Quarterhill Inc

TSX:QTRH

Earnings Call Transcript 2022-Q1

[Operator]

Good morning, and welcome to Quarterhill's Q1 Fiscal 2022 Financial Results Conference Call. On this morning's call, we have Mr. Bret Kidd, President and CEO; and Mr. Steve Thompson, Interim Chief Financial Officer. [Operator Instructions] Earlier this morning, Quarterhill issued a news release announcing its financial results for the 3-month period ended March 31, 2022. This news release, along with the company's MD&A and financial statements will be available on Quarterhill's website and will be filed 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 the IFRS. Please refer to the company's Q1 2022 management's discussion and analysis 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 Canadian dollars unless otherwise specified. I will now turn the meeting over to Mr. Kidd. Please go ahead, sir.

[Bret Kidd, executive]

Thank you. Good morning, everyone, and thank you all for joining us on today's call. Before we begin with our review and outlook, I want to take a moment to honor the memory of Michael Vladescu, WiLAN's CEO, who passed away last week. Michael's sudden and untimely passing was a tragic shock to the entire team at Quarterhill and in particular, to those who work closely with him at WiLAN.

Michael was appointed WiLAN's CEO in 2019, having previously served as COO since joining the company in 2012. Michael was active in the patent licensing industry for more than 25 years, and he was a well-regarded and recognized leader, often sought as a speaker at industry events and ranked prominently in annual rankings of IP dealmakers and influencers.

But most importantly, he was a talented, hard-working and kind person who was equally loved and respected by his colleagues and those who came to know in the IP industry. I worked closely with Michael for the past 5 to 6 months. And during that relatively short period of time, he left a big and lasting impression on me. Michael was an outstanding leader and a key driver of WiLAN's success over the past 10 years.

His presence will be sorely missed, and my thoughts, condolences and prayers are with his family, friends and colleagues during this difficult time. So in terms of the agenda for today's call, I'll start with a look at business highlights for Q1, followed by a discussion on our outlook and priorities. After which, Steve will take a look at the key financial results. Then we'll open it up for questions.

Looking at the numbers at a high level, Q1 consolidated revenue was $168.5 million, and adjusted EBITDA was $79.1 million. These were significant increases year-over-year and were due primarily to the substantial contribution from our licensing business, WiLAN as well as top line contribution from VDS and ETC ITS businesses acquired in April and September 2021, respectively.

Our working capital stood at $176.9 million at quarter end, providing plenty of firepower to execute on our growth plan. WiLAN's license activity in the quarter led to our significant outperformance in Q1 and once again reflects the important role that it has played in helping us execute on our ITS mandate. The patent license business model has variability in its near-term quarterly financial performance, but over a longer time frame, WiLAN has consistently shown it can generate significant cash flow. Q1 was no exception.

WiLAN's success provided the initial capital required to pivot the business back in 2017 and it has been contributing meaningful cash flows to the ITS expansion ever since. We announced this morning that Andrew Parolin has been appointed CEO of WiLAN. Andrew has been a senior executive at WiLAN for nearly 15 years and represents the amazing leadership talent bench at WiLAN. Most recently, Andrew was Senior Vice President, Licensing, responsible for the licensing of the company's portfolio of wireless, wireline, digital television and other technologies. Andrew is an exceptional talent in the patent licensing industry. And during his tenure, his business unit has negotiated license agreements with more than 100 companies, including global technology leaders, LG, Cisco, Nokia, Ericsson, Panasonic and Sony.

He provides great continuity with the WiLAN team as well as the Quarterhill Board and executive team, and I look forward to working even more closely with him in the months ahead.

In December last year, we announced a strategic review for the WiLAN business. And in Q1, we hired Stout, a global investment bank and advisory firm, as lead adviser for the review process. While it was a difficult decision to launch a process for WiLAN, it was recognized that there may be better alternatives for that business and as part of a public company holdco structure, especially given Quarterhill's strategic focus on the ITS business.

