Quorum Information Technologies Inc. (“Quorum” or the “Company”), a
leading provider of dealership and customer management software and
value-added services to the automotive industry, released its
results for Q3 2019 today.
“This is Quorum’s third quarter as a combined
Company following our recent acquisitions,” stated Maury Marks,
President and CEO. “I am pleased to report our strong combined
results from the XSellerator, DealerMine, Autovance and Advantage1
divisions.”
- Q3 2019 was the highest SaaS revenue and total revenue quarter
in the Corporation’s history.
- Gross revenue increased by 151% to $8,574K in Q3 2019 from
$3,418K in Q3 2018.
- SaaS revenue increased to $5,550K in Q3 2019 compared to
$2,863K in Q3 2018, an increase of $2,687K or 94%.
- Q3 2019 was the highest EBITDA quarter in the Corporation’s
history. EBITDA was $1,422K in Q3 2019 as compared to $391K
in Q3 2018, an increase of $1,031K.
|
In Q3 2019, we collectively posted both a record
total revenue amount and a record Software as a Service (“SaaS”)
revenue amount from 1,020 customers, compared to 466 customers in
Q3 2018. SaaS revenue in the quarter was $5.55 million, or
65% of total revenue, and Business Development Centre (“BDC”)
revenue was $2.02 million, or 24% of total revenue. Quorum’s
annual run rate based on September 2019 is now $22.6 million for
its SaaS revenue and $7.8 million for its BDC revenue, and 89% of
Quorum’s revenues are under long-term or evergreen contracts.
Quorum also posted record Earnings before Interest, Taxes,
Depreciation, and Amortization (EBITDA) of $1.4 million during Q3
2019, an increase of $1.0 million over Q3 2018 EBITDA of $0.4
million.
Looking more specifically to our divisions, our
XSellerator division had a 9% increase in SaaS revenue over Q3 2018
based on growth in its customer base and growth in average
recurring revenue per unit (“ARRPU”). The XSellerator team
completed the release of two new products in Q3 2019, which should
help drive future ARRPU growth.
Both DealerMine and Autovance had good quarterly
revenue growth in Q3 2019. As mentioned in previous Quorum
disclosure, DealerMine, Autovance and Advantage are high-growth,
cloud-based SaaS businesses that can show immediate returns when
adopted, as they do not require OEM integration and require
significantly less training and support to transition dealerships
to their solutions. DealerMine had a strong quarter fueled by
the completed roll out of their Service CRM software and BDC
services for the previously announced AutoCanada Canadian
dealerships contract. Autovance had a 35% increase in SaaS
revenue over Q3 2018 from growth of their Desk product and released
their new Menu product. The Advantage product should be ready
to sell to (used) Independent dealerships in Q4 2019.
Quorum successfully closed its oversubscribed
bought deal private placement offering of common shares as
announced on November 7, 2019. Pursuant to the offering,
Quorum issued 10,574,825 shares at a price of $0.87 per share for
aggregate gross proceeds of $9,200,098. The net proceeds of
the offering will be used for growth initiatives, working capital,
general corporate purposes and future potential acquisition
opportunities.
As we look forward, Quorum’s priorities remain
to grow its SaaS revenues while showing operating leverage from its
increased scale. The opportunity set remains as large as ever
and we are working hard to capitalize on it.
1 Oasis Auto Complete Systems Limited has been renamed as
Advantage.
