Insights from the CEO of Quor Group

BEN HILLARY, COMMODITIES PEOPLE

Hello and good morning, afternoon or evening to all of our viewers, wherever you're listening in from today. My name is Ben Hillary, managing director of commodities people, and I'm really, really delighted to be joined here by Steve Hughes, CEO of Quor Group, a leading provider of CTRM solutions, and one with some pretty exciting developments in the last few months. And I believe a lot more to come. Over the next 15 minutes or so, we'll be taking a deep dive into all things CTRM, its utilization through the various tail risk events we've seen in recent years, its role in driving sustainability and the energy transition, AI technology ecosystems, and finally, a glimpse into what the future may hold for Quor. So, Steve, welcome and thank you very much for being here.

STEVE HUGHES, QUOR GROUP

My pleasure as always. It's good to speak to you again.

BEN HILLARY, COMMODITIES PEOPLE

Thank you. Well, diving right in first question, it's, well, it's very hard to believe that que is just two years old. So yeah, tell us about the journey so far.

STEVE HUGHES, QUOR GROUP

So, in fact, we're going to have to qualify for two years. Let me give a bit of history. So it's two years ago that STG approached Brady Technologies and eventually signed a deal to carve out what is now core. So you could almost count that first year as a transition to make sure that the two companies were separated appropriately and working effectively. There's a lot of people internally say, well, the core brand's really only one and a bit years old. We started the company really in March of last year, so it's even younger than the two years. And I think, you know, we were backed by a private equity firm called Symphony Technology Group, or STG for short. And again, for those not familiar with SDG, they're based in California. They are around, have around about $10 billion of assets under management. They're all enterprise software companies of some form. So a range of maybe 32, 30, 30 few companies in the portfolio. Core is one of them. And what they wanted to do was establish a foothold in the world of commodity trading, risk management. I've been asked many times why, and I think the main reason is if there's anything with longevity in this world, it's commodity trading. We can't do without energy, food, water, etcetera. And many of those things are traded. We're not quite on the stage of trading air, I guess, but hopefully that will never come. But the other things will be around forever. So it's a good market to be in. And the reason they carved out core, which is a great specialist in metals, is to be a platform company to then grow that business and fill the whole commodity asset classes from soup to nuts. And with that of course you've got a brand new company from almost, you know, just over a year ago. I joined in June of last year. So new CEO. So we've been through a lot of changes to position where we are today. And the message to staff was really if the plan is for us to acquire and grow quickly, we better make sure that this platform, this platform called Quor Group is very stable, runs like a swiss watch because if it isn't like that and you start acquiring and growing quickly, then you're asking for trouble. So that first almost year now has been spent on doing just that. Cultural changes, changes to processes, how we do things to make sure that we're ready for the coming stages. And as you know, we just acquired Echo, with STG's help and encouragement and that's, that's, you know, we had to be ready for that to happen and I'm pleased to say we are and we're ready for that very thing. So in a nutshell that's the first couple of years or really one year. One year and a few months.

BEN HILLARY, COMMODITIES PEOPLE

So excellent. And besides, what's been happening within the core outside of port for the last two years have been rare to say the least. With pestilence, with war, with extreme volatility, inflation just to name a few. How has core supported their users through this period? And I suppose also for those non core clients, how can they ensure that their technology supports, they're keeping a steady path during such challenging events?

