Quarterhill Announces Q2 2017 Financial Results Shift in strategy driving revenue growth OTTAWA, Canada – August 10, 2017 – Quarterhill Inc. (“Quarterhill” or the “Company”) (TSX:QTRH) (NASDAQ:QTRH), announces its financial results for the three- and six-month periods ended June 30, 2017. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated. Second Quarter Highlights
- Revenue of $18.6 million
- Adjusted EBITDA* of $4.8 million
- Net income of $3.6 million, or $0.03 per share
- Cash from operations of $3.1 million
- Announced a new acquisition-oriented growth strategy and changed the name of the public company to Quarterhill
- Acquired International Road Dynamics (“IRD”), a highway traffic management technology company specializing in supplying products and systems to the global Intelligent Transportation Systems industry, on June 1, 2017
- Acquired VIZIYA Corp (“VIZIYA”), a software and services provider that helps companies optimize their asset performance, on May 4, 2017
- Completed the first tuck-in acquisition – iCOMS Detections S.A
“Q2 was a significant period for the Company as we launched a major shift in our growth strategy by transitioning our public parent company into a diversified investment holding firm focused on acquiring companies in the Industrial Internet of Things market,” said Shaun McEwan, Interim CEO of Quarterhill. “We quickly began executing on our new plan and completed the acquisitions of IRD and VIZIYA in the quarter. As part of the new strategy, we renamed the public company Quarterhill, and kept the WiLAN name with our patent license business, which will continue to operate as one of the Company’s investments.” “Our new strategy reflects our belief that the best path to grow the business and shareholder value is to acquire promising growth companies and support them while they build their businesses. This diversification strategy will add additional lines of business to the overall public Company, which will open-up new revenue and cash flow streams, and mitigate the lumpiness that we had experienced in the past. This is evident already; even though the acquired businesses had only a partial contribution to our Q2 financials, we are already seeing the positive impact they can have on our revenue and margins.” Approval of Eligible Dividend The Board of Directors has declared an eligible quarterly dividend of CDN $0.0125 per common share payable on October 5, 2017, to shareholders of record on September 15, 2017.
Business Strategy and Segments
Quarterhill is developing a portfolio of established businesses having histories of generating cash flows from their operations in the “Technology”, “Mobility”, “Factory” and “City” vertical segments of the Industrial “Internet of Things” market. As of June 30, 2017, the Company had investments in three of its four targeted vertical segments: Technology (WiLAN), Mobility (IRD), and Factory (VIZIYA).
Quarterhill’s goal is to build a consistently profitable company with a diversified investment base and global market presence within its vertical segments to increase shareholder value by emphasizing the importance of recurring revenue streams and the predictability of operating results. The Company intends to achieve these objectives through a combination of organic growth and acquisitions.
Q2 and Year-to-Date 2017 Consolidated Financial Review
Quarterhill’s consolidated financial results for Q2 2017 include contributions from its wholly owned subsidiaries; WiLAN, IRD and VIZIYA. Included in these consolidated financial results are IRD’s results from operations for the period from June 1 to June 30, 2017, VIZIYA’s results from operations for the period from May 4 to June 30, 2017, and WiLAN’s results from operations for the entire quarter. The 2016 comparative period information presented represents solely WiLAN’s results for the specified period. Certain comparative information has been restated to conform to the new basis of presentation.
Consolidated revenues for the three-months ended June 30, 2017 were $18.6 million, compared to $16.0 million in the same period last year, which represents an increase of $2.6 million or 16%. The increase was due to the partial contribution in Q2 2017 from the acquired IRD and VIZIYA businesses. Consolidated revenues for the six-months ended June 30, 2017 were $26.2 million, compared to $46.1 million in the same period last year.
Gross margin for the three-months ended June 30, 2017 was $9.0 million, or 48.8%, compared to $9.8 million, or 61%, in the same period last year. Gross margin for the six-months ended June 30, 2017 was $9.3 million, or 35%, compared to $31.9 million, or 69%, in the same period last year. Gross margin for the three- and six-month periods ended June 30, 2017 reflects contribution across all three vertical segments, compared to the same periods last year, which reflect only the operations of what is now the Company’s Technology segment.
Operating expenses for the three-months ended June 30, 2017 were $12.4 million, compared to $12.6 million in the same period last year. Operating expenses include selling, general and administrative costs, research and development costs, and depreciation and amortization. The acquisitions this quarter resulted in an incremental $1.3 million in acquisition related expenses and an incremental $0.7 million in amortization related to acquired intangible assets. Operating expenses for the six-months ended June 30, 2017 were $20.2 million compared to $25.3 million in the same period last year.
