Quorum Releases Q3 Fiscal Year 2010 Results
November 26 2010 - 7:00AM
Marketwired Canada
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(TM), 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.
Financial Highlights
(dollar figures in '000)
----------------------------------------------------------------------------
Nine Nine
Months Months
Ended Ended Q3 Ended Q3 Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2010 2009 2010 2009
----------------------------------------------------------------------------
Gross revenue $ 5,840 $ 5,386 $ 1,863 $ 1,853
Gross profit 3,297 3,226 1,059 1,216
EBITDA expenses(1) 2,291 2,077 733 686
Operating income before interest,
taxes, depreciation and
amortization (EBITDA) 1,006 1,149 326 530
Net income (loss) 120 201 (226) 9
Cash flow from operating activities 888 673 298 332
Quarterly cash expenditures (cash
payments for operating and
investing activities) $ 5,889 $ 5,881 $ 2,060 $ 1,849
----------------------------------------------------------------------------
KEY MANAGEMENT METRICS
XSellerator installations - in the
period 27 6 8 3
XSellerator active dealership
rooftops 235 221 235 221
----------------------------------------------------------------------------
Financial Highlights
(dollar figures in '000)
----------------------------------------------------------------------------
Q2 Ended Q2 Ended Q1 Ended Q1 Ended
June 30, June 30, March 31, March 31,
2010 2009 2010 2009
----------------------------------------------------------------------------
Gross revenue $ 2,031 $ 1,636 $ 1,946 $ 1,896
Gross profit 1,162 903 1,076 1,107
EBITDA expenses(1) 779 653 779 738
Operating income before interest,
taxes, depreciation and
amortization (EBITDA) 383 250 297 369
Net income (loss) 330 3 15 189
Cash flow from operating activities 305 53 285 289
Quarterly cash expenditures (cash
payments for operating and
investing activities) $ 2,014 $ 2,072 $ 1,815 $ 1,960
----------------------------------------------------------------------------
KEY MANAGEMENT METRICS
XSellerator installations - in the
period 9 1 10 2
XSellerator active dealership
rooftops 228 224 221 225
----------------------------------------------------------------------------
(1) EBITDA expenses include salaries and benefits, general and
administrative and sales and marketing
About Quorum
Quorum is a North American company focused on developing, marketing,
implementing and supporting its XSellerator(TM) 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.
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 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.
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