Q3 2019 Financial
Highlights
|
|
|
|
|
($000’s except per share amounts) |
|
Nine Months EndedSept 30,
2019 |
Nine Months EndedSept 30,
2018 |
Q3 Ended Sept 30, 2019 |
Q3 Ended Sept 30, 2018 |
Q2 EndedJune 30,
2019 |
Q2 EndedJune 30,
2018 |
Q1 EndedMarch 31,
2019 |
Q1 EndedMarch
31, 2018 |
SaaS revenue |
$ |
16,271 |
|
$ |
8,407 |
|
$ |
5,550 |
|
$ |
2,863 |
|
$ |
5,437 |
|
$ |
2,811 |
|
$ |
5,284 |
|
$ |
2,733 |
|
BDC revenue |
|
5,337 |
|
|
- |
|
|
2,017 |
|
|
- |
|
|
1,984 |
|
|
- |
|
|
1,336 |
|
|
- |
|
Services and one-time revenue |
|
2,530 |
|
|
2,104 |
|
|
1,007 |
|
|
555 |
|
|
795 |
|
|
760 |
|
|
728 |
|
|
789 |
|
Gross revenue |
|
24,138 |
|
|
10,511 |
|
|
8,574 |
|
|
3,418 |
|
|
8,216 |
|
|
3,571 |
|
|
7,348 |
|
|
3,522 |
|
Gross margin2 |
|
11,464 |
|
|
5,599 |
|
|
4,182 |
|
|
1,768 |
|
|
3,831 |
|
|
1,913 |
|
|
3,451 |
|
|
1,918 |
|
SaaS revenue gross margin percentage |
|
64 |
% |
|
71 |
% |
|
66 |
% |
|
70 |
% |
|
65 |
% |
|
71 |
% |
|
64 |
% |
|
71 |
% |
BDC revenue gross margin percentage |
|
19 |
% |
|
- |
|
|
19 |
% |
|
- |
|
|
19 |
% |
|
- |
|
|
17 |
% |
|
- |
|
Gross margin percentage |
|
47 |
% |
|
53 |
% |
|
49 |
% |
|
52 |
% |
|
47 |
% |
|
53 |
% |
|
47 |
% |
|
54 |
% |
EBITDA expenses3 |
|
7,932 |
|
|
4,458 |
|
|
2,760 |
|
|
1,377 |
|
|
2,479 |
|
|
1,351 |
|
|
2,693 |
|
|
1,730 |
|
Operating income before interest, taxes, depreciation and
amortization (EBITDA) |
|
3,532 |
|
|
1,141 |
|
|
1,422 |
|
|
391 |
|
|
1,353 |
|
|
562 |
|
|
757 |
|
|
188 |
|
EBITDA percentage of revenue |
|
15 |
% |
|
11 |
% |
|
17 |
% |
|
11 |
% |
|
16 |
% |
|
16 |
% |
|
10 |
% |
|
5 |
% |
Adjusted cash income (loss) |
|
1,461 |
|
|
(407 |
) |
|
655 |
|
|
(176 |
) |
|
768 |
|
|
174 |
|
|
38 |
|
|
(405 |
) |
Income (loss) before deferred income tax
expense |
|
(450 |
) |
|
(408 |
) |
|
53 |
|
|
(56 |
) |
|
118 |
|
|
46 |
|
|
(621 |
) |
|
(398 |
) |
Net income (loss) |
|
374 |
|
|
(513 |
) |
|
620 |
|
|
(52 |
) |
|
309 |
|
|
(216 |
) |
|
(556 |
) |
|
(245 |
) |
Comprehensive income (loss) |
|
315 |
|
|
(470 |
) |
|
630 |
|
|
(91 |
) |
|
292 |
|
|
(189 |
) |
|
(606 |
) |
|
(189 |
) |
Net income (loss) per share |
$ |
0.0061 |
|
$ |
(0.0097 |
) |
$ |
0.0102 |
|
$ |
(0.0010 |
) |
$ |
0.0051 |
|
$ |
(0.0041 |
) |
$ |
(0.0091 |
) |
$ |
(0.0047 |
) |
- Q3 2019 was the highest SaaS revenue and total revenue quarter
in the Corporation’s history. Gross revenue increased by 151%
to $8,574K in Q3 2019 from $3,418K in Q3 2018. The increase
in revenue is due to:
- An increase of $2,687K during Q3 2019 in SaaS revenue as a
result of the DealerMine and Oasis acquisitions and as a result of
organic growth of both XSellerator and Autovance; and
- An increase of $2,007K during Q3 2019 in services revenue
primarily attributable to the DealerMine acquisition.
