A little rain on the "Roadmap" paradeI love the Quarterhill story and I think the stock is likely moving higher. But people should remember that the sceptics are not without an argument.
Quarterhill has a history of being top-heavy in terms of fixed costs. Note that in 2020, even with the Viziya sale and the big Intel settlement, the company's return on equity was less than 7%. One might have thought that, including those 2 huge paydays we would have had ROE of 20% plus. Not even close.
Of course part of what held down the ROE was the huge cash holding--which was providing a return that would fit under a microscope. And the cash holding now looks to have been prudently deployed.
That said, in a way Quarterhill is currently looking as top-heavy as ever. For example, this little company currently has five CEOs. All great people I'm sure but it highlights the obvious detail that if this company is going to become reliably profitable it is going to have to get a LOT bigger. Most companies would be thrilled to have, say, 20% per annum sales growth. Quarterhill is going to have to do vastly better than that if it doesn't want to be struggling for years. My feeling would be that they really want to be at $500 million plus in sales within 3-4 years.
And I think ETC might really help them get there. But I understand how some people have a hard time totally buying into the story.
Additionally, one should bear in mind that while ITS is tech, it is also construction. That can mean big up-and-down cycles. The industry was riding high in 2016-17 and then, for many companies in the industry, including IRD, sales pretty much fell off a cliff. Something like that will happen again some day though, I admit, given the whole smart city movement, it might be many years away.
If / when the shares move above $3 I will NOT be using my newly-acquired margin space to buy even more shares, all driven by debt.
I'm sure my bank loves me but I would prefer not to give them an opportunity to skin me alive if some "surprise" were to drag the stock back down below $3. They are, after all, a bank.