and year-to-date operating results from VIZIYA, up to the date of sale on May 15, 2020, are reported as net income (loss) from discontinued operations in accordance with IFRS 5.

Consolidated revenues for the three months ended June 30, 2020 ("Q2 2020") were $16.8 million, compared to $52.9 million in Q2 2019. Consolidated revenues for the six-month period ended June 30, 2020 ("YTD 2020") were $38.4 million, compared to $102.7 million in the same period last year. 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. Revenue was lower in the Q2 2020 and YTD 2020 periods due primarily to the closure of a greater volume, and value, of licensing contracts in the prior year periods.

Recurring revenue for the Q2 2020 and YTD 2020 periods was $5.6 million and $9.5 million, compared to $6.0 million and $11.7 million in the same periods last year. Certain revenues characterized as recurring have a timing component to them and are recognized when the related work is completed. As such, the decrease in recurring revenue in 2020 is primarily a timing-based issue and does not reflect lower renewal or retention rates.

Gross margin for the Q2 2020 and YTD 2020 periods was 25% and 30%, compared to 46% and 47% in the same periods last year. Gross margin was lower in the Q2 2020 and YTD 2020 periods due primarily to lower revenue at WiLAN as described above, offset in part by higher gross margin at IRD. IRD and WiLAN's cost of sales benefited by $0.6 million and $0.3 million, respectively, via the Government of Canada's Canadian Emergency Wage Subsidy ("CEWS") program.

Operating expenses include selling, general and administrative costs ("SG&A"), research and development costs ("R&D"), depreciation and amortization of intangible assets and special charges. For Q2 2020, Quarterhill had special charges of $0.7 million compared to $15.0 million in Q2 2019. YTD 2020, special charges were $0.9 million compared to $16.7 million in the same period last year. 

Excluding special charges, operating expenses for the Q2 2020 and YTD 2020 periods were $11.9 million and $24.3 million, compared to $14.0 million and $27.9 million in the same periods last year. Operating expenses were lower in 2020 due primarily to lower SG&A and R&D and a CEWS benefit at IRD of $0.7 million.

Adjusted EBITDA for the Q2 2020 and YTD 2020 periods was ($2.0) million and ($1.8) million, compared to $17.1 million and $34.2 million in the same periods last year. The decrease in Adjusted EBITDA reflects the lower revenue at WiLAN, offset in part, by higher Adjusted EBITDA at IRD and lower corporate expenses.

Net income for Q2 2020 was $9.5 million, or $0.08 per basic and diluted common share, compared to net loss of ($5.9) million, or ($0.05) per basic and diluted common share, in Q2 2019. Net income for the YTD 2020 period was $4.4 million, or $0.04 per basic and diluted common share, compared to net loss of ($6.0) million, or ($0.05) per basic and diluted common share, in the same period last year. Net income in the Q2 2020 and YTD 2020 periods was driven primarily by net income from discontinued operations of $14.5 million and $14.3 million, respectively, which included a $17.7 million gain on the sale of VIZIYA in Q2 2020. 

Cash generated from (used in) continuing operations for the Q2 2020 and YTD 2020 periods was ($4.3) million and $5.4 million, compared to $45.0 million and $29.2 million in the same periods last year. Cash and cash equivalents and short-term investments increased to $143.1 million at June 30, 2020, compared to $89.4 million at December 31, 2019. The Company had debt of $7.4 million at June 30, 2020, compared to $4.4 million at December 31, 2019.

Conference Call and Webcast
Quarterhill will host a conference call to discuss its financial results today at 10:00 AM Eastern Time. Management slides that accompany the conference call can be viewed via the webcast.

Webcast Information
Live webcast: https://produceredition.webcasts.com/starthere.jsp?ei=1348487&tp_key=00592de315       

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://produceredition.webcasts.com/starthere.jsp?ei=1348487&tp_key=00592de315    

Telephone replay will be available from 1:00 p.m. Eastern Time on August 6, 2020 until 11:59 p.m. Eastern Time on August 20, 2020 at: 1.855.859.2056 (Toll Free) or 1.416.849.0833 (International). The telephone replay requires the passcode 4283448.

The table below highlights financial performance for the Company's Licensing and Intelligent Systems 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.