- SaaS revenue increased to $5,550K in Q3 2019 compared to
$2,863K in Q3 2018, an increase of $2,687K or 94%. Quorum’s
Q3 2019 SaaS revenue of $5,550K translates into a yearly run rate
of $22,200K. SaaS revenue was 65% of total revenue for Q3
2019 as compared to 84% for Q3 2018. The decrease in SaaS
revenue as a percentage of total revenue is due to significant BDC
revenue in Q3 2019 for which there was no comparable revenue in Q3
2018. At the end of Q3 2019, Quorum had 1,020 unique customers
compared to 466 customers at the end of Q3 2018.
- As noted above, as part of the DealerMine acquisition, Quorum
acquired a Business Development Centre (“BDC”). BDC revenue
was $2,017K in Q3 2019 for which there was no comparable revenue in
Q3 2018 as the DealerMine acquisition was completed in Q4
2018. This translates into a yearly run rate of
$8,068K. BDC revenue was 24% of total revenue for Q3
2019.
- 89% of the Corporation’s revenue is contracted revenue.
Contracted revenue is calculated by combining SaaS and BDC revenue.
- Gross margin increased to $4,182K or 49% in Q3 2019 compared to
$1,768K or 52% for Q3 2018. As of Q3 2019, cost of goods
sold, “direct costs – salaries and benefits”, no longer includes
research and development salaries and benefits expense. Research
and development salaries and benefits expense were reclassified
from costs of goods sold to operating expenses to better align
Quorum’s financial statements with other technology company’s
financial statements. Comparable periods have been
updated. While gross margin increased by $2,414K, gross
margin percentage decreased by 3% during Q3 2019. The
increase in gross margin is primarily due to additional revenue of
$5,156K associated with DealerMine and Oasis offset by the
additional third party costs and salaries and benefits for the two
divisions during Q3 2019.
- Q3 2019 was the highest EBITDA quarter in the Corporation’s
history. EBITDA was $1,422K in Q3 2019 as compared to $391K
in Q3 2018, an increase of $1,031K. An increase in gross
margin was offset by an increase in salaries and benefits, research
and development, and sales and marketing expense primarily due to
the DealerMine and Oasis acquisitions.
2 Research and development expense was previously included in
direct costs – salaries and benefits. Comparative periods
have been restated.3 EBITDA Expenses include salaries and benefits,
research and development, general and administrative, and sales and
marketing.
Adjusted Cash Income
|
|
|
|
|
|
|
($000’s) |
|
Nine Months Ended Sept 30,
2019 |
Nine Months Ended Sept 30,
2018 |
Q3 Ended Sept 30, 2019 |
Q3 Ended Sept 30, 2018 |
Q2 Ended June 30,2019 |
Q2 Ended June 30, 2018 |
Q1 Ended March 31,2019 |
Q1 Ended March 31, 2018 |
|
|
|
|
|
|
|
|
|
EBITDA |
$ |
3,533 |
|
$ |
1,141 |
|
$ |
1,422 |
|
$ |
391 |
|
$ |
1,353 |
|
$ |
562 |
|
$ |
757 |
|
$ |
188 |
|
Capitalized salaries and overhead |
|
(2,074 |
) |
|
(1,600 |
) |
|
(767 |
) |
|
(619 |
) |
|
(585 |
) |
|
(388 |
) |
|
(721 |
) |
|
(593 |
) |
Acquisition and financing expense |
|
2 |
|
|
52 |
|
|
- |
|
|
52 |
|
|
- |
|
|
- |
|
|
2 |
|
|
- |
|
Adjusted cash income (loss) |
$ |
1,461 |
|
$ |
(407 |
) |
$ |
655 |
|
$ |
(176 |
) |
$ |
768 |
|
$ |
174 |
|
$ |
38 |
|
$ |
(405 |
) |
- Adjusted cash income was $655K for Q3 2019 as compared to
negative $176K for Q3 2018, an increase of $831K. The total
of capitalized salaries and overhead was $767K for Q3 2019 as
compared to $619K in Q3 2018.
