Toronto-based investor relations (IR) software company Q4 Inc. has laid off 48 of its 620 employees, joining a growing list of Canadian tech companies to cut staff and reduce costs amid tough market conditions.
The layoffs, which Q4 Inc. announced yesterday and are effective immediately, impact eight percent of the company’s workforce. Q4 Inc called the move a restructuring that involves a “reorganization” of the firm’s sales and marketing functions, as well as “a refinement of research and development [R&D] teams against the company‘s most successful products.”
“We decided to make these changes to the business to ensure we are well positioned for the current market, the future growth ahead, and our path to profitability.”
-Darrell Heaps, Q4 Inc.
Q4 Inc. founder and CEO Darrell Heaps said the cost-cutting moves come in response to current market conditions, adding that it will help Q4 Inc. accelerate its path to profitability. The company is working to become cash flow and EBITDA positive by the second half of next year.
“This morning, it is with a heavy heart that we announced a restructuring that reduced the size of our team by 8% or 48 people,” wrote Heaps in a LinkedIn post from Tuesday sharing the news. “After careful consideration, we decided to make these changes to the business to ensure we are well positioned for the current market, the future growth ahead, and our path to profitability.”
Heaps added that the layoffs focus Q4 Inc’s sales, marketing and product teams on “the most important areas” of the company’s business, but did not elaborate on which specific areas. The CEO told BetaKit in an interview that Q4 Inc. has “built out a lot” over the last nine months, and is now focused on “levelling off” its R&D investments and becoming more efficient from a sales and marketing perspective.
Rising inflation, interest rates, and geopolitical tensions have contributed to a broader market downturn that has led many high-growth tech firms to reduce costs and lay off staff amid a difficult fundraising environment and prospective recession.
According to layoff tracking website Layoffs.fyi, 554 tech companies from across the world have cut a combined 73,445 employees so far this year.
Other Canadian tech firms that have laid off staff in recent months include Vendasta, AlayaCare, Hootsuite, Dooly, Article, Mejuri, Uberflip, RenoRun, Shopify, Wealthsimple, Clearco, Unbounce, Clutch, Coinsquare, Introhive, Ritual, and Bonsai.
Amid these conditions, Heaps told BetaKit that Q4 Inc. has pulled back its spending on areas of its business that are not producing immediate returns.
“When we look at the future of the market, the future of the business, what we have to assume is that it’s going to be a long period for the market to get back to growth mode,” said Heaps.
Q4 Inc, which trades on the Toronto Stock Exchange (TSX) as ‘QFOR,’ offers a capital markets communications platform. Through its software, which boasts a list of over 2,650 clients that includes Netflix, Walmart, and Nike, Q4 Inc. aims to help public companies better understand their performance and engage with investors. Q4 Inc’s platform facilitates webcasts and earnings calls, organizes financial statements, and provides data analysis.
Q4 Inc. saw significant growth during COVID-19, fuelled by tailwinds associated with the pandemic-driven shift to virtual, the health of North America’s public markets, and its January 2020 acquisition of S&P Global Market Intelligence’s IR web hosting business.
The company went public last year as part of a wave of Canadian tech initial public offerings (IPOs), raising $100 million CAD through its TSX IPO, citing plans to focus on mergers and acquisitions (M&A) to fuel its growth. Q4 Inc’s shares began trading in October 2021 at a price of $11.52 CAD per share, reaching a high of $12 before dropping 63 percent to 4.43 CAD apiece, where they sit today. Q4 Inc. has been caught up in a broader public tech stock selloff that has also hurt other Canadian companies.
Q4 Inc. released its second quarter 2022 financial results a couple of weeks ago. In Q2, the firm delivered revenue of $13.8 million USD—an increase of 11.5 percent excluding its virtual shareholder meeting services businesses, which the company terminated in Q3 2021. Q4 Inc. also generated a net loss of $11.4 million, and an adjusted EBITDA loss of $8.7 million, which the firm attributed to “peak” investments in sales and marketing and research and development during the quarter. Coming out of the second quarter, Q4 Inc. had $45 million in cash on its balance sheet.
In a statement as part of the company’s latest earnings report, Heaps highlighted Q4 Inc’s double-digit recurring revenue growth as a reason for optimism, noting that with the company’s peak investment period in the rearview mirror, Q4 Inc. was in the process of accelerating its path to profitability amid “challenging” macroeconomic conditions. This week’s layoffs represent one of the ways that Q4 Inc. is looking to make that happen.
The layoffs also follow a recent leadership shuffle at Q4 Inc. CFO Ryan Levenberg resigned from his role at the end of May, and has since been replaced by COO Donna de Winter, who was named permanent CFO earlier this month.
Heaps noted that Q4 Inc’s business “hasn’t been built on the IPO market of 2021,” claiming that the company has still produced strong sales results in recent months and sees room to grow within its existing client base during what has become a tough market for publicly-traded firms.
While this period has been challenging for Q4 Inc. from a new logo acquisition standpoint, Heaps said the company is seeing strong demand from its existing customer base on the renewal, upselling, and cross-selling sides.
“The beauty of this business is that we sit at the intersection between public companies and public investors, and the demand for those sides of the market to continuously communicate and engage with one another, no matter what the market condition … that’s the foundation of our business model, and that foundation is incredibly durable,” said Heaps.
UPDATE (24/08/22): This story was updated to include commentary from Darrell Heaps.
Feature image courtesy Q4 Inc.