ViQ first quarter results Results modestly beat estimates. Hopefully long suffering holders will eventually be rewarded.
PHOENIX, Ariz., May 11, 2022--(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 first quarter ending March 31, 2022. Results are reported in US dollars and prepared in accordance with International Financial Reporting Standards ("IFRS").
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"We are on track to achieve our goals this year, realizing at least $50 million in revenue and improving our gross margin to reflect the integration of our technology platforms across all verticals, including Legal (Courts). Late in the quarter, we signed two new technology services contracts to support Court recording and transcription services and to facilitate transcripts of depositions and examinations under oath and hearings. These contracts have an estimated annual value of $1.9 million, which will increase the annual recurring revenue and positively impact organic growth numbers post COVID. The integration of Auscript and The Transcription Agency ("TTA") this year, and migrating all Court clients to VIQ technology, is expected to drive significant gross margin improvement. March represents the first month, in over 26 months, that revenue is free from lockdowns. We are energized to compete in a new post-pandemic normal," said Sebastien Par, VIQ’s Chief Executive Officer.
"The Auscript acquisition increased our geographic and segment mix supporting further investment in Court technologies given the response to productivity gains in this segment. Additionally, VIQ’s ability to scale large contracts in Australia will continue accelerating regional revenue improvements. Australia represents 54% of current revenue. We expect revenue mix to continue to shift toward the Australian market as the year progresses given first quarter seasonality with court closures in January and February," concluded Mr. Par.
"As market requirements shift, our solutions flex to support the needs of our clients," said Susan Sumner, VIQ’s President and Chief Operating Officer. "We are collaborating with a major U.S. court system to utilize our end-to-end solution suite to create efficiencies in the way testimony is managed. This high margin solution helps manage increased demand created by the court reporter shortage by automating the creation of a draft transcript edited by court resources. We are also collaborating with a notable court client in the UK to use FirstDraft™ creating new ways to deliver content to improve the accessibility and timeliness of information to key courtroom stakeholders. Our recent Fast Company award recognizes VIQ’s innovative approach leveraging AI to create efficiencies and drive transparency in courtrooms around the world."
Ms. Sumner continued, "We experienced significant gross margin improvement in our core technology services, driven primarily by migration to our technology, which increased from 38.4% to 46.5% year-over-year without subsidies. Additionally, there was a dramatic improvement in the cost to produce a minute of content in the U.S.1, which decreased by 13%. We are seeing meaningful improvements to key performance measures as we integrate the technology throughout our services operations, while markets reopening increased our organic bookings by 64%1."
First Quarter 2022 Financial Highlights:
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Revenue of $11.5 million compared to $8.3 million in the same quarter of 2021. The increase of approximately $3.2 million, or 40%, was primarily driven by the acquisitions of Auscript and TTA offset by lower Technology sales recorded in Q1 2022;
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In early February, 15 days of lockdown in Australia impacted revenue by an estimated $0.5 million. During the first quarter 2022, the Company’s revenue mix by vertical was Legal (Courts) 58%, Criminal Justice (including Law Enforcement) 13%, Insurance 15% and Media, Corporate and Government 14%;
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During the first quarter 2022, the Company generated 54% of its revenue from Australia, 41% from the US and 5% in the UK, Canada and other geographies;
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Gross profit was $5.5 million, or 47.6% of revenue, compared to $4.0 million, or 48.7% of revenue, in the same quarter of 2021. The increase in Gross Profit for the three months ended March 31, 2022, is primarily due to Q4 2021 acquisitions and productivity gains, partially offset by lower technology revenue versus the comparative period in 2021. In addition, the comparative 2021 period includes $0.1 million in COVID-19 wage subsidies versus nil in the three months ended March 31, 2022. Excluding COVID-19 wage subsidies, Gross Profit Margin1 for the three months ended March 31, 2022, would be 47.6% versus 47.3% in the comparative period in 2021. The improvements mentioned by Ms. Sumner, above, are embedded in the US technology services margins;
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Net loss was $2.0 million, or $0.07 per diluted share, versus net loss of $1.7 million, or $0.07 per diluted share, in the same quarter in 2021; and
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Adjusted EBITDA1 was negative $1.0 million versus Adjusted EBITDA of positive $0.3 million in the first quarter of 2021. The decrease in Adjusted EBITDA was driven primarily by lower technology sales not fully offset by higher technology services revenue and related gross profit, and higher Selling, General and Administrative expenses. Additionally, the Company had $0.3 million in COVID-19 wage subsidies in the comparable 2021 period.
"Given that acquisitions closed late in the fourth quarter of last year, our gross margins reflect pre-integration results this quarter. As we integrate the acquisitions this year, and migrate our Court revenue into our technology, we expect overall gross margins will continue to lift further. SG&A expenses will decrease as we gain operating leverage, and begin to generate positive EBITDA," said Alexie Edwards, VIQ’s Chief Financial Officer.
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| 1 Please refer to "Non IFRS Financial Measures" below in this news release. |
2022 Priorities and Reaffirming Goals for Full Year 2022:
VIQ is reaffirming its goals for 2022. Financial expectations include generating at least $50 million in revenue with an expected gross margin in the range of 47%-55%.
VIQ’s geographic revenue mix shifted toward Australia following the completion of the Auscript acquisition with approximately 50% of its 2022 revenue expected to be 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, Corporate and Government. Legal (Courts) is expected to grow to 64% of revenue versus 34% in 2021, and Criminal Justice, Insurance and Media, and Corporate and Government are each expected to shift 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 technology revenue as FirstDraft is adopted, and more clients leverage higher margin machine drafts. The technology and technology services pipelines have strengthened, and related revenue will be realized during 2022.