On plan to exit 2023 with break-even run rate
EBITDA and generate cash in 2024
Q4 Inc. (TSX: QFOR) (“Q4” or the “Company”), the leading capital
markets access platform, today announced its financial results for
the three and nine months period ended September 30, 2023. QFOR
reports in U.S. dollars and in accordance with International
Financial Reporting Standards (“IFRS”).
Q3 2023 Year-over-Year Financial Highlights
- Revenue of $14.7 million, up 3.5% - driven by 5% subscription
revenue growth;
- Annual recurring revenue1 (“ARR”) of $56.4 million, up 3.1% or
$1.7 million;
- Annual recurring revenue per account (“ARPA“) of $21,315, up
11.3%;
- Non-subscription Platform revenue and Platform services were
seasonally flat YoY;
- Gross margin of 68.7%, up 970 basis points;
- Adjusted EBITDA2 of $(1.9) million compared with $(7.5)
million, an improvement of 75%;
- Adjusted EBITDA2 per share $(0.05), an improvement of $0.14 per
share;
- Net loss of $(3.7) million, an improvement of $8.2
million;
- Net loss per share of $(0.09), a $0.21 per share
improvement;
- Operating cash consumption of $0.5 million compared to $6.7
million used in Q3 2022; and
- At September 30, 2023, the Company had available liquidity of
$43.3 million, comprising $20.8 million in cash and an available
and undrawn credit facility of $22.5 million.
“I am proud of our team’s ability to continue expanding
subscription growth on the Q4 Platform, generating long-term high
quality revenue and associated margins,” said Darrell Heaps,
Founder and CEO of Q4 Inc. “The changes we have put in place over
the last year, coupled with technology advancements, have paved our
path towards profitability while significantly improving
organizational efficiency and effectiveness, resulting in over $18
million in annualized savings. We anticipate achieving break-even
run rate EBITDA by the end of this year, exiting 2023 with a gross
margin in the 70s, and generating cash flow in 2024.”
“Furthermore, I am very pleased about this morning’s
announcement regarding joining forces with Sumeru Equity Partners.
The Sumeru team possesses a deep understanding of our business and
their support will enable us to further build on our exceptional
culture, while investing in our strategic initiatives, and
expanding the Q4 Platform to help our customers win in the capital
markets,” commented Heaps.
Q3 2023 Operational Highlights and Subsequent Events
- Over 88% of Q4 clients are actively using the Q4 Platform,
gaining new and unique insights while improving workflow;
- Recognized as one of Canada’s Top Growing Companies by The
Globe and Mail;
- Won multiple Stevie® Awards in the 2023 International Business
Awards® Program;
- Won two Transform Awards recognizing the new Q4 brand for Best
Corporate Brand Evolution and Best Brand to Reflect Change in
Positioning;
- Subsequent to the quarter, Q4 was recognized for Best
Tech-Driven Capital Markets Platform and Most Innovative IR Website
by Global Brands Magazine;
- Added 73 new clients on to the platform in Q3, for a total of
216 YTD and ending the quarter with 2,580 clients;
- More than 81,000 investors created a Q4 account during the
quarter, bringing the total to 452,000 investors worldwide who
benefit from a Q4 account;
- More than 18 million unique investors interacted with Q4’s
network of IR websites monthly during the quarter; and
- On November 13, 2023, Q4 Inc. entered into a definitive
arrangement agreement with Sumeru Equity Partners who will acquire
all of the issued and outstanding shares of the Company for CDN
$6.05 in cash per Common Share, other than the Rolling Shareholders
including Messrs. Darrell Heaps and Neil Murdoch and associates
thereof and Ten Coves Capital, who represent approximately 34.1% of
the issued and outstanding common shares.
Webcast Information
As a result of the announcement this morning, Monday, November
13, 2023, that Q4 Inc. has entered into a definitive arrangement
agreement with Sumeru Equity Partners, the Company will not host a
live webcast session with analysts.
Q4's unaudited interim consolidated financial statements and
management's discussion and analysis for the three and nine months
ended September 30, 2023 will be available on Q4's IR website and
will be filed on SEDAR at www.sedar.com.
