Toronto-based Quarterhill Inc. is beginning to show what its turnaround can look like when stronger contract economics meet growing demand for road-monitoring technology. The intelligent transportation systems company posted its strongest adjusted profitability in more than three years during the second quarter of 2026, despite reporting slightly less revenue than a year earlier.
The improvement was supported by restructuring, better-performing tolling contracts and continued strength in Quarterhill’s commercial-vehicle and enforcement operations. Recent wins stretching from Oklahoma and Indiana to South Korea and Thailand are also broadening the company’s footprint. At the same time, Quarterhill is preparing for a much larger bet: the planned acquisition of Conduent’s tolling solutions business. Unless otherwise stated, Quarterhill reports its financial results in U.S. dollars.
Profitability Improved Even Though Revenue Barely Moved
Quarterhill generated second-quarter revenue of $42.5 million, compared with $43.1 million in the same period of 2025. On the surface, that looks like an uneventful quarter. Underneath the revenue line, however, the financial picture changed considerably. Gross profit climbed to $12.2 million from $6.3 million, lifting the company’s gross margin to 29% from just 15% a year earlier.
That margin expansion helped adjusted EBITDA reach $4.6 million, compared with an adjusted EBITDA loss of $2.7 million in Q2 2025. Quarterhill put its adjusted EBITDA margin at 11%, calling the quarter its strongest profitability performance in more than three years. It was also the company’s fourth consecutive quarter of positive adjusted EBITDA. For a business that had spent much of the previous year dealing with weak tolling-contract economics and restructuring costs, the improvement marks a significant change in operating direction.
The Turnaround Looks Sharper Against Last Year’s Problems
The contrast with mid-2025 helps explain why the latest numbers matter. In Q2 2025, Quarterhill’s adjusted EBITDA deteriorated to a $2.7 million loss, while two problematic tolling contracts reduced adjusted EBITDA by approximately $3.9 million during the quarter. Gross margin had fallen to 15%, and management was trying to renegotiate contracts while addressing a cost structure that was no longer delivering acceptable returns.
Weeks before those results were reported, Quarterhill announced plans to eliminate approximately 100 positions, representing around 15% of its workforce. The restructuring was expected to generate roughly $12 million in annualized savings, with the full benefit anticipated in 2026. By Q3 2025 the company had returned to positive adjusted EBITDA, and gross margins were recovering. The newest quarter suggests those measures were not simply temporary cuts: stronger contract economics and operating discipline are now appearing directly in the company’s reported margins.
Commercial-Vehicle Technology Is Becoming a Bigger Growth Engine
Quarterhill said the small year-over-year decline in Q2 revenue reflected lower tolling-project activity, partly offset by growth in its commercial-vehicle and enforcement business. That division has increasingly become an important counterweight to the more uneven economics of large tolling projects. Management also cited higher commercial-vehicle and enforcement revenue as one of the factors behind the improvement in adjusted EBITDA.
The trend was already visible earlier in 2026. First-quarter revenue rose 14% year over year to $38.6 million, with Quarterhill attributing that increase primarily to its commercial-vehicle and enforcement operations. The unit includes technologies that can identify, weigh, classify and screen heavy vehicles as they travel through highway networks. Instead of relying solely on traditional roadside inspections, transportation agencies can use the systems to collect information continuously and direct enforcement resources toward trucks that warrant closer attention.
Weigh-In-Motion Systems Solve a Very Practical Highway Problem
One technology at the centre of Quarterhill’s commercial-vehicle business is weigh-in-motion, commonly shortened to WIM. These systems measure characteristics such as axle weights while vehicles are moving, allowing agencies to gather information without requiring every truck to stop on a static scale. WIM data can support freight planning, pavement and bridge management, traffic monitoring and the pre-screening of vehicles for enforcement.
The U.S. Federal Highway Administration notes that electronic screening can distinguish likely compliant vehicles from potential violators before they stop at an inspection facility. That allows safe and legal trucks to bypass some facilities while enforcement teams concentrate on higher-risk vehicles. FHWA also says states must enforce commercial-vehicle size and weight rules to protect infrastructure while keeping freight moving efficiently. That combination of safety, efficiency and infrastructure protection helps explain why technologies once viewed mainly as specialized weigh-station equipment are becoming part of broader digital highway networks.
New U.S. Contracts Show Where Demand Is Coming From
Quarterhill has accumulated a series of U.S. transportation contracts that illustrate the commercial opportunity. In July, the company announced a $5.25 million Oklahoma Department of Transportation contract to modernize commercial-vehicle screening at an existing Interstate 35 weigh station. The planned technology includes weigh-in-motion, electronic screening, ramp and mainline sorting, tire-anomaly classification and vehicle dimensioning.
