Quarterhill Announces Second Quarter Fiscal 2021 Financial Results
08/05/2021 - 06:30 AM
TORONTO Aug. 5, 2021 /PRNewswire/ - Quarterhill Inc. ("Quarterhill" or the "Company") (TSX: QTRH) (OTCQX: QTRHF), announces its financial results for the three and six months ended June 30, 2021. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.
Q2 Fiscal 2021 Highlights
Consolidated Revenue was $18.9 million Consolidated Adjusted EBITDA1 was ($3.0) million . The Intelligent Transportation Systems ("ITS") segment generated $2.7 million Consolidated cash generated from operations was $1.7 million Cash, cash equivalents, and short-term investments were $122.7 million June 30, 2021 Working capital was $138.5 million June 30, 2021 Acquired VDS GmbH ("VDS"), a German Intelligent Transportation Systems ("ITS") provider of high precision traffic monitoring devices Ongoing integration of Sensor Line (acquired in January 2021 ) and VDS, which has already led to revenue and cost synergies "In Q2, we continued to make progress on our M&A strategy acquiring VDS, which was our second acquisition of the year," said Paul Hill , President and CEO of Quarterhill. "The two acquisitions were tuck-ins for our wholly-owned subsidiary International Road Dynamics Inc. ("IRD") and the integration of both companies is going very well. Already, we are generating new revenue opportunities, realizing cost synergies and laying the groundwork for IRD's further expansion into Europe . Looking out through the remainder of the year, we have a robust pipeline of M&A opportunities of all sizes and are intent on completing more transactions, with a particular focus right now on larger sized deals."
"On the operational front, IRD delivered solid revenue and Adjusted EBITDA in Q2 and the two tuck-in acquisitions demonstrate the global platform potential of the business and their ability to identify, acquire, integrate and grow acquired companies. Our other wholly-owned subsidiary, WiLAN Inc. ("WiLAN"), has generated licensing activity year-to-date despite challenges posed by the COVID-19 pandemic, but overall, its financial results so far in 2021 reflect the episodic nature of the IP industry business model. On an annual basis, WiLAN has historically delivered significant cash flows and we continue to expect that for 2021. This means we are looking for a strong second half from the business and we remain encouraged by the pipeline of opportunities the team is working on."
Approval of Eligible Dividend
The Board of Directors has declared an eligible quarterly dividend of $0.01 25October 8, 2021 , to shareholders of record on September 10, 2021 .
Q2 Fiscal 2021 Financial Review
The Interim Condensed Consolidated Financial Statements for the three and six months ended June 30, 2021 and for the respective comparison periods have been prepared to reflect continuing operations and therefore exclude results in 2020 during those periods from VIZIYA, which was sold by Quarterhill on May 15, 2020 . The 2020 operating results from VIZIYA, up to the date of sale on May 15, 2020 , are reported as net loss from discontinued operations in accordance with IFRS 5.
Quarterhill's revenue is broadly segmented into Licensing, reflecting the WiLAN business, and ITS, reflecting the IRD business. Quarterhill's Management's Discussion and Analysis and Interim Condensed Consolidated Financial Statements for the three and six months ended June 30, 2021 are available at the Company's website SEDAR
Consolidated revenues for the three months ended June 30, 2021 ("Q2 2021") were $18.9 million $16.8 million June 30, 2021 ("YTD 2021") were $38.2 million $38.4 million
Gross margin for Q2 2021 was 18% compared to 25% in Q2 2020. Gross margin for the YTD 2021 period was 26% compared to 30% in the same period last year. Gross margin at IRD was 37% in Q2 2021 compared to 42% in Q2 2020, and for the YTD 2021 period was 39% , compared to 35% in the same period last year. IRD margins may fluctuate on a quarterly basis depending primarily on the nature of projects underway during the period and the related margin profile. WiLAN gross margins decreased in the quarter and YTD period primarily due to higher litigation and contingent legal and partner costs compared to the same periods last year.
