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Good afternoon. My name is Amy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Quorum Information Technologies Q2 2020 Results Conference Call. [Operator Instructions]Mr. Maury Marks, you may begin your conference.
Thank you, Amy. Good morning, and thank you for attending Quorum Information Technologies Q2 2020 Results Conference Call. Quorum is a leading provider of dealership and customer management software and value-added services to the automotive industry.Today, we will provide you with a financial and operational overview of our Q2 2020 results as impacted by COVID-19. After our presentations, we will open the floor to your questions.Marilyn will now begin with our forward-looking information advisory, Marilyn, please go ahead.
Thank you, Maury. Good day, everyone. Thank you for being here with us today. I would like to remind everyone that certain statements in this presentation and on our call are forward-looking in nature. These include statements involving known and unknown risks, such as the continued risks related to COVID-19. Uncertainties and other factors outside of management's control that could cause actual results to differ materially from those expressed in the forward-looking statements.Quorum does not assume any responsibility for the accuracy and completeness of the forward-looking statements and does not undertake any obligations to publicly revise these forward-looking statements to reflect subsequent events or circumstances. For additional information on possible risks, including risks related to COVID-19, please refer to our MD&A dated December 31, 2019, located on the SEDAR website.Total revenue in Q2 2020 was $5.9 million, a 28% decrease over $8.2 million in Q2 2019 and a decrease of 30% from the $8.5 million achieved in Q1 2020. The decrease in our revenue is mainly attributed to the $1.8 million in SaaS and BDC COVID-19 discounts that we gave our dealership customers in April and May. SaaS revenue in Q2 2020 as impacted by the $1.8 million in April and May COVID-19 discount was $4.3 million, a decrease of 23% from $5.5 million in Q2 2019 and a sequential decrease of 28% from $5.9 million in Q1 2020.Normalized SaaS revenue without the $1.5 million April and May COVID-19 discount would have been $5.8 million. Undiscounted SaaS revenue for June 2020 was $1.95 million or a quarterly run rate of $5.8 million, resulting in an annual run rate of $23.4 million. This compares to a SaaS annual run rate of $23.7 million achieved in Q1 2020.SaaS revenue growth slowed in Q2 2020 as it did towards the end of Q1 2020 as dealerships primarily focused on navigating the sustainability of their operations. Also delaying our ability to add to our SaaS revenues in Q2 was that our on-site insulation and training services were delayed due to COVID 19.Due to the April and May SaaS COVID-19 discounts we provided our customers, our monthly average recurring revenue per rooftop or ARRPU for Q2 2020 dipped to $1,373. Based, however, on discounted June SaaS revenue figures, it rebounded to $1,898 per customer compared to $1,922 in Q1 2020 and $1,833 in Q2 2019.Our customer rooftop totaled $1,035 compared to $1,027 at the end of Q1 2020 and compared to $1,007 at the end of Q2 2019. SaaS revenue represented 72% of total revenue in Q2 2020 compared to 67% in Q2 of 2019 and 70% in Q1 2020. BDC revenue in Q2 2020 was $1.5 million, a decrease of 18% from $1.9 million in Q2 2019 and a decrease of 28% from $2.1 million in Q1 2020.Normalized BDC revenue without the April and May COVID-19 $0.3 million discount would have been $1.8 million. Undiscounted BDC revenue for June 2020 was $0.66 million or a quarterly run rate of $2 million and an annual run rate of $8 million. This compares to a BDC annual run rate of $8.5 million achieved in Q1 2020.With