Quorum Information Techs

Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I'd like to welcome everyone to the Quorum Information Technologies Incorporated second quarter 2023 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 would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Maury Marks, President and CEO. Please go ahead.

Thank you, Regina. Hello, everybody, and thank you for attending Quorum Information Technologies Q2 2023 Results Conference Call and Concurrent Webcast today. Joining me in the call is our Chief Financial Officer, Marilyn Bowne. Quorum is a North American software and services company providing essential enterprise solutions at automotive, dealerships and original equipment manufacturers rely on for their operations. Through a combination of purposeful product investment and five strategic acquisitions in the last six years, including our latest acquisition of VIN Automotive Technology Limited on June 23rd, Quorum now has a uniquely integrated product suite of 13 essential software solutions that are used in whole or in part by 1,425 dealership customers across North America. VIN Now being our 13th product solution is an automotive marketplace that will complement Quorum's dealership vehicle sales solutions as we continue to build our product suite capability beyond the DMS solution. Now with 13 of the 25 most common categories of software that dealerships utilize, Quorum is well positioned to develop, partner, or acquire products for the remaining 12 categories. Dealerships typically start with a single product from Quorum's product suite and experience increased synergy and value as added Quorum solutions are deployed to their dealership. Many of Quorum's customers only leverage one solution out of the 13 available Quorum solutions. The result is that Quorum has a $55 million annual SaaS revenue cross-selling opportunity across our existing customer base. That growth opportunity is approximately two times our $28.3 million SaaS annual reoccurring revenue run rate, and that is just within our current customer base. Note that since the acquisition of VIN closed in late Q2, we are still assessing and strategizing on the pricing of the VIN solution under quorum and will report both the number of net new acquired rooftops and the size of our additional cross-selling opportunity in our Q3 results. I will also speak to our strategy behind the acquisition in more detail later on this call. While not yet including the VIN rooftops, At least one Quorum software solution is installed in 40% of the franchise automotive dealerships in Canada. And in the past six years, Quorum has added 1,043 of our 1,425 unique rooftops we have today, primarily through acquisition combined with some organic growth. Switching to our results for Q2 2023, I'm excited to report that Quorum reached a $10 million revenue quarter. Additionally, our Q2 over Q1 SaaS revenue growth showed some signs of improvement as increased by 1.3% or 5% annualized. QORM also posted a 17% EBITDA margin for Q2 and if you factor out the $0.3 million spent for NADA in Q1 2023, QORM has posted 4 consecutive quarters of 16-17% EBITDA margins and we are working to further improve these margins. The improvement in profitability over the last four quarters is from our more balanced profitable growth strategy we implemented in the second half of 2022. The strategy included incorporating a more efficient sales strategy by prioritizing cross-selling and a $2 million annual cost reduction plan to drive free cash flow. Marilyn will now review our financial results in more detail, and I will follow with some additional comments on our results, as well as our recent acquisition of VIN. After our prepared remarks, we'll open the floor to your questions. Marilyn, please go ahead.

Thank you, Maury. And hello, everybody. 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, uncertainties, and other factors outside of management's control that could cause actual results to differ materially from those expressed in the forward-looking statements. Quorum 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. For additional information on possible risks, please refer to our annual MD&A, dated December 31, 2022, on the CDERplus.ca website. As Maury mentioned, quorum continued a disciplined approach to profitability in Q2, 2023, delivering a year-over-year increase of 17% for adjusted EBITDA and 46% for adjusted cash income or ACI. Additional highlights of our second quarter 2023 results are revenue increased by 2% to $10.0 million compared to $9.8 million in Q2 2022 and increased by 1.3% compared to $9.9 million in Q1 2023, for an annualized increase of 5%. SAS revenue increased by 1% to 7.1 million compared to 7.0 million in Q2 2022. CDC revenue increased by 3% to 2.8 million compared to 2.7 million in Q2 2022. Total annual reoccurring SAS revenue was 28.3 million compared to 28.0 million in Q2 2022. Total annual reoccurring BDC revenue was 11.1 million compared to 10.7 million in Q2 2022. Growth margin increased by 30% to 4.9 million compared to 4.7 million in Q2 2022. Adjusted EBITDA increased by 17% to 1.7 million compared to 1.4 million in Q2 2022. And adjusted EBITDA margin increased by 3% to 17% compared to 14% in Q2 2022. Adjusted cash income was 1.0 million, an increase of 0.3 million over Q2 2022 or 46%. SAS growth margin percentage remained consistent year over year at 68% of SAS revenue. BDC growth margin percentage decreased by 3% to 12% of BDC revenue. However, when compared to Q1 2023, BDC growth margin percentage improved by 2%. Starting in late 2022, we began working on multiple initiatives to reduce the BDC cost structure to improve BDC growth margins in 2023. We are happy to see that those initiatives are producing results. As a reminder of the revenue generating leverage our BDC provides, roughly every $3 of BDC revenue generates $1 of SAS revenue. Including cash of 4.9 million, total net working capital as of June 30th, 2023 decreased by .6 million to 5.6 million as compared to December 31st, 2022. This decrease is primarily due to an increase in contingent consideration related to the VIN acquisition, decreases in prepaid expenses and loan receivable, offset by an increase in accounts receivable. With that, I'd like to pass it back to Maury.