Quarterhill (TSE:QTRH) management said the company’s multi-year operational transformation continued to show results in the fourth quarter and second half of 2025, highlighted by stronger margins, a second straight quarter of positive adjusted EBITDA, and positive operating cash flow for the quarter and full year.
Management points to turnaround progress and improved execution discipline
Chief Executive Officer Chuck Myers said the company has been working through a multi-year effort to “stabilize the business, improve execution discipline, and return the company to sustainable profitability.” Entering 2026, he said Quarterhill is operating from a stronger foundation with improving margins, positive adjusted EBITDA, and growing demand for its technology solutions, including momentum in its AI-enabled platform.
- Restructuring to align costs with the scale of the business, which he said generated “millions in annualized cost savings” and improved efficiency.
- Targeted actions to improve the performance and economics of certain tolling programs.
- A more disciplined bidding framework, requiring defined financial thresholds and positive cash flow during implementation.
- Strengthened project execution oversight and performance tracking tied to key milestones.
He added that revenue for 2025 was in line with 2024, reflecting a deliberate focus on improving tolling program economics rather than “chasing volume,” while gross margins expanded significantly as restructuring actions took hold and contract performance improved.
Q4 and full-year revenue modestly higher year over year
Chief Financial Officer David Charron said fourth-quarter revenue was $38.5 million, compared with $38.9 million in the prior-year period. For the full year 2025, revenue was $155.2 million, up from $153.3 million in 2024.
Charron attributed the full-year increase primarily to continued growth in the safety and enforcement business, which offset variability in project timing within the tolling segment. He reiterated that quarterly revenue can vary based on project timing and other factors, including weather, and said management remains focused on profitability and the quality of work pursued.
Quarterhill ended 2025 with a backlog of $404 million, which Charron described as contracted value not yet completed under existing customer agreements, including signed contracts and expected extensions where scope and timing are defined. He noted the company’s backlog increasingly includes recurring operations and maintenance services revenue, which he said generally carries higher margins and improves cash flow visibility. Beyond backlog, management said the company’s opportunity pipeline remains approximately $2 billion across tolling modernization, safety and enforcement deployments, and follow-on programs with existing customers.
Margin expansion drives improved adjusted EBITDA and operating cash flow
Charron reported fourth-quarter gross margin of 31%, up from 20% in the fourth quarter of 2024 and higher than the 26% reported in Q3. For the full year, gross margin was 21%, compared with 18% in 2024. He said the improvement reflected restructuring actions taken earlier in the year, improved contract economics in the tolling business, and continued strong margin performance in the safety and enforcement segment.
Adjusted EBITDA in the fourth quarter was $4.4 million, or 11% of revenue, compared with $1.2 million, or 3% of revenue, in the prior-year quarter. Charron said this marked the second consecutive quarter of positive adjusted EBITDA and a “marked improvement” from negative adjusted EBITDA in the first half of 2025. For the full year, adjusted EBITDA was negative $300,000, with management emphasizing that the second half reflected the impact of operational improvements.
Operating cash flow was positive $4.1 million in Q4, which Charron said was the second consecutive quarter of positive cash from operations following two quarters of cash used in operations in the first half. For the full year, the company generated approximately $2.3 million in operating cash flow, compared with negative $4.4 million in the prior year, which Charron said reflected stronger margins and working capital management.
Balance sheet priorities include refinancing and working capital conversion
Quarterhill ended the year with $24.8 million in cash, compared with $24.1 million at the end of the third quarter. Charron highlighted debt maturities later in 2026, including a bank facility of about $14 million and convertible debentures of about $40 million.
He said a key priority following the company’s return to profitability is “cleaning up the balance sheet and optimizing the company’s capital structure.” The company has engaged financial advisors to evaluate and execute a “comprehensive refinancing solution,” and Charron said the process is well advanced. He added management is encouraged by the level of interest received and expects to provide additional details “in the near future.”
On working capital, Charron told analysts the company sees further opportunity in 2026, pointing specifically to unbilled revenue that he said remains higher than he would like. He said management intends to focus on converting unbilled revenue to accounts receivable and then to cash.
AI-enabled platform rollout and long-term margin targets
Myers described transportation infrastructure as being in the early stages of a global modernization cycle, with governments and agencies under pressure to improve safety, manage traffic volumes, and operate more efficiently. He said there is a shift toward intelligent transportation systems (ITS) platforms where AI-driven software is central to infrastructure management, positioning Quarterhill “in the center of these trends.”
He said the company is in the final stages of rolling out its next-generation platform intended to act as a unified command center for real-time operations, reporting, and decision-making. Myers said the platform is designed to replace “a mix of disconnected tools” with a unified system built around AI, including capabilities such as vehicle fingerprinting, predictive analytics, anomaly detection, and emerging capabilities in agentic and visual AI. He also said the platform is designed to integrate with existing systems across CRM, ERP, and operational platforms and, over time, will bring together tolling, enforcement, and mobility data into a single platform to improve scalability and support margin expansion.
In the Q&A, Myers reiterated long-term targets of 40% gross margins and 20% EBITDA, and said that, of the company’s roughly $400 million backlog, approximately $375 million to $380 million is viewed as “about 40% gross margin, 20% EBITDA business.” He also said follow-on and renewal contracts in 2026 and 2027 could be a catalyst for further improvement, and noted that the company added $166 million in new and additional changes to existing contracts during 2025.
On commercialization, Myers said the company expects to announce a contract “in the near future” related to the new platform, adding that it has been developed over the past 12 to 14 months and a good portion is complete and ready for commercial operations. Charron said capitalized development costs increased alongside higher product development efforts and that investors should expect that level to continue.
Looking ahead, Myers said Quarterhill’s primary focus remains organic growth, while also exploring selective strategic acquisitions to strengthen technology capabilities, expand market presence, and increase operating leverage. He said the company has engaged a global M&A firm to help define targets and synergies.
About Quarterhill (TSE:QTRH)
Quarterhill is a global leader in the Intelligent Transportation System (ITS) industry, advancing mobility through smart infrastructure solutions that reduce congestion, improve roadway safety, and create more sustainable travel. Each year, Quarterhill’s platforms process billions of transactions, perform compliance and safety inspections on millions of commercial vehicles, and enable transportation agencies worldwide to optimize thousands of lanes of traffic to improve travel for everyone. Leveraging advanced artificial intelligence and machine learning technologies, Quarterhill’s platform delivers automation and predictive insight to help agencies manage transportation networks more efficiently.
