Doug, you didn’t, did you? Dougie cuts target to $1.75. ITS headwinds persist as we await any WiLAN signals
Investment Recommendation
We are maintaining our HOLD rating on Quarterhill following third quarter results which reflected ongoing pressures on the ITS business and negligible WiLAN contributions. While ITS saw sequential improvement over Q2 and the backlog (US$0.5B+) remains healthy, delays and inflationary headwinds are expected to hold back near-term margin expansion as implementations pushed to the right eventually ramp up and transition to higher-margin maintenance work. The WiLAN strategic review process is still ongoing with no further updates provided. We have updated our forecast for a more conservative revenue and margin outlook for each of the businesses. On our lowered expectations and ongoing multiple compression facing in the ITS segment, our SotP-based target price is reduced to $1.75 (from $2.00).