Now moving to ITS. The ITS segment had contract wins in Q1 totaling approximately $75 million, including Orange County, California and Alameda County, California for ETC, and Indiana for IRD. Shortly after quarter end, ETC announced a new contract with E-ZPass and IRD announced another with Indiana, combined for an additional $35 million.

These dollar amounts, again, representing over $110 million total do not include the option years, nor do they include change or follow-on orders, both of which are commonly associated with contracts at ETC and both of which can have a materially higher impact on final contract value and on lifetime margins. As I mentioned at our AGM, we are very excited for the E-ZPass opportunity. Essentially, we are building an interoperability hub for 40 tolling agencies spanning 18 U.S. states. This enables seamless billing and transaction processing across all agencies, assuring that drivers from different states are charged accordingly as they travel from one state to another. This contract, combined with ETC's current operation of the Central U.S. Interoperability Hub, effectively make ETC the interoperability provider for all tolling agencies east of the Rockies.

Over time, the E-ZPass interoperability hub could become a foundation for Mobility-as-a-Service transactions or an account with any of the agencies [ unable to do ] paper tolls, parking, mass transit and other mobility services that could create new opportunities for ETC to expand the nature of this relationship to include these or other services and to develop a transaction-based revenue model around them.

While we've had a good run of winning new business and our implementation and new sales pipelines remain full, several factors in Q1 impacted our top and bottom lines in the ITS segment, which are largely timing related. One is that there is seasonality in IRD's Q1 due to regular delays related to winter weather. This can impact project implementation and related billing, and we saw some of that in Q1. We see IRD's picking up in Q2 and into the second half of the year as we enter the stronger seasonal periods.

IRD also had a project for which certain costs were recognized in Q1, while related revenue will be recognized in Q2 and Q3. At ETC, certain new project implementations ramped up a bit slower than expected in Q1. But again, nothing that we don't see us picking up during the remainder of the year. But we're definitely not talking about any lost opportunities in any way.

As an example, in one case, a customer decided to begin implementation on a series of smaller tolling lanes first rather than starting with a larger portion of their road network, which had been originally planned. It doesn't alter the scope of the project, just the timing of the work in the receipt of the implementation revenue associated with each set of lanes. The third factor relates to the macroeconomic forces that I spoke of on our year-end call in March, which include both availability and cost of labor and supply chain issues impacting access to certain project materials.

Both had an impact in Q1, but we are working to mitigate that impact going forward. To address supply chain impacts, we are working to secure alternative sourcing, adjusting operations and working with customers to get hardware orders in much earlier in programs. On the labor side, our ITS businesses have strong cultures, and we are doing well retaining staff, which is certainly a competitive advantage these days. To accommodate the significant amount of new business this year, we continue to add resources and recruiting experienced hires while also ramping up college recruiting, offshore capabilities and other sources of technical talent.

Finally, to recognize, both supply chain and labor cost, we are aligning our proposals and pricing to reflect new realities. As for the outlook for the ITS segment in 2022, we have work to do, but our view has not changed from our year-end call, and we continue to expect growth for the year from the Q4 revenue run rate with an adjusted EBITDA margin in line with that generated in Q4.

Looking out 2 to 3 years, we are targeting an adjusted EBITDA margin of 15%, and we'll get there through revenue expansion and a greater percentage of higher-margin revenue projects as they move into the operations phase as well as the cost savings at the corporate and segment levels.

I'll spend a few minutes now discussing my top priorities for the next 12 to 24 months, which serve to underpin our growth and margin objectives. First is to focus our solutions on the top 3 mobility challenges today, which, in our view, really equate to 3 undeniable trends in the market. First is user-funded infrastructure and revenue-generating solutions.

As I've mentioned on prior calls, there is a multitrillion dollar gap between infrastructure funds and needs. As governments struggle to finance infrastructure projects, user-funded infrastructure projects like tolling offer a fair and impactful solution. ETC is strong in this area with its tolling solutions, as is IRD offers tolling along with red light and speed cameras and the evolving future of weight-based charging for commercial vehicles.

