Quarterhill Q2 Earnings Call Highlights

Quarterhill (TSE:QTRH) reported second-quarter revenue of $42.5 million and adjusted EBITDA of $4.6 million, marking its strongest quarterly adjusted EBITDA performance in more than three years, according to management.

Revenue was down slightly from $43.1 million in the second quarter of 2025, while first-half revenue increased 5% year over year to $81.1 million. The company said its backlog stood at $415 million as of June 30, representing work expected to be completed under existing customer agreements, including signed contracts and certain anticipated extensions with defined scope and timing.

“These results demonstrate the operating leverage in our model and our ability to convert revenue into profit,” Chief Executive Officer Chuck Myers said during the company’s earnings call.

Profitability and Cash Flow Improve

Quarterhill’s gross profit rose to $12.2 million, or 29% of revenue, from $6.3 million, or 15% of revenue, a year earlier. Chief Financial Officer David Charron attributed the improvement to stronger contract economics, disciplined execution and performance across the business.

Adjusted EBITDA improved by $7.3 million from a loss of $2.7 million, or negative 6% of revenue, in the prior-year quarter. The second quarter was Quarterhill’s fourth consecutive quarter of positive adjusted EBITDA.

Cash generated from operations totaled $5.7 million, compared with a $4.6 million use of cash in the second quarter of 2025. Quarterhill ended the period with $26.2 million in cash, up from $14.7 million at the end of the first quarter.

The company also said it had closed and announced a new secured term loan that includes a $100 million accordion facility. Charron said the capital structure is intended to support current operations, growth investments and acquisitions.

Contract Wins Span Tolling, Commercial Vehicle Screening

Management highlighted several new customer wins during the quarter. The Utah Department of Transportation selected Quarterhill’s tolling back-office and customer-service platform for the I-15 Express Lanes network. Oklahoma expanded its relationship with the company through a $5.25 million commercial vehicle screening project.

Outside North America, Quarterhill secured approximately $2.1 million in new orders in South Korea and Thailand. Myers said the company views its transportation technology, installed infrastructure and artificial intelligence capabilities as competitive differentiators in helping agencies use transportation data for real-time decisions, safety and operational efficiency.

Charron said tolling accounted for approximately 55% of the company’s business mix, with safety and enforcement representing about 45%. He said both segments were profitable on a standalone basis.

Myers said commercial operations outside the United States represent a growth area, while the company has also been receiving renewals in the U.S. He said the international commercial business generated roughly $20 million in revenue last year and could grow “pretty nicely” this year, though he did not provide a formal forecast.

Conduent Tolling Acquisition Remains Targeted for Fourth Quarter

Quarterhill continues to expect its acquisition of substantially all assets of Conduent’s tolling solutions business to close in the fourth quarter of 2026. The transaction, announced June 30, calls for $70 million in cash plus Quarterhill common shares equal to 7% of the company’s issued and outstanding shares at closing.

The cash portion is expected to be debt financed. Under the agreement, Conduent will receive half of the share consideration subject to a six-month lockup and the remaining half subject to a 12-month lockup.

Upon closing, Quarterhill expects the deal to approximately triple its tolling revenue and position the company as the second-largest tolling operator in the U.S., according to Myers. Management expects the combined company, after planned synergies, to generate more than $400 million in annual revenue on a pro forma 2026 basis, with adjusted EBITDA margins between 10% and 15%.

The acquisition is also expected to increase combined revenue backlog to approximately $2 billion, supported by multi-year agency relationships and recurring service contracts. Charron said the backlog provides visibility into growth in later years, while Myers said the figure represents fully contracted backlog.

• Purchase price: $70 million in cash plus shares representing 7% of Quarterhill’s outstanding shares at closing.
• Expected timing: Fourth quarter of 2026.
• Expected combined annual revenue: More than $400 million on a pro forma 2026 basis after planned synergies.
• Expected adjusted EBITDA margin: 10% to 15%.
• Expected combined backlog: Approximately $2 billion.

Integration Work Underway

Management said integration planning is underway, including work with lenders, surety-bond providers and functional teams involved in the carve-out. Charron said carve-out transactions are complex but that the company remains on track for a fourth-quarter closing.

Quarterhill has identified expected synergies from headcount, real estate and third-party vendors, though management declined to provide further details on staffing needs or final synergy figures. Myers said the company expects to reach the stated 10% to 15% adjusted EBITDA margin range during 2027.

Myers also said the acquired operations would be complementary rather than overlapping with Quarterhill’s existing contracts. The transaction is expected to add a larger U.S. footprint and a U.K. operation of several hundred people, which management said could provide a starting point for European growth in tolling.

Quarterhill said it expects to file a business acquisition report within 75 days following closing, including audited financial statements for Conduent’s tolling solutions business and pro forma financial statements for the combined company.

About Quarterhill (TSE:QTRH)

Quarterhill is a global leader in the Intelligent Transportation System (ITS) industry, advancing mobility through smart infrastructure solutions that reduce congestion, improve roadway safety, and create more sustainable travel. Each year, Quarterhill's platforms process billions of transactions, perform compliance and safety inspections on millions of commercial vehicles, and enable transportation agencies worldwide to optimize thousands of lanes of traffic to improve travel for everyone. Leveraging advanced artificial intelligence and machine learning technologies, Quarterhill's platform delivers automation and predictive insight to help agencies manage transportation networks more efficiently.

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