Quarterhill Inc T.QTRH

REKR pays $15M for ITS firm that makes $1M EBITDA/qtr

[v_guerriero]

This puts things into perspective.

Rekor just buys an ITS company for $15M, for a business that generates the same EBITDA of IRD/ETC combined.  They paid a 5X multiple.  

Rekor market cap declines $12M on the news of the acquisition.  A great time time to be in ITS!

So if now there is an external multiple of 5X for an ITS transaction, how can they not write down the ETC goodwill?

[mrmoribund]

And as for Southern Traffic Services (now being acquired by Rekor)? It's big enough that Quarterhill must have been aware of the opportunity. If Quarterhill didn't want it at a price marginally higher than Rekor is paying (which they presumably didn't) . . . well . . . I'd think they had their reasons. So, VG, since you believe in the 5x multiple for Southern Traffic Services . .

[Capharnaum]

I just think that Souther Traffic Services is not the kind of company that they want to add. Also, never really looked at REKR but their financials look bleak. Good for them to have doubled their annual revenues for 14% of their market cap value. However, this leaves them without cash and they're burning like $10M in cash per quarter. Even if you add the $1M in EBITDA from their acquisition

[mrmoribund]

Oh my goodness. VG, if you want to talk about Rekor as a disaster then for sure I'm 100% with you. It is far exceeding any of my expectations as to how quickly it could turn into a total train wreck. Q1 G&A expenses at more than 2x revenue. And that's not even including Selling & marketing OR R&D. And while recurring revenue year-over-year was up--when you net that out you

[cabbieJBJ]

Rekor is the build it and they will come model.  It has spent heavily developing its technology and will probably benefit from the Biden infrastructure money, once it is in the hand of the governments.  Unlike ETC whose customers are state or multi-state or larger entities, Rekor (like Iteris) appears to be mostly local. Neither Iteris nor Rekor generate revenue for their customers

[mrmoribund]

"mrmoribund, I too see shades of Canaccord in the Riley comment." Well, yes, though when you look at it that way it puts Canaccord in a much more favourable light. Canaccord was part of the QTRH.DB financing last fall. The fact that they reduced their recommendation to HOLD suggests that they really are trying to do what's best for their own investing clients. I've expressed

[checkup]

Canaccord is not a reliable source of information for QTRH.  They come by their nickname, Canaccrap, honestly.

[v_guerriero]

Rekor and Itiris are important as they were part of the justification of the acquisition model in ITS and then getting a higher multiple.  They were used to justify overpaying for ETC because of big growth in the industry, then they should be used as a proxy for when things are not going well.  Where is the 15% annual growth when sales just declined by 20%? ITS transactions are going

[cabbieJBJ]

The downside scenario is always in play as is the upside scenario.  The real question is, "Which is more probable?"

[v_guerriero]

With Apple out of the way. All that is left is the Q2 results that will show a negative WiLan print and a $1M ITS EBITDA print.  The company will not organically generate any cash with the standalone businesses.   All that is left is a stout IP Hail Mary or a transformational acquisition that will create immense noise in the income statement that will confuse shareholders for 12

[cabbieJBJ]

Based on prior commentary, I expect Q2-22 ITS revenue between $48M - $50M and EBIDTA between $4.3M - $4.5M. I also expect a tuck-in of substance, delivering higher margin, and largely accretive from the get go.

[v_guerriero]

Margins are not going to bounce back like that.   ETC and IRD are small firms with no buying power.  They have fixed price contracts and are going to see margins squeezed.  If powerful and large firms like Walmart and Target margins are collapsing, there is no way that two bit companies can blunt a low-growth, inflationary environment. This will expose that these are product

[moneyguy87]

If it's that bad VG - why don't you just leave? Your sticking around and posting endlessly suggests you are not on the up and up. Cheers