Continued revenue growth and expanding ARPA at
higher margins
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”
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230809347184/en/
Investors Edward Miller Director, Investor Relations
(437) 291-1554 ir@q4inc.com
Media Heather Noll Corporate Communications Manager
media@q4inc.com
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