Canada's Quarterhill Q2 revenue dips 1% as tolling activity slows

Overview

• Canada ITS solutions provider's Q2 revenue declined slightly yr/yr due to lower tolling project activity

• Adjusted EBITDA for Q2 turned positive, marking fourth consecutive quarter of positive adjusted EBITDA

• Company, in June, agreed to acquire Conduent's tolling solutions business, expected to triple tolling revenue

Outlook

• Quarterhill expects Conduent acquisition to triple tolling revenue and result in $2 bln backlog

• Company projects pro forma annual revenue exceeding $400 mln and adj EBITDA margin of 10%-15%

• Quarterhill sees commercial opportunity pipeline above $2 bln as agencies fund infrastructure modernization

Result Drivers

• LOWER TOLLING ACTIVITY - Co said Q2 revenue declined slightly yr/yr due to reduced tolling project activity

• MARGIN EXPANSION - Gross margin rose to 29% from 15%, driven by restructuring, stronger contract economics and disciplined execution on tolling contracts

• COMMERCIAL VEHICLE GROWTH - Growth in commercial vehicle and enforcement business partially offset revenue decline

Company press release: ID:nPn4dhX4Da

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 4 "strong buy" or "buy", no "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the electronic equipment parts peer group is "buy"

• Wall Street's median 12-month price target for Quarterhill Inc is C$4.75, about 47.5% above its August 12 closing price of C$3.22

Reuters Recommended Reads

• Aug 10 - Business process solutions firm Conduent Q2 revenue slips

• Aug 12 - Stantec Q2 adjusted EPS beats estimates on acquisition growth, margin gains

• Aug 13 - Germany's INIT half-year revenue rises on ticketing projects growth

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)