The second area is safety with our ever-growing demands for improvement. Safety is an IRD strength with its leading Weigh-in-Motion and Tire Anomaly solutions for commercial vehicles and growing capabilities in red light and speed enforcement. ETC's tolling solutions also have a role here as studies have shown that fatalities on toll roads are 1/3 of that on non-toll roads.

Sustainability is the third industry challenge where governments are making ever larger commitments and they are in need of technologies to meet those commitments. Both IRD and ETC have solutions that address environmental priorities, including managed lanes and congestion pricing at ETC and IRD's traffic management, bicycle detection and Weigh-in-Motion solutions, among others.

Sustainability is certainly an area where we will continue to expand in the coming years. We have a great industry reputation to leverage in these areas. For example, ETC has received the highest technical scores in every procurement it has participated in the last 3 years. IRD has differentiated technical capabilities across the commercial vehicle enforcement space and continues to expand in smart cities. And we will continue to elevate our solutions through internal development and M&A., reinforcing our strengths in sensors and software while adding data and operational solutions that will help us move towards more transaction processing and recurring revenue models.

My second priority is to continue with our strategic consolidation plan. M&A remains a core of our approach going forward, with our focus to add scale, which could be international or North America, add technologies or operational capabilities that reinforce our leadership in our current markets and diversification via businesses that address usage charging, safety and/or sustainability challenges in new markets.

We have considerable resources to pursue M&A, but we'll continue to be patient and disciplined buyers, looking to pay reasonable valuations for opportunities with both good operational and financial profiles.

My third priority is to continue to integrate the ITS businesses and the corporate function at Quarterhill. We do expect to see some modest decline in corporate spend this year, but it will be more of a transition year as we still have 3 portfolio companies, are running the process for the WiLAN business and as we carefully optimize cost in the fast-growing ITS businesses. Savings will increase further in 2023 and beyond.

A larger portion of savings will take some time as some elements, especially third-party services like insurance and IT contracts have set expiration dates. The integration between IRD and ETC will focus on revenue, technological and operational synergies. Cost efficiencies will be realized. But given that we are in growth mode at both businesses, these will require extra care.

On our Q2 call, I'll provide some additional detail on our integration plan and the savings we believe can be achieved in 2023. On the personnel front, one of my top priorities is to appoint a full-time CFO. The search is well underway, and we have made good progress. We've narrowed down the field of candidates and expect to have an announcement in due course.

At the Board level, we have added new leadership and expertise geared to the ITS strategy. Rusty Lewis, Pamela Steer and Kim Stevenson have all joined the Board since March. I spoke about Pam and Rusty on our last call, but just today, we announced that Kim will be joining the Board. Kim has had a distinguished career in the tech industry, having leadership roles at Intel, Lenovo, HP, EDS and IBM. And most recently, she was responsible for a $6 billion P&L at NetApp, leading their foundational data service business unit.

Of note, during her 8 years at Intel, Kim advanced progressively senior roles that included Chief Information Officer and Chief Operating Officer for Intel's Internet of Things unit, which focused on Intel's expansion into automotive technologies. Kim is currently on the board of Mitek Systems and spent 5 years on the Board at Skyworks, both NASDAQ-listed companies and both with capabilities central to ITS. Skyworks is a $5 billion leader in wireless networking, Internet of Things and 5G semiconductor technologies, including automotive applications like cellular telematics, LIDAR, radar and camera technologies and vehicle-to-everything communication.

Mitek is a global leader in mobile capture and digital identity verification solutions built on AI and machine learning, which is also very relevant to our ITS business. We look forward to drawing on Kim's extensive tech background and her knowledge and experience in emerging fields like AI and mobile capture, IoT and their applications to the automotive industry to help us broaden our leadership in ITS.

In closing, we are very excited with the opportunity in front of us today and are well positioned to execute on our organic and M&A growth plan. ITS industry tailwinds are significant and remain in place even in tumultuous markets. We have a $4 billion organic sales pipeline in ITS. We have strong M&A deal flow that's being generated internally from both ETC and IRD as well as from our network of third-party advisers. We have a leadership team and a broad experience in ITS and M&A, and we have a strong balance sheet, giving us great flexibility to grow.

