Earnings call transcript: VIQ Solutions Q4 2024 sees profit improvement

VIQ Solutions Inc. (VQS) reported its financial results for the fourth quarter of 2024, showcasing a remarkable improvement in profitability metrics. The company achieved a 2% year-over-year increase in revenue for the quarter, reaching $10.5 million. Notably, VIQ Solutions reduced its net loss by 51% from the previous year, marking significant progress towards profitability. The company’s stock, however, experienced a 5% decline, closing at $0.19, near its 52-week low. According to InvestingPro data, the stock currently trades at $0.13, with a market capitalization of just $6.94 million, suggesting potential undervaluation based on InvestingPro’s Fair Value analysis.

Key Takeaways

• VIQ Solutions reported a 51% reduction in net loss for the full year 2024.
• Q4 2024 revenue increased by 2% compared to the same period in the previous year.
• Stock price fell by 5%, closing at $0.19, close to its 52-week low.
• The company onboarded 59 new SaaS clients and saw 100% growth in its AI-powered First Draft solution.

Company Performance

VIQ Solutions demonstrated solid performance in Q4 2024, with revenue growth and a substantial reduction in net loss. The company’s focus on AI-powered solutions and operational efficiencies contributed to its improved financial standing. Despite the positive financial results, the stock price declined, which may reflect broader market trends or investor caution.

Financial Highlights

• Full Year 2024 Revenue: $43.2 million, a 5% increase year-over-year.
• Gross Profit: $19.2 million, up 6%.
• Gross Margin: 44.5%.
• Adjusted EBITDA: $2 million, improved from a negative $4 million in 2023.
• Net Loss: $7 million, a 51% reduction.
• Q4 Revenue: $10.5 million, a 2% increase.
• Q4 Adjusted EBITDA: $500,000, a 175% improvement.

Outlook & Guidance

Looking forward to 2025, VIQ Solutions aims to sustain margin expansion, deepen client integration, and accelerate SaaS adoption. The company plans to continue investing in AI research and development to drive innovation and improve EBITDA performance. Generating free cash flow remains a priority as the company positions itself for long-term growth.

Executive Commentary

CEO Sebastien Pare remarked, "2024 was a transformative year for VIQ, defined by measurable progress towards scalable and recurring profitability." He emphasized the pivotal role of AI in reshaping the transcription industry, stating, "AI is no longer just a productivity tool. It’s changing the dynamics of the transcription industry." CFO Alexey Edwards added, "We are positioned to expand margins, scale profitably, and generate free cash flow in 2025."

Risks and Challenges

• Market Competition: Increasing competition in the AI-powered transcription space could pressure margins.
• Economic Conditions: Macroeconomic instability could affect client budgets and spending.
• Technological Advancements: Rapid technological changes might necessitate continual innovation to maintain a competitive edge.
• Regulatory Compliance: Ensuring compliance with evolving global data protection regulations remains critical.

VIQ Solutions’ Q4 2024 results reflect a company on the path to sustained profitability through strategic investments in technology and operational efficiencies. However, market reactions indicate that investors remain cautious, likely due to external factors and broader market conditions.

Full transcript - Viq Solutions Inc (VQS) Q4 2024:

Aubrey Liu, Corporate Finance Controller, VIQ: Only 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. Your host for today is Aubrey Liu, Corporate Finance Controller for VIQ. Please go ahead.

Andre, Unspecified, VIQ: Thank you. Before we begin, please note that certain statements made on today’s call are forward looking within the meaning of applicable securities law. These statements involve risks and uncertainties that may cause actual results to differ materially. Please refer to the forward looking statements section in our press release and the company’s filings on sedarplus. As a reminder, all dollar amounts are in U.

S. Dollars unless otherwise stated. With us today are Sebastien Pare, CEO of VIQ and Alexey Edwards, CFO. With that, I will now turn the call over to Sebastian. Sebastian?

Sebastien Pare, CEO, VIQ: Thank you, Andre. Thank you, Andre, and good morning, everyone. 2024 was a transformative year for VIQ, defined by measurable progress towards scalable and recurring profitability. We moved decisively beyond post pandemic stabilization, executing a company wide operational reset that embedded automation and AI into the core of our workflows across all regions. Today, our editors operate in increasingly specialized high value roles augmented by AI driven tools and structured content systems, all within a highly secure compliance focused infrastructure.

