Progress

Recommendations

Info

Quorum Information Technologies Inc. Income Summary For Q3 FY2005, revenues from operations were $1.01 million compared to $0.91 million for Q3 FY2004, an increase of $0.10 million or 11%. For the nine months ended September 30, 2005, revenues from operations were $4.35 million compared to $3.13 million for the nine months ended September 30, 2004, an increase of $1.22 million or 39%. The net loss from operations (EBITDA) for Q3 FY2005 was $(809,442) or $(0.030) per share compared to $(215,306) or $(0.009) per share for Q3 FY2004. The net loss from operations (EBITDA) for the nine months ended September 30, 2005 was $(1,573,554) or $(0.058) per share compared to $(416,324) or $(0.018) per share for the nine months ended September 30, 2004. The net loss for Q3 FY2005 was $(617,377) or $(0.023) per share, compared to a net loss of $(325,199) or $(0.014) for Q3 FY2004. The net loss for the nine months ended September 30, 2005 was $(1,217,216) or $(0.045) per share, compared to a net loss of $(518,600) or $(0.022) for the nine months ended September 30, 2004. Detailed discussion on Operating Results for the Periods Ended September 30, 2005 and September 30, 2004 Revenue and Gross Margin Analysis Nine Nine Q3 Q3 Q2 Q2 Q1 Q1 months months ended ended ended ended ended ended ended ended September September June June March March September September 30, 2005 30, 2004 30, 2005 30, 2004 31, 2005 31, 2004 30, 2005 30, 2004 Gross revenue $4,349,662 $3,129,314 $1,006,734 $ 906,604 $1,904,141 $1,227,630 $1,438,787 $ 995,079 Cost of products and services sold 3,805,265 2,139,076 1,073,524 681,191 1,489,817 840,770 1,241,924 617,114 Gross margin $ 544,397 $ 990,238 $ (66,790) $ 225,413 $ 414,324 $ 386,860 $ 96,863 $ 377,965 Gross margin % 13% 32% — 25% 22% 32% 14% 38% KEY MANAGEMENT METRICS XSELLERATOR Installations – in the period 17 17 3 5 10 7 4 5 XSELLERATOR Installations – to date 133 108 133 108 130 103 120 96 Project Revenue $1,806,389 $2,251,822 $ 186,380 $ 593,550 $1,127,430 $ 940,228 $ 492,579 $ 718,043 Support Revenue 1,266,686 877,492 493,256 313,054 406,604 287,402 366,826 277,036 Palm Project Revenue 1,276,587 — 327,098 — 370,107 — 579,382 — Gross Revenue $4,349,662 $3,129,314 $1,006,734 $ 906,604 $1,904,141 $1,227,630 $1,438,787 $ 995,079 Revenue For Q3 FY2005, revenues from operations were $1.01 million compared to $0.91 million for Q3 FY2004, an increase of $0.24 million or 11%. XSELLERATOR revenue is made up of two main components: • Project Revenue, which is revenue associated with the initial sale and installation of the software and; • Support Revenue, which is revenue associated with the on-going maintenance and support of the software and network infrastructure for the customer. The three main sub-components of Project Revenue include: • DISTRIBUTOR, the hardware and network solution; since XSELLERATOR is a Windows- based product run on a server based computing model, new customers must upgrade their existing computer hardware and infrastructure to a more modern platform; • Software licenses for XSELLERATOR which are sold per seat; and • Implementation revenue related to training and taking the new customer “live” on the system. 4
The Support Revenue is the recurring annuity income stream from existing customers to support and maintain the software on-site, and the free upgrades that provide new and enhanced functionality to the software. Consistent with the Corporation’s revenue recognition policy, XSELLERATOR Project Revenues are recognized in the period that the DISTRIBUTOR server and the XSELLERATOR software is installed at the customer’s site, regardless of when the customer intends to ‘go live’ with the XSELLERATOR software. The Support Revenue is recognized in the period that the support service has been delivered to the customer. For Q3 FY2005, Project Revenues decreased to $0.19 million, compared to $0.59 million for Q3 FY2004. Three new customers were added in Q3 FY2005 compared to five in Q3 FY2004. As well, project revenues on a per new customer added basis decreased in Q3 FY2005 as the three dealerships added in Q3 FY2005 were smaller stores with less users than the five stores added in Q3 FY2004. The Corporation expects installs in Q4 FY2005 to improve in both