Results Reflect Solid Execution During
Pandemic
Organizational Consolidation in Q1 Drives
Efficiencies and Cost Savings
VIQ Solutions Inc. (“VIQ” or the “Company”) (TSX: VQS and OTCQX:
VQSLF), a global provider of secure, AI-driven, digital voice and
video capture technology and transcription services, today reported
unaudited financial results for the fourth quarter and full year
2020. Results are reported in US dollars and are prepared in
accordance with International Financial Reporting Standards
("IFRS").
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20210407006032/en/
“We are pleased with VIQ’s execution and commitment to continued
evolution and growth as we deliver record results to our
shareholders and despite a challenging year, we are in a better
position than a year ago. We delivered on financial goals, expanded
our foundational AI, successfully executed global organizational
realignment, and further refined our growth strategies to keep pace
with market dynamics. Our significant investment in technology and
infrastructure created a solid foundation to scale consistently,
steadily becoming the global leader of secure, AI-driven, solutions
and services with $32 million in revenue, generating strong 2020
cash flow and Adjusted EBITDA,” said Sebastien Paré, VIQ Chief
Executive Officer.
“Our 2020 transition to a cloud-based, machine supervised
workflow increased operational excellence and created clear focus
and accountability. Investments in innovation expanded our
technology stack with the successful launch of FirstDraft,
CapturePro™ Conference, CapturePro™ On-the-Go, and MobileMic™ Pro
strengthening our market leadership,” Mr. Paré added.
“We are excited as we entered 2021 to launch VIQ 3.0, the next
step in our digital transformation focusing on AI-powered workflows
to support monetization of the vast amount of digital content
recorded annually in our markets. This new, value-added service
creates actionable, on-demand documentation from a single data set
to support a variety of use cases within our expanding global
markets,” Mr. Paré continued.
“The large multi-industry data sets that VIQ creates, edits and
annotates fuels our proprietary machine learning to drive improved
productivity, new products, and business insights optimizing agency
workflow around the world. This data is the foundation of our
growth and commercial competitiveness.” Mr. Paré concluded.
Fourth Quarter 2020 Financial Highlights:
- Revenue of $7.8 million increased 28% compared to $6.1 million
in the same quarter of 2019;
- Gross profit of $3.0 million represented 38.1% of revenue
compared to $2.4 million, or 39.3% of revenue, in the same quarter
of 2019. The decrease in gross margin for the three months ended
December 31, 2020 was primarily due to the impacts of COVID-19 on
volume while the Company maintained non-variable payroll, as well
as the processing of post-migration backlog resulting in overtime
costs and accelerated hiring costs across all segments to change
workforce profile to editors;
- Adjusted EBITDA was $0.6 million versus the prior year negative
Adjusted EBITDA of $0.3 million, representing an increase of
approximately $1.0 million. Partially offsetting higher revenues,
and a gain on contingent consideration of $0.9 million, the
Adjusted EBITDA was negatively impacted by the gross margin impacts
mentioned previously, as well as higher SG&A expense as the
Company invested in scalability and innovation;
- Net loss was $3.9 million versus $2.5 million in 2019. For a
reconciliation of Net loss to Adjusted EBITDA, please see the table
on page 9 of this press release.
“2020 was a critical year for VIQ to prove our assumptions
related to productivity and efficiency gains, despite the
challenges of COVID-19,” said Susan Sumner, VIQ President and Chief
Operating Officer. “We validated the productivity gains in
migrating our clients to NetScribe™, powered by the aiAssist™
platform. Results show a 30% improvement by our highest volume
editors. We migrated 80% of our US services operation to this
technology and successfully built, what we believe, is the largest
group of editors in the US in the segments we serve. We
intentionally preserved staffing to ensure we can manage our
expected volume recovery in mid 2021.”
“We also seeded the organization to accelerate our organic
growth expanding our sales and marketing and preparing our
technology to monetize the value of an audio file maximizing
“options” for the content we deliver,” Ms. Sumner added.