This evolution is accelerating output, improving consistency, reducing costs and enhancing the scalability of our platform as we continue to strengthen our financial and operational foundation. These innovative advancements are not only driving client value, but they’re also delivering financial results, And 2024 marked a key inflection point for the company. We delivered a full year of positive adjusted EBITDA, materially narrowing our net loss and improved throughputs with automation and platform driven efficiencies. This performance validates the strength of our revised operating model and our ability to generate recurring value in a tech enabled servicing environment. While Q4 included typical seasonal softness and some onetime costs related to restructuring and the strategic reviews, our full year results reflect tangible progress towards sustained profitability and long term growth.

We’re executing against a plan, a clear plan, prioritizing cost control, margin expansion and the continued evolution of our platform to drive value creation for shareholders. Our strategy in 2024 was anchored around four key priorities. Number one, completing global tech platform migrations in all regions. Number two, driving measurable productivity and regional margin expansion number three, optimizing EBITDA performance within our existing recurring revenue base and number four, advancing towards a free cash flow generating operating model. These efforts resulted in a $6,000,000 year over year improvement in adjusted EBITDA, reaching $2,000,000 for the year ended 12/31/2024.

This turnaround was underpinned by strategic investments in automation, rigorous cost control and optimized workflows across our operations. We successfully navigated shift in industry dynamics as transcription moved further from labor intensive models to our hybrid AI augmented best cost resources for production approach. Our six steps automation blueprint, now fully deployed across all regions, position VIQ to scale securely while maintaining high standards and compliance in sector specific accuracy. With this foundation in place, the company is well positioned to drive further EBITDA growth, margin expansion and free cash flow generation in 2025 and beyond. We’re already seeing meaningful returns from our strategic investments, with clear progress in both gross margin expansion and EBITDA trajectory.

Our focus on cost discipline is reflected in improvement across both COGS and OpEx. In recent quarter, VIAQ has begun tracking towards a full year positive EBITDA and is well positioned to generate the free cash flow, driven by stable top line and strengthened operating leverage. Notably, our gross margin expansion, particularly in the second half, was being fueled by the growing Maturitya platform and the operational efficiencies realized following the NetScribe migration. Now I’m going to ask Alexey to walk over the financial results for 2024. Alexey?

Alexey Edwards, CFO, VIQ: Thank you, Sebastian. Good day, everyone. Let me recap our full year 2024 financial highlights. Revenue increased by 5% year over year to $43,200,000 supported by consistent customer volumes and a growing base of SaaS clients. Gross profit rose to $19,200,000 up 6% with gross margin improving to 44.5%, driven by cost optimization and automation gains.

Adjusted EBITDA reached $2,000,000 a material improvement from negative $4,000,000 in 2023, positioning the company for sustained financial health and long term value creation. Selling and administrative expenses declined 22% year over year with a 24% reduction in Q4, reflecting disciplined execution and early returns from workforce optimization. Net loss of R7 million dollars a decrease of R7.3 million dollars or 51% from the same period in the prior year, a meaningful step towards achieving profitability. Earnings per share improved materially year over year, even in the context of share dilution, highlighting stronger underlying financial health on a per share basis. With that, I’ll turn over to Sebastian.

Sebastien Pare, CEO, VIQ: Thank you, Alexey. Our continued strategic focus on AI driven automation and platform modernization is translating into measurable commercial and financial outcomes. The key accomplishment for 2024 included: number one, securing several enterprise contracts amounting to $38,900,000 in multiyear bookings, significantly strengthening our recurring revenue base. Several of these contracts began ramping in 2024 with full run rate expected in 2025. We onboarded 59 new SaaS clients, accelerating our shift to a subscription based model with improved revenue predictability, achieving 100% year over year revenue growth in our AI powered First Draft solution, underscoring strong product market fit and adoption across customer segments.

We also enhanced our core AI platform to continue optimization of our domain specific language models, advanced post processing tools and diarization technology, delivering improvement in transcription speed, accuracy and scalability. These milestones validate the strength of our platform and reinforce our competitive differentiation in complex, regulated, multi speaker environment. In parallel, following the successes in The United States and The United Kingdom, Australia continues to be a cornerstone of our transformation in 2024. The Australia team delivered substantial progress by migrating all eligible production volume to the Netstrike platform. And now we’re starting to see a clear shift in market dynamics.

