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Annual MeetingJune 12, 2019
2
Safe HarbourCertain statements in this presentation, other than statements of
historical fact, may include forward-looking information that involves
various risks and uncertainties that face the Company. Such statements
may contain words and expressions based on management’s current
assumptions and expectations related to 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.
There can be no assurance that any statements of forward-looking
information contained in this document will prove to be accurate. Actual
results and future events could differ materially from those anticipated in
such statements. These and all subsequent written and oral statements
containing forward-looking information are based on the estimates and
opinions of management on the dates they are made and expressly
qualified in their entirety by this notice. Except as required by applicable
laws, the Company assumes no obligation to update forward-looking
statements should circumstances or management's estimates or opinions
change. Readers are cautioned not to place undue reliance on any
statements of forward-looking information that speak only as of the date
of this presentation. Additional information identifying risks and
uncertainties relating to the Company’s business are contained under the
heading “Risk Factors” in Quarterhill’s filings with the various Canadian
securities regulators which are available online at www.sedar.com.
This presentation includes references to adjusted Earnings Before Interest,
Taxes, Depreciation and Amortization or “adjusted EBITDA”. Adjusted
EBITDA are earnings 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.
Unless otherwise noted, all dollar amounts are in United States currency.
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2018 & Q1 2019 Review
44
Our Goal
Provide investors with a profitable growth-
oriented investment opportunity by acquiring
and operating financially attractive niche
technology companies.
5
Diversification Strategy: Value Drivers
Driving shareholder value by improving financial outcomes
TSX: QTRH, NASDAQ: QTRH
Focus on accretive acquisitions
Stay disciplined with financial and operational criteria =
Optimize Opex structure
Invest in organic growth and tuck-in acquisitions
Maximize long-term cash flow
Increase recurring revenue
Grow AEBITDA and cash flow
Deliver more predictability in quarterly performance+
Acquire portfolio companies Enhance portfolio companies Improve financial profile
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2018: Operational stabilization and tangible progress on M&A strategy
TSX: QTRH, NASDAQ: QTRH
Strengthened deal capabilities
Evolved target focus
Expanded pipeline
~$6M in expenses saved
through restructuring
$145.1M jury verdict in trial
versus Apple
Strong finish to 2018—momentum
carried into Q1 2019
Aligned compensation plan to long-term share
price appreciation
M&A
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Compensation Plan Tied to Long-Term Share Appreciation
Executives and Board members have equity ownership requirements
TSX: QTRH, NASDAQ: QTRH
Smaller short-term cash incentives
Equity-based incentives driven by long-term share price performance
Key Themes Short-term cash incentives Long-term equity incentives
maximum
20%of incentive
target
only earned if 5-year share price target hit
shares can’t be sold for up to 8 years
30% 3-year vesting periodoptions
70%PSUs
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Financial Metrics
Revenue1 (millions) Adjusted EBITDA1
(millions)
Restructurings in 2018 at WiLAN & IRD to save ~ $6 million/year
TSX: QTRH, NASDAQ: QTRH
0
20
40
60
80
100
120
140
2016 2017 2018 TTM
WiLAN Acquisitions
-20
-10
0
10
20
30
40
50
60
70
2016 2017 2018 TTM
WiLAN Acquisitions Corporate
1: VIZIYA and IRD were acquired in May and June of 2017, respectively.
Q1 2018 Q1 2019
Q1 2018 Q1 2019
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WiLAN: a cash flow generating business (000’s)
TSX: QTRH, NASDAQ: QTRH
7.0
10.47.5
9.5 8.4
0.8
11.5
49.7
-8.1
3.3
-6.8
5.3
11.6
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
~$4M annual expenses removed in 2018
WiLAN cash from operations
Revenue >$850M, Adj EBITDA >$400M last 10 years; $135M in dividends and buybacks
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Growing Recurring Revenue
5.1
13.4
21.9
2016 2017 2018
Recurring Revenue1
(millions)
1.6
15.8
4.4
Wilan IRD VIZIYA
Recurring Revenue by Portfolio Company
(millions) (2018)
108%
CAGR
Growing Recurring Revenue
TSX: QTRH, NASDAQ: QTRH1: VIZIYA and IRD were acquired in May and June of 2017, respectively.
