Quarterhill (OTC:) Inc. (QTRH) has announced a significant increase in its Q1 2024 revenue, reaching $34.9 million, which marks a 23% rise from the previous year. The company’s adjusted EBITDA also showed improvement, turning a previous loss into a modest gain. A notable development in the quarter was the extension of a contract with the Illinois Tollway and progress with other implementations. Quarterhill’s strategic acquisition of Red Fox is set to enhance its software development capabilities and presence in the European logistics market. With a substantial backlog exceeding $500 million, the company is well-positioned for future growth and is focusing on expanding its margins and cash flow to establish itself as a key industry player.
Key Takeaways
- Quarterhill’s Q1 revenue increased by 23% year-over-year to $34.9 million.
- Adjusted EBITDA improved from a $3.8 million loss in Q1 2023 to a $0.2 million gain.
- The company’s tolling unit signed a 5-year contract extension with the Illinois Tollway.
- Acquisition of Red Fox aims to bolster European market presence and software development.
- Quarterhill has a revenue backlog of over $500 million, indicating strong future revenue potential.
- The company is focusing on margin expansion, positive cash flow, and becoming a major industry player.
Company Outlook
- Quarterhill is transitioning to a software-centric business model with higher margin potential.
- The company is not providing specific EBITDA guidance but expects growth throughout 2024, aiming for double-digit margins by year-end.
- The backlog, slightly reduced in Q1, is expected to be replenished during the year.
Bearish Highlights
- The company noted that tolling projects tend to have lower margins initially in the maintenance phase.
- Enforcement revenues were down in Q1 but are expected to increase in subsequent quarters.
Bullish Highlights
- Quarterhill completed the strategic acquisition of Red Fox, enhancing its software capabilities.
- The company expects to reduce working capital by 10-15% in the second half of the year.
- Cash and cash equivalents stood at $30.4 million, with an additional $5 million line of credit available.
Misses
- There was no specific EBITDA guidance provided for the year.
- The outcome of the ongoing litigation with Microsoft (NASDAQ:) remains uncertain and is too early to determine.
Q&A Highlights
- The company is focusing on growing EBITDA margins and reducing working capital.
- Long-term goals include reaching a 20% EBITDA margin.
- The company is confident in meeting its debt covenants, with convertible debentures maturing in October 2026.
Quarterhill’s Q1 2024 financial results reflect a positive trajectory, with increased revenue and an improved EBITDA. The acquisition of Red Fox and the tolling unit’s contract extension are strategic moves that showcase the company’s commitment to growth and market expansion. Despite some challenges, such as lower initial margins on tolling projects and an unresolved legal dispute with Microsoft, the company’s substantial backlog and plans for reducing working capital indicate a strong outlook. Quarterhill’s management team remains focused on achieving long-term profitability and shareholder value.
InvestingPro Insights
Quarterhill Inc. (QTRH) has shown an impressive 23% year-over-year increase in Q1 2024 revenue, with strategic moves signaling a bullish outlook. However, an in-depth look at the company’s financial health through InvestingPro metrics reveals a more nuanced picture. The company’s market capitalization stands at $140.77 million, indicating a modest size in the technology sector. Despite its growth, Quarterhill’s P/E ratio is currently negative at -2.92, reflecting investor concerns about profitability. Additionally, the revenue growth of 21.96% in the last twelve months ending Q1 2024 showcases the company’s capacity to increase its sales.
InvestingPro Tips suggest that while Quarterhill has been able to maintain dividend payments for 15 consecutive years, a noteworthy sign of stability, it is also quickly burning through cash and suffers from weak gross profit margins. These factors, combined with a valuation that implies a poor free cash flow yield, could be cause for investor caution. On the positive side, the company’s liquid assets exceed its short-term obligations, providing some financial flexibility.
