Quarterhill Inc.

Good morning, everyone, and welcome to the Quarter Hill Second Quarter 2026 Financial Results Conference Call. Joining us today are Chuck Myers, Chief Executive Officer, and David Charron, Chief Financial Officer. At this time, all participants are in listen-only mode. Following management's remarks, we will open up the call for question and answer session, during which analysts are invited to ask questions. Earlier this morning, Quarter Hill issued a news release announcing its financial results for the second quarter ended June 30, 2026. This news release, along with the company's MD&A and financial statements, are available on Cedar Plus. Certain matters discussed during today's conference call or responses to questions may constitute forward-looking information and statements. Actual results could differ materially from those anticipated. and others. Risk factors that could affect results and assumptions used to develop such forward-looking information are detailed in the company's earnings release, most recent annual information form and other public filings available on CEDAW+. During this conference call, Porterhill will refer to certain non-GAAP financial measures and ratios, such as adjusted EBITDA, non-GAAP financial measures and ratios do not have a standardized meeting prescribed by IFRS and may not be comparable to similar measures disclosed by other companies. Please refer to the company's Q2 2026 MDNA and earnings release for full cautionary notes regarding the use of forward-looking statements and non-IFRS measures. Finally, please note that all financial information provided is in U.S. dollars unless otherwise specified. I will now turn the call over to Mr. Myers. Please go ahead.

Good morning, everyone, and thank you for joining us. This morning, we announced another quarter of consistent execution and improved profitability. Revenue was $42.5 million, and adjusted EBITDA was $4.6 million at a margin of approximately 11%. That was our strongest quarter of adjusted EBITDA in over three years. These results demonstrate the operating leverage in our model and our ability to convert revenue into profits. Technology is central to our strategy, and it is a clear competitive differentiator. It turns transportation data into real-time insight and action that helps agencies operate more efficiently, improve roadway safety, and make faster decisions. It also makes our deployments more repeatable, strengthens project economics, and lets us deliver greater value at a competitive price. Very few companies combine our transportation expertise installed infrastructure, and AI capabilities. Customers are responding to that combination, and we see it in our recent wins. The Utah Department of Transportation select our advanced tolling back office and customer service federal platform for its I-15 express lanes network. Oklahoma expanded its longstanding relationship with us through a new $5.25 million commercial vehicle screening project. Internationally, we secured approximately 2.1 million new orders in South Korea and Thailand. Together, these wins show we can attract new customers, expand existing relationships, and deploy our technology across multiple applications and geographies. We believe the commercial opportunity pipeline in our industry remains above $2 billion. Now, let me turn to our pending acquisition of Conduit's tolling solutions business. It materially advances our strategy to build a larger, more focused, and more profitable ITS platform. Upon closing, the transaction is expected to approximately triple our tolling revenue and make Quarter Hill the second largest tolling operator in the U.S. We expect that the acquisition will add significant scale, long-term agency relationships, and extensive capabilities across electronic tolling, back office operations, and roadside systems. We expect it will also give us a much larger installed brace along where we can deploy our technology and AI-enabled solutions. The transaction is highly attractive and highly complimentary. We have identified significant day one synergies and built a clear integration plan to realize them. Integration planning is going well, and we continue to expect the transaction to close in the fourth quarter. This is exactly the kind of opportunity we have built Quarter Hill to execute. We know the tolling industry, we know these customers, and we know how to operate transportation technology businesses. We are confident we can integrate the conduit tolling operations, capture the cost efficiencies we have identified, and scale the platform profitably. The conduit acquisition also shows why M&A works in our platform. in tolling our approaches to add long-duration contracted value and valuable agency relationships to an operating platform we already have in place. We've identified actionable M&A pipeline of approximately $3 billion across our target markets. These potential opportunities give us visibility into long-term opportunities. We know the playbook, and we have the platform and experience and financial relationships to execute it. Halfway through 2026, we're executing the plan we laid out over the year. We're delivering consistent financial performance, winning new business, advancing our technology leadership, and preparing to add significant scale. With that overview, I'll turn the call over to Dave to discuss our Q2 financial results and the details of the transaction.

Thank you, Chuck, and good morning, everyone. I'll start with Quarter Hill's second quarter financial results. and then cover the financial terms and expected financial profile of the conduit transaction. A reminder that all figures are in US dollars. It's important to note that the financial results I'll discuss today cover Quarter Hill's current operations only. Okay, now on to our results. In the second quarter, we generated revenue of 42.5 million compared with 43.1 million in the second quarter of 2025. For the first six months of 2026, We grew revenue 5% to $81.1 million from $77 million in the prior year period. And as of June 30, 2026, our backlog was $415 million. Just a reminder that our backlog includes the value of work we have not yet completed but expect to perform under existing customer agreements. This includes signed contracts and expected extensions of existing programs where we have defined the scope and timing. our backlog excludes unsigned opportunities and potential change orders. 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. Stronger contract economics, disciplined execution and continued strong performance across the business drove the improvement. Our adjusted EBITDA on Q2 was $4.6 million or 11% of revenue compared with an adjusted EBITDA loss of $2.7 million or minus 6% of revenue in Q2 last year. This represents a $7.3 million year-over-year improvement. And this is our fourth consecutive quarter of positive adjusted EBITDA with the improvements coming from this significant increase in gross profit and the operating leverage in our business model. Cash generated from operations in Q2 was $5.7 million compared with the use of cash of $4.6 million in the prior year period. Again, strong operating performance and disciplined working capital management drove the improvement. We continue to remain focused on converting our earnings into cash and managing the timing of customer collections and project-related investments. On the balance sheet, we ended the second quarter with $26.2 million in cash compared with $14.7 million at the end of the first quarter of 2026. As we stated earlier, we closed and announced our new secured term loan with $100 million accordion facility. Our capital structure provides us with the flexibility to fund our current operations, invest in growth, and execute our acquisition strategy. Now I'll discuss the terms and expected financial profile of the conduit tolling transaction, which we announced on June 30th. The agreement is to acquire substantially all of the assets of Conduit's tolling solutions business for $70 million in cash plus Quarter Hill common shares representing 7% of our issued and outstanding shares at closing. As we said in our earlier press release, we expect to fund the cash portion through debt. Conduit will receive 50% of the share consolidation subject to a six-month lockup with the remaining 50% subject to a 12-month lockup. The equity consideration aligns Conduit with the long-term performance of the combined company. 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%. The transaction will also bring our combined revenue backlog to approximately $2 billion, providing substantial visibility into future revenue through multi-year agency relationships and recurring service contracts. As mentioned, we expect the transaction to close in the fourth quarter of 2026. Following the closing, we'll file a business acquisition report, or BAR, within 75 days. The bar will include audited financial statements for Conduit's tolling solutions business and pro forma financial statements for the combined company. With that, I'll turn the call back over to Chuck for his closing remarks.