Q4 Inc. Reports Strong Progress in Second Quarter 2023 Results

Q4 Inc. (TSX:QFOR) (“Q4” or the “Company”), the leading capital markets access platform, today announced its financial results for the three and six months period ended June 30, 2023. QFOR reports in U.S. dollars and in accordance with International Financial Reporting Standards (“IFRS”).

Q2 2023 Year-over-Year Financial Highlights

• Revenue of $15.1 million, up 10%;
• Annual recurring revenue¹ (“ARR”) of $55.8 million, up 4.5%;
• Annual recurring revenue per account (“ARPA“) of $20,859, up 12%;
• Gross margin of 68.3%, up 1180 basis points;
• Adjusted EBITDA² of $(3.8) million compared with $(8.7) million, an improvement of 56%;
• Adjusted EBITDA² loss per share $(0.09), an improvement of $0.13 per share;
• Net loss of $(6.1) million, an improvement of $5.4 million; and
• Net loss per share of $(0.15), a $0.14 per share improvement.

“During Q2, and throughout the last twelve months, the innovations coming from our platform strategy drove increased product adoption, ARPA growth and client loyalty,” said Darrell Heaps, Founder and CEO of Q4 Inc. “For investors, the successful execution of this expansion sales strategy offers confidence and visibility for future quarters. Major structural changes have been put in place over the last year which have reduced operating costs and driven significant margin improvement. We expect to exit 2023 with gross margin in the mid 70’s compared with 59% for the full year 2022.”

Q2 2023 Operational Highlights

• Over 2,000 clients and agencies active on the Q4 Platform in Q2, gaining new and unique insights while improving workflow;
• Announced the appointment of Keith Reed as Chief Operating Officer and Tim Stahl as Chief Revenue Officer;
• Unveiled new brand and visual identity, positioning Q4 as the leading capital markets access platform;
• Launched Earnings Lifecycle on the Q4 Platform, the market’s only application to streamline the planning, execution, and impact of quarterly disclosures;
• Introduced first-of-its-kind Event Management Application to the Q4 Platform, providing new IR event management technology for virtual event planning;
• Enhanced institutional targeting as part of the Engagement Analytics Suite, bringing new insights to clients that uncover untapped investor opportunities;
• Announced progress on pioneering generative artificial intelligence (“AI”) on the Q4 Platform that is purpose built for IR;
• More than 85,000 new Q4 investor accounts created during the three month period, up more than 50% since the end of 2022. As of June 30th, more than 370,000 investors have signed up for this platform service;
• More than 16 million unique investors access Q4’s network of IR websites every month; and
• Available liquidity of $44.2 million at the end of June 2023, including $21.7 million in cash and an available credit facility of $22.5 million which remains undrawn.

“By harnessing our vast amounts of proprietary data, coupled with the power of generative AI, we are transforming the investor relations workflow and solidifying our position as the leading capital markets access platform,” said Darrell Heaps. “This is what differentiates the Q4 platform and delivers unmatched value to our clients.”

“The progress made by our team in Q2 represents another significant stride towards sustained profitable growth,” commented Donna de Winter, CFO of Q4 Inc. “Looking ahead to the second half of 2023, irrespective of broader capital markets activity, we expect continued revenue momentum and margin expansion. The deliberate actions we have taken to significantly lower our operating expenses are improving our visibility to both positive EBITDA and cash flow in 2023.”

Webcast Information

Q4 will host a webcast to discuss the Company's financial results at 9:30 am ET on Wednesday, August 9, 2023. Participants can register here in advance or access the webcast live. 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 consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2023 will be available on Q4's IR website and will be filed on SEDAR at www.sedar.com.

Second Quarter 2023 Results

Selected Financial Measures

Revenue
	Three Months Ended June 30,					Six Months Ended June 30,
	2023	2022	Change	Change		2023	2022	Change	Change
(USD, in thousands)	$	$	$	%		$	$	$	%
Capital markets platform	13,569	12,541	1,028	8.2%		26,751	25,405	1,346	5.3%
Platform services	1,520	1,196	324	27.1%		2,818	2,260	558	24.7%
Other	9	16	(7)			28	34	(6)
Total revenue	15,098	13,753	1,345	9.8%		29,597	27,699	1,898	6.9%
Gross profit	10,318	7,777	2,541	32.7%		19,804	15,783	4,021	25.5%
Percentage of total revenue	68.3%	56.5%				66.9%	57.0%

Key Performance Indicators
(in USD)	June 30, 2023			June 30, 2022		Change		Change
Annual Recurring Revenue (in millions)	$		55.8	$	53.3	$	2.5	4.5 %
Average Recurring Revenue per Account	$		20,859	$	18,642	$	2,217	11.9%

Results of Operations

The following table outlines our consolidated statement of loss and comprehensive loss for the three and six months ended June 30, 2023 and 2022:

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2023	2022		2023	2022
(USD, in thousands)	$	$		$	$
Revenue	15,098	13,753		29,597	27,699
Direct cost of revenue	4,780	5,976		9,793	11,916
Gross profit	10,318	7,777		19,804	15,783
Operating Expenses
Sales and marketing	4,711	6,505		9,591	11,649
Research and development	4,123	4,992		8,422	9,122
General and administrative	6,039	5,777		11,565	11,548
Depreciation and amortization	903	914		1,844	1,815
Foreign exchange (gain) loss	(147)	961		(140)	364
Other expenses	817	67		1,141	347
Total operating expenses	16,446	19,216		32,423	34,845
Loss from operations	(6,128)	(11,439)		(12,619)	(19,062)
Finance expenses	54	19		66	41
Finance income	(184)	(3)		(276)	(6)
Impairment loss	—	—		634	—
Gain on derivative financial instruments	—	(116)		—	(1,221)
Loss before income taxes	(5,998)	(11,339)		(13,043)	(17,876)
Income taxes	59	110		112	170
Net loss	(6,057)	(11,449)		(13,155)	(18,046)
Other comprehensive income (loss)
Foreign exchange gain (loss) on foreign operations	9	(52)		31	(63)
Net loss and comprehensive loss	(6,048)	(11,501)		(13,124)	(18,109)
Basic and diluted loss per share	(0.15)	(0.29)		(0.33)	(0.45)
Weighted average number of common shares outstanding - basic and diluted	40,012	39,715		39,965	39,670