Adjusted EBITDA for the three-months ended June 30, 2017 was $4.8 million, or $0.04 per basic Common Share, compared to $7.0 million, or $0.06 per basic Common Share, in the same period last year. The difference primarily reflects the lower adjusted EBITDA performance of our Technology segment due to its lower revenues, which was partially offset by the addition of adjusted EBITDA from each of our acquired businesses. For the six-months ended June 30, 2017, adjusted EBITDA was $2.6 million, or $0.02 per basic Common Share, compared to $26.7 million, or $0.22 per basic Common Share, in the same period last year, which reflects the significantly lower revenues generated in our Technology segment year-over-year.
Net income for three-months ended June 30, 2017 was $3.6 million, or $0.03 per basic and diluted Common Share, compared to a net loss of ($3.2) million or ($0.03) per basic and diluted Common Share in the same period last year. For the six-months ended June 30, 2017, net loss was ($3.6) million, or ($0.03) per basic and diluted Common Share, compared to net income of $1.8 million, or $0.01 per basic and diluted Common Share, in the same period last year.
Cash generated from operations for three-months ended June 30, 2017 was $3.1 million, compared to $8.3 million in the same period last year. Cash generated from operations for six-months ended June 30, 2017 was $11.5 million compared to $23.1 million in the same period last year.
Cash and cash equivalents and short-term investments amounted to $49.0 million at June 30, 2017, compared to $107.7 million at December 31, 2016. The decrease is primarily attributable to $66.3 million spent on the acquisitions of IRD and VIZIYA, which was partially offset by cash generated from operations of $11.5 million in the six-month period.
The table below highlights financial performance for the Company’s Technology, Mobility and Factory segments. For detailed results and discussion related to these segments, please refer to the Management’s Discussion and Analysis (“MD&A”) document, which will be filed on Sedar and at www.quarterhill.com in the investor section.
| |
|
For the three months ended June 30, 2017 |
|
| |
|
Technology |
|
|
Mobility |
|
|
Factory |
|
|
Corporate |
|
|
Total |
|
| Revenues |
|
$ |
12,048 |
|
|
$ |
4,648 |
|
|
$ |
1,915 |
|
|
$ |
- |
|
|
$ |
18,611 |
|
| Cost of revenues (excluding depreciation and amortization)
|
|
|
6,368 |
|
|
|
2,752 |
|
|
|
401 |
|
|
|
- |
|
|
|
9,521 |
|
| |
|
|
5,680 |
|
|
|
1,896 |
|
|
|
1,514 |
|
|
|
- |
|
|
|
9,090 |
|
| Selling, general and administrative |
|
|
1,772 |
|
|
|
972 |
|
|
|
876 |
|
|
|
594 |
|
|
|
4,214 |
|
| Research and development |
|
|
- |
|
|
|
308 |
|
|
|
360 |
|
|
|
- |
|
|
|
668 |
|
| Depreciation of property, plant and equipment |
|
|
88 |
|
|
|
48 |
|
|
|
34 |
|
|
|
- |
|
|
|
170 |
|
| Amortization of intangibles |
|
|
5,321 |
|
|
|
236 |
|
|
|
471 |
|
|
|
- |
|
|
|
6,028 |
|
| Special charges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,294 |
|
|
|
1,294 |
|
| Results from operations |
|
|
(1,501 |
) |
|
|
332 |
|
|
|
(227 |
) |
|
|
(1,888 |
) |
|
|
(3,284 |
) |
| Finance income |
|
|
(173 |
) |
|
|
- |
|
|
|
- |
|
|
|
(61 |
) |
|
|
(234 |
) |
| Finance expense |
|
|
- |
|
|
|
11 |
|
|
|
3 |
|
|
|
- |
|
|
|
14 |
|
| Foreign exchange loss (gain) |
|
|
(100 |
) |
|
|
286 |
|
|
|
41 |
|
|
|
(653 |
) |
|
|
(426 |
) |
| Other expense (income) |
|
|
- |
|
|
|
(69 |
) |
|
|
- |
|
|
|
- |
|
|
|
(69 |
) |
| Income before taxes |
|
|
(1,228 |
) |
|
|
104 |
