QFOR Q4 Inc

FINSIGHT Group Inc ("FINSIGHT"), a New York City based financial technology provider that beneficially owns over 2 million or approximately 5.6% of Q4’s outstanding shares and represents approximately 8.9% of the non-rolling shareholders, today issued a letter to its fellow Q4 Inc (TSE: QFOR) (“Q4” or the “Company”) shareholders to join FINSIGHT in voting AGAINST the Company’s proposed plan of arrangement to be acquired by Sumeru Equity Partners (“Sumeru”) (the “Arrangement”) at a special meeting of Q4 shareholders ("Special Meeting") currently scheduled for January 24, 2024. (All amounts in USD unless otherwise specified).

The full text of the letter follows:

January 17, 2024

Dear Fellow Shareholders:

By now, we hope you have reviewed our December 28, 2023 letter to the Q4 board of directors (the “Board”) and our January 12, 2024 press release that methodically outlined the key events and details that we believe demonstrate that the proposed Arrangement is a conflicted, premature and opportunistic transfer of value from the Company’s non-rolling shareholders (“Non-Rolling Shareholders”), who collectively own 63% of the shares outstanding, to the private equity investors, senior management, and other insiders (“Rolling Shareholders”) who collectively own 37% of the shares outstanding.

The Special Committee of the Board (the “Special Committee”) subsequently responded to our press release, in a letter dated January 15, 2024, to attempt to convince shareholders that FINSIGHT’s concerns about the conflicted and flawed process, the low valuation, opportunistic timing, and the lack of detail or consideration paid to the standalone option, were misplaced.

In this letter, FINSIGHT seeks to reiterate our position and analysis, and address some of the assertions made by the Special Committee:I. In their January 15, 2024, letter, the Special Committee repeated its claim that it ran a robust process. Shareholders that have not yet read our January 12, 2024, press release, or Q4’s Management Information Circular (the “MIC”), are invited to review pages 30-33 of the MIC. FINSIGHT believes the following key facts are straightforward and demonstrate that the Special Committee’s claims are false:

• Ten Coves and senior management determined from the outset (June 2023) that it would only entertain offers that enabled Ten Coves to roll. We believe Ten Coves knew that this self-serving structural impediment would significantly impair the universe of strategics and sponsors willing to acquire the Company (many of whom would prefer a clean capital structure or fulsome acquisition) and it was a key motive driving the lack of buyer outreach.
• On July 4, Sumeru executed an NDA. Eight days later, on July 12, the Special Committee “determined that it would engage in a preliminary price exploration exercise with the Potential Counterparties… and defer any formal sale process until an indication of interest had been received from at least one.” Here, the Special Committee established a clear criterion to initiate a “formal sale process.”
• On July 26, Sumeru submitted a non-binding indication of interest. Yet, nine days later, on August 4, the Special Committee “noted the Board’s views on the need for certainty to secure an offer within an acceptable range and the risk of one of more Potential Counterparties withdrawing its proposal as a result of the Company commencing a broader sale process.”

Fellow shareholders, the above events and quotes are drawn directly from the Company’s MIC. We believe the Special Committee understood and more importantly, acknowledged that they were not engaging in a “formal sale process” by relying solely on indications of three of the four inbound sponsors and that the process therefore cannot meet the standard of being “robust.” Moreover, the Special Committee refused to address or explain why Sumeru was given over 60 days after submitting its $6.05 offer to negotiate terms acceptable specifically to Ten Coves, while the entirety of the go-shop period was merely 35 days. If Sumeru needed 120 days to diligence and negotiate an agreement acceptable to Ten Coves, we are skeptical that the Special Committee believed, in good faith, that other bidders could do it in a quarter of the time.

II. In its January 15, 2024, letter, the Special Committee claimed: “Q4’s revenues are highly dependent on initial public offering volume” and that “[b]efore its IPO, Q4 was able to grow by more than 30% annually; half of this growth was through acquisitions. Absent this M&A, Q4’s prospects of growth are materially impaired.”

This is nonsensical and disingenuous. At what point were IPO investors and shareholders told they were investing in an acquisition vehicle rather than a pre-eminent software solutions provider for public companies? The Company itself doesn’t believe this, as evidenced by the over $35 million it spent on sales and marketing since its IPO and by the investor presentation currently posted to Q4’s website, that claims it has penetrated just 6% of corporate issuers (who pay most of its fees) and estimates the total addressable market for its services to be $20 billion1.