Operating expenses include selling, general and administrative costs ("SG&A"), research and development costs ("R&D"), depreciation and amortization and special charges. Operating expenses for Q2 2021 were $12.2 million $12.6 million $24.7 million $25.2 million
Consolidated Adjusted EBITDA for Q2 2021 was ($3.0) million compared to ($2.0) million in Q2 2020. Consolidated Adjusted EBITDA for the YTD 2021 period was ($3.4) million compared to ($1.8) million in the same period last year. IRD generated Adjusted EBITDA of $2.7 million $4.1 million ($3.9) million and for the YTD 2021 period was ($2.7) million .
Cash generated from (used in) continuing operations for Q2 2021 was $1.7 million ($4.3) million in Q2 2020. Cash generated from (used in) continuing operations for the YTD 2021 period was ($4.1) million compared to $5.4 million $122.7 million $141.3 million December 31, 2020 . Working capital at June 30, 2021, was $138.5 million $159.7 million December 31, 2020 .
Conference Call and Webcast
Quarterhill will host a conference call to discuss its financial results today at 10:00 AM Eastern Time .
Webcast Information
The live audio webcast will be available at:
https://produceredition.webcasts.com/starthere.jsp?ei=1479850&tp_key=3c86cac3c6
Dial-in Information
To access the call from Canada and U.S., dial 1.888.664.6392 (Toll Free) To access the call from other locations, dial 1.416.764.8659 (International) Replay Information
Webcast replay will be available for 365 days at:
https://produceredition.webcasts.com/starthere.jsp?ei=1479850&tp_key=3c86cac3c6
Telephone replay will be available until 11:59 p.m. Eastern Daylight Time on May 13, 2021 at: 1.888.390.0541 (Toll Free North America) or 1.416.764.8677 (International).The telephone replay requires the passcode 353765.
1 Non-IFRS Disclosure
Quarterhill has historically used a set of metrics when evaluating our operational and financial performance. We continually monitor, evaluate and update these metrics as required to ensure they provide information considered most useful, in the opinion of our management, to any decision-making based on Quarterhill's performance. This section defines, quantifies and analyzes the key performance indicators used by our management and referred to elsewhere in this press release, which are not recognized under IFRS and have no standardized meaning prescribed by IFRS. These indicators and measures are therefore unlikely to be comparable to similar measures presented by other issuers.
In this press release, we use the Non-IFRS term "Adjusted EBITDA" to mean net income (loss) from continuing operations before: (i) income taxes; (ii) finance expense or income; (iii) amortization and impairment of intangibles; (iv) special charges and other one-time items; (v) depreciation of right-of-use assets and property, plant and equipment; (vi) stock-based compensation; (vii) foreign exchange (gain) loss; and (viii) equity in earnings and dividends from joint ventures. Adjusted EBITDA is used by our management to assess our normalized cash generated on a consolidated basis and in our operating segments. Adjusted EBITDA is also a performance measure that may be used by investors to analyze the cash generated by Quarterhill and our operating segments. Adjusted EBITDA should not be interpreted as an alternative to net income and cash flows from operations as determined in accordance with IFRS or as a measure of liquidity.
About Quarterhill
Quarterhill is focused on acquisition, management and growth of companies in the intelligent transportation systems ("ITS") and innovation and licensing industries. Our goal is to execute an investment strategy that capitalizes on attractive growth opportunities within ITS - and its adjacent markets - to become a global leader in that industry. Quarterhill is listed on the TSX under the symbol QTRH and on the OTCQX Best Market under the symbol QTRHF. For more information: www.quarterhill.com
Forward-looking Information
This news release contains forward-looking statements regarding Quarterhill and its business. Forward-looking statements are based on estimates and assumptions made by Quarterhill in light of its experience and its perception of historical trends, current conditions, expected future developments and the expected effects of new business strategies, as well as other factors that Quarterhill believes are appropriate in the circumstances. The forward-looking events and circumstances discussed herein may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Quarterhill, including: potential risks and uncertainties relating to the ultimate geographic spread of the novel coronavirus ("COVID-19"); the severity of the disease; the duration of the COVID-19 outbreak; actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impact; the potential negative impacts of COVID-19 on the global economy and financial markets and any resulting impact on Quarterhill and/or its business. Other factors include, without limitation, the risks described in Quarterhill's March 11, 2021 annual information form for the year ended December 31, 2020 (the "AIF"). Copies of the AIF may be obtained at www.sedar.com . Quarterhill recommends that readers review and consider all of these risk factors and notes that readers should not place undue reliance on any of Quarterhill's forward-looking statements. Quarterhill has no intention, and undertakes no obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Quarterhill Inc.
