Mr. John Gillberry reports

QUARTERHILL ANNOUNCES Q1 FISCAL 2023 FINANCIAL RESULTS

Quarterhill Inc. has released its financial results for the three months ended March 31, 2023. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

Q1 Fiscal 2023 Highlights

• Consolidated revenue was $44.0 million (ITS revenue was $38.3 million and Licensing revenue was $5.7 million) ITS revenue backlog3 was more than USD$500.0 million at March 31, 2023
• Consolidated Adjusted EBITDA1 was ($6.9) million
• Cash, cash equivalents, and short-term investments were $51.7 million at March 31, 2023
• Subsequent to quarter-end and the AGM, Charles ("Chuck") Myers was appointed to the board of directors on May 9, 2023

"Highlights in the ITS segment in Q1 included another strong quarter from IRD, in what is typically a seasonally slow period for the business," said John Gillberry, Interim CEO of Quarterhill. "In an effort to drive more rapid integration of the ITS businesses and to accelerate improvement of the financial and operational performance in the ITS segment, a leadership change was made in Q1, and the board has since launched the search process for a new CEO."

"In the interim, Rusty Lewis, Board Chair, and I have been working to get the ITS segment on the path to more consistent revenue growth and sustainable earnings. Our focus has been on working through the ongoing tolling projects that are in implementation, fine-tuning our business development strategy and driving the businesses towards an integrated shared services model. Subsequent to quarter-end we took further actions on our integration plan, which will result in additional savings to the Q4 2022 restructuring."

"The ITS industry has a compelling growth profile and with our world-class assets in tolling (ETC) and enforcement (IRD) we remain committed to our pure-play strategy. We expect top-line and margin improvement in the ITS segment as we move through 2023, driven largely by our integration efforts and steady progress on the seven large tolling projects that are in implementation. Several of these seven projects are expected to transition from the implementation phase to the operations phase in 2023 with the remainder doing so in 2024. This will have a favorable impact on margins and cash flows as the gross margin percentage for tolling operations revenue is substantially higher than that of implementation revenue. Ultimately, as stated on our year-end conference call, we believe that 2023 will see positive Adjusted EBITDA for the ITS business, inclusive of corporate segment costs."

"Regarding the strategic review for WiLAN, the process remains ongoing, and we continue to engage with interested parties. In the meantime, it's business as usual for the team as they seek to build their pipeline and execute on their various licensing programs. We will continue to keep shareholders abreast of any material developments with the business and with the strategic review."

Q1 Fiscal 2023 Financial Review

Quarterhill's revenue is broadly segmented into ITS, reflecting the tolling (ETC) and enforcement (IRD) businesses, and Licensing, reflecting the WiLAN business.

Quarterhill's Management's Discussion and Analysis and financial statements for the three months ended March 31, 2023 ("Q1 2023") are available at the Company's website and at its profile at SEDAR.

• Consolidated revenues for the three months ended March 31, 2023 were $44.0 million compared to $168.5 million in the comparative prior year period. The decrease in consolidated revenue in Q1 2023 was due primarily to the size of licensing agreements completed in Q1 2022. The majority of WiLAN's licenses are generally one-time in nature and significant fluctuations in revenue, gross margin, and Adjusted EBITDA can result when the volume or dollar value of licenses changes from one period to the next. ITS revenue in Q1 2023 was up slightly compared to Q1 2022.
• Gross margin percent2 for the three months ended March 31, 2023, was $4.6 million, or 11%, compared to $92.7 million, or 55% in the comparative prior year period. Gross margin in the ITS segment was 13% in Q1 2023 compared to 28% in Q1 2022. ITS gross margins may fluctuate on a quarterly basis depending primarily on the nature, and stage, of projects underway during the period, their related margin profile and the timing for which associated costs and revenue are recognized. ITS gross margin for Q1 2023 primarily reflects management reserves taken to account for the ebb and flow typical of a large infrastructure project in its early stages and the high proportion of revenue generated from tolling projects that are in the implementation phase as projects at this stage of development tend to have lower gross margin. Gross margin is expected to increase as these tolling projects transition to the operations phase in 2023 and 2024.
• Licensing gross margin will fluctuate depending primarily on the level of litigation and contingent legal and partner costs incurred in a respective period relative to revenue generated. Licensing gross margins may also be impacted by litigation cost accruals related to expected future expenses for ongoing litigations.
• Operating expenses include SG&A, research and development costs ("R&D"), depreciation and amortization and other charges. Total operating expenses for the three months ended March 31, 2023, were $20.4 million, compared to $21.8 million in the comparative prior year period. The decrease in operating expenses in Q1 2023 was driven primarily by the ITS integration and cost reduction initiatives undertaken in Q4 2022.
• Consolidated Adjusted EBITDA1 for the three months ended March 31, 2023, was ($6.9) million, compared to $79.1 million in the comparative prior year period. The decrease in Adjusted EBITDA for Q1 2023, compared to Q1 2022, is due to the changes in revenue, direct costs of revenue and operating expenses as previously explained.
• Net loss for the three months ended March 31, 2023, was ($15.6) million, or ($0.14) per diluted share, compared to a net income of $56.9 million, or $0.50 per diluted share, in the comparative prior year period.
• Cash used in operations for the three months ended March 31, 2023, was ($10.2) million, compared to ($8.8) million in the comparative prior year period.
• Cash and cash equivalents and short-term investments were $51.7 million at March 31, 2023, compared to $67.9 million at December 31, 2022. Among the uses of cash in Q1 2023 was approximately $2.4 million of non-recurring items.

