VIQ Solutions Reports Second Quarter and First Half 2022 Financial Results and Reaffirms Full Year 2022 Goals

Rhea-AI Summary

VIQ Solutions Inc. (VQS) reported impressive Q2 2022 results with a 51% revenue growth over the previous year, totaling $12.4 million. Bookings soared by 159%, reaching $4.4 million, and the number of net new clients increased by 20% compared to Q1 2022. Despite a net loss of $3.2 million for the quarter, the company anticipates positive cash flow and performance in the second half of the year. VIQ reaffirmed its full-year revenue goal of at least $50 million and a gross margin of 47%-55%.

Positive

• Revenue increased by 51% year-over-year to $12.4 million, indicating strong demand.
• Bookings rose by 159% to $4.4 million, signaling growth potential.
• Net new clients grew by 20% versus the prior quarter, expanding market reach.
• Gross profit margin improved to 49.3%, indicating efficiency gains.
• Positive Adjusted EBITDA achieved in June 2022, suggesting recovery.

Negative

• Net loss of $3.2 million for Q2 2022, although improved from $10.5 million in Q2 2021.
• Adjusted EBITDA remained negative at -$0.7 million, despite prior improvements.

Revenue Grew 51% Versus the Prior Year

Bookings Were up 159% and Net New Clients Increased 20% Versus the Prior Quarter

PHOENIX, Ariz.--(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 second quarter and first half of 2022, ended June 30, 2022, including Bookings¹ of $4.4 million, representing an increase of 159% compared to Q12022 and a 20% gain in the number of net new clients during the quarter. Additionally, the Company reaffirmed its previously announced full year 2022 goals. Results are reported in US dollars and prepared in accordance with International Financial Reporting Standards ("IFRS").

“Our innovative technology, solid infrastructure, comprehensive solutions and editing expertise put us in a unique position to accelerate growth and increase market penetration globally. Digital modernization spend continues to increase in our sector and our differentiated technology, combined with human expertise, helps to solve our customers’ productivity and delivery challenges amid labor constraints that are evident in the global verbatim documentation industry,” said Sebastien Paré, VIQ’s Chief Executive Officer.

Mr. Paré continued, “After navigating COVID related headwinds for 26 months, we placed a sharper focus on our key performance indicators to provide greater transparency and measures of success. Based on our Bookings and the recovery in our production capacity for the first half of the year, we anticipate organic revenue growth, excluding acquisitions, to meet expectations. Bookings, active clients, production volumes, and annual delivered content have all increased to new highs in Q2, while the cost to produce a minute of documentation dropped by 8.5% in Q22022 when compared to Q12022. We achieved a positive EBIDTA month in June 2022, and we are on track to achieve positive Adjusted EBITDA in the second half of the year.”

“We delivered a strong second quarter of 2022 with Bookings of $4.4 million representing an increase of 159% from Q12022. With our strong client relationships and comprehensive solution portfolio, we capitalized on healthy demand across the markets we serve, adding new orders from existing clients and creating relationships with new accounts. The significant growth in our bookings is a positive indicator, and while it takes time to flow through as revenue, it is expected to positively contribute to future organic revenue growth,” said Susan Sumner, VIQ’s President and Chief Operating Officer.

Ms. Sumner continued, “We have also seen consistent improvement in our gross margin as we work diligently to integrate the volume from our fourth quarter 2021 acquisitions to take advantage of productivity gains from implementing NetScribe™, powered by aiAssist™. Further, during Q22022 we expanded our global workforce and increased utilization of fixed costs that negatively impacted Q12022 due to shutdowns of courts.”

Second Quarter 2022 Financial Highlights:

• Revenue of $12.4 million compared to $8.2 million in the same quarter of 2021;
• Gross profit was $6.1 million, or 49.3% of revenue, compared to $4.0 million, or 48.6% of revenue, in the same quarter of 2021;
• Net loss was $3.2 million, or $0.11 per diluted share, versus net loss of $10.5 million, or $0.42 per diluted share, in the same quarter in 2021; and
• Adjusted EBITDA¹ was negative $0.7 million versus a negative Adjusted EBITDA of $0.3 million in the second quarter of 2021.

First Half of 2022 Financial Highlights:

• Revenue of $23.9 million compared to $16.4 million in the first half of 2021;
• Gross profit was $11.6 million, or 48.5% of revenue, compared to $8.0 million, or 48.6% of revenue, in the same period of 2021;
• Net loss was $5.2 million, or $0.17 per diluted share, versus net loss of $12.2 million, or $0.49 per diluted share in the same period in 2021; and
• Adjusted EBITDA was negative $1.7 million versus Adjusted EBITDA of essentially nil in the first half of 2021.