Full Year 2020 Financial Highlights:
- Record revenue of $31.7 million increased 27% compared to $25.1
million in revenue in 2019;
- Generated 70% of revenue in the United States, 27% in
Australia, and 3% in EMEA and Canada;
- Gross profit of $16.2 million represented 50.9% of revenue
versus $10.8 million or 43.1% in 2019. Gross profit for the year
includes $2.8 million in COVID-19 wage subsidies. Excluding the
COVID-19 impacts to both revenue and expense, gross margin for the
year was favorably impacted by higher revenue and increased
productivity and was partially offset by the impact of
integrations;
- Record Adjusted EBITDA of $5.0 million increased 473% compared
to $0.9 million in 2019. The $4.1 million increase in Adjusted
EBITDA includes the negative impact of COVID-19 on revenues and the
positive impact from the related wage subsidies and gain on
contingent consideration of $0.9 million. Excluding the estimated
impacts of COVID-19, the increase in Adjusted EBITDA was primarily
driven by higher revenues and productivity gains;
- Net loss was $11.4 million versus $4.5 million in 2019. For a
reconciliation of Net loss to Adjusted EBITDA, please see the table
on page 9 of this press release;
- Outstanding shares increased to 23.6 million at the end of 2020
from 10.9 million shares at the end of 2019. Share count increased
primarily as a result of the conversion of the Company’s
convertible notes from debt to equity during the year, the issuance
of new shares in November as part of the $15 million capital raise,
and the exercising of warrants.
Alexie Edwards, VIQ Chief Financial Officer stated, “Our
financial strategy this past year focused on providing sufficient
capital to fund technology and AI, organic growth and acquisitions,
improving our capitalization table and preparing to uplist to
national exchanges in Canada and United States. We finalized the
uplisting to the TSX in January 2021. We ended the year with $16.8
million in cash, providing us with ample liquidity as we entered
2021.”
Organizational Consolidation to Drive Efficiencies and Cost
Savings
The Company has completed the consolidation of its global
operations to allow for improved operating efficiencies and the
ability to service its vertical market sectors more effectively,
resulting in an expected annual cost saving of approximately $1
million.
Organizational changes to ensure cross-functional efficiencies
and support business group functions include:
- The consolidation of the management team designed to add focus
to the vertical sectors the Company supports across the globe;
- The consolidation of global production operations to drive
uniformity in all business processes;
- A newly formed innovation team focusing solely on the expansion
of the propriety AI and the extension of technology innovations
that exist outside the Company’s intellectual property;
- Realignment of all existing corporate functions to drive more
effective operations across the three international geographies of
operation.
Mr. Paré concluded, “We will concentrate on refining our
customer-focused strategy to increase same-store sales and will
continue to invest in our offerings to meet client expectations.
Our continued client migrations will increase productivity gains
and gross margin through our tech-enabled workforce. We will also
further expand our footprint through strategic acquisitions and
organic sales growth. Now, more than ever, scale, globalization,
and segmentation are critical to VIQ’s ability to change the game
in global documentation related solutions and services. Our
ultimate goal is to be the number one provider of a digital data
content repository that offers highly secure SaaS and AI-powered
workflow solutions for clients across the globe.”
2021 Priorities
The Company is focused on several initiatives in 2021 to drive
growth in revenue and profitability, and defensibility,
including:
- Driving organic revenue growth through stepped-up investments
in infrastructure including sales, marketing, finance, operations,
and technology;
- Integrating prior acquisitions and driving productivity gains
through an enabled workforce;
- Migrating clients to the full tech stack;
- Further global expansion through net new clients, contracts,
and acquisitions;
- Continued development of AI-driven solutions for clients;
- Mitigate the impact of COVID-19 on results and process customer
backlog;
- Complete and begin to integrate at least two acquisitions.
A core aspect of the Company’s plan is doubling down on AI
Machine Learning investments, operational infrastructure, and
organic growth driving capabilities. Over time, this is expected to
result in high top-line and bottom-line growth driving continued
increases in shareholder value.
Q1 and Full Year 2021 Outlook
Due, in part, to the ongoing uncertainty surrounding the future
impact of COVID-19, the Company is not providing specific financial
guidance for 2021.
As a growth-oriented company disrupting a fast changing global
industry, the Company plans on keeping its accelerated investments
in the next generation of aiAssist, to scale sales and marketing
and to continue to acquire strategic assets worldwide. The Company
anticipates these growth-oriented investments may from time-to-time
pressure gross margin and Adjusted EBITDA during 2021.
