TOP IDEAS: First quarter results unveil the
full financial contribution from Quorum Information Technologies’ (TSXV: QIS)
latest acquisitions. Stock is up 295%.
Investorfile's share price accumulation
target of $0.40 forQuorum Information Technologieswas reached on
August 17, 2015. For the record, we do not revise share price targets for our
Investorfile Top Ideas - Small Cap Value Stocks. We have positioned our blog to
be one of the first providers of a pragmatic perspective of a small cap company
stock's potential worth, where there may be uncovered value that has been
largely overlooked by the investment community.
We feel really positively about our Top Idea, Quorum Information
Technologies Inc. (TSXV: QIS – C$0.79), because of its strong start in 2019.
Quorum Information Technologies Inc. is a North American company focused on
developing, marketing, implementing and supporting its portfolio of software
and service solutions for automotive dealerships. The Company says its vision
is to build a single, integrated, end-to-end business process solution for
North American automotive dealerships that covers all of their
To deliver on this vision, Quorum says it has initiated a build,
resell and acquire strategy, which combines continued development of ITS
flagship XSellerator Dealer
Management System ("DMS”) product, partnering with complementary third-party
service providers to resell value-added services to Quorum’s existing customer
base, while acquiring strategic companies that provide innovative solutions
that augment the Company’s existing suite of product offerings.
We said Quorum Information Technologies Inc. has had a
strong start to this year. This was due to the full quarter financial
contributions from its recent acquisitions of Oasis Auto and Dealermine (both
of which were acquired Q4 of 2018), which was reported in its Q1 2019 report.
Of note, Investorfile highlighted the attributes of the Dealermine acquisition
in its last blog post on the Company (See: Quorum
Information Technologies has doubled in size and is expanding quickly into USA).
Compared to one year ago, Quorum has grown significantly by more than doubling its
customer base from 449 auto dealerships to 971 unique auto dealerships located
throughout Canada and the USA. As such,
the Company posted record total revenues in the first quarter of 2019 of C$7.3
million, which equates to an annual revenue run-rate of approximately C$30
important to note that 90% of the reported revenue by the Company is recurring
in nature from monthly Software-as-a-Service (SaaS) subscription fees and
long-term and evergreen contracts (Call Centres). This provides strong revenue
visibility for Quorum’s business operations going forward.
EBITDA was C$757 thousand in Q1 2019, which
equates to over 10% in EBITDA margins. Included in Q1 was significant trade
show cost associated with the annual National Automobile Dealers Association
convention. Because this expense does not reoccur in the remaining three
quarters of the year - coupled with the expected increase in operating leverage
and organic growth - EBITDA margins are poised to rise throughout the balance
of 2019, thus increasing Quorum’s profitably in the near-term.
We note that Quorum had drawn C$8.125
million from its available C$15 million debt facility to help finance its recent
acquisitions. With the predictability of the Company’s recurring revenue
streams and EBITDA expansion, the debt leverage is still reasonable.
Year-to-date, Quorum’s stock is up about 15%.
At Investorfile, we feel that momentum in the stock price will continue to
build based on the success of recent acquisitions, which are contributing significantly
to the financials. This is evident in revenue pick up and strong cash flow
generation in the Company’s Q1 results.
In less than one year, Quorum Information
Technologies has transformed itself into a much bigger Company with a very
strong recurring revenue base. This will continue to engage more institutional
investors and analysts to this story which should continue to have a positive
impact on valuation of the Company’s shares.
We began this blog post stating that we feel good
about this stock pick and we should, given the share price being up 295% since
Investorfile first recommended this Company as a small cap value investment
Quorum Information Technologies delivers value for auto dealerships and small
Quorum Information Technologies has
approximately 60.9 million shares outstanding.
Author Ownership Disclosure: TSXV: QIS - Yes
This article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.
Investorfile is not engaged in
an investor relations agreement with Quorum Information Technologies Inc. nor
has it received any compensation from Quorum Information Technologies Inc. for
the preparation or distribution of this article.
The author of this article has
acquired and may trade shares of Quorum Information Technologies Inc. through
open market transactions and for investment purposes only.