Q3 2023 Quarterhill Inc Earnings Call

Speaker 1: Good morning and welcome to Quarter Hill's third quarter fiscal 2020 three financial results conference call.

Good morning, and welcome to partner Health third quarter fiscal 2023 financial results Conference call.

On this morning's call, we have Chuck Myers, CEO and pile Kris interim Chief Financial Officer.

Speaker 1: On this morning's call, we have Chuck Meyers, CEO , and Kyle Kreist, Interim Chief Financial Officer.

Speaker 1: At this time, all participants are in listen-only mode.

At this time, all participants are in listen only mode.

Speaker 1: Following the management's presentation, we will conduct a question and answer session during which analysts are invited to ask questions.

Following the managements presentation, we will conduct a question and answer session.

During which analysts are invited to ask questions.

Speaker 1: To ask a question, please press star 1 on your touchtone phone to register.

To ask a question. Please press star one on your Touchtone phone to register.

Speaker 1: If you need any assistance during the call, please press star 0.

If you need any assistance during the call. Please press star zero.

Speaker 1: Earlier this morning, Carter Hill issued a news release announcing its financial results for the three in nine months ended September 30, 2023.

Earlier this morning harder Hill issued a news release announcing its financial results for the three and nine months ended September 30th 2023.

Speaker 1: The news release along with the company's MD&A and financial statements are available on Quarter Hill's website and on CEDAR Plus.

This news release, along with the company's MD&A and financial statements are available on quarter Hills website and on Cedar plus.

Speaker 1: Certain matters discussed during today's conference call or answers that may be given to questions constitute forward-looking statements.

Certain matters discussed during today's conference call or answers that may be given to questions could constitute forward looking statements.

Speaker 1: Actual results could differ materially from those anticipated.

Actual results could differ materially from those anticipated.

Speaker 1: Risk factors that could affect results are detailed in the company's annual information form and other public fillings that are available in CDER.

Risk factors that could affect results are detailed in the company's annual information form.

Other public filings that are available in theater.

Speaker 1: During this conference call, Quarter Hill will refer to adjusted EBTDA.

During this conference call quarter Hill will refer to adjusted EBITDA.

Speaker 1: Adjusted Ibida does not have any standardized meaning prescribed by IFRS.

Adjusted EBITDA does not have any standardized meaning prescribed by I F. R. S.

Speaker 1: Please refer to the company's third quarter, 2023, MDNA, for full cautionary notes regarding the use of forward-looking statements and non-IFRS measures.

Please refer to the company's third quarter 2023, MD&A for full cautionary notes regarding the use of forward looking statements and non ifr as measures.

Speaker 1: Finally, please note that all financial information provided is in Canadian dollars unless otherwise specified. I will now turn the meeting over to Mr. Myers. Please go ahead.

Finally, please note that all financial information provided is in Canadian dollars unless otherwise specified I.

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

Speaker 2: Great, thank you, Alan. Good morning, everyone, and thank you for joining us on today's call. In terms of an agenda today, I'll review the highlights for the quarter after which Kyle will take a look at key financial.

Great. Thank you Allen.

Good morning, everyone and thank you for joining us on today's call are in terms of an agenda today I'll review the highlights for the quarter after which Kyle I'll take a look at key financial results and after Kyle we'll open it up for questions before we get into our results I'd like to briefly introduce myself share with you. Some of the reasons why I'm excited to take on the CEO role at <unk>.

Speaker 2: And after Kyle will open it up for questions. Before we get into our results, I'd like to briefly introduce myself, share with you some of the reasons why I'm excited to take on the CEO role at Quarter Hill and what my near-term priorities and longer-term goals.

Hill, and what my near term priorities and longer term goals on I've spent 20 plus years in the technology industry as a CEO and board member at multiple companies, both public and private.

Speaker 2: I spent 20 plus years in the technology industry as a CEO and board member and multiple companies, both public and private. It was one of the co-founders of Transcore, which today is one of the leaders in the ITS industry. This is where I first crossed paths with our chairman, Rusty Lewis, who is also one of the founders of that business.

Was one of the co founders of Trans core, which today is one of the leaders in the I T. S. Industry. This is where I first cross paths with our chairman Rusty Lewis who is also one of the founders of that business hours.

