QUORUM INFORMATION TECHNOLOGIES INC. Investor Presentation
Q1 2024 Quarterly Results
MAY 29, 2024
Forward Looking Information Disclaimer
This presentation document contains certain forward-looking information and statements within the meaning of applicable securities laws. All statements in this presentation, 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 rooftop sales and increasing Automotive Group Partnerships; the timing for completion and cost of OEM integration; cross-selling initiatives across Quorum's customer base; estimates of return on assets and Adjusted EBITDA*; improvements in gross margins, operating margins, and Adjusted Cash Income*; 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 VINN and Accessible Accessories acquisitions; the effect of the BDC Capital facility; the effect of the conflicts in Ukraine, Israel and Gaza on industry activity and economic activity in North America as a whole; various industry activity forecasts; growth opportunities including those in the United States; anticipated requirements by OEM manufacturers 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 presentation. The forward-looking information and statements contained in this presentation 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) market availability of new and used vehicles and vehicle replacement parts; (iv) consumer vehicle trade-in and vehicle purchasing drivers and behavior; (v) schedules and timing of certain projects and Quorum's strategy for growth; (vi) Quorum's future operating and financial results; and (vii) treatment under governmental regulatory regimes and tax and other laws. The forward-looking information and statements included in this presentation 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 new 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.
UNITED STATES
This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or any other jurisdiction. Any such offer to sell or solicitation of an offer to buy the securities described herein or during the presentation will be made only pursuant to subscription documentation between Quorum and prospective purchasers. Any such offering will be made in the United States in reliance upon an exemption from registration under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), for an offer and sale of securities that does not involve a public offering, and the offer and sale of the securities will be conditioned on the receipt of representations, warranties and agreements of prospective purchasers to establish that exemption. Any securities described in this document have not been, and will not be, registered under the U.S. Securities Act and may not be offered or sold in the United States except in transactions exempt from, or not subject to, registration under the U.S. Securities Act and applicable U.S. state securities laws. Accordingly, the securities may not be resold, pledged, hypothecated or otherwise disposed of or transferred except in accordance with the registration requirements of the U.S. Securities Act and any applicable state securities laws or pursuant to an applicable exemption from such registration requirements of the U.S. Securities Act and any applicable state securities laws. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS COMMUNICATION. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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About Quorum
For the quarter ended March 31, 2024:
Annual Recurring Revenue
SaaS*: $28.8 million
BDC*: $10.1 million
SaaS* Revenue
$7.2 million (2% year over year growth)
BDC* Revenue
$2.5 million (-9% year over year growth)
Total Revenue
$10.1 million (2% year over year growth)
Adjusted EBITDA*
$2.1 million (61% year over year growth) Adjusted EBITDA* Margin
21%
Customer Dealerships (Rooftops)
1,417
Monthly Recurring Revenue per Unit/Customer (MRRPU)*
$1,693 (4% year over year growth)
Quorum is a North American SaaS software and service company providing essential enterprise solutions that Automotive Dealerships and Original Equipment Manufacturers (OEMs) rely on for their operations.
A combination of purposeful product investment and five strategic acquisitions in the last six years has given Quorum a uniquely integrated product suite of 13 essential software solutions used in whole or in part by 1,417 dealership customers.
At least one of Quorum's software solutions is installed in 40% and 0.6% of the franchised automotive dealerships in Canada and the USA, respectively.
STRATEGIC FOCUS
- Quorum is focusing on a more profitable growth strategy which emphasizes cross-selling and better company-wide cost management.
- This has resulted in moderate growth while achieving record Adjusted EBITDA* margins in both Q4 2023 and Q1 2024 of 21%.
- Please refer to the "Non-GAAP Measures" and "Glossary of Acronyms" slides in the Appendix of this presentation for the meaning of
this term or acronym. | 3 |
Driving Revenue Growth through Cross-Selling
-
Quorum has acquired over 1,000 of its current dealership customers through acquisition and consequently,
many customers only leverage 1 out of 13 of our solutions. - Acquisition of Accessible Accessories in Q2 2022 increased our cross-selling opportunity.
- Dominant position in Canada - at least one Quorum solution is installed in 40% of Canadian franchised dealership rooftops.
- The customer rooftop decline is primarily due to Quorum's profitable growth strategy which emphasizes cross selling over new dealership acquisitions. This has also resulted in an increase in MRRPU*.