For readers looking to delve deeper into Quarterhill’s financial prospects, there are additional InvestingPro Tips available, which can be accessed through the company’s specific InvestingPro page. These insights offer valuable perspectives on Quarterhill’s financial health and future profitability, which analysts predict could turn positive within the year. Using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to InvestingPro, unlocking access to the full list of tips and metrics that can guide investment decisions.
Full transcript – Wi-LAN Inc (QTRHF) Q1 2024:
Operator: Good morning and welcome to Quarterhill’s Q1 2024 Financial Results Conference Call. On this morning’s call, we have Chuck Myers, CEO; and Kyle Chriest, Chief Financial Officer. At this time, all participants are in a listen-only mode. Following management’s presentation, we will conduct a question-and-answer session during which analysts are invited to ask questions. [Operator Instructions] Earlier this morning, Quarterhill issued a news release announcing its financial results for the quarter ended March 31, 2024. This news release, along with the company’s MD&A and financial statements, are available on Quarterhill’s website and on SEDAR+. Certain matters discussed during today’s conference call or answers that may be given to questions could constitute forward-looking 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 SEDAR+. During this conference call, Quarterhill will refer to adjusted EBITDA. Adjusted EBITDA does not have any standardized meaning prescribed by IFRS. Please refer to the company’s Q1 2024 MD&A for full cautionary notes regarding the use of forward-looking statements and non-IFRS measures. Finally, please note that all financial information provided is in US dollars unless otherwise specified. I will now turn the meeting over to Mr. Myers. Please go ahead, sir.
Chuck Myers: Good morning, everyone and thank you for joining us on today’s call. In terms of the agenda today, I’ll discuss results for the quarter after which Kyle will take a look at the key financial results. And after Kyle, we’ll open it up to questions. Q1 summary; overall, we are pleased with the Q1 results which were in line with our expectations. Revenue was $34.9 million, up 23% from last year and adjusted EBITDA improved to positive $0.2 million from negative $3.8 million in Q1 last year. Q1 solid revenue growth and significant year-over-year improvement in adjusted EBITDA reflect the work we’ve done in the past year to strengthen our project management, integrate operations and manage expenses. Our substantial revenue backlog at quarter end was more than US$500 million which gives us good revenue visibility for the remainder of 2024 and into subsequent years. Kyle will look at these numbers in more detail in his section. For our business review, our two business units; tolling and enforcement, made progress in quarter one and their ongoing projects, as well as closing new business and advancing other opportunities through the sales pipeline. On the tolling side, we signed a 5-year extension with the Illinois Tollway and continue to make progress with our current implementations moving them closer to the operations phase later this year. Since our last call, we’ve seen progress on that front with E-470, CTRMA and OCTA in Orange County. Since joining, much of my time has been focused on stabilizing and streamlining the business. However, we are currently ramping up our bidding activity, and will be more aggressive during the remainder of the year in pursuing new opportunities. On top of all the work we’ve done to internally enhance our bidding process over the year, we think that the addition of Red Fox has further strengthened our bid potential. We announced the acquisition of Red Fox during Q1 and the transaction closed after the quarter in early April. As a reminder, Red Fox is a profitable and growing provider of automatic vehicle detection and classification or what we commonly call AVDC software to the tolling industry, but also, we believe with applications to our enforcement business as well. AVDC is responsible for the detection, classification and tracking of a vehicle as it enters an exit a tolling facility. Red Fox’s Quantum (NASDAQ:) software platform is unique in its ability to process captured data from both, LiDAR and impairment inductive loops. They are at the forefront of advanced AVDC solutions and have recently been recognized as such. Congratulating the Red Fox team, last week, we announced Red Fox has been recognized twice by the King’s Award for Enterprise in the UK, winning an award for innovation and another award for excellence in international trade. Perhaps unfamiliar here in North America, the Kings Award are considered very prestigious in the UK. The King’s Award recognize outstanding achievement by UK businesses in the categories of innovation, international trade, sustainable development and promoting opportunity through social mobility; and they’ve been honoring companies this way since 1965. We are obviously very pleased with the acquisition and to have them as part of the Quarterhill team. Our tolling unit is a customer of Red Fox as an integrator of their Quantum software. So we have first-hand experience with the quality performance and untapped potential of the product. As mentioned, we’re already working to integrate Quantum into our bids, and we see the potential to integrate it with both, our tolling and enforcement. Q1 was a good quarter for the enforcement business. Renewal and customer expansion activity was solid, with lots of singles and doubles in terms of contract size which is typical for that business, especially in the first quarter. These included a $4 million contract at Tennessee which is our first in that state, as well as new safety enforcement contracts in Washington, DC and New Jersey among others. Q1 is traditionally