CALGARY, ALBERTA–(Marketwire – Nov. 26, 2010) – Quorum Information Technologies Inc. (TSX VENTURE:QIS) (“Quorum” or the “Company”) today released its Third Quarter (Q3) Fiscal Year (FY) 2010 results. Quorum delivers its dealership management system (DMS), XSellerator™, and related services to automotive dealerships throughout North America. The Company is both an Integrated Dealership Management System (IDMS) strategic partner with General Motors Corporation (GM) and a strategic partner with Microsoft. Quorum's XSellerator product is broadly promoted to its target dealerships throughout North America by these prominent industry partners. Maury Marks, Quorum's President and CEO made the following remarks about the Company's Q3 FY2010 results:
Quorum is focused on responsible growth and exceptional customer care. Our overriding strategic goals are to continue to expand our customer base through new sales while generating sustained positive cash flow every quarter. At the same time, we are committed to providing outstanding service and support to our customers. Following are highlights of our progress towards those goals in Q3 FY2010:
- Growth – the Company completed 27 rooftop installations for the nine months ended September 30, 2010 compared with six for the nine months ended September 30, 2009. We continue to meet our goals of high implementation rates (compared to 2009), quality installs and positive cash flow every quarter. Continued growth of our customer base is critical to improving Quorum's long-term profitability.
- Dealership Mix – As part of GM's 2009 restructuring, GM announced that 42% of its franchised dealerships in both Canada and the U.S. would not have their franchises renewed. This has significantly impacted Quorum's customer base and many of our dealerships changed their business over to a different manufacturer or closed their business. In Q3 FY2010, the last of the dealerships affected by GM's announcement made their decisions and in Q4 FY2010 we have managed the last of the dealership “change-overs” and closures. We are now looking forward to continued growth in both our customer base and ongoing XSellerator software support revenues in 2011.
A positive outcome to the GM 2009 restructuring is that Quorum now has a more diverse customer base, as 25% of our dealerships are now non-GM franchised dealerships, up from 10% at June 30, 2009. The Company currently supports GM, Isuzu, Chrysler, Hyundai, KIA, Nissan, Subaru, NAPA and Bumper to Bumper dealerships.
- Customer Care – the focus was on three key activities in this quarter:
- Our semi-annual GM IDMS customer satisfaction survey results showed that two-thirds of our Dealer Principals would definitely recommend us and the remaining one-third would likely recommend us.
- During the quarter we completed most of the development for a new release of XSellerator that was installed in our pilot dealerships in November 2010. The release contains the largest number of key enhancements in a single release in the Company's history.
- During the quarter we also completed most of the development of a new self-help web-based customer support portal (the “Dealer Resource Center”) that was general released in November 2010.
- Financial Results – the quarter produced mixed results. Revenue was up slightly from Q3 FY2009; however, it was down from Q2 FY2010. We remained cash flow positive and posted strong EBITDA. However, a large non-cash tax adjustment created a net loss after tax. Despite these items, the most important achievement is that Q3 FY2010 was our fifth consecutive cash flow positive quarter.
The following is a summary of our Q3 FY2010 financial performance (see financial highlights table below):
- Revenue increased by 1% compared to Q3 FY2009 and was down 8% compared to Q2 FY2010. The Q3 FY2009 revenue included $180K from the last of our SQL Server migrations revenue. Based only on net new, support and integration revenue our revenue increased by 11% over Q3 FY2009. Our revenue was down from Q2 FY2010 largely because of less installs and lower revenue per install.
- Gross Profit margin of 57% was the same as the margin in Q2 FY2010 and was down from 66% in Q3 FY2009. The Q3 FY2009 gross margin was up due to the higher margin SQL Server migrations.
- EBITDA (earnings before interest, taxes, depreciation and amortization) in Q3 FY2010 was $326K versus $530K in Q3 FY2009 and $383K in Q2 FY2010. Our EBITDA remained relatively strong compared to Q2 FY2010 given that we completed less installs at slightly lower margins.