Recent RFP activity highlights growing demand for faster turnaround times, greater cost efficiency, enhanced security protocols and scalable self servicing capabilities. We’re well positioned to meet these needs by accelerating the adoption of AI powered transcription and tailoring NetStrike capabilities to involve the client requirements. Customer engagement trends to continue to validate the strength of our platform with growing demand for compliance driven, AI augmented cloud workloads. This momentum is unlocking new levels of operational flexibility, reinforcing Viagyu leadership position and laying a strong foundation for future growth. Innovations such as Netscribe advanced formatter, outsourced management and our AI assist engine, featuring domain specific language model and enhanced speaker recognition have elevated our capability to deliver faster, more accurate and scalable compliance based documentation solutions.

Additionally, we achieved SOC two Type one and two compliance in 2024, reinforcing our commitment to the highest level of data security and regulatory compliance. We remain deeply invested in several high impact AI and R and D initiatives that will be introduced throughout 2025. These innovations are expected to drive further gains in automation, documentation accuracy and overall productivity, supporting our long term growth and profitable target. Now I’m going to ask Alexey to walk you over the Q4 results. Alexey?

Alexey Edwards, CFO, VIQ: Thanks, Sebastien. I’ll recap a few of our fourth quarter financial highlights. In Q4 twenty twenty four, we delivered revenue of $10,500,000 a 2% increase over Q4 twenty twenty three. Gross profit of 4,400,000.0 a decrease of 6% from the same period in the prior year due to certain nonrecurring onetime costs related to retro pay adjustment and an onerous contract loss recorded in Q4 twenty twenty four. The onerous contract loss will be reversed in Q1 twenty twenty five.

Adjusted EBITDA of $500,000 which is a 175% improvement over the same period in the prior year. Despite seasonality in late December due to the annual court recess, this improved performance demonstrates a major inflection point reflecting disciplined cost control and automation benefits. Net loss of $3,600,000 an increase of $600,000 from the same period in the prior year, due primarily to foreign exchange loss and restructuring costs. While Q4 presented a typical seasonal softness and a temporary gross margin dip, the full year performance demonstrates clear progress towards sustainable profitability. 2025 outlook and priorities.

Looking towards 2025, we remain laser focused on execution and margin growth. Our key priorities include: one, sustained margin expansion through automation, dynamic pricing and revenue diversification two, deeper client integration, combining multimodal AI, workflow automation and secure compliance frameworks. Three, accelerated SaaS adoption to meet demand for scalable AI powered transcription solutions in high stakes environments. Fourthly, AI platform innovation with continued enhancements of domain specific language models, post processing and productivity agents. And fifthly, enhancing VIQ’s adjusted EBITDA performance.

Improving VIQ EBITDA performance continues to be a top priority, and we are encouraged by our 2024 results and the start of 2025. With a leaner cost base, proven automation blueprint and a stabilized revenue foundation, VIQ is positioned to expand margins, scale profitably and generate free cash flow in 2025. I will now hand over to Sebastien to provide closing remarks.

Sebastien Pare, CEO, VIQ: Thank you, Alexey. In closing, the transcription landscape is undergoing a profound transformation, fueled by the rise of vertical AI, enhanced diarization and secure self serve technology. What was once a manual, time intensive process has evolved into an intelligent AI powered workflow, delivering faster, more accurate and highly scalable results. Purpose built language models tailored to sectors like insurance, courts, law enforcement and media are significantly improving contextual accuracy, while advanced diarization ensures clear, more reliable attribution in complex multi speaker environment. Concurrently, market demand continues to accelerate for secure, cloud based platform with built in compliance and flexible self serve capabilities, empowering both our clients and our editors to manage workflow with greater control, efficiency, and transparency.

This transformation is not just technological, it’s financial. In 2024, VI could deliver a $6,000,000 turnaround, reaching a $2,000,000 EBITDA. This significant financial turnaround underscores our commitment to sustainable profitability and positions the company for continued margin expansion and positive free cash flow generation in 2025. AI is no longer just a productivity tool. It’s changing the dynamics of the transcription industry.

By enabling our human experts to take on more specialized, high value roles, VIQ is building a stronger, leaner and more scalable business aligned with long term value creation. On behalf of the leadership team, I would like to extend our sincere thanks to our employees for their dedication, to our customers for their continued trust, and to our investors for their ongoing support. Feel free to contact the company directly with any follow-up questions using the contact details on the company’s website. We answer every one of those inquiries. We look forward to sharing our Q1 results in the next five to six weeks.

Now I’ll turn it over to the operator for closing.

Aubrey Liu, Corporate Finance Controller, VIQ: Thank you for joining our call today. This now concludes our conference call. You may now disconnect.

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