dealerships reducing or closing their operations during the COVID-19 pandemic, some dealerships reduced their BDC services. BDC revenue represented 26% of total revenue in Q2 2020, compared to 23% in Q2 2019 and 25% in Q1 2020. SaaS and BDC revenues together represented 98% of our total revenue in Q2 2020.Services and onetime revenue decreased to $0.1 million in Q2 2020 compared to $0.8 million in Q2 2019 and compared to $0.5 million in Q1 2020. The revenue in Q2 2020 was down due to multiple inflation and training visits that were postponed due to COVID-19. For Q3 2020 and onward, Quorum will be providing remote installation and training services for most products. This will allow Quorum to continue to safely provide installation and training services as dealership demand recovers.Gross margin was $2.4 million or 41% of total revenue in Q2 2020 compared to $3.8 million or 47% of revenue in Q2 2019 and $3.9 million or 45% of revenue in Q1 2020. Gross margin and gross margin percentage decreased due to the cost of revenue not decreasing proportionately with the decrease in revenue.Gross margin run rate for June, which do not include customer discounts or COVID-19 government subsidies, was 45% of revenue. While costs were reduced significantly during Q2 2020 as a result of COVID-19, costs were not reduced proportionately to the decrease in revenue because management's focus to preserve their company's ability to scale the business once dealership business returned. Additionally, many third-party costs, such as third-party integration, licensing fees and OEM integration fees could not be eliminated.Total operating expenses before financing costs, taxes, depreciation, amortization, stock-based compensation and foreign exchange for Q2 2020 were 24% of revenue as compared to 30% of revenue for Q2 2019. Sales and marketing expense for Q2 2020 was 6% of revenue compared to 13% in Q1 2020 and compared to 8% of revenue in Q2 2019. Sales and marketing expenses for Q2 2020 decreased as a direct result of COVID-19-related travel restrictions. Sales and marketing expenses run rate for June, not including COVID-19 government subsidies, were 7% of revenue.General and administrative expenses for Q2 2020 were 16% of revenue compared to 20% of revenue in Q1 2020 and 20% in Q2 2019. The decrease in general and administrative expense in Q2 2020 was due to a reduction in salaries and benefits expense due to COVID-19 as well as proceeds received and accrued as a result of the Canadian emergency wage subsidies.General and administrative expenses run rate for June, not including COVID-19 government subsidies were 20% of revenue. Research and development expenses for Q2 2020 was 3% of revenue compared to 3% in Q1 2020 and compared to 2% in Q2 2019. Research and development expenses run rate for June, not including COVID-19 government subsidies, were 3% of revenue.During Q2 2020, the corporation received $2.1 million from various government sources. $1.8 million came from the Canadian emergency wage subsidy, and we applied this funding as a reduction of cost of revenue, salaries and operating expenses. Adjusted EBITDA was $1.1 million in Q2 2020 or 14% of normalized revenue compared to $0.9 million in Q1 2020 and $1.4 million in Q2 2019.Adjusted cash income, or ACI, was $645,000 in Q2 2020 compared to $52,000 in Q1 2020 and $768,000 in Q2 2019. At June 30, 2020, Quorum had a cash and cash equivalent balance of $8.8 million, $12.9 million in current assets, net working capital of $9 million and a current ratio of 3.3. Long-term debt was $9.2 million, including the $8.1 million that we have drawn on our $15 million BDC capital debt financing facility. The balance of our long-term debt is mostly 0% unsecured debt with the government through the Atlantic Canada Opportunities Agency.With that, I'd like to pass it back to Maury.
