Quarterhill Announces Q2 Fiscal 2022 Financial Results
Quarterhill Inc. (TSX: QTRH; OTCQX: QTRHF) reported Q2 2022 financial results with consolidated revenue of $43.9 million, a significant increase from $18.9 million a year earlier. However, Adjusted EBITDA was (9.0 million) due to project implementation delays and increased operating expenses, which included a $14.6 million litigation charge. The company’s cash reserves rose to $122.9 million, and it appointed new key executives. A quarterly dividend of $0.0125 per share was declared, payable October 7, 2022.
- Consolidated revenue increased to $43.9 million, more than doubling compared to the previous year's $18.9 million.
- Record ITS segment revenue backlog reached US$573.0 million.
- Cash and equivalents at $122.9 million indicate strong liquidity.
- Adjusted EBITDA was negative $9.0 million, down from a lesser loss of $3.2 million in Q2 2021.
- Operating expenses rose to $37.4 million due to inflation and a one-time $14.6 million litigation charge.
- Gross margin for ITS segment decreased to 15% from 37% year-over-year.
TORONTO, Aug. 11, 2022 /PRNewswire/ - Quarterhill Inc. ("Quarterhill" or the "Company") (TSX: QTRH) (OTCQX: QTRHF) a leading provider of tolling and enforcement solutions in the Intelligent Transportation System ("ITS") industry, as well as, through its Wi-LAN Inc. ("WiLAN") subsidiary, a leader in Intellectual Property licensing, announces its financial results for the three- and six-month periods ended June 30, 2022. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.
- Consolidated Revenue was
$43.9 million - Consolidated Adjusted EBITDA1 was (
$9.0) million - Cash, cash equivalents, and short-term investments were
$122.9 million at June 30, 2022 - Working capital2 was
$138.1 million at June 30, 2022 - Appointed Kim Stevenson to the board
- Appointed John Karnes as Quarterhill's Chief Financial Officer
- Appointed Andrew Parolin as WiLAN's Chief Executive Officer
"Q2 was a mixed quarter with revenue more than doubling, expected revenue backlog3 in the ITS segment reaching a record level of US
"Including Q3, our ITS business has signed contracts totaling more than US
"We expect our top-line and margin performance to improve in the future. These are long-term infrastructure projects with stable customers and important public policy objectives, designed to deliver a valuable set of services and outcomes for decades to come. Further, these are projects that would continue to move forward should the economy enter a prolonged recession. In summary, with the significant contract wins we have completed in the past 18 months, the liftoff we are now seeing in certain of our implementation-stage projects and the new project awards that we expect to be made in the next several quarters, we believe that our ITS model for revenue growth and margin expansion remains firmly in place."
Mr. Kidd added: "WiLAN, our licensing business, completed several license agreements in Q2, building on its strong Q1 results. On a year-to-date basis, WiLAN's results reflect its cash flow generating potential and build on its long-term track record for doing so. The strategic review process for WiLAN remains ongoing and we will announce material developments in due course."
The Board of Directors has declared an eligible quarterly dividend of
Quarterhill's revenue is broadly segmented into ITS, reflecting the IRD and ETC businesses, and Licensing, reflecting the WiLAN business. ETC was acquired September 1, 2021 and as a result, the comparative financial statements for the three and six months ended June 30, 2021 do not include results from ETC.
Quarterhill's Management's Discussion and Analysis and financial statements for the three and six months ended June 30, 2022 ("Q2 2022" and "2022 year-to-date") are available at the Company's website and at its profile at SEDAR.
Consolidated revenues for the three and six months ended June 30, 2022 were
Gross margin percent2 for the three and six months ended June 30, 2022 was
Operating expenses include selling, general and administrative costs ("SG&A"), research and development costs ("R&D"), depreciation and amortization and other charges. Operating expenses for the three and six months ended June 30, 2022 were
Consolidated Adjusted EBITDA1 for the three and six months ended June 30, 2022 was negative
Net income (loss) for the three and six months ended June 30, 2022 was (
Cash generated from (used in) operations for the three and six months ended June 30, 2022 was
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://app.webinar.net/38vZ7ERG16j
Dial-in Information
- To access the call from Canada and U.S., dial 1.888.220.8474 (Toll Free)
- To access the call from other locations, dial 1.647.484.0475 (International)
Replay Information
Webcast replay will be available for 365 days at:
https://app.webinar.net/38vZ7ERG16j
Telephone replay will be available until 11:59 p.m. Eastern Daylight Time on August 18, 2022 at: 1.888.203.1112 (Toll Free North America) or 1.647.436.0148 (International).The telephone replay requires the passcode 7443681.
