Mr. Sebastien Pare reports
VIQ SOLUTIONS REPORTS RECORD 2020 REVENUE AND ADJUSTED EBITDA WITH STRONG GROWTH OUTLOOK
VIQ Solutions Inc. has released its unaudited financial results for the fourth quarter and full year 2020. Results are reported in United States dollars and are prepared in accordance with international financial reporting standards (IFRS).
"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 Pare, 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. Pare 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. Pare 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. Pare concluded.
Fourth quarter 2020 financial highlights:
Revenue of $7.8-million increased 28 per cent compared with $6.1-million in the same quarter of 2019;
Gross profit of $3.0-million represented 38.1 per cent of revenue compared with $2.4-million, or 39.3 per cent of revenue, in the same quarter of 2019. The decrease in gross margin for the three months ended Dec. 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 postmigration backlog resulting in overtime costs and accelerated hiring costs across all segments to change work force profile to editors;
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $600,000 versus the prior year negative adjusted EBITDA of $300,000, representing an increase of approximately $1.0-million. Partially offsetting higher revenues, and a gain on contingent consideration of $900,000, the adjusted EBITDA was negatively impacted by the gross margin impacts mentioned previously, as well as higher SG&A (selling, general and administrative) expense as the company invested in scalability and innovation;
Net loss was $3.9-million versus $2.5-million in 2019.
"Two thousand twenty 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-per-cent improvement by our highest volume editors. We migrated 80 per cent of our U.S. services operation to this technology and successfully built, what we believe, is the largest group of editors in the U.S. 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 per cent compared with $25.1-million in revenue in 2019;
Generated 70 per cent of revenue in the United States, 27 per cent in Australia, and 3 per cent in EMEA (Europe, the Middle East and Africa) and Canada;
Gross profit of $16.2-million represented 50.9 per cent of revenue versus $10.8-million or 43.1 per cent 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 favourably 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 per cent compared with $900,000 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 $900,000. 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;
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 (artificial intelligence) 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. Pare 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 work force. 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."
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 work force;
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 continuing 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 a.m. ET. The call will consist of a brief update by VIQ's CEO, Sebastien Pare, Alexie Edwards, VIQ's chief financial officer, 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 or by dialling 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 No. 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.
About VIQ Solutions Inc.
VIQ is a global provider of secure, AI-driven (artificial intelligence), 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 cybersecure 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.
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