Record revenue and Adjusted EBITDA driven
by patent license business
OTTAWA, Nov. 9, 2017 /CNW/ - Quarterhill Inc.
("Quarterhill" or the "Company") (TSX:QTRH) (NASDAQ:QTRH),
announces its financial results for the three and nine month
periods ended September 30, 2017. All
financial information in this press release is reported in U.S.
dollars, unless otherwise indicated.
Third Quarter Highlights
- Revenue of $85.9 million,
exceeding the high-end of the expected $72.5
to $82.5 million range previously provided
- Adjusted EBITDA* of $60.6
million, exceeding the high-end of the expected $50.0 to $56.0 million range previously
provided
- Net income of $26.2 million, or
$0.22 per share
- Announced a new comprehensive license agreement with Samsung,
in the Technology segment
- Acquired a portfolio of patents in the Technology segment using
the partner model; patents are related to Content Delivery Network
technology
- Announced three contracts collectively valued at more than
$10.0 million, in the Mobility
segment
- Acquired iCOMS Detections S.A. ("iCOMS"), based in Belgium, in the Mobility segment
"Our strong performance in Q3 reflects a significant
contribution from WiLAN, our patent license business," said
Shaun McEwan, Interim CEO of
Quarterhill. "Patent licensing tends to generate variable quarterly
performance and Q3 clearly demonstrates the upside that can occur
from that type of business model. The significant cash flow that
will be generated from our Q3 performance will help to support
Quarterhill's growth initiatives."
Approval of Eligible Dividend
The Board of Directors
has declared an eligible quarterly dividend of CDN $0.0125 per common share payable on January 5, 2018, to shareholders of record on
December 15, 2017.
Business Strategy and Segments
Quarterhill is
developing a portfolio of established businesses that have
histories of generating cash flows from their operations in the
"Technology", "Mobility", "Factory" and "City" segments of the
Industrial "Internet-of-Things" market. As of September 30, 2017, the Company had investments
in three of its four targeted segments: Technology (WiLAN);
Mobility (IRD); and Factory (VIZIYA).
Quarterhill is working to build a consistently profitable
company with a diversified investment base and global market
presence within its segments, and to increase shareholder value by
emphasizing the importance of recurring revenue streams and the
predictability of operating results. The Company intends to achieve
these objectives through a combination of organic growth and
acquisitions.
Q3 and Year-to-Date 2017 Consolidated Financial
Review
Quarterhill's consolidated financial results for Q3
2017 include full quarter contributions from each of its wholly
owned subsidiaries; Wi-LAN Inc. ("WiLAN"), International Road
Dynamics Inc. ("IRD") and VIZIYA Corp ("VIZIYA"). The 2016
comparative period information presented represents solely WiLAN's
results for the specified period. Certain comparative information
has been restated to conform to the new basis of presentation.
Consolidated revenues for the three months ended September 30, 2017 were $85.9 million, compared to $16.6 million in the same period last year, which
represents an increase of 417%. The increase was primarily due to
strong patent licensing results from WiLAN and the inclusion of a
full quarter of operations from IRD and VIZIYA.
Consolidated revenues for the nine months ended September 30, 2017 were $112.1 million, compared to $62.7 million in the same period last year.
Gross margin for the three months ended September 30, 2017 was $67.5 million, or 78.6%, compared to $11.2 million, or 67.5%, in the same period last
year. Gross margin for the nine months ended September 30, 2017 was $76.7 million, or 68.5%, compared to $43.0 million, or 68.6%, in the same period last
year. Gross margins for the three and nine month periods ended
September 30, 2017 reflect
contribution across all three segments, compared to the same
periods last year, which reflect only the operations of what is now
the Company's Technology segment.
Operating expenses include selling, general and administrative
costs, research and development costs, depreciation, amortization,
loss on disposal of intangible asset, and special charges.
Operating expenses for the three months ended September 30, 2017 were $31.3 million, compared to $8.7 million in the same period last year.
Operating expenses for the nine months ended September 30, 2017 were $51.5 million compared to $33.9 million in the same period last year.
Operating expenses increased in the year-over year periods due to
the addition of the IRD and VIZIYA operations, acquisition-related
costs associated with the purchases of IRD and VIZIYA, and a
$15.2 million non-cash charge in Q3
2017 related to a loss on disposal of an intangible asset.
