Qfor 102013

Confidential | Copyright © Q4 Systems Corporation

Management Presentation

Dhru Desai, Executive Chairman

Dr. Nandu Thondavadi, CEO

September 2013


Safe Harbor Statement

2

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 forward-

looking 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.


Our Vision

3

Innovative SMAC Technology Platforms for

Disruptive Business Models


Q4 Systems - At A Glance

4

Corporate Data Focus

Industry Verticals Business Units

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

Information Technology for

Enterprise Customers

Social Media

Enterprise Mobility

Analytics and Business Intelligence

Cloud Computing

Healthcare IT

Retail IT

Financial Services IT

Q4 Consulting

Q4 Solutions

Q4 Cloud

Q4 Health


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

5


Q4 Organization– Business Units and Offerings

• SMAC (Social, Mobility, Analytics, Cloud Computing) Strategies

• Enterprise IT- Architecture

• Migration and Compliance Consulting Q4 Consulting

• Cloud Enablement

• Hosting

• Managed Services Q4 Cloud

• Mission Critical IT systems

• Implementation, Migration and Support

• Full array of IT Outsourcing Q4 Solutions

• Health Exchange Platforms

• Benefits Administration

• Systems Integration Q4 Health

6


Our Performance

7

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

2010 2011 2012 2013 2014 2015 2016

Q4 Consulting

Q4 Solutions

Q4 Cloud

Q4 Health

EBITDA Revenues


Key Clients

8


Proprietary IP Relevance

Critical Mass Client Relationship

QHIX/QBIX/QLIX

Quildlr/Qwoosh/Qrazor

Libserra

Sensatron

Big Enough to Deliver – Small Enough to

Care

Eco-System to Instantly Scale

Compete and Partner as Necessary

Fully-Integrated Supply Chain

Recurring Revenues

Cross-Sell Opportunity

Integral Part of Client’s Annual IT Spend Plan

Client-Focused Field Offices

Technology

Alignment with Market

SMAC

Thought Leadership

Unique Selling Proposition

9


Overall Market Opportunity

Convergence of SMAC Technologies

into Platform offering

•Healthcare IT – Market Place/ Exchanges, Disintermediation and Consumerism, “Regulated Retail”

•Retail IT – Multi/Omni Channel, SMAC enabled supply chain, distribution and retail commerce

Verticals with most Disruption

opportunities

$5 trillion in IT Spend by 2020

(SMAC and Exchanges)

10


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

Health Exchange – Drivers and Opportunities

11

Opportunity to become Amazon.com of Healthcare Disruption


Health Exchange Opportunity

Addressable Market

Over 100 million people looking to

buy insurance through Exchanges

QFOR aims for at least 5% share (5 million covered

lives over next 36 months)

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 Non-Health 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


PAYORS

PROVIDERS

EMPLOYERS

PUBLIC

EXCHANGES

TPAs

BROKERS

Future Current

PRIVATE

EXCHANGES

Healthcare Landscape


PRIVATE

EXCHANGE

QHIX

EMPLOYEES

CARRIERS / PAYORS EMPLOYERS GROUPS

ADMIN SUPPORT

BROKERS / AGENCIES

• Shop, Compare, Planning

• Unified Access to Benefits/ Wellness market place

All Benefit products

• Health/ non-Health

• Wealth & Wellness

• Insurance / non- Insurance

• Call Center

• Web/Chat

• Retail

• Aggregation & Branding

• Dis-Intermediation

• Consolidated Billing

• Custom Contributions

• Beyond Traditional Benefits

ExchangeFunctionality


Exchange Functionality

15

EMPLOYERS

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

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


Investment Highlights

Rapidly Growing Market

Opportunity

Dynamic Industry Verticals

Growth Stage Company

Robust Product Technology

and Sales Pipeline

Superior Business Model

Significantly Undervalued

SMAC IT Market expected to grow at a CAGR rate of 38% through 2020

Healthcare >> Evolving “Market Place” and Exchange models

Retail >> Multi Channel Retail platforms

12 quarters of EBITDA positive result;

100+ Blue chip clients and deployed technology platform;

600+ strong delivery organization

Proprietary IP-protected technology portfolio;

Market leader in Health Exchange platforms;

Many $1M+ revenue opportunity in sales pipeline

Scalable deployment with non-linear cost structure;

Recurring revenue;

Blend of product and services revenue

Trading @ 0.45x Revenue/4x EBITDA;

Against target peer group comps at 2.5xRevenue/15-25xEBITDA)


Peer Comparison

Name 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%

Median 3.6x 3.7x 99.6x

Q4 Systems QFOR 0.33 22.05 0.7x 0.6x 8.8x 32.2 43.06%

As of October 10, 2013

SOURCE: Bloomberg

17


Thank You

Dhru Desai, Executive Chairman

[email protected]

Dr. Nandu Thondavadi, CEO

[email protected]

Qfor 102013

Business

Transcript of Qfor 102013