Quarterhill has reported its strongest quarter of adjusted profitability in more than three years, as the intelligent transportation systems (ITS) company prepares to significantly expand its US tolling business.

The Toronto-based company recorded revenue of US$42.5m in the second quarter of 2026, slightly down from US$43.1m in the same period last year. Quarterhill said the decline was primarily due to lower tolling project activity, partly offset by growth in its commercial vehicle and enforcement business. Adjusted EBITDA reached US$4.6m, compared with a US$2.7m loss in Q2 2025, marking Quarterhill’s fourth consecutive quarter of positive adjusted EBITDA.

Its adjusted EBITDA margin was 11%. Gross margin increased from 15% to 29% year-on-year, which the company attributed to restructuring, improved contract economics, execution on tolling contracts and continued strong margins in its commercial vehicle and enforcement operations. Quarterhill nevertheless reported a net loss of US$5.6m for the quarter, compared with a US$6.8m loss a year earlier.

Cash generated from operations was US$5.7m, against cash used in operations of US$4.6m in Q2 2025. Revenue backlog stood at US$415m at the end of June. Quarterhill chief executive Chuck Myers said: “We continued to strengthen our financial profile in the second quarter as we build a larger, more focused, and more profitable ITS platform.”

Quarterhill also pointed to continued activity in its tolling business during the quarter, including a US$6.3m contract with the Utah Department of Transportation to deploy a new tolling back-office and customer service platform across the state’s I-15 Express Lanes network. The five-year contract, which includes five optional one-year extensions, covers 77 tolling locations.

The company also secured approximately US$2.1m of orders in South Korea and Thailand for commercial vehicle and tolling systems, extending its presence in the Asia-Pacific region. According to Myers, Quarterhill’s commercial opportunity pipeline remains above US$2bn as transportation agencies continue to invest in modernising tolling and roadside operations.

The results do not include any contribution from Conduent’s tolling solutions business, which Quarterhill agreed to acquire on 30 June for US$70m in cash and shares. The transaction, which is expected to close in the fourth quarter of 2026 subject to regulatory and other customary conditions, is expected by Quarterhill to approximately triple its tolling revenue and give the combined business a backlog of around US$2bn.

The company has said the deal would make it the second-largest tolling operator in the USA. Quarterhill expects the enlarged business to generate annual revenue of more than US$400m, with an adjusted EBITDA margin of between 10% and 15%. Myers said completing and integrating the Conduent transaction would be the company’s immediate priority during the second half of the year.