Speaker 2: I was introduced to Quarter Hill earlier this year in an advisory role and officially joined the board at MIT.

I was introduced.

Quarter Hill earlier this year in an advisory role and officially joined the board in May taking on the CEO role appeal to me for several reasons, one I'm familiar with the industry and it has strong underlying growth dynamics to quarter Hills has excellent I T. S assets, good organic growth as well as the potential.

Speaker 2: Taking on the CEO roll appeal to me for several reasons. One, I'm familiar with the industry, and it has strong underlying growth, I mean.

Speaker 2: Two, quarter hills has excellent IPS assets, good organic growth, as well as the potential to serve as a platform for M&A down the road. Three, we have an opportunity here with a little more cleanup on our projects and integration to establish a positive cash flow, major player in the I-TIST industry.

To serve as a platform for M&A down the road three we have an opportunity here with a little more cleanup on our projects and integration to establish a positive cash flow major player in the eye test industry.

Speaker 2: And there is really only room for a few. And for the company has gone through significant transition over the past few years to become a peer play IPS company. During this transition period, Quarter Hill has largely flown below the radar in the investment community. And I believe there's an opportunity to create significant shareholder value, but we are establishing our story in executing on our growth depends.

And there was really only room for a few.

And for the company has gone through significant transition over the past few years to become a pure play I T. S company. During this transition period quarter Hill is largely flown below the radar in the investment community and I believe there's an opportunity to create significant shareholder value, but we are establishing our story and executing on.

Our growth potential.

Speaker 2: Since joining CEO in September , I've done a deep dive into the company's operations, spending the majority of my time with employees, customers, and partners on the ground in North America, Europe , and Asia. I've been impressed with those who have met so far and with the level of commitment, collaboration, that exists throughout the organization. I look forward to working with the team to achieve our objectives.

Since joining as CEO in September.

I've done a deep dive into the company's operations spending the majority of my time with employees customers and partners on the ground in North America, Europe, and Asia have been impressed with those who I've met so far and with the level of commitment collaboration that exists throughout the organization I look forward to working with the team to achieve our objectives.

Speaker 2: Beyond getting to know the team and seeing our operations in action, another reason for all my travels is I believe further integration opportunities exist to improve our operational efficiency in effect.

Beyond getting to know the team and seen our operations in action. Another reason for all my travels since I believe further integration opportunities exist to improve our operational efficiency and effectiveness much has been accomplished on the integration front over the last 12 months, but I think that some clean up is still required and I look to complete any further action.

Speaker 2: Much has been accomplished on the integration front over the last 12 months, but I think that some cleanup is still required and I look to complete any further actions by you.

<unk> by year end.

Speaker 2: Our strategy won't marketly change marketly in the near term. As I said, we have world-class ITS assets and polling and enforcement. And we're focused on growing these franchises and capitalizing on the positive trends in the ITS industry. My ultimate goal for the businesses to generate robust cash flows and to manage expenses in order to build a healthy balance sheet, capable of supporting both our organic and acquisitive strategies.

Our strategy won't markedly changed markedly in the near term as I said, we have world class I T S assets and tolling and enforcement and we're focused on growing these franchises and capitalizing on the positive trends in the I T. S industry My ultimate goal for the businesses to generate robust cash flows and to manage expenses in order.

To build a healthy balance sheet capable of supporting both our organic and acquisitive strategies.

Speaker 2: MNA isn't the top priority of ours right now, though we would look at tuck-ins if they meet our financial and operational criteria. To that degree, to the degree that we execute on our organic growth potential and create that balance sheet strength that I mentioned, we will create greater opportunities to accelerate our expansion through MNA.

M&A isn't a top priority of ours right now, though we would look at tuck ins if they meet our financial and operational criteria to that degree we to the degree that we execute on our organic growth potential and create that balance sheet strength that I mentioned, we will create greater opportunities to accelerate our expansion.

Through M&A.

Speaker 2: I'll spend a few minutes reviewing our results from the quarter. Looking at our headline numbers, revenue in Q3 was 45.7 million. Justin EBida was 1.9 million. Cash and equivalents were 60.9 million. At quarter end and revenue backlogs stood at more than US dollars of 500 million. Kyle will discuss these numbers in some detail in his second.

