Quarterhill Inc.

Good morning and welcome to Quarter Hills Q2 2024 Financial Results Conference Call. On this morning's call, we have Chuck Myers, CEO and CalPriest Chief Financial Officer. At this time, all participants are in listen-only mode. Following management's presentation, we will conduct a question and answer session during which analysts are invited to ask questions. To ask a question, please press star 1 on your touchtone phone to register. Should you require any assistance during the call, please stress our zero. Earlier this morning, Quarter Hill issued a news release announcing its financial results for the three and six months ended June 30th, 2024. This news release, along with the company's NDNA and financial statements, are available on Quarter Hill's website and Cedar Plus. Certain matters discussed during today's conference call are answers that may be given to questions could constitute forelooking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's annual information form and other public filings that are available on CEDAR+. During this conference call, Quarterhill will refer to adjusted EBITDA. Adjusted EBITDA does not have any centralized meaning prescribed by IFRS. Please refer to the company's Q2 2024 MDNA for full cautionary notes regarding the use of forward-looking statements and non-IFRS measures. Finally, please note that financial information provided is now in U.S. dollars unless otherwise specified.

I will now turn the meeting over to Mr. Myers. Please go ahead, sir.

Good morning, everyone, and thank you for joining us on today's call. In terms of the agenda today, I'll discuss the results for the quarter, after which Kyle will take a look at the key financial results. After Kyle, we'll open it up for questions. Q2 summary, overall, we're pleased with the Q2 results, which were in line with our expectations and showed progress on our goals to drive top-line growth, increase adjusted EBITDA margin, and improve cash flow. Revenue was 41.5 million, up 7.5% from Q2 last year. Adjusted EBITDA was 1.7 million, down from 2.9 in Q2 last year, but up from 200,000 in Q1. Cash from operations in Q2 was 802,000 compared to cash used in operations of 6.9 million in Q2 last year. This obviously is a big swing year over year and reflects a lot of the work we've done in the past year to strengthen program management, integrate operations, and manage expenses. In fact, this was the first quarter of positive cash from operations for Quarter Hill in two years. Our substantial revenue backlog at the quarter end was $500 million, which gives us good revenue visibility for the remainder of 2024 and into subsequent years. Kyle will take a look at these numbers in more details in his section. Q2 business unit review and Q2 are two business units tolling enforcement executed on their ongoing projects as well as closed new and follow-on businesses and advanced other opportunities through the sales pipeline. On the tolling side, we made progress on several sections of highway with CTRMA in Texas as our activity under that contract continues to grow. We've also seen progress with E470 and OCTA in Orange County. as those projects move towards acceptance and operations respectively. We remain active with our bidding activity with a focus on both follow-on business and landing new customers. Regarding new customers, we expect to have a couple of bids in by the end of the year, subject to delays in the bidding process that can occur at the customer end. In addition to the work we've done internally to enhance our bidding process over the year, we think that the addition of Red Fox has strengthened our value proposition. We announced the acquisition of RedFox during Q1 and the transaction closed Q2. As a reminder, RedFox is a profitable and growing provider of automated vehicle detection and classification software to the tolling industry, but we also believe with applications to our enforcement business as well. AVDC is responsible for the detection, classification, and tracking of a vehicle as it enters and exits tolling facilities. In Q2, Red Fox was recognized for its technical prowess, winning two King's Awards for Enterprise, one for innovation and the other in excellence in international trade. The King's Awards are considered very prestigious in the UK, with King Charles himself involved in the recognition of the winners. The awards recognize outstanding achievement by UK businesses in categories such as innovation, international trade, sustainable development. And they've been honoring companies this way since 1965. We're obviously very pleased with the acquisition and to have them as part of the quarter health team. As mentioned, we are already working to integrate their quantum software into our bids, and we see the potential to integrate it with both of our tolling enforcement units. Our enforcement unit delivered solid results in Q2, with this being one of the seasonally strong quarters. The business continues to generate steady and reliable performance with plenty of follow-on renewal and new customer contracts. These include new agreements in North and South Dakota, New York, California, and Idaho. Subsequent to quarter end, we announced two international deals, one in South Korea and one in Thailand. Of note, our contract in North Dakota was for our artificial intelligence vehicle classification system used for traffic monitoring. This involves the use of AI video automatic traffic recorders, or ATRS, that count and classify vehicles. which is essential for highway planning, design, maintenance, and management. As you know from our previous calls, AI and machine learning applications in ITS are an