With that, at this point, I will hand it over to Steve to talk through the financials. Steve?

[Stephen Thompson, executive]

Thank you, Bret, and good morning, everyone. I'll take a look at key consolidated numbers as well as numbers from our ITS and Licensing segments. As Bret mentioned, the eighth full year-over-year top line growth was driven primarily by licensing activity at WiLAN in Q1.

ITS revenue in Q1 was $37.8 million and included a full quarter of contribution from ETC and VDS, which were acquired after Q1 last year, compared to $11.5 million in Q1 last year. As Bret mentioned, we expect a pickup in revenue from IRD in subsequent quarters on account of Q1 seasonality and one particular contract for which revenue was pushed into Q2/Q3. And at ETC, certain projects experienced lower-than-expected implementations, for which we expect to make up for lost ground throughout the course of the year.

Gross margin for Q1 2022 was 55% compared to 34% in Q1 2021. Gross margin increased in Q1 2022 due to the results from the licensing business. Licensing gross margin rose significantly in the quarter to 63% compared to 25% in Q1 2021. The licensing gross margin will fluctuate depending primarily on the level of litigation and contingent legal and partner costs incurred in the quarter relative to the revenue generated.

Gross margin in the ITS segment was 28% in Q1 2022 compared to 40% in Q1 2021. The IT margins reflect the recognition in Q1 of costs related to an IRD project for which revenue will be recognized in Q2, Q3 as well as government subsidy payments made in Q1 last year related to pandemic relief that did not reoccur this year.

With the ETC business, as we move through the initial implementation phases of projects with Ohio River Bridges, Central Texas and Orange County, margins in 2022 will affect that in the initial implementation year. It's usually the first 2 revenue tends to have a lower gross margin in the subsequent operational years of those contracts, revenues -- higher gross margin range of 30% to 50%, with the higher end largely dependent on the level of charge orders involved -- change orders.

Change orders can have a significant impact on the overall contract value. Based on ETC's historical track record, change orders on average had the impact of multiplying initial contract value by a factor of more than 8x. For example, a contract with a base period value of $50 million would ultimately generate more than $400 million in revenue over its entirety. Operating expenses for Q1 2022 were up on a dollar basis due to the addition of acquired ETC and VDS expenses and were down significantly on a percentage of revenue basis due to leverage in the licensing operating model.

As Bret mentioned, we are not immune to inflationary pressures, and particularly as it relates to personnel resources and that did have some impact on expenses in the quarter. We do expect expenses at the corporate level to have a modest decline this year with a more material reduction in 2023.

Consolidated adjusted EBITDA in Q1 was $79.1 million, driven by WiLAN, which builds on its track record for generating cash flows to the business. Adjusted EBITDA in the ITS segment will improve in coming quarters as we pick up some revenue for which costs were recognized in Q1 as implementation activity accelerates. Income before taxes was $71.1 million and taxes were $14.8 million or an effective rate of 21%. Of the $14.8 million in income tax expense, $14.2 million is a deferred income tax expense and $600,000 is current income tax expense.

Cash used in operations was $8.5 million in Q1 and cash, cash equivalents and short-term investments were $60.2 million at March 31, 2022 compared to $72.6 million at the end of 2021. Working capital increased significantly to $176.9 million at quarter end, up from $105.1 million at year-end. Accounts receivable jumped from $30.2 million at the end of 2021 to $158.1 million at the end of Q1, with the substantial portion of these receivables having been collected subsequent to quarter end.

Regarding the recurring return of capital to shareholders, we continue our quarterly dividend payments in Q1. And on May 4, the Board of Directors declared the next eligible dividend of $0.0125 per share to be payable on July 8, 2022, for shareholders of record on June 17, 2022.

In closing, our outlook remains strong. We have a focused strategy, a healthy M&A pipeline, good business fundamentals in both our ITS and licensing segment and a very strong financial foundation to support our growth initiatives.