I'll spend a few minutes resolving reviewing our results from the quarter looking at our headline numbers revenue in Q3 was $45 7 million. Adjusted EBITDA was 1.9 million cash and equivalents were $60 9 million at quarter end and revenue backlog stood at more than U S dollars.

500 million Kyle will discuss these numbers in some detail in his section.

Speaker 2: quarterly revenue and adjusted EBITDA work up year over year due to top-line growth at both IRD and ETC and the positive impact from integration and cross-control initiatives made this year.

Quarterly revenue and adjusted EBITDA were.

Up year over year due to top line growth at both I R. D N E T C and the positive impact from integration and cost control.

Initiatives made this year.

Speaker 2: IRD, our Enforcement Unit, had another good quarter with revenue growth and strong order booking activity. At this point in the year, IRD has booked as much new business in 2023 as they did in all of 2020.

I R D. Our enforcement unit had another good quarter with revenue growth and strong order booking activity at this point in the year I R. D has booked as much new business in 2023 as they did in all of 2022 setting themselves up for continued momentum into 2024.

Speaker 2: Setting themselves up to continued momentum into 2020.

Speaker 2: Among those new orders in the quarter was a 13.7 million dollar traffic monitoring contract in Hawaii. These systems collect traffic volume, speed, vehicle classification and weight data to keep the road safe and acceptable in the vision.

Among those new orders in the quarter was $13 7 million dollar traffic monitoring contract in Hawaii, you systems collect traffic volumes speed vehicle classification and weight data to keep the roads safe and accept this accessible and efficient.

Speaker 2: Subsequent to quarter end, IRD has added a couple new way in motion related contracts, one in California and one in North Carolina. In both cases, we are also deploying our tax IRD tire safety screen service, which has been a nice increase in adoption.

Subsequent to quarter end ire D has added a couple new way and motion related contracts, one in California, and one in North Carolina in both cases, we are also deploying our tax IR D tire safety screening service, which has been a nice and it hadn't seen a nice increase in adoption this year.

Speaker 2: IRD's enforcement systems improve road safety and vehicle mobility and are a source of revenue for cash-strapped governments. Their business matches up well with some of the greater challenges in those that the industry is facing.

Irt's enforcement systems improve road safety and vehicle mobility, and our source of revenue for cash strapped governments their business matches up well with some of the greater challenges than those of the industry is facing.

Speaker 2: Their outlook for the remainder of the year in the 2020-24 remains strong subject to some of the typical seasonal factors in Q4 when the weather can delay install.

Your outlook for the remainder of the year and into 2024 remains strong subject to some of the typical seasonal factors in Q4, when the weather can delay installations.

Speaker 2: In Q3, ETC continued to make progress with its tolling implementation. So Ohio River bridges or ORB, as we call it, went live with ETC's back office toll system. In Texas-based CPRMA, went live with the first of its several roadside projects that were planned.

In Q3 E. T C continued to make progress with its tolling implementation, So, Ohio River bridges or O R. B as we call. It went live with E. T. Six back office toll system in Texas based C. T. R. M. A went live with the first of its several roadside projects that were planned with us with O. R. B. This is a 10 year contract.

Speaker 2: With ORB, this is a 10-year contract, with three years allocated for implementation and seven years for operations.

With three years' allocated for implementation in seven years for operations and maintenance. We're now in the early days of the operations and maintenance period in the final directs duration of the contract could be extended by another six years, if all our be exercised the option periods going live with nice milestone achievement for the EQT team and.

Speaker 2: We are now in the early days of the operations. The maintenance period and the final duration of the contract could be extended by another six years if ORB exercise the option.

Speaker 2: Going live was a nice milestone achievement for the ETC team and on a long-term stable contract that could last up to another 30 years.

On a long term stable contract it could last up to another 13 years with.

Speaker 2: With CTRMA, ETC launched its roadside toll collection system on State Highway 71 in Austin. This is the first of six toll road projects we expect we'll see CTRMA adopt ETC's toll collection system in the greater Austin area. Several other road segment projects are currently under construction are expected to go live next year in 2024.

