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Quarterhill Announces Financial Results for 2018

02 28 19
  • Year ends on a strong note with solid revenue, Adjusted EBITDA and cash from operations
  • Momentum continues into Q1 2019 with revenue for the quarter expected to be in a range of $33-36 million
  • Restructurings initiated in second half of 2018 at IRD and WiLAN, expected to save $6.0 million per year in expenses
  • As part of its restructuring, Michael Vladescu named President & CEO at WiLAN

OTTAWA, Feb. 28, 2019 /PRNewswire/ - Quarterhill Inc. ("Quarterhill" or the "Company") (TSX: QTRH) (NASDAQ: QTRH), announces its financial results for the three- and twelve-month periods ended December 31, 2018. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

Q4 and Fiscal 2018 Highlights:

  • Q4 revenue was $25.4 million; Fiscal 2018 revenue was $77.4 million
  • Q4 recurring revenue was $4.7 million (18% of total revenue); Fiscal 2018 recurring revenue was $22.0 million (28% of total revenue)
  • Q4 Adjusted EBITDA* was $3.2 million; Fiscal 2018 Adjusted EBITDA was ($10.6) million
  • Q4 cash generated by operations was $9.6 million; Fiscal 2018 cash used in operations was ($8.4) million
  • Cash balance at year-end was $67.3 million, compared to $62.4 million at the end of Q3 2018 and $86.6 million at the end of 2017
  • IRD and VIZIYA's combined revenue and Adjusted EBITDA in Fiscal 2018 was $56.6 million and $5.8 million, respectively
  • Won a trial victory versus Apple Inc in Q3 2018 in the U.S. District Court for the Southern District of California regarding patents in WiLAN's wireless portfolio
  • Initiated restructurings in Q3 2018 at IRD and in Q4 2018 at WiLAN, which combined are expected to save the Company approximately $6.0 million per year in operating expenses

"While 2018 was challenging in certain respects, we ended the year on a positive note in Q4 with strong revenue, Adjusted EBITDA and cash from operations," said Doug Parker, President & CEO of Quarterhill. "Overall, tangible progress was made in a year that I would characterize as one of operational stabilization while continuing to make advancements on our diversification strategy. Adding new companies to our portfolio remains a primary objective of the strategy but ensuring that our existing portfolio companies are optimizing their performance is equally important. The restructurings we have undertaken at WiLAN and IRD are expected to save approximately $6.0 million per year in expenses and we believe the changes made will help those businesses to drive superior performance for years to come."

"As part of our WiLAN restructuring, we have streamlined its operational structure. As a result, we have appointed Michael Vladescu, an industry veteran and long time WiLAN senior executive, to the position of President and Chief Executive Officer of the business, replacing Keaton Parekh. Mike was instrumental in building WiLAN's very successful partnership program and has a proven track record of delivering tangible multi-year results for the organization. I look forward to working closely with Mike and the team as they continue to enhance our business opportunity in the evolving technology innovation and licensing marketplace. I want to thank Keaton for his contribution to our organization during his short tenure with WiLAN."

"On the M&A side, the 2018 environment reflected somewhat of a seller's market, but we still made good progress assembling our deal team, evolving our target focus and building our M&A ecosystem, which helped to generate strong deal flow and a growing pipeline of opportunities. With the strength and progress at both IRD and VIZIYA in 2018, we are seeing a number of smaller tuck-in opportunities suitable for enhancing those businesses, while also continuing to aggressively pursue other acquisition targets that meet our disciplined financial and operational criteria. Throughout 2019 we will remain focused on cash flow and expenses throughout all our businesses, in order to maintain a strong and sustainable balance sheet capable of supporting both our organic and acquisitive growth opportunities."

"Finally, as we look to next quarter, we anticipate continued momentum from our operations, reflected in license deals such as SK hynix, and while we do not anticipate providing regular guidance on a quarterly basis, we do expect Quarterhill's consolidated revenue for Q1 2019 to be in the range of $33-$36 million."

