VIQ Solutions Q3 2024 Earnings Report

VIQ Solutions EPS Results

• Actual EPS: -C$0.03
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

VIQ Solutions Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

VIQ Solutions Announcement Details

• Quarter: Q3 2024
• Date: 11/12/2024
• Time: After Market Closes
• Conference Call Date: Wednesday, November 13, 2024
• Conference Call Time: 11:00AM ET

VIQ Solutions (TSE:VQS) 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.

VIQ Solutions Q3 2024 Earnings Call Transcript

Key Takeaways

• VIQ reported Q3 revenue of $11.1 M (+10% Y/Y), adjusted EBITDA of $0.8 M (+158% Y/Y) and reduced net loss by $3.3 M, while YTD adjusted EBITDA increased $4.8 M to $1.5 M and net loss improved by $7.9 M.
• The First Draft SaaS solution saw revenue double in the first nine months and is now expanding from law enforcement and small firms into larger enterprises and court reporting agencies.
• VIQ launched an AI-powered NetScribe formatting tool, automating complex court templates and helping clients address backlogs amid industry reporter shortages.
• Post-migration cost reductions delivered a 30% productivity boost for Australian transcribers (from 19 to 24.5 folios/hour), enabling a shift to a flexible, variable‐cost staffing model.
• Most of VIQ’s long-term agreements in Australia have been renewed or re-awarded this year with improved pricing and terms, reinforcing revenue stability and customer commitment.

Presentation

[Operator]

Your host for today is Audrey Liu, Corporate Finance Controller for VIQ. Please go ahead.

[Audrey Liu, Corporate Finance Controller at VIQ Solutions]

Thank you. Good morning, everyone, and welcome to VIQ Solutions' 2024 Third Quarter Financial Results Conference Call. Before we begin, I would like to point out certain statements made on today's call contain forward-looking information subject to known and unknown risks, uncertainties, and other factors. For a complete discussion of the risks and uncertainties facing VIQ, we refer you to the company's MD&A and other continuous disclosure filings, which are available on SEDAR at sedar.com. As a reminder, all dollar amounts are in U.S. dollars unless otherwise stated. With us today, we have Sebastien Paré, CEO, Susan Sumner, President and COO, and Alexie Edwards, CFO of VIQ. I will now turn the call over to Sebastien Paré to begin.

[Sebastien Paré, CEO at VIQ Solutions]

Thank you, Audrey. Good morning, everyone, and thank you for joining our Third Quarter Earnings Call. Q3 was a transformative quarter for VIQ, where we achieved notable financial milestones. We saw a $2.1 million improvement in Adjusted EBITDA year-over-year, a $7.9 million reduction in net loss over the first nine months, and 10% revenue growth compared to the same period of last year. For the first nine months of 2024, Adjusted EBITDA reached $1.5 million, a $4.8 million improvement from last year, truly reflecting our continued operational discipline and focus on margin expansion. The third quarter brought incremental gross margin gains, several major contract renewals, and back-to-back positive EBITDA, all building on the momentum of previous quarters.

[Sebastien Paré, CEO at VIQ Solutions]

Today, we will walk you through our key achievements, especially our core Australian markets, along with operational highlights and our strategic direction focused on strengthening financial stability and driving sustainable profitability as we move towards 2025. Afterwards, Susan and Alexie will provide deeper insight into our operations and financial performance. Q3 2024, we maintained stability in revenue growth and steady gross margin expansion, which underscores the success of our technology-led strategy to build a more scalable, efficient business model. A key driver of our growth is our FirstDraft solution, which continues to gain strong traction across all revenue segments. FirstDraft is central to our land and expand strategy, allowing us to attract new clients and deepen our engagement with existing ones. This solution positions the company to establish and scale partnerships with aligned organizations, enhancing our value proposition and creating new growth opportunities across the business.

[Sebastien Paré, CEO at VIQ Solutions]

SaaS revenue from the FirstDraft doubled in the nine months ending September 30th, reflecting the increased value our technology brings to our customers. Originally targeting smaller entities like law enforcement agencies, law firms, and individual editors, VIQ FirstDraft has evolved with deep vertical industry-specific enhancements in speech recognition, domain-specific language models, post-processing, and formatting capabilities unique to our industry and the geographies. We're now expanding to serve larger enterprises, including court reporting agencies, major law firms, court in-house legal teams, insurance companies, and transcription providers. Additionally, we advance our NetScribe platform with stage two of its transformation, introducing the industry-first AI-powered formatting tool specifically designed for courts and court reporting. This tool automates complex formatting to diverse U.S. and global court templates, addressing the pressing need for efficiencies amid a skilled court reporter shortage and crisis-level backlogs within most of the courts.

[Sebastien Paré, CEO at VIQ Solutions]

It's already delivering meaningful benefits to deposition firms, courts, and agencies needing quick and accurate documentation under tight resources. Our AI-driven enhancements in NetScribe and across our product portfolio are transformative, enabling more customized, scalable solutions for our clients. With foundational migrations now largely completed, we accelerated cost reduction initiatives in Q3, achieving greater operational and administrative efficiencies which strengthened our margins. This process is ongoing and will continue in sync with the platform adoption. Looking ahead, we're confident that these efficiencies will continue to drive improvements in gross margin and Adjusted EBITDA in the quarters to come. VIQ Solutions is strategically positioned to deliver sustained value for our customers and shareholders as we move forward. Thank you, and I'll now hand it over to Susan and Alexie to provide you with additional details. Susan? Susan there? Then I will probably.

[Susan Sumner, President and COO at VIQ Solutions]

Sorry, Sebastien. I just got, sorry.

[Sebastien Paré, CEO at VIQ Solutions]

Oh, okay.

