Quorum Announces Q3 FY2017 Results

CALGARY, ALBERTA -- (Marketwired) -- 11/16/17 -- Quorum Information Technologies Inc.(TSX VENTURE: QIS), a leading provider of dealership and customer management software and value-added services to the automotive industry, released its 2017 third quarter results today.

Maury Marks, Quorum's President and CEO provided the following comments on the Company's Q3 FY2017 operational and financial results:

--  Recurring Software as a Service "SaaS" support revenue increased by 15%
    in Q3 FY2017 compared to Q3 FY2016 and represented 83% of Quorum's total
    revenue for Q3 FY2017. Increases in support revenue are driven by:

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Revenue Type                              Q3 2017        Q3 2016     Growth
----------------------------------------------------------------------------
Support revenue                     $   2,560,594  $   2,217,010         15%
Add-on revenue                            307,508        403,585        -24%
New installations revenue                 201,756        389,359        -48%
                                  ------------------------------------------
Core revenue subtotal                   3,069,858      3,009,954          2%
Transitions revenue                             -         49,169       -100%
                                  ------------------------------------------
Gross revenue                       $   3,069,858  $   3,059,123        0.4%
                                  ------------------------------------------
                                  ------------------------------------------

    --  Additional support revenue for new dealership rooftops (net of
        losses),
    --  Add-on revenue that includes a recurring support charge (for
        example; XSELLERATOR user licenses, eQUIP web training subscriptions
        and annual support price increases),
    --  Recurring support revenues from Quorum-developed products such as
        Communicator
    --  Recurring support revenues from sales of 3rd party products,
        especially those that are part of our integrated end-to-end business
        process strategy, and
    --  Consolidated recurring support revenue from the September 1, 2017
        acquisition of Autovance. Included in support revenue for Q3 FY2017
        is Autovance's September 2017 monthly support revenue of $26K for
        non-Quorum customers. Including charges to Quorum, Autovance's total
        support revenue for their 151 customers for September 2017 was $40K.
        Additionally, for comparative purposes, Quorum charged our 60
        customers that use Autovance $23K in support revenue for September
        2017.
--  To further explain, Quorum has always strategically focused on providing
    an integrated end-to-end business process for automotive dealerships.
    --  To fully realize on this strategy we have learned that we need to
        work with select 3rd party companies that share our integrated
        vision, that allow Quorum to be a reseller of their product and that
        add significant value to our customers. As examples, we previously
        announced partnerships with Autovance and Warranty Finder and
        recently announced a new partnership with AutoTextDriver. The
        partnership with Autovance and the integration of their web-based
        desking product was a very strategic fit for Quorum and our
        customers and that partnership ultimately led to the acquisition.
    --  From a dealership's perspective, dealers are paying for multiple,
        non-or-partially integrated solutions and if Quorum, with strategic
        partners, can deliver one integrated solution, it solves a
        significant problem for the dealer and improves their efficiency.
    --  From a shareholder's perspective, dealerships are already paying for
        these 3rd party products. If Quorum can deliver more value with
        truly integrated 3rd parties, with attractive reseller arrangements,
        Quorum can translate this into growth in our recurring revenue and
        margins.
--  Customer base - In Q3 FY2017 Quorum completed three new rooftop
    installations and had one rooftop loss. Quorum had a quarterly churn of
    0.3% and a trailing 12-month churn of 2.7%. The primary reason for
    losses continues to be from industry consolidation among dealer groups,
    where the new ownership group is already utilizing a competitor's
    software in its other dealerships. Our long-term plan is to have
    integration to all manufacturers where we become a viable option for
    virtually all dealer groups and, thus, become the beneficiary of such
    industry consolidation more often. Quorum ended the quarter with a total
    of 338 active installed dealership rooftops. New install revenue
    decreased by 48% because the three Q3 FY2017 installs were smaller in
    size as compared to the four Q3 FY2016 installs.
--  Sales Backlog - not all dealership rooftops sold in FY2017 were able to