Adjusted EBITDA for the three months ended September 30, 2017 was $60.6 million, or $0.50 per basic Common Share, compared to
$9.4 million, or $0.09 per basic Common Share, in the same period
last year. For the nine months ended September 30, 2017, Adjusted EBITDA was
$63.1 million, or $0.55 per basic Common Share, compared to
$36.2 million, or $0.30 per basic Common Share, in the same period
last year. The year-over-year increase in Adjusted EBITDA is
primarily due to strong performance in the patent license business
in Q3 2017 and the inclusion of operations from the businesses
acquired earlier in 2017.
Net income for the three months ended September 30, 2017 was $26.2 million, or $0.22 per basic and diluted Common Share,
compared to net income of $0.7
million, or $0.01 per basic
and diluted Common Share, in the same period last year. For the
nine months ended September 30, 2017,
net income was $22.6 million, or
$0.19 per basic and diluted Common
Share, compared to net income of $2.4
million, or $0.02 per basic
and diluted Common Share, in the same period last year. As
described above, the year-over-year increase in net income is
primarily due to strong performance in the patent license business
in Q3 2017 and the inclusion of operations from the businesses
acquired in 2017.
Cash generated from operations for the three months ended
September 30, 2017 was $9.3 million, compared to $6.2 million in the same period last year. Cash
generated from operations for the nine months ended September 30, 2017 was $20.8 million compared to $29.3 million in the same period last year. Cash
from operations was negatively impacted in Q3 2017 due to a
significant increase in accounts receivable, of which the related
amount was collected in full subsequent to quarter-end.
Cash and cash equivalents and short-term investments amounted to
$40.6 million at September 30, 2017, compared to $107.7 million at December
31, 2016. The decrease is primarily attributable to
$67.4 million spent on the
acquisitions of IRD, VIZIYA and iCOMS, and $18.2 million spent on the repayment of patent
finance obligations, which were partially offset by cash generated
from operations of $20.8 million in
the nine month period.
The table below highlights financial performance for the
Company's Technology, Mobility and Factory segments. For detailed
results and discussion related to these segments, please refer to
the Management's Discussion and Analysis document, which will be
filed on SEDAR and at www.quarterhill.com in the investor
section.
|
For the three months
ended September 30, 2017
|
|
Technology
|
Mobility
|
Factory
|
Corporate
|
Total
|
Revenues
|
$
|
72,592
|
$
|
11,555
|
$
|
1,750
|
$
|
-
|
$
|
85,897
|
Cost of revenues
(excluding depreciation and amortization)
|
|
9,882
|
|
8,048
|
|
495
|
|
-
|
|
18,425
|
|
|
62,710
|
|
3,507
|
|
1,255
|
|
-
|
|
67,472
|
Selling, general and
administrative
|
|
1,310
|
|
2,530
|
|
905
|
|
1,756
|
|
6,501
|
Research and
development
|
|
-
|
|
853
|
|
639
|
|
-
|
|
1,492
|
Depreciation of
property, plant and equipment
|
|
82
|
|
445
|
|
28
|
|
1
|
|
556
|
Amortization of
intangibles
|
|
5,473
|
|
1,072
|
|
791
|
|
-
|
|
7,336
|
Loss on disposal of
intangibles
|
|
15,190
|
|
-
|
|
-
|
|
-
|
|
15,190
|
Special
charges
|
|
-
|
|
-
|
|
-
|
|
218
|
|
218
|
Results from
operations
|
|
40,655
|
|
(1,393)
|
|
(1,108)
|
|
(1,975)
|
|
36,179
|
Finance
income
|
|
(76)
|
|
(1)
|
|
-
|
|
(16)
|
|
(93)
|
Finance
expense
|
|
926
|
|
43
|
|
3
|
|
(2)
|
|
970
|
Foreign exchange loss
(gain)
|
|
(131)
|
|
409
|
|
2
|
|
(41)
|
|
239
|
Other expense
(income)
|
|
-
|
|
(231)
|
|
-