Q1 19 recurring revenue $5.6M up 33% compared to Q1 18
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($000’s, except per share data)As at
March 31, 2019
As at
December 31, 2018
Cash and cash equivalents $50,406 $63,929
Short-term investments, including restricted amounts $3,361 $3,239
Total assets $246,420 $237,412
Total debt $3,118 $3,070
Dividend declared per Common Share C$0.0125 C$0.0125
3.5% Dividend yield (as at May 9, 2019)
Strong Balance Sheet
Deployed $67.4M on
three acquisitions
in 2017
Cash & cash equivalents >$70M today (post Q1)
Strong Balance Sheet
TSX: QTRH, NASDAQ: QTRH
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2018: Money Returned to Shareholders
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2018
$4.6M dividends and buybacks paid
2009 – 2018
$135M dividends and buybacks paid
1313
M&A Strategy
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Our Focus
Intelligent Systems
Licensing
Verticalized enterprise
software and solutions
servicing large and
established industries
Technology-enabled
companies servicing
converging industries
Technology innovation
and licensing
Enterprise Software
TSX: QTRH, NASDAQ: QTRH
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Deal Flow: Target-Rich Environment*
Revenue<$10M
~30,000companies
Revenue$10-$50M
~7,000companies
Revenue$50M-$1B
~2,500companies
Revenue>$1B
~300companies
Large addressable market for accretive technology-centric M&A
FOCUS‘S
*Global Enterprise Company Data: ISV World, February 2018 TSX: QTRH, NASDAQ: QTRH
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Our Playbook
Recurring Revenue
Positive EBITDA
High Customer Retention
Profitable Growth
Predictable Cash Flows
Dedicated Management
Team
Organic Growth Upside
Ability to Enhance
Operations
ROIC Target 15-20%
LTM EBITDA Multiple Focus
Earnings vs Revenue Growth
LTM Revenue < $50M
A portfolio with sustainable revenue, earnings and cash flow growth
Our Sweet Spot Financially Disciplined Buyer
TSX: QTRH, NASDAQ: QTRH
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Generating Significant Deal Flow
1. Portfolio companies’ industry and market knowledge
2. Financial community
3. Agents and brokers
4. Industry specific networking
5. Strategic partnerships
6. Existing customers and suppliers
Increase internal resources over time and ramp deal volumes
Virtual M&A ecosystem combines internal and external resources
Experienced M&A team
100+ transactions
$6B+ deployed
capital
20+years M&A experience
TSX: QTRH, NASDAQ: QTRH
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Integration Strategy
Autonomy largely retained by portfolio companies
Improve operating metrics
Garner industry expertise
Provide access to capital
Corporate driven M&A process
Today TomorrowIdentify cost and revenue synergies
Shared go-to market and product development strategies
Expanded business unit-driven M&A
Streamlined and centralized infrastructure
TSX: QTRH, NASDAQ: QTRH
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How We Measure Success
Organic Revenue Growth
Acquisition Revenue Growth
Adjusted EBITDA
Free Cash Flow
Recurring Revenue %
reinvest cash flows into new investment opportunities
Incentivize businesses to improve cash flow & profitable growth
Return on Invested Capital 15-20%
TSX: QTRH, NASDAQ: QTRH
2020
Portfolio Companies
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Financial Highlights
Predecessor business to Quarterhill
TTMRevenue &Adj EBITDA
IndustrySegment
21
Select Attributes Investment Highlights
Turn-key Licensing
Reputation and Proven Track Record
Professionalism
Capital
Stability
44 Partners
Cash Flow Generator
400+ Licenses
Jury trial victory vs Apple
60 Patent Portfolios
WiLAN Today
Patent Licensing
$47.1M &$10.3M
TSX: QTRH, NASDAQ: QTRH
Licensing
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Financial Highlights
Date Acquired
TTMRevenue &Adj EBITDA
IndustrySegment
22
Select Solutions Investment Highlights
Truck Compliance
Traffic and Bridge Monitoring
Toll Collection
Weigh-in-Motion (WIM)
Traffic Safety
Global Presence
Evolving Technologies
Stable Revenue Base
Strong Management Team
Established Niche Player
IRD TodayIntelligent Systems
Intelligent Transportation Systems (ITS)
June 1, 2017
$46.9M &$4.4M
TSX: QTRH, NASDAQ: QTRH
2323
Enterprise Software
Select Solutions Investment Highlights
ERP Agnostic
Innovative Culture
High Profitability
Strong Management Team
Established Niche Player
VIZIYA Today
Analytics
Scheduling
Maintenance Budgeting
Mobile Enhancement
Warranty Tracking
Financial Highlights
Enterprise Asset Management Software
May 4, 2017
$11.2M &$1.3M
Date Acquired
TTM Revenue & Adj EBITDA
IndustrySegment
TSX: QTRH, NASDAQ: QTRH
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Management
Doug Parker, President & CEO
Shaun McEwan, CFO
Prashant Watchmaker, SVP & General Counsel
Russ Stuebing, SVP Corporate Development
Neil Urquhart, SVP Human Resources
Corporate Info
Ticker: QTRH on NASDAQ and TSX
Shares Outstanding: 118.6M
Market Cap1:
NASDAQ: ~$130M
TSX: ~$170M
Dividend Yield1: 3.5%
Analyst Coverage:
Canaccord
CIBC
Cormark
Board of Directors
John Gillberry, Chairperson Paul McCarten
Jim Skippen, Vice-Chairperson Doug Parker
Roxanne Anderson Rick Shorkey
Ron Laurie
1: as at June 11, 2019 TSX: QTRH, NASDAQ: QTRH
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Significant opportunity for accretive acquisitions
Proven playbook for value creation—opportunity to get in on “ground floor”
Strong balance sheet—cash >$70M post-Q1 2019
Damages trial vs Apple set for August 2019—potential catalyst
Businesses recently restructured to improve operational efficiency
Investment Highlights
TSX: QTRH, NASDAQ: QTRH
Investor PresentationMarch 2018
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