The C T. R. M E E T C launched its roadside toll collection system on state Highway 71 in Austin. This is the first of six toll road projects. We expect we will see C. T. R. M. A adopt E. G fees toll collection system in the greater Austin area. Several other road segment projects are currently under.

Construction are expected to go live next year in 2024, we.

Speaker 2: We did have two toll projects in Q3 where certain revenue expected in the quarter was pushed out. We expect to pick up a portion of this in Q4 and the remainder in 2024. This was due to scheduling shifts and in the respective project timelines, something that is an uncommon large infrastructure project and the implementation.

We did have two toll projects in Q3, where certain revenue expected in the quarter was pushed out we expect to pick up a portion of this in Q4 and the remainder in 'twenty 'twenty. Four this was due to scheduling shifts and in the respective project timelines something that is an uncommonly large infrastructure project in the implementation stage.

Speaker 2: While we've managed to wrap our arms around the majority of the challenges we've experienced earlier in the year on certain projects, we did have one project incur cost overruns in Q3, which impacted revenue and margins. Kyle will speak to the impact of both these items in his section.

While we managed to wrap arounds arms around the majority of the challenges we've experienced earlier in the year on certain projects. We did have one project incur cost overruns in Q3, which impacted revenue and margins Todd will speak to the impact of both of these items in his section.

Speaker 2: Another positive key development at ETC in the quarter was that we're in the process of submitting bids on several new contracts after a period of focusing primarily on active implementations and our existing book of business. We've made significant changes in our bidding strategy with new personnel and processes put into place this year. We're being very selective in the opportunities that we choose to pursue and are currently engaged in a number of bids where decisions are likely to be made in 2024.

Another positive key development at E. T C. In the quarter was it we're in the process submitting bids on several new contracts. After a period of focusing primarily on active implementations in our existing book of business. We've made significant changes in our bidding strategy with new personnel and processes put into place. This year will be very selective in the APA.

Attunity said, we choose to pursue and are currently engaged in a number of bids where decisions are likely to be made in 2024.

Speaker 2: In the meantime, we continue to make progress on transitioning projects from implementation to the maintenance phase. One or two more could occur this year with the remainder that are currently in implementation expected to move into maintenance in 2021.

In the meantime, we continue to make progress on transitioning projects from implementation to the maintenance phase one or two more could occur this year with the remainder that are currently in implementation expected to move into maintenance. In 2024. These are long term projects with stable and reliable customers and we're only in the early innings of them. These projects have the potential for.

Speaker 2: These are long-term projects with stable and reliable customers and we're only in the early innings of them. These projects have the potential for the expansion over their lifespan and we believe they will continue to contribute to the health of the business for many years.

The expansion over their lifespan.

We believe they will continue to contribute to the health of the business for many years to come as.

Speaker 2: As far as our 2023 financial outlook is concerned, we said previously that we expect the ITS segment to generate positive adjusted EBITDA in 2023. Based on having achieved this result already after nine months and taking our Q4 outlook into consideration, we think we're well on our way to achieving this goal.

As far as our 2023 financial outlook is concerned we said previously that we expect the I T. S segment to generate positive adjusted EBITDA in 2023 based on having achieved this result already after nine months and taking our Q4 outlook into consideration, we think we're well on our way to achieving this goal.

Speaker 2: We continue to make changes at the board level to reflect the evolution of the business.

We continue to make changes at the board level to reflect the evolution of the business as discussed on our last call. During Q3, we added Bill Morris to the board and announced the retirement of Michelle to the Touche Bill is a seasoned leader with extensive managerial and board experience and we're pleased to have him joined it just put a pivot.

Speaker 2: As discussed on our last call during Q3, we added Bill Morris to the board and announced the retirement of Michelle to Fatoush.

Speaker 2: Bill is a seasoned leader with extensive managerial and board experience, and we're pleased to have him join at this pivotal time. Michelle has been contributing, been a contributing board member for well over a decade, and he will have an observer status on our board until the AGM next year. Michelle is also Quarter Hills designated board observer at Wiley.

Full time, Michelle has been contributing been a contributing board member for well over a decade and he will have an observer status on our board until the AGM next year. Michelle is also quarter Hills designated Board Observer at Wildland, you'll monitor developments, there and advisors have how to best optimize our residual interest in wildland elect.

