VIQ Solutions Incorporated (VIQ), a global provider of transcription and technology services, reported a transformative third quarter in 2024, with significant improvements in financial performance, including a $2.1 million increase in adjusted EBITDA year-over-year and a $7.9 million reduction in net loss over the first nine months.
The company also experienced revenue growth compared to the same period last year, with SaaS revenue from their FirstDraft solution doubling in the nine-month period ending September 30.
Key Takeaways
- VIQ Solutions reported notable year-over-year financial improvements in Q3 2024.
- The company achieved a $2.1 million increase in adjusted EBITDA and a $7.9 million reduction in net loss for the first nine months.
- Revenue growth was observed, with SaaS revenue from FirstDraft doubling.
- Major contract renewals and the advancement of the NetScribe platform were highlighted.
- The company focuses on operational discipline, margin expansion, and sustainable profitability.
Company Outlook
- VIQ Solutions is focused on strengthening financial stability and driving sustainable profitability.
- The company is expanding its FirstDraft solution to larger enterprises and has introduced AI-powered formatting tools in its NetScribe platform.
- Cost reduction initiatives are ongoing, aiming to improve operational and administrative efficiencies.
- VIQ is strategically positioned to deliver sustained value for customers and shareholders.
Bearish Highlights
- The company's financial improvement comes after a period of losses, indicating a need for continued strategic initiatives to maintain positive trends.
Bullish Highlights
- VIQ Solutions has seen a 30% productivity improvement among Australian transcribers.
- The company has secured substantial renewals and new contracts, particularly in Australia.
- Strong growth is expected in the insurance vertical, with higher volumes on the AI platform.
Misses
- No specific misses were mentioned in the summary provided.
Q&A highlights
- The company did not provide a Q&A session during the call but directed investors to their investor channel for questions.
In conclusion, VIQ Solutions' third quarter of 2024 marks a period of financial growth and operational achievements. With the successful expansion of their technology solutions, the company is making strides in improving productivity and efficiency, which is reflected in their improved financial metrics. The focus on AI integration and strategic initiatives positions VIQ for continued progress and success in the future.
InvestingPro Insights
To complement VIQ Solutions' reported financial improvements in Q3 2024, recent data from InvestingPro offers additional context for investors. Despite the company's progress, InvestingPro Tips highlight that VIQ is "quickly burning through cash" and that "short term obligations exceed liquid assets." These insights suggest that while VIQ has made strides in reducing its net loss and improving EBITDA, financial stability remains a key focus area.
The company's market capitalization stands at $8.96 million, reflecting its current valuation in the market. Interestingly, VIQ is "trading at a low revenue valuation multiple," according to another InvestingPro Tip. This could indicate potential undervaluation, especially considering the reported growth in SaaS revenue from their FirstDraft solution.
In terms of performance metrics, VIQ's gross profit margin for the last twelve months as of Q3 2024 was 45.44%, which aligns with the company's focus on margin expansion mentioned in the article. However, the operating income margin for the same period was -14.82%, underscoring the ongoing challenges in achieving profitability.
It's worth noting that VIQ has shown a positive price trend, with a 1-year price total return of 41.18% as of the latest data. This performance may reflect investor optimism about the company's turnaround efforts and strategic initiatives.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights beyond those mentioned here. In fact, there are 6 more InvestingPro Tips available for VIQ Solutions, which could provide valuable perspective on the company's financial health and market position.
Full transcript - Viq Solutions Inc (VQS) Q3 2024:
Audrey Liu - Corporate Finance Controller:
Sebastien Pare - CEO:
Susan Sumner - President and COO:
Alexie Edwards - CFO:
Operator: Good day, ladies and gentlemen. Today, we are hosting a conference call to discuss the 2024 Third Quarter Financial Results for VIQ Solutions, Incorporated. Currently all participants are in a listen-only mode. [Operator Instructions] Your host for today is Audrey Liu, Corporate Finance Controller for VIQ. Please go ahead.
Audrey Liu: 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 Pare, CEO; Susan Sumner, President and COO; and Alexie Edwards, CFO of VIQ. I will now turn the call over to Sebastian Pare to begin.
Sebastien Pare: 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 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. Today, we will walk you through our key achievements especially our core Australian markets, along with operational highlights and our strategic direction, focus on strengthening financial stability and driving sustainable profitability as we move towards 2025. Afterwards, Susan Alexi 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. 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 allying organizations, enhancing our value proposition and creating new growth opportunities across the business. SaaS revenue from the FirstDraft doubled in the nine months ending September 30, reflecting the increased value our technology brings to our customers. Originally targeting smaller entities like line 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 vehicle teams, insurance companies and transcription providers. Additionally, we advanced our NetScribe platform with Stage 2 of its transformation, introducing the industry-first AI power 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 and then a skilled court reported shortage and crisis level backlogs within most of the courts. It's already delivering meaningful benefits to deposition firms, courts and agencies needed 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 strengthens 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 solution is strategically positioned to deliver sustained value for our customers and shareholders as we move forward. Thank you. And I will now hand it over to Susan and Alexie to private you with additional details. Susan?
Susan Sumner: Thank you, Sebastian. Change always comes at a cost in the market at 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. 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 core agencies. We are also gaining traction with our partners such as our digital 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, continue to drive major driver of revenue. 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 have been reawarded most of our long-term revenue agreements. With these renewals come improved pricing and turns 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 wells 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. 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. And 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: 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 30, 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 and 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. For the nine months ended September 30, 2024, and 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. And 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 are 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. 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 the 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 financial targets. Now I'll hand over to Sebastien to provide closing remarks.
Sebastien Pare: 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 in financial strength going forward. We remain focused on delivering for our customers, advancing our technology and achieving our strategic and financial objectives. Close the progress we've made in Q3 bolstered financial foundation, enabling us to drive further improvement in gross margin and EBITDA. Thank you for your continued support, and I look forward to answering any questions you might have through our investor channel available on our website. Thank you.
Operator: 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 our conference call. You may now disconnect.
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