Quorum Information Techs

Good day, and thank you for standing by. Welcome to the Quorum Information Technology's second quarter 2025 results. At this time, all participants are in listen-only mode. After the speaker's presentation, we'll open up for questions. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's call is being recorded. I would now like to hand it over to your speaker today, Maury Morks, President and CEO. Please go ahead.

Thank you, Victor. Hello, Rudy, and thank you for attending Quorum Information Technologies Q2 2025 Results Conference Call and Concurrent Webcast. Joining me is our Chief Financial Officer, Marilyn Bowne. 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. Looking to our Q2 2025 results, Quorum delivered a 3% increase in reoccurring revenue driven by a 1% increase in SaaS revenue and 11% increase in BDC revenue. This 11% growth in BDC revenue reflects strong demand for our service CRM and BDC offerings, particularly from new dealership customers. I am also happy to report that our adjusted EBITDA in Q2 2025 increased to 1.8 million or 18% of revenue from 1.5 million or 15% of revenue in Q1 2025. This was a result of the adjusted EBITDA improvement plan that we implemented in Q1 2025. Our adjusted EBITDA of 1.8 million in Q2 2025 was also comparable to Q2 2024's 2 million when accounting for the $0.2 million in software development costs that we chose to more conservatively expense versus capitalize this year. Comparatively, our cash EBITDA in Q2 2025 was $1.4 million versus $1.3 million in Q2 2024. The improvements in our adjusted EBITDA allowed us to pay down the full $0.9 million of our cash flow loan balance in Q2 2025, and that portion of the BDC capital loan is now fully repaid. Strengthening our balance sheet has been a key focus as we have reduced the BDC capital loan balance from $9.1 million at the end of 2023 to $2.8 million at the end of Q2 2025. We have also optimized our lease space in Q2 2025 by cancelling a lease for unused space in St. John's, New Brunswick, and by reallocating to a smaller office in Q3 2025 in St. John's, Newfoundland and Labrador. On our balance sheet, our lease asset decreased from $1.4 million at the end of Q4 2024 to $0.5 billion at the end of Q2 2025, while lease liabilities declined from $1.6 million to $0.4 million, reflecting our office space optimization efforts. At the end of Q2 2025, Quorum had $3.6 million in cash and cash equivalents and $4.2 million in net working capital. Marilyn will now review our Q2 2025 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, Maureen, and good day, everybody. Thank you for being here with us today. I would like to remind everyone that certain statements in this presentation are for 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&A dated December 31st, 2024 on the cdarplus.ca website. As Maureen mentioned, in Q2 2025, Quorum also expanded its top line revenue year over year, significantly improved its adjusted EBITDA and cash EBITDA quarter over quarter, and paid out the remaining balance of the cash flow loan portion of our BDC capital loan facility. Year over year, the second quarter of 2025, as compared to the second quarter of 2024, Total revenue increased by 3% to $10.3 million. SAS revenue increased by 1% to $7.3 million. BDC revenue increased by 11% to $2.7 million due to new customer revenue. SAS growth margin decreased to 65% from 67%, primarily due to an increase in third-party costs. BDC growth margin remained consistent at 20%, As Quorum continues to work on multiple initiatives to reduce the BDC cost structure, looking to quarter-over-quarter gross margin improvement, our BDC gross margin returned to 20% in Q2 2025 compared to 15% in Q1 2025 as we implemented our adjusted EBITDA improvement plan. Overall, gross margin increased to $5 million, or 49% of revenue, in Q2 2025 compared to 4.9 million or 50% in Q2 2024. Adjusted EBITDA decreased by 7% to 1.8 million or an 18% margin compared to 2 million or a 20% margin year over year, primarily because we expensed 0.2 million more software development costs in Q2 2025 versus Q2 2024, as Maury mentioned. Our adjusted EBITDA in Q2 2025 increased to $1.8 million or 18% of revenue from $1.5 million or 15% of revenue in Q1 2025. This was a result of the adjusted EBITDA improvement plan we implemented in Q1 2025, and Maury will talk about that later in the call. Comparatively, our cash EBITDA in Q2 2025 were $1.4 million versus $1.3 million in Q2 2024. In Q2 2025, Quorum prepaid $0.8 million in principal and interest on the cash flow loan portion of our BDC capital loan facility, which now has been fully repaid six months earlier than originally anticipated. and with the remaining mezzanine loan portion of the BDC capital loan facility standing at $2.8 million. As mentioned on our past few earnings calls, Quorum will continue to prepay 15% of the BDC capital mezzanine loan balance of $2.8 million as of June 30, 2025 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 June 30th, 2025, Quorum had net working capital of $4.2 million, cash and cash equivalents of $3.6 million, and total debt to cash EBITDA of 0.8 times compared to two times at June 30th, 2024. With that, I'd like to pass it back to Maureen.