Speaker 2: He will monitor developments there and advise us on how to best optimize our residual interests in wildlife.

Speaker 2: I'll echo sentiments made on our prior call by saying that on behalf of the entire team at Quarter Hill, I wish Michel the best in all his future pursuit.

I Echo sentiments made on our prior call by saying that on behalf of the entire team at quarter Hill I wish Michelle the best in all his future pursuits.

Speaker 2: In closing, I'm thrilled to be here today as CEO of the company and in a position to build on our strong ITS business. I'm working with the team on our three-year strategic plan, and we'll have more to report on the financial and strategic outlook for the business when we report our Q4 results next year.

In closing I'm thrilled to be here today as CEO of the company and in a position to build on our strong Ikea business I'm working with the team on our three year strategic plan and we'll have more to report on the financial and strategic outlook for the business. When we report our Q4 results next year for.

Speaker 2: For now, my top priorities are further integration of our ITS business and driving operational efficiency through our organization. Continue to, with the successful go-live dates on our tolling projects, with more expected this year and in the remainder of 2024.

For now my top priorities are further integration of our I T S business and driving operational efficiency through our organization continue to with the successful go live dates on our tolling projects with more expected this year and in the remainder of 2024 execute on our business development.

Speaker 2: execute on our business development pipeline, and in particular, win new tolling mandates in 2024, and continue to improve the financial performance to drive margin expansion with growing and reliable cash flows that can support both organic and acquisition-related growth.

Blind and in particular, when new tolling mandates in 2020 core and continue to improve the financial performance to drive margin expansion with growing and reliable cash flows that can support both organic and acquisition related growth.

Speaker 2: In a growing ITS industry where we have two strong platform businesses, a significant sales pipeline and revenue backlog, and a well-respected and talented team, we're well-positioned to execute on these goals.

And a growing I T S industry, where we have two strong platform businesses, a significant sales pipeline and revenue backlog and are well respected and talented team we are well positioned to execute on these goals.

Speaker 2: With that, I'll pass it over to Kyle for a closer look at the Q3 numbers. Kyle?

With that I'll pass it over to Kyle for a closer look at the Q3 numbers pile.

Thank you Chuck and good morning, everyone.

Speaker 3: note that all discussion on quarterly and year-to-date financial numbers reflect just the results of our ITS business. YLAN's financial results in 2023 and 2024

Note that all discussion on quarterly and year to date financial numbers reflect just the results of our Ics business wireline financial results in 2023, and 2022 are reflected in the discontinued operations line items in our P&L and cash flow statement as that business was sold on June 15 of this year with that I'll start.

With a look at revenue in the quarter.

Speaker 3: Revenue was forty five point seven million dollars of eight percent year-over-year

Q3 revenue was $45 $7 million up 8% year over year for the year to date period revenue was $135 9 million up 14%.

Speaker 3: year to date period, revenue was $135.9 million, up 14%. The increases are due to growth from both IRD and ETC. Chuck touched on two factors that impacted revenue in the quarter. One, we had approximately $3.8 million in revenue from

The increases are due to growth from both Iot and DTC.

Chuck touched on two factors that impacted revenue in the quarter. One we had approximately $3 8 million in revenue from two EPC projects and to a lesser extent, one Iot project that was pushed into future periods.

This is just the timing issue and we fully expect to recognize this revenue in future periods, including a portion of that in Q4.

Second we experienced cost overruns on one project that impacted revenue by $2 $3 million cost overruns have the effect of reducing the percentage of completion on a project and therefore it is revenue recognized this.

Speaker 3: Second, we experienced cost overruns on one project that impacted revenue by $2.3 million. Cost overruns have the effect of reducing the percentage of...

This $2 3 million dollar reduction to revenue results in an equal $2 3 million dollar reduction to margin and therefore EBITDA in the period.

Speaker 3: $3 million reduction to margin, and therefore EBITDA in the period.

As Chuck touched on in his section section at the end of Q3, we had significant backlog of more than USD $500 million, which is a good indicator for revenue visibility going forward.

Speaker 3: At the end of Q3, we had significant backlog of more than U.S. $500 million, which is a good indicator of what's going on.

