TORONTO, May 12, 2022 /PRNewswire/ - Quarterhill Inc. ("Quarterhill" or the "Company") (TSX: QTRH) (OTCQX: QTRHF), announces its financial results for the three-month period ended March 31, 2022. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.
Q1 Fiscal 2022 Highlights
- Consolidated Revenue was $168.5 million
- Consolidated Adjusted EBITDA1 was $79.1 million
- Cash, cash equivalents, and short-term investments were $60.2 million at March 31, 2022
- Working capital2 was $176.9 million at March 31, 2022
- ITS segment had significant new contract wins totaling approximately $75.0 million
- We appointed Rusty Lewis and Pamela Steer to the board in Q1 and subsequent to quarter end, appointed Kim Stevenson to the board
- WiLAN signed license agreements with Apple and Kyocera
- Stout hired as lead financial advisor for the WiLAN strategic review process
"Driven by strong results from WiLAN, our licensing segment, Quarterhill generated significant revenue and Adjusted EBITDA in Q1," said Bret Kidd, President and CEO at Quarterhill. "With a long history of generating cash flow, WiLAN's results in Q1 will further strengthen our balance sheet and add substantial capital resources to support our organic and M&A growth plans."
"The top-line for our ITS business was up significantly year-over-year led primarily by the addition of ETC, though revenue and margin results for the quarter were impacted by seasonality in the IRD business, the timing of the rollout for certain projects and inflationary pressures. Overall, our outlook for the year is unchanged at this time and remains favourable. We expect results to pick up in subsequent quarters as IRD moves into its seasonally stronger periods and as ITS implementation activity increases."
"On the cost front, we expect expenses to trend down this year as integration efforts are underway at both the corporate level and between IRD and ETC. The decline will be modest in 2022 as we still have three portfolio companies and are running the review process for WiLAN, but we expect deeper savings to come in 2023. The broader tailwinds in the ITS industry remain in place and with our significant financial resources, we believe we are well positioned to capitalize on the opportunities in our US$4.0 billion sales pipeline and to accelerate growth via M&A."
Approval of Eligible Dividend
The Board of Directors has declared an eligible quarterly dividend of $0.0125 per common share payable on July 8, 2022, to shareholders of record on June 17, 2022.
Q1 Fiscal 2022 Financial Review
Quarterhill's revenue is broadly segmented into ITS, reflecting the IRD and ETC businesses, and Licensing, reflecting the WiLAN business. ETC was acquired September 1, 2021 and as a result, the comparative financial statements for the three months ended March 31, 2021 do not include results from ETC.
Quarterhill's Management's Discussion and Analysis and financial statements for the three months ended March 31, 2022 ("Q1 2022") are available at the Company's website and at its profile at SEDAR.
Consolidated revenues for Q1 2022 were $168.5 million, compared to $19.3 million in Q1 2021. ITS revenue increased in Q1 2022 due to the acquistion of VDS Verkehrstechnik GmbH ("VDS") in April 2021 and ETC in September 2021. WiLAN's revenue increased significantly in Q1 2022 due to strong license activity in the quarter. The majority of WiLAN's licenses are generally 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.
Gross margin percent2 for Q1 2022 was 55% compared to 34% in Q1 2021. Gross margin increased in Q1 2022 due primarily to a number of agreements having been completed by the licensing business. Licensing gross margin rose significantly in the quarter to 63% compared to 25% in Q1 2021. Licensing gross margin will fluctuate depending primarily on the level of litigation and contingent legal and partner costs incurred in a respective period relative to revenue generated. Gross margin in the ITS segment was 28% in Q1 2022 compared to 40% in Q1 2021. ITS margins reflect the addition of the ETC business and may fluctuate on a quarterly basis depending primarily on the nature of projects underway during the period, their related margin profile and the timing for which associated costs and revenue are recognized.
Operating expenses include selling, general and administrative costs ("SG&A"), research and development costs ("R&D"), depreciation and amortization and other charges. Operating expenses for Q1 2022 were $21.8 million (13% of revenue) compared to $12.5 million (65% of revenue) in Q1 2021. Operating expenses have increased year-over-year due primarily to the addition of expenses from the ITS companies acquired in 2021 [as well as inflationary pressures on materials and personnel].
Consolidated Adjusted EBITDA1 for Q1 2022 was $79.1 million compared to negative $408 thousand in Q1 2021. Consolidated Adjusted EBITDA increased due primarily to strong Q1 2022 revenue generated by the licensing segment, offset in part by higher operating expenses. On a segment basis, in Q1 2022, the ITS business generated Adjusted EBITDA of $1.0 million and the licensing business generated Adjusted EBITDA of $81.0 million.
Net income before tax in Q1 2022 was $71.7 million and income tax expense was $14.8 million, of which $14.2 was deferred income tax expense and $0.6 million was current income tax expense. This compares to net loss before tax of $5.2 million and an income tax recovery of $0.9 million in Q1 2021. Q1 2022 net income was $56.9 million, or $0.50 per basic share and $0.44 per diluted share, compared to net loss of ($4.3) million, or ($0.04) per basic share and ($0.04) per diluted share in Q1 2021.
Cash used in operations for Q1 2022 was ($9.2) million compared to ($5.9) million in Q1 2021. Cash and cash equivalents and short-term investments were $60.2 million at March 31, 2022, compared to $72.6 million at December 31, 2021. Working capital at March 31, 2022, was $176.9 million compared to $105.1 million at December 31, 2021. A significant portion of the accounts receivable outstanding at March 31, 2022, were collected subsequent to quarter-end.
Conference Call and Webcast
Quarterhill will host a conference call to discuss its financial results today at 10:00 AM Eastern Time.
Webcast Information
The live audio webcast will be available at:
https://produceredition.webcasts.com/starthere.jsp?ei=1544749&tp_key=0b55de646a
Dial-in Information
- To access the call from Canada and U.S., dial 1.888.664.6392 (Toll Free)
- To access the call from other locations, dial 1.416.764.8659 (International)
Replay Information
Webcast replay will be available for 365 days at:
https://produceredition.webcasts.com/starthere.jsp?ei=1544749&tp_key=0b55de646a
Telephone replay will be available until 11:59 p.m. Eastern Daylight Time on May 19, 2022 at: 1.888.390.0541 (Toll Free North America) or 1.416.764.8677 (International).The telephone replay requires the passcode 185837.
Non-IFRS Financial Measur