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Research Note - Quarterhill Inc. (QTRH:TSX, $2.16|BUY $4.50 TARGET) IRD Awarded $13.8M Contract with NY State

This morning, Quarterhill Inc. (QTRH:TSX) announced that IRD was awarded a two-year $13.8M contract with New York State. The contract includes the installation and maintenance of permanent traffic data collection systems across NY state. IRD will be responsible for all parts, equipment, materials, labour and technical expertise to install and maintain the data collection sites. As such, we are increasing our estimates for the ITS business in 2023.

The contract also includes maintenance services for the State’s existing sites and weigh-in-motion sites and installation of new sites to grow New York State Department of Transportation’s (NYSDOT) data collection program. NYSDOT will utilize IRD’s iTHEIA non-intrusive data collection solution that eliminates the need for road closures during installation and maintenance. IRD’s iTHEIA product provides superior longevity in comparison to the previous intrusive technology used by NYSDOT.

The data collected will be used to summarize and interpret traffic information in order to assess transportation needs, determine highway infrastructure performance, and develop highway planning recommendations.


Our Thoughts: QTRH’s ITS business has now signed over $230M in new contracts in the last twelve months (Figure 1); a key element in the QTRH story that we think has gone unnoticed by the market given the magnitude of the potential WiLAN sale. We remind readers that we expect ITS to post accelerating revenue growth and provide steady recurring revenue (unlike WiLAN).

Our blue-sky scenario for Quarterhill would result in over $300M in cash on the balance sheet, which can be deployed at <10x EBITDA, adding $30M+ in ITS EBITDA. We remain very encouraged by the development QTRH has made to transition to a pure play ITS company – new management team, board changes, WiLAN strategic review, signing additional ITS contracts. We are maintaining our BUY recommendation and $4.50/share target price based on a sum-of-the-parts valuation.

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