|
|
-
|
|
(231)
|
Income (loss) before
taxes
|
|
39,936
|
|
(1,613)
|
|
(1,113)
|
|
(1,916)
|
|
35,294
|
Current income tax
expense (recovery)
|
|
5,082
|
|
232
|
|
(5)
|
|
-
|
|
5,309
|
Deferred income tax
expense (recovery)
|
|
(5,369)
|
|
(858)
|
|
(291)
|
|
10,292
|
|
3,774
|
Income tax expense
(recovery)
|
|
(287)
|
|
(626)
|
|
(296)
|
|
10,292
|
|
9,083
|
Net income
(loss)
|
$
|
40,223
|
$
|
(987)
|
$
|
(817)
|
$
|
(12,208)
|
$
|
26,211
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
61,400
|
|
707
|
|
3
|
|
(1,550)
|
|
60,560
|
|
|
|
|
|
|
|
|
|
|
|
Other reconciling
items:
|
|
|
|
|
|
|
|
|
|
|
Effect of deleted
deferred revenue
|
|
-
|
|
82
|
|
292
|
|
-
|
|
374
|
Increased costs from
inventory step-up
|
|
-
|
|
444
|
|
-
|
|
-
|
|
444
|
Stock based
compensation
|
|
-
|
|
67
|
|
-
|
|
206
|
|
273
|
Effect of deleted
prepaid expense
|
|
-
|
|
(10)
|
|
-
|
|
-
|
|
(10)
|
|
For the nine months
ended September 30, 2017
|
|
Technology
|
Mobility
|
Factory
|
Corporate
|
Total
|
Revenues
|
$
|
92,218
|
$
|
16,203
|
$
|
3,665
|
$
|
-
|
$
|
112,086
|
Cost of revenues
(excluding depreciation and amortization)
|
|
23,644
|
|
10,800
|
|
896
|
|
-
|
|
35,340
|
|
|
68,574
|
|
5,403
|
|
2,769
|
|
-
|
|
76,746
|
Selling, general and
administrative
|
|
5,484
|
|
3,502
|
|
1,781
|
|
2,350
|
|
13,117
|
Research and
development
|
|
-
|
|
1,161
|
|
999
|
|
-
|
|
2,160
|
Depreciation of
property, plant and equipment
|
|
261
|
|
493
|
|
62
|
|
1
|
|
817
|
Amortization of
intangibles
|
|
16,097
|
|
1,308
|
|
1,262
|
|
-
|
|
18,667
|
Loss on disposal of
intangibles
|
|
15,190
|
|
-
|
|
-
|
|
-
|
|
15,190
|
Special
charges
|
|
-
|
|
-
|
|
-
|
|
1,512
|
|
1,512
|
Results from
operations
|
|
31,542
|
|
(1,061)
|
|
(1,335)
|
|
(3,863)
|
|
25,283
|
Finance
income
|
|
(467)
|
|
(1)
|
|
-
|
|
(77)
|
|
(545)
|
Finance
expense
|
|
926
|
|
54
|
|
6
|
|
(2)
|
|
984
|
Foreign exchange loss
(gain)
|
|
(516)
|
|
695
|
|
43
|
|
(694)
|
|
(472)
|
Other expense
(income)
|
|
-
|
|
(300)
|
|
-
|
|
-
|
|
(300)
|
Income (loss) before
taxes
|
|
31,599
|
|
(1,509)
|
|
(1,384)
|
|
(3,090)
|
|
25,616
|
Current income tax
expense
|
|
6,516
|
|
333
|
|
34
|
|
-
|
|
6,883
|
Deferred income tax
expense (recovery)
|
|
(7,869)
|
|
(920)
|
|
(485)
|
|
5,416
|
|
(3,858)
|
Income tax expense
(recovery)
|
|
(1,353)
|
|
(587)
|
|
(451)
|
|
5,416
|
|
3,025
|
Net income
(loss)
|
$
|
32,952
|
$
|
(922)
|
$
|
(933)
|
$
|
(8,506)
|
$
|
22,591
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
63,147
|
|
1,517
|
|
523
|
|
(2,054)
|
|
63,133
|
|
|
|
|
|
|
|
|
|
|
|
Other reconciling
items:
|
|
|
|
|
|
|
|
|
|
|
Effect of deleted
deferred revenue
|
|
-
|
|
107
|
|
534
|
|
-
|
|
641
|
Increased costs from
inventory step-up
|
|
-
|
|
581
|
|
-
|
|
-
|
|
581
|
Stock based
compensation
|
|
57
|
|
99
|
|
-
|
|
296
|
|
452
|
Effect of deleted
prepaid expense
|
|
-
|
|
(10)
|
|
-
|
|
-
|
|
(10)
|
Conference Call and Webcast
Quarterhill will host a
conference call to discuss its financial results today at
10:00 AM Eastern Time.
Call Information
The live audio webcast will be
available at
http://event.on24.com/wcc/r/1527032-1/438BD0AD28382873CEDA2B344C7CFB3C
- To access the call from Canada
and U.S., dial 1.888.231.8191 (Toll Free)
- To access the call from other locations, dial 1.647.427.7450
(International)
Replay Information
A webcast of the call will be available at
http://event.on24.com/wcc/r/1527032-1/438BD0AD28382873CEDA2B344C7CFB3C
- A telephone replay will be available from 1:00 PM ET on November 9,
2017 until 11:59 PM ET on
November 16, 2017 at: 1.855.859.2056
(Toll Free) or 1.416.849.0833 (International).
