Setting Up to Deliver Growth Balanced with Profitability
Quorum is a North American SaaS Software and Services company providing essential enterprise solutions
that automotive dealerships and Original Equipment Manufacturers (OEMs) rely on for their operations.
TSX Venture Exchange: QIS
OTC Pink: QIFTF
Welcome to our September 2022 Investor Newsletter!
On August 24th we announced our Q2 2022 Results where we again posted record total and recurring revenues.
Total Revenue of $9.8 million (up 8% y/y)
Recurring Revenue of $9.7 million (up 10% y/y)
$7.0 million of Recurring SaaS Revenue (up 9% y/y)
$2.7 million of Recurring Services (BDC) Revenue (up 12% y/y)
Annualized Recurring Revenue of $38.7 million (based on June 30, 2022)
Adjusted EBITDA of $1.4 million
Adjusted Cash Income of $0.7 million
A combination of purposeful product investment and four strategic acquisitions in the past five years has given Quorum a uniquely integrated product suite of 12 essential software solutions used in whole or in part by over 1,450 dealership customers.
At least one Quorum solution is installed in 42% and 0.6% of the franchised automotive dealerships in Canada and the US, respectively.
BALANCING GROWTH AND PROFITABILITY
For the remainder of the year*, we are engaging in a more balanced approach to deliver a streamlined growth strategy with improved profitability. This positioning should start to be more evident in Q4 of this year and beyond.
Streamlined Growth Strategy:
1. Cross Selling Opportunity – our highest priority is to capture more of Quorum’s $55 million annual SaaS revenue cross selling opportunity – which is a 2X growth opportunity that exists just within our current customer base (based on our Q2 2022 $28 million annual SaaS revenue run rate). The average customer currently spends $1,600 per month at Quorum (MRRPU). For context, a monthly revenue increase of $120 per customer equates to 7.5% annual SaaS revenue growth, delivering higher gross margin product sales while reflecting lower customer acquisition cost, or CAC.
2. New Customer Acquisitions – our streamlined strategy for new customer acquisitions is by “landing and expanding” at new dealerships. Our focus is on initially selling high demand vehicle service-related solutions which are easier to sell in a market where dealerships typically have 1/3 of their regular vehicle inventory due to supply chain shortages. As a note, most of our products are dealership management system (DMS) agnostic, meaning we can “land” with a smaller product and then expand with the goal of moving that customer to our full DMS product.
Improved profitability by improving our EBITDA margins and operating free cash flow through:
Our streamlined revenue growth which will produce higher gross margin sales, as detailed above
Ongoing cost efficiencies by implementing better company-wide cost and staff management
Company-wide price optimization strategy for key products priced below market, along with contractual price escalators
UPCOMING INVESTOR EVENTS
Small Cap Growth Virtual Investor Conference – Thursday, October 6, 2022(hosted by Virtual Investor Conferences)
Quorum will be making an investor presentation with Q&A, scheduled for 12:00 noon ET. All interested investors are invited to attend, we look forward to seeing you there! Pre-Conference Agenda and Registration.
RECENT INDUSTRY INSIGHTS
August 2022 Canadian Light Vehicle Sales
As reported by DesRosier’s Automotive Consultant’s Inc. (DAC) on September 2, sales of light vehicles in Canada continued to struggle in August. DesRosier’s reported that while predictions had abounded (especially south of the border) that August would represent the tipping point in which the market would reverse direction and start to show sales gains, this was not the case in Canada.
DAC sales estimates put August monthly sales at 126,534 units, down 13.9% from the August 2021 figure of 146,925 units. Andrew King, Managing Partner of DAC commented “The monthly market total was the lowest August sales number since the 121,655 units sold in 1999”. DAC reported that the monthly seasonally adjusted annualized rate (SAAR) came in at just under 1.4 million – broadly in the range seen over the past 6 months and lacking any substantive glimmer of hope for a return to a more normal sales pace.
As we’ve highlighted, Quorum continues to focus on selling high demand vehicle service-related solutions which are easier to sell in a market where dealerships typically sell fewer new vehicles because they have 1/3 of their regular vehicle inventory due to supply chain shortages, and due to changing consumer sentiment amid increasing interest rates and looming recession fears. Dealerships do continue to show strong profitability due to their strong service and parts business, and high margins on the vehicles they do sell.
Quorum has worked hard to build and provide a product and services strategy that resonates with automotive dealerships across North America. Our successful history of organic growth and accretive acquisition have led to our position as a leading auto dealership SaaS software solutions provider, with at least one Quorum solution installed in 42% of dealerships in Canada, and with substantial growth runway across North America.
We have been able to achieve this through our amazing employees and their dedication to innovation, which makes them the driving force behind our success and ensures that Quorum has a product suite and service offering prepared for the future of automotive.
I would also like to invite you to schedule a follow up conversation with us if you are interested in hearing more about Quorum. You can do so by sending your request in an email to our Investor Relations lead, Daniela Trnka, at email@example.com.