Quadrant 4 Systems Corporation Investor Presentation

1. Management Presentation
Dhru Desai, Executive Chairman
Dr. Nandu Thondavadi, CEO
September 2013
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2. Safe Harbor Statement
This partial discussion of the statements of financial condition and operations of the
Company should be read in conjunction with the condensed consolidated financial
statements and related notes contained in the Company’s latest quarterly report on
Form 10-Q as filed with the Securities and Exchange Commission. Various remarks
about the Company’s future expectations, plans and prospects constitute forwardlooking statements for purposes of the safe harbor provisions under The Private
Securities Litigation Reform Act of 1995. Such remarks are valid only as of today,
and the Company disclaims any obligation to update this information. Actual results
may differ materially from those indicated by these forward-looking statements as a
result of various important factors, including those discussed in the Company’s most
recent Annual Report on Form 10-K filed with the Securities and Exchange
Commission. In addition, today’s presentation and Webcast may include non-GAAP
financial measures within the meaning of SEC Regulation G.
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3. Our Vision
Innovative SMAC Technology Platforms for
Disruptive Business Models
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4. Q4 Systems - At A Glance
Corporate Data
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Name: Q4 Systems Corporation
Ticker: OTC QB – QFOR
Shares: 66.8 MM
Revenue & EBITDA: $40 MM / $4.5 MM
Corporate Counsel: Kelly Drye Warren
Auditors: Sassetti & Co.
Transfer Agent: Securities Transfer Crop
Focus
 Information Technology for
Enterprise Customers
 Social Media
 Enterprise Mobility
 Analytics and Business Intelligence
 Cloud Computing
Industry Verticals
 Healthcare IT
 Retail IT
 Financial Services IT
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Business Units
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Q4 Consulting
Q4 Solutions
Q4 Cloud
Q4 Health
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5. Management & Board
 Dhru Desai – Executive Chairman & CFO
 25-years experience successfully building private & public companies in IT & telecom
 Founder & CEO of Cronus Technologies – later acquired by Cisco
 Nandu Thondavadi, Ph.D. – CEO
 Founder of Global Technology Ventures – an M&A advisory to the IT sector
 Served in various roles with companies such as EDS, Square D, Coleman and others
 Former professor at the Kellogg School of Management, Northwestern University
 Thomas Sawyer, Ph.D. – Director
 Senior executive with more than 25-years public company experience, Technology
advisor to 3 presidents of USA
 Robert Steele, Chief Sales and Marketing Officer
 30 years veteran in health care, insurance and technology sector, NFL player
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6. Q4 Organization– Business Units and Offerings
Q4 Consulting
Q4 Cloud
Q4 Solutions
Q4 Health
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• SMAC (Social, Mobility, Analytics, Cloud Computing) Strategies
• Enterprise IT- Architecture
• Migration and Compliance Consulting
• Cloud Enablement
• Hosting
• Managed Services
• Mission Critical IT systems
• Implementation, Migration and Support
• Full array of IT Outsourcing
• Health Exchange Platforms
• Benefits Administration
• Systems Integration
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7. Our Performance
EBITDA
Revenues
$90,000,000
$25,000,000
Q4 Health
$80,000,000
$70,000,000
$20,000,000
Q4 Cloud
$60,000,000
$15,000,000
Q4 Solutions
$50,000,000
$40,000,000
$10,000,000
Q4 Consulting
$30,000,000
$20,000,000
$5,000,000
$10,000,000
$0
2010
2011
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2012
2013
2014
2015
2016
$0
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8. Key Clients
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9. Unique Selling Proposition
Proprietary IP
 QHIX/QBIX/QLIX
 Quildlr/Qwoosh/Qrazor
 Libserra
 Sensatron
Critical Mass
Relevance
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Technology
Alignment with Market
SMAC
Thought Leadership
Client Relationship
 Big Enough to Deliver – Small Enough to
Care
 Recurring Revenues
 Eco-System to Instantly Scale
 Integral Part of Client’s Annual IT Spend Plan
 Compete and Partner as Necessary
 Client-Focused Field Offices
 Cross-Sell Opportunity
 Fully-Integrated Supply Chain
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10. Overall Market Opportunity
Convergence of
SMAC Technologies
into Platform
offering
Verticals with most
Disruption
opportunities
•Healthcare IT – Market Place/ Exchanges,
Disintermediation and Consumerism, “Regulated Retail”
•Retail IT – Multi/Omni Channel, SMAC enabled supply
chain, distribution and retail commerce
$5 trillion in IT
Spend by 2020
(SMAC and
Exchanges)
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11. Health Exchange – Drivers and Opportunities
Regulatory Trends
•Affordable Care Act
•Changes in underwriting
requirements
Employer Trends
•Fixed Contribution Model –
similar to 401k shift 20
years ago
•80% employees & over
50% employers groups will
prefer health exchange
Market Trends
•Consolidation an
Disintermediation
•Aggregation - Multicarrier,
Health & Non-Health
products
•Consumerism – Control,
Freedom and Flexibility
Economics
•Compelling case for Market
Places
•Private Exchanges moving
ahead with little reliance on
Obama Care
•Technology will improve cost
and efficiency
Opportunity to become Amazon.com of Healthcare Disruption
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12. Health Exchange Opportunity
QFOR aims for at
least 5% share (5
million covered
lives over next 36
months)
Addressable
Market
Over 100 million
people looking to
buy insurance
through Exchanges
QFOR
Revenue
Model
$2 - $6 per member
per month (PMPM)
Distribution
Model
Private Label with
20 large insurance
brokers
Exclusive strategic
arrangement with
Health and NonHealth Insurance
Carriers
JV with HR, Payroll
and Third Party
Administrators
Status
Fully Functional
exchange
commercially
available TODAY
50,000 members
enrolled, 4
Exchange partners
in implementation
In discussion with 5
of 9 smaller Blue
Cross and 4 other
tier 2 carriers
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13. Healthcare Landscape
Current
Future
PAYORS
PUBLIC
EXCHANGES
TPAs
PROVIDERS
EMPLOYERS
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BROKERS
PRIVATE
EXCHANGES

