Quorum Information Techs

Good day and thank you for standing by. Welcome to the Quorum Information Technologies fourth quarter and year-end 2024 results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during a session, you need to press star 101 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 101 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Maury Marks, President and CEO. Please go ahead.

Thank you, Victor. Hello, everybody, and thank you for attending Quorum Information Technologies Q4 and year-end 2024 Results Conference Call on Concurrent Webcast. Joining me is our Chief Financial Officer, Marilyn Baum. Quorum offers innovative and robust technology solutions and services to vehicle dealerships and original equipment manufacturers, or OEMs, across North America. Quorum has a uniquely integrated product suite of 13 essential software solutions that are used in whole or in part by over 1400 dealership customers across North America. At least one of Quorum's software solutions is installed in 40% of the franchise automotive dealerships in Canada. Offering 13 of the 25 most common categories of software solutions that automotive dealerships utilize, 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 Quorum has a $54 million annual SAS revenue cross-selling opportunity within our existing customer base, which is approximately two times our 2024 SAS revenue of $28.8 million. We are very pleased to present to you Today are 2024 Q4 and year-end results. As many of you know, Quorum commenced a profitable growth strategy in 2023, and we have delivered material improvements in our adjusted EBITDA and cash EBITDA margins. Our cash EBITDA was $5.5 million in 2024, an increase of 89% over 2023, and our adjusted EBITDA was $8.3 million, an increase of 18% over the prior year. We've also strengthened our balance sheet through significant repayments on our BDC capital loan facility. In 2024, we paid $5.1 million, reducing the balance from $9.1 million to $4 million at the end of 2024. Our improved profitability has not only allowed us to reduce our debt, but it also positions us to consider future strategic capital allocation opportunities. Merrill will now review our Q4 and year-end 2024 financial results in more detail, and I will follow up with some additional comments. After our prepared remarks, we'll 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 could cause actual results to differ materially from those expressed in the forward-looking statements. The form is not assuming responsibility for the accuracy and completeness of the four looking statements and does not undertake any obligation to publicly revise these four looking statements to reflect subsequent events or circumstances. For additional information on possible risks, please refer to our annual MD&A, dated December 31st, 2024, on the CDERplus.ca website. As Maureen mentioned, throughout 2023 and 2024, Quorum improved its financial position by focusing on profitable growth through cost management and a focus on cross-selling Quorum products to existing customers. The company is no longer reporting rooftop counts and reoccurring revenue per rooftop as these metrics became less relevant over time. Acquisitions of value-added but low price point solutions resulted in high rooftop counts and an average recurring revenue per rooftop, which was not representative of the underlying customer base. However, for this quarter only, we will disclose our rooftop count, which was 1,412, a decrease of six rooftops or 0.004% from Q3 2024. We are also introducing a new financial metric, cash EBITDA, which we defined as adjusted EBITDA, less stock-based compensation, one-time acquisition-related expense, repayment of lease liability, purchase of property and equipment, and software development costs, which reflects how much cash we are generating. With that, I'd like to review our Q4 2024 results, followed by a review of our full-year 2024 results. In the fourth quarter of 2024, as compared to the fourth quarter of 2023, total revenue increased by 1% to $10 million. SAS revenue increased by 2% to $7.2 million. The increase in SAS revenue is due to a combination of cross-selling and new customer revenue. BDC revenue decreased by 1% to $2.6 million. BDC revenue in Q4 2024, however, was the highest quarter of BDC revenue in 2024. SAS growth margin remained consistent at 67%. BDC growth margin of 17% decreased by five points from 22%. The decrease in BDC growth margin is primarily due to new hires that are less productive through their training period. Forum continues to work on multiple initiatives to reduce the BDC cost structure. Overall growth margin remained consistent at 4.8 million or 48% compared to 4.8 million or 49%. Adjusted EBITDA decreased by 5% to $2 million or a 20% margin compared to $2.1 million, a 21% margin. The year-over-year decrease for adjusted EBITDA is primarily due to the decrease in BDC growth margin. Cash EBITDA increased by 10% to $1.2 million or a 12% margin compared to $1.1 million or an 11% margin. For the full year, 2024, as compared to the full year, 2023, total revenue decreased by 1% to $40 million due to a decrease of $0.9 million in BDC revenue offset by an increase of $0.6 million in SAS revenue. SAS revenue increased by 2% to $28.8 million and was 72% of revenue for 2024 as compared to 70% for 2023. BDC revenue decreased by 8% to $10 million and was 25% of revenue for 2024 as compared to 27% in 2023. The decrease, as mentioned earlier, was primarily due to SAF constraints. Growth margin increased by 3% to $19.8 million, primarily due to an increase in SAF revenue as well as operational efficiencies for the SAF and BDC cost structures as compared to 2023. Adjusted EBITDA increased by 18% to $8.3 million due to an increase in growth margin, a decrease in research and development expenses, sales and marketing expenses, and general administrative expenses. Adjusted EBITDA margin increased by 4 points to 21% from 17%. Cash EBITDA increased by 89% to $5.5 million due to the adjusted EBITDA improvements mentioned and lower software development costs. Cash EBITDA margin doubled from 7% to 14%. As Maureen mentioned, in 2024, Quorum also paid down $5.1 million against its BDC capital loan facility, compared with $1.6 million paid down in 2023. This has reduced our BDC capital loan facility to $4 million at year-end 2024 from $9.1 million at year-end 2023. Quorum plans to pay down the BDC Capital cash flow loan balance of $1.2 million as of December 31, 2024, in full by the end of 2025. And we will continue to prepay 15% of the BDC Capital mezzanine loan balance of $2.8 million at December 31, 2024, on an annual basis until maturity in August 2027. that paying more than 15% on an annual basis would result in significant penalties to Quorum. As of December 31st, 2024, Quorum had a net working capital of 3.2 million and cash and cash equivalents of 2.2 million and total debt to cash EBITDA of one time compared to 3.7 times at December 31st, 2023 and 6.4 times at December 31st, 2022. With that, I'd like to pass it back to Maury.