a slower quarter on the enforcement side, primarily due to weather related delays and lighter scheduling. However, results from that unit came in within target and we think we remain on plan for the year. In discussing our strategy; on our last call, I outlined the broad strokes of our 3-year plan which we believe will drive top line growth, margin expansion, positive cash flow. Foremost, we remain focused on leveraging improvements we’ve made in the past year to our project management and contract bidding processes to grow a world-class tolling enforcement units. At the same time, we’re looking at three areas we can strengthen those existing operations while expanding our capabilities in addressable market. The first is to leverage our footprint and expertise in Europe and to pursue tolling opportunities there. We recently had a large contingent from the Quarterhill companies and technical staff attend the Intertraffic show in Amsterdam which is one of the premier events for the ITS industry in the world. The show gave us an opportunity to advance discussions with customers, prospects and partners on entering the tolling market in Europe and the addition of Red Fox to enhance our potential on this front. The second area of focus is on software development to support the tolling and enforcement businesses, as well as the penetration in other verticals. We’ve augmented our internal development goals with the acquisition of Red Fox and their Quantum solutions, and long term will continue with a buy-and-build approach to expanding our transportation software portfolio. AI and machine learning will play a big role in our development, as well in the transportation industry itself and we are focusing on these areas around visual technology, vehicle ID and classification, as well as data mining and analytics. These two areas could have positive applications for both our business units and we believe in the best interest and demand from our customers is there. The third element of our strategy is adapting and broadening our solutions to fit within select niches in the logistics market. Our focus here today is on intermodal terminals, ports, borders and asset managements. We have a small project underway that fits within this market for the rail logistics business. And our goal here is to see if we can expand the mandate with that customer and replicate it with other businesses. As I said a couple of months ago, we’re at an early stages of our go-to-market strategy and logistics but we believe the addressable market is significant and that developing these solutions is complementary to our existing verticals. Integration and right-sizing, a big part of our positive transformation this year has been integration and streamlining of our business. And while much of the heavy lifting has been done, we continue to look for ways to further drive efficiency and effectiveness through this business. In an effort to further streamline operations, improve margins, drive positive cash flow, earlier in May we made adjustments to our workforce and they are expected to save us approximately $3 million in 2024 and $4 million in annual basis going forward. Importantly, we don’t believe these changes will impact our growth capabilities as projects have transitioned from implementation to operations on the tolling side, we have excess capacity that we are able to streamline. We have teams in place that can effectively manage new mandates that come in and we have the need scale up beyond we can tap into contract and temporary services to do so. We also continue to add strategically to the team, in particular, looking to expand our sales team and add selectively, we’re seeking greater efficiency and output in other areas like technology. Finally, my last point on the integration front is we’ve launched the unified branding campaign throughout the business and unveiled our new look at the Intertraffic show I mentioned earlier under the Quarterhill brand. The brand brings together our entire portfolio under the Quarterhill name and includes a new look and feel website that I encourage you to engage with. In terms of our outlook; a little has changed since our year-end call in March. We look to build on the progress we’ve made by enhancing our large projects in implementation towards the operations phase, enhancing our technology footprint, expanding relationships with existing customers, winning strategic opportunities and growing both revenue and adjusted EBITDA. We plan to achieve this by remaining focused on growing our world-class franchises in tolling and enforcement, while investing in higher margin software applications and seeking expansion opportunities in the European market and logistics verticals. Our goal is to achieve growth while generating reliable cash flows in order to build a healthy and sustainable balance sheet capable of supporting both organic and acquisitive growth strategies. We expect our cash position to improve as we move through 2024 as we realize milestone payments on several ongoing tolling projects as we benefit from a leaner, more optimized organizational structure. In closing, we’re making progress with improving our financial results, enhancing our software solutions and optimizing our cost structure. We’re obviously not done and we have more work to do on all fronts but we are doing it from a position of strength. We have excellent ITS assets, a great team and extensive customer base in both business units and a significant revenue backlog that gives us stability and visibility looking forward. We are very focused on improving our cash flow position which Kyle will touch on and we remain very excited and optimistic with our prospects to become a major player in the industry. Simply put, we want to be number one or number two in our markets and we have the foundation in place to achieve that. With that, I’ll turn it over to Kyle. Kyle?