Acquired Rooftops & Cross-Sell Across Existing Customer Rooftops
$91,500,000 | Cross-Selling Opportunity | ||||||||
Rooftops | |||||||||
$81,500,000 | • | Additional dealership rooftops | |||||||
• | Expanded solutions offering | ||||||||
Accessible | |||||||||
$71,500,000 | Accessories | ||||||||
Acquisition Q2 | |||||||||
Oasis | 2022 | $54 million cross- | |||||||
$61,500,000 | Acquisition Q1 | ||||||||
2019 | selling opportunity | ||||||||
DealerMine | (opportunity to | ||||||||
$51,500,000 | increase existing | ||||||||
Acquisition Q4 | |||||||||
2018 | customer spend) | ||||||||
$41,500,000 | 1440 | 1427 | 1417 | ||||||
Autovance | VINN | ||||||||
1045 | Automotive | ||||||||
$31,500,000 | Acquisition Q3 | 1027 | 1021 | Acquisition Q2 | |||||
2017 | 876 | 2023 | |||||||
$28.8 million SaaS | |||||||||
$21,500,000 | |||||||||
run rate based on | |||||||||
419 | Q1 2024 SaaS | ||||||||
$11,500,000 | 325 | Actual SaaS Revenue Growth | revenue | ||||||
$1,500,000 | |||||||||
2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Q1 2024 |
- Please refer to the "Non-GAAP Measures" and "Glossary of Acronyms" slides in the Appendix of this presentation for the meaning of
this term or acronym. | 4 |
Quorum Solutions Help Dealerships in the Competitive Automotive Market
1. TRANSFORM PRODUCT MIX
Support ACES - Autonomous driving, Connectivity, Electrification, and Shared mobility trends.
2. NEED FRICTIONLESS WORKFLOWS
Better workflows from Sales and Service into the DMS which Quorum delivers through our complete product suite and dealership wide reporting tool.
Dealership wide reporting tool for the full Quorum product suite
3. IMPROVE DEALERSHIP PROFITABILITY
Demand higher ROI from all our solutions which Quorum delivers through our Dealer Performance strategy.
Customer Relationship Management Tools that provide a 360-degree view of how dealership's
customers shop, service and interact with their store
Quorum's Business Development Centre services - a call centre for dealerships to contact customers for service and repair work
4. SUPPORT EVOLVING CONSUMER DEMAND
Consumers demanding new way of doing business without sacrificing gross margin - Quorum delivers digital retailing and touchless service experience.
Quorum's MyDeal, digital retailing solution, and Desk, in store solution, integrate seamlessly ensuring online vehicle payments
always match dealership sales staff numbers. Accessible Accessories add an accessories digital retailing solution and
VINN adds a premier automotive marketplace to our offering.
Quorum's service lane inspection and quoting tools provides a touchless
consumer experience and drives in $60K of customer pay revenue per dealership
per month
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Total Available Market (TAM*)
1. Cross-SellTAM*: $54 M of Annual (SaaS) Cross-Selling Opportunity Across Existing Customer Rooftops, calculated as follows:
Available Annual TAM* Calculation | |
Available Solutions for Cross-Selling: | $4,870 |
Captured MRRPU* (Q1 2024): | $1,693 |
Remaining (Cross-Sell) MRRPU*: | $3,177 |
Existing Rooftops (Q1 2024): | 1,417 |
Canada: 1,292 rooftops of 3,235 available (Quorum has 40% market share)
USA: 125 rooftops of 19,575 available (Quorum has 0.6% market share)
Remaining (Cross-Sell) MRRPU*: | $3,177 |
Available Cross-Sell TAM* Monthly: | $4.5 M |
Available Cross-Sell TAM* Annually: | $54 M |
2. Expand New Customer Base TAM* - Remaining Franchise Dealer Opportunity is over $1.8 B in ARR*
Annual Recurring Revenue (ARR*) Calculation
Available Franchised Rooftops: | 21,393 | ||
Canada: | 3,235 | - 1,292 (Q1 2024) = 1,943 | |
USA: | 19,575 | - 125 (Q1 2024) = 19,450 | |
Rooftops multiplied by ARR* | |||
Available Quorum Monthly Spend: | $7,000 | ||
Canada: | 1,943 x $7,000 x 12 = $163 M | ||
USA: | 19,450 x $7,000 x 12 = $1.6 B | ||
Available Franchised Rooftops ARR*: | $1.8 B |
Pursuing a Profitable Growth Strategy
Why a Balanced Approach...
