VIQ Solutions Reports Second Quarter Results Growth Goals Remain on Track for 2020
PHOENIX, Ariz.–(BUSINESS WIRE)–VIQ Solutions Inc. (“VIQ” or the “Company”) (TSX Venture Exchange: VQS and OTC Markets: VQSLF) a global provider of secure, AI-driven, digital voice and video capture technology and transcription services, today reported record financial results for the second quarter 2020. Results are reported in US dollars and are prepared in accordance with International Financial Reporting Standards (“IFRS”).
“The second quarter results this year are the best we have had on record. Despite the impacts of the C-19 pandemic, we remain on track for 2020 growth goals. This is due to careful planning, the high productivity of our workforce supported by our cloud-based, AI-powered workflow platform, and software sales from previous quarters now in deployment,” said Sebastien Paré, VIQ President and CEO.
Key Second Quarter 2020 Highlights:
- Record revenue of $8.3 million which represents a 33.4% increase year-over-year despite the impacts of C-19 on new sales and organic revenue;
- Recurring revenue of $7.5 million compared to $5.7 million the prior year, which represents 91% of total revenue;
- Gross profit of $5.1 million represented 61.2% of revenue versus 40% of revenue in the prior year. Gross margin was favorably impacted by software sales delivery from previous quarters that were on-hold due to C-19 and by C-19 wage subsidies;
- EBITDA of $1.3 million and Adjusted EBITDA of $1.8 million increased approximately 300% year-over-year, driven by higher revenue, software sales, productivity gains in transcription services and wage subsidies;
- Added 43 organic new clients;
- VIQ’s $63.6 million total enterprise value at June 30, 2020, comprised of market capitalization of $54.2 million, and net debt of $9.4 million, increased more than 100% versus enterprise value a year ago of approximately $31 million, comprised of market capitalization of $20 million plus net debt of $11 million;
- Stock market liquidity of approximately 5.6 million shares, up by 500% versus prior year for the period of January 1 to June 30, 2020. Equity dollar volume for the same period increased to $20 million, up by 680% versus prior year and VWAP of US$2.54, up by 38% versus prior year. Third quarter 2020 volume run rate is on course for annual record volume, tradable on more than thirteen North American exchanges.
Key First Half of 2020 Financial Highlights:
- Revenue of $15.8 million versus $12.5 million in the prior year, increased 26.4% year-over-year;
- Generated 72% of revenue in the United States, 26% in Australia, and 2% in EMEA and Canada;
- Gross profit of $8.3 million represented 52.4% of revenue versus 44.0% of revenue in the prior year;
- EBITDA of $1.8 million and Adjusted EBITDA of $2.4 million versus $0.7 million the prior year increased 217% year-over-year;
- YTD: Market liquidity (through July 29th) volume and price increased significantly. Traded volume, across all markets, grew to 6.6 million shares, up approximately 500% versus the prior year. Equity dollar volume increased to $16.4 million, up by 680% versus the prior year.
Mr. Paré continued, “With an enterprise value of $64 million, we are tracking toward our goal of $100 million in 2021. We expect our strong corporate performance will continue, driven by organic revenue growth, improved revenue quality, accretive acquisitions, and gross margin gains, which are realized by the migration of our customers to NetScribe™, resulting in strong EBITDA and positive EPS as we enter 2021.”
“Our strong financial results have set the foundation to transition our valuation from last year at traditional lower transcription multiples, toward recurring revenue, AI and SaaS multiples which are significantly higher. That leaves plenty of room for our enterprise value to expand and underscores why we believe we are still significantly undervalued.”