[Susan Sumner, President and COO at VIQ Solutions]

Thank you, Sébastien. Change always comes at a cost, and in our case, it's a lower cost. Since migrating our technology to Australia, we have seen core metrics that drive our transcription business improve month over month. In early 2024, a transcriber working on a court case in Australia was averaging 19 folios per hour. A folio is a unit of measure we use in Australia for producing legal documents. Today, that same transcriber has increased their productivity to over 24.5 folios per hour. Additionally, we have added 10 minutes of extra typing time to their day. This is a direct result of the technological implementation, and we are still in the preliminary stage where transcribers are evolving into more efficient editors.

[Susan Sumner, President and COO at VIQ Solutions]

As we move forward, we will expand our focus into other regions, such as the U.S., where historically we have been more conservative about actively selling to court agencies. We are also gaining traction with our partners, such as ORdigiNAL in the U.K., where our pipeline across the region is rapidly expanding, particularly with courts and law enforcement agencies looking to embrace AI technologies into their core workflow. We now believe our competitive advantage in our technology, scale of resource, and expansive security positions us for significant growth in the U.S. and Canada and other markets that are ready for this kind of disruption. We see a strong commitment not only to our technology but also to our company. This quarter, we have secured substantial renewals and new contracts. Our customer base, which includes some of the largest court systems globally, continues to be a major driver of revenue.

[Susan Sumner, President and COO at VIQ Solutions]

We value these large footprints and long-term contracts, and we are proud to announce that in 2024, particularly in Australia, we have been renewed or been reawarded most of our long-term revenue agreements. With these renewals come improved pricing and terms, allowing us to deploy our suite of technologies to enhance efficiency and security for our clients. There is a new culture taking shape within the virtual worlds of VIQ and the industries that we serve. While we have historically operated in slow-moving verticals, we are now seeing a shift. Whether it's a transcriber transitioning into a role of an editor and embracing a new way of creating content, or a customer who is eager to understand, evaluate, and adopt innovative technologies, we are driving this change and enabling transformation across the industry. In the third quarter, we achieved key operational milestones.

[Susan Sumner, President and COO at VIQ Solutions]

With migrations now complete, we have accelerated our cost reduction initiatives further, improving operational efficiencies. We have seen a 30% productivity improvement among our transcribers in Australia, which has allowed us to shift from a fixed staffing model to a more flexible, variable cost model that adapts to case volume and court scheduling. This has significantly enhanced our cost efficiency and flexibility. We continue to see strong growth in our insurance vertical, with higher volumes expected to continue in the coming quarters, and the increased volume processed on our AI platform has further strengthened our proprietary domain-specific language models and post-processing capabilities, resulting in reduced word error rates and faster processing times for audio-to-text transcription. It is still early days, but we no longer need to prove the value of our technology. We now need to showcase it to the industry and show what we can do.

[Susan Sumner, President and COO at VIQ Solutions]

2025 is shaping up to be a very promising year. Now I'll hand it over to Alexie Edwards to provide an update on our financial results. Alexie?

[Alexie Edwards, CFO at VIQ Solutions]

Thank you, Susan. Depending on where you are, good morning, good afternoon, or good evening. I'd like to walk you through some of our key financial highlights for the third quarter of 2024. For the quarter ended September 30th, 2024, revenue came in at $11.1 million, reflecting an increase of $1 million, or 10%, compared to the same period last year. Gross profit totaled $5.1 million, up by $0.8 million, or 19%, from the same period in the prior year. Net loss of $1.1 million, an improvement of $3.3 million from the same period last year. An Adjusted EBITDA reached $0.8 million, an increase of $2.1 million, or 158%, compared to the same period in the prior year. Now let's look at the nine-month performance.

[Alexie Edwards, CFO at VIQ Solutions]

For the nine months ended September 30th, 2024, revenue was $32.6 million, representing an increase of $1.9 million, or 6%, from the same comparative period in 2023. Gross profit at $14.8 million, an increase of $1.4 million, or 11%, compared to the same period last year. Net loss was reduced to $3.5 million, a substantial improvement of $7.9 million from the comparative period in 2023. An Adjusted EBITDA for the first nine months of the year was $1.5 million, reflecting a significant improvement of $4.8 million from the same period last year. We're pleased to report a significant improvement in Adjusted EBITDA, with a $2.1 million increase for the quarter and $4.8 million increase for the nine months of 2024, compared to the same period last year.

[Alexie Edwards, CFO at VIQ Solutions]

This growth highlights the effectiveness of our strategic initiatives focused on, first, productivity and margin expansion, secondly, rigorous cost management, and thirdly, our ability to capitalize on revenue opportunities in an industry undergoing rapid modernization through AI integration. Our commitment remains steadfast on executing effectively for our customers and delivering our strategic priorities and financial targets. Now I'll hand over to Sébastien to provide closing remarks.

[Sebastien Paré, CEO at VIQ Solutions]

Thank you, Alexie. Our back-to-back positive EBITDA results underscore the effectiveness of our technology and operational initiatives. Since February 2024, we have consistently achieved positive EBITDA, positioning the company for substantial improvement and financial strength going forward. We remain focused on delivering for our customers, advancing our technology, and achieving our strategic and financial objective. To close, the progress we've made in Q3 bolstered financial foundation, enabling us to drive further improvement in gross margin and EBITDA.

[Sebastien Paré, CEO at VIQ Solutions]

Thank you for your continued support, and I look forward to answering any questions you might have throughout our investor channel available on our website. Thank you.

Participants

Executives

• Alexie Edwards, CFO
• Sebastien Paré, CEO
• Audrey Liu, Corporate Finance Controller
• Susan Sumner, President and COO