Quorum Releases Q3 Fiscal Year 2015 Results

CALGARY, ALBERTA–(Marketwired – Nov. 23, 2015) – Quorum Information Technologies Inc. (“Quorum” or the “Company”) (TSX VENTURE:QIS) today released its Third Quarter (Q3) Fiscal Year (FY) 2015 results. Quorum delivers its dealership management system (DMS), XSELLERATOR™, and related services to automotive dealerships throughout North America. The Company is both a Dealer Technology Assistance Program (DTAP) 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. Quorum also supplies its product to Chrysler, Hyundai, Kia, Nissan, Subaru, NAPA and Bumper to Bumper franchised dealership customers as well as other franchised, independent and some non-automotive dealerships.

Maury Marks, Quorum's President and CEO made the following remarks about the Company's Q3 FY2015 operational and financial results:

Operational results highlights for Q3 FY2015 are as follows:

• Quorum continues to enhance two important areas of our software and we now track key dealership utilization metrics related to these areas in a Dealership Success Scorecard:
  • Communicator features text, email and instant message functionality that is integrated into the XSELLERATOR workflow. Aggregate data on Communicator's recent usage is shown below.
  • Make More Money (“M3”) is an initiative which focuses on ten XSELLERATOR processes that drive incremental revenue into our dealership customers' operations. Aggregate data from the Vehicle Inspection Process (“VIP”), which is just one of the ten M3 processes, is shown below.
  • Sales CRM – Quorum continues to make significant enhancements to sales Customer Relationship Management (CRM) features within XSELLERATOR. Currently 22 dealerships have been trained on the new Sales CRM, nine of whom were previously on a third party CRM solution. Added usage statistics will be added to the Dealership Success Scorecard early in 2016.

Dealership Success Scorecard¹

¹ The numbers and dollar figures included in the Dealership Success Scorecard are based on dealership results.

• In Q2 FY2015, Quorum entered into agreements with Ford and their DMS integration technology partner, Oxlo, to develop a full suite of Ford integration and offer our XSELLERATOR dealership and customer management system to Ford and Lincoln dealerships. Quorum is actively building the integration and plans to pilot with our first Canadian Ford dealership in Q1 FY2016. Quorum initially plans to focus on the Ford Canadian market and will later offer our DMS to the Ford US market.
• Key customer metrics are as follows:
  • Customer Satisfaction Index (“CSI”) semi-annual survey in Q3 FY2015 showed an average of 82% of dealer principals as “satisfied” or “very satisfied” and an average of 85% of end users as “satisfied” or “very satisfied” overall. Our survey in Q1 FY2015 reported “satisfied” or “very satisfied” comparative numbers of 81% for dealer principals and 94% for end users. Our survey in Q1 FY2014 reported “satisfied” or “very satisfied” comparative numbers of 89% for dealer principals and 81% for end users. In all three surveys in the last two years almost all the remaining respondents reported as “somewhat satisfied”. Any dealer principals or end users that report as dissatisfied are immediately followed on by our support teams.
  • Our monthly Support Center CSI survey continues to report an average of approximately 95% “very satisfied” with the service received from our support team.

Financial Results highlights for Q3 FY2015 are as follows:

• Quorum's key to growing profits is having a critical mass of installed dealerships that supply a recurring revenue stream, along with a well-managed fixed and variable cost structure. Sales increased by 24% to $2,779K in Q3 FY2015 from $2,243K in Q3 FY2014. The increase in sales is due to:
  • An increase of $252K in recurring support revenue as a result of having more active dealership rooftops at the end of Q3 FY2015 as compared to the end of Q3 FY2014;
  • An increase of $197K in support plus revenue which is a result of an increase in training services revenue;
  • An increase of $64K in net new revenue which was a result of completing more installations in Q3 FY2015 as compared to Q3 FY2014; and
  • An increase of $24K in transitions revenue from converting our customers to the new Microsoft Windows and SQL Server 2012 products.
• Margin after direct costs increased by $154K to $1,456K in Q3 FY2015, as compared to $1,302K in Q3 FY2014, a 12% increase. The percentage increase in margin after direct costs did not increase in proportion to the percentage increase in revenue due to the following:
  • Third party costs increased by $290K to $604K in Q3 FY2015, as compared to $314K in Q3 FY2014. The increase in third party costs is due:
    • An increase in the cost of servers and licenses of $218K.
    • The actual cost of licenses that should have been reported in Q3 FY2014 should have been $72K higher. As reported in the 2014 annual report, the entire cost of licenses associated with transitions revenue in FY2014 was accrued in Q4 FY2014, while these expenses are more evenly spread throughout FY2015.
  • Direct salaries and benefits increased by $92K to $719K in Q3 FY2015, as compared to $626K in Q3 FY2014 due to new hires that were added during the quarter.
  • An increase in support plus, net new and transitions revenue which are lower margin revenue streams.
• Earnings before interest, taxes, depreciation, amortization, stock-based compensation and foreign exchange (EBITDA) increased by $23K to $469K in Q3 FY2015 from $446K in Q3 FY2014. Increased margin after direct costs was offset by larger salaries and benefits expense due to additional variable compensation as well added staffing costs. General & administrative expense decreased by $80K as a result of lower office rental expense. On September 1, 2014, the Calgary offices relocated and the Corporation signed a new five-year contract at a substantially lower annual rental rate.
• Income before deferred income tax expense decreased by $28K to $96K in Q3 FY2015 from $124K in Q3 FY2014. Stock-based compensation increased by $28K during Q3 FY2015 due to an increase in the share price of the Corporation.

The Corporation had its strongest growth quarter to date with sales rising by 24%. Sales growth came from more net new installs, increased recurring support revenues and higher support plus training revenue. Quorum has seen eight consecutive quarters of significant revenue growth (over the prior year quarters) and we continue to increase our staffing levels in anticipation of future growth. Our strategy to focus on product innovations, improving product utilization and superior levels of customer service has increased the market demand for our product and services.

Quorum has filed its Q3 2015 consolidated financial statements and notes thereto as at and for the period ended September 30, 2015 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.

Financial Highlights

About Quorum

Quorum is a North American company focused on developing, marketing, implementing and supporting its XSELLERATOR product for GM, Chrysler, Hyundai, Kia, Nissan, Subaru, NAPA and Bumper to Bumper franchised dealership customers as well as other franchised, independent and some non-automotive 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' DTAP program, Quorum is also one of largest DMS provider for GM's Canadian dealerships with 25% of the market. Quorum is a Microsoft Partner 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.

Forward-Looking Information

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 period ended September 30, 2015. 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.