Kyle Chriest: Thank you, Chuck and good morning, everyone. Before we get into the financials, I want to remind everyone that with our Q1 2024 results, we have switched to reporting from CAD to USD. A significant portion of our sales expenses, assets and liabilities are denominated in US dollars. Our internal budgeting and reporting processes, their structure around this currency and the move to USD while enhancing our internal management efficiency and external stakeholders ability to assess our financial performance. Secondly, please note that all discussion on Q1 2023 financials reflects only the results of our ITS business. Wireline financial results in Q1 2023 are reflected in the discontinued operations line items on our P&L and cash flow statement as that business was sold in June 2023. With that I’ll start with a look at revenue in the quarter. Q1 revenue was $34.9 million, up 23% year-over-year. The increase for the quarter was due to improved performance from our tolling unit which saw incremental revenues and had experienced cost overruns in the Q1 2023 period that it negatively impacted revenue. Our enforcement unit delivered another quarter with steady and reliable contribution. This contribution was predictably reduced in Q1 which is a seasonally low quarter and of course, that ramps back up in the remaining three quarters of the year. As Chuck touched on in his section, at the end of the quarter, we had significant backlog of more than $500 million, providing good visibility into revenue for the next several years. Of note, a large portion of the backlog is the higher margin contracted maintenance revenue versus implementation revenue. We expect this to result in improved margins as we move throughout the year. However, as we have said previously, for those tolling projects that have recently moved into the maintenance phase, margins tend to start out lower at the launch date and rise over a period of a few quarters before stabilizing. Goss margin percentage in Q4 was 18% for the quarter compared to 13% in Q1 last year. The increase in gross margin is primarily due to improved margin profile on tolling implementation project which experienced expense overruns in the prior year period. The increase in gross profit margin percentage is also due to improved margins on certain tolling projects that have transitioned from implementation to maintenance. Total operating expenses for Q1 2024 were $10.5 million compared to $11.6 million in Q1 2023. The decrease was primarily due to lower sales, general and administrative or SG&A expenses and R&D expenses. SG&A was $6.4 million compared to $7 million in Q1 2023. As a percentage of revenue, SG&A in Q1 2024 was 18% compared to 24.5% in Q1 2023. We have work to drive efficiencies in the business through our integration efforts which are reflected in the year-over-year decrease in SG&A. With the streamlining initiative, Chuck mentioned earlier, the majority of the $3 million in 2024 savings will be expected inside cost of goods sold. There are some SG&A savings as well but also some key SG&A investments we need to make to grow the business. Overall, we expect to hold SG&A cost increases year-over-year to under 10%. Q4 Adjusted EBITDA was positive for the fourth quarter in a row at $0.2 million, up from negative $3.8 million in Q1 of last year. Adjusted EBITDA improved year-over-year due to stronger performance from the tolling unit supported by steady results from the enforcement unit. As a reminder, Q1 has seasonal impact on the enforcement unit with its results expected to strengthen in the Q2 to Q4 period. We expect adjusted EBITDA to grow and for margins to improve as we move throughout the year. This will be driven by the enforcement unit moving into a seasonally stronger quarter, and with certain tolling projects generating higher margin revenue having moved into the contract operations phase from the implementation phase. Turning now to the balance sheet. At quarter end, we had adjusted working capital of $75.4 million compared to $78.9 million at the end of 