Quorum Information Technologies Inc. (TSX V: QIS)
Interview with:
Maury Marks, President and CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
DISTRIBUTOR™, a Windows and Web solution, and XSELLERATOR™, a dealership management software program, which combine to form a Dealership and Customer Relationship Management System (DMS) for the automotive dealership market.

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Quorum’s DISTRIBUTOR™ and XSELLERATOR™ software combine to form the only Windows-based, fully integrated Dealership Management System (DMS) that is a full ERP for the automotive dealership market

 
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Technology
Auto Dealership Mgmt. Software
(TSX V: QIS)

Quorum Information Technologies Inc.


Suite 200, 6715-8 Street N.E.
Calgary, AB, T2E 7H7
Telephone: 403 777 0035 Ext: 110

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Maury Marks
President and CEO

Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
January, 13 2005

BIO:
Mr. Marks received a Bachelor of Management (with Distinction) with a major in Accounting from the University of Lethbridge in 1988.  In 1991, Mr. Marks received his Chartered Accountant’s designation after articling with Deloitte and Touche, Calgary.

Mr. Marks continued to work with Deloitte and Touche in the Management Consulting group in the systems development area until 1992.  From 1992 to 1995, Mr. Marks worked with various companies, consulting on computer development, implementation, and system selection projects.  Since 1996, Mr. Marks has devoted all his time to building Quorum Information Technologies Inc., and XSellerator™, its proprietary software product for the automotive dealership market.

Company Profile:
Quorum is a Calgary based company with a primary focus on developing, marketing, implementing and supporting proprietary software products. Its key products are DISTRIBUTOR™, a Windows and Web solution, and XSELLERATOR™, a dealership management software program, which combine to form a Dealership and Customer Relationship Management System (DMS) for the automotive dealership market. What makes our software so exciting, and different from the competition, is that it's current technology; the same Windows-based technology used by every other industry is finally available for automotive dealerships. XSELLERATOR™ isn't just a management system; it's a more efficient, productive and profitable way for dealerships to do business.

Currently, Quorum has 13% of the GM dealership market in Canada, making it the 3rd largest Dealership System Provider for GM in Canada. The Company has grown from having their system implemented in 15 dealerships in 2000, to 30 in 2001, to 60 in 2002 - and has since added 60 more new dealers for a total of 120 to date. The Company was recognized by the Deloitte & Touche Technology Fast 500 as one of the fastest growing technology companies in North America.

Quorum's success comes from developing, marketing, implementing and supporting the best DMS System, products and services for automotive dealerships, and from our commitment to total customer satisfaction. Quorum has expertise in all aspects of Dealership and Customer Relationship Management, and employs the best people in the business to deliver it.

CEOCFOinterviews: Mr. Marks, what was your vision for Quorum in the beginning and how has it developed over time?
Mr. Marks: “We wanted to develop an integrated software tool for automotive dealerships and we wanted to develop it using the latest technology. I grew up in the automotive business; my parents owned an automotive store, so I saw the type of technology that was delivered through the dealerships. Typically, it was old, character- based technology with multiple modules and it lacked the functionality that I thought dealerships needed. We embarked on building this beautiful Windows-based integrated software package, and we continued to build it out so that it managed everything that a dealership needs. It manages everything from the sales department, to the customer walking in the door, to the time you deliver them a car, to following up with them after the fact. It manages the entire service department, right from booking to technicians clocking their time in, to submission of warranties, to posting and handling the accounting for all the work orders. It handles the parts department as well, including ordering and stocking parts and selling them to customers. It handles all the accounting underneath and all the customer relationship management throughout. It is a broad piece of software, which is why it has taken us this long to get to this point in time. Now we have the best product in the marketplace. We are getting accolades across the board from the manufacturers to the media and from our customers.”

CEOCFOinterviews: Who is using the product?
Mr. Marks: “Car dealerships are using this; the same dealerships that you go in to buy your car from or to get your vehicle serviced. Right now, we are focused on the GM market segment. We have an incredible relationship with GM Canada and with GM U.S. We felt there were a number of integration points where we could pass data back and forth from the dealership to GM in Canada and GM in the U.S. better than any other DMS. We feel we are the leader in that area in terms of B-to-B integration points with GM. Almost every one of our dealerships is a GM store and XSELLERATOR becomes their enterprise-wide software tool.”

CEOCFOinterviews: Does GM have a recommended list, and how does the relationship with GM help you?
Mr. Marks: “GM has a listing and we are listed in Canada as a fully integrated software solution. We are listed similarly down in the U.S.; I think the term is fully certified in the U.S. What really helped us is that we are the first ones to come to the table to build new integration points. A thing to keep in mind is that the manufacturers have done a very good job on the supply chain management side of things. General Motors, Ford and Chrysler are really working on the supply chain side. Now their focus is on their retail chain. There are many things that they need to accomplish and I will give you some examples. If you go to buy a car at a dealership, one of the things that they have is a paper vehicle invoice that lists all the options on a vehicle and pricing. To date, what dealers are doing is taking that paper invoice and manually keying it into their existing system. A little over a year ago, we worked with GM to build that integration point so we would just receive the data and then integrate the electronic vehicle invoice information within our system. We have gone on to build a multitude of integration points with GM Canada, and now want to carry that momentum forward and begin building some of those integration points with GM U.S.”

