Q4-INC.

Q4 Inc. (TSX:QFOR) (“Q4” or the “Company”), a leading capital markets communications platform, today announced its financial results for the three and six months period ended June 30, 2022. All amounts are expressed in US dollars unless otherwise stated.

“The second quarter results show our continued progress against our overall strategy and vision,” said Darrell Heaps, CEO of Q4. “We achieved double digit recurring revenue growth, driving product adoption with higher ARPA expansion growth, as our customers continued to renew subscriptions at record levels and increase their spend with Q4. Given the challenging macro environment, and with our peak investment period behind us, we are accelerating our path to profitability. With a focus on expanding our operating leverage, initiatives are underway to improve sales efficiency and utilize low cost geographies to drive down operating expenses. Combined with our gross margin expansion, these will bring forward our commitment to be cash and EBITDA positive by H2 2023, well in advance of our prior expectations. This acceleration will ensure we remain well capitalized through to profitability, while also ensuring we remain well positioned to continue delivering strong growth moving forward.”

Second Quarter 2022 Financial Highlights

• Delivered revenue of $13.8 million, an increase of 11.5% with the exclusion of virtual shareholder meeting services (VSM) business which was strategically terminated in Q3 2021. Including the VSM business in the prior year, revenue declined 20.5% year over year

• Drove annual recurring revenue¹ as of June 30, 2022 to $53.3 million, increasing 12.4% year over year, driven in part by 107 existing customers purchasing additional subscriptions

• Average recurring revenue per account (ARPA) grew 4.1% for the quarter, an increase over the preceding quarter's ARPA growth rate of 3.2%

• Ended the quarter with gross margin of 56.5%, a decline of 24 basis points year over year, with the company continuing to guide gross margin expansion to mid 60s by year end

• Net loss of $11.4 million, or $(0.29) per share and Adjusted EBITDA² loss of $8.7 million, reflecting peak investments in S&M and R&D completed in the quarter 

Second Quarter and Subsequent to Quarter-End Operational Highlights

• Completed Q2 with 2,685 total customers compared to 2,505 customers from the prior year period.

• Launched the Capital Connect platform, along with the Engagement Analytics and Website Management apps as the first of several applications that will be available through a single user interface.

• Continued migration of clients onto our corporate earnings webcasting platform, with over 700 earnings events hosted on our platform in Q2, representing 66% of the total earnings events hosted by Q4 in the quarter. This new platform provides a much improved experience for our customers and investors, while also being one of the primary drivers of our gross margin expansion strategy.

• Announced new partnerships with Diligent and eSSENTIAL Accessibility, enhancing our offering through providing clients access to best in class service providers.

• Announced the acceleration of the timeline to profitability by improving sales efficiency, and utilizing low cost geographies to expand operating leverage throughout the remainder of 2022 and 2023, and achieve positive cash flow and EBITDA in H2 2023.

• Announced the appointment of Donna de Winter as the new Chief Financial Officer. 

Webcast Information

Q4 will host a webcast with Darrell Heaps, CEO and Donna de Winter, CFO and COO to discuss the Company's financial results at 9:30 am ET on Friday, August 12, 2022. Participants can register in advance or access the webcast live at https://events.q4inc.com/attendee/382420795 . Supplemental materials will be available at least fifteen minutes prior to the start of the event. A replay of the webcast will be available at investors.q4inc.com shortly after the event concludes.

Audience questions will be taken real-time via the Q4 Platform. Investors can also submit their questions in advance to ir@q4inc.com or via our IR website . We will do our best to respond to your questions either on the webcast, if time permits or shortly thereafter. We appreciate your interest.

Q4's unaudited interim condensed consolidated financial statements and management's discussion and analysis for the three and six months period ended June 30, 2022 will be available on Q4's IR website and will be filed on SEDAR at www.sedar.com .

Second Quarter 2022 Results

Selected Financial Measures
Revenue
		Three Months Ended June 30,								Six Months Ended June 30,
		2022		2021		Change		Change		2022		2021		Change		Change
(U.S. dollars in thousands)		$		$		$		%		$		$		$		%
Capital markets platform		12,541		16,421		(3,880)		(23.6)%		25,405		27,019		(1,614)		(6.0)%
Platform services		1,196		847		349		41.2%		2,260		1,566		694		44.3%
Other		16		21		(5)				34		29		5
Total revenue		13,753		17,289		(3,536)		(20.5)%		27,699		28,614		(915)		(3.2)%
Gross profit		7,777		9,818		(2,041)		(20.8)%		15,783		15,979		(196)		(1.2)%
Percentage of total revenue		56.5%		56.8%						57.0%		55.8%

Key Performance Indicators
		June 30, 2022			June 30, 2021			Change			Change
(U.S. dollars, except ARR which is in millions)		$			$			$			%
Annual Recurring Revenue		$	53.3		$	47.4		$	5.9		12.4 %
Average Revenue per Account		$	18,642		$	17,912		$	730		4.1 %