Quarterhill uses both IFRS and certain non-IFRS financial measures to assess performance. Non-IFRS financial measures are financial measures disclosed by a company that (a) depict historical or expected future financial performance, financial position or cash flow of a company, (b) with respect to their composition, exclude amounts that are included in, or include amounts that are excluded from the composition of the most directly comparable financial measure disclosed in the primary financial statements of the company, (c) are not disclosed in the financial statements of the company and (d) are not a ratio, fraction, percentage or similar representation. Non-IFRS ratios are financial measures disclosed by a company that are in the form of a ratio, fraction, percentage or similar representation that has a non-IFRS financial measure as one or more of its components, and that are not disclosed in the financial statements of the company.
These non-IFRS financial measures and non-IFRS ratios are not standardized financial measures under IFRS, and, therefore, are unlikely to be comparable to similar financial measures presented by other companies. Management believes these non-IFRS financial measures and non-IFRS ratios provide transparent and useful supplemental information to help investors evaluate our financial performance, financial condition, and liquidity using the same measures as management. These non-IFRS financial measures and non-IFRS ratios should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.
Adjusted EBITDA - Non-IFRS Financial Measures
We use the non-IFRS financial measure "Adjusted EBITDA" to mean net (loss) income adjusted for (i) income taxes, (ii) finance expense or income; (iii) amortization and impairment of intangibles; (iv) other charges and other on-time items; (v) depreciation of right-of-use assets and property, plant and equipment; (vi) stock-based compensation; (vii) foreign exchange (gain) loss; and (viii) other income which includes equity in earnings from joint ventures, and (ix) dividends received from joint ventures. Adjusted EBITDA is used by our management to assess our normalized cash generated on a consolidated basis and in our operating segments. Adjusted EBITDA is also a performance measure that may be used by investors to analyze the cash generated by Quarterhill and our operating segments. Adjusted EBITDA should not be interpreted as an alternative to net loss and cash flows from operations as determined in accordance with IFRS or as measure of liquidity. The most directly comparable IFRS financial measure is Net (loss) income.
Adjusted EBITDA per share – Non-IFRS ratio
Adjusted EBITDA per share is calculated as Adjusted EBITDA divided by the basic weighted average of common shares. Adjusted EBITDA per share is used by our management and investors to analyze cash generated by Quarterhill on a per share basis. The most comparable IFRS measure is earnings per share.
Backlog - Non-IFRS Financial Measures
We use the non-IFRS measure "backlog" to mean the total value of work that has not yet been completed but that in management's experience of similar situations has: (a) a high certainty of being performed pursuant to existing contracts or work orders specifying job scope, value and timing; (b) an expectation of expansion of existing contracts due to expected extensions; and/or (c) been awarded to one or more of our ITS operating subsidiaries as evidenced by a binding contract or where the finalization of a binding contract is reasonably assured. Activities under such contracts may cover a period of up to 15 years. We do not include in "backlog", the value of any expected but unsigned change orders that management considers may apply to such contracts.
Supplementary financial measures are financial measures disclosed by a company that (a) are, or are intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of a company (b) are not disclosed in the financial statement of the company, (c) are not non-IFRS financial measures, and (d) are not non-IFRS ratios.
Key supplementary measures disclosed are as follows:
Gross margin %
Calculated as gross profit as a percentage of revenue.
Working capital
Calculated as total current assets minus total current liabilities.