    be installed by September 30, 2017 and Quorum has 18 sold dealership
    rooftops that plan to be installed in future quarters.
--  Total Addressable Market (TAM) - in order to increase our TAM, Quorum
    must complete multi-month projects with vehicle manufacturers (OEMs) to
    integrate to their systems. In 2017, we have worked with both Nissan to
    allow our system to be available to Nissan US dealerships and Ford to
    allow our system to be available to Ford US dealerships.
--  On-Site training accounts for 60% of our add-on revenue and the
    remainder of add-on revenue is a result of up-front charges for items
    like network options, XSELLERATOR user licenses, and integrated 3rd
    party products. Add-on revenue decreased because we conducted fewer on-
    site training visits in Q3 FY2017 compared to Q3 FY2016. Training is key
    to Quorum's success because it drives increased Dealership Success
    Scorecard metrics, results in increased customer satisfaction and
    reference-ability of our customers. For Q3 FY2017 we:
    --  Continued to experience delays or rule changes for specific
        provinces for the Canada Job Grant, resulting in dealerships putting
        their training plans on hold pending their Canada Job Grant
        approval. For Q4 FY2017, we have adjusted our quoting process and
        reset customer expectations to match the status of the province
        which should result in increased future training visits.
    --  Completed the on-site setup and training for five GM US pilot
        dealerships under the GM DTAP Service Lane program. Under this
        program the dealerships recover their training costs through the GM
        co-op funds. The dealerships also receive significant monthly
        incentives for utilizing Quorum's "Platinum" level certified
        inspection and quoting tools under the DTAP Service Lane program.
        This is an exciting opportunity because once final approval is
        received by GM, Quorum's "Platinum" certified tools and GM's
        financial incentives should drive significant training and support
        revenue.
--  Customer Satisfaction metrics are as follows:
    --  Each year we conduct Customer Satisfaction Index ("CSI") surveys.
        The results of our Q3 FY2017 survey compared to our Q1 FY2017 survey
        showed strong customer satisfaction as follows:
        --  Q3 FY2017 reported 86% of dealer principals as "satisfied" or
            "very satisfied" and 96% of end users as "somewhat satisfied",
            "satisfied" or "very satisfied" overall.
        --  Q1 FY2017 reported 85% of dealer principals as "satisfied" or
            "very satisfied" and 98% of end users as "somewhat satisfied",
            "satisfied" or "very satisfied" overall.
    --  Our monthly Support Center CSI survey continues to report
        approximately 95% "very satisfied" with the service received from
        our support team.
--  Dealership Utilization - Quorum continues to enhance Communicator, VIP
    and Sales CRM and we track key dealership utilization metrics related to
    these areas in a Dealership Success Scorecard below. Getting our
    dealerships to utilize these areas increases Add-on revenue, customer
    satisfaction and reference-ability of our customers.

Dealership Success Scorecard(1)

----------------------------------------------------------------------------
           Communicator - Dealerships utilizing Communicator: 240
                      Messages in Q3 FY2017: 2,622,916
               Year over year quarterly message growth: 159%

               M3 (VIP only) - Dealerships utilizing VIP: 145
        Total Q3 FY2017 incremental Customer Pay revenue: $27,361,117
              Q3 FY2017 average dealer monthly revenue $62,899
                Year over year quarterly revenue growth: 56%

                    Sales CRM - Dealerships trained: 95
               Average Q3 FY2017 utilization of Sales CRM 66%
 Total # of dealerships that have moved away from 3rd party CRM systems: 22
----------------------------------------------------------------------------

Areas of the Dealer Scorecard

    --  Communicator features text, email and instant message functionality
        that is integrated into the XSELLERATOR workflow.
    --  Make More Money ("M3") is an initiative which focuses on ten
        XSELLERATOR processes that drive incremental revenue into our
        dealership customers' operations. Aggregate data from the Vehicle
        Inspection Process ("VIP"), which is just one of the ten M3
        processes, is shown above.
    --  Sales CRM - Quorum continues to make significant enhancements to
        sales Customer Relationship Management (CRM) features within
        XSELLERATOR.
--  Employees - none of the Company's accomplishments are possible without
    highly motivated, engaged people. Our sincere thanks to the people that
    drive Quorum. Every year we measure our staff engagement and we actively
    work towards improving our job satisfaction and engagement throughout
    the Company.

