Record revenue and Adjusted EBITDA driven by patent license business

OTTAWA, Nov. 9, 2017 /PRNewswire/ - Quarterhill Inc. ("Quarterhill" or the "Company") (TSX:QTRH) (NASDAQ:QTRH), announces its financial results for the three and nine month periods ended September 30, 2017. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

Third Quarter Highlights

• Revenue of $85.9 million, exceeding the high-end of the expected $72.5 to $82.5 million range previously provided
• Adjusted EBITDA* of $60.6 million, exceeding the high-end of the expected $50.0 to $56.0 million range previously provided
• Net income of $26.2 million, or $0.22 per share
• Announced a new comprehensive license agreement with Samsung, in the Technology segment
• Acquired a portfolio of patents in the Technology segment using the partner model; patents are related to Content Delivery Network technology
• Announced three contracts collectively valued at more than $10.0 million, in the Mobility segment
• Acquired iCOMS Detections S.A. ("iCOMS"), based in Belgium, in the Mobility segment

"Our strong performance in Q3 reflects a significant contribution from WiLAN, our patent license business," said Shaun McEwan, Interim CEO of Quarterhill. "Patent licensing tends to generate variable quarterly performance and Q3 clearly demonstrates the upside that can occur from that type of business model. The significant cash flow that will be generated from our Q3 performance will help to support Quarterhill's growth initiatives."

Approval of Eligible Dividend
The Board of Directors has declared an eligible quarterly dividend of CDN $0.0125 per common share payable on January 5, 2018, to shareholders of record on December 15, 2017.

Business Strategy and Segments
Quarterhill is developing a portfolio of established businesses that have histories of generating cash flows from their operations in the "Technology", "Mobility", "Factory" and "City" segments of the Industrial "Internet-of-Things" market. As of September 30, 2017, the Company had investments in three of its four targeted segments: Technology (WiLAN); Mobility (IRD); and Factory (VIZIYA).

Quarterhill is working to build a consistently profitable company with a diversified investment base and global market presence within its segments, and 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.

Q3 and Year-to-Date 2017 Consolidated Financial Review
Quarterhill's consolidated financial results for Q3 2017 include full quarter contributions from each of its wholly owned subsidiaries; Wi-LAN Inc. ("WiLAN"), International Road Dynamics Inc. ("IRD") and VIZIYA Corp ("VIZIYA"). 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 September 30, 2017 were $85.9 million, compared to $16.6 million in the same period last year, which represents an increase of 417%. The increase was primarily due to strong patent licensing results from WiLAN and the inclusion of a full quarter of operations from IRD and VIZIYA. Consolidated revenues for the nine months ended September 30, 2017 were $112.1 million, compared to $62.7 million in the same period last year.

Gross margin for the three months ended September 30, 2017 was $67.5 million, or 78.6%, compared to $11.2 million, or 67.5%, in the same period last year. Gross margin for the nine months ended September 30, 2017 was $76.7 million, or 68.5%, compared to $43.0 million, or 68.6%, in the same period last year. Gross margins for the three and nine month periods ended September 30, 2017 reflect contribution across all three segments, compared to the same periods last year, which reflect only the operations of what is now the Company's Technology segment.

Operating expenses include selling, general and administrative costs, research and development costs, depreciation, amortization, loss on disposal of intangible asset, and special charges. Operating expenses for the three months ended September 30, 2017 were $31.3 million, compared to $8.7 million in the same period last year. Operating expenses for the nine months ended September 30, 2017 were $51.5 million compared to $33.9 million in the same period last year. Operating expenses increased in the year-over year periods due to the addition of the IRD and VIZIYA operations, acquisition-related costs associated with the purchases of IRD and VIZIYA, and a $15.2 million non-cash charge in Q3 2017 related to a loss on disposal of an intangible asset.

Adjusted EBITDA for the three months ended September 30, 2017 was $60.6 million, or $0.50 per basic Common Share, compared to $9.4 million, or $0.09 per basic Common Share, in the same period last year. For the nine months ended September 30, 2017, Adjusted EBITDA was $63.1 million, or $0.55 per basic Common Share, compared to $36.2 million, or $0.30 per basic Common Share, in the same period last year. The year-over-year increase in Adjusted EBITDA is primarily due to strong performance in the patent license business in Q3 2017 and the inclusion of operations from the businesses acquired earlier in 2017.

Net income for the three months ended September 30, 2017 was $26.2 million, or $0.22 per basic and diluted Common Share, compared to net income of $0.7 million, or $0.01 per basic and diluted Common Share, in the same period last year. For the nine months ended September 30, 2017, net income was $22.6 million, or $0.19 per basic and diluted Common Share, compared to net income of $2.4 million, or $0.02 per basic and diluted Common Share, in the same period last year. As described above, the year-over-year increase in net income is primarily due to strong performance in the patent license business in Q3 2017 and the inclusion of operations from the businesses acquired in 2017.

Cash generated from operations for the three months ended September 30, 2017 was $9.3 million, compared to $6.2 million in the same period last year. Cash generated from operations for the nine months ended September 30, 2017 was $20.8 million compared to $29.3 million in the same period last year. Cash from operations was negatively impacted in Q3 2017 due to a significant increase in accounts receivable, of which the related amount was collected in full subsequent to quarter-end.

Cash and cash equivalents and short-term investments amounted to $40.6 million at September 30, 2017, compared to $107.7 million at December 31, 2016. The decrease is primarily attributable to $67.4 million spent on the acquisitions of IRD, VIZIYA and iCOMS, and $18.2 million spent on the repayment of patent finance obligations, which were partially offset by cash generated from operations of $20.8 million in the nine 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 document, which will be filed on SEDAR and at www.quarterhill.com in the investor section.

 

 

Conference Call and Webcast
Quarterhill will host 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/1527032-1/438BD0AD28382873CEDA2B344C7CFB3C  

• 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/1527032-1/438BD0AD28382873CEDA2B344C7CFB3C  

• A telephone replay will be available from 1:00 PM ET on November 9, 2017 until 11:59 PM ET on November 16, 2017 at: 1.855.859.2056 (Toll Free) or 1.416.849.0833 (International).
• Conference ID #: 99524733

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 and other one-time expenses; (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. ADJUSTED 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 segment across multiple segments. 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 each of its February 10, 2017 annual information form for the year ended December 31, 2016 (the "AIF") and its August 9, 2017 Management's Discussion and Analysis of Financial Condition and Results of Operations for the 3 and 6 months ended June 30, 2017 and 2016 (the "Q2 MD&A"). Copies of the AIF and the Q2 MD&A 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.

 

 

 

 

 

 

 

 

 

 

SOURCE Quarterhill Inc.

For media and investor inquiries, please contact: Shaun McEwan, Interim CEO, T: 613.688.4898, E: [email protected]; Dave Mason, Investor Relations, T: 613.688.1693, E: [email protected]