2023. Quarterhill has adopted amendments to IAS 1 which became effective January 1, 2024. These IFRS amendment, specify that conditions that exist at the end of our reporting period are those that will be used to determine if the right to the first settlements of liabilities exists. The amendments define a settlement of a liability to include settlement through company’s own equity instruments. This means that we must now classify our convertible debentures as a current liability, even if the expected repayment or conversion is more than one year away, and even if it is not expected to be settled in cash. As a result, we are using adjusted working capital, a non-IFRS measure, to highlight the strong working capital position that we have. Adjusted working capital is defined as working capital adjusted for convertible debentures and derivative liabilities. As a reminder, our convertible debentures mature October 30, 2026 [ph]. We ended the quarter with cash and cash equivalents of $30.4 million compared to $42.7 million at the end of 2023. Cash used in continuing operations in Q1 was $10.1 million compared to $6.6 million in Q1 last year. Primary uses of cash in Q1 were related to working capital adjustments which included $5 million in payables, a $2 million increase in unbilled revenues, and $1.5 million of cyclical inventory purchases. Other uses of cash included debt repayments and interest expense. As Chuck mentioned, improving our cash flow is a top priority and integral to our strategy. The declining cash in Q1 is primarily due to the timing of collections on certain contract milestone payments which is reflected on the balance sheet in unbilled revenue and receivables. As stated on our last call, our outlook for cash in 2024 is that we expect to generate positive cash from operations for the year. Due to the nature of our business, operating cash flows may vary significantly between periods due to changes and timing and working capital balances, namely with collections and payments. Finally, last year, we amended our credit agreement to provide for covenant relief that ran until March 31, 2024. As of March 31, 2024, we were well on side of these covenants and are projecting to remain well on side of them based on our business plan. This concludes my review of the financial results and I’ll now turn the call over to the operator for Q&A.
Operator: [Operator Instructions] Your first question comes from Gavin Fairweather with Cormark.
Gavin Fairweather: Maybe just to start out on the European tolling opportunities. I know that the business has an existing footprint in that market but maybe speak through your efforts to prepare to enter that market in a more fulsome way for tolling? Or are you hiring some more experienced tooling people in that market. Are you having discussions with local players around partnerships? Maybe just talk about the effort today?
Chuck Myers: Well, you just hit on both of the key points. We do actually have some quite experienced tolling folks in Europe today that had been primarily focused on the safety and enforcement piece. But as we mentioned earlier, we did do our first kick-off in Europe. As the company, we’ve been very careful about where we’ve been spending money but this was our first big conference which was Intertraffic in Amsterdam which is a large conference that happens every two years but this was actually a 4-year window, I believe because of COVID. So we do have good resources in Europe and good partnerships and we are actively and aggressively pursuing those now and looking for just the right opportunities. We have a couple of opportunities in the near term that we think we’re probably going to be bidding on. And so we expect to possibly see some small wins by the end of the year but probably early into the 2025.
Gavin Fairweather: Thanks for that. And maybe just in general, you can speak to the cadence of kind of tolling RFPs hitting the market and kind of how you’re feeling about the ability to put up a good win rate in that business as you’ve revised some of your bidding mechanisms?
