Earnings call transcript: Viq Solutions sees margin growth in Q1 2025

Viq Solutions Inc. reported its Q1 2025 earnings, showcasing a notable improvement in gross margins and a positive cash flow from operations. Despite a slight year-over-year revenue decline, the company’s strategic initiatives in AI-driven transcription services have positioned it well for future growth. The stock experienced a 5% decline, closing at $0.19, reflecting mixed investor sentiment. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculation, though investors should note its significant debt burden.

Key Takeaways

• Viq Solutions’ Q1 2025 revenue fell by 3.5% to $9.6 million.
• Gross profit increased by 13%, with a gross margin of 51.9%.
• The company achieved positive cash flow from operations of $652,000.
• FirstDraft platform adoption grew by 39% year-over-year.

Company Performance

Viq Solutions has made significant strides in enhancing its operational efficiency and expanding its AI-driven transcription capabilities. The company reported a gross profit of $5 million, marking a 13% increase from the previous year. This improvement is largely attributed to the adoption of its FirstDraft platform, which saw a 39% increase in usage. Despite a 3.5% decline in revenue, the company’s focus on high-margin revenue streams has bolstered its financial standing.

Financial Highlights

• Revenue: $9.6 million, down 3.5% year-over-year
• Gross Profit: $5 million, up 13% year-over-year
• Gross Margin: 51.9%, up from 44.3% in Q1 2024
• Adjusted EBITDA: $872,000, a significant improvement from -$83,000 in Q1 2024
• Cash Position: $1.6 million

Market Reaction

Following the earnings announcement, Viq Solutions’ stock decreased by 5%, closing at $0.19. This movement places the stock closer to its 52-week low of $0.15. While the decline suggests cautious investor sentiment, InvestingPro data shows a significant 25% return over the last week, despite a 16.7% decline over the past six months. The stock trades at a notably low revenue multiple, potentially offering value for investors willing to accept the risks.

Outlook & Guidance

Viq Solutions is targeting free cash flow in fiscal 2025, with plans to continue expanding gross margins. The company is focusing on growing its SaaS offerings and enhancing platform automation. Revenue forecasts for FY2025 and FY2026 are projected at $44.67 million and $45.57 million, respectively.

Executive Commentary

CEO Sebastien Pare emphasized the company’s strategic shift, stating, "We’re turning a manual high-volume industry on its head, and Viq is setting the benchmark for secure, scalable AI-driven content services." CFO Alexey Edwards highlighted the importance of gross margin expansion in achieving free cash flow goals.

Risks and Challenges

• Revenue Decline: The 3.5% drop in revenue could signal challenges in market penetration or competition.
• Market Sentiment: The stock’s decline suggests investor concerns about the company’s ability to sustain growth.
• Industry Competition: As the transcription industry shifts towards AI solutions, maintaining a competitive edge will be crucial.
• Economic Conditions: Broader economic pressures could impact client budgets and spending on transcription services.

Viq Solutions’ Q1 2025 performance reflects a company in transition, leveraging technology to improve efficiency and profitability. While challenges remain, especially in maintaining revenue growth, the strategic focus on AI and operational optimization positions it for potential long-term success.

Full transcript - Viq Solutions Inc (VQS) Q1 2025:

Audrey Liu, Corporate Finance Controller, BIQ: Good day, ladies and gentlemen, and welcome to the IT Solutions two thousand twenty five first quarter earnings conference call. Currently, all participants are a listen only mode. For those that dialed in, should you require any assistance during the call, please press then 0 on your touch tone phone. For questions and answers regarding recent disclosures or any other matter, please reach out directly to the company using the contact details of the company website. Your host for today is Audrey Liu, corporate finance controller for BIQ.

Please go ahead. Thank you. Before we begin, please note that certain statements made on today’s calls 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

Sebastien Pare, Chief Executive Officer, BIQ: the forward looking statements section in our press release and the company’s filing on sedarplus. As a reminder, all dollar amounts are in U. S. Dollars unless otherwise stated. With us today are Sebastien Pare, Chief Executive Officer and Alexey Edwards, Chief Financial Officer.

I will now turn the call over to Sebastien.

