Jamie Murray Quarterhill IncQTRH.TOHOLDFeb 16, 2024

He owns the debentures from 2021 for income but not the shares. They have a bit better sales momentum but the revenue is chunky. Its technology business is in the right part of the market but it has been a chronic under-performer. Maybe there will be some improvement but he will redeem the debentures when they mature.

Pivoting from technology patents to transportation sensors. Strategic pivot looked good on paper, but hasn't worked out. He'd be looking at other options.

His firm owns the debentures instead. They collect a 6% interest coupon, the bonds won't be converted (as the stock price hasn't risen), and they hope to get their money back in about a year.

They dominate US market share in electronic toll roads, and lead in weight-in-motion in trucks. This space is getting more technology driven. They had low-margin contracts a few years ago, but those are turning around, so we will see wider margins. Recent quarters are guiding towards that under new management. They have bought back shares. Is a good time to buy.

He owns the quarterly debentures. It was a good story, but now stuck in neutral. Sales and revenue growth are lumpy, because they depend on contracts (in infrastructure). Has disappointed investors. He will let his debentures mature in 2026. They have cash to buy companies as revenue grows. It's worth holding onto.

QTRH is now down 16.5% over the last year. Since we last spoke about it, QTRH has been awarded two contracts valued at US$3.4M for system upgrades and maintenance at commercial vehicle enforcement stations operated by the Idaho State Police. While this news is positive, QTRH continues to have negative cash flows while earnings are also expected to be negative again next year. We do not think it is worth buying right now.
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Very experienced team now running the company. Insider buying. Solely focused on intelligent transportation solutions. Biggest market share in US for electronic tolls. Sitting on a ton of data analytics, looking to monetize. Wouldn't hesitate to buy on this pullback. 

Great infrastructure asset. The industry will be consolidating, especially by private equity.

A global leader in intelligence transportation systems, like weighing trucks on highways. Are gradually becoming a tech company; recently developing AI tools to analyze the ton of data they've collected to help with road safety. Insiders are buying a lot shares and they have strengthened management. Lower-margin contracts are coming off soon. This space will consolidate drive up shares eventually to $3-4. They can cross-sell for synergy.

One of his biggest positions. Huge backlog, growing addressable market. Divested one segment, so now a pure play in technology, and valuation should increase. Experienced management and strong board. Starting to attract institutional interest. Significant, hidden value through its massive amounts of data. Insider buying, very telling.

"Thesis creep" is when you change your investment thesis to fit what the company's doing. Intelligent management systems for traffic. Buying businesses, winning contracts with US government. Unique small cap. You could hold. Outlook is generally positive, but not for him.

He owns the convertible debentures yielding 6%, gives defensiveness. Well capitalized, bunch of cash on balance sheet.

That's right. They've been severely beaten up over the last few years. Massive outflow of funds out of Canada, and it hits the smaller stocks even more. A lot of retail investors put in fund redemptions last year, so that created many bargains.

Over the last 6 months, he added to many of his small- and mid-cap positions. Companies like QTRH, JWEL, and EQB.

One of his biggest positions. Fantastic board, much-improved management team with wonderful expertise in a great space. Focused on driving shareholder value. Huge backlog. Should see improved margins. Insiders buying a lot of stock.

He was the lead activist investor. Since then, they have a brand new board and management board with serious experience. They're in a great space; huge infrastructure spending will happen in coming decades in intelligent transportation. They lead in electronic tolls in the US and lead in electronic weighing of vehicles. Insiders are buying a lot of stock in recent months, so they have a lot of confidence; this is rare and bodes well. Much upside ahead. 

The company is seeing positive growth in the tolling and enforcement business, and it has a revenue backlog exceeding $500M. Its market cap is around $228M, and its price has begun to turnaround since the summer, where it announced a credit relief program for its subsidiary. The company expects a stronger Q4 as certain revenue from two of its tolling projects was pushed into subsequent periods due to scheduling adjustments. Its balance sheet is OK, profit margins have been improving (while still unprofitable), and its valuation is cheap (trading less than book value and a forward sales multiple of 1.2X). We feel this could be the beginnings of a turnaround for the company, but we would like to see sustained progress on its efforts towards profitability and growth.
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It has gone through tremendous changes in the past 6 months. He teamed up with others to buy 10% of the company and forced the board to make changes. It is in the Intelligent Transportation space and the board is now much more experienced in this area. Also the new CEO and Chairman have tremendous experience in this field and were part of a company that pioneered ITS. The balance sheet has been de-risked with the sale of Wi-Lan and the implementation stage of the transformed company is now over. There are also better margins now. It is very cheap so institutional investors may start to look at it again.