Results of Operations

The following table outlines our consolidated statement of loss and comprehensive loss for the three and six months ended June 30, 2022 and 2021:

		Three Months Ended			Six Months Ended
		June 30,			June 30,
		2022	2021		2022	2021
(U.S. dollars in thousands)		$	$		$	$
Revenue		13,753	17,289		27,699	28,614
Direct cost of revenue		5,976	7,471		11,916	12,635
Gross profit		7,777	9,818		15,783	15,979
Operating Expenses
Sales and marketing		6,505	4,444		11,649	8,837
Research and development		4,992	2,784		9,122	5,624
General and administrative		5,777	4,626		11,548	9,609
Depreciation and amortization		914	1,016		1,815	2,082
Foreign exchange loss		961	193		364	166
Other expenses		67	51		347	272
Total operating expenses		19,216	13,114		34,845	26,590
Loss from operations		(11,439)	(3,296)		(19,062)	(10,611)
Finance expenses		19	309		41	440
Finance income		(3)	(7)		(6)	(8)
(Gain) loss on derivative financial instruments		(116)	(1,350)		(1,221)	4,744
Loss before income taxes		(11,339)	(2,248)		(17,876)	(15,787)
Income taxes		110	69		170	66
Net loss		(11,449)	(2,317)		(18,046)	(15,853)
Other comprehensive (loss) income
Foreign exchange (loss) gain on foreign operations		(52)	3		(63)	(14)
Net loss and comprehensive loss		(11,501)	(2,314)		(18,109)	(15,867)
Basic and diluted loss per share		(0.29)	(0.22)		(0.45)	(1.53)
Weighted average number of common shares outstanding - basic and diluted		39,715	10,614		39,670	10,379

Key Balance Sheet Information
		June 30, 2022		December 31, 2021		Change		Change
(U.S. dollars in thousands)		$		$		$		%
Cash		45,108		63,283		$(18,175)		(28.7)%
Total assets		91,487		109,117		(17,630)		(16.2)%
Total liabilities		29,876		30,415		(539)		(1.8)%
Total long-term liabilities		7,331		8,065		(734)		(9.1)%

Non-IFRS Measures and Reconciliation of Non-IFRS Measures

This press release makes reference to certain non-IFRS financial measures including key performance indicators used by management and typically used by our competitors with software-as-a-service (“SaaS”) business models. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore not necessarily comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS financial measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS financial measures and industry metrics are used to provide investors with supplemental measures of our operating performance and liquidity and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS financial measures and industry metrics, in the evaluation of similar companies. Management also uses non-IFRS financial measures and industry metrics in order to facilitate operating performance comparisons from period to period, the preparation of annual operating budgets and forecasts and to determine components of executive compensation.

EBITDA and Adjusted EBITDA

We define EBITDA as net loss, adjusted for depreciation and amortization, finance expenses, finance income and income taxes. Adjusted EBITDA is a supplemental measure used by management to assess our financial and operating performance without regards to financing methods or capital structure. Adjusted EBITDA represents EBITDA, adjusted for the following: share-based compensation, unrealized foreign exchange (gain) loss, (gain) loss on derivative financial instruments, and transaction related expenses. We believe EBITDA and Adjusted EBITDA, two non-IFRS financial measures, are useful in assessing our operating cash flows as they eliminate the effects of non-cash expenses and one-time or non-recurring items recorded in the statements of loss and comprehensive loss. The Company’s definition of EBITDA and Adjusted EBITDA may be different than similarly titled measures used by other companies. The following table reconciles Adjusted EBITDA to net loss for the periods indicated.

		Three Months Ended			Six Months Ended
		June 30,			June 30,
		2022	2021		2022	2021
(U.S. dollars in thousands)		$	$		$	$
Net loss		(11,449)	(2,317)		(18,046)	(15,854)
Depreciation and amortization		914	1,016		1,815	2,082
Finance expenses(1)		19	309		41	440
Finance income		(3)	(7)		(6)	(8)
Income taxes		110	69		170	66
EBITDA		(10,409)	(930)		(16,026)	(13,274)
Other adjustments
Share-based compensation expense(2)		874	208		1,022	455
Unrealized foreign exchange loss(3)		961	212		364	266
(Gain) loss on derivative financial instruments(4)		(116)	(1,350)		(1,221)	4,744
Transaction related expenses(5)		—	453		22	819
Adjusted EBITDA		(8,690)	(1,407)		(15,839)	(6,990)

Note:
(1)	Finance expenses are primarily related to interest and accretion of financial liabilities.
(2)	Share-based compensation includes non-cash expenditures recognized in connection with the issuance of options under our Legacy Equity Incentive Plan to our employees and directors. Options granted under the Legacy Equity Incentive Plan have become options under our Omnibus Equity Incentive Plan (the “Omnibus Plan”) in connection with the IPO in 2021. This amount also includes the restricted share units ("RSUs"), performance share units ("PSUs") and deferred share units ("DSUs") granted under the Omnibus Plan.
(3)	These adjustments represent the change in the value of foreign currency denominated transactions that are recorded in financial statements prior to the settlement of invoices.
(4)	These adjustments represent fair value adjustments relating to outstanding warrants.
(5)	Transaction related expense represents expenses relating to our IPO and include professional, legal, consulting and accounting fees that are non-recurring and would otherwise not have been incurred.

