WiLAN ‘lumpiness’ continues to dog Ottawa’s Quarterhill as Q3 revenues plummet

Parker
Quarterhill CEO Doug Parker. File photo.

Despite reporting third quarter earnings far below last year’s figures, shares of Ottawa-based Quarterhill (TSX:QTRH)(NASDAQ:QTRH) were up slightly in trading on Thursday.

The local firm, which last year branched out from its focus on patent licensing and litigation to acquire companies in the Industrial Internet of Things (IIOT) space, reported revenues of $4.8 million for the three-month period ending Sept. 30. (All figures in USD.)

That’s quite a drop from the $72.2 million in revenues it reported over the same period in 2017, but it’s the aforementioned patent licensing division – operations here fall under the company’s old name, WiLAN – that’s largely responsible for the drop.

Revenue in this segment is largely contingent on successful litigation over the use of the company’s sizeable portfolio of technology patents. Collecting on a big win in one quarter, with no guarantee of similar income the following year, makes tracking the firm’s growth prospects difficult for investors and can lead to what the firm has coined as “lumpy” earnings results.

Expect the lumps to continue for Quarterhill. One of the firm’s highlights this past quarter was a $145.1-million legal victory against Apple, in which a U.S. court ruled the Cupertino tech giant had infringed on one of WiLAN’s held patents. Revenue for that decision has yet to be reflected in Quarterhill’s books.

Last year’s pivot to focus on IIoT is bringing growth elsewhere to the firm, as revenues in Quaterhill’s systems and recurring revenues segments were slightly up this past quarter. One of the firm’s acquisitions, International Road Dynamics, won a five-year, $8-million contract with the State of Hawaii in the quarter to provide traffic monitoring and data collection services.

The company brought in acquisitions specialist Doug Parker as CEO late last year to lead its M&A strategy. In a release, Quarterhill stated that it’s continuing to build out its acquisition pipeline and teased that “advanced negotiations … are currently underway.”

The company posted a net loss of $9.3 million for the quarter compared to a profit of $26.2 million a year ago.

Despite the sharp drop in revenue, shares of Quarterhill were up about four cents to $1.68 in trading on the TSX Thursday.