“We saw the recovery in production capacity in June which led to a positive Adjusted EBITDA for that month. We expect to generate positive cashflow from operations and improving liquidity in the back half of 2022, and we are pleased that despite the impact of the Great Resignation, primarily in Australia, we still expect to achieve our full year 2022 revenue and gross margin goals,” said Alexie Edwards, VIQ’s Chief Financial Officer.

_____________________
¹ Please refer to "Non-IFRS 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%.

The growth in Bookings reflects the continued demand for innovative solutions and services to support the transformation of document workflows making evidentiary content secure and more accessible. The Company is poised to continue generating long-term recurring revenue and SaaS contracts rather than strictly up-front licensing contracts. The transition has been underway for some time and is now accelerating amid a return to organic revenue growth post the COVID era.

Conference Call Details

VIQ will host a conference call and webcast to discuss its Second Quarter 2022 results on Thursday, August 11 at 11:00 AM Eastern Time. The call will consist of updates by Sebastien Paré, VIQ CEO, Alexie Edwards, VIQ CFO, and Susan Sumner, VIQ 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 1-888-440-4052 (North America toll-free) or +1-646-960-0827 (international) to be connected to the call by an operator using conference ID number 4983233. 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

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, 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.

Forward-looking Statements

Certain statements included in this press 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, including negatives thereof, suggesting future outcomes or that certain events or conditions “may” or “will” occur. These statements are only predictions. Forward-looking statements or information in this press release include, but are not limited to expectations regarding future organic growth, financial expectations, including expectations for Adjusted EBITDA, trends regarding digital modernization spend, expectations regarding post-COVID demand, expected improvements in liquidity, expectations regarding full year revenue and gross margin and the timing of the Company's earnings call.

Forward-looking statements or information are 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 when made, 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 press release, assumptions have been made regarding, among other things, 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 information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as of the date of this press release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, included but not limited to the factors described in greater detail in the “Risk Factors” section of the Company’s annual information form dated March 31, 2022, in the Company’s annual report form on Form 20-F and in the Company’s other materials filed with the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission from time to time, available at www.sedar.com and www.sec.gov, respectively.

These factors are not intended to represent a complete list of the factors that could affect the Company, however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this press release are made as of the date of this press release and the Company expressly disclaims any obligations to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.

Financial Outlook

This press release contains a financial outlook within the meaning of applicable Canadian securities laws. The financial outlook has been prepared by management of the Company to provide an outlook for the Company's revenue and gross margin for the 2022 fiscal year and may not be appropriate for any other purpose. The financial outlook has been prepared based on a number of assumptions including the assumptions discussed under the heading "Forward-looking Statements" above and assumptions with respect to market conditions, pricing, and demand. The actual results of the Company's operations for any period will likely vary from the amounts set forth in these projections and such variations may be material. The Company and its management believe that the financial outlook has been prepared on a reasonable basis. However, because this information is highly subjective and subject to numerous risks, including the risks discussed and referred to under the heading "Forward-looking Statements" above, it should not be relied on as necessarily indicative of future results.

VIQ Solutions Inc.
Consolidated Statements of Financial Position
(Expressed in United States dollars, Unaudited)
		June 30, 2022				December 31, 2021
Assets
Current assets
Cash		$	3,491,907			$	10,583,534
Trade and other receivables, net of allowance for doubtful accounts			5,794,612				5,594,368
Inventories			36,744				49,557
Prepaid expenses and deposits			1,759,941				2,054,793
Non-current assets			11,083,204				18,282,252
Restricted cash			495,187				303,945
Property and equipment			593,949				460,974
Right of use assets			907,472				1,134,493
Intangible assets			13,253,541				14,762,140
Goodwill			11,963,187				12,283,100
Deferred tax assets			584,590				464,800
Total assets		$	38,881,130			$	47,691,704
Liabilities
Current liabilities
Trade and other payables and accrued liabilities		$	7,120,751			$	5,380,701
Income tax payable			262,393				97,784
Share based payment liability			132,790				551,201
Derivative warrant liability			853,278				1,862,876
Current portion of long-term debt			888,623				1,109,713
Current portion of lease obligations			251,781				287,901
Current portion of contract liabilities			1,446,077				1,003,187
Non-current liabilities			10,955,693				10,293,363
Deferred tax liability			1,037,454				1,199,266
Long-term debt			7,648,396				11,999,108
Long-term contingent consideration			84,838				166,603
Long-term lease obligations			767,143				900,868
Other long-term liabilities			1,016,331				1,042,938
Total liabilities			21,509,855				25,602,146
Shareholders' Equity
Capital stock			72,317,239				72,191,764
Contributed surplus			5,243,008				4,842,208
Accumulated other comprehensive income			38,021				74,526
Deficit			(60,226,993	)			(55,018,940	)
Total shareholders’ equity			17,371,275				22,089,558
Total liabilities and shareholders' equity		$	38,881,130			$	47,691,704