CEOCFOinterviews: Is the auto industry behind most of the rest of the world in how they approach this?
Mr. Marks: “The auto industry is behind the rest of the world in their use of technology to deliver efficiencies and to deliver CRM tools to the retail chain. There are some interesting reasons for this. For instance, the first reason is that the barrier to entry within the automotive industry is huge from a software development perspective. I mentioned before that we deliver sales, service, parts, accounting and CRM automation as one integrated package. We have an enormous amount of code within our software package, and if you want to play in the automotive industry, you have to have the best product out there. We come along with modern technology, which is the same technology that is being used in other industries. We are not reinventing the wheel. It is modern technology but you have to recognize that if you are going to get into this industry, there is a lot of work to do because the DMS software package has to be completely integrated and feature rich. It has to cover so many different departments within the dealership.”

CEOCFOinterviews: Are the dealerships looking for this type of software or do you have to convince them?
Mr. Marks: “You do have to get them to recognize the need. One of the best comments I have heard from dealers that have gone on to our system is ‘I had no idea what color T.V. was like when all I ever watched was black and white’. When we show our system off, typically people are very excited because they had no idea that it was available. The next reaction, after they get over how exciting it is, is fear of change and that is probably the biggest hurdle that we face. We basically swap their old system, which managed every department, and implement a brand new system. They become concerned over how much change impact will take place, because they have been with the same technology for the last fifteen years; but they also know the technology they have been using has become stagnant. I know that is hard to believe in this day and age, that there are still industries on such old technology, but that is the environment that the automotive retail market is in today. Which is great for us because it’s a great opportunity.”

CEOCFOinterviews: Are you simply installing new software or does it include replacing hardware as well?
Mr. Marks: “Because we are Windows based, when we go into a dealership, we end up having to replace their complete network infrastructure. We replace old fourteen-inch green screen monitors and dot matrix printers and put down an entire Windows infrastructure. We are using Microsoft tools and modern equipment, but we have come up with a particular way to configured it that is certified by Microsoft, which is why we are Microsoft Gold distributors. We then put XSELLERATOR, our Windows based dealership management system, on top of that.”

CEOCFOinterviews: How costly is it for the dealership, and what is your revenue model for this?
Mr. Marks: “Our dealership customers today range from ten users to a hundred and twenty users in size. That is an enormous range and we have built our software across all different sizes in dealerships. The average dealership has about forty users, and we are typically selling that for 120 thousand in cap cost, which is everything including DISTRIBUTOR hardware and XSELLERATOR software. The capital cost is not where our focus is. The focus in our company is on the support revenue. It may be 120 thousand cap, but we are looking to get anywhere from $3,500 to $4,000 a month for supporting that particular dealership. At the beginning, we have to do a lot for that amount each month. When we take them live on our system, there is a lot of support involved, but as they get used to the software, the support requirement will fall off. We will take anywhere from four to eight hours of calls per month for that support revenue. We do produce new versions and push those up to the dealerships but they are included within the program. For us it is about growing our customer base because we realize that the high margin piece of the business is that re-occurring support revenue. When you can get three or four thousand a month per dealership, and you can grow your model out to a thousand to three thousand dealerships, this becomes an incredible annuity business with a high margin.”

CEOCFOinterviews: Once everyone in the dealership is trained, how do you maintain that relationship with the customer?
Mr. Marks: “Part of our model is to continue to push new versions of the software. We listen to feedback from our dealerships and they get all the latest and greatest of what we have developed. As we roll along, they are getting more and more features, so their software component is always current. Over time, they will have to put a new DISTRIBUTOR and new server underneath it all, but the software component stays current. What is also interesting for us is, because we push new versions out, there is an enormous training opportunity that we can also charge for. Our focus has always been on getting our software out and growing our dealership base, but now we are starting to focus on the training opportunity. It is a two-fold training opportunity; it is a web based training opportunity but there is also a profitable consulting training opportunity. We can go in after XSELLERATOR is installed and help train the dealership on new functionality that has been added to our software. We can also profit on training them to use features in our software that may have always been there, but they have never used. For example, in a dealership there is a big lack of customer relationship management. Dealerships are good at processing transactions but they are not as good at looking after the customers and being aware of who their best customers are and what the value of that customer is. Our software gives them all the tools to manage and look after their customers better.”