Segmented statements of (loss) income for the three- and six-month periods ended June 30, 2020 and 2019 are included below: 

 

For the Three months ended June 30, 2020

CONTINUING OPERATIONS

Licensing

 

Intelligent
Systems

 

Corporate

 

Total

Revenues

       

License

$

68

 

$

 

$

 

$

68

Systems

 

11,138

 

 

11,138

Recurring

252

 

5,366

 

 

5,618

 

320

 

16,504

 

 

16,824

Direct cost of revenues

3,062

 

9,594

 

 

12,656

Gross profit

(2,742)

 

6,910

 

 

4,168

Depreciation of right-of-use assets

63

 

159

 

15

 

237

Depreciation of property, plant and equipment

16

 

225

 

6

 

247

Amortization of intangibles

3,588

 

1,260

 

 

4,848

Selling, general and administrative expenses

746

 

2,333

 

2,747

 

5,826

Research and development expenses

 

555

 

 

555

Impairment losses of intangible assets

233

 

 

 

233

Special charges

 

659

 

 

659

Results from operations

(7,388)

 

1,719

 

(2,768)

 

(8,437)

Finance income

(22)

 

(6)

 

(132)

 

(160)

Finance expense

38

 

74

 

6

 

118

Foreign exchange loss (gain)

342

 

(235)

 

(110)

 

(3)

Other income

 

(431)

 

 

(431)

(Loss) income before taxes

(7,746)

 

2,317

 

(2,532)

 

(7,961)

Current income tax expense

56

 

22

 

 

78

Deferred income tax (recovery) expense

(4,582)

 

167

 

1,363

 

(3,052)

Income tax (recovery) expense

(4,526)

 

189

 

1,363

 

(2,974)

Net (loss) income from continuing operations

$

(3,220)

 

$

2,128

 

$

(3,895)

 

$

(4,987)

         

Adjusted EBITDA

$

(3,419)

 

$

4,041

 

$

(2,614)

 

$

(1,992)

   
   
 

For the Six months ended June 30, 2020

CONTINUING OPERATIONS

Licensing

 

Intelligent
Systems

 

Corporate

 

Total

Revenues

       

License

$

9,817

 

$

 

$

 

$

9,817

Systems

 

19,141

 

 

19,141

Recurring

703

 

8,776

 

 

9,479

 

10,520

 

27,917

 

 

38,437

Direct cost of revenues

8,831

 

18,012

 

 

26,843

Gross profit

1,689

 

9,905

 

 

11,594

Depreciation of right-of-use assets

124

 

327

 

30

 

481

Depreciation of property, plant and equipment

32

 

428

 

11

 

471

Amortization of intangibles

7,071

 

2,519

 

 

9,590

Selling, general and administrative expenses

1,724

 

5,817

 

4,580

 

12,121

Research and development expenses

 

1,424

 

 

1,424

Impairment losses of intangible assets

233

 

 

 

233

Special charges

 

659

 

213

 

872

Results from operations

(7,495)

 

(1,269)

 

(4,834)

 

(13,598)

Finance income

(122)

 

(7)

 

(253)

 

(382)

Finance expense

78

 

125

 

11

 

214

Foreign exchange loss (gain)

1,596

 

(929)

 

(1,252)

 

(585)

Other income

 

(809)

 

 

(809)

(Loss) income before taxes

(9,047)

 

351

 

(3,340)

 

(12,036)

Current income tax expense

1,242

 

102

 

 

1,344

Deferred income tax (recovery) expense

(5,971)

 

(608)

 

3,098

 

(3,481)

Income tax (recovery) expense

(4,729)

 

(506)

 

3,098

 

(2,137)

Net (loss) income from continuing operations

$

(4,318)

 

$

857

 

$

(6,438)

 

$

(9,899)

         

Adjusted EBITDA

$

64

 

$

2,709

 

$

(4,528)

 

$

(1,755)

   
   
 

For the Three months ended June 30, 2019

CONTINUING OPERATIONS

Licensing

 

Intelligent
Systems

 

Corporate

 

Total

Revenues

       

License

$

32,807

 

$

 

$

 

$

32,807

Systems

 

14,035

 

 

14,035

Recurring

292

 

5,744

 

 

6,036

 

$

33,099

 

$

19,779

 

$

 

$

52,878

Direct cost of revenues

16,035

 

12,692

 

 

28,727

Gross profit

17,064

 

7,087

 

 

24,151

Depreciation of right-of-use assets

82

 

182

 

15

 

279

Depreciation of property, plant and equipment

40

 

391

 

5

 

