Quarterhill Q3 2026 Earnings Call - DEFI TECHNOLOGIES INC

Explicit Guidance:

• No specific forward-looking revenue, earnings, margin, or cash flow guidance provided for 2027 or beyond; management explicitly stated that detailed pro forma financials (debt, cash, debt capacity) post-Conduit acquisition will be disclosed upon deal closing rather than provided now.
• Q4 2026 Expectation: Confirms full integration of Conduit's tolling business operating results into future reporting post-closing.
• FY2026 Outlook: Implies continued focus on margin expansion and positive adjusted EBITDA trajectory based on Q3 performance, though no specific FY2026 targets were restated beyond the "fifth consecutive quarter of positive adjusted EBITDA."

Business-Segment Outlook:

• Tolling: LA Metro contract ($28.2M, 14-year potential) is "well underway" with implementation revenue expected to accrue over the contract term; represents validation of next-gen technology for long-duration programs.
• Commercial Vehicle: Secured $5.25M Oklahoma contract (Interstate 35 deployment) and multi-year maintenance contracts with PA and ID DOTs; outlook emphasizes expansion of existing relationships and entry into new domestic/international markets.
• AI Platform: Rolling out modular, AI-enabled next-generation platform to new customers in Q1 (January launch referenced); targets labor-intensive automation (image review to customer service/reporting) with phased adoption capability; strategy is to start with tolling but scale to broader transportation markets over time.
• Geography: UK market identified as a "sweet spot" with upcoming tolling opportunities in the "next couple of years"; Germany speed enforcement business divested as misaligned; Q4 2026 acquisition of Conduit's tolling business (including UK operations) expected to close subject to TSX approval and closing conditions.

Market and Competitive Outlook:

• Demand Trends: "Cautiously optimistic" feedback from Conduit customer base regarding transition; significant "RFPs on the market" suggest active bidding cycles.
• Competitive Positioning: Technology and reputation cited as primary drivers for recent major wins (LA Metro, Oklahoma); management views AI as an early innings opportunity to improve accuracy and efficiency.
• Structural Changes: Acquisition of Conduit's tolling business expected to create a combined entity capable of competing for larger, multi-year contracts; integration planning is underway with closing targeted for Q4 2026.
• Pricing/Capacity: No explicit pricing guidance; focus on "contract economics" improvements following restructuring.

Macro / Industry Outlook:

• Regulatory: Conduit acquisition pending receipt of TSX (Toronto Stock Exchange) approval.
• Economic/Industry View: Management expresses high confidence in executing the strategy for 2027; sees structural opportunity in the ITS and tolling markets globally, particularly in Europe.
• FX: All financial information reported in USD; no specific FX hedging or currency impact guidance provided.

Strategic Initiatives:

• M&A: Closing the acquisition of Conduit's tolling business in Q4 2026 is the primary near-term strategic milestone; integration planning has made "significant progress."
• Capital Structure: Completed simplification of capital structure in Q3/Q4 2026: raised $51.8M CAD via private placement, repaid $57.5M CAD convertible debentures in full, and divested remaining 10% YLAN interest for $8.5M USD; eliminates dilution and interest expense.
• Divestitures: YLAN interest divested (early earn-out payment of $6.25M received); underperforming German speed enforcement unit sold previously.
• Expansion: Plans to scale AI platform beyond tolling into broader transportation markets; targeting growth in European tolling opportunities over the next two years.

Risks and Headwinds to Outlook:

• M&A Execution: Closing of Conduit acquisition is conditional on "satisfaction of closing conditions" including TSX approval; timing not guaranteed beyond "work towards closing in the fourth quarter."
• Contract Performance: LA Metro contract is a "subcontract" dependent on partner performance and long-term execution (up to 14 years).
• General Risks: Standard risk factors regarding forward-looking information (material difference between anticipated and actual results) detailed in filings; market-specific risks in Europe (e.g., competitive bidding dynamics).
• Caveats: Management declined to discuss competitive bidding dynamics with Conduit due to antitrust considerations.

Management Tone on the Future:

• Confidence Level: Extremely high; CEO stated, "I've never been more confident in our strategy or our ability to execute it."
• Momentum: Describes current state as a "solid position to execute our strategy" driven by improved operating performance and strengthened balance sheet.
• Forward Focus: Shift from "restructuring" to "accelerating growth and scaling the business."
• Hedges: Limited explicit hedges; tone is assertive regarding the benefits of the capital structure cleanup and AI platform rollout.

Miscellaneous:

• Conference Participation: Management to appear at Roth Technology Conference (NYC) and Cowan Tech Conference (Toronto, 23rd) in the upcoming weeks.
• Investor Relations: Detailed pro forma balance sheet (post-Conduit closing) will be disclosed at the time of the deal announcement rather than during this call.
• Capital Raise Details: $51.8M CAD raised via bought deal (20.9M shares at $2.48 CAD), with ~$2M invested by insiders.