Mr. Rusty Lewis reports

QUARTERHILL TO ACQUIRE CONDUENT TOLLING SOLUTIONS BUSINESS

Quarterhill Inc. has entered into a definitive asset purchase agreement to acquire substantially all of the assets of the tolling solutions business of Conduent Business Services LLC and certain of its affiliates. The transaction is expected to approximately triple Quarterhill's tolling revenue upon closing and create a leading tolling platform with greater scale, long-term backlog visibility and enhanced capabilities across electronic tolling, back-office operations and roadside systems. All dollar figures included herein are presented in U.S. dollars, unless otherwise noted.

Upon closing of the transaction, Quarterhill and the business are expected to have approximately $2-billion of combined backlog, providing strong visibility into future contracted revenue. On a pro forma combined basis after planned synergies, the combined business would have generated more than $400-million of revenue annually with an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin between 10 per cent and 15 per cent.

"This is a transformational transaction for Quarterhill and one the board enthusiastically supports," said Rusty Lewis, chairman of Quarterhill's board. "Conduent's tolling solutions business brings scale, long-term agency relationships, proven technology capabilities and deep tolling expertise in a core market. 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."

"This acquisition materially advances our strategy to build a larger, more focused and more profitable ITS [intelligent transportation system] platform," said Chuck Myers, chief executive officer of Quarterhill. "With greater scale, enhanced backlog visibility and meaningful adjusted EBITDA contribution after anticipated day-one synergies, we believe Quarterhill will have a stronger foundation for long-term growth."

The Conduent tolling business provides end-to-end tolling solutions for government transportation agencies primarily across the United States and the United Kingdom, including electronic toll collection, open-road tolling, all-electronic tolling, vehicle detection and classification, automated licence plate recognition, payment processing, customer care, invoicing, video processing, analytics, and related back-office and roadside functions. Quarterhill expects to work closely with Conduent to support a smooth transition for customers and employees following closing.

Transaction details

Under the terms of the agreement, Quarterhill and certain of its affiliates will acquire substantially all of the assets and assume certain liabilities of the business for aggregate consideration consisting of (i) $70-million in cash, subject to customary adjustments; plus (ii) common shares in the capital of Quarterhill representing 7.0 per cent of the issued and outstanding shares on closing of the transaction. The company expects to finance the cash portion of the consideration through debt.

As a condition to the closing of the transaction, Quarterhill and Conduent will enter into a customary registration rights agreement pursuant to which, among other things, the shares issued as consideration in connection with the transaction will be subject to a six-month contractual lock-up for the first 50 per cent of such shares and a 12-month lock-up for the remaining 50 per cent of such shares, subject to customary exceptions, and Conduent will be granted certain registration rights with respect to such shares for so long as the company group beneficially owns, or exercises control or direction over, at least 4 per cent of Quarterhill's then-outstanding common shares. The shares will also be subject to any applicable resale restrictions under Canadian securities laws and the rules of the Toronto Stock Exchange.

Completion of the transaction is subject to a number of closing conditions customary for a transaction of this nature, including TSX approval and the satisfaction of other customary conditions precedent. The transaction is expected to close in Q4 2026. There can be no assurance that the transaction will be completed on the terms described herein or at all.

Advisers

AlixPartners is acting as financial adviser to Quarterhill in connection with the transaction, and DLA Piper U.S. LLP and DLA Piper (Canada) LLP are acting as legal advisers to Quarterhill. Jefferies Group LLC is acting as financial adviser to Conduent in connection with the transaction.

About Quarterhill Inc.

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. By working in close partnership with governments, communities and industry leaders, Quarterhill is building today's connected roadways while shaping the next generation of intelligent, resilient mobility. Quarterhill is listed on the TSX under the symbol QTRH and on the OTCQX Best Market under the symbol QTRHF.

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