Quarterhill Inc T.QTRH

Add ons to ETC contracts

[ChiChi3]

Cabbie (or others), what is your view of the estimate given in the past on the add ons multiple for ETC contracts.  In past calls they`ve indicated 7-8 times the original contract value may be expected for future ad on revenue - so some of the $100 millioin contracts could be worth $700 or $800 million (albeit over perhaps 10+ years but still VERY material).  My concern is those multiple were given by those no longer with the firm (and perhaps let go partly because those estimates were too optimistic.  Do you have the same reservations and/or have you recently confirmed those multiples with management?  Cabblie, I know you were modeling a multiple in the 5x range in your projections.

Thanks,

Chi

[cabbieJBJ]

Chi, the 7x - 8x was based on ETC actual experience with contracts prior to the acquisition by QTRH.  It is a talked to factor within the industry, not just ETC/IRD/QTRH. I'm using 5x in my model, as you note. QTRH won't indicate a multiple number and will only say ~7.5x is the average. The low in the range was ~3.8x as I recall. That's why I am comfortable with 5x for now. It is

[ChiChi3]

Thanks for the confirmation and background Cabbie!  As always, much appreciated.  i just wish we could get the analysts to start having enough confidence to factor that into their models and share price targets. My assumption would be that they are only using the base contract value - they still imply a nice upside from here but if the add-ons were factored in, those forecasts would be

[cabbieJBJ]

Change in analyst sentiment is a slow process Chi. Look at the recent sale of Q-Free.  Analysts rationalize the EBITDA multiple by looking at Q-Free's next quarter projection (11x) versus the last 12 month actual (16x) as justification for holding QTRH's multiple at low double digit/high single didits. Greater clarity on the line of sight to profitability should come with the Q3

[Tsmith]

dont trust the anylsts  that backlog is revelent $500 million us dollars Are good anylst would have seen that for sure dont kid yourself.

[mrmoribund]

Can be a slow process. It can also be a surprisingly quick process. Sometimes a bit like a herd of sheep. They're all facing south, a twig snaps, and suddenly they're all running north in a panic. Look at the vast difference in the market's valuation of Rekor vs. Quarterhill. Rekor trades at around 7x sales vs. less than 1x for Quarterhill. Rekor is losing $$ hand over fist

[cabbieJBJ]

As you have historically stated mrmoribund, rightly so it would seem, show the money and they will come.  It could explode, as you have opined.  I'm banking on it. It looks like analysts need one or two more data points on priofitability, perhaps one on growth and/or a credible growth vision from the new CEO. PS - I still don't understand Rekor, although I did make a few bucks

[Socrates1]

and all the effort by MM or BROKER to elect ice bergs to keep it below $1.50 has nothing to to do with it? Not watching the tape? I hear your explonations and yes, that would usually work when the free market decides! This pig is on a leash! we will rally when they are flush and "the group" of honest brokers so interested in QTRH aggree..... LOL....

[cabbieJBJ]

Good morning Socrates.  The truth is out there... somewhere between your consipiracy theory hypothesis, mrmoribund's show profitability and they will find you and pollyanna me! :-) Stay strong. Happy Sunday.

[mrmoribund]

Rekor's seemingly nutty valuation can be explained by three things: (1) Not too long ago (2021) it was essentially a meme stock. Some people remember and cling to that way of valuing it. This is a cognitive fallacy in which history is overvalued. (2) Rekor's very high current rate of sales growth. My view is that investors are overextrapolating this growth in their projections--which