|
|
|
(271 |
) |
|
|
(1,174 |
) |
|
|
(2,569 |
) |
| Current income tax expense (recovery) |
|
|
691 |
|
|
|
101 |
|
|
|
39 |
|
|
|
- |
|
|
|
831 |
|
| Deferred income tax expense (recovery) |
|
|
(1,877 |
) |
|
|
(62 |
) |
|
|
(194 |
) |
|
|
(4,876 |
) |
|
|
(7,009 |
) |
| Income tax expense (recovery) |
|
|
(1,186 |
) |
|
|
39 |
|
|
|
(155 |
) |
|
|
(4,876 |
) |
|
|
(6,178 |
) |
| Net income (loss) |
|
$ |
(42 |
) |
|
$ |
65 |
|
|
$ |
(116 |
) |
|
$ |
3,702 |
|
|
$ |
3,609 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA |
|
|
3,934 |
|
|
|
810 |
|
|
|
520 |
|
|
|
(504 |
) |
|
|
4,760 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other reconciling items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of deleted deferred revenue |
|
|
- |
|
|
|
25 |
|
|
|
242 |
|
|
|
- |
|
|
|
267 |
|
| Increased costs from inventory step-up |
|
|
- |
|
|
|
137 |
|
|
|
- |
|
|
|
- |
|
|
|
137 |
|
| Stock based compensation |
|
|
26 |
|
|
|
32 |
|
|
|
- |
|
|
|
90 |
|
|
|
148 |
|
| |
|
For the six months ended June 30, 2017 |
|
| |
|
Technology |
|
|
Mobility |
|
|
Factory |
|
|
Corporate |
|
|
Total |
|
| Revenues |
|
$ |
19,626 |
|
|
$ |
4,648 |
|
|
$ |
1,915 |
|
|
$ |
- |
|
|
$ |
26,189 |
|
| Cost of revenues (excluding depreciation and amortization)
|
|
|
13,762 |
|
|
|
2,752 |
|
|
|
401 |
|
|
|
- |
|
|
|
16,915 |
|
| |
|
|
5,864 |
|
|
|
1,896 |
|
|
|
1,514 |
|
|
|
- |
|
|
|
9,274 |
|
| Selling, general and administrative |
|
|
4,174 |
|
|
|
972 |
|
|
|
876 |
|
|
|
594 |
|
|
|
6,616 |
|
| Research and development |
|
|
- |
|
|
|
308 |
|
|
|
360 |
|
|
|
- |
|
|
|
668 |
|
| Depreciation of property, plant and equipment |
|
|
179 |
|
|
|
48 |
|
|
|
34 |
|
|
|
- |
|
|
|
261 |
|
| Amortization of intangibles |
|
|
10,624 |
|
|
|
236 |
|
|
|
471 |
|
|
|
- |
|
|
|
11,331 |
|
| Special charges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,294 |
|
|
|
1,294 |
|
| Results from operations |
|
|
(9,113 |
) |
|
|
332 |
|
|
|
(227 |
) |
|
|
(1,888 |
) |
|
|
(10,896 |
) |
| Finance income |
|
|
(391 |
) |
|
|
- |
|
|
|
- |
|
|
|
(61 |
) |
|
|
(452 |
) |
| Finance expense |
|
|
- |
|
|
|
11 |
|
|
|
3 |
|
|
|
- |
|
|
|
14 |
|
| Foreign exchange loss (gain) |
|
|
(385 |
) |
|
|
286 |
|
|
|
41 |
|
|
|
(653 |
) |
|
|
(711 |
) |
| Other expense (income) |
|
|
- |
|
|
|
(69 |
) |
|
|
- |
|
|
|
- |
|
|
|
(69 |
) |
| Income before taxes |
|
|
(8,337 |
) |
|
|
104 |
|
|
|
(271 |
) |
|
|
(1,174 |
) |
|
|
(9,678 |
) |
| Current income tax expense (recovery) |
|
|
1,434 |
|
|
|
101 |
|
|
|
39 |
|
|
|
- |
|
|
|
1,574 |
|
| Deferred income tax expense (recovery) |
|
|
(2,500 |
) |
|
|
(62 |
) |
|
|
(194 |
) |
|
|
(4,876 |
) |
|
|
(7,632 |
) |
| Income tax expense (recovery) |
|
|
(1,066 |
) |
|
|
39 |
|
|
|
(155 |
) |
|
|
(4,876 |
) |
|
|
(6,058 |
) |
| Net income (loss) |
|
$ |
(7,271 |
) |
|
$ |
65 |
|
|
$ |
(116 |
) |
|
$ |
3,702 |
|
|
$ |
(3,620 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBITDA |
|
|
1,747 |
|
|
|
810 |
|
|
|
520 |
|
|
|
(504 |
) |
|
|
2,573 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other reconciling items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of deleted deferred revenue |
|
|
- |
|
|
|
25 |
|
|
|
242 |
|
|
|
- |
|
|
|
267 |
|
| Increased costs from inventory step-up |
|
|
- |
|
|
|
137 |
|
|
|
- |
|
|
|
- |
|
|
|
137 |
|
| Stock based compensation |
|
|
57 |
|
|
|
32 |
|
|
|
- |
|
|
|
90 |
|
|
|
179 |
|
Conference Call and Webcast
WiLAN will conduct a conference call to discuss its financial results today at 10:00 AM Eastern Time.