Conference Call Details
VIQ will host a conference call to discuss its full year 2020
results on Thursday, April 8 at 11:00 AM Eastern Time. The call
will consist of a brief update by VIQ’s CEO, Sebastien Paré, 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 4689678. 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,
media, 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.
About this Earnings Release
This earnings release contains important information about our
business and our performance for the three and twelve months ended
December 31, 2020, as well as forward-looking information about
future periods. This earnings release should be used as preparation
for reading our forthcoming Management's Discussion and Analysis
(MD&A) and Audited Consolidated Financial Statements for the
year ended December 31, 2020, which we intend to file with
securities regulators in Canada in the coming days. These documents
will be made available at sedar.com or mailed upon request. The
Consolidated Financial Statements and Management's Discussion and
Analysis for the year will be posted on the Company's website at
https://viqsolutions.com/investors and the SEDAR website at
www.sedar.com.
The financial information contained in this earnings release is
prepared using International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board. This
earnings release should be read in conjunction with our 2019 Annual
MD&A, our 2019 Audited Consolidated Financial Statements, our
2020 First, Second, and Third Quarter MD&A and Interim
Condensed Consolidated Financial Statements, and our other recent
filings with Canadian securities regulatory authorities, which are
available on SEDAR at sedar.com.
Forward-looking Statements
Certain statements included in this news release constitute
forward-looking statements or forward-looking information under
applicable securities legislation. Such forward-looking statements
or information are provided for the purpose of providing
information about management's current expectations and plans
relating to the future. Readers are cautioned that reliance on such
information may not be appropriate for other purposes.
Forward-looking statements or information typically contain
statements with words such as "anticipate", "believe", "expect",
"plan", "intend", "estimate", "propose", "project" or similar words
suggesting future outcomes or statements regarding an outlook.
Forward-looking statements or information in this news release
include, but are not limited to, the Company’s ability to scale
consistently, accelerate its organic growth, expand its global
footprint and strengthen its market leadership in the industries in
which it operates; the Company’s ability to complete future
strategic acquisitions; expectations regarding the Company’s
development and launch of future product and service offerings,
including without limitation, VIQ 3.0 and the benefits that
customers will realize as a result of such offerings; the
anticipated benefits of the Company’s consolidation of its global
operations and expectations regarding cost savings related thereto;
the benefits that the Company anticipates will be realized as a
result of its continued migration of clients, including, without
limitation, the effect that the continued migration of clients will
have on productivity and gross margin; the strategic initiatives
that the Company intends to focus on in 2021, the effect that such
initiatives will have on the Company’s revenue, profitability,
defensibility , top-line and bottom-line growth and shareholder
value; the Company’s intention to continue investing in its
AI-driven solutions, to scale sales and marketing and to continue
acquiring strategic assets globally, and the effect that such
actions will have on gross margin and Adjusted EBITDA; and the
anticipated timing of the Company’s filing of its Management’s
Discussion and Analysis and Audited Consolidated Financial
Statements for the year ended December 31, 2020.
Forward-looking statements or information is based on several
factors and assumptions which have been used to develop such
statements and information, but which may prove to be incorrect.
Although VIQ believes that the expectations reflected in such
forward-looking statements or information are reasonable, undue
reliance should not be placed on forward-looking statements because
VIQ can give no assurance that such expectations will prove to be
correct. In addition to other factors and assumptions which may be
identified in this news release, assumptions have been made
regarding, among other things; the Company’s ability to execute its
business plan as currently contemplated; the Company’s ability to
migrate its customers to the NetScribe platform in accordance with
projected timelines; the Company’s ability to maintain its existing
customer contracts in good standing; the Company’s ability to
successfully recover revenues delayed to 2021; the Company’s
ability to identify and acquire suitable acquisition targets; the
accuracy of the Company’s financial projections; and the Company’s
ability to continue to grow its customer base in accordance with
current projections. Readers are cautioned that the foregoing list
is not exhaustive of all factors and assumptions that have been
used.