Other key financial results highlights for Q3 FY2017 are as follows:

--  Gross revenue increased to $3,070K in Q3 FY2017 from $3,059K in Q3
    FY2016.
--  Gross margin decreased to $1,462K in Q3 FY2017 from $1,586K in Q3
    FY2016. Gross margin as a percentage of gross revenue decreased to 48%
    from 52% due to increased staff levels that were underutilized during
    the quarter because there were fewer new installations and fewer
    training visits than planned.
--  Earnings before interest, taxes, depreciation, amortization, stock-based
    compensation and foreign exchange (EBITDA) decreased to $478K in Q3
    FY2017 from $582K in Q3 FY2016. The decrease was mainly due to an
    increase in cost of goods sold and general and administrative expenses,
    offset by a decrease in indirect salaries and benefits expense.
--  Income before deferred income tax expense was $175K in Q3 FY2017
    compared to $224K in Q3 FY2016.
--  Including cash of $4,268K, total net working capital at September 30,
    2017 was $4,989K with a current ratio of 4.76, compared to $5,622K at
    December 31, 2016, with a current ratio of 5.42, a decrease of $633K.
    The decrease is largely due to the $875K in cash consideration paid for
    the acquisition of Autovance (for more information on the Autovance
    transaction please see Note 3 to the financial statements).

Quorum has seen sixteen consecutive quarters of revenue growth (over the prior year quarters). In this quarter we had smaller growth, however, the fundamentals behind future revenue growth are still very strong as follows:

--  Our SaaS based recurring revenue continued to grow, and by an impressive
    15% in Q3 2017 year over year.
--  Our pipeline has 18 sold rooftops that will be installed in future
    quarters.
--  Our dealership 12 month churn is low at 2.7% and the primary reason for
    any churn is industry consolidation.
--  We continue to sign new 3rd party partnership deals and dealers continue
    to utilize more of our existing 3rd party partners.
--  The Dealer Success Scorecard continues to show improving results, which
    indicates higher utilization of critical areas of XSELLERATOR by our
    customers.
--  Dealership customers' satisfaction remains high.
--  We continue to increase our total addressable market with new OEM
    integration planned in the US with both Nissan and Ford and with
    continue certifications for added integration like our GM "Platinum"
    Service Lane certification for our VIP and quoting process.

Quorum has filed its Q3 2017 consolidated financial statements and notes thereto as at and for the period ended September 30, 2017 and accompanying management's discussion and analysis in accordance with National Instrument 51-102 - Continuous Disclosure Obligations adopted by the Canadian securities regulatory authorities. Additional information about Quorum will be available on Quorum's SEDAR profile at www.sedar.com and Quorum's website at www.QuorumDMS.com.

Financial Highlights

                              Nine
                            Months           Nine
                             Ended          Months     Q3 Ended     Q3 Ended
                           Sept 30,         Ended      Sept 30,     Sept 30,
                               2017  Sept 30, 2016         2017         2016
----------------------------------------------------------------------------

Gross revenue           $ 9,529,547  $   9,050,725  $ 3,069,858  $ 3,059,123

Direct costs              4,681,630      4,343,503    1,608,228    1,473,501

Gross margin              4,847,917      4,707,222    1,461,630    1,585,622

Earnings before
 interest, taxes,
 depreciation and
 amortization (EBITDA)    1,400,783      1,527,806      477,667      582,013

Income before deferred
 income tax expense         510,690        655,540      175,068      224,484