Call Information
The live audio webcast will be available at http://event.on24.com/wcc/r/1465983-1/476A2A33D8B4F83D6332197F41AF0594
- 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
A webcast of the call will be available at http://event.on24.com/wcc/r/1465983-1/476A2A33D8B4F83D6332197F41AF0594
A telephone replay will be available from 1:00 PM ET on August 10, 2017 until 11:59 PM ET on August 17, 2017 at: 1.855.859.2056 (Toll Free) or 1.416.849.0833 (International).
Conference ID #: 54032419
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 from continuing operations before: (i) income taxes; (ii) finance expense or income; (iii) amortization of intangibles; (iv) special charges; (v) depreciation of property, plant and equipment; (vi) effects of deleted deferred revenue; (vii) the effects of fair value step up in inventory acquired, and (viii) stock based compensation. 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. EBITDA SHOULD NOT BE INTERPRETED AS AN ALTERNATIVE TO NET EARNINGS AND CASH FLOWS FROM OPERATIONS AS DETERMINED IN ACCORDANCE WITH U.S. GAAP OR AS A MEASURE OF LIQUIDITY.
About Quarterhill
Quarterhill is a diversified investment holding company focused on growing its business by acquiring technology companies in the Industrial Internet of Things (“IIoT”) segment across multiple verticals. Quarterhill targets companies with a broad range of products and services that capture, analyze and interpret data, and that have strong financial performance, excellent management teams, strong intellectual property underpinnings and significant opportunities to develop long-term recurring and growing revenue streams. 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 its February 10, 2017 annual information form for the year ended December 31, 2016 (the “AIF”). Copies of the AIF may be obtained at www.sedar.com or www.sec.gov. 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.
For media and investor inquiries, please contact:
Shaun McEwan Dave Mason
Interim CEO Investor Relations
T: 613.688.4898 T: 613.688.1693
E: [email protected] E: [email protected]
Quarterhill Inc.
|
|
| Condensed Consolidated Interim Statements of Operations |
|
| (in thousands of United States dollars, except share and per share amounts) (unaudited) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the three months ended, |
|
|
For the six months ended, |
|
| |
|
June 30, 2017 |
|
|
June 30, 2016 |
|
|
June 30, 2017 |
|
|
June 30, 2016 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
$ |
18,611 |
|
|
$ |
15,961 |
|
|
$ |
26,189 |
|
|
$ |
46,121 |
|
| Cost of revenues (excluding depreciation and amortization) |
|
|
9,521 |
|
|
|
6,293 |
|
|
|
16,915 |
|
|
|
14,263 |
|
| |
|
|
9,090 |
|
|
|
9,668 |
|
|
|
9,274 |
|
|
|
31,858 |
|
| Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling, general and administrative |
|
|
4,214 |
|
|
|
2,646 |
|
|
|
6,616 |
|
|
|
5,186 |
|
| Research and development |
|
|
668 |
|
|
|
- |
|
|
|
668 |
|
|
|
- |
|
| Depreciation of property, plant and equipment |
|
|
170 |
|
|
|
106 |
|
|
|
261 |
|
|
|
213 |
|
| Amortization of intangibles |
|
|
6,028 |
|
|
|
9,850 |
|
|
|
11,331 |
|
|
|
19,872 |
|
| Special charges |
|
|
1,294 |
|
|
|
- |
|
|
|
1,294 |
|
|
|
- |
|
| |
|
|
12,374 |
|
|
|
12,602 |
|
|
|
20,170 |
|
|
|
25,271 |
|
| Results from operations |
|
|
(3,284 |
) |
|
|
(2,934 |
) |
|
|
(10,896 |
) |
|
|
6,587 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign exchange (gain) loss |
|
|
(426 |
) |
|
|
(114 |
) |
|
|
(711 |
) |
|
|
(277 |
) |
