Ottawa’s Quarterhill sets record annual revenues despite rough Q4

Quarterhill CEO Doug Parker. (Photo by Mark Holleron)

A depressed fourth quarter wasn’t enough to bring down a year of record annual revenues for Quarterhill, as the firm says its acquisition strategy introduced last year is now poised to bear fruit.

Revenues for the Ottawa-based firm’s fiscal 2017 were $134.7 million, an increase of 45 per cent year-over-year. Recurring revenues represented 10 per cent of those figures, compared to six per cent last year. Net profit was $10.2 million for the year, down from $11.1 million. (All figures in USD.)

The fourth quarter was less impressive. Revenues were $22.6 million for the three-month period ending Dec. 31, 2017, down from $30.2 million a year ago. The firm posted a net loss of $12.4 million compared to a profit of $8.6 million last year.

The jump in year-over-year revenue can be partly attributed to the acquisitions Quarterhill made in 2017.

Last spring, Quarterhill (TSX:QTRH)(NASDAQ:QTRH) announced a new business model that has seen the firm purchase three firms in the industrial internet of things space this past year. New CEO Doug Parker said during the firm’s quarterly earnings call that the acquisition pains are now over, and despite slow initial performances, the acquired firms will soon begin hitting their strides.

An M&A specialist, Parker turned to baseball to explain Quarterhill’s acquisition strategy, suggesting the team is taking a “disciplined” approach at the plate. They’re not looking for unproven firms with high potential, but rather, companies that are more accustomed to “hitting solid singles than monster home runs.”

Lumpy bottom line

The firm’s primary revenue source remains its WiLAN patent-licensing business. Parker said the firm is making “great progress” diversifying its revenue streams: 75 per cent of revenue came from WiLAN this past year, compared to 94 per cent in 2016.

Revenue from this business are inconsistent from quarter to quarter, depending on whether particular licences were signed as well as the success or failure of litigation and court battles over patents.

In the fourth quarter, revenues from the WiLAN division were $10.8 million, down from $29.9 million a year previous.

Looking at annual earnings is a more productive comparison in this segment, the firm’s CEO said: WiLAN indeed accounted for a total $102 million revenues this past fiscal year, up from $87.8 million in 2016. He did not, however, suggest that quarter-to-quarter revenues from the division would become any smoother in the future.

“The bottom line is, lumpiness will continue,” he said.

Quarterhill also recently added a Waterloo office, where it hopes to capitalize on the southwestern Ontario city’s tech sector.

“With a presence in both of Canada’s premier technology hubs, Ottawa and Waterloo, we are well positioned to continue to attract the top talent needed to execute on, and expand, our growth potential,” Parker said in a release.

Quarterhill’s shares dropped nine per cent, or 20 cents, sinking to C$2 on the Toronto Stock Exchange Thursday.