Interim Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income (Unaudited)
(in thousands of Canadian dollars, except share and per share amounts)
Three months ended June 30,
Six months ended June 30,
CONTINUING OPERATIONS
2021
2020
2021
2020
Revenues
Licensing
$
1,750
$
320
$
9,598
$
10,520
Intelligent Transportation Systems
17,125
16,504
28,593
27,917
18,875
16,824
38,191
38,437
Direct cost of revenues
Licensing
4,854
3,062
10,723
8,830
Intelligent Transportation Systems
10,711
9,594
17,521
18,013
15,565
12,656
28,244
26,843
Gross profit
3,310
4,168
9,947
11,594
Operating expenses
Depreciation of right-of-use assets
304
237
583
481
Depreciation of property, plant and equipment
256
247
489
471
Amortization of intangible assets
4,351
4,848
8,838
9,590
Selling, general and administrative expenses
6,336
5,826
13,411
12,121
Research and development expenses
579
555
973
1,424
Impairment losses on intangible assets
—
233
—
233
Special charges
343
659
382
872
12,169
12,605
24,676
25,192
Results from operations
(8,859)
(8,437)
(14,729)
(13,598)
Finance income
(33)
(160)
(54)
(382)
Finance expense
112
118
181
214
Foreign exchange loss (gain)
107
(3)
(18)
(585)
Other income
(556)
(431)
(1,186)
(809)
Loss before taxes
(8,489)
(7,961)
(13,652)
(12,036)
Current income tax expense
230
78
774
1,344
Deferred income tax recovery
(2,343)
(3,052)
(3,763)
(3,481)
Income tax recovery
(2,113)
(2,974)
(2,989)
(2,137)
Net loss from continuing operations
(6,376)
(4,987)
(10,663)
(9,899)
Net income from discontinued operations
—
14,455
—
14,255
Net (loss) income
$
(6,376)
$
9,468
$
(10,663)
$
4,356
Other comprehensive (loss) income that may be
Foreign currency translation adjustment
(3,112)
(11,188)
(6,846)
9,875
Comprehensive (loss) income
$
(9,488)
$
(1,720)
$
(17,509)
$
14,231
(Loss) income per share
From continuing operations
$
(0.06)
$
(0.04)
$
(0.09)
$
(0.08)
From discontinued operations
—
0.12
—
0.12
(Loss) income per share - Basic
$
(0.06)
$
0.08
$
(0.09)
$
0.04
From continuing operations
$
(0.06)
$
(0.04)
$
(0.09)
$
(0.08)
From discontinued operations
—
0.12
—
0.12
(Loss) income per share - Diluted
$
(0.06)
$
0.08
$
(0.09)
$
0.04
Quarterhill Inc.
