Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Quarterhill Inc (QTRHF, Financial) reported a 12% increase in Q3 revenue, reaching $38 million compared to the previous year.
- The company has a substantial revenue backlog of $475 million, providing good visibility into future revenue streams.
- Quarterhill Inc (QTRHF) successfully expanded its global footprint with new contracts in Thailand, South Korea, and several U.S. states.
- The company is focusing on enhancing its technical capabilities and has added key hires to strengthen its project bid and development teams.
- Quarterhill Inc (QTRHF) expects to return to positive adjusted EBITDA in Q4 2024 and aims for revenue growth and margin expansion into 2025.
Negative Points
- Quarterhill Inc (QTRHF) reported a negative adjusted EBITDA of $2.8 million for Q3 2024, impacted by reserves taken for two tolling projects.
- The company's gross margin percentage decreased to 13% in Q3 2024 from 23% in the same period last year.
- There were cost overruns on two tolling projects, resulting in a $4 million reserve impacting revenue and margins.
- Quarterhill Inc (QTRHF) experienced a decline in cash and cash equivalents, ending Q3 with $23.1 million compared to $42.7 million at the end of 2023.
- The company is undergoing strategic right-sizing and restructuring, which may involve further workforce reductions to optimize operations.
Q & A Highlights
Q: Can you provide more details on the challenges faced with the tolling implementations and what actions are being taken to address them?
A: Chuck Myers, CEO, explained that the two contracts in question were established before his tenure. Both are now in revenue-collecting mode, but require further integration and renegotiation due to inflation impacts. The company has taken reserves to address potential costs, aiming to resolve these issues by year-end.
Q: How do you expect margins to improve in Q4 and into 2025?
A: Kyle Chriest, CFO, stated that margins should increase as projects transition from implementation to maintenance. The company expects positive EBITDA margins in Q4, aiming for mid to high single digits, and targets 10% or above in 2025.
Q: Can you discuss the tolling bid activity in North America and efforts to expand into Europe?
A: Chuck Myers noted increased bid activity, with several bids submitted and more expected. The company is also exploring partnerships in Europe and the Middle East, aiming to announce a sizable award by year-end.
Q: What is the outlook for the revenue backlog and cash flow?
A: Kyle Chriest highlighted a significant backlog of $475 million, with a substantial portion expected to be realized next year. The company anticipates positive cash flow from operations in Q4, driven by improved collections and billing processes.
Q: How should we view the Y Land dividend and its future potential?
A: Chuck Myers indicated that the $3.8 million dividend is ad hoc and not predictable. The company expects continued dividends but has limited control or visibility over their timing or amount.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