Quarterhill is a leading provider of tolling and enforcement solutions in the Intelligent Transportation System (ITS) industry, as well as, through its Wi-LAN Inc. subsidiary, a leader in Intellectual Property licensing. Our goal is global leadership in ITS, via organic growth of the Electronic Transaction Consultants, LLC (ETC) and International Road Dynamics, Inc. (IRD) platforms, and by continuing an acquisition-oriented investment strategy that capitalizes on attractive growth opportunities within ITS and its adjacent markets. Quarterhill is listed on the TSX under the symbol QTRH and on the OTCQX Best Market under the symbol QTRHF. For more information: www.quarterhill.com
This news release contains forward-looking statements regarding Quarterhill, its operating subsidiaries and their respective businesses. 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, its operating subsidiaries and/or their respective businesses. Other factors include, without limitation, the risks described in Quarterhill's March 20, 2022 annual information form for the year ended December 31, 2021 (the "AIF"). In addition, readers are also urged to review the additional risk factors disclosed in our Management's Discussion and Analysis for our three months ended June 30, 2022 filed today on www.sedar.com. Quarterhill recommends that readers review and consider all of these risk factors and notes that readers should not place undue reliance on any of Quarterhill's forward-looking statements. Quarterhill has no intention, and undertakes no obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Quarterhill Inc. | ||||||||
Interim Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Unaudited) | ||||||||
(in thousands and in Canadian dollars, except share and per share amounts) | ||||||||
Three months ended June 30, | Six months ended June 30, | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Revenues | ||||||||
Licensing | $ 4,639 | $ 1,750 | $ 135,377 | $ 9,598 | ||||
Intelligent Transportation Systems | 39,230 | 17,125 | 76,997 | 28,593 | ||||
43,869 | 18,875 | 212,374 | 38,191 | |||||
Direct cost of revenues | ||||||||
Licensing | 4,790 | 4,854 | 53,493 | 10,723 | ||||
Intelligent Transportation Systems | 33,235 | 10,711 | 60,381 | 17,521 | ||||
38,025 | 15,565 | 113,874 | 28,244 | |||||
Gross profit | 5,844 | 3,310 | 98,500 | 9,947 | ||||
Operating expenses | ||||||||
Depreciation of right-of-use assets | 567 | 304 | 1,135 | 583 | ||||
Depreciation of property, plant and equipment | 478 | 256 | 1,007 | 489 | ||||
Amortization of intangible assets | 6,204 | 4,351 | 12,546 | 8,838 | ||||
Selling, general and administrative expenses | 14,228 | 6,336 | 27,875 | 13,411 | ||||
Research and development expenses | 797 | 579 | 1,437 | 973 | ||||
Other charges | 15,107 | 343 | 15,203 | 382 | ||||
37,381 | 12,169 | 59,203 | 24,676 | |||||
Results from operations | (31,537) | (8,859) | 39,297 | (14,729) | ||||
Finance income | (91) | (33) | (495) | (54) | ||||
Finance expense | 2,458 | 112 | 5,507 | 181 | ||||
Foreign exchange (gain) loss | (810) | 107 | (260) | (18) | ||||
Other income | (4,236) | (556) | (8,257) | (1,186) | ||||
(Loss) Income before taxes | (28,858) | (8,489) | 42,802 | (13,652) | ||||
Current income tax expense | 555 | 230 | 1,157 | 774 | ||||
Deferred income tax (recovery) expense | (5,576) | (2,343) | 8,581 | (3,763) | ||||
Income tax (recovery) expense | (5,021) | (2,113) | 9,738 | (2,989) | ||||
Net (loss) income | $ (23,837) | $ (6,376) | $ 33,064 | $ (10,663) | ||||
Other comprehensive loss that may be reclassified subsequently to net income (loss): | ||||||||
Foreign currency translation adjustment | 5,992 | (3,112) | 2,054 | (6,846) | ||||
Comprehensive (loss) income | $ (17,845) | $ (9,488) | $ 35,118 | $ (17,509) | ||||
Net (loss) income per share | ||||||||
Basic | $ (0.21) | $ (0.06) | $ 0.29 | $ (0.09) | ||||
Diluted | $ (0.21) | $ (0.06) | $ 0.25 | $ (0.09) |
Quarterhill Inc. | ||||
Interim Condensed Consolidated Statements of Financial Position (Unaudited) | ||||
(in thousands and in Canadian dollars) | ||||
As at | June 30, 2022 | December 31, 2021 | ||