Forward-looking statements or information is based on current
expectations, estimates and projections that involve several risks
and uncertainties which could cause actual results to differ
materially from those anticipated by VIQ, including but not limited
to; the risk that delayed revenues will be unrecoverable; the risk
that Company will be unable to successfully migrate its customers
to its NetScribe platform as anticipated or at all; the risk that
certain of the Company’s customer contracts will be terminated; the
risk that the Company’s projections are not accurate; the risk that
the Company will be unable to identify or acquire suitable
acquisition targets; the risk that the Company will be unable to
integrate future acquisitions into its existing operations and the
risks and uncertainties described under the heading “Risk Factors”
in VIQ’s Annual Information Form for the year ended December 31,
2019, filed with the Canadian securities regulatory authorities
under VIQ’s SEDAR profile at www.sedar.com.
These risks and uncertainties may cause actual results to differ
materially from the forward-looking statements or information.
Readers are cautioned that the foregoing list is not exhaustive of
all possible risks and uncertainties. The forward-looking
statements contained in this release are made as of the date of
this release and, except as required by applicable law, VIQ
undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
VIQ Solutions Inc. Consolidated Statements of Financial Position
(Expressed in United States dollars) (Unaudited)
December 31, 2020
December 31, 2019
Assets
Current assets
Cash
$
16,835,671
$
1,707,654
Trade and other receivables, net of
expected credit loss
4,475,751
3,169,545
Inventories
49,381
64,706
Prepaid expenses and deposits
254,230
184,207
21,615,033
5,126,112
Non-current assets
Restricted cash
42,835
37,536
Property and equipment
215,835
111,587
Right of use assets
309,566
647,046
Intangible assets
12,118,352
10,216,461
Goodwill
6,976,096
4,295,515
Deferred tax assets
1,441,942
599,935
Total assets
$
42,719,659
$
21,034,192
Liabilities
Current liabilities
Trade and other payables and accrued
liabilities
$
5,305,600
$
3,515,028
Income tax payable
201,592
94,606
Share appreciation rights plan
obligations
126,503
149,078
Current portion of long-term debt
1,486,136
1,103,438
Current portion of convertible note
-
2,336,804
Current portion of lease obligations
113,218
307,436
Current portion of contract
liabilities
1,252,957
455,026
8,846,006
7,961,416
Non-current liabilities
Deferred tax liability
60,587
269,598
Long-term convertible note
-
3,601,182
Long-term debt
12,138,799
6,505,637
Long-term contingent consideration
1,575,528
-
Long-term lease obligations
240,981
382,208
Long-term contract liabilities
70,834
-
Other long-term liabilities
360,525
103,629
Total liabilities
22,933,260
18,823,670
Shareholders’ equity
Capital stock
50,234,551
21,987,937
Contributed surplus
4,970,945
4,552,528
Accumulated other comprehensive loss
(78,906
)
(135,058
)
Deficit
(35,340,191
)
(24,194,885
)
19,786,399
2,210,522
Total liabilities and shareholders’
equity
$
42,719,659
$
21,034,192
VIQ Solutions Inc. Consolidated Statements of Loss and
Comprehensive Loss (Expressed in United States dollars)
(Unaudited)
Year ended December
31,
2020
2019
Revenue
$
31,749,693
$
25,096,308
Cost of sales
15,599,437
14,276,321
Gross profit
16,150,256
10,819,987
Expenses
Selling and administrative expenses
11,034,902
8,954,512
Research and development expenses
1,074,178
994,640
Stock-based compensation
725,316
195,113
Foreign exchange (gain) loss
(132,306
)
217,040
Depreciation
445,995
528,484
Amortization
4,813,248
2,973,945
17,961,333
13,863,734
Loss before undernoted items and income
taxes
(1,811,077
)
(3,043,747
)
Interest expense
(4,934,517
)
(1,549,904
)
Accretion and other financing expense
(1,216,949
)
(916,734
)
Gain (loss) on revaluation of conversion
feature liability
(1,308,440
)
2,330,964
Loss on repayment of long-term debt
(1,497,804
)
–
Business acquisition costs
(19,058
)
(484,387
)
Gain on contingent consideration
946,503
–
Impairment of goodwill and intangibles
(2,258,369
)
–
Other income (expense)
10,373
(761,235
)
(12,089,338
)
(4,425,043
)
Current income tax expense
(106,986
)
(93,580
)
