This morning, Quarterhill Inc. announced that Electronic Transaction Consultants, LLC (QTRH subsidiary) was awarded a ten-year $80m contract with the Alameda County Transportation Commission (San Francisco Bay Area, California). The contract is for the implementation and operation of electronic toll system integration services for the I-680 Express Lanes. Alameda CTC is the managing agency for the I-680 Express Lanes on behalf of the I-680 Sunol Smart Carpool Lane Joint Powers Authority. The contract’s initial term is ten-years with options for up to an additional four-year operations and maintenance extension. The initial $80m contract excludes the optional years.

Our Thoughts: The contact represents an approximate ~5% boost to QTRH’s ITS top line and is in line with QTRH’s strategy of pure play ITS transition. We are seeing continued development of the relationships QTRH has been fostering across the US and beyond. With the contact comes opportunity for higher margin revenues associated with maintenance post implementation, and recurring revenue streams.

Currently we are not releasing an updated forecast for FY/23 & FY/24 as we await Q4/22 results.

Looking forward, we are awaiting the details of QTRH’s license and settlement agreement with Micron Technology, Inc. as a potential catalyst in the near term. 

QTRH maintains a strong balance sheet and we remain encouraged by the development of relationships with state agencies throughout the US. We are maintaining our BUY recommendation and $4.25/share target price based on a sum-of-the-parts valuation.