Interim Condensed Consolidated Statements of Financial Position (Unaudited)
(in thousands of Canadian dollars)
As at
June 30, 2021
December 31, 2020
Current assets
Cash and cash equivalents
$
119,863
$
135,700
Short-term investments
2,848
5,550
Restricted short-term investments
3,025
—
Accounts receivable
12,298
13,747
Unbilled revenue
10,922
13,549
Income taxes recoverable
239
264
Inventories (net of obsolescence)
10,971
9,068
Prepaid expenses and deposits
3,537
8,264
163,703
186,142
Non-current assets
Accounts receivable
494
506
Prepaid expenses and deposits
534
338
Right-of-use assets, net
4,484
3,780
Property, plant and equipment, net
2,844
2,783
Intangible assets, net
53,405
59,261
Investment in joint venture
7,776
6,704
Deferred income tax assets
30,045
28,202
Goodwill
19,096
16,093
118,678
117,667
TOTAL ASSETS
$
282,381
$
303,809
Liabilities
Current liabilities
Accounts payable and accrued liabilities
$
17,105
$
20,038
Income taxes payable
892
631
Current portion of lease liabilities
1,332
1,012
Current portion of deferred revenue
5,909
4,800
25,238
26,481
Non-current liabilities
Deferred revenue
3,096
2,573
Long-term lease liabilities
3,157
2,747
Deferred income tax liabilities
—
78
6,253
5,398
TOTAL LIABILITIES
31,491
31,879
Shareholders' equity
Capital stock
543,977
547,537
Contributed surplus
49,133
46,250
Accumulated other comprehensive (loss) income
(3,265)
3,581
Deficit
(338,955)
(325,438)
250,890
271,930
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
282,381
$
303,809
Quarterhill Inc.
Interim Condensed Consolidated Statement of Cash Flows (Unaudited)
(in thousands of Canadian Dollars)
Three months ended June 30,
Six months ended June 30,
2021
2020
2021
2020
Cash generated from (used in) operations
Net loss from continuing operations
$
(6,376)
$
(4,987)
$
(10,663)
$
(9,899)
Non-cash items
Stock-based compensation expense
586
221
1,010
196
Depreciation of right-of-use assets
304
237
583
481
Interest expense on lease liabilities
34
56
84
112
Depreciation and amortization
4,607
5,095
9,327
10,061
Foreign exchange gain (loss)
78
(478)
(18)
(194)
Equity in earnings from joint venture
(557)
(431)
(1,187)
(809)
Gain on disposal of intangible assets
(53)
—
—
—
Impairment losses on intangible assets
—
233
—
233
Gain on disposal of assets
—
(6)
—
(10)
Deferred income tax recovery
(2,343)
(3,052)
(3,763)
(3,481)
Long-term accounts receivable
12
—
12
—
Embedded derivatives
(1)
121
5
(101)
Changes in non-cash working capital balances
5,454
(1,267)
481
8,817
Cash generated from (used in) continuing operations
1,745
(4,258)
(4,129)
5,406
Net cash flows attributable to discontinuing operations
—
(2,478)
—
(3,075)
Net cash generated from (used in) operating activities
1,745
(6,736)
(4,129)
2,331
Financing
Dividends paid
(1,473)
—
(2,854)
(1,481)
Bank indebtedness
—
4,796
—
2,984
Payment of lease liabilities
(269)
(271)
(562)
(586)
Repayment of long-term debt
—
(13)
—
(120)
Exercise of stock options
—
14
—
14
Repurchase of shares for cancellation
(1,741)
—
(2,065)
—
Common shares issued for cash on the exercise of
57
—
234
—
Common shares issued from performance stock units
—
—
—
24
Cash (used in) generated from continuing
(3,426)
4,526
(5,247)
835
Net cash (used in) generated from financing activities
(3,426)
4,526
(5,247)
835
Investing
Proceeds from disposition of a subsidiary
—
49,400
—
49,400
Cash sold on disposition of a subsidiary
—
(1,825)
—
(1,825)
Proceeds from short-term investments
3,000
—
3,000
—
Purchase of restricted short-term investments
(3,025)
—
(3,025)
—
Proceeds from sale of property, plant and equipment
—
12
—
16
Purchase of property, plant and equipment
(51)
(586)
(88)
(887)
Acquisition of business, VDS
(2,780)
—
(2,780)
—
Purchase of intangibles
—
(8)
—
(25)
Cash (used in) generated from continuing
(2,856)
46,993
(2,893)
46,679
Net cash flows attributable to discontinuing operations
—
(11)
—
(81)
Net cash (used in) generated from
(2,856)
46,982
(2,893)
46,598
Foreign exchange on cash held in foreign currency
(2,037)
(4,853)
(3,568)
3,881
Net (decrease) increase in cash and cash equivalents
(6,574)
39,919
(15,837)
53,645
Cash and cash equivalents, beginning of
126,437
101,596
135,700
87,870
Cash and cash equivalents, end of
$
119,863
$
141,515
$
119,863
$
141,515
Quarterhill Inc.
