VIQ Solutions Q2 2024 Earnings Call Transcript

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August 13, 2024

Key Takeaways

  • VIQ delivered 10% revenue growth to $11.6 million in Q2, with gross margin near 46% and adjusted EBITDA up 181% to $800 K as net loss narrowed to $600 K.
  • Customer momentum was strong with 122 net new logos and the best second-quarter customer growth since before the pandemic, driven by high client retention and contract expansions.
  • The company’s transformation into an AI-powered workflow platform is largely complete, processing over 2.1 million minutes of verbatim content and boosting efficiency and margins.
  • Adoption of VIQ First Draft and foreign language capabilities rose 25%, improving domain-specific AI models, reducing turnaround times, and strengthening competitive differentiation.
  • Key operational milestones included migrating to the Netscribe AI Assist platform in Australia and rolling out critical formatting enhancements, reinforcing leadership in complex documentation for government and enterprise sectors.
AI Generated. May Contain Errors.
Earnings Conference Call
VIQ Solutions Q2 2024
00:00 / 00:00

There are 5 speakers on the call.

Operator

gentlemen. Today, we are hosting a conference call to discuss the 2024 Second Quarter Financial Results for VIQ Solutions Inc. Currently, all participants are in a listen only mode. Details on the company website. Your host for today is Audrey Liu, Corporate Finance Controller for VIQ.

Operator

Please go ahead.

Speaker 1

Thank you. Good morning, everyone, and welcome to VIQ Solutions' 2024 Second Quarter Financial Results Conference Call. Before we begin, I would like to point out that certain statements made 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 and A and other continuous disclosure filings, which are available on sedar@sedar.com. As a reminder, all dollar amounts are in U.

Speaker 1

S. Dollars unless otherwise stated. With us today, we have Sebastien Pare, CEO Susan Sumner, President and COO and Alexei Edwards, CFO of VIQ. I will now turn the call over to Sebastien Pare to begin. Sebastien?

Speaker 2

Thank you, Audrey. Good day, everyone, and welcome to our Q2 2024 earnings call. Back in May, we outlined a clear strategy for navigating the challenges, but also the opportunities of 2024. Today, I'm pleased to announce that our Q2 results have not only met, but surpassed expectations, reinforcing the robust momentum we've built over the past year. This quarter, we achieved robust results, a 10% increase in revenue and gross margin approaching 46% on a consolidated basis.

Speaker 2

Q2 also marked our best 2nd quarter for customers growth since before the pandemic, driven by strong client retention and contract expansions. We also secured 122 net new logos underscoring our robust post pandemic recovery and the rising demand for our industry leading solutions. This success reflects our deepened customers' relationship in our innovative approach transforming how both customers and transcribers and track with digital verbatim content. The significant increase in adjusted EBITDA underscores the strength of our transformation into an AI power workflow platform company. By streamlining operations and leveraging the built in efficiencies in our business model, we started to maximize efficiencies, solidify our leadership in high value complex verbatim documentation sectors, including courts, insurance, law enforcement, media and legal.

Speaker 2

With our transition to advanced technology and AI largely complete, we're now focused on driving further margin expansion from the rich data set. In Q2, more than 2,100,000 minutes of verbatim counting was processed on the platform. To put this into perspective, a 1% improvement in our technology services gross margin generates approximately $400,000 in additional annual adjusted EBITDA. As industries increasingly embrace AI, we're not merely positioned to benefit, we're poised to lead. Our technology is establishing new industry benchmarks and our transcribers are evolving into highly skilled editors, further enhancing our competitive edge.

Speaker 2

Adoption and utilization of VIQ First Draft have increased across all revenue segments. Adoption and utilization of foreign languages has also increased by 25% in some of our operating geographies in Q2 compared to Q1. The higher volumes processed by our AI have strengthened our domain specific language models, post processing and foreign language capabilities, reducing the time required to produce a minute of audio while protecting the highest level of security, formatting and accuracy. For our stakeholders, this translates to a clear path for continued financial growth in the second half of the year and beyond. We're not just adapting to industry changes.

Speaker 2

We're at the forefront driving them and positioning the company for sustained success and significant long term value creation. Over to you, Susan.

Speaker 3

Thank you, Seb. When we first set out to expand this company, our focus was clear. It was to establish a competitive edge that would set us apart in this industry. It's worth remembering that just 5 years ago, we had a vision, a platform and a workflow that we believed would fundamentally transform the way this industry operates. We were never interested in making marginal improvements that would lead to gradual change.

