 TOP IDEAS: Stock is up 50% as more and more auto dealerships convert to Quorum
Information Technologies' (TSXV: QIS) software offerings.
2014 was a good year for Quorum
Information Technologies Inc. (TSXV: QIS - $0.30). Revenues were up 15% to
$9.21 million, EBITDA grew 18% to $1.47 million and cash flow from operations
doubled to $1.84 million.
What’s to expect over the next
few years? The continuation of double-digit revenue growth as the Company
seizes new market opportunities.
Quorum Information Technologies automates
integrates and streamlines every department in an auto dealership with its
advanced Dealership & Customer Relationship Management System (DMS)
software products - XSELLERATOR™. Quorum's software offering goes well beyond
traditional DMS systems because it has integrated customer relationship
management (CRM) tools, measurable processes that can help auto dealerships
generate more service revenue.
Today about 295 General Motors, Toyota, Chrysler, Subaru, Hyundai, KIA, Nissan, NAPA and Bumper to Bumper dealerships throughout Canada and USA utilize
the Company’s XSELLERATOR™ software products. Once installed Quorum earns
recurring software support revenues (80% of total) plus additional revenues for
software integration and training.
Last year
the Company had reached a critical mass of auto dealerships that used its
software leading to Quorum’s improved operating efficiencies and increase in
profitability. This was largely due to the Company’s strategic partnership with
General Motors (GM) which promotes the XSELLERATOR DMS to all GM dealerships in
Canada.
Quorum is now one of the largest DMS providers for GM's Canadian dealerships
with 25% of the market and growing.
But GM
dealerships are not the only growth opportunity for Quorum.
In
January of this year Quorum announced that it completed
the successful software conversion to XSELLERATOR for its first Toyota dealership in Canada. Since then the Company has
begun the software conversion and training for several other Toyota dealerships. There are about 285 Toyota dealerships across Canada.
Beyond Toyota, another
market opportunity has emerged. A Quorum competitor will be exiting the
Canadian marketplace by 2016. As a result, about 125 Ford auto dealerships will
need to replace their DMS software, which will no longer be supported in Canada. Conversion
to XSELLERATOR software is a viable option.
Given the
market opportunities at GM, Toyota
and Ford dealerships, Quorum is positioned for multiple years of growth.
Since we
first profiled Quorum’s stock as one our Top Ideas in June of 2014 at $0.20 (See: Quorum Information Technologies delivers value for
auto dealerships and small cap investors), the stock trades about
50% higher in value. Given the Company’s financial progress, we still believe
the stock should be accumulated up to a price of $0.40 per share. That said, it
is our view that the stock price will likely eclipse our target over the longer
term.
As of December 31, 2014 cash
holdings at Quorum have increased to $1.72 million. The Company has very little
debt.
The Company has approximately 41.5 million
shares outstanding.
Quorum Information Technologies website: www.quorumdms.com
Author Ownership Disclosure: TSXV: QIS - Yes
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