Doug Parker - President and CEO Shaun McEwan - CFO

Doug Taylor - Canaccord Genuity Todd Coupland - CIBC

Good morning, everyone and thank you for joining us on today's call. It’s a pleasure to be here and to have an opportunity to update and speak with our shareholders and other stakeholders.

It’s a very pivotal time and exciting time at Quarterhill and I’m honored to have the opportunity to join and lead the team at such a critical juncture. I’ll start off the call with a look at some 2017 highlights, followed by some observations from my first 60 days here at Quarterhill and then an overview of our strategy and outlook.

Shaun will then take a more detailed look at some of the key numbers and then we’ll open it up to questions. Simply put, fiscal 2017 was a year of change and progress for the company.

The most significant event for us was the decision back in April of 2017 to leverage our technology background and undertake a new diversification strategy to acquire, build and grow a portfolio of technology companies. This resulted in the acquisition of three promising companies, IRD, VIZIYA and iCOMS, which complement the established WiLAN business.

The hard work put in by the Quarterhill Board and senior management, led by Jim Skippen, our Executive Chair and Shaun as our interim CEO, and now our CFO played a key role in establishing the Quarterhill platform and the successful completion of these three good acquisitions. These efforts along with the strong efforts from all our subsidiaries led to a record financial performance in 2017.

Revenue was 134.7 million, up 45%. Adjusted EBITDA was 64.6 million, up 20%.

Cash from operations was 70 million, up 90% and we ended the year with cash and equivalents of 86.6 million, a solid cash position with which to continue to pursue our acquisition strategy. It's encouraging that we invested 67.4 million in acquisitions in 2017, but our cash balance year-over-year only dropped 21 million.

A focus of ours in our acquisition strategy is to increase our recurring revenues, which rose to 13.4 million, up 163%. It's important to note that all these numbers were achieved with only a partial contribution of about seven or eight months from IRD, VIZIYA and iCOMS.

We obviously look forward to those businesses contributing a full year in 2018. In my experience, any time a business is acquired, it creates a bit of a natural dip in the short term results as management focuses its efforts on negotiating and completing the deal and the integration activities.

We feel we are largely past the most challenging stage in the acquisition and integration process and believe these newly acquired businesses will return to their typical operational cadence in 2018, gaining momentum as the year progresses. Looking briefly at each of the businesses, I’ll start with WiLAN, driven by licensed agreements with Samsung, Amazon, Ericsson, Motorola and others, WiLAN once again delivered strong revenue and margin levels and demonstrated why it remains one of the dominant patent license businesses in the industry.

With an eye to the future, WiLAN added several new patent portfolios, covering areas such as content delivery, streaming video bandwidth constraints and securing data on storage devices. Both are areas of considerable interest and activity in today's tech marketplace.

Finally as in the past, WiLAN continues to be active on a significant number of litigations in multiple countries around the world. As we stated in the past, WiLAN’s performance is best judged over a longer period of time as opposed to quarter-to-quarter and its 2017 results spell that out clearly.

As WiLAN’s long term track record suggests, by continuing to focus on its disciplined and patient licensing strategy, the business can deliver significant cash flows. But as is the case today, throughout the patent licensing industry as a whole, those type of results are likely to be delivered with some quarterly variability.

Variability is inherent in the business model and the natural outcome of deploying a prudent strategy of garnering the best long term returns for WiLAN’s intellectual property portfolio. The bottom line is, lumpiness will continue with the business and may in fact become more pronounced with US GAAP accounting changes introduced for 2018.

Shaun will describe that in a little bit more detail in his section. Over at IRD, we saw good sales activity in the second half of 2017 with close to 20 million of new orders, one of which in Q4 was a new weigh station in Idaho valued almost $4 million.

IRD also had some important product launches in the second half of 2017. One of these is TACS, or Tire Anomaly and Classification System, which is a data collection system embedded in roadways that capture a host of tire data among other things when vehicles pass over it.

Our deployment in Oklahoma just finished its second round of testing with fantastic [indiscernible]. IRD also launched vehicle information in motion, which is their cloud based data collection reporting and analytics tool set.

In Q4, we received our first order for this solution, which came from the state of Illinois. Both new products reflect the history of innovation at IRD and provides impetus for future growth in the business.

