At some point (2012-2015) they generated 1/3 of their revenue with GM in the US using only their XSellerate DMS. They have more experience with integration there then they are given credit. One of the peculiarities of non-DMS products is that they pay integration costs to other DMS providers. For example PBS DMS is integrated with Dealermine CRM (they list it as partnership). Check this source for example: https://www.pbssystems.com/partners
If they manage this, it would count as a cross sell (but through acquisition). If they do it smart, it could earn them a high marginal ROIC. I would assume Damien would veto bad ideas, Alternatively, they could cut on integration cash outflow (capitalized R&D) and start paying 10% dividend. Or just cumulate cash and be acquired by likes of CDK, PBS or Dealertrack.
I am still digging around to see what are they doing with investment tax credits and loans from ACOA, but they seem fairly valued for a stable business which they can be at even lower cost. As you mention, there are barriers to entry, but they also protect them if they want to be a cash cow.
Appreciate the detailed breakdown! The cost cutting efforts and AI push sound promising but with BDC revenue declining and SaaS growth barely moving, do you think their cross-selling strategy is enough to reignite growth?
At some point (2012-2015) they generated 1/3 of their revenue with GM in the US using only their XSellerate DMS. They have more experience with integration there then they are given credit. One of the peculiarities of non-DMS products is that they pay integration costs to other DMS providers. For example PBS DMS is integrated with Dealermine CRM (they list it as partnership). Check this source for example: https://www.pbssystems.com/partners
Now there are so many of these small affiliate software companies that for Quorum, it would be the smartest to target non DMS offerings that are integrated with most common DMS providers among their existing rooftops. I managed to find close to 400 here alone https://www.capterra.com/auto-dealer-software/?features=3990e00b-853e-41a0-a871-33607f212727&sort=alphabetical.
If they manage this, it would count as a cross sell (but through acquisition). If they do it smart, it could earn them a high marginal ROIC. I would assume Damien would veto bad ideas, Alternatively, they could cut on integration cash outflow (capitalized R&D) and start paying 10% dividend. Or just cumulate cash and be acquired by likes of CDK, PBS or Dealertrack.
I am still digging around to see what are they doing with investment tax credits and loans from ACOA, but they seem fairly valued for a stable business which they can be at even lower cost. As you mention, there are barriers to entry, but they also protect them if they want to be a cash cow.
Any updates? Especially given its recent earnings report (and board changes)?
Appreciate the detailed breakdown! The cost cutting efforts and AI push sound promising but with BDC revenue declining and SaaS growth barely moving, do you think their cross-selling strategy is enough to reignite growth?
Thanks as always Jacob, I don't see any clear catalyst that could change the market's view of the company either.
You are welcome Juan.