Approval of Eligible Dividend
The Board of Directors has declared an eligible quarterly dividend of CDN $0.0125 per common share payable on April 5, 2019, to shareholders of record on March 22, 2019.

Business Strategy and Segments
Our acquisition strategy focuses primarily on financial metrics while remaining cognizant of broader technology and market trends as we build a portfolio of businesses that are characterized as having recurring revenue, free cash flow and profitable growth potential. Driven by the execution of a proven and disciplined acquisition strategy, we seek to enable shareholders to benefit from consolidation and convergence trends in today's technology industry. As of December 31, 2018, the Company had investments in three segments: Licensing (WiLAN); Intelligent Systems (IRD); and Enterprise Software (VIZIYA).

Q4 and Fiscal 2018 Consolidated Financial Review
Quarterhill's consolidated financial results for the three- and twelve-month periods ended December 31, 2018 include a full contribution from Wi-LAN Inc. ("WiLAN"), International Road Dynamics Inc. ("IRD") and VIZIYA Corp. ("VIZIYA"). The 2017 comparative period information for the twelve-month period ended December 31, 2017, includes a full contribution from WiLAN along with IRD's results from operations for the period from June 1, 2017 to December 31, 2017 and VIZIYA's results from operations for the period from May 4, 2017 to December 31, 2017.

Consolidated revenues for the three months ended December 31, 2018 were $25.4 million, compared to $22.6 million in the same period last year. The quarter-over-quarter increase was due to stronger performance at IRD and WiLAN. Consolidated revenues for Fiscal 2018 were $77.4 million, compared to $134.7 million in Fiscal 2017. The year-over-year decrease was primarily due to strong performance from WiLAN in Q3 2017 when it generated revenue of $72.6 million. IRD and VIZIYA's combined revenue in Fiscal 2018 was $56.6 million compared to $34.1 million which they generated in Fiscal 2017 following their respective acquisitions by the Company.

Gross margin for the three months ended December 31, 2018 was $9.6 million, or 38%, compared to $8.7 million, or 38%, in the same period last year. Gross margin for Fiscal 2018 was $18.8 million, or 24%, compared to $85.4 million, or 63%, in Fiscal 2017. The year-over-year decrease in gross margin reflects the variability in WiLAN's revenue noted above. Gross margin and gross margin percentage increased for both IRD and VIZIYA in Fiscal 2018 compared to Fiscal 2017.

Operating expenses for the three months ended December 31, 2018 were $30.7 million, compared to $23.7 million in the same period last year. Operating expenses for Fiscal 2018 were $77.3 million compared to $75.2 million in Fiscal 2017. Operating expenses increased in Fiscal 2018 due primarily to a full-year of operations from IRD and VIZIYA, $6.2 million of one-time restructuring charges and $16.6 million of non-cash charges related to an impairment loss on goodwill and an impairment loss on intangibles, offset in part by $26.3 million in non-cash charges related to a loss on disposal of intangible assets and impairment losses on intangibles in Fiscal 2017.

Adjusted EBITDA for the three months ended December 31, 2018 was $3.2 million, or $0.02 per basic Common Share, compared to $1.5 million, or $0.01 per basic Common Share, in the same period last year. The quarter-over-quarter increase in Adjusted EBITDA is primarily due to stronger performance from WiLAN and IRD. For Fiscal 2018, Adjusted EBITDA was ($10.6) million, or ($0.11) per basic Common Share, compared to $64.6 million, or $0.53 per basic Common Share, in Fiscal 2017. The year-over-year decrease in Adjusted EBITDA reflects the variability in the WiLAN business and the $72.6 million in revenue it generated in Q3 2017. For Fiscal 2018, Adjusted EBITDA combined for IRD and VIZIYA was $5.8 million compared to $3.8 million which they generated in Fiscal 2017 following their respective acquisitions by the Company.