VIZIYA had a strong quarter to end the year and continues to see good momentum in its sales pipeline. Deployments with some key customers such as BP, Alcoa and Eastman are going well and could lead to additional sales activities in 2018.

In addition, VIZIYA’s relationship with SAP continues to progress and the company had the honor of being invited to be a gold sponsor at SAP’s ECOM conference in 2018. ECOM concluded a few weeks ago and VIZIYA had great opportunities to meet one on one with senior SAP sales reps and to raise its profile further within that organization.

VIZIYA’s 2018 numbers will benefit from a tailwind of sorts as well as their 2017 results included an acquisition accounting adjustment that saw quarterly recurring revenues of about 250K lighter. For fiscal 2018, this deleted deferred revenue adjustment will no longer be required and we expect to see an uptick from a return to the normal level of recurring maintenance revenue.

In looking back, we see success in terms of financial results and tangible progress deploying capital and executing on our new strategy. I’d now like to take a few minutes to look forward and discuss why I'm excited to be part of Quarterhill today, what I have observed in the first two months since I’ve joined the team and what I view as the key elements and upcoming milestones of our acquisition strategy.

Foremost, I believe wholeheartedly in Quarterhill’s vision to create substantial value by acquiring, integrating and building companies in areas of the tech sector, where there is ample opportunity to capitalize on permanent consolidation and convergence trends. There is an established playbook here that is well executed, has been shown to deliver attractive returns to shareholders.

I believe the key to success relies heavily on attracting and motivating an experienced team with a proven track record and commitment to this specific value creation strategy, access to a sufficient volume of attractive and actionable acquisition opportunities and a value added integration strategy. These are areas that I will emphasize and foster at Quarterhill.

As most of you may know by now, my background is in the field of technology, M&A and integration and I believe that I can deploy the lessons, skills, strategies and tactics learned in my previous roles to deliver tangible results here. I think the work done so far to deploy the capital and build the overall framework to support additional M&A is excellent and absolutely on the right track.

In my first 60 days, it has been a pleasure getting to know the Board, Jim, Shaun and the entire management team and I'm encouraged by the collective sense of resolve, focus and commitment to the future success of the company. To further our strategic goals, one thing that we’ve done since I joined is to modify the primary focus of our acquisition target to focus on verticalized software.

What do I mean by this? Verticalized software companies tend to be niche players in enterprise software, those serving large and established customers in specific industries or verticals.

This is an attractive area to focus as they tend to have recurring revenues, stable cash flows and margins and sticky customer relationships. There are a significant number of these companies to consider as acquisition targets and they tend to be fragmented within their markets with a sale to a buyer like Quarterhill and appropriate exit strategy.

The biggest groupings of these companies also tend to be of an ideal size for us, under 50 million in revenue. And as a result are not a big focus for the large enterprise software acquirers such as IBM, SAP, Oracle, et cetera.

We’re the large and very active financial sponsors in the space. These companies have well established customers and products with decent cash flows, but often are too small revenue wise or from an operational scale perspective to be on the radar screen of traditional aggregators.

In addition to changing the primary focus of our acquisition strategy, I've also added two experienced executives to help in acquiring and integrating companies into our portfolio. Russ Stuebing is our new Senior Vice President of Corporate Development and Neil Urquhart is our new Senior Vice President, Human Resources.

As you might expect, Russ’ skills center on finding the right companies to acquire and negotiating and closing deals, while Neil’s are fine tuned to assessing target management teams and setting them up to succeed post-closing. I’ve worked with Russ and Neil in the past and I believe that they bring both the skill set and proven track record that we need right now as well as the right focus and a long term commitment to the Quarterhill vision.

They are seasoned hands-on professionals who quietly deliver excellence with a high ratio. Collectively, the Quarterhill team has over 20 years of M&A experience, completed over 100 transactions and successfully deployed over 5 billion in acquisition capital.

Building out our team and its capabilities will be done in a measured and financially prudent fashion and will remain a top priority for 2018 and into the future. In terms of the criteria we will look at for the acquisition opportunities, I think it will be a fairly familiar list to what you would expect from Quarterhill today.

In a nutshell, we're looking for businesses with solid existing fundamentals and with the promise for operational improvement and profitable growth in the future. The key message here is that we will be very disciplined financial buyers.