Thank you, Marilyn. As I said in our press release last night, I want to begin with saying how proud I am of all the Quorum employees who rose to the challenges presented by COVID-19 in Q2 and delivered the strong results we have today. During the second quarter of 2020, we took a number of key strategic steps to ensure we merged from COVID-19 as a stronger organization that is more adaptable to the new business circumstances.Those steps included: one, preserving our SaaS and BDC annual run rates; two, managing our balance sheet, especially our cash position; three, transforming our delivery model for products and services to a remote delivery model; four, reprioritizing our key development projects to align with the needs of our dealership customers and the challenges that they are facing; and five, continuing to pursue and evaluate M&A opportunities.When it comes to preserving our annual run rates, we initiated a Quorum-wide project to help all of our dealership customers utilize our existing software functionality to help them manage through the COVID-19 pandemic. Additionally, as Marilyn mentioned, we provided our customers with discounts for April and May. These strategic discounts protected our long-term SaaS and BDC revenues as evidenced by the fact that based on our June 2020 revenue, which did not include any customer discounts. One, our annual SaaS run rate is $23.4 million compared to an annual run rate of $23.7 million based on Q1 2020 revenue; and two, our BDC run rate is $8 million compared to an annual run rate of $8.5 million based on Q1 2020 revenue.Two, in managing our balance sheet, we had a number of initiatives: one, during the quarter, we tightly managed our cost structure and balance sheet, focusing on accounts receivable and capital costs; two, we also started to realize additional cost synergies from our One Quorum strategy, which leverage the economies of scale that exist across our 3 acquisitions. Finally, during the quarter, we received the CEWS government funding of $1.8 million, which offset our April and May revenue decline. The result is a Quorum-produced adjusted EBITDA of $1.1 million in Q2 2020 or 14% of normalized revenue.Three, we have transformed the delivery of our -- of most of our installation and training services to be web-based. The 3 key benefits of web-based installation and training services are that we can scale the deliver our services faster, book SaaS revenue related to our products quicker and, of course, deliver the services safely for both our staff and our customers.When it comes to reprioritizing our development projects, we initiated the following: one, in April 2020, Autovance announced its MyDeal digital retailing system to allow dealers and customers to interact online for vehicle sales. We are currently installing MyDeal into the first dealerships. Two, in May 2020, Accelerator launched its DMS service performance pack, a set of integrated tools designed to help dealerships provide a more touchless service experience and to help maximize the performance of their service departments.We have recently completed development on some added functionality that allows customers to transparently receive videos directly from service providers or technicians for possible added repairs and to then approve those repairs from their phone or any other device. This new functionality will go into pilot dealerships in September.Three, DealerMine has prepared a bundled offering that includes the DealerMine service CRM software and BDC services to help dealerships to refill their service lanes by contacting customers about more urgent repairs like vehicle recalls or campaigns.And then four, our Quorum team is transforming Q Analytics into an enterprise reporting tool to account for the entire Quorum product suite. We believe that Q Analytics will help with cross-selling of our entire product suite, thus increasing our monthly ARRPU. Currently, Q Analytics covers 6 of our 10 products.Finally, for M&A, we have embarked on engaging with companies as M&A opportunities arise. And we started to proactively contact companies and investigate potential opportunities to acquire software solutions that would fit with our current product suite and our vision for the future of our product suite.In conclusion, while there are indications that dealership's business is returning, there remains some uncertainty regarding the duration and depth of the disruption to dealership's business from COVID-19. Fortunately, Quorum solutions are considered critical to dealership operations and are highly valued in helping dealers recover from the COVID-19 shutdown.It also appears as though the impacts of COVID-19 may provide a tailwind for increases in automotive sales and services going forward as fewer people take public transit and instead choose to drive. We continue to monitor and analyze the economy and the automotive dealership market in hopes of executing our growth plans as fast as the market will allow us to. And we'll continue to diligently manage the financial impacts COVID-19 may have on our business in order to maintain the longevity and stability of our operations while continuing to support those around us.Operator, I'd like to now open the conference to any questions from our audience.
[Operator Instructions] Your first question comes from the line of Gavin with Cormark.
Gavin?
Can you hear me?
Yes, I can.
Okay. I just wanted to start out on the selling environment. When I look at the auto sales year-over-year in July, they were kind of close to flat, so a nice recovery there. And you guys have obviously introduced a number of new innovative products. And it sounds like you're having kind of conversations with clients about kind of selling those in there.So I'm just kind of curious what you're hearing from customers as you're trying to engage them on kind of getting new products up and running with those dealerships and to drive new ARRPU for you.