Current assets | ||||
Cash and cash equivalents | $ 121,361 | $ 70,746 | ||
Short-term investments | 1,550 | 1,851 | ||
Restricted short-term investments | 6,611 | 3,095 | ||
Accounts receivable | 21,848 | 30,176 | ||
Unbilled revenue | 32,517 | 35,926 | ||
Income taxes recoverable | 457 | 385 | ||
Inventories (net of obsolescence) | 14,145 | 13,731 | ||
Prepaid expenses and deposits | 6,512 | 5,192 | ||
205,001 | 161,102 | |||
Non-current assets | ||||
Accounts receivable | 513 | 505 | ||
Prepaid expenses and deposits | 1,415 | 945 | ||
Right-of-use assets, net | 6,678 | 7,761 | ||
Property, plant and equipment, net | 5,783 | 5,694 | ||
Intangible assets, net | 141,826 | 151,355 | ||
Investment in joint venture | 8,138 | 7,458 | ||
Deferred compensation asset | 1,546 | 1,524 | ||
Deferred income tax assets | 28,333 | 37,786 | ||
Goodwill | 53,583 | 53,065 | ||
247,815 | 266,093 | |||
TOTAL ASSETS | $ 452,816 | $ 427,195 | ||
Liabilities | ||||
Current liabilities | ||||
Accounts payable and accrued liabilities | 52,753 | 42,008 | ||
Income taxes payable | 784 | 700 | ||
Current portion of lease liabilities | 1,884 | 2,166 | ||
Current portion of deferred revenue | 8,260 | 7,989 | ||
Current portion of long-term debt | 3,228 | 3,181 | ||
66,909 | 56,044 | |||
Non-current liabilities | ||||
Deferred revenue | 2,632 | 2,839 | ||
Long-term lease liabilities | 4,875 | 5,626 | ||
Long-term debt | 45,409 | 58,968 | ||
Convertible debentures | 47,302 | 45,959 | ||
Derivative liability | 3,026 | 9,441 | ||
Deferred compensation liability | 1,370 | 1,350 | ||
Deferred income tax liabilities | 5,710 | 5,852 | ||
110,324 | 130,035 | |||
TOTAL LIABILITIES | 177,233 | 186,079 | ||
Shareholders' equity | ||||
Capital stock | 546,098 | 544,345 | ||
Contributed surplus | 50,373 | 49,937 | ||
Accumulated other comprehensive income | 2,198 | 144 | ||
Deficit | (323,086) | (353,310) | ||
275,583 | 241,116 | |||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 452,816 | $ 427,195 |
Quarterhill Inc. | ||||||||
Interim Condensed Consolidated Statement of Cash Flows (Unaudited) | ||||||||
(in thousands and in Canadian Dollars) | ||||||||
Three months ended June 30, | Six months ended June 30, | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Cash used in operations | ||||||||
Net (loss) income | $ (23,837) | $ (6,376) | $ 33,064 | $ (10,663) | ||||
Non-cash items | ||||||||
Stock-based compensation expense | 222 | 586 | 951 | 1,010 | ||||
Depreciation of right-of-use assets | 567 | 304 | 1,135 | 583 | ||||
Interest expense on lease liabilities | — | 34 | — | 84 | ||||
Depreciation and amortization | 6,682 | 4,607 | 13,553 | 9,327 | ||||
Foreign exchange loss (gain) | (810) | 78 | (260) | (18) | ||||
Other income | (383) | (557) | (1,842) | (1,187) | ||||
Loss on disposal of intangible assets | — | (53) | — | — | ||||
Loss on disposal of assets | — | — | 70 | — | ||||
Deferred income tax expense (recovery) | (5,576) | (2,343) | 8,581 | (3,763) | ||||
Embedded derivatives | (323) | (1) | (540) | 5 | ||||
Gain from change in fair value of derivative liability | (3,783) | — | (6,415) | — | ||||
Changes in non-cash working capital balances | 105,084 | 5,466 | 20,344 | 493 | ||||
Net cash generated from (used in) operating activities | 77,843 | 1,745 | 68,641 | (4,129) | ||||
Financing | ||||||||
Dividends paid | (1,432) | (1,473) | (2,840) | (2,854) | ||||
Payment of lease liabilities | (558) | (269) | (1,070) | (562) | ||||
Repayment of long-term debt | (13,720) | — | (14,503) | — | ||||
Repurchase of shares for cancellation | — | (1,741) | — | (2,065) | ||||
Common shares issued for cash on the exercise of options | 971 | 57 | 1,095 | 234 | ||||
Net cash used in financing activities | (14,739) | (3,426) | (17,318) | (5,247) | ||||
Investing | ||||||||
Proceeds from short-term investments | — | 3,000 | 301 | 3,000 | ||||
Proceeds from sale of property, plant and equipment | — | — | 211 | — | ||||
Purchase of property, plant and equipment | (1,096) | (51) | (1,096) | (88) | ||||
Purchase of intangible assets | (678) | — | (1,220) | — | ||||