Audrey Liu, Corporate Finance Controller, BIQ: Thank you, Audrey, and good morning, everyone. At VIQ, we’re always at it’s not just about where we’re going, it’s also about how we’re getting there. In q one, we delivered clear measurable proof that our strategy is working. We entered 2025 with a strong momentum across all regions, especially in Australia, where the impact of our platform strategy is now unquestionable. First Drive output in Australia grew over 232% year over year following the completion of last year’s technology migration.

Each month, adoption continues to climb with more functionalities being rolled out and more of our human workforce adapting to new First Draft Fire workflow. We’re seeing the results in our margin. In The UK, First draft usage for human editing increased by over 80%. In The US, we saw steady growth across every first draft metrics. Overall, first draft adoption increased by 39% year over year at the source of our productivity gains and the financial margin gains reflected in Q1 results.

Our decision to roll out platform migration in phases, starting in The U. S. And The U. K. In prior year, was intentional.

It gave us a chance to apply those learnings in Australia, And now we’re seeing the payback, steady regional margin gains driven by repeatable cross market playbooks. The U. S. And The U. K.

Are now consistently operating above 60% gross margin. That’s a powerful validation of our transformation framework. Australia is at a key inflection point, transitioning from a fixed cost model to a more flexible variable labor approach. It’s a shift that positions us well to unlock the next phase of margin expansion in 2025. And it’s why we remain confident in our ability to scale effectively even if that volume and client capacity fluctuates evenly.

Thanks for expanding gross margin. We are tracking towards a sustainable operation and capability to generate free cash flow later this year, assuming current productivity levels and volumes hold steady. That matters because it reduced our reliance on outside capital to fund operations going forward. To be clear, cyclical fluctuation in backlogs will continue to occur from time to time, but the structural improvement we’ve made gave us the tools to manage through them. In Q1, we delivered adjusted EBITDA of almost $900,000 That’s a meaningful improvement from a loss of $83,000 a year ago and nearly double what we reported last quarter in Q4.

On a constant currency basis, revenue was flat year over year. The 3.5% decline reported was mostly tied to the foreign exchange headwinds, not the fundamentals. And with The U. S. And UK volumes trending up post quarter, we feel optimistic at this stage on how Q2 is shaping up.

Most importantly, the gross margin in Q1 hit 51.9%, which is up to 7.6% from 44.3% in q one of last year. That’s a strong indicator that our model is scaling and that the free cash flow in fiscal twenty twenty five is within reach. We’re now done. We believe there’s still room to expand margins much further. This quarter also marked major progress on cost control.

We achieved greater workflow flexibility and lower unit production costs, improving, we believe, are durable, not onetime gains. With automation and AI at the center of our model, we will continue to improve our customer unit profitability and expand our lead in every region we serve. These results are proof that our strategy is not just working, it’s accelerating. To provide you a little bit of industry context ahead of the AGM in June, the evidence transition industry is undergoing a fundamental transformation, shifting from manual labor intensive workflow to AI powered platform that are offer speed, accuracy, security and compliance at scale. At the core of this evolution is a hybrid model where human in the loop oversight continues to play a critical role tailored to the precision, context, and accountability required by each client and use case.

To illustrate the pace of change, today, advanced AI system can transcribe over a ninety minute long audio file in less than thirty seconds, a task that traditionally, before any technology, took five to six hours of manual effort depending on the complexity and the number of speakers involved. Speech to text accuracy is no longer the barrier. The real challenge and the real opportunity lies the downstream steps, client specific formatting, diarization, domain trained language models, intelligent post processing, contextual validation, all while meeting rigorous evidence and regulatory standards. These are the areas where human oversight remains crucial, and it will basically vary based on the content and the risk profile of each organization. This is more than the technology upgrade.

It’s a structural shift in how transcription services are delivered and scaled. It demands new tools, new workflow, and a collaborative approach between people and machines. Our team embracing it, leveraging the AI enabled processes to enhance productivity, short term turnaround times, and deliver measurable client value. Our enterprise clients are also evolving. They now expect secure self serve mobile and audit workflow, seamless integration, verify accuracy, summarization, multilingual capabilities, and fast reliable delivery, all governed by strict SLAs and KPIs.