436

Amortization of intangibles

4,703

 

1,257

 

 

5,960

Selling, general and administrative expenses

451

 

3,255

 

2,869

 

6,575

Research and development expenses

 

779

 

 

779

Special charges

711

 

 

14,244

 

14,955

Results from operations

11,077

 

1,223

 

(17,133)

 

(4,833)

Finance income

(52)

 

(5)

 

(332)

 

(389)

Finance expense

10

 

349

 

5

 

364

Foreign exchange (gain) loss

(236)

 

74

 

249

 

87

Other income

(4)

 

(237)

 

 

(241)

Income (loss) before taxes

11,359

 

1,042

 

(17,055)

 

(4,654)

Current income tax expense (recovery)

54

 

(19)

 

 

35

Deferred income tax expense (recovery)

2,564

 

(489)

 

(1,132)

 

943

Income tax expense (recovery)

2,618

 

(508)

 

(1,132)

 

978

Net income (loss) from continuing operations

$

8,741

 

$

1,550

 

$

(15,923)

 

$

(5,632)

         

Adjusted EBITDA

16,628

 

3,089

 

(2,635)

 

17,082

   
   
 

For the Six months ended June 30, 2019

CONTINUING OPERATIONS

Licensing

 

Intelligent
Systems

 

Corporate

 

Total

Revenues

       

License

$

69,527

 

$

 

$

 

$

69,527

Systems

 

21,483

 

 

21,483

Recurring

963

 

10,711

 

 

11,674

 

$

70,490

 

$

32,194

 

$

 

$

102,684

Direct cost of revenues

33,038

 

21,596

 

 

54,634

Gross profit

37,452

 

10,598

 

 

48,050

Depreciation of right-of-use assets

381

 

355

 

30

 

766

Depreciation of property, plant and equipment

95

 

793

 

10

 

898

Amortization of intangibles

9,394

 

2,515

 

 

11,909

Selling, general and administrative expenses

983

 

6,395

 

5,441

 

12,819

Research and development expenses

 

1,517

 

 

1,517

Special charges

2,435

 

 

14,244

 

16,679

Results from operations

24,164

 

(977)

 

(19,725)

 

3,462

Finance income

(76)

 

(8)

 

(574)

 

(658)

Finance expense

14

 

443

 

8

 

465

Foreign exchange (gain) loss

(491)

 

329

 

527

 

365

Other income

(4)

 

(335)

 

 

(339)

Income (loss) before taxes

24,721

 

(1,406)

 

(19,686)

 

3,629

Current income tax expense

5,248

 

207

 

 

5,455

Deferred income tax expense (recovery)

5,129

 

(1,285)

 

(777)

 

3,067

Income tax expense (recovery)

10,377

 

(1,078)

 

(777)

 

8,522

Net income (loss) from continuing operations

$

14,344

 

$

(328)

 

$

(18,909)

 

$

(4,893)

         

Adjusted EBITDA

$

36,456

 

$

2,761

 

$

(4,996)

 

$

34,221

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) effects of  deleted  deferred  revenue;  (vii)  stock-based  compensation;  (viii)  foreign  exchange  (gain)  loss;  and  (ix)  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 Intellectual Property and Intelligent Transportation System (ITS) industries. Our goal is to pursue an investment strategy that capitalizes on attractive market trends in both 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 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 27, 2020 annual information form for the year ended December 31, 2019 (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 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 Income (Loss) and Comprehensive Income and (Loss)

(Unaudited)

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

 
 

Three months ended June 30,

 

Six months ended June 30,

 

2020

 

2019

 

2020

 

2019

Revenues

     

License

$

68

 

$

32,807

 

$

9,817

 

$

69,527

Systems

11,138

 

14,035

 

19,141

 

21,483

Recurring

5,618

 

6,036

 

9,479

 

11,674

 

16,824

 

52,878

 

38,437

 

102,684

Direct cost of revenues

       

License

3,063

 

16,035

 

8,803

 

33,038

Systems

6,594

 

9,181

 

12,574

 

14,224

Recurring

2,999

 

3,511

 

5,466

 

7,372

 

12,656

 

28,727

 

26,843

 

54,634

Gross profit

4,168

 

24,151

 

11,594

 

48,050

Operating expenses

       

Depreciation of right-of-use assets

237

 

279

 

481

 

766

Depreciation of property, plant and equipment

247

 

436

 

471

 

898

Amortization of intangibles

4,848

 