Speaker 3

From the start, we knew that true transformation would require a radical shift in both how customers and transcribers interact with content. Despite the challenges we faced from a global pandemic to the great resignation that lingered into last year, We stand on a foundation that we've built with intention and resilience. Our platform has not only driven efficiencies, but has also consistently delivered favorable results. In the Q2, we achieved several operational milestones. We successfully completed our planned migrations to the Netscribe AI Assist platform, largely in Australia, resulting in improved gross margins.

Speaker 3

We saw significant volume expansion in our insurance vertical with higher volumes expected to continue. Client adoption and utilization of our 1st draft technologies across all revenue segments have increased. Higher volumes processed on our AI platform have strengthened our proprietary domain specific language models and post processing capabilities, leading to reduced word error rates and decreased time required to produce a minute of audio, ultimately delivering a more usable document to our customers. The evolution of AI is a topic of discussion at dinner tables and boardrooms globally. It's no different here at VIQ.

Speaker 3

To fully leverage the content we manage, the segments we serve and the technology we've developed, we must strike the perfect balance between cutting edge, adaptable technologies and equally adaptable human capital. Learning for our language models must continuously learn and evolve through these integrated engagements, creating a symbiotic relationship between our technology and the people who use it. Ultimately, this technology coupled with our skilled workforce must deliver results. Our investments in the past 5 years are now manifested in the results of the last three quarters and we have just started this journey. We are delivering change in the most complex segments such as courts around the world and the timing of our mission is ever present and critical.

Speaker 3

Approximately 75% of our revenue comes from government agencies. While this makes our progression more challenging, it also underscores the critical need for governments to embrace AI and we are beginning to see this progression. We are fortunate to have long standing relationships with key governmental agencies worldwide who trust in the security and innovation of what we have built. This trust is reflected in our contract renewals and key price increases tied to the increasingly complex relationship that we have with these agencies. Our technology allows us to climb higher up the value chain and this progression was by design.

Speaker 3

Our transcribers are evolving into editors and the speed of this transition is happening significantly faster than where we were 5 years ago. We believe our platform will set this industry will be set as the industry standard, driving a capacity constrained industry to VIQ because they recognize us as a reliable, highly efficient workflow technology and therefore the best foundation for creating and completing complex documentation. This is the same reason we see customers increasingly utilizing our technology to broaden their access to first draft content. As we move forward, we will continue to advance our operational organization, especially as we mature our technology migrations in the court systems of Australia and the United Kingdom. While much has been accomplished, much remains to be done.

Speaker 3

We are excited to announce critical enhancements to our formatting technology, further solidifying DAQ as the leader in producing highly complex content in the segments that we serve. We have weathered the storm and we are so excited to see the operational and technological progress now showing in our financial results. And now I'll hand it over to Alexia Edwards to provide an update.

Speaker 4

Thank you, Susan. Good day, everyone. I'd like to walk you through some of our key financial highlights for the Q2 of 2024. For the quarter ending June 30, 2024, revenue came in at 11,600,000 reflecting an increase of $1,100,000 or 10% compared to the same period last year. Gross profit totaled $5,300,000 up by $600,000 or 14% from the same period in the prior year.

Speaker 4

Net loss narrowed to $600,000 an improvement of $3,000,000 from the same period last year. Adjusted EBITDA reached $800,000 an increase of $1,700,000 or 181% compared to the same period in the prior year. Let's look at the 6 months ending June 30, 2024. Revenue was $21,500,000 representing an increase of $900,000 or 5% from the same comparative period in 2023. Gross profit stood at $9,700,000 an increase of $600,000 or 7% compared to the same period last year.

Speaker 4

Net loss was reduced to $2,400,000 dollars a substantial improvement of $4,600,000 or 66% from the same comparative period in 2023. And adjusted EBITDA for the first half of the year was $700,000 reflecting an improvement of $2,700,000 from the same period last year. We are extremely proud and pleased to report a significant improvement in adjusted EBITDA with a $1,700,000 increase for the quarter $2,700,000 increase for the 1st 6 months of 2024 compared to the same period last year. This growth highlights the effectiveness of our strategic initiatives focused on productivity and margin expansion, rigorous cost management and 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 on our strategic priorities and financial targets.

Speaker 2

Thank you, Alexey. Thank you for joining us today. Feel free to contact the company directly with any of the follow-up questions using the contact details on the company website. As we move to the second half of twenty twenty four, we look forward to sharing our Q3 results around mid November. Now I'll turn it over to the operator for closing.

Operator

Thank you. For questions and answers regarding recent disclosures or any other matter, please reach out directly to the company using the contact details on the company website.

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