VIQ Solutions Reports Record 2020 Revenue and Adjusted EBITDA with Strong Growth Outlook

Results Reflect Solid Execution During Pandemic

Organizational Consolidation in Q1 Drives Efficiencies and Cost Savings

PHOENIX, Ariz.–(BUSINESS WIRE)–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”).


“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.

Contacts

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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