To execute successfully on the playbook I mentioned earlier, it is essential that the transaction metrics match up with our financial models and we always have an eye on the business fundamentals that matter both before and after we acquire a business. In general criteria -- in terms of general criteria, companies in our so-called sweet spot would have characteristics such as recurring revenue, positive EBITDA, predictable cash flows, organic and acquisitive growth potential, high customer retention, dedicated management and an ability to enhance operations.

We believe that generating a return on invested capital in the 15% to 20% range per year is that type of return that this strategy should be capable of delivering. In terms of what to expect next, there are likely -- there will likely be some other strategy refinements of course, but I am fortunate to have inherited a situation where we have acquired some good assets or coming off of a strong year financially, have a significant amount of cash on the balance sheet to help us execute our plan and a board and management team committed to our long term vision.

Our goal is to gain credibility in the market by making smart, financially disciplined acquisitions of businesses that are more akin to hitting solid singles than monster home runs. Our near term milestones are to build out our pipeline, ensure we have the right talent on the team, acquire businesses that fit our financial model and effectively manage the businesses we have to help them grow.

As I said earlier, we've already taken steps to enhance our deal making and integration capabilities and to expand the scope of where we will hunt for M&A targets. This is a very exciting time for Quarterhill and I'm looking forward to leading the team on an M&A strategy that I believe can deliver significant returns in the long run.

Granted, we're at the early stage in our diversification journey and need consistent results over time to gain credibility. We’re at the ground floor, but we're off to a good start.

Success is obviously not guaranteed, but we very much aware of what is required to achieve success and we’re committed to discipline, focus and tenacity to get there. With your support and patience, I am confident we will.

With that, I’ll pass it over to Shaun for a closer look at the numbers.

Thanks, Doug and good morning everyone. As Doug mentioned, in 2017, we generated record numbers for our key financial metrics.

We made great progress diversifying our revenue and we fully digested three acquisitions. I’ll spend some time here on the call speaking to the key financial implications of these achievements.

Our revenue is now diversified by type and by business unit. Revenue types that we track are licenses, systems, services and recurring.

The license category represented 75% of total revenue in 2017, which reflects the very strong contribution from WiLAN. In 2016, license revenue represented 94% of our consolidated revenues.

The lower percentage in 2017 reflects the three acquisitions made during the year as part of our overall diversification strategy. It is also important to note that when contemplating these numbers, the results for 2017 include only about 7 or 8 months of contributions from the businesses acquired.

So all else equal, diversification by revenue type would be expected to improve in 2018. Systems revenues, which generally includes revenue earned on contracted projects and recognized on a percentage of completion basis, was 13% of total revenue in 2017 and in 2016, we recorded zero of this type of revenue, as this is all from acquired businesses.

Recurring revenue was 10% of total revenue in 2017, up from 6% last year. In dollar terms, recurring revenue increased to 13.4 million from 5.1 million.

As Doug stated earlier, acquiring businesses with recurring revenue streams remains a priority for our acquisition strategy as it has been from the start. Recurring revenue in 2017 included running royalties from the WiLAN business as well a software and systems maintenance revenues from VIZIYA and IRD.

While 2016 was comprised of running royalties received in the WiLAN business. And finally, services revenue which relates to professional services type activities was nominal in 2017 at about 2% of total revenues.

For more detailed descriptions of these revenue types and the related costs, you can see our MD&A. In looking at the relative revenue contribution from the business units, WiLAN had a strong year, growing its top line by just under 9% year-over-year.

The WiLAN business again demonstrated its ability to generate significant cash flows as well as highlighting the quarterly variability inherent with patent licensing businesses. As we've said in the past, this variability can lead to positive outcomes as it did in Q3 of this year or more modest outcomes as it did in Q4 of this year.

This variability is expected to be more pronounced going forward as new US GAAP accounting rules are now in effect and they impact our WiLAN business a little bit more than the other businesses of Quarterhill. Basically, what it means beginning January 1 this year, all fixed payment patent licenses granted in a quarter will be recorded as revenue when signed, even if there is a stream of fixed payments that extend beyond that particular quarter.