- Net income for Q3 FY2010 was negative $226K compared to positive $9K in Q3 FY2009 and positive $330K for Q2 FY2010. Quorum's non-cash deferred tax expense of $234K was high during the quarter compared to previous quarters due to an adjustment in our transfer pricing policy percentages. These changes were implemented for the filing of the 2009 fiscal year taxes during Q3 FY2010 and will be implemented in future filings. The effect was that Quorum utilized more of our high tax rate U.S. taxes losses, which resulted in a large reduction in our future tax asset and our computed tax expense.
- Positive quarterly cash flow from operating activities of $298K was achieved in Q3 FY2010 versus $332K in Q3 FY2009 and $305K in Q2 FY2010. Net cash outflows for investing and financing activities were $218K in Q3 FY2010 for a quarterly increase in cash of $81K. We closed the quarter with $1,630K in cash.
Quorum continues to generate positive cash flow despite a weaker revenue quarter. We continue to be a market leader in product innovation backed by strong implementation and support services. This is evidenced by our excellent customer satisfaction results. Quorum has filed its 2010 Q3 consolidated financial statements and notes thereto as at and for the period ended September 30, 2010 and accompanying management's discussion and analysis in accordance with National Instrument 51-102 – Continuous Disclosure Obligations adopted by the Canadian securities regulatory authorities. Additional information about Quorum will be available on Quorum's SEDAR profile at www.sedar.com and Quorum's website at www.QuorumDMS.com.
|(dollar figures in '000)|
|Nine Months Ended Sept. 30, 2010||Nine Months Ended Sept. 30, 2009||Q3 Ended Sept. 30, 2010||Q3 Ended Sept. 30, 2009||Q2 Ended June 30, 2010||Q2 Ended June 30, 2009||Q1 Ended March 31, 2010||Q1 Ended March 31, 2009|
|Gross revenue||$ 5,840||$ 5,386||$ 1,863||$ 1,853||$ 2,031||$ 1,636||$ 1,946||$ 1,896|
|Operating income before interest, taxes, depreciation and amortization (EBITDA)||1,006||1,149||326||530||383||250||297||369|
|Net income (loss)||120||201||(226)||9||330||3||15||189|
|Cash flow from operating activities||888||673||298||332||305||53||285||289|
|Quarterly cash expenditures (cash payments for operating and investing activities)||$ 5,889||$ 5,881||$ 2,060||$ 1,849||$ 2,014||$ 2,072||$ 1,815||$ 1,960|
|KEY MANAGEMENT METRICS|
|XSellerator installations – in the period||27||6||8||3||9||1||10||2|
|XSellerator active dealership rooftops||235||221||235||221||228||224||221||225|
(1) EBITDA expenses include salaries and benefits, general and administrative and sales and marketing
Quorum is a North American company focused on developing, marketing, implementing and supporting its XSellerator™ product for GM, Isuzu, Chrysler, Hyundai, KIA, Nissan, Subaru, NAPA and Bumper to Bumper dealerships. XSellerator is a dealership and customer management software product that automates, integrates and streamlines every process across departments in a dealership. One of the select North American suppliers under General Motors' IDMS program, Quorum is the second largest DMS provider for GM's Canadian dealerships with 25% of the market. Quorum is a Microsoft Gold Certified Partner and Field-Level Managed ISV in both Canada and the United States. 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.
This press release contains certain forward-looking statements and forward-looking information (“forward-looking information”) within the meaning of applicable Canadian securities laws. Forward-looking information is often, but not always, identified by the use of words such as “anticipate”, “believe”, “plan”, “intend”, “objective”, “continuous”, “ongoing”, “estimate”, “expect”, “may”, “will”, “project”, “should” or similar words suggesting future outcomes. In particular, this press release includes forward-looking information relating to results of operations, plans and objectives, projected costs and business strategy. Quorum believes the expectations reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.
Forward-looking information is not a guarantee of future performance and involves a number of risks and uncertainties some of which are described herein. Such forward-looking information necessarily involves known and unknown risks and uncertainties, which may cause Quorum's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking information. These risks and uncertainties include but are not limited to the risks identified in Quorum's Management's Discussion and Analysis for the year ended December 31, 2009. Any forward-looking information is made as of the date hereof and, except as required by law, Quorum assumes no obligation to publicly update or revise such information to reflect new information, subsequent or otherwise.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.