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 |
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 |
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 |
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 |
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 Cash Flows
(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 |
Accumulated |
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 |
|||||||||