- Income before deferred income tax expense increased to $53K for
Q3 2019 compared to loss before deferred income tax expense of $56K
in Q3 2018. The increase in income before deferred income tax
expense is primarily due to the $1,031K increase in EBITDA, offset
by an increase in interest on long-term debt expense of $433K as
well as increases in non-cash expenses during Q3 2019.
- Including cash of $622K, total net working capital at September
30, 2019 was $1,354K with a current ratio of 1.34, compared to
$1,538K at June 30, 2019, with a current ratio of 1.42, a decrease
of $184K.
Strategy and Outlook
Quorum’s vision is to build a single,
integrated, end-to-end business process solution for North American
automotive dealerships that covers all of their business-critical
processes. To deliver on this vision, Quorum has initiated a
build, resell and acquire strategy, which combines continued
development of Quorum’s flagship XSellerator Dealer Management
System (“DMS”) product, partnering with complementary third-party
service providers to resell value-added services to Quorum’s
existing customer base, and acquiring strategic companies that
provide innovative solutions that augment Quorum’s existing suite
of product offerings.
The genesis of this vision was a recognition of
the changing landscape in the automotive dealer market as well as
an in-depth understanding of the numerous disparate products that
Quorum’s customers purchase from a variety of third-party
providers. With many Quorum customers spending approximately
$7,000 per month on other third-party products, there is
opportunity to consolidate these products under one offering.
For a dealer group, Quorum can currently displace up to six
different products, allowing Quorum to capture part of this
third-party spend while providing cost savings to customers and
streamlining business processes.
Delivering on this vision, Quorum acquired
Autovance Technologies Inc. (“Autovance”) in August 2017, which
provides sales desking solutions to help salespeople seamlessly
present payment, lease and financing information to
customers. Quorum has continued to market the Autovance Desk
product to both new customers as well as its existing XSellerator
customers, and has recently made the Autovance Desk product
available to US-based XSellerator dealerships. Quorum
believes that this additional value-added product will accelerate
US growth opportunities by providing a more fulsome solution for
US-based dealers and dealer groups. Autovance has recently
added Autovance Menu to its suite of products. Currently,
Autovance Menu is in pilot and Quorum plans to market the Autovance
Menu product in Q4 2019. At the time of acquisition, 63
XSellerator customers utilized the Autovance Desk product. As
of September 30, 2019, 114 XSellerator customers utilize Autovance
Desk.
In October 2018, Quorum completed the
transformative acquisition of DealerMine Inc. (“DealerMine”).
The deal significantly accelerates Quorum’s strategic vision to be
a full-service provider to automotive dealerships by adding
DealerMine’s Customer Relationship Management (CRM) Service, Sales
CRM and call centre services known as the Business Development
Centre (“BDC”). The deal also significantly increases Quorum’s
scale resulting in a combined company customer base of over 860
dealership rooftop customers at the time of acquisition, up from
447 prior to the acquisition. With only 15 XSellerator
customers at the time of acquisition utilizing the DealerMine
Service CRM product and BDC services, Quorum believes there is a
significant growth opportunity for DealerMine within Quorum’s
existing customer base. On January 25, 2019, DealerMine and
AutoCanada entered into a strategic partnership with respect to the
establishment of a dedicated BDC for AutoCanada’s Canadian
dealerships. As of September 30, 2019, DealerMine has 476
customers and 33 XSellerator customers that utilize DealerMine’s
products.