- Conference ID #: 99524733
Non-GAAP Disclosure*
Quarterhill follows U.S. GAAP in preparing its interim and
annual financial statements. We use the term "Adjusted EBITDA" to
mean net income from continuing operations before: (i) income
taxes; (ii) finance expense or income; (iii) amortization of
intangibles; (iv) special charges and other one-time expenses; (v)
depreciation of property, plant and equipment; (vi) effects of
deleted deferred revenue; (vii) the effects of fair value step up
in inventory acquired, and (viii) stock based compensation.
Adjusted EBITDA is used by Quarterhill management to assess our
normalized cash generated on a consolidated basis and in our
operating segments. Adjusted EBITDA is also a performance measure
that may be used by investors to analyze the cash generated by
Quarterhill and our operating segments. ADJUSTED EBITDA IS NOT A
MEASURE OF FINANCIAL PERFORMANCE UNDER U.S. GAAP. IT DOES NOT HAVE
ANY STANDARDIZED MEANING PRESCRIBED BY U.S. GAAP AND IS THEREFORE
UNLIKELY TO BE COMPARABLE TO SIMILARLY TITLED MEASURES USED BY
OTHER COMPANIES. ADJUSTED EBITDA SHOULD NOT BE INTERPRETED AS AN
ALTERNATIVE TO NET EARNINGS AND CASH FLOWS FROM OPERATIONS AS
DETERMINED IN ACCORDANCE WITH U.S. GAAP OR AS A MEASURE OF
LIQUIDITY.
About Quarterhill
Quarterhill is a diversified
investment holding company focused on growing its business by
acquiring technology companies in the Industrial Internet of Things
segment across multiple segments. Quarterhill targets companies
with a broad range of products and services that capture, analyze
and interpret data, and that have strong financial performance,
excellent management teams, strong intellectual property
underpinnings and significant opportunities to develop long-term
recurring and growing revenue streams. Quarterhill is listed on the
TSX and NASDAQ under the symbol QTRH. For more information:
www.quarterhill.com.
Forward-looking Information
This news release contains
forward-looking statements and forward-looking information within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995 and other United States and
Canadian securities laws. Forward-looking statements and
forward-looking information are based on estimates and assumptions
made by Quarterhill in light of its experience and its perception
of historical trends, current conditions, expected future
developments and the expected effects of new business strategies,
as well as other factors that Quarterhill believes are appropriate
in the circumstances. Many factors could cause Quarterhill's actual
performance or achievements to differ materially from those
expressed or implied by the forward-looking statements or
forward-looking information. Such factors include, without
limitation, the risks described in each of its February 10, 2017 annual information form for the
year ended December 31, 2016 (the
"AIF") and its August 9, 2017
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the 3 and 6 months ended June 30, 2017 and 2016 (the "Q2 MD&A").
Copies of the AIF and the Q2 MD&A may be obtained at
www.sedar.com or www.sec.gov. Quarterhill recommends that readers
review and consider all of these risk factors and notes that
readers should not place undue reliance on any of Quarterhill's
forward-looking statements. Quarterhill has no intention, and
undertakes no obligation, to update or revise any forward-looking
statements or forward-looking information, whether as a result of
new information, future events or otherwise, except as required by
law.
All trademarks and brands mentioned in this release are the
property of their respective owners.
Quarterhill
Inc.