Speed remains essential, but flexibility is becoming just as important. Across segments, we see clients calibrating the level of human verification based on use case, content type, and operational risk. Some rely on the fully verified transcript for evidence purposes. Others use first draft outputs with minimum human review for early stage analysis or internal workflow. This variability is shaping a more intelligent, efficient operating model.

Just to give you some examples, legal teams may use first draft for early case development, applying full human verification for court submitted for evidence transcript. Government agencies on the opposite may process internal briefing and procedural records with first draft first model while applying oversight where policy and compliance demanded. Media organization may prioritize speed for life coverage and real time publishing while actively applying editorial review for in-depth or regulatory content. Insurance provider often automate routine documentation and claims intake with additional scrutiny reserved for disputed or litigated related files. Line enforcement units may also use first draft generated transcript for internal investigation escalating to the full human review for interviews going for court proceedings.

This flexible fit for purpose model reflects a broader industry trend. In fact, recent survey showed that over two thirds of our legal services leaders around the world are now viewing AI adoption as a top strategic priority. BIQ is exceptionally well positioned to meet that demand. Adoption of our first draft platform, Next5 and FirstDraft, continues to grow, driven by measurable gains in speed, efficiency, security and compliance across complex volume environment. Looking ahead, our product road map includes deeper regional expertise, multilingual automation, real time diarization and enhanced to value customers.

We we are our pleased services, and VIQ is leading that evolution. Q1 marked a strategic inflection point as we shifted from customization to margin led execution. First, in Australia. First draft volume increased by 232% year over year following the platform migration. Productivity gains accelerated as NetScribe adoption increased despite elevated volume and a persistent backlog for low quality audio from search and police clients.

From December to March, editing efficiency improved by 13.25%, reflecting continued workforce optimization and a growing impact of the automated workflow. These gains have strengthened our ability to take on more short term driven work while enhancing margin resilience. First half also as far as fast usage without professional editing by BIQ rose 72% year over year, underscoring its value in delivering fast, accurate and compliant transcript for high volume complex content. Adoption was especially strong among governance and law enforcement clients where mobile users surged 96.4%. In March, we had over 300 active users on FirstDraft, reflecting deeper integration into client workflow and growing reliance on our AI powered workflow.

Foreign languages. Our multilingual capabilities rolled out late last year were now a meaningful driver of the margin expansion that we saw in Q1 results. As the platform adoption at scale, we’ve seen an average of 26% year over year increase in foreign language margin contribution, with performance varying by language complexity and automation maturity. A key driver of this improvement has been the strategic shift from external vendors to in house trained partners, including multilingual specialists now operating on NetSprite platform. This transition alone has contributed to a 17% uplift in overall margin, reinforcing the value of our platform centric delivery model in driving sustainable cost efficiency and scalability.

In The United Kingdom, the weekly throughput post transition to the platform rose 64%, driven by increased automation and better resource alignment. We also successfully completed the ISO 9,001 certification, reinforcing our commitment to quality and compliance in regulated markets. In The United States, our near real time offering is gaining momentum in the corporate finance and governance sectors, and we’re poised to become a keystone in our largest account for each of those verticals. In Q1, we completed a formal strategic review led by an independent special committee of the Board with external financial and legal advisers. Committee evaluated multiple paths, including a number of private proposals received, capital structure changes and strategic alternatives.

Based on market conditions and the company’s improved financial trajectory, the Board, as recommended by the independent committee, concluded that the best course is to remain public and continue executing on our automation first strategy. The costs related to the strategic review and special committee have been purposely broken out and separated from operating activities of the company to allow shareholders to better understand the underlying performance of our business activity. The term adjusted operating loss was added in the MD and A for that specific purpose. It does not preclude future strategic actions. The company remains open to opportunities that strengthen our capital position, accelerate growth or enhance shareholder value.

The external interest we receive and the outcome of our strategic review reaffirm that we are on the right path and making measurable progress. With four consecutive quarters of positive EBITDA, strengthening recurring revenue and a more efficient cost structure, we are well positioned to preserve and expand our strategic option moving forward. Alexei, over to you. Thank you, Sebastian. Good morning, good afternoon, or good night, depending on where you are.