Right. Yes. So a few things. So thought #1 on this is what we're finding is when we're talking to dealerships, there's sort of 2 camps of thinking. And there's lots of grayer in between, but there's 2 camps of thinking, right? There's people that are actively looking for new solutions and really wanting to drive their business forward despite the times that we're in, but really wanting to be more competitive and grow their business.And then there's the other dealerships out there that they have really -- they're not open to new conversations about new technology or new costs or they're just looking to weather the storm at this point in time and make sure they're sort of ready to come out the other side. And part of the thinking in doing that is to really restrict the amount of change in the organization, the amount of costs that they incur.I mean we obviously focus on the first group, and those are the conversations that we want to have out there. And for that first group, I mean, they're on the forefront of their thinking. So they're looking for the solutions like the MyDeal solution that I talked about, where a customer can basically purchase a car online.Now MyDeal isn't quite that sophisticated that you could do the complete transaction online, but you can do all of the prepricing and trade-in pricing and negotiation with some final steps needing to be done as touchlessly as possible in conjunction with the dealership. And then those same dealership customers, right? Are looking for things like our power lane solution with the video capability and everything that we're doing on the service performance pack, especially as it pertains to everything being touchless.So it's -- those are -- for us, the focus is those particular customers and really pushing forward predominantly the new product offerings that we've had that are really oriented to help them operate their business in a touchless environment, in the COVID environment that we're in.So yes, I think that's probably sort of my first sort of key thoughts. I do have one more thought in here. We are finding that it's a lot easier for us to engage in conversations on cross-selling than it is for us to engage in brand-new conversations for new customer acquisitions.So some of the new customer acquisition conversations are starting to come and there -- and we're starting to get into some of those conversations and starting to move those deals along, but those have taken longer than any of our conversations where we're just cross-selling different products across different divisions to our existing customer base.
Got it. That was very helpful color. Next, I wanted to chat on the services side a little bit. You talked about how you're kind of transitioning to complete remote implementation model kind of beginning, I guess, in Q3.So I guess a couple of questions on that. Are you going to see some projects that maybe were kind of put on hold to come back in Q3 and get some revenue kind of back going as people bill?And then secondly, historically, you've kind of made minimal gross margin on the services side as you're looking at reduced kind of barriers to customers going live. When you think about remote implementation and the efficiencies that, that can bring, do you think you can kind of move that to breakeven or kind of make some margin on that line kind of going forward?
Yes. So there was a bunch of questions in there. So I'll split those. So your first question was just related to our whole delivery on remote installs. You got to keep in mind, if you go across our product base, there are some products that we've always remote installed, and there are some other products that have been a challenge for us to remote install. We did a lot of work in Q2 to really up our game across our whole product suite being able to remote install with the one exception being -- well, we did a lot of work on it, but one except -- the one most difficult thing for us to remote install is our Accelerator product, which is the whole DMS.Now we can do some remote installs. And in actual fact, we've already done some in Q3. And so we are seeing that we've not only transformed our model on remote installs, but we're also testing that model by doing some of the different installs, which I think was sort of the crux of your question was, are you starting to see some uptake on that remote install side of things? And we are.Now that we're selling, especially where we're doing cross-sales, and we're selling the remote services as part of the expectation that we've set on the sale itself, we are starting to do some of those installs across our different divisions, which is fantastic. We're monitoring those really closely. We're adjusting how we're doing those installs to try and make the customer experience as smooth as possible. And to date, that's going quite well for us.We do have a backlog of Q2 and Q1, mostly Q1 sales where we did sell with an expectation that we would be on-site. Wherever possible, we've tried to move those dealerships to a remote install, but we still have some of those dealerships that have really wanted us to be on-site. So we're trying to look at how we could safely do that going into sort of Q3 and Q4. So that's another piece that's going on. So I think that covers the first part of your question.The second part of your question was around gross margins. So for us, we have different teams that we try to -- that we do cross-train on either doing installs or doing training visits so that they basically can cover our entire suite of different products within our different divisions. And so as we get busier as we get more sales demand as that group becomes busier, we really should see an improvement in margins on our install and onetime revenues because we should be a lot more efficient as an organization in doing these installs. So we're fully expecting to see that, but we need the sales demand to really get our teams fully utilized.
Got it. And then one more before I pass the line. The DSO looked a little bit kind of elevated this quarter. Just curious, are you providing some flexibility on kind of payment terms? Or are you finding that a few customers are kind of a bit -- it's harder to pay given everything that's going on?
Sorry, what looked elevated?
Your receivables relative to your revenue. So maybe it's just because the revenue was depressed this quarter because of the discount that, that might have...