area of great interest for us going forward, and I'll touch on that shortly. Strategy. Our three-year plan remains focused on leveraging improvements we've made in the past year to our project management and contract bidding process to grow our tolling and enforcement At the same time, we're looking at three areas where we can strengthen those existing operations while expanding our capabilities and market reach. The first is to leverage our existing footprint and our safety and enforcement expertise in Europe to pursue tolling opportunities. On our last call, I spoke about our participation at the inter-traffic show in Amsterdam, which took place during Q2 and is one of the premier events for the ITS industry. The show gave us an opportunity to advance discussions with customers, prospects, and partners on a broad number of tolling enforcement opportunities throughout Europe, with the addition of RedFox enhancing our potential on this front. The second area of focus is on software development to support tolling enforcement businesses, as well as our penetration into other verticals. The addition of RedFox and their quantum solution helps us to advance our goals there. In long term, we will continue with our buy and build approach to expanding our suite of applications. AI and machine learning will play an important role in development of our technology roadmap, as will our focus on visual technology and data mining and analytics. We're already active on this front, as I just mentioned, with the North Dakota wind. And ultimately, these applications will provide a natural lead-in to our third area of focus, which is logistics. We've had a big development on the AI machine learning front with the addition of our newest board member, which I'll discuss in a moment. On the logistics side, we have a project underway that is going well, and we expect to see the mandate with this customer to expand this year while simultaneously build out our sales pipeline. We're in the early stages of our go-to-market strategy here, but we believe the addressable market is significant and that developing these solutions is complementary to our existing verticals. Integration and rightsizing. A big part of our positive transformation in the last year has been the integration and streamlining of our ITS business, and this work continues, especially on the technology side. As part of our ongoing efforts to drive efficiencies, we announced restructuring with our Q1 results that was effective in Q2. While we have reduced headcount in certain areas of the business, where we believe growth will not be impacted, we also continue to strategically add to the team, in particular, expanding our sales team and adding select senior resources to help drive the execution on our three-year plan. Finally, during the quarter, we launched a unified branding campaign throughout the business and unveiled our new look at the InterTraffic Show, as I mentioned earlier. The branding brings together our entire portfolio of subsidiaries under the Quarter Hill name, with an overhaul of our customer-facing messaging and a new website. A board member, in keeping with the themes of AI and organizational change, we also announced today that Vineet Khosla has joined the Quarter Hill board effective immediately. Vineet is the chief technology officer at the Washington Post, where he's leading their engineering team and is driving force behind their technology vision and innovation strategies. Vineet is a pioneering researcher and a leading voice in AI, machine learning, and cloud computing, and has driven significant advancements in these fields. He joined The Post in 2023 and brings an extensive track record as an innovator and executive at some of the world's largest companies. Prior to The Post, Vineet was at Uber for five years, where he was responsible for the development of their map routing engine, which optimized routes and timing. Before Uber, He was at Apple for more than eight years. At Apple, he built the core framework for Siri's AI engine. He was an AI engineer at Siri when it was acquired by Apple in 2010. Those of you that have followed the Quarter Hill name for some time may recall that our previously owned business, YLAN, acquired the original Siri patents in 2016. Vinit played a key role in the development of the technology behind those patents. Finally, he earned a master's in artificial intelligence from the University of Georgia in 2005, so he's not a newcomer to this growing industry. Overall, we're very pleased to have Vinit join the board and look forward to him playing a role in the development of our product roadmap and our push to expand the software side of our business, especially with AI and machine learning. Outlook. Looking forward, our goal is to drive growth for revenue, adjusted EBITDA and cash flow in 2024 and beyond. We look to achieve this by capitalizing on the progress in our large tolling projects, the steady growth from our enforcement business, the expansion of our technology software footprint, and the opportunity to expand into new markets and verticals. Over time, this will result in the company generating reliable cash and building a strong balance sheet capable of supporting both our organic and acquisitive growth strategies. In closing, we're making progress and improving our financial results enhancing our software solutions, and optimizing our cost structure. We have a great team at Quarter Hill, excellent ITS assets, strong customer relationships, and a significant revenue backlog. We are very well set to be number one, number two player in the industry, and simply put, that is our goal. With that, I'll turn it over to Kyle. Kyle?