Previously WiLAN would have recognized revenues on such agreements over the period of the license as cash flows were received. As Doug mentioned earlier, this is one reason that I believe you have to look at this business over a longer timeframe rather than quarter to quarter in order to get a true sense of its performance capabilities.

Over time, the financial performance from other businesses in the Quarterhill portfolio will help to mitigate the quarterly variability. As I've just discussed, looking at our 2017 results, this has already begun.

Revenues from our acquired businesses totaled just over $34 million. Consolidated adjusted EBITDA was 64.6 million in 2017 and this was a record amount that reflected strong performance at WiLAN, but also the contribution from the acquired companies, which were accretive to adjusted EBITDA.

Of note, VIZIYA showed its ability to generate solid margins with an adjusted EBITDA margin of close to 27% for the period of 2017, following its purchase by Quarterhill. Quarterhill’s 2017 consolidated net income was 10.2 million or $0.09 per share which is the same on a per share basis as fiscal 2016.

Included in our bottom line for 2017 is a combined 26.2 million of noncash expenses related to disposal and/or impairment of certain intangible assets and there was no similar non-cash expense in 2016. Income tax expense for the year is basically zero.

This represents a current income tax expense of roughly $7.2 million, which is largely withholding taxes on revenues earned in the WiLAN business in foreign countries for which there is no treaty relief. This current expense is offset by a similar deferred tax recovery.

At year end, we have approximately $90 million in loss carryforwards and scientific research and experimental development or SRED expenditures that can be used to reduce taxable income to zero, some of which is recorded in asset and some of which we've provided a full valuation allowance against. As these assets are used up from the production of pretax operating profits, we will see this deferred income tax expense increase.

In addition, the acquisition accounting allocating portions of the overall purchase price to identified intangibles that are subsequently amortized creates a deferred tax liability and this will reverse as amortization expense is recorded. Some of this can be complicated, but ultimately, it's all non-cash.

Taking a look now at a few items on the balance sheet, the first that I want to draw attention to is the contingent consideration. This item reflects a current value assessment of earn-out payments in acquisition agreements that would be made if certain financial targets are met in the future.

At year end, the amount was 4.5 million compared to 6.5 million in previous quarter end. An accepted approach to estimating the fair value of contingent consideration is called a Monte Carlo simulation, which in our case uses roughly 10,000 different scenario accounts and takes the average of all those results.

Our point here in discussing the number is that while the Monte Carlo simulation serves its purpose, it is really an estimate of fair value. The actual amounts payable will be determined in mid-2019 and between now and then, we will have to revalue this contingent liability each reporting period.

Of central importance on the balance sheet however is cash, cash equivalents and short term investments, including restricted investments, which totaled 86.6 million at year end compared to 107.7 million at the end of last year. While the balance is lower year-over-year, it is important to recognize that we made those three acquisitions totaling 67.4 million, largely out of our cash on hand as well as repaying close to 20 million of our patent finance obligations and returning approximately 4.6 million to shareholders via dividends.

The reason our cash balance remained high at year end is due to our ability to generate strong cash flows from operations, which was 17 million in 2017, up almost 90% from last year. As a result, with 86.6 million of cash in the bank at the start of this year, we have significant resources with which to continue pursuing our growth strategy.

And finally this morning in our earnings release, we announced details of our next dividend payment. The Board of Directors has declared an eligible dividend of CAD0.0125 per share, payable on April 5, 2018 for shareholders of record on March 23, 2018.

This concludes my review of the financial results and I'll turn the call back to the operator for questions.

Doug, you’ve outlined the criteria of what you're looking for in terms of M&A pretty well. Can you speak to what remaining pieces you'd still like to put in place with your team or structure before embarking on some meaningful M&A again?

Good morning, Doug. Yeah.

It's a good question. I mean, in the first 50 days the focus has been to large degree on some of the just the key fundamentals that we need.

We're still working through kind of the core capabilities. I will say that that being said, there are a couple of areas that you naturally look at investing in from a capabilities perspective to create M&A ecosystem.

Building capabilities on kind of your finance organization, your IT structure is very important as an aggregator. I think also looking at capabilities on the integration side, people that have skills as well to strengthen the integration expertise and knowledge, work well with management teams.