At an industry level, the automotive dealer
market is seeing increased consolidation into larger dealer groups,
which creates opportunities for DMS providers like Quorum that can
integrate multiple dealer rooftops under one solution. Auto
manufacturers are also increasing the requirements for DMS
providers to integrate with their own OEM back-end systems, and
de-certifying those DMS providers that are unable to connect their
solutions with these systems. In January 2019, XSellerator
completed certification with Volkswagen (VW) and Audi. Those
certifications allow XSellerator to be sold to VW and Audi
dealerships which increase XSellerator’s total available market,
particularly to those dealer groups which house a variety of
different vehicle brands. The XSellerator division has
completed integration with OEM’s representing 18 different brands
in Canada and 12 different brands in the US. To complete
Quorum’s all makes certification strategy, the XSellerator division
still needs to complete integrations with the remaining OEM
manufacturers being Honda/Acura, Mazda, BMW, Mercedes and Volvo and
complete additional integrations with the US OEM manufacturers
including Toyota/Lexus, Hyundai, Kia and Subaru.
In addition, as smaller DMS providers struggle
with the increased development and licensing fees associated with
increased OEM integration, Quorum believes there is an opportunity
to consolidate these providers under one platform to achieve
economies of scale and spread these costs over a larger customer
base. To this end, Quorum completed the acquisition of Oasis
Auto Complete Systems Limited (“Oasis”) in January 2019, which will
allow for existing Oasis franchised dealerships to transition to
the XSellerator platform, and the Oasis Advantage Product Suite
will form the basis for a new system targeted at the independent
dealership market. As of September 30, 2019, a total of 19
Oasis Advantage customer conversions to XSellerator have been sold
and nine have been converted or installed.
In Q1 2019, Quorum successfully closed a $15
million debt financing facility with BDC Capital Inc. Quorum
drew $8.125 million immediately to retire a bridge financing
facility that was used to acquire DealerMine Inc. and pay the cash
consideration of the Oasis acquisition. The balance of the
BDC Capital Inc. facility remains available for potential future
acquisitions.
As Quorum moves forward, it has never had a more
exciting set of growth opportunities. These opportunities include
growing the core XSellerator DMS business, cross-selling products
and services to our DMS customers, growing acquired assets, and
continuing to assess other strategic acquisitions. DealerMine,
Autovance and Advantage are high-growth, cloud-based Software as a
Service (“SaaS”) businesses that can show immediate leverage in
that they do not require OEM integration and require significantly
less training and support to transition dealerships to their
solutions. Continuing to build out the XSellerator base is the
foundation on which the Corporation can offer solutions from our
recent acquisitions and third party reseller arrangements.
Quorum Q3 2019 Results Conference Call
Details and Investor Presentation
Quorum will host a conference call at 11:00 MT
(13:00 ET) on Friday, November 15, 2019. Anyone wishing to
participate in the call is asked to dial-in using the following
numbers and ask for the Quorum Information Technologies Inc. Q3
2019 Results Conference Call:
Local: |
1 (403) 451-9838 |
|
|
Toll-Free North America: |
1 (888) 231-8191 |
|
|
Conference ID#: |
7359532 |
Quorum’s Q3 2019 Earnings Results investor
presentation is also available for download under the Investors
section on the Company’s website at www.quorumdms.com.
Forward Looking Information
This report contains certain forward-looking
information and statements within the meaning of applicable
securities laws. All statements in this report, other than
statements of historical fact, which address events or developments
concerning Quorum Information Technologies Inc. ("Quorum" or the
“Corporation”) that Quorum expects to occur are "forward-looking
information and statements". The use of any of the words "expect",
"anticipate", "continue", "estimate", "objective", "ongoing",
"may", "will", "project", "should", "potential", "could",
"scheduled", "believe", "plans", "intends", "might" and similar
expressions are intended to identify forward-looking information or
statements.
