Quarterhill's M&A Pivot: Becoming a Tolling Consolidator
Quarterhill Inc. (QTRH.TO) is no longer just a turnaround story. In its Q2 2026 earnings call on August 13, the company reported its strongest adjusted EBITDA quarter in three years and unveiled a transformative acquisition that could reshape its competitive position. The Conduent acquisition of Conduent's Tolling Solutions business is expected to close in Q4 2026, and management is confident it will triple tolling revenue and make Quarterhill the second-largest tolling operator in the U.S.
Beyond the M&A, the underlying business is improving. Revenue came in at $42.5 million, down only slightly from $43.1 million a year ago, but gross profit jumped from 15% to 29% of revenue. As CFO David Charron noted, “Our gross profit in Q2 of this year was $12.2 million, or 29% of revenue, compared with $6.3 million, or 15% of revenue, in the same period last year.” — David Charron, Chief Financial Officer · 2026-08-13 This margin expansion is a result of better contract economics, disciplined execution, and a more favorable revenue mix. For the first half, revenue grew 5% to $81.1 million. CEO Chuck Myers highlighted the operational leverage: “These results demonstrate the operating leverage in our model and our ability to convert revenue into profit.” — Charles Myers, Chief Executive Officer · 2026-08-13 The tolling revenue mix is now roughly 55% tolling and 45% safety and enforcement, as disclosed in the Q&A: “It's approximately 55% is on the tolling side and 45% on the safety and enforcement side.” — David Charron, Chief Financial Officer · 2026-08-13 Both segments are profitable.
The Conduent deal is the most significant strategic move since the company's restructuring. The purchase price is $70 million in cash plus 7% of Quarterhill common shares. Pro forma, the combined company is expected to generate over $400 million in annual revenue with an EBITDA margin of 10–15% after synergies.
The combined backlog would be about $2 billion, providing substantial long-term visibility. Management believes the opportunity pipeline in the industry remains above $2 billion, and they have identified an actionable M&A pipeline of $3 billion. Earlier this year, Myers described a similar pipeline size: “Our current pipeline that we're going after is about $2 billion right now.” — Chuck Myers, Chief Executive Officer · 2025-05-15 This indicates consistent opportunity flow.Upon closing, we expect the transaction to approximately triple our tolling revenue. And on a pro forma combined basis, after planned synergies, we expect the business would generate more than $400 million in annual revenue with an adjusted EBITDA margin of between 10% to 15%.
Quarterhill's emphasis on technology and AI is a key differentiator. The company is deploying AI-powered solutions in tolling and enforcement. As Myers explained, “It also makes our deployments more repeatable, strengthens project economics, and lets us deliver greater value at a competitive price.” — Charles Myers, Chief Executive Officer · 2026-08-13 The AI capabilities are integrated into vehicle classification, image recognition, and customer service automation. In the earlier call (November 2025), Myers highlighted the Safety and Enforcement business: “That business is roughly $60 million a year. It's roughly 25% EBITDA, continues to grow nicely.” — Charles Myers, Chief Executive Officer · 2025-11-06 This shows the foundation they are building on.
Looking ahead, the company expects the Conduent acquisition to close by Q4, and integration planning is well underway. Management is confident about reaching the 10–15% EBITDA margin range by 2027. While they declined to give specific synergy numbers, they reiterated that the backlog quality is strong and that the transaction is 'not essentially buying a company, but buying a double-digit number of contracts,' as Myers put it. This indicates a careful, contract-by-contract diligence process.