VIQ Solutions Inc.
Consolidated Statements of Loss and Comprehensive Loss
(Expressed in United States dollars, Unaudited)
		Three months ended June 30						Period over Period Change						Six months ended June 30						Period over Period Change
		2022			2021			$			%			2022			2021			$			%
Revenue		12,351,655			8,191,812			4,159,843			51			23,876,636			16,446,034			7,430,602			45
Cost of sales		6,257,453			4,210,733			2,046,720			49			12,293,385			8,447,120			3,846,265			46
Gross profit		6,094,202			3,981,079			2,113,123			53			11,583,251			7,998,914			3,584,337			45
Expenses
Selling and administrative expenses		6,532,440			3,953,046			2,579,394			65			12,668,748			7,492,156			5,176,592			69
Research and development expenses		278,357			260,010			18,347			7			477,442			499,673			(22,231	)		(4	)
Gain on contingent consideration		(7,489	)		109,269			(116,758	)		(107	)		96,072			13,275			82,797			624
Stock-based compensation		540,580			6,687,792			(6,147,212	)		(92	)		1,492,776			6,773,787			(5,281,011	)		(78	)
Depreciation		139,853			70,101			69,752			100			275,567			143,656			131,911			92
Amortization		1,079,784			1,118,014			(38,230	)		(3	)		2,103,414			2,292,822			(189,408	)		(8	)
Interest expense		241,128			335,594			(94,466	)		(28	)		580,841			667,013			(86,172	)		(13	)
Accretion and other financing costs		156,307			254,712			(98,405	)		(39	)		289,280			519,661			(230,381	)		(44	)
Loss on revaluation of options		(355,215	)		-			(355,215	)		(100	)		(1,063,662	)		-			(1,063,662	)		(100	)
Gain on revaluation of RSUs		(134,205	)		-			(134,205	)		(100	)		(308,458	)		-			(308,458	)		(100	)
Gain on revaluation of the derivative warrant liability		(159,964	)		-			(159,964	)		(100	)		(1,046,780	)		-			(1,046,780	)		(100	)
Restructuring Costs		154,727			238,037			(83,310	)		(35	)		169,108			360,253			(191,145	)		(53	)
Business acquisition costs		374,053			-			374,053			-			395,517			-			395,517			-
Other income		(120	)		(4,841	)		4,721			(98	)		(729	)		(8,294	)		7,565			(91	)
Foreign exchange loss		489,803			153,400			336,402			(219	)		748,563			368,725			379,838			(103	)
Loss before income taxes		(3,235,837	)		(9,194,055	)		5,958,218			65			(5,294,448	)		(11,123,813	)		5,829,365			52
Current income tax expense		(110,135	)		(43,348	)		(66,787	)		154			(172,642	)		(1,358	)		(171,284	)		12,613
Deferred income tax recovery (expense)		147,834			(1,261,259	)		1,409,093			(112	)		259,037			(1,040,280	)		1,299,317			(125	)
Income tax recovery (expense)		37,699			(1,304,607	)		1,342,306			103			86,395			(1,041,638	)		1,128,033			108
Net Loss		(3,198,138	)		(10,498,662	)		7,300,525			70			(5,208,053	)		(12,165,451	)		6,957,398			57
Weighted average number of common shares outstanding
Basic		28,653,056			25,029,019									29,890,785			24,749,637
Diluted		28,653,056			25,029,019									29,890,785			24,749,637
Net income (loss) per share
Basic		(0.11	)		(0.42	)								(0.17	)		(0.49	)
Diluted		(0.11	)		(0.42	)								(0.17	)		(0.49	)