In particular, but without limiting the
foregoing, this document may contain forward-looking information
and statements pertaining to the following business plan of Quorum
including its plans for targeting new Original Equipment
Manufacturer (“OEM”) Integration, new dealership roof top sales,
and increasing Automotive Group Partnerships; the timing for
completion and cost of OEM Integration; estimates of return on
assets and EBITDA; potential merger and acquisition (“M&A”)
opportunities; the timing of adoption of new accounting standards
and the potential impact of new accounting standards on the
Corporation’s financial statement; the effect of acquisitions on
the Corporation including the effect of the Autovance, DealerMine
and Oasis acquisitions; the effect of the BDC Capital facility; the
effect of the Cormark Securities Inc., Beacon Securities Limited
and PI Financial Corp private placement; various industry activity
forecasts; growth opportunities including those in the United
States; anticipated requirements by OEM manufactures relating to
integrations and certifications; and other expectations, beliefs,
plans, goals, objectives, assumptions, information and statements
about possible future events, conditions, results of operations or
performance. Various assumptions were used in drawing the
conclusions or making the forecasts and projections contained in
the forward-looking statements throughout this report. The
forward-looking information and statements contained in this report
reflect several material factors, expectations and assumptions
including, without limitation: (i) capital expenditures by dealers;
(ii) market availability of current and future dealership rooftops;
(iii) schedules and timing of certain projects and Quorum's
strategy for growth; (iv) Quorum's future operating and financial
results; and (v) treatment under governmental regulatory regimes
and tax and other laws. The forward-looking information and
statements included in this report are not guarantees of future
performance and should not be unduly relied upon.
Forward-looking statements are based on current
expectations, estimates and projections that involve a number of
risks and uncertainties, which could cause actual results to differ
materially from those anticipated and described in the
forward-looking information and statements. Such information and
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
information or statements including, without limitation: (i)
volatility in exchange rates for the Canadian dollar relative to
the US dollar; (ii) liabilities and risks inherent in the software
services industry; (iii) competition for, among other things,
capital and skilled personnel; (iv) changes in general economic,
market and business conditions in Canada and the United States; and
(v) actions by governmental or regulatory authorities including
changes in income tax laws or changes in tax laws. Quorum cautions
that the foregoing list of assumptions, risks and uncertainties is
not exhaustive. The forward-looking information and statements
contained in this document speak only as of the date of this
document, and Quorum assumes no obligation to update or revise them
to reflect news events or circumstances, except as may be required
pursuant to applicable laws. Any financial outlook or future
oriented financial information in this document, as defined by
applicable securities legislation, has been approved by management
of Quorum. Such financial outlook or future oriented financial
information is provided for the purpose of providing information
about management's current expectations and plans relating to the
future. Readers are cautioned that reliance on such information may
not be appropriate for other purposes.
About Quorum Information Technologies
Inc.
Quorum is a North American company focused on
developing, marketing, implementing and supporting its portfolio of
software and services for automotive dealerships that includes:
- XSellerator™, a Dealership Management System (DMS) that
automates, integrates and streamlines key processes across
departments in a dealership, and emphasizes revenue generation and
customer satisfaction.
- DealerMine CRM, a sales and service Customer Relationship
Management system and set of Business Development Center services
that drives revenue into the critical sales and service departments
in a dealership.
- Autovance, a sales desking system that increases sales
department gross margins and improves customer satisfaction for
dealerships.
- Advantage, a full showroom system for both franchised and
independent dealerships and a comprehensive operating system that
includes accounting for the independent market.
Quorum has filed its Q3 2019 unaudited condensed
consolidated financial statements and notes thereto as at and for
the three months ended September 30, 2019, and accompanying
management and discussion and analysis in accordance with National
Instrument 51-102 - Continuous Disclosure Obligations adopted by
the Canadian securities regulatory authorities.
Quorum Information Technologies Inc. is traded
on the Toronto Venture Exchange (TSX-V) under the symbol QIS.
For additional information please go to
www.QuorumDMS.com.
Neither the TSX Venture Exchange nor its
regulation services provider (as that term is defined in the
policies of the TSX Venture Exchange) has reviewed this release and
neither accepts responsibility for the adequacy or accuracy of this
release.
Quorum Contact: Maury Marks
403-777-0036MarksM@QuorumDMS.com
PDF
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