VIQ Solutions (VQS) Revises Q3 Outlook and Financial Outlook for FY21 and FY22
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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 provides an update on its growth plans, updated outlook for the third quarter of 2021 and financial outlook for the full years 2021 and 2022. Additionally, the Company announces it will host an analyst and investor call today at 11:00 A.M. ET to discuss further details. All dollar amounts are expressed in U.S. dollars unless otherwise stated.
As further detailed below, VIQ has achieved significant corporate milestones this year, putting it in a position to execute its acquisition roll-up strategy. With the completion of The Transcription Agency (“TTA”) acquisition and the acquisition of Auscript Australasia Pty Ltd (“Auscript”), expected to be complete in the fourth quarter 2021, along with organic growth and the expected emergence from COVID-19 lockdowns globally in 2022, the Company is on track to generate at least $50 million in revenue1 with 47%-55% gross margin and 10%-20% adjusted EBITDA margin2 by the end of fiscal 2022.
“With several of our large Legal Court and Law Enforcement clients in Australia operating at 50% of normal capacity due to the prolonged shutdowns, the last three months have been a particularly challenging period from an operations and capital markets perspective. However, we believe we have managed through the pandemic well, fortified our balance sheet, and taken the steps necessary to execute our roll-up strategy and long-term growth plan, despite global M&A delays due to COVID-19 and international travel restrictions. We are in a strong position from a competitive standpoint and are rolling out FirstDraft, powered by AI, which will drive our revenue mix toward a more scalable, higher margin SaaS model,” said Sebastien Paré, VIQ's Chief Executive Officer.
The Company’s management and board of directors (the “Board”) collectively represent the single largest shareholder group of VIQ, with over 27% ownership prior to the U.S. only registered direct offering (the “RDO”) completed on September 15 and hold approximately 24% ownership of the issued and outstanding shares of the Company (on a fully diluted basis) after completion of the RDO.
Mr. Paré continued, “The Board and management wish to acknowledge they were disappointed by the market’s reaction to both the revised near-term outlook issued on July 30 and the RDO. We believe that raising capital was needed to close on accretive acquisitions and onboard significant new institutional shareholders. At this time in our growth trajectory, we are emerging from the COVID-19 pandemic in a strong position in a global industry digitizing at a fast pace to accommodate the new delivery expectations.”
“On August 12, VIQ’s shares began trading on Nasdaq following, our graduation to the TSX in Canada in January. Just last year, we were considered a venture company, and in 2021, we are listed nationally on big boards both in Canada and the U.S. This year’s equity trading volumes have leapfrogged prior year volumes on the TSXV and OTCQX. Our listings on the Nasdaq and TSX, coupled with strong trading liquidity, are expected to facilitate increased investment by institutional shareholders globally,” stated Alexie Edwards, VIQ's Chief Financial Officer.
Update on Long-term Global Growth Plans
“The senior exchange listings and a strategic capital raise were necessary to enable us to continue executing our accretive roll-up strategy which has accelerated with many new global opportunities. We believe the acquisition of TTA, the leading supplier of secure outsourced transcription services to clients in private and public sectors throughout the United Kingdom, will enable us to expand our presence in the U.K. where we now have post Brexit compliant, jurisdictional access,” said Susan Sumner, VIQ President and Chief Operating Officer.
“Additionally, our planned acquisition of Auscript this quarter enables VIQ to provide exceptional service and enhance the quality of delivery for all Australian clients with an opportunity to leverage our innovative technology offerings while improving our overall margin profile,” added Ms. Sumner.
Third Quarter 2021 Outlook
Though the Company is still in the process of closing its third quarter results, it is providing an interim update and expects to report revenue in the range of $7.0-$7.1 million and gross margin in the range of 48% to 49%1 for the third quarter of 2021. The revenue outlook for the quarter is below previously issued guidance primarily because of prolonged COVID-19 shutdowns in the States of New South Wales and Victoria in Australia, where some of the Company's largest customers are located. These shutdowns delayed new contracts and significantly reduced, albeit temporarily, the Court and Law Enforcement production volumes in the quarter. Additionally, labor shortages in the U.S. drove increased operating costs despite reduced volumes during the last quarter.
Clients in the States of New South Wales and Victoria are expected to resume normal production in November when 80% of the population is expected to be double vaccinated. In the U.S., labor shortages are slowly being reduced as the direct U.S. Government to independent contractor subsidies are ending. Pent-up demand caused by these delays is expected when volume production resumes. As a result, demand has developed, creating opportunities for FirstDraft, powered by aiAssist™ to help alleviate the operational pressure for quality, faster turnaround timelines, and new delivery expectations in post-pandemic digitization. The Company’s full earnings announcement is expected to be issued mid-November 2021.
Goals for Full Year 2021 and 2022:
The Company’s expectations for the 2021 fiscal year are to achieve revenue in the range of $34 to $35 million with gross margin in the 48%-50% range1.
The Company’s revised Queensland contract, previously announced December 2020, was expected to begin during the third quarter of 2021. This $5+ million annualized contract is now expected to commence sometime in the first half of 2022.
The Company’s goals for 2022 include a full year of normalized revenue for TTA and Auscript, the new organic growth contracts delayed in 2021, and processing the backlog related to COVID-19 shutdowns. Financial expectations include generating at least $50 million in revenue with 47%-55% gross margin1 and 10%-20% adjusted EBITDA margin2.
“Over the past nine months, VIQ has achieved some significant milestones, and we are positioned to elevate our consolidated revenue and margin structure next year as we expect to see additional tangible evidence in our results that our strategy is working,” Mr. Edwards added.
Financial Strategy Milestones Achieved During 2021:
- Graduated to the Toronto Stock Exchange - January 2021;
- Filed a Base Shelf Prospectus in Canada and Form F-10 in the U.S. - June 2021;
- Filed a Prospectus Supplement and listed on Nasdaq Capital Market - August 2021;
- Filed Prospectus Supplement and raised $18 million through a RDO in the U.S. - September 2021;
- Established VIQ UK, enabling the launch of Netscribe™, powered by aiAssist, in all global commercial geographies - September 2021;
- Closed TTA acquisition - October 2021; and
- Announced a binding Asset Purchase Agreement for Auscript - expected to close in the fourth quarter of 2021.
Mr. Edwards continued, “To match the Company’s strategic revenue model including SaaS models, using AI as a driver to automate transcription services, we expect to begin providing enhanced disclosures of key performance indicators beginning next year.”
Conference Call Details
VIQ’s management will host a conference call today to discuss the Company’s growth plans followed by a question-and-answer period at 11:00 A.M. ET. Investors may access a live webcast of the call on the Company’s website at www.viqsolutions.com/investors or by dialing 1-888-506-0062 (North America toll-free) or +1-973-528-0011 (international) to be connected to the call by an operator using conference ID number 747125. 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.
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