JULY 2021

TSX Venture: QIS

Welcome to Quorum’s July 2021 Investor Newsletter!

As we move into the summer months Quorum is hard at work on our multiple growth initiatives which include selling our DMS solution to more automotive dealerships and dealer groups, and further advancing the machine learning capabilities of our software.

In June we announced that the O’Regan’s Automotive Group in Nova Scotia has selected Quorum’s best in class XSellerator Dealership Management System (DMS) and related Product Suite as their main DMS software provider.

Early this week we announced that we had received NRC IRAP grant funding up to $750,000 to add machine learning capabilities to our Sales CRM, PowerLane and Communicator Cloud-based applications. This funding will also accelerate our Microsoft partnered project to consolidate our dealerships’ data in Microsoft Azure Synapse.

On May 26 we announced our Q1 2021 results, delivering a 3% quarter over quarter (or 12% annualized) revenue growth rate. Total revenue was $8.6 million in Q1 2021 compared to $8.3 million in Q4 2020.

Most exciting was the significant uptick we saw in March. Our SaaS revenue annual run rate based on March 2021 was $24.9 million, an increase over the $24.2 million based on Q4 2020, an increase of 3%, or 12% annualized. Our BDC revenue annual run rate based on March 2021 was $9.4 million compared to $7.8 million based on Q4 2020, or an increase of 20%, or 80% annualized. Adjusted EBITDA¹ grew by 46% over Q1 2020 to $1.3 million, we ended the quarter with 1,010 dealership rooftop customers, and our monthly recurring revenue per customer, or MRRPU, expanded to $2,013 in Q1 2021 from $1,971 in Q4 2020.

The Auto Dealership Transition to Digital – Growing and Here to Stay

In late Q3 2020 Quorum released MyDeal, an online vehicle purchasing solution to address automotive dealerships’ evolving needs for robust digital retailing solutions.

While MyDeal continues to experience strong market adoption in 2021, we were excited to see the results of a recent Desrosiers Automotive Consultants Inc. (DAC) study of 3,328 new vehicle dealers across Canada that reinforced our belief that the transition to digital is growing rapidly. The DAC study published in the DesRosiers Automotive Reports stated that:

• Online new vehicle purchasing is here to stay – Online initial contact rose from an average 29.7% of cases in 2019 to 38.9% in 2020. The portion of sales which had occurred entirely online rose to 7.6%. When asked about the future, dealers overwhelmingly forecasted a sharp increase in the number of online-only sales, rising to an expected average of 17.8% for 2025.

• Online used vehicle purchasing to also continue to grow – While online-only sales accounted for just 2.6% of total used sales in 2019, this number grew to 6.7% in 2020. When asked about their future outlook, dealers noted that they expect online-only used sales to occupy 15.5% of the market in 2025.
• Decreases in salespeople per store to continue – Dealers do not expect their average number of salespeople to bounce back to 2019 levels even by 2025, rising only to 9.7 salespeople per store on average. The expected growth in online-only sales could be a factor in this shift if online processes enable fewer salespeople to handle a greater number of clients.
• Dealers are spending on websites and systems upgrades to facilitate the shift to more online sales – With these heightened expectations regarding online sales, 19.9% of dealers noted upgrading their website/systems in 2020. Of those 80.1% that did not, 58.5% expect to do so in 2021. While forecasting further online sales in the future is one thing, dealers are clearly expending resources internally in order to facilitate this shift.

RECENT NEWS:

July 6, 2021 – Quorum receives research funding for Machine Learning project – We will be receiving advisory services and funding of up to $724,746 from the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP) to support a research and development project to consolidate Quorum’s dealership data and add machine learning capabilities to its Cloud-based applications. The NRC IRAP support is the next step in a process started in 2020 when Quorum launched QAnalytics – an enterprise reporting toolfor the Quorum suite of products powered by Microsoft PowerBI. QAnalytics is now utilized by 30% of Quorum’s XSellerator Dealership Management System (DMS) customers.

June 28, 2021 – Quorum Announces O’Regan’s Automotive Group Partnership – The O’Regan’s Automotive Group in Nova Scotia has selected Quorum’s best in class XSellerator Dealership Management System (DMS) and related Product Suite as their main DMS software provider. Susan Johnston, VP Marketing & Communications at the O’Regan’s Automotive Group said “Quorum’s Product Suite and corporate vision have helped the O’Regan’s Automotive Group grow its revenue over the last four years. We look forward to working even closer with Quorum and utilizing their solutions to streamline and enhance our operations across all locations.”

May 26, 2021 – Q1 2021 Results – “While SaaS growth was partially restricted early in Q1 2021 due to COVID-19 travel restrictions, it rebounded in March and our SaaS revenue continues to grow in Q2. BDC growth was strong in Q1 2021 and we have identified a number of BDC gross margin expansion opportunities that we plan to execute on throughout 2021,” stated Maury Marks, Quorum President and CEO. “Additionally, our transformative MyDeal and PowerLane solutions, which allow dealership customers to buy a vehicle online and to have a touchless service experience are experiencing stronger market adoption and increasing our ‘share of wallet.”

RECENT INVESTOR EVENTS:

Wednesday, May 26:

Q1 2021 Results News Release

Q1 2021 Quarterly Report:

Q1 2021 Quarterly Results Investor Presentation:

Thursday, May 27:

Q1 2021 Results Conference Call (Webcast Replay)

UPCOMING AUGUST EVENTS (exact dates to be announced)

• Annual General Meeting
• Q2 2021 Results

Thank you for your continued interest in Quorum. Have a great summer and we look forward to providing you with our Q2 2021 results in August.

Kind regards,

Maury

Maury Marks
President and CEO

¹Adjusted EBITDA (non-GAAP) – Net income (loss) before interest and financing costs, taxes, depreciation, amortization, stock-based compensation, foreign exchange gains and losses, one-time acquisition-related expenses and restructuring fees.