STEVE HUGHES, QUOR GROUP

Okay, I'll answer that in a couple of ways. First of all, you're dead right. The increased market volatility due to geopolitical events is disrupting the commodity supply chain. So shipping around the Red Sea is now rerouted elsewhere and it's adding maybe 6000 journeys in ten days. Now as most people know, and certainly your listeners will know, commodity trading is often looked at. You're walking a tightrope in many ways because it's a very complex supply chain getting from origination to market. Millions can happen. So in many cases they're trading on very thin margins. So things like that disruption really doesn't help, particularly as around 12% of global trade goes to the Suez Canal. And that diversion is really not helping. Similarly with COVID I remember some research we did during or after COVID and it showed that freight costs were jumping in excess of 25% for long haul imports anyway. Now that has a dramatic effect on, you know, a trading company's ability to make, to make money and make sure they stay afloat. So with that, I think what that did to the commodities world underlined the need for an automated CTRM system and all it can do for clients in that industry. So we kind of had that already. But what we're seeing in terms of trend and the one that we're reacting to is companies are now trying to much better integrate disparate systems to get a more holistic view of what's happening and help them optimize their trading and operations to make sure that that profitability is preserved even during these tumultuous times. So we see demand for, if you take cause product and eckers products, both are supported by a set of APIs. And the uptake in those in recent times has been tremendous. Where they want the CTRM, which is the beating heart of the business, to now communicate with other parts, essentially to get real time risk management and operations in one place. So although CTM isn't responsible for all that, it's often the heart of where all those things come in and where the decisions are made. So both Ecker and Quor have been following that route to make sure that we're, the products can adequately talk to the rest of the world, if you will, to make that possible during these turbulent times. So I think that's what I would say. And the other big trend is the trend towards business intelligence and dashboards that give me very quick gauge, visual gauge on what's happening in my operations, so I can adjust accordingly and very quickly. And again, both firms, and if I'm honest, Ecker's done a better job so far of that than core of building dashboards that allow people to make very quick decisions and with real time data being consolidated in. So I think those are the major changes that we are making to support our clients and our prospective clients in this new world of change and disruption.

BEN HILLARY, COMMODITIES PEOPLE

Moving to maybe arguably more positive disruption. It has been really incredible in these last few years to see sustainability, ESG and the energy transition really becoming such a business driver for many commodity firms. What's Quor's approach to these megatrends?

STEVE HUGHES, QUOR GROUP

Yeah, I think the main thing is we've got companies who maybe were, for example, not really in the metals arena now adding metals to their portfolio because of the demand caused by the move to renewable energy. So things like cobalt and lithium, nickel, copper, those sorts of things are in high demand. So we're seeing a shift in firms that didn't operate in that area and think we need a slice of that business as it moves forward from a core eco point of view, we've got capabilities to support that, particularly in terms of ESG reporting. Remembering, at the end of the day, ESG is simply, at the end of the day, simply a reporting mechanism to make sure that you can report upwards and outwards in terms of your compliance with various things. So we're doing that both organically, in terms of developing the products to support those things. We're also looking at further acquisitions that might accelerate our move into renewable energy. As you know, there's quite a few companies around, both long standing and new, that really focus on the renewable energy world. So, you know, we're there to support it. We plan that. We plan as ever to be ahead of the curve in terms of our customers. But particularly the demand in metals is fueling that. I think it was the international energy agencies that said that they expect to see a sevenfold increase by 2030 in those metals that I mentioned earlier. We're around to support that, both in terms of our existing customers moving into the metals arena, or indeed our customers in metals now focusing on those new, exciting, growing markets to make sure that they're well supported during that. But it's a very, very interesting topic, particularly when you get in front of clients and you see what they're doing with it. And if I'm honest, some don't quite know how to react. But the great thing about being a vendor is you collect the experience of many, many trading companies, so you end up in a position where you can help those who are a little behind the curve, if you will.

BEN HILLARY, COMMODITIES PEOPLE

Yeah, excellent. More generally. More generally, technology really does seem to be moving more than ever at breakneck speed. AI in particular is at the front of many, many traders' minds. What's been Core's approach to such technology?

STEVE HUGHES, QUOR GROUP

Well, prior to the merger, both companies were investing reasonably heavily in AI, and we continue to do that. If I turn for a second to STG, I mentioned SDG has got over 30 companies in its portfolio. And a recent survey, internal survey they did, revealed that virtually every company in the portfolio is investing in AI of some type, which kind of is great to know that others are doing it. The real advantage of being with STG is this. STG is able to step back from all of those operations and look at AI in isolation, and then how it might apply to companies. So they're making a considerable investment, in fact, on behalf of all portfolio companies. Forget what the individuals are doing, including Quora and EKA, and they're making a side investment, quite sizable side investment, to again get ahead of the curve, which then each of the portfolio companies, including core and Ecker, can take advantage of. So we're looking forward to that because we are working hard and investing in AI as two product sets to now have a third input. That's, it's actually much bigger than the investment we could make individually and get that help from STG. And the learning from all those other companies is a fabulous thing, but we're very much building AI into our and machine learning into much of what we do day on day. So we, you know, we know that's going to. Well, it's already started revolutionizing the world. An anecdotal story. I had a message from Manav Gag this week, who was Eka's founder, and his message was, Steve, I've got a message from you. I'm absolutely certain it's not you because the phone number is wrong, but my God, the caller mimicked your voice perfectly. Now that will be AI enabled. So that's kind of the downside of AI and other stuff. We all have to be cautious, but I think there's a tremendous upside in gaining advantage. And I think if our clients don't move that way, you can bet your life that the competition is. And again, we intend to be ahead of that curve, so we're there before they decide to exploit such technologies. Yeah.

