VIQ Solutions Announces Transformative Q3 2024: Significant Growth in Adjusted EBITDA

VIQ Solutions Inc. (“VIQ”, “VIQ Solutions” or the “Company”) (TSX: VQS), a global provider of secure, AI-driven, digital voice and video capture technology and transcription services, is pleased to announce its unaudited financial results for the third quarter ending September 30, 2024. Results are reported in US dollars and prepared in accordance with International Financial Reporting Standards (“IFRS”).

“Our third-quarter results reflect strong financial performance, driven by revenue growth and improved gross margins. This success is a direct result of our effective court migrations in Australia and significant productivity gains. The enhancements made to our AI-driven Netscribe platform, including the introduction of AI-based formatting tools for court reporters, have streamlined operations and boosted efficiency, leading to substantial cost savings and margin expansion. With key migrations now complete and a strong focus on cost optimization, we have improved operational efficiency, positioning the company for continued gross margin growth and enhanced Adjusted EBITDA in the quarters ahead,” said Sebastien Paré, CEO of VIQ Solutions.

Third Quarter 2024 Operational Highlights

• Global Tech-AI Migrations: We have successfully transitioned the majority of our revenue-generating operations to the NetScribe AI Assist platform on a global scale, driving increased gross margins and improved operational efficiency.
• Renewals and New Awards: Key renewals and new contract awards with major clients have strengthened our ARR revenue base for the coming years.
• Productivity Gains in Australia: Operational improvements in the Australian court sector have enabled a shift from fixed staffing to a variable-cost model that adapts to case volume and court scheduling, enhancing flexibility and cost efficiency.
• Increased Client Adoption and Utilization: Client engagement with FirstDraft has grown across all revenue segments, leading to a twofold increase in FirstDraft SaaS revenue year over year for the nine months ending September 30, 2024.
• Enhanced AI Platform Performance: Rising volumes processed on our AI Platform have further optimized our proprietary Domain-Specific Language Models (DSLMs) and post-processing, reducing word error rates and improving transcription efficiency, which cuts the time required to transcribe each minute of audio.
• Insurance Volume Growth: The Insurance sector continues to experience steady growth, with a notable acceleration in recent months. One major client has boosted its volume by 800% since expanding its contract in April 2024, while another key client’s recent contract expansion has resulted in a 250% increase in volume since July 2024. These significant increases highlight the growing demand for our solutions within the Insurance industry.

“Our third-quarter results demonstrate strong revenue growth and improved gross margins, driven by successful court migrations in Australia and a 30% productivity gain among our transcribers. The enhancements to our AI-driven Netscribe platform have revolutionized document creation by automating complex, state-specific templates, bringing greater consistency and efficiency to court reporting. As demand for court reporting services continues to rise, our technology is proving essential in supporting clients facing resource constraints. With key migrations now completed, we have accelerated cost-reduction initiatives, further enhancing operational efficiency. We are confident that these advancements will continue to drive gross margin expansion and strengthen Adjusted EBITDA in the coming quarters.” said Susan Sumner, COO and President of VIQ Solutions.

Third Quarter 2024 Financial Highlights

• Revenue of $11.1 million, an increase of $1 million or 10%, from the same period in the prior year.
• Gross profit of $5.1 million, an increase of $0.8 million or 19% from the same period in the prior year.
• Net loss of $1.1 million, a decrease of $3.3 million or 75%, from the same period in the prior year.
• Adjusted EBITDA¹ of $0.8 million, an improvement of $2.1 million, or 158%, from the same period in the prior year.

“We are thrilled to report a significant improvement of approximately $2.1M to Adjusted EBITDA from the same period last year. This growth reflects the success of our strategic productivity margin initiatives, tight cost management and revenue expansion in an industry experiencing rapid modernization due to the integration of AI technology. We remain focused on executing our strategic priorities and financial targets. Enhancing VIQ’s Adjusted EBITDA performance remains a top priority” said Alexie Edwards, VIQ’s Chief Financial Officer.

¹ Represents a non-IFRS measure. Non-IFRS measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Management believes non-IFRS measures, including Adjusted EBITDA, provide supplementary information to IFRS measures used in assessing the performance of the Company’s business. Please refer to the “Non-IFRS Measures” section below.

A copy of the Company’s unaudited financial statements and accompanying MD&A for the three and nine months ended September 30, 2024 (collectively, the “Financial Information”) will be available under the Company’s profile on SEDAR+ at www.sedarplus.ca.

Conference Call Details

VIQ will host a conference call and webcast to discuss Financial Information on Wednesday November 13, 2024, at 11:00 a.m. (Eastern time). The call will consist of updates by Sebastien Paré, VIQ’s Chief Executive Officer, Alexie Edwards, VIQ’s Chief Financial Officer, and Susan Sumner, VIQ’s President and Chief Operating Officer, 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 at least 10 minutes before the call starts.

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.

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.

Forward-looking Statements

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 improved 2024 performance, including to gross margin, the Company’s focus and its priorities, expected higher volumes, increases in SaaS sales and the evolution of sectors in 2024, the filing of the Financial Information on SEDAR+ and the conference call to discuss the Company’s financial results.

Forward-looking statements are 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, cost savings from workforce optimization, cost reductions from the Company’s workflow solutions and that sales and prospects may increase revenue. In addition to other factors and assumptions that may be identified in this press release, assumptions have been made regarding, among other things, recent initiatives, cost savings from workforce optimization, cost reductions from the Company’s workflow solutions, 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 information form and in the Company’s other materials filed with the Canadian securities regulatory authorities.

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 Net Loss to Adjusted EBITDA, the most directly comparable IFRS measure for the three and nine months ended September 30, 2024, and 2023:

Non-IFRS Measures

The Company prepares its financial statements in accordance with IFRS. Non-IFRS measures are provided by management to provide additional insight into our performance and financial condition. VIQ believes 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 is not a measure recognized by IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, Adjusted EBITDA 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. For a reconciliation of net income (loss) to Adjusted EBITDA please see the Company’s MD&A for the three and nine months ended September 30, 2024.

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 adjusting 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 impairment of property and equipment, 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, loss on modification or extinguishment of debt, 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.

Trademarks

This press release includes trademarks, such as “NetScribe”, which are protected under applicable intellectual property laws and are the property of VIQ. Solely for convenience, our trademarks referred to in this press 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 that 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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