This concludes my review of the financial results, and I'll now turn the call over to the operator for Q&A. Thank you very much.

[Operator]

[Operator Instructions] Your first question comes from Maxim Barron from Cormark Securities.

[Maxim Barron, analyst]

I want to start off on the WiLAN business there. And I was hoping you can give us any sort of sales process update for that business or timing expectations from your end?

[Bret Kidd, executive]

Thanks for the question. Yes, as mentioned in the opening remarks, we did hire Stout in Q1 and are working with them on the process diligently. As I mentioned, probably on previous calls, we've been very encouraged by the inbound interest that we've received on WiLAN since we announced the review earlier or late last year. And that's only been confirmed by Stout as we've gone into the process. In fact, they've indicated for a business in this space, it's actually quite a bit more interest than they would normally expect to see.

So we're very encouraged by what we're hearing so far. And also about, obviously, the progress in the business itself with the performance in Q1 and the indications that, that should end up having on the ultimate outcome. Of course, there could be several different potential ways that a process like that will end. But given the interest and the creative ideas that we're hearing via the advisers, we're very encouraged and optimistic about the outcome.

[Maxim Barron, analyst]

Great. That's great to hear. Just switching to the ITS segment. I know you mentioned that the sales pipeline seems to be strong. I was just hoping to get any color that you might have on change in demand from potential clients, given the current market environment? Or anything you're seeing along the pipeline there?

[Bret Kidd, executive]

Yes. Great question as well. And actually, both pipelines continue to grow. They grew from the end of last year to the end of the first quarter. So the ITS segment, which is one of the many great things about it, really isn't cyclical. The infrastructure needs that are out there and some of those undeniable trends that I talked about before, are not really going to change as a result of macro conditions. So there could be things slowing down and some others speeding up.

But overall, we're seeing the pipelines grow. And with the capabilities that we have, 2 strong units, as I mentioned in the opening comments, the ETC is getting the highest technical scores across all the competition in its bids and then likewise, IRD has very differentiated technologies. So with the position we have, the momentum that we have in the market, coming from '21 and continuing into '22, we expect that to continue on, again, even in the midst of the markets which are getting tougher from a macro perspective.

[Maxim Barron, analyst]

Great. That's great to hear. And maybe just a quick follow-up on that. Are you seeing any international progress yet coming in with ETC or I want to see how you look at the geographical potential there?

[Bret Kidd, executive]

Yes, there's absolutely a market for ETC solutions abroad. And with IRD's footprint in 80 countries, that certainly becomes a great conduit for that. And there are several opportunities already that both IRD and ETC are working on internationally.

We do expect those to develop more probably next year as opposed to this year. And in the meantime, a lot of that $4 billion in pipeline that we talked about that I mentioned earlier is actually in the ETC business and just in the United States. So there's still a tremendous amount of work and opportunity for ETC here. But that's just expanding internationally as well, again, especially with the distribution, if you will, that IRD has already globally.

[Operator]

And your next question comes from Todd Coupland from CIBC.

[Thomas Ingham, analyst]

I had a few financial questions and then some macro questions. First, on working capital. Obviously, AR is up a lot from the licensing. How much of that should turn into cash? And what is the timing on that, please?

[Bret Kidd, executive]

Steve, I'll let you go and jump in on those?

[Stephen Thompson, executive]

Yes. I think we've mentioned that the significant portion of our AR has been collected after quarter end. If you look at our recent -- or past couple of years, you can take a look, particularly on the licensing segment, look at our larger quarters when we have significant revenues and look at our collection experience in the quarters following, you'll see that there's a fairly strong correlation on when we're collecting after revenues are entered into from the licensing segment.

[Thomas Ingham, analyst]

Okay. So like if we look at the December quarter, you ended -- roughly $30 million, you're $158 million. So is the messaging that you've collected $125 million or $130 million, something like that?

[Stephen Thompson, executive]

Yes. I can't get into the exact amount, but I can just say that we've shown that we have significant collections following the quarters when we have revenue recognized in the Licensing segment, and we expect a continued trend that we've been showing in the past couple of years in that area.

