VIQ Solutions Reports Fourth Quarter and Full Year 2022 Financial Results
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 fourth quarter and full year ending December 31, 2022. Results are reported in US dollars and prepared in accordance with International Financial Reporting Standards ("IFRS").
"We ended a challenging 2022 with a 48% increase in year over year revenue which 93% is Annual Recurring Revenue ("ARR")1 and a 53% increase in year over year net new bookings," said Sebastien Paré, VIQ's Chief Executive Office. "We delivered on our promise to gradually return to organic growth post pandemic in 2023 and to bring end-to-end workflow technologies to clients around the world to solve key problems like the critical shortage of court reporters and the need to move content securely to the cloud. As our customers find more efficient ways to create and digitize delivery of their evidentiary content, we continue to execute our strategy to extend our Artificial Intelligence ("AI") to targeted verticals through scale, industry specific content, optimized workflow, and human knowledge."
"The positive impact our AI-powered, NetScribe™ technology has had in our most mature markets was impressive and underscores the value of VIQ IP. Productivity and efficiency gains reflected in gross margin post migration reached 55.8% in the United States and 61.6% in the United Kingdom. This is a material improvement from the gross margin ranges noted post-acquisition. Australia, representing 53% of our revenue exiting 2022 is scheduled to complete migrations onto the platform in 2023 which will further improve margins."
Fourth Quarter 2022 Financial Highlights
Full Year 2022 Financial Highlights
1 Represents a non-IFRS measure. Please refer to the "Non-IFRS Measures" section below and the reconciliation tables at the end of this press release.
On January 13, 2023, the Company entered a senior debt facility with Beedie Investments Ltd. ("Beedie"), pursuant to which Beedie has agreed to advance up to $15 million to the Company (the "Loan"). $12 million of the Loan has been advanced to the Company as an initial advance with an additional $3 million available to the Company to be drawn in subsequent advances in a minimum of $1 million for growth initiatives.
"As macroeconomic headwinds changed, we adjusted our focus, aligning our global resources, conducting a 10% reduction in headcount, and restructured to improve Adjusted EBITDA as we work to evolve into a leaner, more data driven company," said Alexie Edwards, VIQ Chief Financial Officer. "In January 2023, we refinanced our legacy debt facility eleven months ahead of maturity with a built-in facility for growth initiatives. We believe this facility provides us with the necessary liquidity to support growth."
As previously disclosed, on September 27, 2022, the Company received a letter from Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) because the closing bid price per share for the Company's common shares had closed below $1.00 for the previous 30 consecutive business days (the "Bid Price Rule"). The Company was given until March 27, 2023, to regain compliance with the Bid Price Rule.
On March 28, 2023, the Company was granted an additional 180-day grace period, or until September 25, 2023, to regain compliance with the Bid Price Rule following the Company's notification to Nasdaq that it would seek to implement a reverse stock split, if necessary, to regain compliance with the Bid Price Rule. To regain compliance with the Bid Price Rule and qualify for continued listing on the Nasdaq Capital Market, the minimum bid price per share of the Company's common shares must be at least $1.00 for at least 10 consecutive business days on or prior to September 25, 2023. If the Company fails to regain compliance during the additional compliance period, then Nasdaq will notify the Company of its determination to delist the Company's common shares, at which point the Company would have an opportunity to appeal the delisting determination to a Nasdaq Listing Qualifications Panel (the "Panel"), but there can be no assurance that the Panel would grant the Company's request for continued listing.
Conference Call Details
VIQ will host a conference call and webcast to discuss its fourth quarter and full year 2022 financial results on Thursday, March 30, 2023 at 11:00 AM Eastern Time. The call will consist of updates by Sebastien Paré, VIQ's CEO, 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 1-888-440-4052 (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.
Certain statements included in this press release constitute forward-looking statements or forward-looking information (collectively, "forward-looking statements") 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 (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 in this press release include, but are not limited to statements with respect to the Company's strategy, improvements to margins, benefits of the Beedie facility, expectations around the Nasdaq delisting and the conference call to discuss the Company's fourth quarter and full year 2022 results.
Forward-looking statements is based on several factors and assumptions which have been used to develop such statements, but which may prove to be incorrect. Although VIQ believes that the expectations reflected in such forward-looking statements 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 press release, assumptions have been made regarding, among other things, recent initiatives and that sales and prospects may increase revenue. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions that have been used.
Forward-looking statements are 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 statements, including but not limited to the factors described in greater detail in the "Risk Factors" section of the Company's annual report form on SEC Form 20-F form dated March 31, 2022 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. Such estimates and assumptions may prove to be incorrect or overstated. 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 such statements or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.
The following is a reconciliation of Technology Services, Support and Maintenance, SaaS and Subscription revenue to ARR, the most directly comparable IFRS measure for the periods ended December 31, 2022 and 2021:
At December 31, 2022 - Reconciliation of 2022 Technology Services, support and maintenance, SaaS, and Subscription revenues to ARR
At December 31, 2021 - Reconciliation of 2021 Technology Services, support and maintenance, SaaS, and Subscription revenues to ARR
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. Adjusted EBITDA and ARR are not a measure recognized by IFRS and does not have standardized meanings prescribed by IFRS. Therefore, Adjusted EBITDA and ARR may not be comparable to similar measures presented by other issuers. Investors are cautioned that Adjusted EBITDA should not be construed as an alternative to net income (loss) as determined in accordance with IFRS.
This news release also includes certain measures which have not been prepared in accordance with IFRS such as Adjusted EBITDA. To evaluate the Company's operating performance as a complement to results provided in accordance with IFRS, the term "Adjusted EBITDA" refers to net income (loss) before 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, current and deferred income tax expense. We believe that the items excluded from Adjusted EBITDA are not connected to and do not represent the operating performance of the Company.
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.
ARR is the annualized equivalent value of the 1- Software Support Maintenance (SSM), 2- Software Subscriptions 3- SaaS and 4- Technology Services revenue of all existing contracts as of the date being measured. This excludes non-recurring revenue from implementation, support, and maintenance fees. The majority of our Editing Services contracts are volumes based. Accordingly, our calculation of ARR assumes that the clients will renew the contractual commitments on a periodic basis as those commitments come up for renewal. A portion of the contract renewals are through a competitive tender process. Contracts agreements may be subject to contract value increases upon renewal reflecting both inflationary increases and the additional value and added products and services provided by our solutions. ARR is not adjusted for the impact of any projected future client cancellations, loss of renewals, service upgrades or downgrades or price increases or decreases.
We use ARR as a measure of our revenue trend and an indicator of our future revenue opportunity from existing recurring client contracts.
We believe that this measure provides a fair real-time measure of performance in a volume and subscription-based environment. ARR provides us with the visibility for consistent and predictable growth to our cash flows. Our total revenue growth coupled with increasing ARR indicates the continued strength in the expansion of our business and will continue to be our focus on a go-forward basis.
This press release includes trademarks, such as "aiAssist", "NetScribe" and "FirstDraft", 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.
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