Quorum Information Techs

Hello, my name is Chris and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Quorum Information Technologies Q3 2022 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. And to withdraw your question, please press star one again. Thank you. Maury Marks, President and Chief Executive Officer. You may begin. Thank you, Chris.

Good morning, everybody. Thank you for attending Quorum Information Technologies Q3 2022 Quarterly Results Conference Call and Concurrent Webcast. Joining me on the call today is our Chief Financial Officer, Marilyn Bao. Quorum is a North American SaaS software and services company that offers innovative and robust technology solutions and services to traditional and electric vehicle dealerships and original equipment manufacturers worldwide. or OEMs across North America. Through a combination of purposeful product investment and four strategic acquisitions in the last five years, Quorum has a uniquely integrated product suite of 12 essential software solutions that are used in whole or in part by 1,464 dealerships across North America. Quorum's product suite currently covers 12 of the 25 most common categories of software that dealerships utilize and quorum has the opportunity to develop partner or acquire products for the remaining categories dealerships typically start with a single product from quorum's product suite and experience synergy and value as added quorum solutions are deployed to their dealerships Currently, at least one of Quorum's software solutions is installed in 42% of the franchise automotive dealerships in Canada, compared to 13% five years ago. Quorum's software solutions are installed in less than 1% of the franchise dealerships in the U.S. Quorum has added 1,043 of the 1,464 unique rooftops we have today in the last five years, primarily through acquisition combined with some organic growth. Many of Quorum's customers only leverage one solution out of the 12 available Quorum solutions. The result is that Quorum has a $55 million annual SaaS revenue cross-selling opportunity across the existing customer base. That growth opportunity is two times our Q3 2022 $28 million annual SaaS revenue run rate, and that is just within our current customer base. The last two years have been spent integrating the staff from our four acquisitions into a one quorum team and integrating our 12 key products, eight of which are from acquired companies. As part of this work, we had to integrate the people from all four strategic acquisitions into a single quorum team. And going forward, we should be able to leverage the power and focus of our one quorum team to accelerate our strategic plan. The other result is that there is now full integration, not only amongst the products themselves, but an integrated go-to-market approach, whereby the sales and marketing and account management teams are harmonized and fully incentivized to drive cross-sales. Marilyn will now review our financial results in more detail, and I will follow with some additional comments on our results. After our prepared remarks, we will open the floor to your questions. Marilyn, please go ahead.

Thank you, Morrie, and hello, everyone. Thank you for being here with us today. I would like to remind everyone that certain statements in this presentation and on our call are forward-looking in nature. These include statements involving known and unknown risks, such as the continued supply chain risks related to COVID-19, uncertainties and other factors outside of management control that could cause actual results to differ materially from those expressed in the forward-looking statements. does not assume any responsibility for the accuracy and completeness of the forward-looking statements, and does not undertake any obligations to publicly revise these forward-looking statements to reflect subsequent events or circumstances. Excuse me. For additional information on possible risks, please refer to our annual MD&A, dated December 31st, 2021, on the CDAR website. Total revenues, again, hit another high mark for Quorum in Q3, 2022, coming in at $9.9 million, which is a 7% increase over $9.2 million in Q3 2021. Q3 2022 was again the highest SaaS revenue quarter in the corporation's history, with an increase from Q3 2021 of $0.5 million, or 7%, up from $6.6 million to $7 million. The year-over-year increase is due to a combination of inorganic and organic growth. 0.3 million or 4% of the 0.5 million increase is attributable to inorganic growth, with the remaining 0.2 million or 3% being attributable to organic growth. Our SAS annual run rate based on Q3 2022 is 28.1 million, an increase over the Q3 2021 SAS annual run rate of 26.2 million. BDC revenue increased by $0.2 million to $2.6 million, up 7% compared to $2.4 million in Q3 2021, and is attributable to the continued growth of the core BDC offerings and the strategic partnership with Idaho Canada. Our BDC annual budget based on Q3 2022 is $10.4 million compared to $9.7 million based on Q3 2021. Our reoccurring SAS and BDC revenues equate to an annual run rate of $38.4 million and represents 97% of Quorum's revenue. Growth margin in Q3 2022 increased to $4.9 million or 49% of revenue compared to $4.3 million or 47% for Q3 2021. SAS growth margin increased to 68% in Q3 2022 as compared to 65% in Q3 2021. BDC growth margin increased to 14% in Q3 2022 as compared to 13% in Q3 2021. The increase in growth margin in Q3 2022 is primarily due to an increase in SAS revenue and BDC revenue without a corresponding increase in cost, as well as an increase in operational efficiencies for both SAS and BDC cost structures as compared to Q3 2021. Adjusted EBITDA and adjusted cash income increased by 17% and 56%, respectively, compared to Q3 2021. These year-over-year increases for both adjusted EBITDA and adjusted cash income are due to an increase in growth margin offset by an increase in research and development, sales and marketing, and general and administrative expenses. Including cash of $4.9 million, total net working capital as of September 30, 2022, decreased to $5.5 million from $7.6 million as of December 31, 2021, a decrease of $2.1 million. This decrease is primarily due to the $1.1 million payment of accrued interest on our BDC capital loan facility in February 2022 and the $0.5 million of contingent consideration related to the acquisition of accessible accessories, and the $0.2 million increase in accounts payable. On February 8, 2022, Quorum restructured its credit facility with BDC Capital Inc. The original loan was replaced with a mezzanine loan and a cash flow loan. The cash flow loan was finalized on October 12, 2022. Going forward, The mezzanine loan accounts for 36% of the loan, while the cash flow loan accounts for the remaining 64%. The new facilities reduce interest rates from a fixed rate of 11.7% to a variable rate, which is calculated as BDC capital's floating rate, which moves in conjunction with the Bank of Canada's overnight rate, plus 3%. And it extends the maturity date from January 15, 2025, to March 15, 2027. The mezzanine facility has an additional 2.65 accrued interest. As at September 30, 2022, the interest rate on the mezzanine loan was 11.05%. The interest rate on the cash flow loan is currently 8.55%. With that, I'd like to pass it back to Maury.