[Thomas Ingham, analyst]

Okay. And then is there any residual tax on the AR that you hadn't collected by the end of the quarter? Or is that just turn into cash? Whatever you end up collecting.

[Stephen Thompson, executive]

I think we provided a breakdown between our deferred tax expense and our current tax expense. And within the current tax expense, that's our accrual and our estimate for the quarter through the tax provision. So just -- we're following the IFRS accounting rules on it. And within that amount, the current tax expense, you sometimes also have withholding taxes, but it does include estimates of corporate tax expenses owed.

[Thomas Ingham, analyst]

And sorry to be so technical on this, but just trying to understand what the net cash looks like. And are there any other sort of like fees or royalties that need to go to third parties? Or that -- what's there is yours?

[Stephen Thompson, executive]

Yes. So that's a good question. And we've spoken before about our contingent -- we have ongoing litigation expenses in the licensing segment that are expensed in the quarter, which are incurred. When we conclude licensing, there are contingent expenses from partner fees as well as litigation partners that are owed, and they would be accrued in the quarter in which the licensing is incurred.

[Thomas Ingham, analyst]

Okay, that's great. And then just on the OpEx, $21 million. I know you're going to talk about synergies of -- with strategic refocusing, I guess, in Q2. Is there any way to size though what that would look like just for the ETC business, like percentage-wise, the $21 million? Is it like 3 quarters of that number or 90%, any -- half? Any color you can provide on that.

[Bret Kidd, executive]

Yes, I guess -- Yes, Steve -- I don't know if how many things -- I don't know if there's any additional color that we can provide right now on one versus the other. Steve, I don't know if you've got any other comments.

[Stephen Thompson, executive]

Yes. I mean -- I think just referring to what we provided in our MD&A on the breakdown there is sort of what we can disclose on our operating expenses and the breakdown between the segments.

[Thomas Ingham, analyst]

All right. That's fine. And 2 macro questions. So first on ETC. It was interesting to hear your commentary about focusing on infrastructure that can get funding. And I'm just wondering, that segment of the market with all the trends that you spoke about, do you have an expectation for market growth. So the slice of the market that is likely going to get the funding that you're talking about. Is this a single-digit growth segment of the market? Is it high-double digits? Any color along those lines would be interesting.

[Bret Kidd, executive]

Yes, absolutely. The tailwinds in this space are very impressive and again, sustainable. I really talked about it in terms of undeniable trends. And it goes back [indiscernible] our gap has to be filled, and so that's where it comes back to the need for user-funded infrastructure.

In the U.S., just a couple of data points. the U.S., I think the number of miles driven, I believe, went up by something like 20% over the past number of years. But meanwhile, 65% of roads and bridges are in need of repair. So given that, combined then, we have some of the safety and sustainability objectives that are out there. The CAGR for this industry used to be more in the 5% realm, but the market studies that we have, show it going to 15% over the next 5 years.

So it's a massive market and accelerating in growth given all of those trends that are behind it. And again, that's where we're excited about the position that we already have in user-funded infrastructure and safety and with [indiscernible] growing presence in other parts of those 2 areas.

If you think about road usage, traditional tolling as a defined road with points A to B that get charged for it, but we're starting to see already in different parts of the world, congestion zones around entire perimeters that help collect revenues but also manage environmental priorities.

And increasingly, we're seeing road usage charging models experimented with as well here in the U.S. too. And so we just see that continuing to accelerate across the board because it has to. That's the way that infrastructure can get funded given the shortage of other revenue sources and declines in things like the gas tax, which is the traditional method.

[Thomas Ingham, analyst]

Okay. That's interesting. And then my last question is on M&A. Are you seeing valuations come down with the overall market? And are you contemplating -- I know you gave the categories of the areas where you could add. But are you -- in that context, are you contemplating also transformational deals? And if so, just talk about what that might look like.

[Bret Kidd, executive]

Sure. Yes. It's on the first question. It's something we've been talking about too. It's probably a bit early to tell. But usually, the public markets tend to affect the private deals as well. But it's a little early to say that in specific conversations that we're having.

