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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Q4 Inc | TSX:QFOR | Toronto | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 6.04 | 6.04 | 6.05 | 0 | 01:00:00 |
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
“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
“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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