| Finance (income) |
|
|
(234 |
) |
|
|
(120 |
) |
|
|
(452 |
) |
|
|
(238 |
) |
| Finance expenses |
|
|
14 |
|
|
|
- |
|
|
|
14 |
|
|
|
- |
|
| Other expense (income) |
|
|
(69 |
) |
|
|
- |
|
|
|
(69 |
) |
|
|
- |
|
| Income before taxes |
|
|
(2,569 |
) |
|
|
(2,700 |
) |
|
|
(9,678 |
) |
|
|
7,102 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current income tax expense (recovery) |
|
|
831 |
|
|
|
837 |
|
|
|
1,574 |
|
|
|
3,860 |
|
| Deferred income tax expense (recovery) |
|
|
(7,009 |
) |
|
|
(385 |
) |
|
|
(7,632 |
) |
|
|
1,474 |
|
| Income tax expense (recovery) |
|
|
(6,178 |
) |
|
|
452 |
|
|
|
(6,058 |
) |
|
|
5,334 |
|
| Net income (loss) |
|
$ |
3,609 |
|
|
$ |
(3,152 |
) |
|
$ |
(3,620 |
) |
|
$ |
1,768 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and fully diluted |
|
$ |
0.03 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average number of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and fully diluted |
|
|
118,587,106 |
|
|
|
119,255,090 |
|
|
|
118,579,684 |
|
|
|
119,768,540 |
|
| Quarterhill Inc. |
|
| Supplemental Condensed Consolidated Interim Statement of Operations Information |
|
| (in thousands of United States dollars, except share and per share amounts) (unaudited) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the three months ended, |
|
|
For the six months ended, |
|
| |
|
June 30, 2017 |
|
|
June 30, 2016 |
|
|
June 30, 2017 |
|
|
June 30, 2016 |
|
| Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Licenses |
|
$ |
12,842 |
|
|
$ |
15,961 |
|
|
$ |
20,420 |
|
|
$ |
46,121 |
|
| Systems |
|
|
3,067 |
|
|
|
- |
|
|
|
3,067 |
|
|
|
- |
|
| Services |
|
|
714 |
|
|
|
- |
|
|
|
714 |
|
|
|
- |
|
| Recurring |
|
|
1,988 |
|
|
|
- |
|
|
|
1,988 |
|
|
|
- |
|
| Total Revenues |
|
$ |
18,611 |
|
|
$ |
15,961 |
|
|
$ |
26,189 |
|
|
$ |
46,121 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenues (excluding depreciation and amortization) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| License |
|
$ |
6,448 |
|
|
$ |
6,293 |
|
|
$ |
13,842 |
|
|
$ |
14,263 |
|
| Systems |
|
|
1,898 |
|
|
|
- |
|
|
|
1,898 |
|
|
|
- |
|
| Services |
|
|
321 |
|
|
|
- |
|
|
|
321 |
|
|
|
- |
|
| Recurring |
|
|
854 |
|
|
|
- |
|
|
|
854 |
|
|
|
- |
|
| Total cost of revenues |
|
$ |
9,521 |
|
|
$ |
6,293 |
|
|
$ |
16,915 |
|
|
$ |
14,263 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarterhill Inc. |
|
| Condensed Consolidated Interim Statements of Comprehensive Income |
|
| (in thousands of United States dollars, except share and per share amounts) (unaudited) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the three months ended, |
|
|
For the six months ended, |
|
| |
|
June 30, 2017 |
|
|
June 30, 2016 |
|
|
June 30, 2017 |
|
|
June 30, 2016 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
3,609 |
|
|
$ |
(3,152 |
) |
|
$ |
(3,620 |
) |
|
$ |
1,768 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Foreign currency translation adjustment |
|
|
533 |
|
|
|
- |
|
|
|
533 |
|
|
|
- |
|
| Comprehensive income |
|
$ |
4,142 |
|
|
$ |
(3,152 |
) |
|
$ |
(3,087 |
) |
|
$ |
1,768 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarterhill Inc. |
|
| Condensed Consolidated Interim Balance Sheets |
|
| (in thousands of United States dollars, except share and per share amounts) (unaudited) |
|
| As at |
|
June 30, 2017 |
|
|
December 31, 2016 |
|
| Current assets |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
44,315 |
|
|
$ |
106,553 |
|
| Short-term investments |
|
|
1,194 |
|
|
|
1,154 |
|
| Restricted Short-term investments |