|
Condensed
Consolidated Interim Statements of Operations
|
(in thousands of
United States dollars, except share and per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended,
|
|
|
For the nine months
ended,
|
|
|
September 30,
2017
|
|
September 30,
2016
|
|
September 30,
2017
|
|
September 30,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
85,897
|
|
$
|
16,569
|
|
$
|
112,086
|
|
$
|
62,690
|
Cost of revenues
(excluding depreciation and amortization)
|
|
18,425
|
|
|
5,398
|
|
|
35,340
|
|
|
19,661
|
|
|
67,472
|
|
|
11,171
|
|
|
76,746
|
|
|
43,029
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
6,501
|
|
|
1,800
|
|
|
13,117
|
|
|
6,986
|
Research and
development
|
|
1,492
|
|
|
-
|
|
|
2,160
|
|
|
-
|
Depreciation of
property, plant and equipment
|
|
556
|
|
|
104
|
|
|
817
|
|
|
317
|
Amortization of
intangibles
|
|
7,336
|
|
|
6,744
|
|
|
18,667
|
|
|
26,616
|
Loss on disposal of
intangible (Note 9)
|
|
15,190
|
|
|
-
|
|
|
15,190
|
|
|
-
|
Special
charges
|
|
218
|
|
|
-
|
|
|
1,512
|
|
|
-
|
|
|
31,293
|
|
|
8,648
|
|
|
51,463
|
|
|
33,919
|
Results from
operations
|
|
36,179
|
|
|
2,523
|
|
|
25,283
|
|
|
9,110
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
(gain) loss
|
|
239
|
|
|
78
|
|
|
(472)
|
|
|
(199)
|
Finance
(income)
|
|
(93)
|
|
|
(138)
|
|
|
(545)
|
|
|
(376)
|
Finance
expenses
|
|
970
|
|
|
-
|
|
|
984
|
|
|
-
|
Other expense
(income)
|
|
(231)
|
|
|
-
|
|
|
(300)
|
|
|
-
|
Income before
taxes
|
|
35,294
|
|
|
2,583
|
|
|
25,616
|
|
|
9,685
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax
expense (recovery)
|
|
5,309
|
|
|
1,028
|
|
|
6,883
|
|
|
4,888
|
Deferred income tax
expense (recovery)
|
|
3,774
|
|
|
898
|
|
|
(3,858)
|
|
|
2,372
|
Income tax expense
(recovery)
|
|
9,083
|
|
|
1,926
|
|
|
3,025
|
|
|
7,260
|
Net income
(loss)
|
$
|
26,211
|
|
$
|
657
|
|
$
|
22,591
|
|
$
|
2,425
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and fully
diluted
|
$
|
0.22
|
|
$
|
0.01
|
|
$
|
0.19
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and fully
diluted
|
|
118,627,249
|
|
|
118,912,606
|
|
|
118,595,713
|
|
|
119,500,216
|
Quarterhill
Inc.
|
Supplemental
Condensed Consolidated Interim Statement of Operations
Information
|
(in thousands of
United States dollars, except share and per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended,
|
|
For the six months
ended,
|
|
September 30,
2017
|
|
September 30,
2016
|
|
September 30,
2017
|
|
September 30,
2016
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Licenses
|
$
|
72,158
|
|
$
|
16,569
|
|
$
|
91,470
|
|
$
|
62,690
|
|
Systems
|
|
6,759
|
|
|
-
|
|
|
9,826
|
|
|
-
|
|
Services
|
|
780
|
|
|
-
|
|
|
1,494
|
|
|
-
|
|
Recurring
|
|
6,200
|
|
|
-
|
|
|
9,296
|
|
|
-
|
Total
Revenues
|
$
|
85,897
|
|
$
|
16,569
|
|
$
|
112,086
|
|
$
|
62,690
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
(excluding depreciation and amortization)
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
$
|
9,864
|
|
$
|
5,398
|
|
$
|
23,706
|
|
$
|
19,661
|
|
Systems
|
|
4,740
|
|
|
-
|
|
|
6,638
|
|
|
-
|
|
Services
|
|
500
|
|
|
-
|
|
|
821
|
|
|
-
|
|
Recurring
|
|
3,321
|
|
|
-
|
|
|
4,175
|
|
|
-
|
Total cost of
revenues
|
$
|
18,425
|
|
$
|
5,398
|
|
$
|
35,340
|
|
$
|
19,661
|
Quarterhill
Inc.
|
Condensed
Consolidated Interim Statements of Comprehensive Income
|
(in thousands of
United States dollars, except share and per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended,
|
|
For the six months
ended,
|
|
September 30,
2017
|
|
September 30,
2016
|
|
September 30,
2017
|
|
September 30,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
26,211
|
|
$
|
657
|
|
$
|
22,591
|
|
$
|
2,425
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
3,209
|
|
|
-
|
|
|
3,742
|
|
|
-
|
Comprehensive
income
|
$
|
29,420
|
|
$
|
657
|
|
$
|
26,333
|
|
$
|
2,425
|
Quarterhill
Inc.