Growth Goals and Outlook on Track; During 2020, the Company Expects to:
- Meet its revenue goal of $34-$37 million with growth driven primarily by the accretive acquisitions from early 2020 and share of wallet organic growth from existing customers particularly in large Fortune 500 customers;
- Achieve revenue growth of approximately 40% versus the prior year – at the low end of its growth target of 40%-50% given the C-19 impact on organic growth;
- Achieve its revenue mix target of 90% recurring revenue, thereby improving the quality of its revenue base;
- Continue to aggressively migrate to the NetScribe™ platform. 75% of customers were migrated by the end of the second quarter; the Company exceeded its goal of 70% by the end of Q2;
- Drive achievement of the Company’s goal of a 50%-55% in gross margin for the year through continued migration, productivity gains, and software sales. Year-to-date gross margins are 52.4%;
- Generate adjusted EBITDA of between 10% and 15% of revenue or $4-$6 million, trending toward the high end of the range given C-19 wage subsidies;
- Earnings per share for the year will include the $0.41 per share negative impact in the first quarter related to the non-cash charges on the Notes conversion.
“As part of our financial strategy and capital markets journey, we continue to improve the quality of revenue moving towards recurring SaaS accounts, supporting acquisitions through lowest cost liquidity, and improving productivity, all while supporting our entire workforce as they work from home. Additionally, we are continuing to improve our balance sheet and capitalization as we progress to an uplisting on both the TSX and Nasdaq and secure a lower cost senior lender. Our enterprise results, strong governance, and shareholder makeup support these advancements,” said Alexie Edwards, VIQ’s CFO.
“As we complete the first round of migrations of our initial three acquisitions to NetScribe, we enter a new phase where we can now pivot to enhancing our technologies to drive deeper improvements to our industry-specific AI. The learnings from these migrations combined with the huge depth of content gained in our key sectors provide the foundation, not only to accelerate productivity enhancements to our transcription workflows but also to improve the products that we deliver to our customers where the drive for faster and more accurate draft content is essential to their competitive positioning,” said Susan Sumner, VIQ’s COO.
Additional Notes Regarding Outlook FY 2020
VIQ Solutions has taken what it believes to be the appropriate measures to ensure continuity of its business during the C-19 health crisis and remains on solid footing with diversified revenue sources across multiple markets and regions.
- On April 24, 2020, the Company received a loan for $2.1M under the U.S. Small Business Administration Paycheck Protection Program through BMO Harris Bank. The loan matures in two years and carries an interest rate of 1%. Principal and interest are due beginning seven months from the date of the note. Generally, the loan will be forgiven if utilized for payment of qualifying expenses during the 24 week period that begins at the origination date of the loan. We expect to not have to repay because use is consistent with purpose;
- In April, the Company qualified for wage subsidies of $1.1 million in Australia over six months;
- VIQ maintains an active M&A pipeline, which may result in additional acquisition(s).
The Consolidated Financial Statements and Management’s Discussion and Analysis for the quarter will be posted on the Company’s website at https://viqsolutions.com/investors and the SEDAR website at www.sedar.com.
The financial information included in this news release should be read together with the consolidated financial statements and Management’s Discussion and Analysis for the quarter ended June 30, 2020, including the notes thereto.
Conference Call Details
VIQ will hold a conference call to discuss its second quarter 2020 results on Thursday, July 30 at 11:00 a.m. ET. The call will consist of a brief update by VIQ President and CEO, Sebastien Paré, Alexie Edwards, VIQ’s CFO, and Susan Sumner, VIQ’s 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 1-866-548-4713 using conference ID number 9876356.
For more information about VIQ, please visit viqsolutions.com.
About VIQ Solutions Inc.
VIQ Solutions is a global expert in video capture software and audio recording with voice-to-text capabilities. VIQ provides a cyber-secure AI technology and service platform to law enforcement, immigration, medical, legal, insurance, courts, and transcription service providers, enabling them to unlock the value of their enterprise digital media and streamline their document-creation workflow, using artificial intelligence tools for measurable business gains.
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, management’s targets for the Company’s growth in 2020, as well as the size, scope, and timing of the implementation of projects, getting to an enterprise value of close to $100 million next year, and preparing for a potential up-listing to the TSX and a US National Exchange within the next year or two.
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 recent initiatives, and that sales and prospects may provide incremental value for shareholders. 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 and described in the forward-looking statements or information including COVID-19 pandemic. 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.
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release.
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