|
|
3,500 |
|
|
|
- |
|
| Accounts receivable |
|
|
13,001 |
|
|
|
20,357 |
|
| Other current assets |
|
|
45 |
|
|
|
- |
|
| Unbilled revenue |
|
|
4,011 |
|
|
|
- |
|
| Income taxes receivable |
|
|
171 |
|
|
|
- |
|
| Inventories |
|
|
5,391 |
|
|
|
- |
|
| Loans receivable |
|
|
1,918 |
|
|
|
1,766 |
|
| Prepaid expenses and deposits |
|
|
4,013 |
|
|
|
1,293 |
|
| |
|
|
77,559 |
|
|
|
131,123 |
|
| Non-current assets |
|
|
|
|
|
|
|
|
| Property Plant and Equipment |
|
|
4,153 |
|
|
|
1,240 |
|
| Intangible assets |
|
|
152,126 |
|
|
|
123,351 |
|
| Investment in joint venture |
|
|
3,179 |
|
|
|
- |
|
| Deferred income tax assets |
|
|
22,591 |
|
|
|
14,646 |
|
| Goodwill |
|
|
41,123 |
|
|
|
12,623 |
|
| TOTAL ASSETS |
|
$ |
300,731 |
|
|
$ |
282,983 |
|
| |
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
| Bank indebtedness |
|
$ |
3,827 |
|
|
$ |
- |
|
| Accounts payable and accrued liabilities |
|
|
13,297 |
|
|
|
15,645 |
|
| Income taxes payable |
|
|
646 |
|
|
|
- |
|
| Current portion of patent finance obligation |
|
|
5,362 |
|
|
|
10,372 |
|
| Current portion of deferred revenue |
|
|
6,722 |
|
|
|
- |
|
| Current portion of long-term debt |
|
|
99 |
|
|
|
- |
|
| |
|
|
29,953 |
|
|
|
26,017 |
|
| Non-current liabilities |
|
|
|
|
|
|
|
|
| Acquisition notes payable |
|
|
6,450 |
|
|
|
- |
|
| Patent finance obligation |
|
|
15,195 |
|
|
|
12,775 |
|
| Success fee obligation |
|
|
- |
|
|
|
47 |
|
| Deferred revenue |
|
|
475 |
|
|
|
- |
|
| Long-term debt |
|
|
383 |
|
|
|
- |
|
| Deferred income tax liabilities |
|
|
9,124 |
|
|
|
- |
|
| TOTAL LIABILITIES |
|
|
61,580 |
|
|
|
38,839 |
|
| Shareholders’ equity |
|
|
|
|
|
|
|
|
| Capital stock |
|
|
418,838 |
|
|
|
419,485 |
|
| Additional paid-in capital |
|
|
22,005 |
|
|
|
21,036 |
|
| Accumulated other comprehensive income |
|
|
16,758 |
|
|
|
16,225 |
|
| Deficit |
|
|
(218,450 |
) |
|
|
(212,602 |
) |
| |
|
|
239,151 |
|
|
|
244,144 |
|
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
|
$ |
300,731 |
|
|
$ |
282,983 |
|
| |
|
|
|
|
|
|
|
|
| Quarterhill Inc. |
|
| Condensed Consolidated Interim Statements of Cash Flows |
|
| (in thousands of United States dollars, except share and per share amounts) (unaudited) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
For the six months ended, |
|
| |
|
|
|
|
|
June 30, 2017 |
|
|
June 30, 2016 |
|
| Cash generate from (used in): |
|
|
|
|
|
|
|
|
| Operations |
|
|
|
|
|
|
|
|
| Net earnings (loss) |
|
$ |
(3,620 |
) |
|
$ |
1,768 |
|
| Non-cash items |
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
179 |
|
|
|
154 |
|
| Depreciation and amortization |
|
|
11,592 |
|
|
|
20,086 |
|
| Foreign exchange (gain) loss |
|
|
(146 |
) |
|
|
(390 |
) |
| Earnings from joint venture |
|
|
(69 |
) |
|
|
- |
|
| Gain (Loss) on disposal of assets |
|
|
- |
|
|
|
13 |
|
| Deferred income tax expense (recovery) |
|
|
(7,632 |
) |
|
|
1,474 |
|
| Accrued investment income |
|
|
(150 |
) |
|
|
(128 |
) |
| Embedded Derivatives |
|
|
10 |
|
|
|
- |
|
| Changes in non-cash working capital balances |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
18,818 |
|
|
|
824 |
|
| Unbilled revenue |
|
|
862 |
|
|
|
- |
|
| Inventories |
|
|
686 |
|
|
|
- |
|
| Prepaid expenses and deposits |
|
|
(436 |
) |
|
|
140 |
|
| Deferred Revenue |
|
|
591 |
|
|
|
- |
|
| Payments associated with success fee obligation |
|
|
(492 |
) |
|
|
(1,732 |
) |
| Accounts payable and accrued liabilities |
|
|
(9,236 |
) |
|
|
853 |
|
| Income taxes payable |
|
|
525 |
|
|
|
- |
|