Net loss for the three months ended December 31, 2018 was ($19.9) million, or ($0.17) per basic and diluted Common Share, compared to net loss of ($12.4) million, or ($0.10) per basic and diluted Common Share, in the same period last year. The quarter-over-quarter increase in net loss was due primarily to the $16.6 million of non-cash charges related to an impairment loss on goodwill and an impairment loss on intangibles in Q4 2018, offset in part by stronger performance from WiLAN and IRD in Q4 2018 and the $11.1 million of non-cash charges related to loss on disposal of intangibles and impairment loss on intangibles in Q4 2017. For Fiscal 2018, net loss was ($49.2) million, or ($0.41) per basic and diluted Common Share, compared to net income of $10.2 million, or $0.09 per basic and diluted Common Share, in Fiscal 2017. For Fiscal 2018, net loss increased due primarily to lower revenue from WiLAN, offset in part by improved overall operational performance at IRD and VIZIYA.

Cash generated from operations for the three months ended December 31, 2018 was $9.6 million, compared to $49.2 million in the same period last year. Cash generated from operations for Fiscal 2018 was ($8.4) million compared to $70.0 million in Fiscal 2017. The quarter-over-quarter and year-over-year decreases in cash from operations are primarily due to lower revenue from WiLAN in 2018, offset in part by improved overall operational performance at IRD and VIZIYA in Fiscal 2018. 

Cash and cash equivalents and short-term investments amounted to $67.3 million at December 31, 2018, compared to $62.4 million at the end of Q3 2018 and $86.6 million at December 31, 2017. The sequential quarterly increase is due to stronger performance from WiLAN and IRD in Q4 2018, while the decrease from the end of Fiscal 2017 is primarily due to lower overall revenue from WiLAN in Fiscal 2018.

The table below highlights financial performance for the Company's Licensing, Intelligent Systems and Enterprise Software 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 December 31, 2018


Licensing

Intelligent
Systems

Enterprise
Software

Corporate


Total

Revenues

$

10,623

$

12,541

$

2,252

$

-


$

25,416

Cost of revenues (excluding depreciation and amortization)


7,742


7,805


314


-



15,861



2,881


4,736


1,938


-



9,555

Selling, general and administrative expenses


599


2,753


1,593


1,087



6,032

Research and development expenses


-


429


448


-



877

Depreciation of property, plant and equipment


48


280


30


4



362

Amortization of intangibles


4,434


950


758


-



6,142

Impairment losses on intangibles


509


-


-


-



509

Impairment loss on goodwill


-


16,066


-


-



16,066

Special charges


2,498


115


-


(1,942)



671

Results from operations


(5,207)


(15,857)


(891)


851



(21,104)

Finance income


(33)


(2)


-


(402)



(437)

Finance expense


1


61


1


-



63

Foreign exchange loss (gain)


612


(392)


115


(453)



(118)

Other income


-


(58)


77


-



19

(Loss) income before taxes


(5,787)


(15,466)


(1,084)


1,706



(20,631)

Current income tax expense (recovery)


656


(92)


(137)


-



427

Deferred income tax (recovery) expense


(4,334)


(593)


(186)


3,984



(1,129)

Income tax (recovery) expense


(3,678)


(685)


(323)


3,984



(702)

Net loss

$

(2,109)

$

(14,781)

$

(761)

$

(2,278)


$

(19,929)













Adjusted EBITDA


2,302


1,901


(89)


(951)



3,163













Other reconciling items:












Stock-based compensation


20


30


14


136



200

Dividends from joint venture


-


317


-


-



317

 


For the twelve months ended December 31, 2018


Licensing

Intelligent
Systems

Enterprise
Software

Corporate

Total

Revenues

$

20,811

$

45,051

$

11,539

$

-

$

77,401

Cost of revenues (excluding depreciation and amortization)


27,539


29,594


1,441


-


58,574



(6,728)


