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Quorum Information Technologies still has multiple years of growth
Posted by: Gerry Wimmer

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:

Author Ownership Disclosure: TSXV: QIS - Yes

Read Disclaimer:

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.



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Gerry: Thanks for small cap stock suggestions over the past 5-years. Your record is very impressive and your analysis has been excellent over the years. I think small investors (and fund managers) should pay much more attention to your work. I look forward reading your blog over the next 5-years!