number and in size of dealership, and Q3 FY2005 is not reflective of management’s expectations going forward. For Q3 FY2005, Support Revenues increased by 58% to $0.49 million, compared to $0.31 million in Q3 FY2004. As more and more customers are added, this annuity stream will continue to grow. Further, now that XSELLERATOR is a more established product in the marketplace, and as the third largest supplier of DMS software to General Motors (GM) dealers in Canada, Quorum will have the ability to charge increased market rates for on-going monthly support fees. During FY2004 the Corporation achieved its first sales of XSELLERATOR in the United States and has grown to twelve U.S. customers at September 30, 2005. As of the date of this report two additional dealerships in the United States have signed up to purchase XSELLERATOR. The U.S. market place has many more customers than there are in Canada. Further, based on the Corporation’s market research to date, the pricing environment is more robust in the U.S., and the Corporation believes it can achieve higher margins on sales to this market. As well, with certification by GM U.S. achieved in Q1 FY2005, the Corporation should be able to increase the number of sales to U.S. based dealerships and to garner more robust support revenues in its U.S. sales going forward. In FY2004 the Corporation rolled out its Dealer Services line of business, which is responsible for all after-market sales to existing customers including new service products such as business process consulting, sales consulting, specific training programs, and many web-based training seminars and new hardware products such as thin clients, printers, monitors and other items dealerships require. In Q3 FY2005 Dealer Services generated consulting and training revenues of $13,004 (Q3 FY2004 – $nil), and this revenue is included in the Project Revenue total discussed above. With a more focused effort on the after-sales market, the Corporation expects to expand its revenue base associated with Dealer Services. In Q1 FY2005 the Corporation entered into a one year agreement with Maritz Inc., a privately held U.S. based company, to deliver and provide support for Handheld Personal Digital Assistant Sales Technology to the approximately 390 U.S. Cadillac dealerships participating in the General Motors Standards for Excellence Process (GM SFE). Maritz Inc. has been involved in the GM SFE program for over ten years. In Q3 FY2005, Quorum realized gross revenue of $0.327 million with respect to this program, and has realized $1.277 million to date in FY2005. Cost of Products and Services Sold and Gross Margin For Q3 FY2005, gross margin decreased to $(0.67) million compared to $0.23 million for Q3 FY2004. The negative gross margin in Q3 FY2005 is due to the following factors: 1) additional implementation and support staff being hired in anticipation of growth opportunities, resulting in increased labour costs included in Cost of Products and Services Sold of $0.618 million in Q3 FY2005 versus $0.403 million in Q3 FY2004. Quorum is staffed to provide installation capabilities of up to five installs per month or fifteen per quarter; 2) a reduction in actual installs to only three in Q3 FY2005; and 3) Quorum has shifted its focus in the sales cycle of XSELLERATOR to try and maximize the amounts achieved in on-going Support Revenue or the annuity portion, versus the amount achieved in the one-time Project Revenue portion during the sale. Project Revenue included in Q3 FY2005 was only $0.186 million compared to $0.594 million in Q3 FY2004. This pricing strategy is more in-line with the competitors in our industry, and as well will result in higher profit margins in the future for the Corporation. 5
Page 1 and 2: 2 0 0 5 Expansion 3rd Quarter Repor
Page 3 and 4: Financial Highlights Nine Nine Q3 Q
Page 5: Management’s Discussion and Analy
Page 9 and 10: Capitalization & Amortization Durin
Page 11 and 12: Net Income and Earnings per Share Q
Page 13 and 14: Unaudited Interim Consolidated Fina
Page 15 and 16: Unaudited - Interim Consolidated St
Page 17 and 18: 4. Share Capital (a) Authorized Unl
Page 19 and 20: Corporate Information Board of Dire

Progress

Create successful ePaper yourself

Delete template?

Save as template?