Q4

Q4 Inc. (TSX:QFOR) (“Q4” or the “Company”), a leading capital markets communications platform, today announced its financial results for the three month period ended March 31, 2022. All amounts are expressed in US dollars unless otherwise stated.

“Our performance for the first quarter highlights the durability and agility of our business model,” said Darrell Heaps, CEO of Q4. “While top line and bottom line results were in line with our expectations, we were especially excited to see the record increase in customer expansion sales and controllable client retention. We believe this demonstrates our ability to provide our clients with a growing number of valuable solutions and services, and is directly correlated to our investments in our technology platform, as well as our focused effort of selling into our established customer base. Looking out to the second half of the year, we would expect material investments to tail off, and to realize greater leverage and accelerating revenue growth as we execute on our growth and path to profitability strategy.”

First Quarter 2022 Financial Highlights

• Delivered revenue of $13.9 million, an increase of 23.1% from the comparative period in the prior year
• Drove annual recurring revenue¹ as of March 31, 2022 to $52.8 million, increasing 18.1% year over year
• Average recurring revenue per account (ARPA) grew 3.2% for the quarter, an increase of 12.2% over the preceding quarter's ARPA growth rate of 2.8%
• Expanded gross margin by 300 basis points year over year to 57.4%
• Net loss of $6.6 million, or $0.17 per share
• Adjusted EBITDA² loss of $7.1 million

First Quarter and Subsequent to Quarter-End Operational Highlights

• Completed Q1 with 2,673 total customers (including customers in the Company’s backlog) compared to 2,391 customers from the prior year period
• Increased the number of products existing customers are using, driving growth in ARPA
• The migration of our corporate earnings webcasting platform continued on plan, with the company delivering 734 earnings events year to date, and over 1000 earnings events in total, since launching the platform
• Continued expansion of Capital Markets Events business to include hybrid and in-person capabilities in addition to fully virtual, resulting in the growth of Q4- hosted sell-side investor conferences and bus tours
• Launched Video Earnings product and expanded set of features to our Virtual Investor Day product
• Signed 3-year extension with New York Stock Exchange and their new expanded issuer services program, offering a broad list of virtual events that go beyond quarterly earnings calls, including but not limited to investor days, ESG events, corporate town halls, and partnering with the NYSE to host in-person events at the Exchange with the benefit of video broadcasting
• Announced Normal Course Issuer Bid on March 23rd to provide us with the flexibility to repurchase stock based on management’s ongoing assessments of the capital needs of the business, the market price of Q4’s common stock and general market conditions

Webcast Information

Q4 will host a webcast with Darrell Heaps, CEO, Ryan Levenberg, exiting CFO and Interim CFO Donna de Winter, to discuss the Company's financial results at 9:30 am ET on Wednesday, May 4, 2022. Participants can register in advance or access the webcast live at https://events.q4inc.com/attendee/251269858 . 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 month period ended March 31, 2022 will be available on Q4's IR website and will be filed on SEDAR at www.sedar.com .

First Quarter 2022 Results

Selected Financial Measures

Revenue
		Three Months Ended March 31,
		2022		2021		Change		Change
(U.S. dollars in thousands)		$		$		$		%
Capital markets platform		12,864		10,598		2,266		21.4%
Platform services		1,063		719		344		47.8%
Other		18		8		10
Total revenue		13,945		11,325		2,620		23.1%
Gross profit		8,006		6,161		1,845		29.9%
Percentage of total revenue		57.4%		54.4%

Key Performance Indicators

		March 31, 2022			March 31, 2021			Change			Change
(U.S. dollars, except ARR which is in millions)		$			$			$			%
Annual Recurring Revenue		$	52.8		$	44.7		$	8.1		18.1	%
Average Revenue per Account		$	18,404		$	17,837		$	567		3.2	%

Results of Operations

The following table outlines our consolidated statement of loss and comprehensive loss for the three months ended March 31, 2022 and 2021:

		Three Months Ended
		March 31,
		2022		2021
(U.S. dollars in thousands)		$		$
Revenue		13,945		11,325
Direct cost of revenue		5,939		5,164
Gross profit		8,006		6,161
Operating Expenses
Sales and marketing		5,144		4,393
Research and development		4,130		2,840
General and administrative		5,771		4,983
Depreciation and amortization		901		1,066
Foreign exchange gain		(597)		(27)
Other expenses		280		221
Total operating expenses		15,629		13,476
Loss from operations		(7,623)		(7,315)
Finance expenses		21		131
Finance income		(3)		(1)
(Gain) loss on derivative financial instruments		(1,104)		6,094
Loss before income taxes		(6,537)		(13,539)
Income taxes		60		(2)
Net loss		(6,597)		(13,537)
Other comprehensive loss
Foreign exchange loss on foreign operations		(11)		(16)
Net loss and comprehensive loss		(6,608)		(13,553)
Basic and diluted loss per share		(0.17)		(1.46)
Weighted average number of common shares outstanding - basic and diluted		39,624		9,252

Key Balance Sheet Information

		March 31, 2022		December 31, 2021		Change		Change
(U.S. dollars in thousands)		$		$		$		%
Cash		55,827		63,283		$(7,456)		(11.8)%
Total assets		101,848		109,117		(7,269)		(6.7)%
Total liabilities		29,599		30,415		(816)		(2.7)%
Total long-term liabilities		8,370		8,065		305		3.8%

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
		March 31,
		2022			2021
(U.S. dollars in thousands)		$			$
Net loss		(6,597	)		(13,537	)
Depreciation and amortization		901			1,066
Finance expenses(1)		21			131
Finance income		(3	)		(1	)
Income taxes		60			(2	)
EBITDA		(5,618	)		(12,343	)
Other adjustments
Share-based compensation expense(2)		148			247
Unrealized foreign exchange (gain) loss(3)		(597	)		54
(Gain) loss on derivative financial instruments(4)		(1,104	)		6,094
Transaction related expenses(5)		22			366
Adjusted EBITDA		(7,149	)		(5,582	)

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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") and performance share units ("PSUs") 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
		March 31,
		2022		2021
(U.S. dollars in thousands)		$		$
Cash flow from (used in) operating activities		(7,592)		(4,416)
Additions to property and equipment		(279)		(161)
Free cash flow		(7,871)		(4,577)

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 months ended March 31, 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 2,673 public companies globally including 50% of the S&P 500. Q4 is based in Toronto, with offices in New York and London. Learn more at q4inc.com .

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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”

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