Net income                  408,633        363,069       99,780       60,140

Comprehensive income        302,636        288,091       52,768      101,620

Basic income per share  $    0.0079  $      0.0071  $    0.0019  $    0.0012

Fully diluted income per
 share                  $    0.0079  $      0.0071  $    0.0019  $    0.0012

Weighted average number
 of common shares
Basic                    52,045,594     51,454,611   52,045,594   51,454,611
Diluted                  52,045,594     51,454,611   52,045,594   51,454,611

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                             Q2 Ended     Q2 Ended     Q1 Ended     Q1 Ended
                             June 30,     June 30,    March 31,    March 31,
                                 2017         2016         2017         2016
----------------------------------------------------------------------------

Gross revenue             $ 3,187,702  $ 3,044,403  $ 3,271,987  $ 2,947,199

Direct costs                1,505,301    1,436,926    1,568,101    1,433,076

Gross margin                1,682,401    1,607,477    1,703,886    1,514,123

Earnings before
 interest, taxes,
 depreciation and
 amortization (EBITDA)        553,847      435,999      369,269      509,794

Income before deferred
 income tax expense           258,829      179,963       76,793      251,093

Net income                    266,212      174,234       42,641      128,695

Comprehensive income          217,681      178,649       32,187        7,822

Basic income per share    $    0.0051  $    0.0034  $    0.0008  $    0.0025

Fully diluted income per
 share                    $    0.0051  $    0.0034  $    0.0008  $    0.0025

Weighted average number
 of common shares
Basic                      52,045,594   51,296,294   52,045,594   51,296,294
Diluted                    52,045,594   51,296,294   52,045,594   51,296,294

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A conference call has been scheduled for Friday, November 17, 2017,
beginning at 8:00 a.m. MT (10:00 a.m. ET). Anyone wishing to participate in
the call is asked to dial-in using the following numbers and ask for the
Quorum Information Technologies Inc. Third Quarter 2017 Results Conference
Call.

          Local:                        1 (403) 451-9838

          Toll-Free North America:      1 (888) 231-8191

About Quorum

Quorum is a North American company focused on developing, marketing, implementing and supporting its automotive dealership and customer management system, XSELLERATOR. Quorum offers the system to franchised, independent and some non-automotive dealerships in Canada and the United States. XSELLERATOR automates, integrates and streamlines every process across departments in a dealership. The system includes tools designed to maximize revenue opportunities for dealerships such as Customer Relationship Management and service inspection and quoting processes. Quorum is a Microsoft partner and XSELLERATOR is developed with modern mobile-enabled technology. Quorum Information Technologies Inc. is traded on the Toronto Venture Exchange (TSX VENTURE) under the symbol QIS and in 2016 was selected to the TSX Venture 50®, an annual ranking of the strongest performing companies on the TSX Venture Exchange. For additional information please go to www.QuorumDMS.com.

Forward-Looking Information

This press release contains certain forward-looking statements and forward-looking information ("forward-looking information") within the meaning of applicable Canadian securities laws. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this press release includes forward-looking information relating to results of operations, plans and objectives, projected costs and business strategy. Quorum believes the expectations reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.

Forward-looking information is not a guarantee of future performance and involves a number of risks and uncertainties some of which are described herein. Such forward-looking information necessarily involves known and unknown risks and uncertainties, which may cause Quorum's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking information. These risks and uncertainties include but are not limited to the risks identified in Quorum's Management's Discussion and Analysis for the period ended September 30, 2017. Any forward-looking information is made as of the date hereof and, except as required by law, Quorum assumes no obligation to publicly update or revise such information to reflect new information, subsequent or otherwise.

Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) has reviewed this release and neither accepts responsibility for the adequacy or accuracy of this release.

(1) The numbers and dollar figures included in the Dealership Success Scorecard are based on dealership results.

Contacts:
Quorum Information Technologies Inc.
Maury Marks
403-777-0036
[email protected]

Source: Quorum Information Technologies Inc.

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