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 unaudited financial results for the second quarter 2021 ended June 30, 2021 and provided an outlook for the third quarter 2021. Results are reported in US dollars and are prepared in accordance with International Financial Reporting Standards (“IFRS”).
“VIQ Solutions reached a significant milestone and began trading on the Nasdaq Stock Exchange on the Nasdaq Capital Market (“the Nasdaq”) last Thursday. This milestone cements our commitment to change the way evidentiary documentation is captured, transformed, analyzed, and distributed. While we were disappointed to terminate our IPO due to market conditions, we are very excited about our recent listing on the Nasdaq. We expect this move will lead to increased liquidity for our shareholders with the trading of our shares occurring on both the Nasdaq and the TSX markets,” said Sebastien Paré, VIQ Chief Executive Officer.
“Earlier this month, we provided a look into our operational results. At that time, we felt it was prudent to align expectations with lockdowns in Australia and the UK, which delayed some revenue. Despite the impact on our revenue, we decided to protect our workforce in preparation for work with existing accounts, as well as new contracts expected to begin when we emerge from these region-specific lockdowns. These shutdowns also temporarily impacted our gross margin as we incurred expenses without revenue. The level of subsidies to offset this impact was significantly reduced this year versus the prior year with approximately $2.5 million less in Covid-19 wage subsidies,” said Susan Sumner, VIQ President and Chief Operating Officer.
Second Quarter 2021 Financial Highlights:
- Revenue of $8.2 million compares to $8.3 million in the same quarter of 2020 and in the first quarter 2021. The decrease of approximately 1% both year-over-year and sequentially was driven by delayed revenue resulting from COVID-19 impact as courts in Australia and in the UK were intermittently shutdown. The estimated Covid-19 related impact on revenue in the quarter exceeded $1 million, and was moved into backlog;
- Gross profit of $4.0 million represented 49% of revenue compared to $5.0 million, or 61% of revenue, in the same quarter of 2020. The decrease in gross margin for the three months ended June 30, 2021 versus the prior year was primarily related to a few factors including: delayed revenue due to the Covid-19 shutdowns moving into backlog; preparation costs for new contracts, for which revenue are expected to commence during the second half of 2021; strategic operating commitments to maintain the Company’s editing capacity to meet expected demand; and phased out Covid-19 wage subsidies;
- Adjusted EBITDA was negative $0.3 million versus the prior year Adjusted EBITDA of $1.8 million. In addition to the gross profit impacts previously mentioned, the decrease in Adjusted EBITDA was driven by approximately $0.6 million in significant one-time professional service fees associated with the completion of capital market milestones including our Nasdaq listing, filing the Company’s Base shelf prospectus dated June 10, 2021 and the F-10 registration statement in the U.S., and acquisition due diligence. For a reconciliation of net loss to Adjusted EBITDA, please see the table at the end of this press release;
- Net loss was $10.5 million versus net loss of $1.0 million in 2020. Approximately $6.7 million of the current quarter’s loss is related non-cash stock-based compensation following the shareholder approval of new Omnibus plan, and approximately $0.2 million in restructuring related expenses.
Expenses Related to Corporate Actions Impacting 2021
Mr. Paré continued, “We completed a significant amount of due diligence on potential acquisitions over the past several months, and we believe that the stage is set for us to continue executing on our M&A roll-up strategy.”
VIQ plans to complete several corporate milestones related to the acceleration of its innovation and global expansion initiatives in 2021. The one-time expenses associated with these corporate milestones are and will be included in the Company’s financial results.
The Company invested significantly in a variety of corporate actions during the first half of 2021 aimed at executing key growth milestones. Investments include upfront expenses in cost of sale and employee retention related to staffing for backlog and expanded contract in Australia, banking, legal and advisory fees related to the Company’s Nasdaq listing, and due diligence for planned acquisitions. These one-time fees are estimated to be approximately $0.2 million in the first quarter and $0.6 million in the second quarter and additional amounts are expected in the second half of 2021. These expenses, while considered “one-time” in nature, will not be added back as part of the Company’s adjusted EBITDA calculation.
“We continue to focus on improving the quality of our revenue as we grow our SaaS strategy and AI innovation at a faster pace. FirstDraft, powered by aiAssist™, creates machine-based documentation with breakthrough accuracy and has proven to improve gross margin by approximately 80% when compared to traditional services. We are improving our productivity and scalability, which should drive significant margin expansion in the future,” said Alexie Edwards, Chief Financial Officer of VIQ.