5,960

 

9,590

 

11,909

Selling, general and administrative expenses

5,826

 

6,575

 

12,121

 

12,819

Research and development expenses

555

 

779

 

1,424

 

1,517

Impairment losses on intangibles

233

 

 

233

 

Special charges

659

 

14,955

 

872

 

16,679

 

12,605

 

28,984

 

25,192

 

44,588

Results from operations

(8,437)

 

(4,833)

 

(13,598)

 

3,462

Finance income

(160)

 

(389)

 

(382)

 

(658)

Finance expense

118

 

364

 

214

 

465

Foreign exchange (gain) loss

(3)

 

87

 

(585)

 

365

Other income

(431)

 

(241)

 

(809)

 

(339)

(Loss) income before taxes

(7,961)

 

(4,654)

 

(12,036)

 

3,629

Current income tax expense

78

 

35

 

1,344

 

5,455

Deferred income tax (recovery) expense

(3,052)

 

943

 

(3,481)

 

3,067

Income tax (recovery) expense

(2,974)

 

978

 

(2,137)

 

8,522

   

Net loss from continuing operations

$

(4,987)

 

$

(5,632)

 

(9,899)

 

(4,893)

Net income (loss) from discontinued operations

$

14,455

 

$

(306)

 

14,255

 

(1,092)

Net income (loss)

$

9,468

 

$

(5,938)

 

4,356

 

(5,985)

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

 Foreign currency translation adjustment

$(11,188)

 

$(4,290)

 

9,875

 

(8,869)

 Comprehensive (loss) income

$(1,720)

 

$(10,228)

 

14,231

 

(14,854)

             

Net income (loss) per share

           

From continuing operations

$(0.04)

 

$(0.05)

 

(0.08)

 

(0.04)

From discontinued operations

$0.12

 

$0.00

 

0.12

 

(0.01)

Net income (loss) per share - Basic

$0.08

 

$(0.05)

 

0.04

 

(0.05)

             

From continuing operations

$(0.04)

 

$(0.05)

 

(0.08)

 

(0.04)

From discontinued operations

$0.12

 

$0.00

 

0.12

 

(0.01)

Net income (loss) per share - Diluted

$0.08

 

$(0.05)

 

0.04

 

(0.05)

 

Quarterhill Inc.

Condensed Consolidated Interim Statements of Financial Position

(Unaudited)

(in thousands of Canadian dollars)

       

As at

June 30, 2020

December 31, 2019

January 1, 2019

Current assets

     

Cash and cash equivalents

$

141,515

 

$

87,870

 

$

87,029

Short-term investments

1,551

 

1,550

 

1,551

Restricted short-term investments

 

 

2,995

Accounts receivable (net of allowance for doubtful accounts)

11,858

 

42,925

 

14,719

Other current assets

218

 

108

 

124

Unbilled revenue

11,260

 

8,965

 

5,432

Income taxes receivable

353

 

137

 

270

Inventories (net of obsolescence)

10,242

 

8,570

 

8,114

Prepaid expenses and deposits

3,287

 

2,242

 

2,927

 

180,284

 

152,367

 

123,161

Non-current assets

     

Accounts receivable

682

 

3,846

 

565

Right-of-use assets

3,906

 

4,502

 

3,972

Property, plant and equipment

2,941

 

2,826

 

3,614

Intangible assets

70,760

 

89,534

 

119,015

Investment in joint venture

6,210

 

5,233

 

5,203

Deferred income tax assets

36,877

 

33,270

 

36,948

Goodwill

17,274

 

32,977

 

34,446

 

138,650

 

172,188

 

203,763

TOTAL ASSETS

$

318,934

 

$

324,555

 

$

326,924

       

Liabilities

     

Current liabilities

     

Bank indebtedness

$

7,036

 

$

4,026

 

$

3,537

Accounts payable and accrued liabilities

12,106

 

25,755

 

24,644

Dividends payable

1,462

 

 

Income taxes payable

285

 

203

 

Current portion of lease liabilities

884

 

998

 

1,120

Contingent liabilities

 

 

1,265

Current portion of deferred revenue

4,544

 

8,638

 

6,357

Current portion of long-term debt

41

 

59

 

407

 

26,358

 

39,679

 

37,330

Non-current liabilities

     

Deferred revenue

1,522

 

1,513

 

1,954

Long-term lease liabilities

3,002

 

3,550

 