15,457


10,098


-


18,827

Selling, general and administrative expenses


2,598


10,250


6,723


7,421


26,992

Research and development expenses


-


2,022


1,549


-


3,571

Depreciation of property, plant and equipment


257


1,129


121


10


1,517

Amortization of intangibles


18,731


3,873


3,029


-


25,633

Impairment losses on intangibles


509


-


-


-


509

Impairment loss on goodwill


-


16,066


-


-


16,066

Special charges


2,498


2,435


-


(1,942)


2,991

Results from operations


(31,321)


(20,318)


(1,324)


(5,489)


(58,452)

Finance income


(36)


(11)


-


(912)


(959)

Finance expense


2


205


11


2


220

Foreign exchange loss (gain)


946


(556)


166


(748)


(192)

Other income


-


(942)


(192)


-


(1,134)

Loss before taxes


(32,233)


(19,014)


(1,309)


(3,831)


(56,387)

Current income tax expense (recovery)


1,793


66


(782)


1


1,078

Deferred income tax (recovery) expense


(11,262)


(1,731)


(935)


5,583


(8,345)

Income tax (recovery) expense


(9,469)


(1,665)


(1,717)


5,584


(7,267)

Net (loss) income

$

(22,764)

$

(17,349)

$

408

$

(9,415)

$

(49,120)












Adjusted EBITDA


(9,280)


3,793


2,011


(7,161)


(10,637)












Other reconciling items:











Effect of deleted deferred revenue


-


167


147


-


314

Stock-based compensation


46


124


38


260


468

Dividends from joint venture


-


317


-


-


317

 


For the three months ended December 31, 2017


Licensing

Intelligent
Systems

Enterprise
Software

Corporate

Total

Revenues

$

8,427

$

10,820

$

3,378

$

-

$

22,625

Cost of revenues (excluding depreciation and amortization)


5,834


7,846


289


-


13,969



2,593


2,974


3,089


-


8,656

Selling, general and administrative expenses


1,006


2,368


1,529


1,950


6,853

Research and development expenses


-


722


373


-


1,095

Depreciation of property, plant and equipment


78


134


27


1


240

Amortization of intangibles


4,514


984


757


-


6,255

Loss on disposal of intangibles


6,726


-


-


-


6,726

Impairment losses on intangibles


4,350


-


-


-


4,350

Special charges


-


-


-


(1,806)


(1,806)

Results from operations


(14,081)


(1,234)


403


(145)


(15,057)

Finance income


(147)


(2)


-


(9)


(158)

Finance expense


6


59


4


-


69

Foreign exchange loss (gain)


41


134


(1)


94


268

Other income


-


(90)


-


-


(90)

(Loss) income before taxes


(13,981)


(1,335)


400


(230)


(15,146)

Current income tax (recovery) expense


(55)


(57)


424


-


312

Deferred income tax expense (recovery)


11,591


(841)


(270)


(13,573)


(3,093)

Income tax expense (recovery)


11,536


(898)


154


(13,573)


(2,781)

Net (loss) income

$

(25,517)

$

(437)

$

246

$

13,343

$

(12,365)












Adjusted EBITDA


1,586


351


1,361


(1,814)


1,484












Other reconciling items:











Effect of deleted deferred revenue


-


107


174


-


281

Increased costs from inventory step-up


-


108


-


-


108

Stock-based compensation


(1)


76


-


136


211

Effect of deleted prepaid expense


-


176


-


-


176

 


For the twelve months ended December 31, 2017


Licensing

Intelligent
Systems

Enterprise
Software

Corporate

Total

Revenues

$

100,645

$

27,023

$

7,043

$

-

$

134,711

Cost of revenues (excluding depreciation and amortization)


