PHOENIX, Ariz.–(BUSINESS WIRE)–VIQ Solutions Inc. (“VIQ” or the “Company”) (TSX and Nasdaq: VQS), a global provider of secure, AI-driven, digital voice and video capture technology and transcription services, today reported its unaudited financial results for the fourth quarter and full year ending December 31, 2021, and reaffirmed its 2022 goals. Results are reported in US dollars and prepared in accordance with International Financial Reporting Standards (“IFRS”).
“VIQ advanced its business strategy in 2021 and made significant progress in overall operational performance during a challenging year given the ebb and flow of COVID-19 recovery in our operating geographies, and the completion of our largest acquisition to date in late December 2021. We are now poised to scale profitability to the next level. We enhanced our capture to documentation offerings, deepened client relationships through new or expanded contracts, and completed two strategic acquisitions – Auscript Pty Ltd (“Auscript”) in Australia and The Transcription Agency (“TTA”) in the UK, that provide a foundation for further global growth in these regions. A key intellectual property patent was obtained for artificial intelligence (AI) innovation that covers ten unique aspects of our proprietary aiAssist automated workflow and analysis platform. The technology productivity impact in Insurance and Law Enforcement allowed us to improve margins in these verticals in 2021, and we expect to replicate these productivity improvements in our Courts vertical in 2022 which will further improve the sustainability of our future gross margin expansion,” said Sebastien Paré, VIQ Chief Executive Officer.
“We are pleased to see our base level gross margin (excluding subsidies) expand by 395 basis points in 2021, providing clear evidence of the productivity gains we are achieving by leveraging our aiAssist™ and NetScribe™ technologies. The volume of industry specialized content processed through our AI workflow increased by 24.3% exiting 2021 at 1.3 million minutes per quarter, and FirstDraft™ is gaining adoption with customers providing a digital transcript within minutes,” said Susan Sumner, VIQ President and Chief Operating Officer.
Mr. Paré continued, “During 2021 we also capitalized on our global labor capacity to lessen the impact of COVID-19 and labor shortages in our operating regions by rethinking structurally, how we utilize our human resources while still providing clients with secure end-to-end solutions without compromising speed and accuracy of content. With our two most recent acquisitions, our Court vertical is forecast to increase to 65% of 2022 revenue globally from 34% in 2021. We anticipate most of our existing Court and Media clients, as well as those gained from the two most recent acquisitions, will migrate onto VIQ’s NetScribe, powered by aiAssist, technology platform over the course of 2022.”
Fourth Quarter 2021 Financial Highlights:
- Revenue of $7.5 million compared to $7.8 million in the same quarter of 2020. The decrease of $0.3 million or 3% was primarily due to fewer billing days in Australia Courts associated with the Government of New South Wales and Victoria COVID-19 related lockdowns, softer technology sales and lower technology service revenue in the US and UK, partially offset by revenue generated from fourth quarter 2021 acquisitions;
- Gross profit of $3.3 million represented 44% of revenue compared to $3.0 million, or 38% of revenue, in the same quarter of 2020. The increase was a result of productivity gains from the migration of US customers to NetScribe, powered by aiAssist, particularly in the Insurance and Criminal Justice verticals, partially offset by lower revenue versus the comparative period in 2020;
- Net loss was $3.6 million, or $0.12 per diluted share, versus net loss of $3.1 million, or $0.15 per diluted share, in the same quarter in 2020; and,
- Adjusted EBITDA was negative $1.8 million versus Adjusted EBITDA of positive $0.7 million in the fourth quarter of 2020. The decrease was driven primarily by professional service fees and selling and administrative expenses, both related to Q4 21 acquisitions, partially offset by productivity gains through NetScribe, powered by aiAssist, and lower sales cost through use of a global workforce.
Full Year 2021 Financial Highlights:
- Revenue of $31.0 million decreased 2% compared to $31.7 million in the prior year. The net decrease of $0.7 million of revenue was primarily due to several factors:
- Lower US Media revenue due to skewed year over year comparisons. During 2020, the Company completed a large one-time archive project that was not repeated in 2021. Additionally, 2020 included additional volumes related to the election cycle. Combined with the COVID-19 impact on the traditional conferencing business throughout the year, Media was negatively impacted in what has otherwise been a growth vertical through the addition of two major news broadcast clients in Q4 and a significant Q1 2022 ramp up by our largest media client in financial earnings work;
- Delayed Courts revenue in Australia was a result of having 163 fewer billing days because of COVID-19 lockdowns during 2021; and,
- Lower US insurance claims attributed to a slower US recovery in car accident claims due to reduced movement of people and traffic from the lockdowns and decreased local policing activities from government mandated lockdowns in various states and local communities. These resulted in lower volumes of insurance recorded statements, police interviews and transcription revenue in the Insurance and Law Enforcement segments.
- These factors are partially offset by:
- Acquisition related revenue in the UK and Australia; and,
- Higher adoption of FirstDraft technology.