| Cash generated from operations |
|
|
11,482 |
|
|
|
23,062 |
|
| Financing |
|
|
|
|
|
|
|
|
| Dividends paid |
|
|
(2,228 |
) |
|
|
(2,242 |
) |
| Bank indebtedness |
|
|
1,523 |
|
|
|
- |
|
| Long Term debt |
|
|
(24 |
) |
|
|
- |
|
| Common shares repurchased under normal course issuer bid |
|
|
(552 |
) |
|
|
(3,123 |
) |
| Common shares issued for cash on the exercise of options |
|
|
- |
|
|
|
11 |
|
| Common shares issued for cash from Employee Share Purchase Plan |
|
|
33 |
|
|
|
35 |
|
| Cash used in financing |
|
|
(1,248 |
) |
|
|
(5,319 |
) |
| Investing |
|
|
|
|
|
|
|
|
| Acquisition of Viziya, net of cash acquired |
|
|
(18,521 |
) |
|
|
- |
|
| Acquisition of IRD, net of cash acquired |
|
|
(47,782 |
) |
|
|
- |
|
| Pruchase of short-term investment |
|
|
(3,500 |
) |
|
|
- |
|
| Purchase of property and equipment |
|
|
(114 |
) |
|
|
(39 |
) |
| Repayment of patent finance obligations |
|
|
(2,778 |
) |
|
|
(2,777 |
) |
| Purchase of intangibles |
|
|
(4 |
) |
|
|
(6,150 |
) |
| Cash used in investing |
|
|
(72,699 |
) |
|
|
(8,966 |
) |
| Foreign exchange loss (gain) on cash held in foreign currency |
|
|
227 |
|
|
|
310 |
|
| Net increase (decrease) in cash and cash equivalents |
|
|
(62,238 |
) |
|
|
9,087 |
|
| Cash and cash equivalents, beginning of period |
|
|
106,553 |
|
|
|
93,431 |
|
| Cash and cash equivalents, end of period |
|
$ |
44,315 |
|
|
$ |
102,518 |
|
| Quarterhill Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Condensed Consolidated Statements of Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands of United States dollars, except share and per share amounts) (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Capital Stock |
|
|
Additional paid in Capital |
|
|
Accumulated Other Comprehensive Income |
|
|
Deficit |
|
|
Equity |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance - December 31, 2015 |
|
$ |
427,781 |
|
|
$ |
16,549 |
|
|
$ |
16,225 |
|
|
$ |
(219,177 |
) |
|
$ |
241,378 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,768 |
|
|
|
1,768 |
|
| Other Comprehensive Income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Shares and options issued: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation expense |
|
|
- |
|
|
|
154 |
|
|
|
- |
|
|
|
- |
|
|
|
154 |
|
| Conversion of deferred stock units to common shares |
|
|
116 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
116 |
|
| Exercise of stock options |
|
|
17 |
|
|
|
(6 |
) |
|
|
- |
|
|
|
- |
|
|
|
11 |
|
| Sale of shares under Employee Share Purchase Plan |
|
|
35 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
35 |
|
| Shares repurchased under normal course issuer bid |
|
|
(6,274 |
) |
|
|
3,151 |
|
|
|
- |
|
|
|
- |
|
|
|
(3,123 |
) |
| Dividends declared |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,245 |
) |
|
|
(2,245 |
) |
| Balance - June 30, 2016 |
|
$ |
421,675 |
|
|
$ |
19,848 |
|
|
$ |
16,225 |
|
|
$ |
(219,654 |
) |
|
$ |
238,094 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance - December 31, 2016 |
|
|
419,485 |
|
|
|
21,036 |
|
|
|
16,225 |
|
|
|
(212,602 |
) |
|
|
244,144 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,620 |
) |
|
|
(3,620 |
) |
| Other Comprehensive Income |
|
|
- |
|
|
|
- |
|
|
|
533 |
|
|
|
- |
|
|
|
533 |
|
| Shares and options issued: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation expense |
|
|
- |
|
|
|
179 |
|
|
|
- |
|
|
|
- |
|
|
|
179 |
|
| Shares issued upon acquisition |
|
|
662 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
662 |
|
| Sale of shares under Employee Share Purchase Plan |