14. ExchangeFunctionality
EMPLOYEES
•
Consolidated Billing
•
Custom Contributions
•
Shop, Compare, Planning
•
Beyond Traditional
Benefits
•
Unified Access to Benefits/
Wellness market place
CARRIERS / PAYORS
EMPLOYERS GROUPS
PRIVATE
EXCHANGE
BROKERS / AGENCIES
•
•
QHIX
Aggregation & Branding
Dis-Intermediation
ADMIN SUPPORT
•
•
Web/Chat
•
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Call Center
Retail
All Benefit products
•
Health/ non-Health
•
Wealth & Wellness
•
Insurance / non- Insurance

15. Exchange Functionality
 Offer plans as defined contributions or
defined benefits.
 Setup divisions, MEWA groups
 Consolidated invoice at various levels.
 Manage open enrollments
 Explore and elect plans.
 Manage personal & dependant info
 Manage COFS, Special enrolment
requests and dependents
 Receive notification
 Manage carrier details & contacts
 Manage plan attributes such as tier details,
marketing names, plan benefits, eligibility
rules, plan riders etc...
 Setup rate factors at carrier level with the
flexibility to override it at plan level
 Receive 834 file in 5010 format
EMPLOYERS
EXCHANGE
USER
 Complete retail-centric experience for shopping
health plans
 Robust plan recommendation and consumer
assistance
 Manage dependents
 Covers the entire cycle from enrollment to billing
 Manage the banquet of offerings to their
clients, employers or individuals
 Access invoice and commission details,
including subsidy invoices
 Receive notices on various business
scenarios such as NPOP terminations,
renewal notices etc...
 Manage multiple exchange tenants
 Enable initial open enrollment and
annual open enrollments
 Manage approval processes in various
business workflow processes
 Schedule and manage jobs for different
business scenarios
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16. Investment Highlights
Rapidly Growing Market
Opportunity
SMAC IT Market expected to grow at a CAGR rate of 38% through 2020
Healthcare >> Evolving “Market Place” and Exchange models
Dynamic Industry Verticals
Retail >> Multi Channel Retail platforms
Growth Stage Company
12 quarters of EBITDA positive result;
100+ Blue chip clients and deployed technology platform;
600+ strong delivery organization
Robust Product Technology
and Sales Pipeline
Proprietary IP-protected technology portfolio;
Market leader in Health Exchange platforms;
Many $1M+ revenue opportunity in sales pipeline
Superior Business Model
Scalable deployment with non-linear cost structure;
Recurring revenue;
Blend of product and services revenue
Significantly Undervalued
Trading @ 0.45x Revenue/4x EBITDA;
Against target peer group comps at 2.5xRevenue/15-25xEBITDA)
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17. Peer Comparison
Ticker
Price
USD
Market
Cap
(MM)
P/S
(TTM)
Fwd.
P/S
EV/EBITDA
(TTM)
Rev.
(TTM)
Fwd. Sales
Growth
YOY
Cornerstone OnDemand
CSOD
48.94
2,516.02
16.5x
10.0x
N/A
149.2
56.51%
Asure Software
ASUR
4.57
27.10
1.0x
0.9x
14.7x
23.9
27.36%
Bridgeline Digital
BLIN
1.04
18.38
0.6x
N/A
N/A
24.5
N/A
Callidus Software
CALD
10.05
382.08
3.6x
3.2x
N/A
100.6
14.05%
Datawatch Corp
DWCH
28.15
184.42
6.5x
4.3x
184.5x
27.5
6.86%
3.6x
3.7x
99.6x
0.7x
0.6x
8.8x
32.2
43.06%
Name
Median
Q4 Systems
QFOR
0.33
22.05
As of October 10, 2013
SOURCE: Bloomberg
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18. Thank You
Dhru Desai, Executive Chairman
dhru.desai@qfor.com
Dr. Nandu Thondavadi, CEO
nandu.thondavadi@qfor.com
Confidential | Copyright © Q4 Systems Corporation