Quorum Information Technologies (TSXV:QIS), an automotive CRM and Salesforce tool, has seen its stock soar during the past year
SmallCapPower | February 26, 2020: Quorum Information Technologies (TSXV:QIS) is an information technology company that is focused on providing comprehensive enterprise and Salesforce solutions to the network of ~20,000 U.S. and ~2,500 Canadian automotive dealerships nationwide. The Company CRMs are in 1,020 unique dealerships in North American as of September 31, 2019, a 118% increase over September 2018.
Quorum Information Technologies’ flagship product is called XSellerator. XSellerator is a comprehensive customer management solution that automates and integrates all departments in an auto dealership, including sales, service, parts, and accounting. XSellerator does not just help dealerships manage their business but it also helps increase customer satisfaction (e.g., Communicator module) and drive incremental sales and service (e.g., M3/Vehicle Inspection (VIP) module) revenue. Quorum’s vision is to build a single, integrated, end-to-end business process solution for North American automotive dealerships that covers all of their business-critical processes.
Supported by all major OEMs. XSellerator has been integrated into most of the major OEMs in Canada, the U.S., or both, including GM (Chevrolet, Buick, GMC, and Cadillac brands), Fiat Chrysler (Chrysler, Dodge, Jeep, and Ram brands), Ford (Ford and Lincoln brands), Toyota (Toyota and Lexus brands), and the Renault Nissan Mitsubishi Alliance (Nissan, Infiniti, and Mitsubishi brands).
XSellerator helps dealerships find new revenue streams. Quorum’s XSellerator platform is a comprehensive solution that helps dealerships optimally manage their business, including helping employees generate new revenue opportunities that can help bolster the bottom line. Management estimates that the Company’s total addressable market is ~20,000 automotive dealerships in the U.S. and ~2,500 in Canada.
Quorum is growing both organically and through acquisitions. In 2019, Quorum Information Technologies acquired DealerMine, an automotive sales CRM. The acquisition added 920 dealerships to its platform, in addition to Advantage, which is a full showroom system for dealerships and a comprehensive operating system that includes accounting modules. From an organic perspective, QIS has been focused on adding new dealerships as well as increasing the penetration rate of key products/modules within its XSellerator DMS platform, including Communicator (77% at the end of Q3 FY18, up from 71% a year ago), M3 Vehicle Inspection Process (49% at the end of Q3 FY18, up from 43% a year ago), and Sales CRM (39% at the end of Q3 FY18, up from 28% a year ago).
Focused on recurring SaaS revenues with solid margins. Quorum’s focus on higher-margin recurring revenues is reflected in its SaaS-based revenue stream, which was 65% of total revenue in Q3 2019, or $5.55 million. This equates to a yearly run rate of $22.2 million. Third-quarter 2019 EBITDA margin was 17% and gross margin was 49%. Gross margins on the SaaS revenue stream before labour was 77%. Quorum’s Q3 2019 SaaS revenue-based monthly average recurring revenue per user (ARRPU) was $1,814 per customer.
Trades at the lower to mid range of its peer group. Quorum Information Technologies stock trades at an NTM EV/Sales multiple of 3.5x, compared with Canada ERP and CRM peers, which trades at an average EV/Sales multiple of 6.5x.
Shares of Quorum Information Technologies closed Tuesday’s trading session down 11% to C$1.37. Quorum has a market cap of C$98M.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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