Key Balance Sheet Information

	June 30, 2023	December 31, 2022	Change	Change
(USD, in thousands)	$	$	$	%
Cash and cash equivalents	21,682	21,536	$146	0.7%
Short-term investments	—	7,607	(7,607)	(100.0)%
Total assets	62,595	73,832	(11,237)	(15.2)%
Total liabilities	30,517	29,459	1,058	3.6%
Total long-term liabilities	10,732	8,210	2,522	30.7%

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 on derivative financial instruments, severance and related costs, impairment loss, regulatory accruals and other costs. 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.

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2023	2022		2023	2022
(USD, in thousands)	$	$		$	$
Net loss	(6,057)	(11,449)		(13,155)	(18,046)
Depreciation and amortization	903	914		1,844	1,815
Finance expenses(1)	54	19		66	41
Finance income	(184)	(3)		(276)	(6)
Income taxes	59	110		112	170
EBITDA	(5,225)	(10,409)		(11,409)	(16,026)
Other adjustments
Share-based compensation expense(2)	457	874		883	1,022
Unrealized foreign exchange (gain) loss(3)	(147)	961		(140)	364
Gain on derivative financial instruments(4)	—	(116)		—	(1,221)
Impairment loss	—	—		634	—
Severance and related costs(5)	545	—		992	—
Regulatory and advisory fees(6)	607	—		819	22
Adjusted EBITDA	(3,763)	(8,690)		(8,221)	(15,839)
EBITDA loss per share	(0.13)	(0.26)		(0.29)	(0.40)
Adjusted EBITDA loss per share	(0.09)	(0.22)		(0.21)	(0.40)

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 ("LEIP") to certain employees and directors. Options granted under the LEIP have become options under our Omnibus Equity Incentive Plan (the “Omnibus Plan”) in connection with the 2021 IPO. 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 expenses relate to regulatory, consulting, advisory, and other fees that are non-operational.

(5) Represents severance and related expenses included in G&A and other expenses.

(6) These expenses relate to professional, consulting, advisory, and other fees that are non-recurring.

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 table reconciles our cash flow from/(used in) operating activities to free cash flow:

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2023	2022		2023	2022
(USD, in thousands)	$	$		$	$
Cash flow from (used in) operating activities	(1,389)	(10,409)		(7,346)	(18,001)
Purchases of property and equipment	(158)	(152)		(200)	(431)
Free cash flow	(1,547)	(10,561)		(7,546)	(18,432)

Key Performance Indicators

This press release also makes reference to “Annual Recurring Revenue” or “ARR” and “Annual Recurring 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, 2023 and 2022.

Forward-Looking Information

This press release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking information”) within the meaning of applicable securities laws. In some cases, forward-looking information generally can be identified by the use of terminology such as “expect”, “continue”, “anticipate”, “intend”, “aim”, “plan”, “believe”, “budget”, “estimate”, “forecast”, “foresee”, “close to”, “target” or negative versions thereof and similar expressions.

This forward-looking information relates to our future financial outlook and anticipated events or results and includes, but is not limited to, information regarding: the Company’s financial position, financial results, business strategy, performance, achievements, growth strategies; the Company’s budgets, operations, and taxes; judgments and estimates impacting our financial statements; the market in which the Company operates; industry trends and the Company’s competitive position; expansion of the Company’s product offerings; trends in research and development ("R&D") expenses and general and administrative ("G&A") expenses, each as a percentage of revenue; planned decreases in sales and marketing and R&D activities; the timing and pace for achieving profitability; and expectations regarding the growth of the Company’s client base, revenue and revenue generation potential.

Forward-looking information is based on certain assumptions, expectations and projections, and analyses made by the Company 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 assumptions, expectations, 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 client relationships and to continue to expand our clients’ 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 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.

Given these risks or uncertainties, investors are cautioned not to place undue reliance on forward-looking information, including any financial outlook. Any forward-looking information that is contained in this MD&A speaks only as of the date of such statement, and the Company undertakes no obligation to update any forward-looking information or to publicly announce the results of any revisions to any of those statements to reflect future events or developments, except as required by applicable securities laws. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data. 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.

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 the leading capital markets access platform that is transforming how issuers, investors, and the sell-side efficiently connect, communicate, and engage with each other.

The Q4 Platform facilitates interactions across the capital markets through IR website products, virtual events solutions, engagement analytics, investor relations CRM, shareholder and market analysis, surveillance, and ESG tools. The Q4 Platform is the only holistic capital markets access platform that digitally drives connections, analyzes impact, and targets the right engagement to help public companies work faster and smarter.

The company is a trusted partner to more than 2,600 public companies globally, including many of the most respected brands in the world, and maintains an award winning culture where team members grow and thrive.

Q4 is headquartered in Toronto, with offices in New York and London. Learn more at investors.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”

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Contact information

Investors
Edward Miller
Director, Investor Relations
(437) 291-1554
ir@q4inc.com

Media
Heather Noll
Corporate Communications Manager
media@q4inc.com