|
Condensed
Consolidated Interim Balance Sheets
|
(in thousands of
United States dollars, except share and per share amounts)
(unaudited)
|
|
As at
|
September 30,
2017
|
|
December 31,
2016
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
35,817
|
|
$
|
106,553
|
|
Short-term
investments
|
|
1,242
|
|
|
1,154
|
|
Restricted Short-term
investments
|
|
3,500
|
|
|
-
|
|
Accounts
receivable
|
|
66,302
|
|
|
20,357
|
|
Other current
assets
|
|
31
|
|
|
-
|
|
Unbilled
revenue
|
|
5,653
|
|
|
-
|
|
Inventories
|
|
5,938
|
|
|
-
|
|
Loans
receivable
|
|
1,000
|
|
|
1,766
|
|
Prepaid expenses and
deposits
|
|
4,081
|
|
|
1,293
|
|
|
123,564
|
|
|
131,123
|
Non-current
assets
|
|
|
|
|
|
|
Property Plant and
Equipment
|
|
3,911
|
|
|
1,240
|
|
Intangible
assets
|
|
132,212
|
|
|
123,351
|
|
Investment in joint
venture
|
|
3,325
|
|
|
-
|
|
Deferred income tax
assets
|
|
18,246
|
|
|
14,646
|
|
Goodwill
|
|
42,673
|
|
|
12,623
|
TOTAL
ASSETS
|
$
|
323,931
|
|
$
|
282,983
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Bank
indebtedness
|
$
|
4,152
|
|
$
|
-
|
|
Accounts payable and
accrued liabilities
|
|
23,863
|
|
|
15,645
|
|
Income taxes
payable
|
|
78
|
|
|
-
|
|
Current portion of
patent finance obligation
|
|
5,422
|
|
|
10,372
|
|
Current portion of
deferred revenue
|
|
6,644
|
|
|
-
|
|
Current portion of
long-term debt
|
|
45
|
|
|
-
|
|
|
40,204
|
|
|
26,017
|
Non-current
liabilities
|
|
|
|
|
|
|
Acquisition notes
payable
|
|
6,450
|
|
|
-
|
|
Patent finance
obligation
|
|
-
|
|
|
12,775
|
|
Success fee
obligation
|
|
-
|
|
|
47
|
|
Deferred
revenue
|
|
523
|
|
|
-
|
|
Long-term
debt
|
|
501
|
|
|
-
|
|
Deferred income tax
liabilities
|
|
8,582
|
|
|
-
|
TOTAL
LIABILITIES
|
|
56,260
|
|
|
38,839
|
Shareholders'
equity
|
|
|
|
|
|
|
Capital
stock
|
|
418,838
|
|
|
419,485
|
|
Additional paid-in
capital
|
|
22,278
|
|
|
21,036
|
|
Accumulated other
comprehensive income
|
|
19,967
|
|
|
16,225
|
|
Deficit
|
|
(193,412)
|
|
|
(212,602)
|
|
|
267,671
|
|
|
244,144
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
|
$
|
323,931
|
|
$
|
282,983
|
Quarterhill
Inc.
|
Condensed
Consolidated Interim Statements of Cash Flows
|
(in thousands of
United States dollars, except share and per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended,
|
|
For the nine months
ended,
|
|
September 30,
2017
|
|
September 30,
2016
|
|
September 30,
2017
|
|
September 30,
2016
|
Cash generated from
(used in):
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
26,211
|
|
$
|
657
|
|
$
|
22,591
|
|
$
|
2,425
|
|
Non-cash
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
273
|
|
|
42
|
|
|
452
|
|
|
197
|
|
|
Depreciation and
amortization
|
|
7,892
|
|
|
6,846
|
|
|
19,484
|
|
|
26,933
|
|
|
Foreign exchange
(gain) loss
|
|
(20)
|
|
|
53
|
|
|
(166)
|
|
|
(337)
|
|
|
Equity in earnings
from joint venture
|
|
(231)
|
|
|
-
|
|
|
(300)
|
|
|
-
|
|
|
Loss on disposal of
intangible
|
|
15,190
|
|
|
-
|
|
|
15,190
|
|
|
-
|
|
|
Gain (loss) on
disposal of assets
|
|
(5)
|
|
|
-
|
|
|
(5)
|
|
|
13
|
|
|
Deferred income tax
expense (recovery)
|
|
3,777
|
|
|
898
|
|
|
(3,855)
|
|
|
2,372
|
|
|
Accrued investment
income
|
|
922
|
|
|
(66)
|
|
|
772
|
|
|
(194)
|
|
|
Embedded
derivatives
|
|
11
|
|
|
-
|
|
|
21
|
|
|
-
|
|
Changes in non-cash
working capital balances
|
|
(44,743)
|
|
|
(2,230)
|
|
|
(33,425)
|
|
|
(2,145)
|
Cash generated from
operations
|
|
9,277
|
|
|
6,200
|
|
|
20,759
|
|
|
29,264
|
Financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
(1,173)
|
|
|
(1,153)
|
|
|
(3,401)
|
|
|
(3,395)
|
|
|
Bank