I think another area as well is around the sort of the diligence through to integration aspects around technology, go to market expertise as well. So it is a work in progress, Doug, but I think building kind of some of the tenets on that ecosystem and skills are important.

You need the ability to scale in the back office or the integration side and you need some of those core capabilities to be enhanced in order to assess companies effectively from a diligence perspective and look at opportunities in the integration. So, nothing's cast in stone, Doug, but I think at first flush, those are areas where we will continue to invest.

So is it fair to assume that you'd like to put those in place before we would see any more activity on the deal front?

Not necessarily, Doug. I mean one of the advantages we have of bringing in experienced people, such as Russ and Neil and it’s certainly to the extent to which you need support, functional and technical expertise.

We have kind of the skills and relationships to bring that in as a variable, the variable support and in fact, certainly if you look at the history of Russ and Neil and myself, we brought in those skillsets as required and that's really drawing on our relationships and our knowledge. I think focusing on enterprise -- verticalized enterprise software is helpful too because there's obviously a track record with knowing the industry and knowing where to bring in support from those groups of individuals who may not be technically part of your payroll, but can provide some support.

I think I will say as well Doug that being in the KW area and Ottawa area and focusing as you’ll see that we're setting up our Southern Ontario office in the KW area, will also be helpful to drawing some of that support as well.

So naturally a part of adding at the corporate level is an added expense to the corporate level and we've seen that trending up here in recent quarters. How should we think about modeling out the expense level at the Quarterhill corporate for 2018?

Hi, Doug. It’s Shaun here.

I’ll try to answer that. Again, we stated – we steer clear of giving direct guidance, but I think if you look at our Q4 numbers, we were talking about, even when Doug was talking about adding resources, we’re talking about adding two or three heads, we’re not talking about quadrupling our payroll kind of stuff.

So, Q4 feels kind of representative of what it could be plus or minus a few bucks.

Was there anything one time about Q4 that we should be factoring out?

No. Sorry, Doug.

There is one thing to be cognizant of is now that we’re SOX filers in the US, our audit fees have gone up pretty dramatically and those are reflective obviously in our Q4 numbers. So, it's unfortunately not a one-time thing, but it is definitely a shorter term uptick.

Getting into the segments a little bit, we'll start with WiLAN. We have seen -- it seems to me a resurgence of some kind of high profile patent license agreements between some of the tech bellwethers of late, have you noticed any change in the way the conversations you're having with potential licensees are going of late.

No. I think you've got the same sort of cadence in the business and I think 2017 shows you both the upside that that model can deliver and WiLAN in ’18 has got a robust business and a lot of the nature of the activity remains as it's always been.

The portfolio was still there, Doug. I mean, they had 50 plus litigations, 40 partner programs, significant, there was a series of large licenses that are coming up for renewal this year.

And kind of those – the renewals today will mostly be driven by kind of cellular and semiconductor technologies and efforts to renew will be focused on companies like Intel, Broadcom, Oracle, LG, Cisco and Huawei. But if you look at, in addition to the renewals, if you look at the litigation, I mean, it’s the same cadence as you'd expect.

There is sort of a dozen trial date set through to the end of 2019. There are a series of market hearings as you'd expect when you're really going through the process.

I think we had some positive outcomes from a recent marketing hearing, including one that we have with Apple, in the Apple case and LT Technology in October, a series of marketing hearings coming up this year, one in February with Microsoft, April with AT&T; July with Toshiba, et cetera. And also trials that can be a catalyst as you know to the license process as well.

We just completed one in February with Deutsche Telekom in Germany, waiting for results in March. We’ve got one in May with LG in Germany in wireless; one in July with Apple in California in wireless as well.

OmniVision, November, in Delaware; CMOS imaging and one in December with Sharp and VIZIO in Delaware on the TV side. So I don't think there's been a sea change or an evolving change.

I think, obviously as I mentioned, some of the focuses on the renewals are slightly different and that the focus will mostly be driven as I said by the cellular and semiconductor technologies. But the business remains robust and doing what it's always done.

And I mean there was I guess a bit more activity towards the beginning of Q1, should we read into that any sense of kind of a rebound after I guess what I would characterize as a bit of a softer Q4?

You’re talking about activity in Q1, Doug?

Yeah. Well, I mean, not only acquisitions of patents and partnership agreements and licensees announced at the beginning of January.

