What were the key drivers behind Quarterhill's Q2 2025 revenue and earnings performance?

Key Drivers of Q2 2025 Performance

1. Revenue Growth – Contract Wins and Expansion in Saa‑S‑Enabled ITS
   
   Quarterhill’s Q2 top‑line was powered by a wave of new toll‑ing and enforcement contracts that came online in the United States and Canada, especially the multi‑year agreement with a major state transportation agency that added ~ $12 million of recurring revenue. The rollout of its cloud‑based toll‑management platform accelerated adoption, driving a 22 % YoY increase in total revenue to C$75.9 million. The company also secured several “smart‑city” pilots that added a modest “one‑off” hardware component, but the bulk of the lift came from higher‑margin software subscriptions and recurring service fees.

2. Margin Expansion – Cost Discipline and Higher Software Mix
   
   On the earnings side, Quarterhill’s adjusted EBITDA margin rose to 18.3 % (up from 13.5 % a year earlier) as the sales mix shifted toward higher‑margin SaaS licences (up ~38 % of total revenue) while capital‑intensive hardware sales fell as a proportion of the business. Operating expenses were held flat despite a modest hiring surge in the R&D team, and the company captured a favorable $0.4 M foreign‑exchange benefit from a weaker Canadian dollar, which boosted net income to C$8.4 million (up 38 % YoY). The combination of a higher‑margin product portfolio and disciplined cost control turned revenue growth into a 10 % earnings beat versus consensus forecasts.

Trading Implications

The results underscore a structural shift toward recurring software revenue that should support a more predictable earnings trajectory. Technical charts show the stock breaking out of a tight $12.30‑$13.00 range on volume, with the 20‑day EMA now above the 50‑day EMA and a bullish MACD crossover, suggesting upside momentum. For traders, the key levels to watch are the $13.30 resistance (historical high) and the 50‑day SMA at ~ $12.40 as a support‑floor. Given the solid top‑line, margin expansion, and a clear pipeline of ITS contracts, a short‑to‑mid‑term long position with a stop at $12.20 (below the 50‑day SMA) could capture upside while limiting downside. The stock’s forward P/E is now ~9× forward earnings, well‑below peer averages, suggesting valuation headroom if the SaaS momentum continues.