Interim Condensed Consolidated Statement of Equity (Unaudited)
(in thousands of Canadian dollars)
Capital Stock
Contributed
Accumulated Other Comprehensive (Loss) Income
Deficit
Total
January 1, 2020
$
570,553
$
32,011
$
10,936
$
(338,297)
$
275,203
Net income
—
—
—
4,356
4,356
Other comprehensive income
—
—
9,875
—
9,875
Stock-based compensation
—
196
—
—
196
Exercise of options
14
—
—
—
14
Common shares issued from
24
—
—
—
24
Dividends declared
—
—
—
(2,943)
(2,943)
June 30, 2020
$
570,591
$
32,207
$
20,811
$
(336,884)
$
286,725
January 1, 2021
$
547,537
$
46,250
$
3,581
$
(325,438)
$
271,930
Net loss
—
—
—
(10,663)
(10,663)
Repurchase of shares for
(4,027)
1,962
—
—
(2,065)
Other comprehensive loss
—
—
(6,846)
—
(6,846)
Stock-based compensation
1,010
—
—
1,010
Exercise of options
331
(97)
—
—
234
Common shares issued from
124
20
—
—
144
Common shares issued from
12
(12)
—
—
—
Dividends declared
—
—
—
(2,854)
(2,854)
June 30, 2021
$
543,977
$
49,133
$
(3,265)
$
(338,955)
$
250,890
Quarterhill Inc.
Reconciliation of Net loss to Adjusted EBITDA (Unaudited)
(in thousands of Canadian dollars, except share and per share amounts)
Three months ended June 30,
2021
2020
$
Per Share
$
Per Share
Net loss from continuing operations
$
(6,376)
$
(0.06)
$
(4,987)
$
(0.04)
Adjusted for:
Income tax expense (recovery)
(2,113)
(0.01)
(2,974)
(0.03)
Foreign exchange gain
107
—
(3)
—
Finance expense (income), net
79
—
—
(42)
—
Special charges
343
—
659
0.01
Impairment losses on intangible assets
—
—
233
—
Depreciation and amortization
4,911
0.04
—
5,332
0.04
Stock based compensation expense (recovery)
586
—
221
—
Other income
(556)
—
(431)
—
Adjusted EBITDA
$
(3,019)
$
(0.03)
$
(1,992)
$
(0.02)
Weighted average number of Common Shares
Basic
114,054,045
118,861,166
Six months ended June 30,
2021
2020
$
Per Share
$
Per Share
Net loss from continuing operations
$
(10,663)
$
(0.09)
$
(9,899)
$
(0.08)
Adjusted for:
Income tax recovery
(2,989)
(0.03)
(2,137)
(0.02)
Foreign exchange gain
(18)
—
(585)
—
Finance expense (income), net
127
—
(168)
—
Special charges
382
—
872
0.01
Impairment losses on intangible assets
—
—
233
—
Depreciation and amortization
9,910
0.09
10,542
0.08
Stock based compensation expense
1,010
0.01
196
—
Other income
(1,186)
(0.01)
(809)
(0.01)
Adjusted EBITDA
$
(3,427)
$
(0.03)
$
(1,755)
(0.02)
Weighted average number of Common Shares
Basic
114,230,204
118,846,724
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SOURCE Quarterhill Inc.