29,478


18,646


1,185


-


49,309



71,167


8,377


5,858


-


85,402

Selling, general and administrative expenses


6,490


5,870


3,310


4,300


19,970

Research and development expenses


-


1,883


1,372


-


3,255

Depreciation of property, plant and equipment


339


627


89


2


1,057

Amortization of intangibles


20,611


2,292


2,019


-


24,922

Loss on disposal of intangibles


21,916


-


-


-


21,916

Impairment losses on intangibles


4,350


-


-


-


4,350

Special charges


-


-


-


(294)


(294)

Results from operations


17,461


(2,295)


(932)


(4,008)


10,226

Finance income


(614)


(3)


-


(86)


(703)

Finance expense


932


113


10


(2)


1,053

Foreign exchange (gain) loss


(475)


829


42


(600)


(204)

Other income


-


(390)


-


-


(390)

Income (loss) before taxes


17,618


(2,844)


(984)


(3,320)


10,470

Current income tax expense


6,461


276


458


-


7,195

Deferred income tax expense (recovery)


3,722


(1,761)


(755)


(8,157)


(6,951)

Income tax expense (recovery)


10,183


(1,485)


(297)


(8,157)


244

Net income (loss)

$

7,435

$

(1,359)

$

(687)

$

4,837

$

10,226












Adjusted EBITDA


64,733


1,868


1,884


(3,868)


64,617












Other reconciling items:











Effect of deleted deferred revenue


-


214


708


-


922

Increased costs from inventory step-up


-


689


-


-


689

Stock-based compensation


56


175


-


432


663

Effect of deleted prepaid expense


-


(10)


-


-


(10)

Dividend from joint venture


-


176


-


-


176

 

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://event.on24.com/wcc/r/1933492/07CD54500990DF0B84400CBDE7F150C1.

Dial-in Information  

  • 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
Webcast replay will be available for 90 days at:
https://event.on24.com/wcc/r/1933492/07CD54500990DF0B84400CBDE7F150C1.

Telephone replay will be available from 1:00 PM ET on February 28, 2019 until 11:59 PM ET on March 7, 2019 at: 1.855.859.2056 (Toll Free) or 1.416.849.0833 (International).

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 (loss) from continuing operations before: (i) income taxes; (ii) finance expense or income; (iii) amortization and impairment of intangibles; (iv) special charges and other one-time items; (v) depreciation of property, plant and equipment; (vi) effects of deleted deferred revenue; (vii) the effects of fair value step up in inventory acquired; (viii) stock based compensation; (ix) foreign exchange (gain) loss; and * equity in earnings and dividends from joint ventures. 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 focused on the disciplined acquisition, management and growth of companies in dedicated technology areas including, vertical market software and solutions, intelligent industrial systems, and innovation and licensing. Quarterhill's emphasis is on seeking out acquisition opportunities at reasonable valuations that provide a foundation for recurring revenues, predictable cash flows and margins, profitable growth, intimate customer relationships and dedicated management teams.  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 Quarterhill's February 28, 2019 annual information form for the year ended December 31, 2018 (the "AIF"). Copies of the AIF may be obtained at www.sedar.com and as part of Quarterhill's Form 40-F for the year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission and available at www.sec.com. 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


Consolidated Statements of Operations


(in thousands of United States dollars, except share and per share amounts)






For the three months ended,


For the year ended,



December 31,
2018


December 31,
2017


December 31,
2018


December 31,
2017













Revenues

$

25,416


$

22,625


$

77,401


$

134,711

Cost of revenues (excluding depreciation and
amortization)


15,861



13,969



58,574



49,309

Gross margin (excluding depreciation and
amortization)


9,555



8,656



18,827



85,402

Operating expenses












Depreciation of property, plant and
equipment


362



240



1,517



1,057

Amortization of intangibles


6,142



6,255



25,633



24,922

Selling, general and administrative


6,032



6,853



26,992



19,970

Research and development


877



1,095



3,571



3,255

Loss on disposal of intangibles


-



6,726



-



21,916

Impairment losses on intangibles


509



4,350



509



4,350

Impairment loss on goodwill


16,066



-



16,066



-

Special charges


671



(1,806)