Free Cash Flow

Free cash flow represents cash flow from (used in) operating activities less additions to property and equipment. We use Free cash flow, a non-IFRS financial measure, to assess the amount of cash available for dividend payments, debt repayment and other investing and financing activities. We believe that this information is useful to certain investors and analysts to evaluate the Company’s performance with respect to its operating cash flow capacity to meet non-discretionary outflows of cash. The following tables reconciles our cash flow from (used in) operating activities to Free cash flow:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2022		2021		2022		2021
(U.S. dollars in thousands)		$		$		$		$
Cash flow from (used in) operating activities		(10,409)		(5,106)		(18,001)		(9,530)
Additions to property and equipment		(152)		(30)		(431)		(191)
Free cash flow		(10,561)		(5,136)		(18,432)		(9,721)

Key Performance Indicators

This press release also makes reference to “Annual Recurring Revenue” or “ARR” and “Average Revenue Per Account” or “ARPA”, which are key performance indicators we use to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. Our key performance indicators may be calculated in a manner different from similar key performance indicators used by other companies. Definitions of these key performance indicators can be found under the heading “Key Performance Indicators” in the Company’s management’s discussion and analysis for the three and six months ended June 30, 2022 and 2021.

Forward-Looking Information

This press release may contain “forward-looking information” within the meaning of applicable securities laws. Forward-looking information may relate to our future financial outlook and anticipated events or results and may include information regarding our financial position, business operations, business strategy, growth strategies, budgets, operations, financial results, taxes, dividend policy, plans and objectives. In certain cases, forward-looking statements that are predictive in nature, depend upon or refer to future events or conditions, and/or can be identified by the use of words such as “expect,” “continue,” “anticipate,” “intend,” “aim,” “plan,” “believe,” “budget,” “estimate,” “forecast,” “foresee,” “close to,” “target” or negative versions thereof and similar expressions, and/or state that certain actions, events or results “may,” “could,” “would,” “might” or “will” be taken, occur or be achieved. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events or circumstances.

Forward-looking information is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Certain assumptions underlying the forward-looking information in this MD&A include: our ability to continue investing in infrastructure to support our growth and brand recognition; our ability to continue maintaining and enhancing our technological infrastructure and the functionality of our platform; our ability to develop and implement new product offerings; our ability to capitalize on growth opportunities and implement our growth strategy; our ability to build our market share and enter new geographies; the total addressable market for our products; our ability to retain key personnel; our ability to maintain existing customer relationships and to continue to expand our customers’ use of our platform and products; our ability to maintain existing relationships on similar terms with our current service providers, suppliers, channel partners and other third parties; our ability to maintain and expand our geographic scope; our ability to execute on our expansion plans; our ability to obtain financing on acceptable terms or at all; the impact of competition; the successful integration of future acquisitions; the changes and trends in our industry or the global economy; changes in laws, rules, regulations, and global standards; and that the risks and uncertainties noted below will not materialize.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as of the date such statements are made, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the following risk factors described in greater detail in the “Summary of Factors Affecting our Performance” and “Financial Instruments and Other Instruments” sections of this MD&A, and in the “Risk Factors” section of our Annual Information Form, which was filed on March 30, 2022, and is available under our profile on SEDAR at www.sedar.com .

If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. The opinions, estimates or assumptions referred to above are described in greater detail in "Summary of Factors Affecting our Performance" and should be considered carefully by prospective investors.

Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this MD&A represents our expectations as of the date of hereof (or as of the date they are otherwise stated to be made), and is subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

Additional information relating to Q4, can be found on SEDAR under the Company’s profile at www.sedar.com .

About Q4 Inc.

Q4 Inc. (TSX: QFOR) is a leading capital markets communications platform that is transforming the way publicly traded companies, investors and investment banks make decisions to efficiently discover, communicate and engage with each other. The Q4 end-to-end technology platform facilitates interactions across the capital markets through its IR website products, virtual events solutions, capital markets CRM, shareholder and market analytics tools. The firm is a trusted partner to more than 2,650 public companies globally including many of the most respected brands in the world. Q4 is based in Toronto, with offices in New York and London. Learn more at q4inc.com .

_____________________________

1 Annual recurring revenue or “ARR” is a key performance indicator. See “Key Performance Indicators”

2 Adjusted EBITDA is a non-IFRS measure. See “Non-IFRS Measures and Reconciliation of Non-IFRS Measures”

View source version on businesswire.com: https://www.businesswire.com/news/home/20220812005076/en/

Link:

ClickThru