Release Date: May 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Quorum Information Technologies Inc (TSXV:QIS) offers a comprehensive suite of 13 essential software solutions used by over 1,400 dealership customers across North America.

• The company has a significant cross-selling opportunity within its existing customer base, with a potential $54 million annual SaaS revenue opportunity.

• Quorum has implemented changes that will result in $1.3 million in annual savings, expected to be fully realized by Q3 2025.

• The company has reduced its total debt to cash EBITDA ratio to 1 time as of March 31, 2025, showing substantial progress from previous levels.

• Quorum is exploring strategic capital allocation options, including organic and inorganic growth opportunities, share repurchases, or dividend payments.

Negative Points

• SaaS revenue growth was modest, increasing by only 1% in Q1 2025 compared to the previous year.

• Overall gross margin decreased to 48% from 51%, with SaaS gross margin dropping from 68% to 66%.

• Adjusted EBITDA decreased by 29% to $1.5 million, with a margin decline from 21% to 15%.

• Cash EBITDA also saw a decline, decreasing by 27% to $1 million, with a margin reduction from 14% to 10%.

• External inflationary factors, key new hires, and annual merit-based increases contributed to decreased profitability.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with CNTMF.

Q: Can you elaborate on the factors contributing to the decrease in adjusted EBITDA margin? A: Marilyn Bown, Chief Financial Officer, explained that the 2% decrease in adjusted EBITDA margin was due to more conservative expensing of software development costs. The remaining 4% decrease was primarily due to a reduction in overall gross margin and increased research and development expenses, as well as general and administrative expenses, which were partially offset by a decrease in sales and marketing expenses.

Q: What strategies are being implemented to achieve the $1.3 million in annual savings? A: Maury Marks, President and CEO, stated that Quorum has implemented a gross margin improvement plan, office lease cost savings, third-party service provider savings, and other cost improvements. These changes are expected to be fully realized by Q3 2025.

Q: How is Quorum addressing the high demand for BDC services and related software? A: Maury Marks highlighted that Quorum is using AI to enhance outreach to dealership consumers, allowing BDC agents to focus on engaged consumers for service appointments and additional service sales. The company is also deploying other technologies to improve BDC agent efficiency.