2,991



(294)



30,659



23,713



77,279



75,176

Results from operations


(21,104)



(15,057)



(58,452)



10,226













Finance income


(437)



(158)



(959)



(703)

Finance expense


63



69



220



1,053

Foreign exchange (gain) loss


(118)



268



(192)



(204)

Other (income) expense


19



(90)



(1,134)



(390)

Income (loss) before taxes


(20,631)



(15,146)



(56,387)



10,470













Current income tax expense


427



312



1,078



7,195

Deferred income tax recovery


(1,129)



(3,093)



(8,345)



(6,951)

Income tax (recovery) expense


(702)



(2,781)



(7,267)



244

Net (loss) income

$

(19,929)


$

(12,365)


$

(49,120)


$

10,226













Net (loss) income per share












Basic and fully diluted

$

(0.17)


$

(0.10)


$

(0.41)


$

0.09













Weighted average number of common shares












Basic


118,642,749



118,555,989



118,607,569



119,245,581

Fully diluted


118,642,749



118,555,989



118,615,683



119,245,581

 

Quarterhill Inc

Supplemental Information to  Consolidated Statement of Operations

(in thousands of United States dollars, except share and per share amounts)



For the three months ended,


For the year ended,


December 31,
2018


December 31,
2017


December 31,
2018


December 31,
2017

Revenues












Licenses

$

10,646


$

10,083


$

23,544


$

101,553

Systems


9,495



7,815



29,252



17,641

Services


589



592



2,629



2,086

Recurring


4,686



4,135



21,976



13,431

Total Revenues

$

25,416


$

22,625


$

77,401


$

134,711













Cost of revenues (excluding depreciation and
amortization)












License

$

7,775


$

5,853


$

27,702


$

29,559

Systems


5,553



5,242



18,945



11,880

Services


281



270



1,276



1,091

Recurring


2,252



2,604



10,651



6,779

Total cost of revenues (excluding depreciation
and amortization)

$

15,861


$

13,969


$

58,574


$

49,309

 

Quarterhill Inc

Consolidated Statements of Comprehensive (Loss) Income

(in thousands of United States dollars)



For the three months ended,


For the year ended,


December 31,
2018


December 31,
2017


December 31,
2018


December 31,
2017













 Net (loss) income

$

(19,929)


$

(12,365)


$

(49,120)


$

10,226













Other comprehensive (loss) income:












Foreign currency translation adjustment


(2,021)



144



(3,868)



3,886

Comprehensive (loss) income

$

(21,950)


$

(12,221)


$

(52,988)


$

14,112

 

Quarterhill Inc

Consolidated Balance Sheets

(in thousands of United States dollars)

As at

December 31, 2018


December 31, 2017

Current assets






Cash and cash equivalents

$

63,929


$

81,818

Short-term investments


1,139



1,236

Restricted short-term investments


2,200



3,500

Accounts receivable


10,812



19,298

Other current assets


91



13

Unbilled revenue


3,990



3,045

Income taxes receivable


198



144

Inventories


5,960



5,083

Prepaid expenses and deposits


2,332



4,129



90,651



118,266

Non-current assets






Accounts receivable


415



-

Property, plant and equipment


2,655



3,801

Intangible assets


87,425



114,944

Investment in joint venture


3,822



3,383

Deferred income tax assets


27,141



20,195

Goodwill


25,303



42,587

TOTAL ASSETS

$

237,412


$

303,176







Liabilities






Current liabilities






Bank indebtedness

$

2,598


$

3,568

Accounts payable and accrued liabilities


18,103



20,487

Income taxes payable


-



599

Contingent consideration


929



-

Current portion of patent finance obligation


-



4,090

Current portion of deferred revenue


4,670



6,733

Current portion of long-term debt


299



115



26,599



35,592

Non-current liabilities






Contingent consideration


-



4,474

Deferred revenue


1,435



884

Long-term debt


173



401

Deferred income tax liabilities


4,337



7,291

TOTAL LIABILITIES


32,544



48,642

Shareholders'equity






Capital stock


419,111



418,873

Additional paid-in capital


22,957



22,489

Accumulated other comprehensive income


16,243



20,111

Deficit


(253,443)