Deferred income tax recovery (expense)
1,051,018
(5,575
)
Income tax recovery (expense)
944,032
(99,155
)
Net loss for the year
$
(11,145,306
)
$
(4,524,198
)
Exchange gain (loss) on translating
foreign operations
56,152
(262,811
)
Comprehensive loss for the year
$
(11,089,154
)
$
(4,787,009
)
Net loss per share
Basic
$
(0.62
)
$
(0.46
)
Diluted
$
(0.62
)
$
(0.46
)
Weighted average number of common shares
outstanding – basic
18,080,533
9,752,131
Weighted average number of common shares
outstanding – diluted
18,080,533
9,752,131
Reconciliation of Non-IFRS Measures
The following is a reconciliation of Net Loss to Adjusted
EBITDA, the most directly comparable IFRS measure for the year
ended December 31, 2020 and 2019:
Unaudited
Three months ended December
31
Year ended December 31
2020
2019
2020
2019
Net income (loss)
(3,857,540
)
(2,525,682
)
(11,145,306
)
(4,524,198
)
Add:
Depreciation
98,632
122,753
445,995
528,484
Amortization
1,431,855
807,852
4,813,248
2,973,945
Interest expense
491,848
403,153
4,934,517
1,549,904
Current income tax expense
(565,707
)
93,580
106,986
93,580
Deferred income tax (recovery) expense
(968,126
)
5,575
(1,051,018
)
5,575
EBITDA
(3,369,038
)
(1,092,769
)
(1,895,578
)
627,290
Accretion and other financing expense
482,849
219,751
1,216,949
916,734
(Gain) loss on revaluation of conversion
feature liability
834,036
(735,743
)
1,308,440
(2,330,964
)
Loss on repayment of long-term debt
207,657
-
1,497,804
-
Impairment of goodwill and intangibles
2,258,369
-
2,258,369
-
Other expense (income)
(7,886
)
762,345
(10,373
)
761,235
Business acquisition costs
-
484,387
19,058
484,387
Stock-based compensation
87,802
(28,740
)
725,316
195,113
Foreign exchange (gain) loss
152,885
54,170
(132,306
)
217,040
Adjusted EBITDA
646,674
(336,599
)
4,987,679
870,835
Non-IFRS Measures
The Company prepares its financial statements in accordance with
IFRS. Non-IFRS measures are used by management to provide
additional insight into our performance and financial condition. We
believe non-IFRS measures are an important part of the financial
reporting process and are useful in communicating information that
complements and supplements the consolidated financial statements.
This MD&A also includes certain measures which have not been
prepared in accordance with IFRS such as Adjusted EBITDA. To
evaluate the Company’s operating performance as a complement to
results provided in accordance with IFRS, the term “Adjusted
EBITDA” refers to net income (loss) before adjusting earnings for
stock-based compensation, depreciation, amortization, interest
expense, accretion and other financing expense, (gain) loss on
revaluation of conversion feature liability, loss on repayment of
long-term debt, business acquisition costs, impairment of goodwill
and intangibles, other expense (income), foreign exchange (gain)
loss, current and deferred income tax expense. We believe that the
items excluded from Adjusted EBITDA are not connected to and do not
represent the operating performance of the Company.
We believe that Adjusted EBITDA is useful supplemental
information as it provides an indication of the results generated
by the Company’s main business activities prior to taking into
consideration how those activities are financed and taxed as well
as expenses related to stock-based compensation, depreciation,
amortization, impairment of goodwill and intangibles, other expense
(income), and foreign exchange (gain) loss. Accordingly, we believe
that this measure may also be useful to investors in enhancing
their understanding of the Company’s operating performance.
Adjusted EBITDA is not a measure recognized by IFRS and do not
have standardized meanings prescribed by IFRS. Therefore, Adjusted
EBITDA may not be comparable to similar measures presented by other
issuers. Investors are cautioned that Adjusted EBITDA should not be
construed as an alternative to net income (loss) as determined in
accordance with IFRS.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210407006032/en/
Media: Laura Haggard Chief Marketing Officer VIQ
Solutions Phone: (800) 263-9947 Email:
marketing@viqsolutions.com
Investor Relations: Laura Kiernan High Touch Investor
Relations Phone: 1-914-598-7733 Email: viq@htir.net
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