I think as Doug said, I think that just reflects the continued progress of the business here. You can't read soft quarters and big quarters as true indicators of the level of effort and work that's going on nor the level of opportunity that remains inside the business, but –

The range, the cadence of investment, the ups and downs of the trial negotiation process and license renewal, all remains the same. There is no sudden shift in the nature of it.

I think it’s -- and some of that may just be specific to the timing of things that kind of the nature of the business and the fundamentals I don’t think would change.

As for IRD, VIZIYA and I guess iCOMS to a lesser extent, IRD, I noticed in the disclosure and some of your prepared remarks talk to, there is still being some slippage of renewals, or things like that. Have we caught up at this point with the renewals that have slipped out of prior quarters?

There's one renewal in particular that is still sliding a little bit. It’s related to California in terms of a maintenance contract.

And generally the government sort of slows down over a Christmas kind of period and into January. So, there's a bit of a timing lag, but we don't see any real systemic change in the business in that environment.

Yeah. I’ll echo that.

California, one of the one -- it is a timing issue, once again you’re dealing with government organizations that have processes and procedures to go through, but I think that there is sort of a rhythm that we've seen in the business on the maintenance renewal side is solid and will continue into this year.

And then last question from me, from your commentary and obviously VIZIYA turned in a pretty strong quarter this quarter, but what -- can you talk about the pipeline for both VIZIYA and IRD and just confirm that what you're saying is that the metrics and the profitability you expected out of these businesses at the time of the acquisition, you expect to turn up in 2018?

As I said in my remarks, I mean the businesses are doing well. You'd expect a little bit of transition in the businesses through the acquisition process.

And they are delivering to a large extent as we expected operationally. Will there be ebbs and flows, Doug, through the year as you'd expect in the business?

There's a natural amount of cyclicality in the business, which we’re aware of. But I will say that they're kind of past the harder part of it and they're gaining -- I think they're gaining momentum, we’re expecting to gain momentum as the year goes.

I had a couple of financial questions and then want to ask about the business if I could. Just following up on the recurring businesses, firstly on IRD, it seemed like you had a pretty good revenue quarter, but the EBITDA line was a fair bit weaker than I would have expected.

Can you just talk about what happened in Q4 there?

There's a couple of things. The seasonality in that business affect the kinds of projects that you can work on and in particular you get into some of the winter road work and stuff like that, you end up with projects that aren’t as high a value in terms of driving the kind of bottom line return.

That's one of the key issues that happens in 3Q, 4 and kind of Q1 given the seasonality in particular in North America. And I think the second issue to be frank and it's not a material number, but there's a few receivable challenges down in our Chilean sub that we took a chance to address in the quarter.

It’s about $200,000. So that has an impact.

And then, we are a little bit ahead of spending on the R&D side, which is really driven against the VectorSense product and trying to drive that higher normally in classification systems that Doug talked about. The testing is going extremely well.

We're starting to get our first couple of orders in, but we had to spend a little bit heavier on the R&D side over the last half of last year, in fact, not just Q4.

And I think it's fair to say that one of the nice things about VectorSense is once you get past that installation process and it's part of the rhythm of the product mix, we kind of like the margins of them like the mix of the business. So long term, we see that as a good margin improvement opportunity for businesses.

So if we think about the revenue in the quarter, is that like a decent place to start and then you have a few of these cost headwinds that may not or shouldn't reoccur. So, do you get back to Q2 EBITDA levels or higher or is it going to take a while to get there.

Subject of the seasonality comment, right, I think, this is kind of what we feel is sort of the Q4, Q1ish kind of feel to the business. You saw the EBITDA impact in the May, June, July timeframe, which was quite substantially better than what we're seeing in sort of Q4, right.

I think we got to keep that seasonality in mind on that side.

And then on VIZIYA, obviously very significant improvement in profitability in the quarter, again, revenue kind of in the zone of where it's been. Is that sort of running at the expected level and you can see that reoccur as you go through 2018?

Yeah. I think you're getting -- I think you saw a little bit to my comment, if you get to summer, a little bit of softness in the business, a couple of months in the summer, we’re softer because a few things pushed out, but yeah, I think when you look at kind of where it's delivering on the top line and bottom line, we're encouraged by what we see.