Yes. I think it's because the revenue is depressed because we've probably never done a better job on receivables than we're doing right now. And if we look at our over 60, over 90, we are -- we've got those down to minimal amounts. Our teams have done a really good job on managing receivables.
[Operator Instructions] Your next question comes from the line of David with PI Financials.
I guess following up on Gavin's question on the installation and the training being done remotely. I just trying to get an understanding, like from a revenue perspective, first off, does that pricing model change if you're doing it remotely, that you wouldn't be charging as much. And then I guess from the margin standpoint, because you're not having to fly people all around, could we see those gross margins actually at least maybe turn positive because it's a more efficient way to do the installations?
Yes. So a few things in here, David. So yes, so we don't have to -- when we're doing installs, obviously, flying people to installs we charge for that time, but we basically charge at a rate where we really only recover the cost. So we won't have that as revenue anymore.I mean we're still going to do some on-site services where we can really do them safely. But for the majority of our services, right, we're going to do them remotely. So that -- so point #1 is we're going to take out some revenue related to travel, but it was very, very low margin revenue. And basically, we charge to recover cost of the person going on-site. So you will see probably a decline in our onetime in services revenue due to that. But that as well will lift our margins on that particular revenue.So I think that -- sorry. And then what was the other part of your question?
I guess just as it relates to the margin side, like you'd run it effectively as a kind of a cost center. But could we see those gross margins get closer to breakeven, just with this new delivery model? That is going to be, I assume, the vast majority of kind of insulation and training.
Yes. And so I'll just maybe echo some of my comments that I made before. Yes, we can. We should be able to see better margins on the onetime services side of things. Those margins will improve as we do more and more work, right? So as sales demand increases and as our staff are more and more utilized under this new model, we definitely should see our margins go up.
So if you're running at, let's call it, 80% utilization, could we see gross margins being breakeven for that line item for that business?
I would -- so off the top of my head, I don't know if 80% utilization is the breakeven point. But I would think that once we get into, yes, probably somewhere in the range of 2/3 to 80%, we should be able to see breakeven margins. I'd have to go back and look at our model to confirm all that.
Yes. I guess just looking at it, when things eventually return to normal and you'd have people flying around and whatnot, just looking at that level of business activity. If you're delivering it remoteless or remotely versus in person, I'm just trying to get a sense at that kind of business level, would you at least be able to get to breakeven gross margin?
Yes. So off the top of my head, I don't know what the exact number. So we'll look, and we'll get back to you and provide some answer on that.
Okay. And you were talking about having done some installs remotely. Were any of those for Accelerator, the DMS? Or are those still likely to be more being done on-site?
Yes. We -- so we have done a couple of Accelerator DMS installs remotely. They were smaller dealerships, but we have done a couple remotely.
And how did that go? Like I'm guessing there maybe was a few hiccups along the way?
Yes, there were, but not more -- any more than we would have had when we were on-site. So one of the things that's critical to the remote model is the expectation you set when you sell the system, whatever the software is, and especially true in something complex like a dealership management system or an ERP for your dealership, right?So we were able to sell the systems with the right expectation, where the staff and the dealership really stepped up, and we're fully aware that this -- that they were going to be required to step up and really work with us from a remote point of view but also take more ownership in the install.And as a consequence, that made a big difference in terms of the whole delivery. Now these are very new installs that we've just completed. So we're still watching them closely and interacting with the management team at the leadership closely and just making sure that things continue to operate smoothly, but so far, so good.
That's good to hear. And I guess, just following up on -- as it relates to the discounts that you guys had offered, you talked about kind of no discounts in June. Were there any customers though that had requested an extension, just given some of the financial issues that they were facing, whether they were asking for additional discounts or maybe other financial aid, whether it's extended payment terms or the like? Or are most of your customers on reasonably firm financial footing?
Yes, we maybe had one or 2 outliers that asked for additional discounts, and that was it. Just about everybody whatever that would be 99% plus of our dealerships were really appreciative of what we had done for them in April and May, and there was no expectation of our customers that we would continue that in June.