(206,939)



204,868



254,534

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

237,412


$

303,176

 

Quarterhill Inc

 Consolidated Statements of Cash Flows

(in thousands of United States dollars)



For the three months ended,


For the year ended,


December 31,
2018


December 31,
2017


December 31,
2018


December 31,
2017

Cash generated from (used in):












Operations












Net (loss) income

$

(19,929)


$

(12,365)


$

(49,120)


$

10,226

Non-cash items












Stock-based compensation


200



211



468



663

Depreciation and amortization


6,503



6,495



27,150



25,979

Foreign exchange loss (gain)


188



(101)



299



(267)

Equity in earnings from joint venture


(58)



(90)



(942)



(390)

Loss on disposal of intangible


-



6,726



-



21,916

Impairment losses on intangibles


509



4,350



509



4,350

Impairment loss on goodwill


16,066



-



16,066



-

Contingent consideration adjustment


(3,545)



(1,976)



(3,545)



(1,976)

Gain on disposal of assets


-



(4)



(24)



(9)

Deferred income tax recovery


(1,129)



(3,093)



(8,345)



(6,951)

Accrued investment income


-



1,000



-



1,772

Embedded derivatives


(75)



18



(78)



39

Changes in non-cash working capital balances


10,829



48,025



9,178



14,603

Cash generated from (used in) operations


9,559



49,196



(8,384)



69,955

Financing












Dividends paid


(1,136)



(1,162)



(4,605)



(4,563)

Long-term accounts receivable


(415)



-



(415)



-

Bank indebtedness


(3,076)



(576)



(970)



1,348

Repayment of long-term debt


48



(38)



(44)



(434)

Common shares repurchased under normal course
issuer bid


-



-



-



(552)

Common shares issued for cash from Employee
Share Purchase Plan


-



35



27



68

Cash used in financing


(4,579)



(1,741)



(6,007)



(4,133)

Investing












Business combinations


-



-



-



(67,415)

Dividends received from joint venture


317



176



317



176

Sales (purchase) of restricted short-term
investments


1,300



-



1,300



(3,500)

Proceeds from sale of property, plant and
equipment


-



13



54



13

Purchase of property and equipment


(156)



(143)



(575)



(399)

Repayment of patent finance obligations


-



(1,389)



(4,167)



(19,556)

Purchase of intangibles


(19)



(138)



(133)



(150)

Cash generated from (used in) investing


1,442



(1,481)



(3,204)



(90,831)

Foreign exchange (loss) gain on cash held in foreign
currency


(191)



27



(294)



274

Net increase (decrease) in cash and cash equivalents


6,231



46,001



(17,889)



(24,735)

Cash and cash equivalents, beginning of period


57,698



35,817



81,818



106,553

Cash and cash equivalents, end of period

$

63,929


$

81,818


$

63,929


$

81,818

 


Quarterhill Inc

Consolidated Statements of Shareholders' Equity

(in thousands of United States dollars)



Capital Stock

Additional
paid in Capital

Accumulated
Other
Comprehensive
Income

Deficit

Total Equity












Balance - January 1, 2017

$

419,485

$

21,036

$

16,225

$

(212,602)

$

244,144












Comprehensive income:











Net income


-


-


-


10,226


10,226

Other comprehensive income


-


-


3,886


-


3,886

Shares and options issued:











Stock-based compensation expense


-


663


-


-


663

Shares issued upon acquisition


662


-


-


-


662

Sale of shares under Employee Share
Purchase Plan


68


-


-


-


68

Shares repurchased under normal course
issuer bid


(1,342)


790


-


-


(552)