2,604

Long-term debt

285

 

271

 

236

Deferred income tax liabilities

 

3,297

 

5,905

 

4,809

 

8,631

 

10,699

TOTAL LIABILITIES

$

31,167

 

$

48,310

 

$

48,029

       

Shareholders' equity

     

Capital stock

$

570,591

 

$

570,553

 

$

570,553

Contributed surplus

32,207

 

32,011

 

31,252

Accumulated other comprehensive income

20,811

 

10,936

 

22,112

Deficit

(335,842)

 

(337,255)

 

(345,022)

 

287,767

 

276,245

 

278,895

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

318,934

 

$

324,555

 

$

326,924

 

Quarterhill Inc.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

(in thousands of Canadian dollars)

 
 

Three months ended June 30,

 

Six months ended June 30,

 

2020

 

2019

 

2020

 

2019

Cash generated from (used in) Operations

         

Net loss from continuing operations

$

(4,987)

 

$

(5,632)

 

$

(9,899)

 

$

(4,893)

Non-cash items

       

Stock-based compensation expense

221

 

285

 

196

 

507

Depreciation of right-of-use assets

237

 

279

 

481

 

766

Interest expense on lease liabilities

56

 

54

 

112

 

103

Depreciation and amortization

5,095

 

6,396

 

10,061

 

12,807

Foreign exchange (gain) loss

(478)

 

(45)

 

(194)

 

(127)

Equity in earnings from joint venture

(431)

 

(241)

 

(809)

 

(339)

Impairment losses on intangibles

233

 

 

233

 

(Gain) loss on disposal of assets

(6)

 

785

 

(10)

 

785

Deferred income tax (recovery) expense

(3,052)

 

943

 

(3,481)

 

3,067

Long-term accounts receivable

 

 

 

(85)

Embedded derivatives

121

 

39

 

(101)

 

132

Contingent consideration adjustment

 

14,244

 

 

14,244

Changes in non-cash working capital balances

       

Accounts receivable

5,949

 

36,744

 

26,559

 

1,697

Unbilled revenue

(2,762)

 

(3,027)

 

(2,026)

 

(3,504)

Income taxes receivable

(252)

 

(72)

 

(209)

 

195

Inventories

(1,952)

 

(213)

 

(1,340)

 

(185)

Prepaid expenses and deposits

(1,474)

 

(278)

 

(1,296)

 

(4)

Deferred revenue

(539)

 

(771)

 

(52)

 

(331)

Accounts payable and accrued liabilities

(282)

 

(4,423)

 

(12,911)

 

4,269

Income taxes payable

45

 

(35)

 

92

 

49

Cash (used in) generated from continuing operations

(4,258)

 

45,032

 

5,406

 

29,153

Net cash flows attributable to discontinuing operations

(2,478)

 

928

 

(3,075)

 

869

Net cash (used in) generated from operating activities

(6,736)

 

45,960

 

2,331

 

30,022

Financing

       

Dividends paid

 

(1,473)

 

(1,481)

 

(2,975)

Bank indebtedness

4,796

 

2,467

 

2,984

 

2,566

Payment of lease liabilities

(271)

 

(420)

 

(586)

 

(871)

Repayment of long-term debt

(13)

 

(276)

 

(120)

 

(300)

Exercise of stock options

14

 

 

14

 

Common shares issued from Performance Stock Units

 

 

24

 

Cash generated from (used in) continuing operations

4,526

 

298

 

835

 

(1,580)

Net cash flows attributable to discontinuing operations

 

(8)

 

 

(19)

Net cash generated from (used in) financing activities

4,526

 

290

 

835

 

(1,599)

Investing

       

Proceeds from disposition of a subsidiary

49,400

 

 

49,400

 

Cash sold on disposition of a subsidiary

(1,825)

 

 

(1,825)

 

Proceeds from sale of property, plant and equipment

12

 

 

16

 

Purchase of property and equipment

(586)

 

(381)

 

(887)

 

(499)

Purchase of intangibles

(8)

 

(98)

 

(25)

 

(125)

Cash generated from (used in) continuing operations

46,993

 

(479)

 

46,679

 

(624)

Net cash flows attributable to discontinuing operations

(11)

 

(31)

 

(81)

 

(123)

Net cash generated from (used in) investing activities

46,982

 

(510)

 

46,598

 

(747)

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

(4,853)

 

(1,951)

 

3,881

 

(3,622)

Net increase in cash and cash equivalents

39,919

 

43,789

 

53,645

 

24,054

Cash and cash equivalents, beginning of period

101,596

 

67,294

 

87,870

 

87,029

Cash and cash equivalents, end of period

$

141,515

 

$

111,083

 

141,515

 

111,083

 

Quarterhill Inc.

