Quorum Information Techs

Hello, everyone. Thank you so much for waiting, and welcome to the Quorum Information Technology's third quarter 2024 results conference call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you'd like to ask a question during that time, please press star and then one on your telephone keypad. Thank you. I'd now like to hand the call over to Mario Marks. You may now begin.

Thank you, Ellie. Hello, everybody, and thank you for attending Quorum Information Technologies Q3 2024 Results Conference Call and Concurrent Webcast. Joining me is our Chief Financial Officer, Marilyn Bowne. Quorum is a North American software and services company providing essential enterprise solutions that automotive dealerships and original equipment manufacturers, or OEMs, rely on for their operations. Quorum has a uniquely integrated product suite of 13 essential software solutions that are used in whole or in part by 1,418 dealership customers across North America. At least one of Quorum's software solutions is installed in 40% of the franchise automotive dealerships in Canada. Quorum has 13 of the 25 most common categories of software solutions that automotive dealerships utilize. As a result, Quorum is well positioned to develop, partner, or acquire products for the remaining 12 categories. Many of Quorum's customers only leverage one solution out of our 13 available solutions. That means we have a $54 million annual SaaS revenue cross-selling opportunity within our customer base, which is approximately two times our $29 million SaaS annual recurring revenue run rate. We are very pleased to present to you today our Q3 2024 results. Not only did we achieve record adjusted EBITDA of $2.3 million and record adjusted cash income of $1.8 million in Q3 2024, but we also paid down $3 million on our BDC capital debt facility. Our profitable growth strategy and better company-wide cost management has now delivered four consecutive quarters of adjusted EBITDA margin of 20% or higher. This improved profitability provides Quorum the latitude to accelerate the pay down of our BDC capital facility, which has been reduced in 2024 from $9 million to the current balance of $4.5 million. Our improved cash flow also better positions us to consider other future capital or strategic investment opportunities. Maren will now review our Q3 2024 financial results in more detail, and I will follow up with some additional comments. After our prepared remarks, we will open the floor to your questions. Marilyn, please go ahead.

Thank you, Maury. Hello, everybody. Thank you for being here with us today. I would like to remind everyone that certain statements in this presentation are forward-looking in nature. These include statements involving known and unknown risks, uncertainties, and other factors outside of management control that cause actual results from those expressed in the forward-looking statements. Quorum is not assuming responsibility for the accuracy and completeness of the forward-looking statements and does not undertake any obligation 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 31st, 2023 on the cdarplus.ca website. As Maury mentioned, we are very excited about the stronger financial position we have achieved through our continued focus on both profitable growth and continued cost management. Our record level adjusted EBITDA in Q3 2024 increased by 15% to 2.3 million compared to 2 million in Q3 2023, representing an adjusted EBITDA margin expansion of 4% from 19% in Q3 2023 to 23% in Q3 2024. This was the fourth consecutive quarter in which we posted an adjusted EBITDA margin of 20% or higher. The increase in adjusted EBITDA is primarily attributable to our continued focus on cost management. Our record level adjusted cash income, or ACI, was $1.8 million in Q3 2024, compared to $1.3 million in Q3 2023, an increase of $0.5 million, or 39%. This represents an adjusted cash income margin expansion of 6%. from 12% in Q3 2023 to 18% in Q3 2024. Additional highlights of our Q3 2024 results as compared to Q3 2023 are as follows. Total revenue decreased 5% to 9.9 million compared to 10.4 million. SAS revenue was 7.2 million compared to 7.1 million, representing an increase of 2% The increase in SAS revenue as compared to the prior year was due to a combination of cross-selling and new customer revenue. BDC revenue was $2.5 million compared to $2.8 million, representing a decrease of 11%. However, BDC revenue has recovered in October 2024 and is comparable to BDC revenue in Q4 2023. Services and one-time revenue was $0.3 million compared to 0.6 million, representing a decrease of 54%. The decrease in services and one-time revenue as compared to the prior year was due to the wind down of the Windows 2022 upgrade project. Annual recurring revenue was 38.7 million compared to 39.3 million. This is comprised of annual recurring SAS revenue of 28.9 million compared to 28.3 million an annual recurring BDC revenue of $9.8 million compared to $11.1 million. Our monthly recurring revenue per customer, or MARPU, increased to $1,698 in Q3 2024 from $1,651 in Q3 2023, mainly due to our focus on cross-selling. Growth margin was $4.9 million, or 50% of revenue, compared to $4.9 million, or 47% of revenue. SAS gross margin increased slightly to 68% as compared to 67%. BDC gross margin also increased slightly to 21% as compared to 20%. As a result of our continued cost cutting efforts, our total operating expenses decreased by 17% to $4.2 million from $5 million. And net income increased by $1.1 million to $0.8 million. primarily due to an increase in adjusted EBITDA, as well as a decrease in financing costs and deferred income tax expense. As mentioned earlier, Quorum's improved profitability has provided us the latitude to accelerate the pay down of both principal and interest on our BDC capital loan facility through 2024. Subsequent to Q3 2024, on October 30th, Quorum made a prepayment of $0.5 million on our BDC capital loan facility. In prepaying $4.4 million in principal and interest through 2024 to date, our BDC capital loan facility has now been reduced from $9 million at the start of 2024 to $4.5 million today, resulting in $0.4 million in annual interest expense savings. With that, I'd like to pass it back to Maury.