Okay. Perfect. Just a couple of more questions here. Marilyn, sorry, I missed it. What was the June run rate for sales and marketing, excluding the government subsidies?
It was 7% of revenue.
Okay. Perfect. And Maury, just talking about the One Quorum initiative, can you kind of maybe talk about kind of where you are right now with that and kind of the financial impact to date and maybe what to expect going forward?
Okay. Well, I'll talk about where we're at, just from a project point of view, I'm not going to really talk about the exact financial impact. Maybe I could -- we might put that on the slide first to talk about in Q3. And maybe disclose some of the things that we've done with the actual financial impacts to them. But in terms of activities and work that we've done.So this became a company-wide initiative. We really went across all of our different groups inside the organization. So we would go across our infrastructure groups, our HR groups, our corporate groups, we looked at sales and sales and marketing. We looked at our operational groups as well. And what we got everybody to look for was we brought people across between different divisions together. We actually -- and in our particular case, we hired an outside consulting person to actually help us sort of manage through the process. And really, what we were looking for was any kind of economies of scale that we could find across the different divisions where we could consolidate on to particular vendors, on particular solutions, on particular platforms.We found a number of sort of quick wins, as you would always expect for us to find within a project like this. So we executed on most wins right away and got the savings or the efficiencies related to those. A lot of our more material change, though, larger dollar items, if you will, are going to come about through a fair bit of process change in the organization. So some of those larger items got initiated in Q2 with us really in Q3 and Q4 and even into Q1 of 2021 being able to realize on the benefits.So to give you an example of one of those, right? NADA, our big auto show. We've always had a couple of different booths at the auto show. Consolidating those booths together takes our auto show spend down. I think we were able to cut it by 1/3 in that particular case. But we won't realize on that benefit until Q1 of 2021.
No, that's helpful. Just 2 more questions. You talked about the M&A and your increased interest in looking at acquisitions. I just want to understand how you're looking at balancing what's going on right now with pandemic, your balance sheet and looking to add acquisitions. It sounds like maybe you're looking more at tuck-in acquisitions at this point versus more kind of DealerMine-type size acquisitions. Is that a fair statement?
Yes, that is a fair statement. Yes, we would like I mean the DealerMine acquisition for us was transformative. And we've mentioned that on calls, it was -- at the time, they were almost the same size -- DealerMine was almost the same size revenue-wise, as was Accelerator -- the Accelerator division and the Autovance division. So it was a very significant acquisition for us and it took us a lot to work through that acquisition.We are -- our ideal acquisition size is a smaller size than that. And now if we come across another large acquisition, and strategically, it makes a lot of sense, we would, of course, pursue that. But our ideal acquisition size is a smaller size, more of a bite-sized chunk for us as an organization.Just one more thing I want to say about this. I mean we've traditionally, when it's come to acquisitions, we've really contacted a lot of different people in the industry and tried to be aware of anything that's going on in the automotive software business, to -- so that we're involved in any kind of M&A deals that are going on out there. We continue to do that. We continue to keep our ear to the ground, so to speak, and look for different acquisition opportunities. So that's one piece of what we're doing.But we also over the past couple of quarters have brought an outside consultant, and that's really helped us get very focused on what our long-term strategy is, especially in the sales, the digital retailing side of sales and really the digital retailing side of service, and where we're going as an organization in those particular areas? And you're seeing some results of that work with that consultant, the MyDeal piece that I talked about, which is our digital retailing side on the sales side. You're seeing the whole service performance pack. It's part of our digital retailing service focus. Those are sort of some of the short-term steps to a longer-term vision of where we're going in sales and service.Because we spent the time and really got very focused on what our vision is, for both the sales and service processes inside the dealership, we were also able to identify where particular partners or acquisition targets would fit into that plan. So as a consequence, now that we've done that underlying work, now we're actually able to proactively start looking out into the marketplace for different acquisitions and really approach organizations about a partnership first, but also to maybe morph that partnership into an acquisition.
That's helpful. Just one last question. I guess there was a mention in the MD&A talking about an amendment to the financing agreement with BDC. It looks like the covenants might have been waived, I guess, for Q2 and Q3, I think. Any color you can provide on that? Was there any violations in the quarter?