Dividends declared


-


-


-


(4,563)


(4,563)

Balance - December 31, 2017

$

418,873

$

22,489

$

20,111

$

(206,939)

$

254,534












Balance - December 31, 2017

$

418,873

$

22,489

$

20,111

$

(206,939)

$

254,534

Adoption of ASU 2014-09


-


-


-


4,272


4,272

Adoption of ASU 2016-16


-


-


-


2,949


2,949

Balance - January 1, 2018


418,873


22,489


20,111


(199,718)


261,755












Comprehensive loss:











Net loss


-


-


-


(49,120)


(49,120)

Other comprehensive loss


-


-


(3,868)


-


(3,868)

Shares and options issued:











Stock-based compensation expense


-


468


-


-


468

Conversion of deferred stock units to
common shares


211


-


-


-


211

Sale of shares under Employee Share
Purchase Plan


27


-


-


-


27

Dividends declared


-


-


-


(4,605)


(4,605)

Balance - December 31, 2018

$

419,111

$

22,957

$

16,243

$

(253,443)

$

204,868

 

Quarterhill Inc

Reconciliations of GAAP Net Income (Loss) to Adjusted EBITDA

(in thousands of United States dollars, except share and per share amounts)



For the three months ended,


For the year ended,

Adjusted EBITDA

December 31,
2018


December 31,
2017


December 31,
2018


December 31,
2017

Net (loss) income

$

(19,929)


$

(12,365)


$

(49,120)


$

10,226

Adjusted for:












Income tax (recovery) expense


(702)



(2,781)



(7,267)



244

Foreign exchange (gain) loss


(118)



268



(192)



(204)

Finance expense


63



69



220



1,053

Finance income


(437)



(158)



(959)



(703)

Special charges


671



(1,806)



2,991



(294)

Amortization of intangibles


6,142



6,255



25,633



24,922

Loss on disposal of intangibles


-



6,726



-



21,916

Impairment losses on intangible assets


509



4,350



509



4,350

Impairment loss on goodwill


16,066



-



16,066



-

Depreciation of property, plant and equipment


362



240



1,517



1,057

Effect of deleted deferred revenue


-



281



314



922

Increased costs from inventory step-up


-



108



-



689

Effect of deleted prepaid expenses


-



-



-



(10)

Stock-based compensation


200



211



468



663

Dividend from joint venture


317



176



317



176

Other expense (income)


19



(90)



(1,134)



(390)

Adjusted EBITDA

$

3,163


$

1,484


$

(10,637)


$

64,617













Adjusted EBITDA per share












Net (loss) income

$

(0.17)


$

(0.10)


$

(0.42)


$

0.09

Adjusted for:












Income tax (recovery) expense


(0.01)



(0.02)



(0.07)



0.01

Foreign exchange (gain) loss


-



-



-



-

Finance expense


-



-



-



0.01

Finance income


-



-



-



-

Special charges


0.01



(0.02)



0.03



(0.01)

Amortization of intangibles


0.05



0.05



0.21



0.20

Loss on disposal of intangibles


-



0.06



-



0.19

Impairment losses on intangible assets


-



0.04



-



0.04

Impairment loss on goodwill


0.14



-



0.14



-

Depreciation of property, plant and equipment


-



-



-



-

Effect of deleted deferred revenue


-



-



-



-

Increased costs from inventory step-up


-



-



-



-

Effect of deleted prepaid expenses


-



-



-



-

Stock-based compensation


-



-



-



-

Dividend from joint venture


-



-



-



-

Other expense (income)


-



-



-



-

Adjusted EBITDA per share

$

0.02


$

0.01


$

(0.11)


$

0.53













Weighted average number of Common Shares












Basic


118,642,749



118,555,989



118,607,569



119,245,581

 

Cision View original content:http://www.prnewswire.com/news-releases/quarterhill-announces-financial-results-for-2018-300803872.html

SOURCE Quarterhill Inc.

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