Mr. Maury Marks reports

QUORUM RELEASES Q1 FISCAL YEAR 2016 RESULTS

Quorum Information Technologies Inc. has released its first-quarter fiscal-year 2016 results.

Maury Marks, Quorum's president and chief executive officer, made the following remarks about the company's first-quarter fiscal 2016 operational and financial results.

Operational highlights for Q1 fiscal 2016 are as follows:

• In January, 2016, Quorum completed the successful software conversion for its first Ford dealership. This strategic client for Quorum represents an entry into a new market segment.
• Quorum continues to enhance three important areas of its software, and it tracks key dealership utilization metrics related to these areas in a dealership success scorecard:
  • Communicator features text, e-mail and instant message functionality that is integrated into the XSellerator workflow. Aggregate data on Communicator's recent usage are shown in the associated table.
  • Make More Money (M3) is an initiative that focuses on 10 XSellerator processes that drive incremental revenue into the company's dealership customers' operations. Aggregate data from the vehicle inspection process (VIP), which is just one of the 10 M3 processes, are shown in the associated table.
  • Sales CRM (customer relationship management) -- Quorum continues to make significant enhancements to sales CRM features within XSellerator. Additional usage statistics will be included to the dealership success scorecard later in 2016.

Dealership success scorecard (1):

Communicator:

Dealerships utilizing Communicator:  189

Messages in Q1 fiscal 2016:  911,080

Year-over-year message growth:  47 per cent

M3 (VIP only):

Dealerships utilizing VIP:  90

Total Q1 fiscal 2016 incremental customer pay revenue:  $13,703,401

Year-over-year revenue growth:  46 per cent

Sales CRM:

Dealerships trained:  33

Total number of dealerships that have moved away from third party CRM systems:  10

Key customer metrics are as follows:

• Customer Satisfaction Index (CSI) semi-annual survey in Q1 fiscal 2016 showed an average of 100 per cent of dealer principals as satisfied or very satisfied, and an average of 88 per cent of end-users as satisfied or very satisfied over all. An additional 11 per cent of end-users reported somewhat satisfied. The company's survey in Q1 fiscal 2015 reported an average of 81 per cent of dealer principals as satisfied or very satisfied, and an average of 94 per cent of end-users as satisfied or very satisfied over all.
• The company's monthly support centre CSI survey continues to report an average of approximately 95 per cent very satisfied with the service received from the company's support team.

Financial highlights for Q1 fiscal 2016 are as follows:

• Sales increased by 21 per cent to $2,947,000 in Q1 fiscal 2016 from $2.43-million in Q1 fiscal 2015. The increase in sales is due to:
  • An increase of $225,000 in recurring support revenue as a result of having more active dealership rooftops at the end of Q1 fiscal 2016 compared with the end of Q1 fiscal 2015;
  • An increase of $84,000 in training revenue;
  • An increase of $199,000 in new implementations revenue, which was a result of completing more installations in Q1 fiscal 2016 as compared with Q1 fiscal 2015;
  • An increase of $8,000 in transitions revenue (server and operating system upgrades) from converting the company's customers to the new Microsoft Windows and SQL Server 2012 products.
• During Q1 fiscal 2016, margin after direct costs increased by $106,000 to $1,514,000 or 51 per cent compared with $1,408,000 or 58 per cent for Q1 fiscal 2015. The 7-per-cent decrease in gross margin percentage is due to:
  • The cost of new hires that were added during Q1 fiscal 2016 in anticipation of future growth;
  • New implementations revenue and transitions revenue increased in Q1 fiscal 2016, and these revenue streams have a higher cost of goods sold and lower margin compared with recurring support and support plus revenue;
  • Higher foreign exchange rate, which increased the cost of the Microsoft licences that are purchased in U.S. dollars for existing customers, transitions and new installations.
• Earnings before interest, taxes, depreciation, amortization, foreign exchange gains and losses, and stock-based compensation (EBITDA) increased by $135,000 to $510,000 in Q1 fiscal 2016 from $375,000 in Q1 fiscal 2015.
• Income before deferred income tax expense increased by $108,000 to $251,000 in Q1 fiscal 2016 compared with $143,000 in Q1 fiscal 2015.
• Quorum had comprehensive income of $8,000 in Q1 fiscal 2016 compared with $214,000 in Q1 fiscal 2015. The reduction is due to a large increase in the non-cash foreign exchange expense of $340,000 ($121,000 loss in Q1 fiscal 2016 compared with a $219,000 gain in Q1 fiscal 2015), offset by a decrease in the non-cash deferred income tax expense of $26,000 and the above-mentioned $106,000 increase in margin after direct costs.
• Net working capital at March 31, 2016, was $5,144,092 with a current ratio of 5.01, compared with $5,128,841 at Dec. 31, 2015, with a current ratio of 5.05, an increase of $15,251.

(1) The numbers and dollar figures included in the dealership success scorecard are based on dealership results.

The corporation had a very strong growth quarter, with sales rising by 21 per cent. Sales growth came from more net new installs, increased recurring support revenues and higher training revenue. Quorum has seen 10 consecutive quarters of significant revenue growth (over the prior-year quarters), and the company continues to increase its staffing levels in anticipation of future growth. The company's strategy to focus on product innovations, improving product utilization and superior levels of customer service has increased the market demand for its product and services.

Quorum has filed its Q1 2016 consolidated financial statements and notes thereto as at and for the period ended March 31, 2016, and accompanying management's discussion and analysis in accordance with National Instrument 51-102 -- Continuous Disclosure Obligations adopted by the Canadian securities regulatory authorities. Additional information about Quorum will be available on Quorum's SEDAR profile and Quorum's website.

                            FINANCIAL HIGHLIGHTS
                                                 Three months  Three months 
                                                        ended         ended 
                                                     March 31,     March 31, 
                                                         2016          2015 
                                                                            
Gross revenue                                  $    2,947,199 $   2,430,307 
Direct costs                                        1,433,076     1,022,070 
Margin after direct costs                           1,514,123     1,408,237 
Earnings before interest, taxes, depreciation                               
and amortization (EBITDA)                             509,794       374,960 
Income before deferred income tax expense             251,093       143,101 
Net income (loss)                                     128,695        (5,648)
Comprehensive income                                    7,822       213,670 
Basic income (loss) per share                  $       0.0025 $     (0.0001)
Fully diluted income (loss) per share          $       0.0025 $     (0.0001)

We seek Safe Harbor.