Third Quarter 2023 Results
Selected Financial Measures
Revenue
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
Change
Change
2023
2022
Change
Change
(USD in thousands)
$
$
$
%
$
$
$
%
Capital markets platform
13,581
12,933
648
5.0%
40,332
38,338
1,994
5.2%
Platform services
1,090
1,232
(142)
(11.5)%
3,908
3,492
416
11.9%
Other
—
10
(10)
(100.0)%
28
44
(16)
(36.4)%
Total revenue
14,671
14,175
496
3.5%
44,268
41,874
2,394
5.7%
Gross profit
10,076
8,360
1,716
20.5%
29,880
24,143
5,737
23.8%
Percentage of total revenue
68.7%
59.0%
67.5%
57.7%
Key Performance Indicators
(in USD)
September 30, 2023
September 30, 2022
Change
Change
Annual Recurring Revenue (in millions)
$
56.4
$
54.7
$
1.7
3.1
%
Average Recurring Revenue per Account
$
21,315
$
19,154
$
2,161
11.3
%
Results of Operations
The following table outlines our consolidated statement of loss
and comprehensive loss for the three and nine months ended
September 30, 2023 and 2022:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
(USD in thousands)
$
$
$
$
Revenue
14,671
14,175
44,268
41,874
Direct cost of revenue
4,595
5,815
14,388
17,731
Gross profit
10,076
8,360
29,880
24,143
Operating Expenses
Sales and marketing
4,076
5,645
13,667
17,294
Research and development
3,113
4,884
11,535
14,006
General and administrative
5,294
6,234
16,859
17,782
Depreciation and amortization
929
923
2,773
2,738
Foreign exchange loss (gain)
89
624
(51)
988
Other expenses
210
1,914
1,351
2,261
Total operating expenses
13,711
20,224
46,134
55,069
Loss from operations
(3,635)
(11,864)
(16,254)
(30,926)
Finance expenses
8
19
74
60
Finance income
(135)
(6)
(411)
(12)
Impairment loss
158
—
792
—
Gain on derivative financial
instruments
—
—
—
(1,221)
Loss before income taxes
(3,666)
(11,877)
(16,709)
(29,753)
Income taxes
72
58
184
228
Net loss
(3,738)
(11,935)
(16,893)
(29,981)
Other comprehensive loss
Foreign exchange loss on foreign
operations
(38)
(54)
(7)
(117)
Net loss and comprehensive loss
(3,776)
(11,989)
(16,900)
(30,098)
Basic and diluted loss per share
(0.09)
(0.30)
(0.42)
(0.75)
Weighted average number of common shares
outstanding - basic and diluted
40,115
39,973
40,016
39,772
Key Balance Sheet Information
September 30, 2023
December 31, 2022
Change
Change
(USD in thousands)
$
$
$
%
Cash and cash equivalents
20,772
21,536
(764)
(3.5)%
Short-term investments
—
7,607
(7,607)
(100.0)%
Total assets
54,644
73,832
(19,188)
(26.0)%
Total liabilities
25,978
29,459
(3,481)
(11.8)%
Total long-term liabilities
3,293
8,210
(4,917)
(59.9)%
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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
(USD in thousands)
$
$
$
$
Net loss
(3,738
)
(11,935
)
(16,893
)
(29,981
)
Depreciation and amortization
929
923
2,773
2,738
Finance expenses(1)
8
19
74
60
Finance income
(135
)
(6
)
(411
)
(12
)
Income taxes
72
58
184
228
EBITDA
(2,864
)
(10,941
)
(14,273
)
(26,967
)
Other adjustments
Share-based compensation expense(2)
293
325
1,176
1,347
Unrealized foreign exchange loss
(gain)(3)
90
624
(51
)
988
Gain on derivative financial
instruments(4)
—
—
—
(1,221
)
Impairment loss
158
—
792
—
Severance and related costs(5)
113
1,598
1,105
1,598
Regulatory and advisory fees(6)
334
862
1,153
884
Adjusted EBITDA
(1,876
)
(7,532
)
(10,098
)
(23,371
)
EBITDA loss per share
(0.07
)
(0.27
)
(0.36
)
(0.68
)
Adjusted EBITDA loss per share
(0.05
)
(0.19
)
(0.25
)
(0.59
)
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 adjustments represent fair value
adjustments relating to outstanding warrants.
(5)
Represents severance and related expenses
included in G&A and other expenses.
(6)
These expenses relate to regulatory,
consulting, advisory, and other fees that are non-operational.
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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
(USD in thousands)
$
$
$
$
Cash flow from (used in) operating
activities
(452)
(6,614)
(7,798)
(24,615)
Purchases of property and equipment
(30)
(77)
(230)
(508)
Free cash flow
(482)
(6,691)
(8,028)
(25,123)
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 September 30, 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”
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231113158194/en/
Investors Edward Miller Director, Investor Relations
(437) 291-1554 ir@q4inc.com
Media Heather Noll Manager, Corporate Communications
media@q4inc.com
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