IN CURRENT ENVIRONMENT SHAREHOLDERS VALUE PROFITABLE BUSINESSES
- In prior years new dealership customer growth was our focus.
- Quorum is now focused on a more profitable growth strategy which emphasizes cross-selling and a more cost-effective new dealership customer growth model.
- The result is moderate growth and improved profitability
with Adjusted EBITDA margin of 21% in both Q4 2023 and Q1 2024, and ACI margin of 16% in Q4 2023 and 17% in Q1 2024.
How We are Delivering a Balanced Approach
INTERNAL INITIATIVES - Adjusted EBITDA and ACI margin expansion from:
- Cross-sellingQuorum products has a lower sales acquisition cost and typically provides Quorum higher gross margins. Quorum products are designed to provide dealerships with increased synergy and value as additional Quorum solutions are deployed to their dealerships.
- Most Quorum products are DMS agnostic, meaning we can land with a smaller, easier to sell product and then expand. These products are also typically OEM agnostic and can be sold to more of the available market.
- Company-wideprice optimization strategy for key products priced below market along with contractual price escalators.
- Better company-wide cost management.
* Please refer to the "Non-GAAP Measures" and "Glossary of Acronyms" slides in the Appendix of this presentation for the meaning of this term or acronym
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Q1 2024 Key Performance Metrics
TOTAL REVENUE: $10.1 million (2% y/y growth)
From Recurring Revenue Streams:
SaaS Revenue | $7.2 million | |
72% of total revenue | ||
2% year-over-year growth | ||
BDC Revenue | $2.5 million | |
25% of total revenue | ||
-9%year-over-year growth | ||
Annual Recurring Revenue (ARR*) Run Rate: | ||
SaaS Run Rate | $28.8 million | |
BDC Run Rate | $10.1 million | |
TOTAL GROSS MARGIN: 51% of total revenue | ||
SaaS Gross Margin | 68% of SaaS revenue | |
BDC Gross Margin | 20% of BDC Revenue |
ADJUSTED EBITDA*: | $2.1 million |
21% of total revenue | |
($1.3 million, or 13% of total revenue in Q1 2023) | |
ADJUSTED CASH INCOME (ACI*): | $1.7 million |
17% of total revenue | |
($0.6 million, or 6% of total revenue in Q1 2023) |
TOTAL AVAILABLE FRANCHISED DEALERSHIP MARKET (TAM):
Canada: | 3,235 franchised dealership rooftops |
USA: | 19,575 franchised dealership rooftops |
TAM VALUE: | $6 billion annually** |
QUORUM CUSTOMER ROOFTOPS: 1,417 | |
SaaS REVENUE MRRPU*: | $1,693 |
* Please refer to the "Non-GAAP Measures" and "Glossary of Acronyms" slides in the Appendix of this presentation for the meaning of this term or acronym. ** Based on research from Empiritas Solutions, dated September 15, 2020.