indebtedness
|
|
401
|
|
|
-
|
|
|
1,924
|
|
|
-
|
|
|
Long term
debt
|
|
(372)
|
|
|
-
|
|
|
(396)
|
|
|
-
|
|
|
Common shares
repurchased under normal course issuer bid
|
|
-
|
|
|
(1,102)
|
|
|
(552)
|
|
|
(4,225)
|
|
|
Common shares issued
for cash on the exercise of options
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11
|
|
|
Common shares issued
for cash from Employee Share Purchase Plan
|
|
-
|
|
|
-
|
|
|
33
|
|
|
35
|
Cash used in
financing
|
|
(1,144)
|
|
|
(2,255)
|
|
|
(2,392)
|
|
|
(7,574)
|
Investing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of
Viziya, net of cash acquired
|
|
-
|
|
|
-
|
|
|
(18,521)
|
|
|
-
|
|
|
Acquisition of IRD,
net of cash acquired
|
|
-
|
|
|
-
|
|
|
(47,782)
|
|
|
-
|
|
|
Acquisition of
iCOMS
|
|
(1,112)
|
|
|
-
|
|
|
(1,112)
|
|
|
-
|
|
|
Purchase of
short-term investment
|
|
-
|
|
|
-
|
|
|
(3,500)
|
|
|
-
|
|
|
Purchase of property
and equipment
|
|
(142)
|
|
|
(6)
|
|
|
(256)
|
|
|
(46)
|
|
|
Repayment of patent
finance obligations
|
|
(15,389)
|
|
|
(1,389)
|
|
|
(18,167)
|
|
|
(4,166)
|
|
|
Purchase of
intangibles
|
|
(8)
|
|
|
(3,000)
|
|
|
(12)
|
|
|
(9,150)
|
Cash used in
investing
|
|
(16,651)
|
|
|
(4,395)
|
|
|
(89,350)
|
|
|
(13,362)
|
Foreign exchange loss
(gain) on cash held in foreign currency
|
|
20
|
|
|
(35)
|
|
|
247
|
|
|
275
|
Net increase
(decrease) in cash and cash equivalents
|
|
(8,498)
|
|
|
(484)
|
|
|
(70,736)
|
|
|
8,603
|
Cash and cash
equivalents, beginning of period
|
|
44,315
|
|
|
102,518
|
|
|
106,553
|
|
|
93,431
|
Cash and cash
equivalents, end of period
|
$
|
35,817
|
|
$
|
102,034
|
|
$
|
35,817
|
|
$
|
102,034
|
Quarterhill
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of
United States dollars, except share and per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Stock
|
|
|
Additional
paid in
Capital
|
|
|
Accumulated
Other
Comprehensive Income
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December
31, 2015
|
|
$
|
427,781
|
|
|
$
|
16,549
|
|
|
$
|
16,225
|
|
|
$
|
(219,177)
|
|
|
$
|
241,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,425
|
|
|
|
2,425
|
|
|
Other Comprehensive
Income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares and options
issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
-
|
|
|
|
197
|
|
|
|
-
|
|
|
|
-
|
|
|
|
197
|
|
|
Conversion of
deferred stock units to common shares
|
|
|
116
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
116
|
|
|
Exercise of stock
options
|
|
|
17
|
|
|
|
(6)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11
|
|
|
Sale of shares under
Employee Share Purchase Plan
|
|
|
35
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35
|
|
Shares repurchased
under normal course issuer bid
|
|
|
(8,501)
|
|
|
|
4,276
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,225)
|
|
Dividends
declared
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,374)
|
|
|
|
(3,374)
|
|
Balance - September
30, 2016
|
|
$
|
419,448
|
|
|
$
|
21,016
|
|
|
$
|
16,225
|
|
|
$
|
(220,126)
|
|
|
$
|
236,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December
31, 2016
|
|
|
419,485
|
|
|
|
21,036
|
|
|
|
16,225
|
|
|
|
(212,602)
|
|
|
|
244,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,591
|
|
|
|
22,591
|
|
|
Other Comprehensive
Income
|
|
|
-
|
|
|
|
-
|
|
|
|
3,742
|
|
|
|
-
|
|
|
|
3,742
|
|
Shares and options
issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
-
|
|
|
|
452
|
|
|
|
-
|
|
|
|
-
|
|
|
|
452
|
|
|
Shares issued upon
acquisition
|
|
|
662
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
662
|
|
|