Speaker 3: It should be noted that a large portion of this backlog is of higher-margin contracted maintenance revenue versus implementation revenue. Gross margin percentage in Q3 is $1.5 million.

It should be noted that a large portion of this backlog is of higher margin contracted maintenance revenue versus implementation revenue.

Gross margin percentage in Q3 was 23% and 21% year to date compared to 27% and 23% in the comparative periods last year.

Speaker 3: Gross Margin compared to the prior year periods is primarily due to the project I mentioned that experienced overruns in Q3. This will result in a reduced margin profile for the project. Of note, the decrease in Gross Profit Margin was partially offset by continuing strong performance in our enforcement operations.

Decrease in gross margin compared to the prior year periods is primarily due to the project I mentioned that experienced overruns in Q3.

This will result in reduced margin profile for the project.

Of note the decrease in gross profit margin was partially offset by continuing strong performance in our enforcement operations.

Sales general and administrative expenses or SG&A were down significantly in Q3 and for the year to date period SG&A was $8 2 million in Q3 compared to $11 2 million in Q3 of 2022.

SG&A as a percentage of revenue in Q3 was 18% compared to 27% in Q3 last year.

Speaker 3: Increase in SG&A largely reflects savings from our restructuring and integration activity in 2020.

The decrease in SG&A largely reflects savings from our restructuring and integration activity in 2023, along with their ongoing focus on driving efficiencies and controlling costs.

Q3, adjusted EBITDA was positive for the second quarter in a row at $1 9 million or four 2% of revenue up from $1 million or two 4% of revenue in Q3 last year.

Speaker 3: adjusted EBITDA was positive for the second quarter in a row at 1.9 million dollars or 4.2 percent of revenue.

Speaker 3: For the year-to-date period, Adjusted EBITDA was $646,000, compared to an Adjusted EBITDA loss of $1,000.

For the year to date period, adjusted EBITDA was 646000 compared to an adjusted EBITDA loss of $9 million in the same period last year.

The improvement year over year, due primarily to revenue growth and the decrease in SG&A.

Speaker 3: Improvements year-over-year are due primarily to revenue growth and the decrease in SG&A. Adjusted EBITDA in Q3 was impacted by approximately $2.3 million.

Adjusted EBITDA in Q3 was impacted by approximately $2 3 million.

Rising from the one project previously mentioned as well as by the revenue that was pushed out from Q3 to future periods.

As Chuck mentioned, we've previously said that we were targeting to achieve positive adjusted EBITDA in 2023 and based on our results year to date and our outlook for the rest of the year, we have confidence in this outcome.

Speaker 3: As Chuck mentioned, we have previously said that we were targeting to achieve positive adjusted EBITDA in 2023, and based on our results here today.

Cash used in continuing operations in Q3 was $2 3 million.

Speaker 3: $3 million and we ended Q3 with cash and cash equivalents of $60.8 million.

And we ended Q3 with cash and cash equivalents of $60 8 million essentially flat to the $61 million at the end of Q2 2023.

Speaker 3: September 30, 2023, we had working capital of $111.1 million, up slightly from the $109.5

At September 32023, we had working capital of $111 1 million up slightly from the $109 5 million at the end of Q2.

Speaker 3: Our outlook for cash over the remainder of the year is that cash will remain...

Our outlook for cash over the remainder of the year is that cash will remain flat. There is upside potential here. If we were able to reach milestones and time to deal and receive payment prior to December 31.

Speaker 3: There is upside potential here if we are able to reach milestones in time to bill and receive payment prior to December 31.

In closing Q3 saw some continued progress from the major steps we've taken this year to integrate the businesses and drive operational efficiency, we generated our second straight quarter of positive adjusted EBITDA, along with stronger top line and margin performance, we stabilized our cash balance in Q3 with the expectation that.

Speaker 3: generated our second straight quarter of positive adjusted EBITDA along with stronger top line and margin performance.

Cash will hold in Q4.

Speaker 3: This concludes my review of the financial results and I'll now turn the call over to

This concludes my review of the financial results and I will now turn the call over to the operator for Q&A.

Okay.

Speaker 1: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Again, if you have a question, please press far one on your touch tone phone.

