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 revenue1Â 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 EBITDA2Â 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: |
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|
(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. |
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|
(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:
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|
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.
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