Quarterhill to Acquire Conduent Tolling Solutions Business

Executive Summary

• Quarterhill Inc. has entered into a definitive asset purchase agreement to acquire substantially all assets of Conduent’s tolling solutions business, a transaction expected to approximately triple Quarterhill’s tolling revenue and create a leading tolling platform.
• The transaction involves an aggregate consideration of $70.0 million in cash (funded via debt) plus common shares representing 7.0% of Quarterhill’s issued and outstanding shares on closing.
• Post-closing, the combined entity is projected to have approximately $2 billion in backlog and generate over $400 million in annual revenue with an adjusted EBITDA margin between 10% and 15% after planned synergies.

Key Details

• Transaction Structure: Asset purchase agreement to acquire substantially all assets and assume certain liabilities of Conduent’s tolling business.
• Consideration:
  • Cash: $70.0 million, subject to customary adjustments.
  • Equity: Common shares of Quarterhill representing 7.0% of issued and outstanding shares on closing.
  • Funding: The cash portion is expected to be funded through debt.
• Financial Impact & Pro Forma Metrics:
  • Backlog: Approximately $2 billion of combined backlog upon closing, providing strong visibility into future contracted revenue.
  • Revenue: Pro-forma combined revenue expected to exceed $400 million annually after planned synergies.
  • Profitability: Pro-forma adjusted EBITDA margin expected to be between 10% and 15% after planned synergies.
  • Scale: Transaction expected to approximately triple Quarterhill’s tolling revenue.
• Closing Conditions & Timeline:
  • Expected to close in Q4 2026.
  • Subject to customary conditions, including TSX approval.
• Lock-up and Registration Rights:
  • Lock-up: 6-month contractual lock-up for the first 50% of shares issued as consideration; 12-month lock-up for the remaining 50%.
  • Registration Rights: Conduent granted certain registration rights for so long as Quarterhill beneficially owns or controls at least 4% of outstanding common shares.
  • Resale Restrictions: Shares subject to applicable Canadian securities laws and TSX rules.
• Target Business Profile:
  • Provides end-to-end tolling solutions for government transportation agencies primarily in the US and UK.
  • Services include electronic toll collection, Open Road Tolling, All Electronic Tolling, vehicle detection/classification, automated license plate recognition, payment processing, customer care, invoicing, video processing, analytics, and back-office/roadside functions.
• Advisors:
  • Quarterhill: AlixPartners (Financial Advisor), DLA Piper US LLP and DLA Piper (Canada) LLP (Legal Advisors).
  • Conduent: Jefferies Group LLC (Financial Advisor).

Notable Quotes

• Rusty Lewis, Chairman of Quarterhill's Board: "This is a transformational transaction for Quarterhill, and one the Board enthusiastically supports... The Board has full confidence in the management team to bring these businesses together, and we believe the combined platform will be better positioned to serve transportation agencies, expand profitability and create sustainable, long-term value for shareholders."
• Chuck Myers, CEO of Quarterhill: "This acquisition materially advances our strategy to build a larger, more focused and more profitable ITS platform... we believe Quarterhill will have a stronger foundation for long-term growth."