First Half of 2021 Financial Highlights:
- Revenue of $16.4 million increased 4% compared to $15.8 million in revenue in 2020;
- Gross profit of $8.0 million represented 49% of revenue versus $8.3 million or 52% in 2020. Gross profit for the first six months of 2021 was negatively impacted by the effects of Covid-19 shutdowns including delayed revenue, and reduced Covid-19 subsidies of approximately $1.1 million, while the Company retained its workforce ahead of the delivery for existing customers and new contracts scheduled for the second half of 2021;
- Adjusted EBITDA was nil ($0.0 million) compared to a positive $2.4 million in 2020. The Adjusted EBITDA was negatively impacted by lower gross margins and higher SG&A expenses related to corporate initiatives of $0.8 million (all described previously). For a reconciliation of Net loss to Adjusted EBITDA, please see the table at the end of this press release;
- Net loss was $12.2 million versus a net loss of $7.7 million in 2020. Approximately $6.8 million of the current period’s loss relates to non-cash stock-based compensation following the shareholder approval of a new Omnibus plan, $0.8 million related to corporate initiatives, and approximately $0.4 million in restructuring related expenses.
“Our $12 million cash balance at quarter end, provides the liquidity to begin acquiring more accretive companies with a tremendous amount of rich domain specific content to help us improve our offerings and expand our client base globally while maintaining a substantial pipeline of potential acquisitions to consider,” Mr. Edwards continued.
Long-term Global Growth Strategy for VIQ as the Branded Industry Leader – Secure, Accurate, Fast
VIQ remains on track to grow organically this year and next year at double-digit rates despite the impacts of Covid-19, which continue to affect some of the Company’s industry verticals and regions, particularly in Australian courts.
VIQ’s scalable technology utilizes sophisticated technology and artificial intelligence (AI) designed to securely ingest significant amounts of evidentiary content to produce accurate, verbatim, diarized documents for mission critical events that have lasting financial and social impact.
AI-powered workflow processed over 20 million minutes of recorded, multi-speaker, multi-channel audio and video in 2020 and transcribed 40 million pages of secure, industry specific evidence documentation creating actionable information for use by their more than 1,800 clients worldwide.
“We generated consistent growth in multi-speaker, highly regulated, evidentiary voice and video data in our core verticals across the globe,” said Susan Sumner. “The U.S. total addressable market in the industries we serve is estimated to be over $10 billion with an annual CAGR of 6.1%. This highlights the increased need for technology and innovative capabilities to manage the vast amount of data collected. Our proprietary workflow solution, powered by AI, will drive transformation in the marketplace while driving margin expansion.”
“We are regarded as the leader in our core verticals, providing advanced technology solutions solving compliance and workflow challenges for our global client base. With the addition of FirstDraft, powered by aiAssist™, we will expand the overall opportunity to digitize an entire library of client content versus only the critical files that are professionally edited for final consumption today. Product innovation remains central to our core strategy and initiatives to drive revenue and increase gross margin,” Ms. Sumner continued.
The Company expects to migrate clients to bundled SaaS hybrid pricing models during the fourth quarter of 2021 and during 2022. These pricing models are expected to drive stronger, long-term client relationships with predictable recurring revenue and higher margins.
VIQ reiterates from its July 30, 2021 news release that it anticipates revenue in the third quarter to be in the range of $8.2 to $8.5 million. Gross margins are expected to be in the range of 46.0% to 47.0%. Gross margin estimates do not include any potential positive impact related to wage subsidies.
The Company continues to execute its planned commitment to scale its technology editing infrastructure, M&A, and sales globally to meet new demands and opportunities for its products and services.
Conference Call Details
VIQ will host a conference call to discuss its second quarter 2021 results on Tuesday, August 17 at 11:00 AM Eastern Time. The call will consist of a brief update by Sebastien Paré, VIQ’s CEO, Alexie Edwards, VIQ’s CFO, and Susan Sumner, VIQ’s 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 1-833-378-1030 (North America toll-free) or +1-236-712-2544 (international) to be connected to the call by an operator using conference ID number 3387846. 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 Inc.
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.