VIQ Solutions Inc.
Adjusted EBITDA
(Expressed in United States dollars, Unaudited)
		Three months ended June 30						Six months ended June 30
(unaudited)		2022			2021			2022			2021
Net Loss		(3,198,138	)		(10,498,662	)		(5,208,053	)		(12,165,451	)
Add:
Depreciation		139,853			70,101			275,567			143,656
Amortization		1,079,784			1,118,014			2,103,414			2,292,822
Interest expense		241,128			335,594			580,841			667,013
Current income tax expense		110,135			43,348			172,642			1,358
Deferred income tax expense (recovery)		(147,834	)		1,261,259			(259,037	)		1,040,280
EBITDA		(1,775,072	)		(7,670,346	)		(2,334,626	)		(8,020,322	)
Accretion and other financing costs		156,307			254,712			289,280			519,661
Gain on revaluation of options		(355,215	)		-			(1,063,662	)		-
Gain on revaluation of RSUs		(134,205	)		-			(308,458	)		-
Gain on revaluation of the derivative warrant liability		(159,964	)		-			(1,046,780	)		-
Restructuring Costs		154,727			238,037			169,108			360,253
Business acquisition costs		374,053			-			395,517			-
Other income		(120	)		(4,841	)		(729	)		(8,294	)
Stock-based compensation		540,580			6,687,792			1,492,776			6,773,787
Foreign exchange loss		489,803			153,400			748,563			368,725
Adjusted EBITDA		(709,106	)		(341,246	)		(1,659,011	)		(6,190	)

Non-IFRS Measures

EBITDA, Adjusted EBITDA, and Bookings, are not measures recognized by IFRS and do not have standardized meanings prescribed by IFRS. Therefore, these terms as used by VIQ may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA and Adjusted EBITDA should not be construed as an alternative to net income (loss) as determined in accordance with IFRS.

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 news release also includes certain measures which have not been prepared in accordance with IFRS such as Adjusted EBITDA, and Bookings.

To evaluate the Company’s operating performance as a complement to results provided in accordance with IFRS, the term “EBITDA” refers to net income (loss) before adjusting earnings for depreciation, amortization, interest expense, and current and deferred income tax expense. 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 options, (gain) loss on revaluation of restricted share units, gain (loss) on revaluation of derivative warrant liability, restructuring costs, (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, and current and deferred income tax expense. We believe that the items excluded from EBITDA and Adjusted EBITDA are not connected to and do not represent the operating performance of the Company. The term “Bookings” refers to the annualized estimated monthly value of our recurring client contracts entered into during the period from (i) new clients and (ii) net upgrades by existing clients within the same workload, plus the actual (not annualized) estimated value of professional services consulting, advisory or project-based orders received during the period. Recurring client contracts are any contracts entered into on a multi-year or month-to-month basis, but excluding any professional services contracts for consulting, advisory or project-based work.

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.

We believe that Bookings is useful supplemental information as it measures the amount of new business generated in a period, which we believe is an important indicator of new client acquisition and our ability to cross-sell new services to existing clients. While we believe Bookings, in combination with other metrics, is an indicator of our near-term future revenue opportunity, it is not intended to be used as a projection of future revenue. Our calculation of Bookings may differ from similarly titled metrics presented by other companies.

For a reconciliation and/or calculation of Adjusted EBITDA and Bookings, please refer to the section entitled "Key Operating Metrics – Non-IFRS Measures" in the Company's management's discussion and analysis for the three and six months ended June 30, 2022, which is available on the Company's SEDAR profile at www.sedar.com.

Trademarks

This press release includes trademarks, such as “NetScribe, and “aiAssist,” which are protected under applicable intellectual property laws and are the property of VIQ. Solely for convenience, our trademarks referred to in this news release may appear without the ® or TM symbol, but such references are not intended to indicate, in any way, that we will not assert our rights to these trademarks, trade names and services marks to the fullest extent under applicable law. Trademarks which may be used in this press release, other than those that belong to VIQ, are the property of their respective owners.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220810005820/en/

Media:

Laura Haggard

Chief Marketing Officer

VIQ Solutions

(800) 263-9947

marketing@viqsolutions.com

Investor Relations:

Laura Kiernan

High Touch Investor Relations

1-914-598-7733

viq@htir.net

Source: VIQ Solutions Inc.

FAQ

What were VIQ Solutions' revenue results for Q2 2022?

VIQ Solutions reported revenue of $12.4 million for Q2 2022, a 51% increase compared to the same quarter last year.

How much did bookings increase for VIQ Solutions in Q2 2022?

Bookings for VIQ Solutions increased by 159% in Q2 2022, totaling $4.4 million.

What is VIQ Solutions' financial guidance for 2022?

VIQ Solutions reaffirmed its goal to achieve at least $50 million in revenue for 2022 with a gross margin of 47%-55%.

Did VIQ Solutions achieve positive EBITDA in the recent quarter?

Yes, VIQ Solutions achieved a positive EBITDA in June 2022, indicating recovery.

How many new clients did VIQ Solutions gain in Q2 2022?

VIQ Solutions gained 20% more net new clients in Q2 2022 compared to the previous quarter.