Q4 Systems Corporation Announces Record Third Quarter Revenue and EBITDA

• Third Quarter EBITDA: $1,018,946, up 109% over the same period last year
• Third Quarter Revenue: $9,142,740, up 40% over same period last year
• Nine Month Revenue: $28,147,799, up 41% over same period last year
• Third Quarter Gross Margin Improved from 22.7% to 28.6% over same period last year

ROLLING MEADOWS, Ill., Nov. 13, 2013 (GLOBE NEWSWIRE) -- Q4 Systems Corporation (Q4) QFOR, an IT software company that develops and implements mission-critical cloud-based enterprise systems for both Fortune 500 companies and smaller enterprises, announced record revenue and EBITDA for the third quarter and nine months ending September 30, 2013.

Third quarter revenue totaled $9,142,740, compared to $6,532,571 for the same period last year. The increase in revenues of $2,610,169, or 40% over the previous third quarter, was primarily due to the acquisition of SMAC (Social, Mobile, Analytics, Cloud) related assets in the first quarter of 2013 and the expansion of the core businesses to include its newly-launched HealthCare Exchange (QHIX). The launch of its Healthcare Exchange platform and the enrollment of its first 50,000 members marked a key milestone for the Company in the third quarter. The early adoption of the Healthcare exchange platform by insurance carriers and third party healthcare providers such as WageWorks WW is a major achievement for Q4 Systems.

Dhru Desai, Chairman, stated: "We are pleased with our third quarter and first nine months of 2013 performance. Not only did we achieve record revenue and EBITDA for the three and nine month periods, but Q4 Systems also opened over 15 new strategic accounts, and we also launched our HealthCare Exchange with great success. The Healthcare Exchange Platform is the result of many years of research and development. We are proud of the fact that our QHIX platform is getting strong validation across all segments of the industry, and leading companies in Benefits space (such as WageWorks) are choosing to build strategic relationships with Q4 Systems. We continue to build our core business units with sufficient capital to service our existing debt. We believe that the HealthCare Exchange Platform, a high-margin business, will be a substantial driver of revenue and earnings going forward."

Revenue for the nine months ending September 2013 was $28,147,799 compared to $19,917,130 for the same period in 2012, an increase of over 41%.

Cost of revenue totaled $6,526,156 compared to $5,051,425 for the same period during 2012. The increase in cost of revenue of $1,474,731 or 29% over the previous third quarter was due primarily to the inclusion of cost of revenue from the Company's acquisition of SMAC related assets in the first quarter of 2013. Cost of revenue is comprised primarily of the direct costs of employee and contract labor and related expenses. Cost of revenues for the nine months ending September 30, 2013 was $20,751,501 compared to $15,737,113 for the same period in 2012.

The gross margin percentage increased from 22.7% during the third quarter of 2012 to 28.6% during this quarter primarily due to addition of non-linear subscription revenues. The gross margin for the nine months ending September 30, 2013 increased to 26.3% from 20.9% for the same period in 2012.

Selling, general & administrative (SGA) expenses totaled $1,597,638 compared to $992,609 for the same period during 2013. The increase in SGA expenses of $605,029, or 60% over the previous third quarter, was due to the inclusion of SGA expenses from the Company's acquisitions in the first quarter of 2013. The SGA expense for nine months ending September 30, 2013 was $3,938,469 compared to $2,517,544 for the same period in 2012.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the three months ending September 30, 2013 was $1,018,946 compared to $488,537 for the same period in 2012. The increase of $530,409 or 109% over the previous third quarter was due to acquisitions in the first quarter of 2013 and successful integration of these SMAC assets into the main operations of Q4. The EBITDA for the nine months ending September 30, 2013 was $3,457,829 compared to $1,662,473 for the same period in 2012, an increase of 108%.

The Company reported a GAPP net loss of $836,309 for the three months ending September 30, 2013 compared to net loss of $914,788 for the same period in 2012. The GAAP losses were primarily due to debt related interest expenses and non-cash charges such as amortization of goodwill. The Company generated sufficient cash flow to service its debt while improving EBITDA by 109% for the quarter. The reduction in net loss of $78,479, or 8.6%, over the previous third quarter was due to increased gross margin contribution, despite increased SGA expenses and non-cash amortization expenses, in the current period as compared to the prior period. The net loss for the nine months ending September 30, 2013 was $2,685,216 compared to $2,604,006 for the same period in 2012.

About Q4 Systems Corporation

Q4 Systems is an IT software company that develops and implements mission-critical cloud-based enterprise systems for both Fortune 500 companies and smaller enterprises. Operating in several countries, Q4 services over 150 companies worldwide. The company is a leading provider of Health Exchange platforms (QHIX) and a proprietary set of SMAC (social media, mobility, analytics and cloud computing) technology solutions to enterprise clients in the Financial Services, Health Care, Retail and Manufacturing sectors. More information about Q4 Systems can be found at http://www.qfor.com.

Forward-Looking Statements

This release contains forward-looking statements, which are subject to the inherent uncertainties in predicting future results and conditions. Any statements that are not statements of historical fact should be considered to be forward-looking statements. Certain factors could cause actual results and conditions to differ materially from those projected in such forward-looking statements. We do not undertake any obligation to release publicly revised or updated forward-looking information, and such information included in this release is based on information currently available and may not be reliable after this date.