VIQ Solutions Q2 2024 Earnings Report

VIQ Solutions EPS Results

• Actual EPS: -C$0.02
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

VIQ Solutions Revenue Results

• Actual Revenue: $15.84 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

VIQ Solutions Announcement Details

• Quarter: Q2 2024
• Date: 8/12/2024
• Time: N/A
• Conference Call Date: Tuesday, August 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 Q2 2024 Earnings Call Transcript

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.

Presentation

[Operator]

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. For those that are dialed in, should you require any assistance during the call, please press Star, then zero on your touchtone phone. For questions and answers regarding the recent disclosures or any other matter, please reach out directly to the company using the contact details on the company website. 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 second quarter financial results conference call. Before we begin, I would like to point out that certain statements made in today's call contain forward-looking information subject to known and unknown risks, uncertainties, and other factors.

[Audrey Liu, Corporate Finance Controller at VIQ Solutions]

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?

[Sebastien Paré, CEO at VIQ Solutions]

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.

[Sebastien Paré, CEO at VIQ Solutions]

Q2 also marked our best second quarter for customers' growth since before the pandemic, driven by strong client retention and contract expansions. We also secure 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 to transforming how both customers and transcribers interact with digital verbatim content.

[Sebastien Paré, CEO at VIQ Solutions]

The significant increase in Adjusted EBITDA underscores the strength of our transformation into an AI-powered workflow platform company. By streamlining operations and leveraging the built-in efficiencies in our business model, we've started to maximize efficiencies and solidify our leadership in high-value, complex verbatim documentation sectors, including courts, insurance, law enforcement, media, and legal.

[Sebastien Paré, CEO at VIQ Solutions]

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 2.1 million minutes of verbatim content 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.

[Sebastien Paré, CEO at VIQ Solutions]

Our technology is establishing new industry benchmarks, and our transcribers are evolving into highly skilled editors, further enhancing our competitive edge. Adoption and utilization of FirstDraft 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.

[Sebastien Paré, CEO at VIQ Solutions]

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

[Susan Sumner, President and COO at VIQ Solutions]

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 five 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.

[Susan Sumner, President and COO at VIQ Solutions]

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 second quarter, we achieved several operational milestones.

[Susan Sumner, President and COO at VIQ Solutions]

We successfully completed our planned migrations to the NetScribe AI Assist platform, largely in Australia, resulting in improved gross margins. We saw significant volume expansion in our insurance vertical, with higher volumes expected to continue. Client adoption and utilization of our FirstDraft 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.

[Susan Sumner, President and COO at VIQ Solutions]

The evolution of AI is a topic of discussion at dinner tables and boardrooms globally. It's no different here at VIQ. 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.

[Susan Sumner, President and COO at VIQ Solutions]

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 five years are now manifested in the results of the last three quarters, and we have just started this journey.

[Susan Sumner, President and COO at VIQ Solutions]

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. 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.

[Susan Sumner, President and COO at VIQ Solutions]

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 relationships that we have with these agencies. Our technology allows us to climb higher up the value chain, and this progression is by design.

[Susan Sumner, President and COO at VIQ Solutions]

Our transcribers are evolving into editors, and the speed of this transition is happening significantly faster than where we were five years ago. We believe our platform 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.

[Susan Sumner, President and COO at VIQ Solutions]

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.

[Susan Sumner, President and COO at VIQ Solutions]

We are excited to announce critical enhancements to our formatting technology, further solidifying VIQ 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 Alexie Edwards to provide an update.

[Alexie Edwards, CFO at VIQ Solutions]

Thank you, Susan. Thank you, Susan. Good day, everyone. I'd like to walk you through some of our key financial highlights for the second quarter of 2024. For the quarter ending June 30, 2024, revenue came in at $11.6 million, reflecting an increase of $1.1 million, or 10%, compared to the same period last year. Gross profit totaled $5.3 million, up by $0.6 million, or 14% from the same period in the prior year.

[Alexie Edwards, CFO at VIQ Solutions]

Net loss narrowed to $0.6 million, an improvement of $3 million from the same period last year. Adjusted EBITDA reached $0.8 million, an increase of $1.7 million, or 181%, compared to the same period in the prior year. Let's look at the six months ending June 30th, 2024.

[Alexie Edwards, CFO at VIQ Solutions]

Revenue was $21.5 million, representing an increase of $0.9 million, or 5%, from the same comparative period in 2023. Gross profit stood at $9.7 million, an increase of $0.6 million, or 7%, compared to the same period last year. Net loss was reduced to $2.4 million, a substantial improvement of $4.6 million, or 66%, from the same comparative period in 2023.

[Alexie Edwards, CFO at VIQ Solutions]

Adjusted EBITDA for the first half of the year was $0.7 million, reflecting an improvement of $2.7 million from the same period last year. We are extremely proud and pleased to report a significant improvement in Adjusted EBITDA, with a $1.7 million increase for the quarter and $2.7 million increase for the first six 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 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.

[Sebastien Paré, CEO at VIQ Solutions]

Thank you, Alexie. 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 2024, 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. Thank you for joining our call today. This now concludes.

Participants

Executives

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