CEOCFOinterviews: Why have you chosen to launch XSELLERATOR in the United States at this point in time?
Mr. Marks: “We are entering the US market at this time because we have now developed our relationship with GM U.S. and we have built the integration points (data transfer between dealership and manufacturer) to GM U.S. systems similar to ones built with GM Canada. The integration points are different on each side of the border. We also wanted our software to be at the point where it was U.S. ready. Everyone told us that we only have one opportunity to move into the U.S., and when we take it to be sure we are ready for it. We spent a lot of time with consultants from the U.S coming up to look at our software end-to-end. The response we got was that this package is ready to go. We had the software package ready, and we had our integration with GM U.S. ready, so that is the big reason for the launch. We are getting a big push from General Motors in Detroit to get down south of the border. We have shown our software at some very high levels within GM U.S. and there is an enormous amount of excitement around our software and an enormous amount of excitement in Quorum’s ability to build new integration points with GM US, like we have done in Canada. We are now putting the plan in place to get our software rolled-out on a massive scale.”

CEOCFOinterviews: What is involved in introducing your services in the U.S.?
Mr. Marks: “We are taking a number of different initiatives. Some of them I cannot disclose at this point. The standard initiative is to put a marketing program in place to focus on a particular region and to put a sales force in place. We are just in the swing of putting those pieces in place. There are other initiatives that we are taking, such as aligning ourselves with high-level consultants who are in touch with this industry. For instance, one of the consultants that we have recently aligned ourselves with is Sandi Jerome, President of CRS Consulting and the editor of Digital Dealer Magazine, which is the top industry magazine in the U.S. She liked our software so much (after reviewing every competing system), that she actually helped us introduce it to new dealerships. She is now selling it on our behalf. We also have a number of initiatives going on with GM U.S. that, after a time, we will be able to announce.”

CEOCFOinterviews: Will you tell us about the financial position of the company?
Mr. Marks: “To date, we are still in a cash-burn position. However, Quorum is well financed to be able to handle the growth. into the U.S. market. We are very well financed. We have a Board of Directors that really understands the opportunity that is sitting in front of us. It is an absolutely enormous responsibility when you consider that we have a chance to be the third player next to ADP and Reynolds & Reynolds in the space – huge companies. At this point in time, we are probably carrying two-and-a-half million in our bank account. We have a number of warrants that are going to come due that are well in the money at this point. That will probably produce another million dollars for us in the near future. We are equipped and set up for the future.”

CEOCFOinterviews: Do you have any new initiatives ahead?
Mr. Marks: “We have many new initiatives that I cannot disclose right now, but we should have news on them shortly. We have a number of initiatives going on in Canada as well. We are continuing to build out the integration points with GM Canada. GM U.S. looks at Canada as the big testing ground.”

CEOCFOinterviews: What about on the global level?
Mr. Marks: “That is next, but we need to take one step at a time. We cannot have a conversation in Detroit without talking global. That is step number two. The global step is probably on a three to five-year horizon.”

CEOCFOinterviews: What is available for the potential investor?
Mr. Marks: “We are in about thirty million shares. Insiders and people that the insiders know well hold seventy-five to eighty percent of those shares. They are viewing this as a long-term investment. About ten to fifteen percent of that group is held by our dealerships. Our dealerships are well invested into our company. We end up with twenty to twenty-five percent free trading shares. If you looked over the last number of months, we have produced good trading volumes.”

CEOCFOinterviews: Do you make a concerted effort to reach potential investors?
Mr. Marks: “We do not today, and it is something that we know we could do much better. Our focus has been ‘heads down, look after the business, and execute on the business plan’. We have had a number of discussions internally and know that we really have to reach out and talk to our audiences. We have so much great news coming up. It is a ‘prove it’ marketplace out there, they want to know what you are going to do and then see you execute on it before they get a comfortable feeling about you. Right now, we need to get out and tell our story and then people can watch us execute on it.”

CEOCFOinterviews: In closing, why should they be interested and what should they know about Quorum that they might not realize when they first look at the company?
Mr. Marks: “They should be interested because we are a small Canadian company with the opportunity in front of us to be a major player in the automotive Dealership Service Provider (DSP) marketplace. That vertical is about 2.5 billion dollars, which does not include all the training services and extras, that is just DSP sales. We have the support of the major players out there, including General Motors and Microsoft. We feel that we are going to be able to deliver not only the software package, which we have already delivered, but on the execution of our complete strategy, which includes a large-scale ramp-up and implementation strategy. It’s going to get very interesting.”

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“Everyone told us that we only have one opportunity to move into the U.S., and when we take it to be sure we are ready for it. We spent a lot of time with consultants from the U.S coming up to look at our software end-to-end. The response we got was that this package is ready to go. We had the software package ready, and we had our integration with GM U.S. ready, so that is the big reason for the launch. We are getting a big push from General Motors in Detroit to get down south of the border. We have shown our software at some very high levels within GM U.S. and there is an enormous amount of excitement around our software and an enormous amount of excitement in Quorum’s ability to build new integration points with GM US, like we have done in Canada. We are now putting the plan in place to get our software rolled-out on a massive scale.” - Maury Marks

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