Further highlighting the fallacy of the Special Committee’s statement, below are excerpts taken verbatim from page 39 of Q4’s October 22, 2021, IPO prospectus:

• “We believe that any public company can benefit from subscribing to the Q4 platform. We estimate that there are approximately 41,500 public companies globally1 and, based on the annual price point of our complete corporate platform, we believe this represents a global market opportunity of approximately US$13 billion annually.”
• “We currently offer certain products in our platform for the sell-side to facilitate the functions of their corporate access teams, including virtual conferencing services, with near-term plans to expand to deal management and research services. We believe that there is a significant need in the global market for these services as we estimate there are approximately 8,000 sell-side firms2, approximately 1,000 annual sell-side investor conferences and approximately 24,000 public offerings1 annually. Based on the cost of our solutions and what we believe the market price is for our upcoming sell-side focused products, we believe the global sell-side opportunity represents an annual market of approximately US$5 billion.”
• “We also sell access to our platform to the buy-side and, in the near-term, plan to add additional products to our platform focused on the buy-side, including virtual meeting management and research services. Globally, there are approximately 25,000 buy-side firms2 and, based on the average cost of our buy-side focused solutions, we estimate a global buy-side market opportunity of approximately US$2 billion annually.”

Fellow shareholders, the Special Committee is either purposely misleading Non-Rolling Shareholders or lacks a fundamental understanding of Q4’s business. Neither are acceptable positions for the directors who purportedly represented the interests of Non-Rolling Shareholders in these negotiations.

III. We are confident that in the event Non-Rolling Shareholders defeat the Arrangement, the Q4 Board and management team will heed the will of shareholders, take action on our recommendations and execute a comprehensive repositioning of Q4.

We have confidence that with the right priorities and accountability in place, Q4 management can drive substantial medium and long-term shareholder value as a standalone public company. With the recent restructuring complete, we reiterate that Q4 management should refocus the Company on organic growth. As articulated in our January 12, 2024, press release, FINSIGHT believes that Q4 can take several steps to catalyze its business, accelerate growth, and unlock immediate value for all shareholders:

• Focus on driving free cashflow by further rationalizing SG&A and reducing R&D, which we believe would instantly be accretive to its valuation. Given the business is near break-even, returning SG&A and R&D to be in line with 2020 levels could generate over $20 million in EBITDA in 2024. Today, the Company supports less than 12% more customers than it did in 2020, while SG&A and R&D has increased 95%.
• Monetize the over $30 million in R&D expenditures and data and increase prices.
• Drive initiatives to begin utilizing Q4’s vast set of proprietary data.
• Consider establishing sales channels within the investment banks, comparable to FINSIGHT and virtual data room providers, where it can potentially garner multiples more average revenue per customer (ARPC) than it does selling through budget constrained IR departments.
• Consider moving forward with a dual-exchange listing in the US, as originally planned, which could widen the Company’s potential investor base, improve trading volumes, and unlock liquidity.

Moreover, senior management should:

• Immediately increase pricing of its core web hosting and webinar services to be more representative of the value it provides its clients. Commoditized virtual data room and b-roll video media companies often command 5-10 times more fees than Q4 on the same IPO despite doing a fraction of the work.
• Recognize that a strong culture is predicated on a physically present team driven by a shared vision. As such, it should immediately end its company-wide ‘work-from-home’ policy that we believe is driving significant employee disengagement, attrition and turnover.

We believe the result of adopting these steps, will be a more focused and more operationally efficient Company that is better positioned to capitalize on its irreplicable market share, vast troves of proprietary data and abundance of cross-sale opportunities.

In 12-24 months, we would welcome the exploration of strategic alternatives provided senior management and the Board committed to an unconflicted and comprehensive sale process, overseen by a Special Committee that thoroughly advocates for the interests of all shareholders.

However, and let us be clear, if following a no-vote the Board does not immediately demonstrate that it is prepared to put the Company on a new course – FINSIGHT will consider all its rights and remedies as a shareholder to bring about the changes necessary to unlock Q4’s full potential.

IV. Finally, to address the question put to us by the Special Committee in its letter and purportedly shared by other shareholders regarding our motivations, FINSIGHT’s interest in Q4 is purely financial. The Company can and should be sold for 2-3x the current Arrangement price.

As the Special Committee itself observed, FINSIGHT is not a traditional investor. We are sophisticated operators of a capital markets technology business that is an upstream service provider – not a competitor to Q4. We understand its business, its ecosystem and all the stakeholders involved. We are happily prepared to forgo a quick return on our investment because of the magnitude of the upside opportunity available for all shareholders if the Company conducted a proper sale process. We’ve put millions of dollars of our own capital behind this and on principle, we will not quietly accept a significantly impaired outcome driven entirely by the decisions of conflicted insiders and fiduciaries, and nor should you.

Fellow shareholders, you do not have to accept this opportunistic transaction. Vote it down.

The time for action has arrived. FINSIGHT encourages you to VOTE AGAINST the Arrangement today. If you have already voted “For” the Arrangement, you can change your vote online to “AGAINST” using the control number and website that was printed on your proxy or voting instruction form.