Board Appointment

Quarterhill is pleased to announce that Charles ("Chuck") Myers was appointed to the board of directors, effective May 9, 2023.

Mr. Myers brings more than 25 years of leadership experience as a Chief Executive Officer, board member, and founder for private and public companies in the technology industry, including a co-founding role at Transcore, a leader in the ITS industry.

Most recently, Mr. Myers served as Chief Executive Officer and board member of Cogniac Corporation, a San Jose, California-based provider of enterprise-class AI deep learning solutions that automate visual inspection through image and video analysis. Under his leadership, Cogniac was named "2021 Global Entrepreneurial Company of the Year in Computer Vision" by Frost & Sullivan and "A Global Leader" by IDC in 2022. Since 2019, the company has grown revenue significantly and has expanded its global customer footprint in multiple verticals.

Prior to Cogniac, Mr. Myers was President, Chief Executive Officer, and Board Member of Airgain, Inc. (NASDAQ: AIRG), a leading provider of embedded antenna technologies used to enable high performance wireless networking. Earlier in his career, Mr. Myers was a co-founder of the SAIC Transportation Division and was instrumental in building the first electronic toll collection system in the United States. That single project subsequently grew into the creation of Transcore, one of the largest electronic toll collection providers in the world. During this period, Mr. Myers played significant roles in several acquisitions including Syntonic, Cubic Toll Systems, and JHK Associates.

Mr. Myers currently serves as a board advisor to Platform Science, a revolutionary fleet management platform; Rx.Health, a digital health platform company; and Energy311, a green energy and fintech startup. Mr. Myers holds a Master of Science degree in Management of Technology from MIT and a Bachelor of Science degree in Engineering from National University, and an Organizational Leadership Certificate from Yale School of Management.

Dividend Update

After careful consideration, the board of directors has adjusted its capital allocation strategy and determined that the Company will no longer pay a dividend. This decision creates financial flexibility and will best position the business to generate value through a capital allocation strategy focused on supporting the growth of the ITS business. The dividend is a legacy of the IP licensing business and dividends are not common among publicly traded ITS companies. ITS companies tend to follow a more traditional growth-oriented model, which requires ongoing investment in areas such as R&D and other organic and non-organic growth initiatives.

Conference Call and Webcast

Quarterhill will host a conference call to discuss its financial results today at 10:00 AM Eastern Time.

Webcast Information

The live audio webcast will be available on-line. Webcast replay will be available for 365 days.

Traditional Dial-in Information

• To access the call from Canada and U.S., dial 1.888.664.6383 (Toll Free)
• To access the call from other locations, dial 1.416.764.8650 (International)

Rapidconnect

To instantly join the conference call by phone, please use the following URL to easily register and be connected into the conference call automatically

Telephone Replay

Telephone replay will be available from 1:00 p.m. ET on May 10, 2023, until 11:59 p.m. ET on May 17, 2023, at: 1.888.390.0541 (Toll Free North America) or 1.416.764.8677.

• Conference ID: 60265813 and Replay Passcode: 265813#

About Quarterhill

Quarterhill is a leading provider of tolling and enforcement solutions in the Intelligent Transportation System (ITS) industry, as well as, through its Wi-LAN Inc. subsidiary, a leader in Intellectual Property licensing. Our goal is global leadership in ITS, via organic growth of the Electronic Transaction Consultants, LLC (ETC) and International Road Dynamics, Inc. (IRD) platforms, and by continuing an acquisition-oriented investment strategy that capitalizes on attractive growth opportunities within ITS and its adjacent markets. Quarterhill is listed on the TSX under the symbol QTRH and on the OTCQX Best Market under the symbol QTRHF.

We seek Safe Harbor.