BEN HILLARY, COMMODITIES PEOPLE

Yeah. That's amazing. I really haven't considered so much that enormous advantage you'd have by being part of that wider group and developing alongside all those different organizations.

STEVE HUGHES, QUOR GROUP

Yeah, it is truly fabulous. Just to underline that. STG are unusual in my experience of many private equity firms I've worked with in the past, in that they are very active in forming a community amongst the portfolio companies.

BEN HILLARY, COMMODITIES PEOPLE

Nice.

STEVE HUGHES, QUOR GROUP

So I'm able to find out that another portfolio company over here may be in an unrelated area, and has already worked on that. We can lean on that very openly, and that just doesn't apply to AI. It applies to every metric you can think of in a business. So when we look at customer satisfaction, employee satisfaction, the ratio of development costs to revenue, revenue per head, all of those things are mapped by SDG. And I'm able to dial into the system called STG Salon. And I can look at a whole range of heat maps, including all those KPI's I just mentioned, and see where core fits amongst the portfolio. And now, it doesn't name who the other people are, but I know which company we are. Each company's got a number, but I know where we fit in the scale and where we're lagging and where we're ahead. Now, you don't normally get that kind of rich feedback when you're a standalone company. And again, I've never seen it happen in another PE firm. So they're doing extremely well at that. And for a CEO trying to lead a new business off the ground, it's absolutely invaluable. But it's ours and other companies can't have it.

BEN HILLARY, COMMODITIES PEOPLE

Good. I think one thing that I guess it's the age-old debate in the CTRM world never goes away, that monolithic systems versus ecosystems, it's really as important today as ever before. What's your perspective on that?

STEVE HUGHES, QUOR GROUP

Yeah, I think in monolithic systems, every monolithic system has its sweet spot, but it can't be sweet in every area. And I think even the very large players have learned that, that you may invest in some very expensive monolithic system, but this desk over here or that desk over there actually needs some specialism in whatever it is, metals, agriculture, whatever. So one of the things I found is that even very large companies who might have a flagship CTRM system are then if you actually look in, they're dotted around with other CTRM systems. So I think you've got this monolith with then the more point solutions sitting around. But they're expert in what they do. And I don't see that trend ending because even with cause ambitions, I can't see there ever being one product that covers it all. And there are other players in the industry, particularly the tier one vendors who kind of claim to do that. But even then they split the portfolio into four or five chunks and really present it as they are still very large, capable systems. But it doesn't mean a client only has one of them. They could have more than one. I think that trend is going to continue. I can't see, even for the ones that have been around forever, if you will, and are very broad and deep in what they do. There's still many cases for the new entrants coming along. If you look at the vendor market to this, the number of new entrants is over 100. There's dozens of new firms coming up that have something new to offer and it's normally about them being adaptable and flexible. And in fact, we are very conscious of that. We either stand still or we die actively building much more flexible, working into our own products to make sure we can keep up with that. But it is the sign of a, if you will, an immature market when you've got a long tail of 100 new entrants and not ten companies because it's all been consolidated. It tells you that the c two m industry is still in motion and in some ways is still immature, which is one of the things that makes it exciting for me, being a Quor Group. And that is the reason I joined, to try and make a difference in that, in that pack. So I don't know what the debate people go on for ages about. You know, you must have a big monolithic. It has to be that. But I'm definitely seeing a trend towards using that and then some more niche solutions, or as you call it, you know, an ecosystem of, a smaller ecosystem of solutions that can add tremendous value.