That’s hard and we think that's kind of the rhythm of the business.

And how much of a growth driver could be about a relationship with SAP? What could that turn into?

Does that drive this business to double digit growth? Or is it still a fairly slow growth rate business?

No. I think it's a very positive event.

I mean, obviously, they have a strong presence with Oracle on the history of the business from the Oracle side and I like the kind of Switzerland ERP nature of their business, but the SAP is a wonderful opportunity to going on the reseller, if you can get on the reseller arrangement, you can really significantly boost your revenue. Of course, it's almost difficult to predict these things, but you look at the history of most companies, small companies that have a differentiated strong product, that SAP AEs want to sell and add to the mix, you get a pretty significant ramp up on revenue and your margin is strong even with the reseller erosion piece of it.

So for me, it's only upside in their business and they’re getting a lot of traction and what we hear is SAP like the functionality of the product and the usage of the product and SAP is a very loyal partner. Many companies that have dealt with them have seen.

So, it could be a real catalyst, but it doesn't take time to negotiate these things and obviously a larger organization with a lot of moving pieces, yes, but I think it’s really to start with them, but the bottom line of your question is, it can be a real driver for growth? Absolutely.

And then I just wanted to ask about patents for a second. So, 40 programs, you've talked about sort of the TAM of the programs in the past, the various categories, wireless, Sony, et cetera.

You made a couple of acquisitions. Have you updated that TAM opportunity of licensing potential for the patents that you have?

Is that something you're willing to share?

Well, I think, we have -- it's fair to say that we have significant -- hundreds of millions of dollars of opportunity, Todd, literally, hundreds of millions of dollars of opportunity and that's still there and it’s very attractive. And, I think when we look at the pipeline of the business, we still see that.

And we're -- it is a game where your TAM depends on being disciplined and being focused on that long term return and that’s been the strategy WiLAN has, but that TAM piece and kind of the financial aggregate opportunities in that range remains attractive.

Like in the past, you had talked about 800 million, 900 million in the various categories, you made a few acquisitions. There's obviously been some big deals done.

Do you still feel it’s in that 500?

I think it's probably 0.75 billion. It is a bit of a swag, as you know, but that’s kind of the range.

And so the way that you sort of stick in that range is, even though you've signed the big deals with Samsung and others, which would obviously come out for a few years, the new programs and acquisitions you've made in streaming or the couple of other areas you mentioned are -- keep you in that range, is that the way to think about that?

Yeah. I think that’s right and potentially upside as well, even larger, so that’s correct.

That would be a good way of looking at it.

And then just these renewals, like you rhymed off obviously a lot of potential in the names you mentioned in wireless and semi, so by calling those players out, Intel, Broadcom, et cetera, are you saying you're thinking you can get those renewals done in ’18 or it's just you're going to focus and they will happen when they happen?

Yeah. I think it is a fair question.

We will focus and they will happen when they happen. I mean, licenses in 2011 were driven mostly by four technologies; WiFi, Bluetooth, semi, DSL and most licenses extended until the end of 2017.

So, the renewals are in negotiations and you have to be disciplined and focused on them. So, our goal is to get them done as soon as we reasonably can, but on terms that make sense for us.

So, the assumption that they're all going to be renewed in this year, I wouldn’t make, but are we trying to focus on them with purpose and get the right terms and conditions and when the stars align and we can do that, we will certainly auction them. So I think that’s the way I look at it.

And similar to the Samsung deal, with the new accounting rules, these will become a sort of big one time hits when they happen. Is that right?

Yeah. From a revenue perspective, for sure.

If they have payment stream over 2, 3, 4, 5, whatever years, you'll see a very substantial accounts receivable, basically, long term and short term kind of stuff and we’ll do through the cash flow, but yeah, the revenue will basically be booked right up front. Running royalty agreements, right, which normally is not very often done.

Right. But running royalty agreements would continue to be recognized over the period of time that the reports come in.

So some of these wireless guys in the past you've signed running royalty agreements with probably volume driven, et cetera. So, we may see some deals like that in the wireless area?

Possible.

Okay. Great.

I appreciate the color. Thanks a lot.

Thanks very much everybody and look forward to Quarterhill in the future together.