Net cash used in investing activities | (5,290) | (2,856) | (5,320) | (2,893) | ||||
Foreign exchange on cash held in foreign currencies | 4,885 | (2,037) | 4,612 | (3,568) | ||||
Net increase (decrease) in cash and cash equivalents | 62,699 | (6,574) | 50,615 | (15,837) | ||||
Cash and cash equivalents, beginning of | 58,662 | 126,437 | 70,746 | 135,700 | ||||
Cash and cash equivalents, end of | $ 121,361 | $ 119,863 | $ 121,361 | $ 119,863 |
Quarterhill Inc. | |||||
Interim Condensed Consolidated Statement of Equity (Unaudited) | |||||
(in thousands and in Canadian dollars) | |||||
Capital Stock | Contributed | Accumulated | Deficit | Total | |
January 1, 2021 | $ 547,537 | $ 46,250 | $ 3,581 | $ (325,438) | $ 271,930 |
Net loss | — | — | — | (10,663) | (10,663) |
Repurchase of shares for cancellation | (4,027) | 1,962 | — | — | (2,065) |
Other comprehensive loss | — | — | (6,846) | — | (6,846) |
Stock-based compensation expense | — | 1,010 | — | — | 1,010 |
Exercise of options | 331 | (97) | — | — | 234 |
Common shares issued from restricted stock units | 124 | 20 | — | — | 144 |
Common shares issued from performance stock units | 12 | (12) | — | — | — |
Dividends declared | — | — | — | (2,854) | (2,854) |
June 30, 2021 | $ 543,977 | $ 49,133 | $ (3,265) | $ (338,955) | $ 250,890 |
January 1, 2022 | $ 544,345 | $ 49,937 | $ 144 | $ (353,310) | $ 241,116 |
Net income | — | — | — | 33,064 | 33,064 |
Other comprehensive income | — | — | 2,054 | — | 2,054 |
Stock-based compensation expense | — | 951 | — | — | 951 |
Exercise of stock options | 1,707 | (612) | — | — | 1,095 |
Common shares issued from restricted stock units | — | 143 | — | — | 143 |
June 30, 2022 | $ 546,098 | $ 50,373 | $ 2,198 | $ (323,086) | $ 275,583 |
Quarterhill Inc. | |||||
Reconciliation of Net loss to Adjusted EBITDA (Unaudited) | |||||
(in thousands and in Canadian dollars, except share and per share amounts) | |||||
Three months ended June 30, | |||||
2022 | 2021 | ||||
$ | Per Share | $ | Per Share | ||
Net (loss) income from continuing operations | $ (23,837) | $ (0.21) | $ (6,376) | $ (0.06) | |
Adjusted for: | |||||
Income tax (recovery) expense | (5,021) | (0.04) | (2,113) | (0.01) | |
Foreign exchange (gain) loss | (810) | (0.01) | 107 | — | |
Finance expense, net | — | — | — | — | |
Other charges | 15,107 | 0.14 | 343 | — | |
Depreciation and amortization | 7,249 | 0.06 | 4,911 | 0.04 | |
Stock based compensation expense | 222 | — | 586 | — | |
Other income | (4,236) | (0.04) | (556) | — | |
Adjusted EBITDA[1] | $ (8,959) | $ (0.08) | $ (3,019) | $ (0.03) | |
Weighted average number of Common Shares | |||||
Basic | 114,389,952 | 114,054,045 |
Quarterhill Inc. | ||||||
Reconciliations of Net income (loss) to Adjusted EBITDA | ||||||
(in thousands of Canadian dollars, except share and per share amounts) | ||||||
Six months ended June 30, | ||||||
2022 | 2021 | |||||
$ | Per Share | $ | Per Share | |||
Net loss from continuing operations | $ 33,064 | $ 0.29 | $ (10,663) | $ (0.09) | ||
Adjusted for: | ||||||
Income tax expense | 9,738 | 0.09 | (2,989) | (0.03) | ||
Foreign exchange (gain) loss | (260) | — | (18) | — | ||
— | — | |||||
— | — | |||||
Other charges | 15,203 | 0.13 | 382 | — | ||
— | — | — | — | |||
Amortization of intangible assets | 14,688 | 0.13 | 9,910 | 0.09 | ||
— | — | |||||
— | — | |||||
Stock based compensation expense | 951 | — | 1,010 | — | ||
Dividends received from joint venture | — | — | — | — | ||
Other income | (8,257) | (0.07) | (1,186) | (0.01) | ||
Adjusted EBITDA[1] | $ 70,139 | $ 0.62 | $ (3,427) | $ (0.03) | ||
Weighted average number of Common Shares | ||||||
Basic | 114,154,645 | 114,054,045 |
1 Please refer to the Adjusted EBITDA Non- IFRS Financial Measures section for further information. |
View original content:https://www.prnewswire.com/news-releases/quarterhill-announces-q2-fiscal-2022-financial-results-301604187.html
SOURCE Quarterhill Inc.
FAQ
What are Quarterhill's Q2 2022 revenue figures?
What is the current cash position of Quarterhill?
What was the Adjusted EBITDA for Quarterhill in Q2 2022?
What dividend was declared by Quarterhill in August 2022?