Chuck Myers: Yes, I think it’s important to understand that the kind of value of this business is the length of the relationships with the customers. To give you, we continue to expand our existing customers. We’re in a number of negotiations on expansion and existing relationships has kind of witnessed, as we talked about our expansion in Illinois, we have a number of those discussions ongoing. And so those you won’t necessarily be see bid in the kind of the public markets. You’ll hear about them after we announce the extensions and those can be a fairly significant portion of our business, probably a very large portion of our business. So we do see a good cadence right now with several RFPs coming hitting the streets now out or that we’ve been we have a pretty good line on for the next 12 months. So the cadence is how you announce it has a lot to do with all of the political process that goes through these things as they’ve been moving forward. I would be probably questionably pressed to give you any exact times on that. But we do see good market action right now and especially in our expansion activities.
Gavin Fairweather: It’s good to hear that. Maybe just on EBITDA margins, I mean, obviously moving profitability higher as a priority. I think that you’ve talked in the past have had a mid-teens target for EBITDA, maybe 20% longer term. I guess I’m just curious like how much of a move we can see as more of these EPC projects slip into maintenance versus kind of how much have the move or require achieving greater scale for the business and some additional wins or M&A? Just curious for your thoughts that.
Chuck Myers: I don’t know that. I mean, we think a lot of it’s going to come from operations. As we’ve mentioned in the past, there’s a hangover in this company from, probably — I mean, this is speculation on my part. The Hangover goes back to all the way, even probably four quarters you bought that company where there were previous under previous ownership they had bid jobs very aggressively and I probably underbid them with the purposes of maybe promoting revenue there. May be not should have been promoted so hard. So I think a lot of the margin enhancement just becomes as we spend a lot of time with our customers on these implementations and cleaning them up and cleaning up any of the software changes that need to be done. A lot of that margin improvement just comes with time and hard work. And so we’re moving that forward. And I think that’s why you’re starting to see some — while it was small that was a 3% margin expansion, I think Kyle just reported. And we expect to continue to see that. Current jobs we’re bidding much, let’s say, with higher margins and we’re more careful about we do, how we do it. And the other side of it is we expect to bid jobs in the future, much more along a software license basis with much higher margins as we kind of transitions how the company positions itself as more of a software company rather than just a simple integrate.
Gavin Fairweather: That’s great to hear. And I apologize. I thought that I’d never ask a Wireline question on a call like but I could see — NASA awarded announced late last week versus Microsoft. I’m sure there was I’ll just kick-off kind of more legal wrangling but has that changed your view on the value of your equity stake or not at all.
Chuck Myers: The reality is Gavin, you have a lot of experience personally with patent and patent litigation, don’t hold your breath. Microsoft is a big company. They have a reputation of taking things literally all the way to the Supreme Court. I can’t remember when I read that, whether it had been through even if that was an appellate, will I don’t think that’s an appellate ruling. So I think we’ve got a ways to go before you’re going to realize anything on that.
Gavin Fairweather: And then maybe just for Kyle. Do you have an estimate on how much excess working capital might be in the business or how much you might be able to pull out between kind of Q2 to Q4 this year as well? Some of these milestones are achieved; any sense there [ph]?
Kyle Chriest: There is an excess. We built up payables as well which we saw we paid down this quarter which was kind of the offset to that excess. But we are targeting to improve working capital somewhere around 10% to 15% overall from where we are today. And that improvement will come in across Q3, Q4 and the year.
Gavin Fairweather: Okay. 10% to 15% reduction in your working capital. Okay, that’s it for me. Thanks so much.
Operator: Your next question comes from Todd Coupland with CIBC.
Todd Coupland: Good morning, everyone. I had a balance sheet question as well. Could you just tell us what the likely outcome will be on the current debt and the converts and what does that look like, I guess, post maturity?
Chuck Myers: Kyle, you want me to take that or you want to take it?