Marilyn, can you speak to that?
No, that was just -- we had asked them to do that postponed to the end of the year. BDC has been a very important, I guess, and helpful partner since we started working with them when we acquired DealerMine. So that's something that we put in place in the off, I guess, in the chance that we did bring a covenant, then that the loan would be moved to the current portion of our balance sheet. So we just -- we were proactive in the -- like I said, in case we did break a covenant, but no.
Okay. And is it, I guess, talks about December 31. So it's waived for Q2 and Q3 and Q4 or it comes back into play in Q4?
I believe it -- it extends to the end of the year.
Okay. So it's waived until the end of the year. So Q1 is when your covenants would come back into effect effectively?
Correct. Yes.
And we did have one final question that comes from the line of Gabriel with Beacon Securities.
Just 2 quick follow-ups. Marilyn, apologies if I missed this, but as it relates to government wave subsidies for Q3, do you anticipate any at the end of the quarter?
We're actually looking at the program to see we do qualify. Some of our -- one of our division does, but it would be a small amount, but they have extended the program. So we're currently just looking into that to see if the other divisions qualify for funding during the period.I haven't -- that's just looking at the Canadian emergency wage subsidy. I haven't heard anything about the PPP program, but we're continuing to look into it.
Okay. So you do expect something, but it will certainly be less than the $2.1 million you guys recognized in Q2.
Definitely, yes, nowhere near that.
Okay. And then just a question for you, Maury. In an earlier response, you talked about wanting to focus on customers who are a bit more progressive now and in terms of their IT infrastructure.Now in terms of the dealerships that you're talking to, they are looking to upgrade or add to their existing software stack. What's the pushback that you're getting on your sales calls that might be stopping them from closing deals.Is it -- are there budget concerns? Is it competitors sort of offering the same sort of stuff, it's just other priorities? Just curious to get your feedback on that.
Yes. So a little bit of it, of course, is other priorities. I mean everybody is incredibly busy just managing the business and managing through the times. So that's always a piece of it, but more so right now.I would say probably some of the pushback that we've got is there's a real interest in some of the new pieces that we're bringing to the marketplace, right?So let me give you an example. We've always sold our sales performance pack to dealerships, which really allows dealership to have a virtual salesperson and do a transaction through the web, but with a salesperson and with a customer interacting electronically to get a deal done.And people really like that. However, MyDeal just extends the capability significantly and gives a lot more capability in the hands of the consumer to do more of the transaction themselves. Well, MyDeal, we announced it early in the quarter, but we're just putting it into our first dealerships now. And we expect, once we get through those first dealerships, we'll get a lot of traction on the MyDeal offering. And we've got a lot of excitement around it.So people are just -- in some cases, they're just waiting for that offering to be ready. We announced our service performance pack. And people really liked where we're going. We had a number of people sign up for that. But we've got a bunch of people that are on the sidelines going, " Geez, we really like that video capability. And so as soon as you have that through pilot, we're ready to jump on board with that," because that just makes everything more touchless and it really fits the operating environment that we want to operate under as a dealership in the service department.So there's a little bit of getting new product to market. I mean we tried to transition our product teams as quick as we can to really get these new pieces to market. And now we're starting to get them to market, and we're starting to get some traction, but we expect a lot more traction in Q3 and then going into Q4 and into 2021 around the pieces that we've been building.
This concludes our question-and-answer session. I will now turn the call back over to Mr. Marks for closing remarks.
All right. Well, thanks, everybody. Thanks for attending. We were -- like we said, we were really excited about the quarter. We thought we fared through COVID-19 quite well. We are seeing the signs of business returning out there across our dealerships. And so we're excited, especially with some of our new product offerings, to get out there and start selling and installing and helping our dealerships out even more and getting the company growing again. We believe we're in a really good and really strong place financially. And so we're excited about Q3 and Q4 and beyond.Thanks again for attending today's call.
Ladies and gentlemen, this concludes today's conference call. On behalf of Quorum Information Technologies. Thank you for participating. You may now disconnect.