- We note the late December close of Auscript was tied to the delayed clearance by the Australian Competitive Bureau and subsequently had an estimated $2 million impact on planned revenue versus reported results. Gross profit of $14.9 million represented 48% of revenue versus $16.2 million or 51% in 2020. The decrease in gross profit was primarily due to reduced Covid-19 wage subsidies and delayed revenue resulting from pandemic impacts. Excluding the COVID-19 wage subsidies impact, gross margin for the full year would be 46% compared to 42% for the full year 2020 representing an increase of 395 basis points. The increase of 395 basis points in gross margin, excluding the impact of COVID-19 wage subsidies, was driven primarily by the following factors:
- The migration of technology services to aiAssist and NetScribe technologies, particularly in the Insurance and Law Enforcement verticals. Note, the Company expects the Courts vertical to be migrated during 2022;
- Proven labor force efficiency gains in using NetScribe and aiAssist technologies enabled a reduction in rates paid per unit of production for certain segments;
- The migration to a global labor force to better utilize access to labor across VIQ entities (follow-the-sun model and new Center of Excellence); and
- The stabilization of the labor force in the US post COVID-19 reducing the requirement for “bonus” payments to incentivize contract labor.
- Net loss for 2021 was $19.7 million, or $0.74 per diluted share, versus a net loss of $11.1 million, or $0.62 per diluted share, for the same period in 2020;
- Adjusted EBITDA was negative $4.9 million for the full year 2021 compared to a positive $5.0 million for the same period in 2020. 65% of the negative Adjusted EBITDA for the year ended December 31, 2021, was driven primarily by higher professional service fees related to various capital markets expenditures including uplisting to the Toronto Stock Exchange, adoption of the Company’s omnibus incentive plan, completion of the SEC registration, filing of a base shelf prospectus, listing on the Nasdaq stock market, and due diligence related to several acquisitions, including those we decided not to pursue. The Company also received $2.4 million in lower COVID-19 subsidies compared to 2020 and recognized $0.6 million in lower contingent consideration gain in 2021 compared to 2020. Adjusted EBITDA is a non-IFRS financial measure. For a reconciliation of net loss to Adjusted EBITDA, please see the table at the end of this press release; and,
- Proforma Annual Recurring Revenue (“ARR”) for the year ended December 31, 2021, increased by 63% to $48.6M USD from $29.7M for the comparative period in 2020. ARR is a non-IFRS financial measure. For a reconciliation of ARR, please see the table at the end of this press release.
“In 2021 we raised $18 million in equity capital, closed on two acquisitions, and settled earn-outs on prior acquisitions. As at December 31, 2021, our cash balance was $10.6 million, and expect our cash flow and EBITDA to improve this year driven by improved gross margins on higher revenue. Our focus in 2022 is on operational execution, and integration of our recent acquisitions, and Court and Media clientele into our AI powered technology workflow. Our clients are undertaking significant investments in digital transformation post COVID-19, and we are well positioned to help many of them achieve their digitalization goals,” said Alexie Edwards, VIQ Chief Financial Officer.
Reaffirming Goals for Full Year 2022:
VIQ is reemphasizing its goals for 2022. Financial expectations include generating at least $50 million in revenue with gross margin expected to be in the range of 47%-55%.
The bridge to expected revenue of at least $50 million includes a full year of 2021 base revenue excluding acquisitions of $30 million, plus TTA and Auscript acquired annualized revenues of approximately $14 million, and the Queensland Courts contract of approximately $6 million, which effectively began in December 2021 upon the close of the Auscript acquisition.
The Company will pursue additional organic growth especially in light of the recovery following the reopening of the economy as COVID-19 restrictions subside.
VIQ’s geographic revenue mix will shift toward Australia following the completion of the Auscript acquisition with approximately 50% of its 2022 revenue derived from Australia versus 31% in 2021.
A similar revenue mix shift is expected to occur within the Company’s four verticals, namely Criminal Justice, Legal (Courts), Insurance and Media, and Corporate and Government. Legal (Courts) is expected to grow to 65% of revenue versus 34% in 2021, and Criminal Justice, Insurance and Media, and Corporate and Government are each expected to go from a revenue contribution of approximately 22% each to approximately 12% each.
The Company’s plan is to continue shifting further toward predictable, recurring, higher margin revenue as FirstDraft is adopted, and more clients leverage higher margin machine drafts.
Conference Call Details
VIQ will host a conference call and webcast to discuss its full year 2021 results on Wednesday, March 30 at 11:00 AM Eastern Time. The call will consist of updates by Sebastien Paré, VIQ CEO, Alexie Edwards, VIQ CFO, and Susan Sumner, VIQ President and COO, followed by a question-and-answer period.
Investors may access a live webcast of the call on the Company’s website at www.viqsolutions.com/investors or by dialing 1-888-440-4052 (North America toll-free) or +1-646-960-0827 (international) to be connected to the call by an operator using conference ID number 4983233. Participants should dial in at least 10 minutes prior to the start of the call.
A replay of the webcast will be available on the Company’s website through the same link approximately one hour after the conference call concludes.
For more information about VIQ, please visit viqsolutions.com.
About VIQ Solutions
VIQ Solutions is a global provider of secure, AI-driven, digital voice and video capture technology and transcription services. VIQ offers a seamless, comprehensive solution suite that delivers intelligent automation, enhanced with human review, to drive transformation in the way content is captured, secured, and repurposed into actionable information. The cyber-secure, AI technology and services platform are implemented in the most rigid security environments including criminal justice, legal, insurance, government, corporate finance, media, and transcription service provider markets, enabling them to improve the quality and accessibility of evidence, to easily identify predictive insights and to achieve digital transformation faster and at a lower cost.
For full forward-looking statements and financial information, please read the full release online.