BEN HILLARY, COMMODITIES PEOPLE

Yeah, I suppose following on from what you were saying there, what is your wider vision of core in the years ahead? What can we expect?

STEVE HUGHES, QUOR GROUP

Well, let me step back a little. The reason I was very happy in another job before I got a knock on the door from Quor Group. Well, from STG, actually. I had no intention of moving. The reason I did was as I mentioned earlier, SDG setup Quor Group as a platform on which to accrete and acquire other assets. And that's very appealing to me. So Eka is, in my 45 years in the software industry, my 25th merger and acquisition activity, and it's something that I enjoy very much. I love change. If things aren't changing, Steve gets bored and goes, find something else. So this is changing all the time. And that's what attracted me. And I think what encouraged STG was the fact that I had got a lot of experience in mergers and acquisitions. So if you look at the immediate future, obviously we were focused on taking two, what were two teams and bringing them into a single team. And I have to say, in all my repetitions of doing merger activities, this has been made easier by the fact that we've got two teams that already are not talking about my product and my background and my history. They're talking about our products and how we present them to clients and focus on the future. And that makes it a lot easier for an old dog like me to try to bring it together into one team. So right now we're working very, very closely on merger activities. So a couple of weeks ago, the core management team went out to Bengaluru to meet the Eka management team, and we spent nearly a week sorting out how we do things. I also have the opportunity to address my 200 something new colleagues at Ecker. But what astonished me was as I, you know, I'm locked in a boardroom doing stuff with the management team as I walked out and, and walking around the building, in every room, you would see poor and EKA people collaborating on different things and getting off. These guys are not having to be forced. It's the other way around, really. They're running at a pace that even I find difficult. So immediately we're focused on getting those two companies together. We're focused on growth individually and collectively. We're focused on attaining the very high benchmarks that STG set of its portfolio companies, which is non trivial. So we're focused on that. We're also working out how we bring the product portfolio together and how that makes sense to clients. And by that, I mean there are other large players in the market who have collected assets in this industry, and their focus is on those assets that, you know, the company is split based on those assets and they present themselves as a collection of products. We don't want to do that. We want to present ourselves as a solution set. So call it core for agriculture, core for metals, core for concentrates, core for whatever you like. And it's then our job to take this portfolio of products, mix and match what we need, then give a solution for a cotton trader, not haycores products, a cotton trader. And that may take a number of products from different parts of the portfolio. Of course, for us, it's a licensing and pricing issue, because if you take those things separately and add them all together, it becomes very expensive. So we're working on that as well in terms of how we price, bundle and position in the marketplace. If you roll that forward again to this vision of wanting to be able to cover all commodity groups, then we still have gaps. So, needless to say, we can fill those gaps by building or we can fill them by acquiring. We're going to lean towards acquiring with STG's help to fill all those gaps out. Once that's done, we can then look at the ancillary products that sit around the heart of a CTRM system, like trade surveillance, business intelligence, all of those things that sit around it, where if you go into a commodity trading company, you see the heart is the CTRM system, but then there's a whole plethora of other things that sit around, and those two would be targets in the longer term. And again, the idea is, with core and Eka coming together, we're now different already from what we call tier two vendors. So long standing, profitable, got a bit of critical mass, good name recognition. All of those things are separated from that long tail of the new entrance I just mentioned. But tier one is dominated by FIS, SAP, and of course ion and I spent time at Ion when we bought open link and Allegro, for example. So we've already as the group has already moved kind of out of tier two but we're not in tier one yet. But longer term we would be, which would give I think a new, fresh, vibrant alternative clients that are using those tier one supplier products. So in a nutshell that's kind of where we're headed. In the longer term, obviously it's going to be again that important thing, lots of change, lots of disruption because we do intend to disrupt things and an exciting time for everybody who's fit enough, well enough and lights change enough to stay with us on the journey. So yeah, I'm really looking forward to that.

BEN HILLARY, COMMODITIES PEOPLE

Excellent. Yeah, yeah, very, very exciting times ahead and very much look forward to seeing it all developed. So. Yeah, well, thanks Steve for it's been a fascinating conversation and thank you to all of our listeners for joining. So until next time, wishing you all the best and thank you.

STEVE HUGHES, QUOR GROUP

Thank you too. Bye.