VIQ Solutions Q3 2024 Earnings Call Transcript

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November 13, 2024

There are 5 speakers on the call.

Operator

Your host for today is Audrey Liu, Corporate Finance Controller for VIQ. Please go ahead.

Speaker 1

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 and A and other continuous disclosure filings, which are available on SEDAR atsedar.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.

Speaker 2

Thank you, Audrey. Good morning, everyone, and thank you for joining our Q3 earnings call. Q3 was a transforming quarter for VIQ, where we achieved notable financial milestones. $2,100,000 improvement in adjusted EBITDA year over year, a $7,900,000 reduction in net loss over the 1st 9 months and 10% revenue growth compared to the same period of last year. For the 1st 9 months of 2024, adjusted EBITDA reached $1,500,000 a $4,800,000 improvement from last year, truly reflecting our continued operational discipline and focus on margin expansion.

Speaker 2

The Q3 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 in our strategic direction, focused on strengthening financial stability and driving sustainable profitability as we move towards 2025. Afterwards, Susan Alexei 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 1st draft solution, which continues to gain strong traction across all revenue segments.

Speaker 2

1st draft 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 aligned organizations, enhancing our value proposition and creating new growth opportunities across the business. SaaS revenue from the first draft doubled in the 9 months ending September 30, reflecting the increased value our technology brings to our customers. Originally targeting smaller entities like law enforcement agencies, law firms and 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 legal teams, insurance companies and transcription providers.

Speaker 2

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 amid a skilled court reporter 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.

Speaker 2

Our AI driven enhancements in NetScribe and across our product portfolio are transformative, enabling more customized scalable solutions for our client. 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. The IQ solution is strategically positioned to deliver sustained value for our customers and shareholders as we move forward.

Speaker 2

Thank you. And I will now hand it over to Susan Alexei to provide you with additional details. Susan? Susan there? Then I will follow-up.

Speaker 2

Sorry, Susan.

Speaker 3

I just got it. Sorry. Thank you, Sebastian. Change always comes at a cost and in our case it's a lower cost. Since migrating our technology to Australia, we have seen core metrics that drive our transcription business improve month over month.

Speaker 3

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.

Speaker 3

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 court agencies. We are also gaining traction with our partners such as ORDIGINAL in the U. K.

Speaker 3

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 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.

Speaker 3

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 to be a 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 been re awarded most of our long term revenue agreements. With these renewals come improved pricing and terms, 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 walls of VIQ and the industries that we serve.

Speaker 3

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 Q3, 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.

Speaker 3

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.

Speaker 3

Now I'll hand it over to Alexey Edwards to provide an update on our financial results. Alexey?

Speaker 4

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 Q3 of 2024. For the quarter ended September 30, 2024, revenue came in at $11,100,000 reflecting an increase of $1,000,000 or 10% compared to the same period last year. Gross profit totaled 5,100,000 dollars up by $800,000 or 19 percent from the same period in the prior year.

Speaker 4

Net loss of $1,100,000 an improvement of $3,300,000 from the same period last year And adjusted EBITDA reached $800,000 an increase of $2,100,000 or 158% compared to the same period in the prior year. Now let's look at the 9 month performance. For the 9 months ended September 30, 2024, revenue was $32,600,000 representing an increase of $1,900,000 dollars or 6% from the same comparative period in 2023. Gross profit at $14,800,000 an increase of $1,400,000 or 11% compared to the same period last year. Net loss was reduced to $3,500,000 a substantial improvement of $7,900,000 from the comparative period in 2023.

Speaker 4

And adjusted EBITDA for the 1st 9 months of the year was $1,500,000 reflecting a significant improvement of $4,800,000 from the same period last year. We're pleased to report a significant improvement in adjusted EBITDA with a $2,100,000 increase for the quarter and $4,800,000 increase for the 9 months of 2024 compared to the same period last year. This growth highlights the effectiveness of our strategic initiatives focused on 1st, productivity and margin expansion secondly, rigorous cost management and thirdly, 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 our strategic priorities and financial targets. Now, I'll hand over to Sebastien to provide closing remarks.

Speaker 2

Thank you, Alexei. 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 objective. To close, the progress we've made in Q3 bolstered financial foundation, enabling us to drive further improvement in gross margin and EBITDA.

Speaker 2

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.

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VIQ Solutions Q3 2024
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