And in terms of the kinds of deals that we're looking for, I mentioned the areas, scale and capabilities to reinforce our technical leadership and then diversification. And really, most of the deals that we are going to be looking at are in the tuck-in category. So those that would fit inside either IRD or ETC. But we also do keep our eyes open for transformational deals or other kinds of platform deals as well.

Those are, again, are going to be fewer given their very nature, but we're certainly open to those as well. Mainly, we want to maintain -- we want to reinforce the strategy that we have and the growth in the areas that I outlined. But we're going to be disciplined in our approach and make sure that we're paying appropriate valuations for the assets that we're getting and specifically looking for things that are accretive, both from a multiple and a margin standpoint.

[Operator]

Your next question comes from Andy Nguyen from Raymond James.

[Andy Nguyen, analyst]

This is Andy on for Steven Li. Just want to follow up on the licensing payment, and I know you guys can't get into the details with that. But could you give us some color on when the -- can you expect the payment to hit your accounts on the cash front?

[Bret Kidd, executive]

Yes. Well, go ahead, Steve, if you...

[Stephen Thompson, executive]

Yes, I think we're -- if you can take a look at what we've said about it being our collections since quarter end being substantial or significant, I think that's what we're talking about today. And I think we can look at the last couple of years of history on how our licensing segment, how the collections come in following quarters, and you'll see -- I guess it will paint you a picture of what your expectations could be in that area. But we can't comment directly on the exact amount of what we've collected since quarter end.

[Operator]

[Operator Instructions] And your next question comes from Nicholas Cortellucci from M Partners.

[Nicholas Cortellucci, analyst]

Congrats on the quarter plus on the license side. It's been a long time coming. I had a question about the ITS business. So in Q4, you guys posted 9% EBITDA margin, and we're guiding for that around there going forward. So is that still a number you guys are comfortable with given the timing delays and the supply chain issues?

[Bret Kidd, executive]

Yes, thanks for the question. And yes, short answer is yes. We believe that's the right way to think about this year on the margin side. I guess, 1 point to make is that because of the seasonality, especially in the IRD business, our plan did not call for margins that were the same as Q4.

So that's sort of anticipated. We came in a bit below that. But given the move out of seasonality in terms of the IRD business and also the success that they're having in the market with some new wins that we've announced and there's others that we haven't yet, but where progress is -- continues to move along on some other deals as well, we feel good about the overall -- that overall direction for marginality this year.

[Nicholas Cortellucci, analyst]

Okay. Great. And then on the M&A, I was kind of wondering just what's been holding you guys back from doing some tuck-ins. You guys have had some dry powder for a few quarters now, and we haven't seen anything. So is it multiples? Or are you guys waiting discussions with [ certain files ]? Just some color there would be helpful.

[Bret Kidd, executive]

Yes. I'll just say that we are active in the market, and so we've had multiple conversations over the last couple of quarters and are continuing to have those. We are in some advanced stage discussions in a couple. And there have been some others where we could have been further down the path, but kind of pointing back to the sort of a disciplined approach, we're being cognizant of the valuations and sort of the appropriateness of the price relative to what we're getting, both operational and financially.

So we do expect more progress on that front. I think this year, of course, it's really hard to predict the timing of M&A deals, but we do expect more progress this year.

[Operator]

And there are no further questions at this time. Mr. Kidd, you may proceed.

[Bret Kidd, executive]

Okay. Thank you again, and thank you, everyone, for joining the call today. Good listening with all of you. And just to reiterate sort of the final comments that I made before about the position that we're in where we are excited about the strategy that we have, the units that we have in place, certainly, the momentum from WiLAN in Q1 but also across the ITS part of the portfolio as well. Excited about this year and where it's going to go.

And then certainly, the continued growth and margin expansion over the next couple of years is something that we we're confident of and excited to realize. So I thank each of you for participating today, and I look forward to speaking with all of you and keeping you up to date in the coming months. Thanks, and have a good day.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines. Have a great day.