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Historical Financial Performance (in $CAD millions)
Revenue
188% | 242% | 270% | 280% | ||||||
183% | $0.7 | $1.2 | |||||||
$0.9 | |||||||||
$10.9 | |||||||||
$3.7 | $1.2 | $10.4 | |||||||
- | 32% | $9.4 | |||||||
$6.8 | $7.5 | ||||||||
$2.9 | $27.6 | $28.2 | $0.4 | ||||||
$2.5 | $0.8 | $22.3 | $22.1 | $25.7 | |||||
$12.7 | $2.5 | ||||||||
$10.3 | |||||||||
$7.2 | |||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Q1 2024 | ||
Services & One-Time Revenue | BDC Revenue (Recurring) | ||||||||
SaaS Revenue (Recurring) | Recurring Revenue Growth since 2017 | ||||||||
SaaS* Gross Margin
Profitability
$18.7 | $19.3 | ||||||||||
$15.2 | $16.4 | ||||||||||
$13.7 | |||||||||||
$6.5 | $8.4 | $7.0 | |||||||||
$4.6 | $4.9 | $5.0 | $5.6 | $5.1 | |||||||
$4.5 | |||||||||||
$1.9 | $2.0 | $1.8 | $2.5 | $2.3 | $3.0 | $2.1 | |||||
$0.5 | $1.7 | ||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Q1 2024 | ||||
Gross Margin | Adjusted EBITDA* | Adjusted Cash Income* | |||||||||
BDC* Gross Margin
20%
68%
68%
66%
$14.7
63%
$14.0
65%
$16.8
68%
$18.7
67% | 68% |
$18.9
13%
10%
11%
12%
$1.2
12% $1.3
16%
$1.7
$7.0
$8.7
$4.9
$0.7
$0.1
$0.8
$0.5
2017
2018
2019
2020
2021
2022
2023 | Q1 2024 |
2018 2019 2020
2021 | 2022 | 2023 | Q1 2024 |
SaaS Revenue Gross Margin | SaaS Gross Margin % of Saas Revenue |
BDC Revenue Gross Margin
BDC Gross Margin % of BDC Revenue
* Please refer to the "Non-GAAP Measures" and "Glossary of Terms" slides in the Appendix of this presentation for the meaning of this term or acronym | 8 |
Market Data (as of May 24, 2024)
Capitalization ($CAD Millions)
Share Price at May 24, 2024 | C$ | $0.74 | 1 | |
Basic Shares Outstanding | MM | 73.5 | ||
Dilutive Securities Outstanding | MM | 0.9 | ||
Diluted Securities Outstanding | MM | 74.4 | (C$) | 0.8 |
Diluted Market Capitalization at May 24, 2024 | C$ MM | $55.0 | ||
Price | ||||
At March 31, 2024 | 0.6 | |||
Share | ||||
- Cash Balance | C$ MM | ($4.0) | ||
+ Debt | C$ MM | $9.6 | ||
+ Lease Liabilities | C$ MM | $2.3 | 0.4 | |
Enterprise Value | C$ MM | $62.9 | May-23 |
Share Price Performance - Past Year
Volume (000s) | Share Price (C$) | 7,000 | ||
6,000 | ||||
5,000 | (000s) | |||
4,000 | ||||
3,000 | Volume | |||
2,000 | ||||
1,000 | ||||
0 | ||||
Aug-23 | Nov-2 3 | Feb-24 |
Open: $0.55
Close: $0.74
High: $0.80
Low: $0.42 Shares Traded: 13,713,971 Outstanding: 73,504,450
Ownership
Directors | Dealerships |
and Mgmt. | (Estimate) |
Other
Shareholders
Institutional ownership represents over 55% of total outstanding shares.
Latest Financing | Share Price Performance - Past Three Years | |||||||
Debt Facilities (as of March 31, 2024): | 7,000 | Open: | $1.07 | |||||
• $8.3M BDC Capital debt | Volume (000s) | Share Price (C$) | ||||||
1.2 | ||||||||
• Mezzanine loan of $3.3M at 12.8% over | 6,000 | Close: | $0.74 | |||||
6 years | 5,000 | High: | $1.19 | |||||
• Cash Flow loan of $5M at 9.8% over 6 | 1 | |||||||
Volume(000s) | ||||||||
Shares Issued: | 10.6 million | PriceShare(C$) | 4,000 | Low: | $0.42 | |||
yrs. | ||||||||
• $1.4M unsecured government debt | 0.8 | 3,000 | Shares Traded: | |||||
Equity Raise November 2019 | 0.6 | 2,000 | 21,770,463 | |||||
1,000 | ||||||||
Issue Price: | $0.87/share | Outstanding: | ||||||
0.4 | 0 | 73,504,450 | ||||||
Gross Proceeds: | $9.2 million | |||||||
May-21Aug-21 | Nov-21Feb-22May-22Aug-22Nov-22 | Feb-23May-23Aug-23Nov-23Feb-24May-24 | ||||||
* Please refer to the "Non-GAAP Measures" and "Glossary of Terms" slides in the Appendix of this presentation for the meaning of this term or acronym | 9 |
Leadership Team
Maury Marks, CPA, CA | Marilyn Bown, CPA, CGA | Rick Johnston |
President, Chief Executive Officer & Founder | Chief Financial Officer | VP Product Management |
Brice Atkinson | Yossi Ronnen | Jane Webb |
VP Operations | VP Software Development | VP Sales & Marketing |
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Disclaimer
Quorum Information Technologies Inc. published this content on 29 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 May 2024 23:31:08 UTC.