Thank you ladies and gentlemen, we will now begin the question and answer session. Again, if you have a question. Please press star one on your Touchtone phone.

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One moment. Please for your first question.

Speaker 1: Your first question comes from Gavin Fairweather of Cormark. Your line is already open.

Your first question comes from Gavin Fairweather of core Mark.

Your line is already open.

Speaker 4: Oh hey good morning and thanks for taking my questions. I just wanted to start out on on ET.

Oh, Hey, good morning, and thanks for taking my questions. Just wanted to start out on an E. T. C. In terms of your book of of implementations, which are ongoing can you just discuss kind of your latest expectations on when these.

Speaker 4: I've discussed kind of your latest expectations when these projects are expected to go into maintenance and operations phases.

These projects are expected to go into the maintenance and operations Phase I think previously you said you know all of the Euro book of business to be kind of up and running.

Speaker 4: I kind of late 24 maybe early 25s, that's still roughly correct and maybe just...

My kind of late 'twenty four maybe early 'twenty five is that still roughly correct and maybe just run us through a with a bit more detail on my knees are things are expected to be up and running.

Speaker 2: yeah i think that uh... hide gavin this is truck miles uh... i think the the answer to question is we're actually seeing uh...

Yeah, I think that hi, Gavin this is Chuck Myers.

I think the answer your question is we're actually seeing.

Speaker 5: significant uptake in the implementation right now. I think we'll have some more things to report on that next quarter, as you can imagine, we're already into the fourth quarter. So we have some visibility on that. We have some visibility on that, so we'll be talking about that a little bit more next time. But of the existing projects that we were in, you know, serious implementation we expect those to be moving into O&M early in the year.

Significant uptake in the in the implementation right now I think we'll have some some more things to report on that next quarter. As you can imagine we're already into the fourth quarter. So we have some visibility on that we have some visibility on that so we'll be talking.

Talking about that a little bit more next time, but of the of the existing projects that we were in serious implementation. We expect those two to be moving into O&M early in the year.

Okay. That's helpful. And then just from modeling perspective as these projects start to move into maintenance phase should we expect a bit of a headwind on revenue, but then kind of higher gross profit and gross margins is that conceptually the way to think about this.

Speaker 4: I respect a bit of a headwind on revenue, but then kind of higher gross profit and gross more.

And Kyle why don't you touch on that one.

Sure.

Speaker 3: I think you're on the right track, Evan there. We would expect a bit of an uptick in margin, generally as the project...

On the right track, even there you would expect a bit of an uptick in margin and generally as the projects move into maintenance. There is a bit of a period of stabilization and adjusting to kind of optimize the system. So after that period occurs you then see a general uptick in margin. So as we transition there would be an uptick.

Speaker 3: period of stabilization and adjusting to kind of optimize the system. So after that period occurs.

Speaker 3: So as we transition there would be enough tick, but then further up tick that would come through.

Then further uptick that would come throughout the year post post go live of the systems into the maintenance and operational period.

Speaker 4: Okay, that's helpful. And you know, interesting comments about ETC,

Okay. That's helpful and interesting comments about our E. T. C are starting to see some more rfps kind of hitting the market maybe.

Speaker 4: and the market. Maybe you can discuss kind of how you're approaching some of these opportunities and how you've changed kind of your bidding practice.

If you could discuss kind of how you're approaching some of these opportunities and you know hype change kind of your bidding practices.

Just to you know kind of limit limit risk says Ah yeah. We've seen some challenges on some of these recent protect maybe discuss that in a lot of it.

Yeah that absolutely happy to take that question.

Speaker 2: I think that it's built into some of my DNA and some of our...

I think that it's a it's built into our into some of my DNA in some of our and.

Speaker 2: And some of the boards as well, at this point, where we implemented earlier this year, a fixed price review board. So the board and myself are very intimately involved with the bids as they go out. And we put together a much more rigorous review process for how we bid things and how those bids fit with kind of the general.

And some of the boards as well at this point, where we implemented earlier this year, our fixed price review board.

So the so the board and myself are very intimately involved with the bids as they go out and we've put together a much more rigorous.

Rigorous review process for how we bid things and how those bids fit with kind of the general.