Condensed Consolidated Interim Statements of Changes in Shareholders' Equity

For the six months ended June 30, 2020 and 2019

(In thousands of Canadian dollars)

 

Capital Stock

 

Contributed
Surplus

 

Accumulated
Other
Comprehensive
Income

 

Deficit

 

Total Equity

January 1, 2019

$

570,553

 

$

31,252

 

$

22,112

 

$

(345,022)

 

$

278,895

           

Net loss

 

 

 

(5,985)

 

(5,985)

Other comprehensive loss

 

 

(8,869)

 

 

(8,869)

Stock-based compensation expense

 

507

 

 

 

507

Dividends declared

 

 

 

(2,975)

 

(2,975)

June 30, 2019

570,553

 

31,759

 

13,243

 

(353,982)

 

261,573

           
           
           

January 1, 2020

$

570,553

 

$

32,011

 

$

10,936

 

$

(337,255)

 

$

276,245

           

Net income

     

$

4,356

 

$

4,356

Other comprehensive income

   

$

9,875

   

$

9,875

Stock-based compensation expense

 

196

     

196

Exercise of options

14

       

14

Common shares issued from performance stock units

24

       

24

Dividends declared

     

(2,943)

 

(2,943)

June 30, 2020

570,591

 

32,207

 

20,811

 

(335,842)

 

287,767

 

Quarterhill Inc.

Reconciliations of Net loss to Adjusted EBITDA

(Unaudited)

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

   
 

Three months ended June 30,

 

2020

 

2019

 

$

 

Per Share

 

$

 

Per Share

Net loss from continuing operations

$

(4,987)

 

$

(0.04)

 

$

(5,632)

 

$

(0.05)

                   

Adjusted for:

               

Income tax (recovery) expense

(2,974)

 

(0.03)

 

978

 

0.01

Foreign exchange (gain) loss

(3)

 

 

87

 

Finance expense

118

 

 

364

 

Finance income

(160)

 

 

(389)

 

Special charges

659

 

0.01

 

14,955

 

0.13

Impairment losses on intangible assets

233

 

 

 

Amortization of intangibles

4,848

 

0.04

 

5,960

 

0.05

Depreciation of property, plant and equipment

247

 

 

436

 

Depreciation of right-of-use assets

237

 

 

279

 

Stock based compensation expense

221

 

 

285

 

Other income

(431)

 

 

(241)

 

Adjusted EBITDA

$

(1,992)

 

$

(0.02)

 

$

17,082

 

$

0.14

                 

Weighted average number of Common Shares

               

Basic

 

118,861,166

   

11,817,466

 

Quarterhill Inc.

Reconciliations of Net loss to Adjusted EBITDA

(Unaudited)

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

 
 

Six months ended June 30,

 

2020

 

2019

 

$

 

Per Share

 

$

 

Per Share

Net loss from continuing operations

$

(9,899)

 

$

(0.08)

 

$

(4,893)

 

$

(0.04)

         

Adjusted for:

       

Income tax (recovery) expense

(2,137)

 

(0.02)

 

8,522

 

0.07

Foreign exchange (gain) loss

(585)

 

 

365

 

Finance expense

214

 

 

465

 

Finance income

(382)

 

 

(658)

 

(0.01)

Special charges

872

 

0.01

 

16,679

 

0.14

Impairment losses on intangible assets

233

 

 

 

Amortization of intangibles

9,590

 

0.08

 

11,909

 

0.10

Depreciation of property, plant and equipment

471

 

 

898

 

0.01

Depreciation of right-of-use assets

481

 

 

766

 

0.01

Stock based compensation expense

196

 

 

507

 

Other income

(809)

 

(0.01)

 

(339)

 

Adjusted EBITDA

$

(1,755)

 

$

(0.02)

 

$

34,221

 

$

0.28

         

Weighted average number of Common Shares

       

Basic

 

118,861,166

   

11,817,466

View original content:http://www.prnewswire.com/news-releases/quarterhill-announces-second-quarter-2020-financial-results-301107385.html

SOURCE Quarterhill Inc.

 

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