Shareholders with questions about their vote can contact Carson Proxy Advisors at 1-800-530-5189 or at info@carsonproxy.com

Sincerely,

Leo EfstathiouCEO, FINSIGHT Group Inc.

About FINSIGHT Group Inc.

FINSIGHT Group Inc is a privately held software service provider that serves thousands of the world’s leading institutional investors, investment banks and corporations. Its applications streamline workflows that facilitate hundreds of billions of dollars worth of capital markets activity annually to provide unparalleled visibility and actionable insights into fixed income and equity capital markets.

Advisors

Goodmans LLP is serving as legal counsel, and Gagnier Communications and Carson Proxy Advisors are serving as strategic advisors to FINSIGHT Group Inc.

Shareholder Contact

Carson Proxy Advisors1-800-530-5189(416) 751-2066info@carsonproxy.com

Media Contact

Riyaz Lalani & Dan GagnierGagnier Communications(416) 305-1459FINSIGHT@gagnierfc.com

Disclaimer for Forward-Looking Information

Certain information in this news release may constitute “forward-looking information” within the meaning of applicable securities legislation. Forward-looking statements and information generally can be identified by the use of forward-looking terminology such as “outlook,” “objective,” “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “plans,” “continue,” or similar expressions suggesting future outcomes or events. Forward-looking information in this news release may include, but is not limited to, statements of FINSIGHT regarding how FINSIGHT intends to exercise its legal rights as a shareholder of the Company.

Although FINSIGHT believes that the expectations reflected in any such forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. Such forward-looking statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements. Except as required by law, FINSIGHT does not intend to update these forward-looking statements.

Information in Support of Public Broadcast Solicitation

The following information is provided in accordance with the corporate and securities laws of the Province of Ontario and federal laws of Canada applicable therein, applicable to public broadcast solicitations. FINSIGHT is relying on the exemption under section 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations ("NI 51-102") to make this public broadcast solicitation. This solicitation is being made by FINSIGHT and not by or on behalf of the management of Q4. The registered office address of Q4 is 99 Spadina Avenue, Suite 500, Toronto, Ontario M5V 3P8.

FINSIGHT has filed this press release containing the information required by section 9.2(4)(c) of NI 51-102 on Q4’s company profile on SEDAR+ at www.sedarplus.ca.

FINSIGHT and Carson Proxy Advisors may solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under corporate and securities laws of the Province of Ontario and federal laws of Canada applicable therein, conveyed by way of public broadcast, including through press releases, speeches or publications, and by any other manner permitted under the applicable laws. Carson Proxy Advisors has been retained by FINSIGHT to act as proxy solicitation agent to assist with FINSIGHT’s solicitation and to provide certain advisory and related services. FINSIGHT will pay Carson Proxy Advisors a fee of up to $125,000, plus related expenses. All costs incurred for the solicitation will be borne by FINSIGHT.

A Q4 shareholder who has given a proxy has the power to revoke it by depositing an instrument in writing signed by the Q4 shareholder or by the Q4 shareholder’s attorney, who is authorized in writing, or if the Q4 shareholder is a corporation, by an officer, or attorney authorized in writing, or by transmitting, by telephonic or electronic means, a revocation signed by electronic signature by or on behalf of the Q4 shareholder or by the Q4 shareholder’s attorney, who is authorized in writing, and deposited with Computershare Investor Services Inc. at any time up to and including the last business day preceding the day of the Meeting, or in the case of any adjournment or postponement of the Meeting, the last business day preceding the day of the adjournment or postponement, or with the Chair of the Meeting on the day of, and prior to the start of, the Meeting or any adjournment or postponement thereof. A Q4 shareholder may also revoke a proxy in any other manner permitted by law, but prior to the exercise of such proxy in respect of any particular matter. If a Q4 shareholder is a non-registered (or beneficial) shareholder, they can contact their broker or nominee to find out how to change or revoke their voting instructions and the timing requirements, or for other voting questions. Intermediaries may set deadlines for the receipt of revocation notices that are farther in advance of the Meeting than those set out above and, accordingly, the Q4 shareholder must take such steps sufficiently in advance of the date of the Meeting for their Intermediary to act on such revocation. If a Q4 shareholder has followed the process for attending and voting at the Meeting online, voting at the Meeting online will revoke all previously submitted proxies. However, in such a case, the Q4 shareholder will be provided with the opportunity to vote by ballot on the matters put forth at the Meeting. If the Q4 shareholder does not wish to revoke all previously submitted proxies, they are instructed to not accept the terms and conditions, in which case such Q4 shareholder can only enter the Meeting as a guest.

FINSIGHT is a shareholder of Q4. With the exception of the foregoing, to the knowledge of FINSIGHT, neither FINSIGHT nor any associates or affiliates of FINSIGHT, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in the Proposed Transaction or any other matter to be acted upon at the Meeting.

1 https://investors.q4inc.com/events-presentations/default.aspx