Speaker 2: bid matrices, you know, cop competitors bids for these projects going forward. And I think that be risks them pretty substantially. We're looking for the good bids. We're not out there looking for the low ball bids. You know, we want to make sure the business is profitable and our projects are profitable.

Bid matrices of.

Competitors bids for these projects going forward and I think that de risks I'm pretty substantially.

We're looking for the good bids.

We're not out there looking for the low ball bids we want to make sure the business is profitable and our projects are profitable.

Speaker 4: So I think that it's a bit different than it's been historically, which has been, let's get the bit out there and let's win and let's worry about what happens to it in kind of the aftermath. And that's definitely not the philosophy we're taking today. That's good to hear and check maybe just...

So I think that it's a bit different than it's been historically.

Which has been lets get the bid out there and let's win and let's worry about what happens to it in kind of the aftermath and that's definitely not the philosophy that we're taking today.

Got it that's good to hear and Chuck maybe just you could give us a sense of kind of your your initial review of the business. It sounds like you've been kind of out meeting with everyone and meeting with the personnel. It sounds like you've seen some additional opportunities maybe bring the two sides of the business closer together and more tightly integrate any.

Speaker 4: and more tightly integrated. Any color on that front or anything else that you've kind of noticed in your initial assess.

Color on that front or anything else that you've kind of noticed your initial assessment would be helpful to hear.

Yeah sure and it's a great question. The you know the business has been run is very disparate businesses and you know the low hanging fruit in in these types of things, especially where quarter Hill has done a number of these acquisition has really been synergistically operating these businesses, we have a number of small.

Speaker 2: The business has been run as very disparate businesses. The low-hanging fruit in these types of things, especially where quarter hill has done a number of these acquisition, has really been synergistically operating these businesses. We have a number of smaller companies in Europe . We have one in Latin America, J.B. and China, that have been a bit disparate when we're bringing them all under the same umbrella operationally.

There are companies in Europe.

We have one in Latin America JV in China.

That have been a bit disparate when we're bringing them all kind of under the same umbrella operationally.

Speaker 2: centralized our technical team under our

We've centralized our technical team under our.

Speaker 2: CTO, we centralized the, you know, the business development under each of the presidents of IRD and ETC.

C T O. We centralize the you know the business development under each of the President's via our D. N E T C and that in that whole process is going to continue and we will probably look at for some consolidation around our operational team and delivery team primarily between the two big businesses.

Speaker 2: And that in that whole process is going to continue. And we'll probably look at for some consolidation around our operational team and delivery team, you know, primarily between the two big businesses of IRD and ETC. And that's really going to be our focus really for the fourth quarter. So we go in.

Ziv I of I R D and E T C and that's really going to be our focus really for the fourth quarter. So we go in go in strong into the into the new year. We've also I've also spent some time, we have a pretty significant outsourced staff in Vietnam and India.

Speaker 2: go and strong into the new year. We've also, I've also spent some time, we have a pretty significant outsourced staff in Vietnam and India recently returned with our CTO.

Recently returned with our CTO from.

Speaker 2: doing a deep dive analysis on those teams to see how we can streamline those centralized those costs and make it as efficient as possible. So I hope that answers your question. Yeah, that's.

Doing a deep dive analysis on those teams to see how we can streamline those centralized soc costs and make it as efficient as possible.

Hope that answers your question got it.

Yeah, that's great. That's it for me thank you.

Thank you.

Speaker 1: Ladies and gentlemen, as a reminder, if you have a question, please press star one.

Ladies and gentlemen, as a reminder, if you have a question. Please press star one.

Speaker 1: As we have no further questions at this time, I will turn the call over to Mr. Myers for closing comments.

As we have no further questions at this time I will turn the call over to Mr. Myers for closing comments.

Speaker 2: I want to thank all of the participants in our investors today and the analysts with that. We thank everyone for participating and we look forward to speaking with you and keeping you abreast of the developments and the coming months. That goodbye again and thank you.

Yeah, I want to thank all of the participants in and our investors today and the analysts with that we thank everyone for participating and we look forward to speaking with you and keeping you abreast of the developments in the coming months that goodbye again and thank you.

Speaker 1: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.

Okay.