|
|
33 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33 |
|
| Shares repurchased under normal course issuer bid |
|
|
(1,342 |
) |
|
|
790 |
|
|
|
- |
|
|
|
- |
|
|
|
(552 |
) |
| Dividends declared |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,228 |
) |
|
|
(2,228 |
) |
| Balance - June 30, 2017 |
|
$ |
418,838 |
|
|
$ |
22,005 |
|
|
$ |
16,758 |
|
|
$ |
(218,450 |
) |
|
$ |
239,151 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quarterhill Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reconciliations of GAAP Net Income (Loss) to Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands of United States dollars, except share and per share amounts) (unaudited) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the three months ended, |
|
|
For the six months ended, |
|
| Adjusted EBITDA |
|
June 30, 2017 |
|
|
June 30, 2016 |
|
|
June 30, 2017 |
|
|
June 30, 2016 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income (Loss) |
|
$ |
3,609 |
|
|
$ |
(3,152 |
) |
|
$ |
(3,620 |
) |
|
$ |
1,768 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax expense |
|
|
(6,178 |
) |
|
|
452 |
|
|
|
(6,058 |
) |
|
|
5,334 |
|
| Foreign exchange (gain) loss |
|
|
(426 |
) |
|
|
(114 |
) |
|
|
(711 |
) |
|
|
(277 |
) |
| Finance expense |
|
|
14 |
|
|
|
- |
|
|
|
14 |
|
|
|
- |
|
| Finance (income) |
|
|
(234 |
) |
|
|
(120 |
) |
|
|
(452 |
) |
|
|
(238 |
) |
| Special charges |
|
|
1,294 |
|
|
|
- |
|
|
|
1,294 |
|
|
|
- |
|
| Amortization of intangibles |
|
|
6,028 |
|
|
|
9,850 |
|
|
|
11,331 |
|
|
|
19,872 |
|
| Depreciation of property, plant and equipment |
|
|
170 |
|
|
|
106 |
|
|
|
261 |
|
|
|
213 |
|
| Effect of deleted deferred revenue |
|
|
267 |
|
|
|
- |
|
|
|
267 |
|
|
|
- |
|
| Increased costs from inventory step-up |
|
|
137 |
|
|
|
- |
|
|
|
137 |
|
|
|
- |
|
| Stock based compensation |
|
|
148 |
|
|
|
- |
|
|
|
179 |
|
|
|
- |
|
| Other expense (income) |
|
|
(69 |
) |
|
|
- |
|
|
|
(69 |
) |
|
|
- |
|
| Adjusted EBITDA |
|
$ |
4,760 |
|
|
$ |
7,022 |
|
|
$ |
2,573 |
|
|
$ |
26,672 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the three months ended, |
|
|
For the six months ended, |
|
| Adjusted EBITDA per share |
|
June 30, 2017 |
|
|
June 30, 2016 |
|
|
June 30, 2017 |
|
|
June 30, 2016 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income (Loss) |
|
$ |
0.03 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax expense |
|
|
(0.05 |
) |
|
|
- |
|
|
|
(0.05 |
) |
|
|
0.04 |
|
| Foreign exchange |
|
|
- |
|
|
|
- |
|
|
|
(0.01 |
) |
|
|
- |
|
| Finance expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Finance income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Special charges |
|
|
0.01 |
|
|
|
- |
|
|
|
0.01 |
|
|
|
- |
|
| Amortization of intangibles |
|
|
0.05 |
|
|
|
0.08 |
|
|
|
0.10 |
|
|
|
0.17 |
|
| Depreciation of property, plant and equipment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Effect of deleted deferred revenue |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Increased costs from inventory step-up |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Stock based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Other expense (income) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Adjusted EBITDA per share |
|
$ |
0.04 |
|
|
$ |
0.06 |
|
|
$ |
0.02 |
|
|
$ |
0.22 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average number of Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
118,587,106 |
|
|
|
119,255,090 |
|
|
|
118,579,684 |
|
|
|
119,768,540 |
|
|
|
|
|