Indiana represents an even larger commitment. Two agreements announced in April have a combined estimated value of $13 million and run through April 2030, covering equipment, software, installation, calibration, maintenance and repairs for WIM and virtual WIM systems statewide. Quarterhill also announced approximately $2.4 million of Caltrans projects involving commercial-vehicle e-screening and WIM installations in California. These are not consumer-facing technologies, but they sit on freight corridors where transportation agencies need reliable data every day, creating a market built around long-term public infrastructure programs.
California Shows How Road Data Can Have Several Uses at Once
Quarterhill’s California projects offer a useful example of why transportation departments invest in these systems. At the Desert Hills Commercial Vehicle Enforcement Facility, the company is deploying e-screening technology intended to help officers concentrate inspections on potentially non-compliant vehicles while allowing compliant trucks to move through more efficiently. Separate WIM systems on Interstate 10 and Route 805 will collect vehicle-weight and traffic information.
Those measurements have value beyond enforcement. California agencies can use them for freight planning, infrastructure monitoring and analysis of how traffic is affecting heavily used corridors. Quarterhill noted when announcing the projects that California moves more than 2.4 billion tons of freight annually across a highway network exceeding 50,000 miles. In a system operating at that scale, better information about vehicle weights and traffic patterns can influence decisions about maintenance, capacity and enforcement. It helps turn roadside sensors into infrastructure-management tools rather than simply electronic scales.
The Commercial-Vehicle Push Is Extending Beyond North America
Quarterhill’s commercial-vehicle strategy is increasingly international as well. On August 4, the company announced approximately $2.1 million in new WIM orders for projects in South Korea and Thailand, with installations planned during 2026 through local partners. The South Korean work involves PAT Bending Plate WIM systems supplied for Korean Expressway Corporation applications including traffic monitoring, overload detection, enforcement and roadway maintenance.
In Thailand, new orders cover Single Load Cell WIM equipment and Quarterhill’s iSINC sensor interface and network controller technology for projects supporting the Department of Highways. These awards follow earlier international activity announced in late 2025 across South Korea, Thailand, Kuwait and Cambodia. Individually, the contracts are smaller than some large U.S. transportation awards. Collectively, however, they show that the same problem exists across many markets: governments want continuous information about freight movement, vehicle loading and infrastructure use without unnecessarily disrupting highway traffic.
Tolling Is Improving, but It Still Creates Uneven Quarterly Revenue
Commercial-vehicle growth does not mean Quarterhill is moving away from tolling. Tolling remains central to the company, but project timing can cause quarterly revenue and margins to move noticeably. In Q2 2026, lower tolling activity was the main reason total revenue slipped from the prior year, even as profitability improved. Management attributed the stronger gross margin partly to improved contract economics and disciplined execution on certain tolling projects.
That is a meaningful change from 2025, when cost overruns on two tolling contracts weighed heavily on results. Quarterhill has since restructured operations and worked to improve project terms. It has also continued winning tolling business, including a $6.3 million Utah Department of Transportation contract covering a back-office and customer-service platform for the I-15 Express Lanes network. The challenge now is making growth in tolling contribute to margins rather than simply adding revenue and execution risk.
The Planned Conduent Deal Could Transform Quarterhill’s Scale
Quarterhill’s biggest strategic move is still ahead. In June, it agreed to acquire substantially all of Conduent’s tolling solutions business. The transaction includes $70 million in cash as well as Quarterhill shares representing approximately 7% of the company after closing. Quarterhill expects the acquisition, subject to approvals and closing conditions, to close during the fourth quarter of 2026.
Management says the transaction could roughly triple Quarterhill’s tolling revenue. The combined operation is expected to have approximately $2 billion of backlog and, on a pro-forma basis after planned synergies, annual revenue above $400 million with an adjusted EBITDA margin between 10% and 15%. Conduent’s tolling operation processes more than 14 million transactions a day across the United States and United Kingdom. That scale creates significant opportunity, but integrating a much larger operation will also test whether Quarterhill’s recent improvements in cost discipline can survive rapid expansion.
Stronger Operations Do Not Yet Mean the Risks Have Disappeared
The latest quarter contains encouraging cash-flow signs. Quarterhill generated $5.7 million from operations, reversing the $4.6 million of cash used in the same quarter last year. Cash and equivalents stood at $26.2 million at June 30, up from $14.7 million at the end of March, although the company said the increase also reflected proceeds from a new secured term loan. Backlog stood at approximately $415 million before the potential Conduent combination.
There is also an important distinction between adjusted operating profitability and bottom-line earnings. Quarterhill still reported an IFRS net loss of $5.6 million in Q2, equal to five cents per basic and diluted share. Adjusted EBITDA excludes several expenses and is not a standardized IFRS measure. The next stage of Quarterhill’s turnaround will therefore be judged not only by contract wins and adjusted margins, but by whether those improvements eventually produce durable net earnings, cash generation and successful integration of the Conduent business.