Sale of shares under
Employee Share Purchase Plan
|
|
|
33
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33
|
|
|
Shares repurchased
under normal course issuer bid
|
|
|
(1,342)
|
|
|
|
790
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(552)
|
|
Dividends
declared
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,401)
|
|
|
|
(3,401)
|
|
Balance - September
30, 2017
|
|
$
|
418,838
|
|
|
$
|
22,278
|
|
|
$
|
19,967
|
|
|
$
|
(193,412)
|
|
|
$
|
267,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterhill
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliations of
GAAP Net Income (Loss) to Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of
United States dollars, except share and per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended,
|
|
|
For the nine months
ended,
|
|
Adjusted
EBITDA
|
|
September 30,
2017
|
|
|
September 30,
2016
|
|
|
September 30,
2017
|
|
|
September 30,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
26,211
|
|
|
$
|
657
|
|
|
$
|
22,591
|
|
|
$
|
2,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
9,083
|
|
|
|
1,926
|
|
|
|
3,025
|
|
|
|
7,260
|
|
|
Foreign exchange
(gain) loss
|
|
|
239
|
|
|
|
78
|
|
|
|
(472)
|
|
|
|
(199)
|
|
|
Finance
expense
|
|
|
970
|
|
|
|
-
|
|
|
|
984
|
|
|
|
-
|
|
|
Finance
income
|
|
|
(93)
|
|
|
|
(138)
|
|
|
|
(545)
|
|
|
|
(376)
|
|
|
Special
charges
|
|
|
218
|
|
|
|
-
|
|
|
|
1,512
|
|
|
|
-
|
|
|
Amortization of
intangibles
|
|
|
7,336
|
|
|
|
6,744
|
|
|
|
18,667
|
|
|
|
26,616
|
|
|
Loss on disposal of
intangible
|
|
|
15,190
|
|
|
|
-
|
|
|
|
15,190
|
|
|
|
-
|
|
|
Depreciation of
property, plant and equipment
|
|
|
556
|
|
|
|
104
|
|
|
|
817
|
|
|
|
317
|
|
|
Effect of deleted
deferred revenue
|
|
|
374
|
|
|
|
-
|
|
|
|
641
|
|
|
|
-
|
|
|
Increased costs from
inventory step-up
|
|
|
444
|
|
|
|
-
|
|
|
|
581
|
|
|
|
-
|
|
|
Effect of deleted
prepaid expenses
|
|
|
(10)
|
|
|
|
-
|
|
|
|
(10)
|
|
|
|
-
|
|
|
Stock based
compensation
|
|
|
273
|
|
|
|
42
|
|
|
|
452
|
|
|
|
195
|
|
|
Other expense
(income)
|
|
|
(231)
|
|
|
|
-
|
|
|
|
(300)
|
|
|
|
-
|
|
Adjusted
EBITDA
|
|
$
|
60,560
|
|
|
$
|
9,413
|
|
|
$
|
63,133
|
|
|
$
|
36,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.22
|
|
|
$
|
0.01
|
|
|
$
|
0.19
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
0.08
|
|
|
|
0.02
|
|
|
|
0.03
|
|
|
|
0.06
|
|
|
Foreign exchange
(gain) loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Finance
expense
|
|
|
0.01
|
|
|
|
-
|
|
|
|
0.01
|
|
|
|
-
|
|
|
Finance
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Special
charges
|
|
|
-
|
|
|
|
-
|
|
|
|
0.01
|
|
|
|
-
|
|
|
Amortization of
intangibles
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
0.16
|
|
|
|
0.22
|
|
|
Loss on disposal of
intangible
|
|
|
0.13
|
|
|
|
-
|
|
|
|
0.13
|
|
|
|
-
|
|
|
Depreciation of
property, plant and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
0.01
|
|
|
|
-
|
|
|
Effect of deleted
deferred revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
0.01
|
|
|
|
-
|
|
|
Increased costs from
inventory step-up
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Effect of deleted
prepaid expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Stock based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Other expense
(income)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjusted EBITDA
per share
|
|
$
|
0.50
|
|
|
$
|
0.09
|
|
|
$
|
0.55
|
|
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
118,627,249
|
|
|
|
118,912,606
|
|
|
|
118,595,713
|
|
|
|
119,500,216
|
|
SOURCE Quarterhill Inc.