Quorum Information Techs

ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Maury Marks, President and CEO. Please go ahead, sir.

Thank you, Jonathan. Hello, everybody, and thank you for attending Quorum Information Technologies Q1 2025 Results Conference Call and Concurrent Webinar. 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. With a uniquely integrated product suite of 13 essential software solutions that are used in whole or in part by over 1,400 dealership customers across North America, there is at least one Quorum software solution 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 software solutions for the remaining 12 categories. With many of Quorum's customers leveraging only one solution out of our 13 available solutions, Quorum has a $54 million annual SaaS revenue cross-selling opportunity within its existing customer base. which is approximately two times our reoccurring annual SAS revenue of $28.9 million based on Q1 2025 results. Looking to our Q1 2025 results, while Quorum continued with its profitable growth strategy, our SAS revenue increased by 1% and BDC revenue increased by 4%. We are experiencing demand in the market for our service CRM and BDC services as dealerships look to improve their service in part or fixed operations results as vehicle tariffs and possibly recessionary headwinds may impact vehicle sales. Quorum also reported adjusted EBITDA margin of 15% in Q1 2025 and a cash EBITDA margin of 10%. For comparative purposes to Q1 2024, 2% of the adjusted EBITDA decreases due to our decision to more conservatively expense versus capitalize more software development costs. Marilyn will talk more about both our adjusted EBITDA and cash EBITDA margins. What I want to discuss is that Quorum has already implemented changes that will result in $1.3 million in annual savings that will be fully realized in Q3 2025, including, number one, a gross margin improvement plan, number two, office lease cost savings, number three, third-party service provider savings, and number four, other cost improvements. Marilyn will now review our Q1 2025 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, and 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. 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&E dated December 31st, 2024 on the CDARplus.ca website. As Maury mentioned, during Q1 2025, while Quorum continued with its profitable growth strategy and company-wide cost management, our profitability decreased mainly due to external inflationary factors, the expense of a key new hire, and annual merit-based increases. While we continued to make prepayments on our BDC capital loan facility. In the first quarter of 2025, as compared to the first quarter of 2024, total revenue increased by 1% to $10.2 million. SAS revenue increased by 1% to $7.2 million. The increase in SAS revenue is due to a combination of price increases, cross-selling, and new customer revenue. BDC revenue increased by 4% to $2.6 million due to new customer revenue. SAS gross margin decreased to 66% from 68%, primarily due to an increase in third-party costs. BDC gross margin decreased to 15% from 20%, primarily due to the buildup of staffing resources required to meet anticipated new customer revenue demand. Overall, gross margin decreased to 4.8 million, or 48%, compared to 5.1 million, or 51%. Adjusted EBITDA decreased by 29% to $1.5 million, or a 15% margin, compared to $2.1 million, or a 21% margin. As Maury mentioned, 2% of the adjusted EBITDA margin decrease is due to expensing more software development costs. The remaining 4% year-over-year decrease for adjusted EBITDA margin is primarily attributable to a decrease in overall gross margin and increases in research and development expenses and general and administrative expenses, offset by a decrease in sales and marketing expenses. Cash EBITDA decreased by 27% to $1 million, or a 10% margin, compared to $1.4 million, or a 14% margin. In Q1 2025, Quorum paid down $0.3 million against its BDC capital loan facility, which included 0.1 million of required principal payments, compared with 0.9 million paid down in Q1 2024. This has further reduced our BDC capital loan facility to 3.7 million at quarter end Q1 2025, from 4 million at year end 2024. Subsequent to the end of the quarter, Quorum made another prepayment of 0.5 million on the BDC capital loan facility on May 8, As mentioned on our last quarter earnings call, Quorum plans to pay down the BDC Capital cash flow loan balance of $0.9 million as of March 31, 2025, in full by the end of 2025, and will continue to prepay 15% of the BDC Capital mezzanine loan balance of $2.8 million at March 31, 2025, on an annual basis until maturity in August Note that paying more than 15% on an annual basis would result in significant penalties to Quorum. As of March 31st, 2025, Quorum had net working capital of $3.7 million, cash and cash equivalents of $3.7 million, and total debt to cash EBITDA of one time, compared to 2.5 times at March 31st, 2024. With that, I'd like to pass it back to Morrie.