Kyle Chriest: No, I can jump in. I guess we’re ways away on the converts and the convertible debt, Todd. Were ideally hoping the share price would be up and we will be converting at in the future. And not diluting the stock, very heavy, the 3D target prices out there and that’s a good price and we got a couple of years to get there. On the debt, we’re back on side of our covenants and we’re forecasting to be on side of our covenants. I had mentioned in our script earlier. And with that debt, it matures around the same time I think at that point in time, we should be looking to extend or looking to pay down the debt depending on the position of the business and what’s best at that time but also a couple of years old.
Todd Coupland: Okay. I’m sorry, I’ve forgotten this number. I thought you said October 2024 maturity.
Kyle Chriest: No.
Chuck Myers: 2026, Todd. We have 2.5 years.
Todd Coupland: 2.5 years. Okay. My apologies for my ignorance on that date. And so the takeaways fine. I mean, you have $50 million in cash and no cash calls for a while. The $21 million debt. How does that compare to your available lines of credit? Do you have a space there, if necessary?
Kyle Chriest: Right now, at the end of the covenant relief period, we reopened up our $5 million line and that’s…
Todd Coupland: Okay. So $5 million on top of the $21 million?
Kyle Chriest: Yes.
Todd Coupland: Okay. And second question for me is, what should the EBITDA margin progression be this year? You’re pretty low in Q1. You have had some high single digit, low double digit EBITDA margins over the last year or two. Yes. Talk about the progression this year and the path to get back to double digits, what type of expectation should investors have on that? Thank you.
Chuck Myers: You want me to take that, Kyle or you want to take that?
Kyle Chriest: I can jump in and let you share some color. Todd, we weren’t giving specific guidance on EBITDA this year but we do expect it to grow throughout 2024. You have to also keep in mind that in the current quarter, the enforcement revenues which bring in solid margins are down in Q1 and will ramp back up in Q2, Q3 and Q4. We want to get to double digit EBITDA as quick as we can. And then longer term, we do want to get it up to that 20% but we’re looking at a couple of years to get there. Anything to add there, Chuck?
Chuck Myers: No. I’d just say, look, I think I’ve mentioned this before, our goal is to exit as close to double digits as we can at the end of the year. And I think I’ve been fairly — that’s been I’ve been pretty transparent about my goal there and that is still our goal and we still think it’s achievable.
Operator: [Operator Instructions]
Todd Coupland: Sorry. Last question for me is on the backlog just down a little bit sequentially. How should we think about the puts and takes in the backlog quarter to quarter versus all the activity you talk about in RFPs and growth in revenue over the course of the year? That’s it for me. Thanks a lot.
Kyle Chriest: Thanks, Todd. On the backlog side, we converted a lot of the items that I think you’d previously mentioned. We had some high-probability pipeline. We know those renewals are coming and a couple of those came in. Chuck mentioned, Illinois and converted now to backlog. We had a couple of wins during the quarter but we overall I think we’re sitting at above $500 million right now. So we drained the backlog a little bit but Q1 wasn’t a large planned replenishing quarter. We still have bids out there and we look to refill as we continue throughout the year.
Operator: There are no further questions at this time. I will now turn the call over to Mr. Myers for closing remarks.
Chuck Myers: Great. Thank you. I just wanted to — a big thank you to all of our shareholders. I realize you’ve been through a lot of things with Quarterhill over the years. Rest assured, me and my team, and Kyle and his team, are working extremely hard to really get this thing going in the right direction, and we’re pretty pleased with where we are. We know we have a lot of work; we’re really focused on moving cash up this year. We want to thank the analysts and the coverage. And to be honest, all of our employees. I mean, everybody is — is grinding now, we’ve got great employees. And over the few days, you’ll hear about the fact that we brought in a new executive program manager to — Kim [ph] comes out of the defense and aerospace business to manage overall our programs, as well as Kyle’s beefed [ph] up his team with three senior significant financial folks just managing projects. So we’re very happy with our team and we’re very happy with the kind of the restructuring process that’s going on. So with that, I’ll just say, thank you, again, to all of our shareholders and for taking the time and being supportive.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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