I’d like to recap our Q1 twenty twenty five financial highlights. Revenue for the quarter was 9,600,000.0, a 3.5% year over year decline, driven primarily by unfavorable foreign exchange. On a constant currency basis and accounting for typical January court seasonality, revenue held steady year over year, reflecting stable volume and targeted price increases. Gross profit rose 13% to $5,000,000 aided by cost efficiencies and a 152,000 onerous contract reversal. Excluding this onetime item, gross margin remained strong at 50.4%.

SG and A declined 12%, reflecting ongoing restructuring and disciplined expense management. Adjusted EBITDA was 872,000, up from negative adjusted EBITDA of 83,000 in Q1 of twenty twenty four and higher than the positive EBITDA adjusted EBITDA of $4.94 in q four of twenty four. Net loss was 1,800,000.0, same as comparable period in 2024. The company reported adjusted operating loss of 700,000.0, representing year over year improvement of 1,100,000.0 from a loss of 1,800,000.0 in the same period of 2024. This figure excludes nonrecurring costs relating to the strategic review, including a 900,000 contingent amount payable to be the capital only in the event of a debt default by the company.

We ended the quarter with $1,600,000 in cash, generating $652,000 in positive cash flow from operations. Thanks to improved adjusted EBITDA and working capital management. Discussions with our lending partner remains collaborative with a shared focus on implementing a sustainable path forward on a revised and achievable covenant structure that supports continued operational improvement. We are very excited about the clear trends we have established on gross margin, increases year over year. For q one twenty five, we increased gross margins of 51.9%, which is up 7.6% from 44.3 in q one of twenty twenty four.

Gross margin expansion is a critical element in our goal of reaching free cash flow during fiscal twenty twenty five. Why are we so confident in our ability to continue to expand gross margin? Firstly, q one twenty five marked another successful quarter of v I two demonstrating our cost control efforts. During this time, we achieved high levels of workforce flexibility and lowered unit production costs. We do not believe these are onetime improvements.

We believe we can continue to leverage automation and AI server workflow to further strengthen unit economics and continue to expand gross margins. Secondly, through gross margin expansion, we are well positioned to achieve sustainable operations and free cash flow in 2025 and beyond. This is important to us as it will allow VIQ to become less reliant on finding sources of capital to fund operations, providing there are no material variation to revenue through that period and the company continues to achieve the desired gross margin level. To summarize, we are very excited about the trends established in Q1 with respect to gross margin expansion. Secondly, we are confident that we are we will continue to expand gross margins through automation and AI driven workflow.

And finally, gross margin will allow us to achieve sustainable operations and free cash flow. Back to you, Sebastian. Thank you, Oleksi. Looking ahead, our priorities are very, very clear. Number one, sustain the gross margin gains to expanded adoption of Netscribe and FirstRef, moving next level of automation to the core of all our workflows.

Streamline on America and The UK operations, where delivery models are now tightly aligned to client demand, driving a sustained reduction in cost to serve. Both regions consistently delivered gross margin above 60%, underscoring the scalability, efficiency of the platform and the operating model. Drive further efficiency in Australia, where gross margin has moved from the low 20s to the mid 40s. The path to higher margin continues in 2025 as we complete the transition to a higher variable label model midyear, and we expect continued upside. We also plan to deploy resources with discipline, prioritizing margin expansion, scalable SaaS growth and adjusted high margin revenue stream.

Currently, there are several initiatives accelerating the SaaS adoption and unlocking connected sources of recurring revenue, strengthening free cash flow and positioning the business for sustained value creation. In parallel, we’re also in constructive conversation with our lender, BD Capital, to recalibrate some of the lending covenants. The goal is to modify some terms to reflect where we are today and avoid the drag of ongoing short term waiters tied to the company operating progress. The discussions are progressing. In closing remarks, q one delivered a strong and strategically meaningful start to 2025, the best ever in the history of the company.

In q one, we’re not just recovering, we’re scaling towards profitability. We delivered four straight quarters of positive adjusted EBITDA and expanded gross margin to over 51%, proving that our platform automation first strategy is working. The industry is moving fast from manual transcription to AI powered workflow. The IQ is in front with NetScribe and FirstDraft now widely adopted across all our key regions, powering faster, more accurate and compliant workflow for courts, law enforcement insurance media and government clients. Q1 market turning point.

Automation is now driving the real financial gains. We’ve improved editing efficiencies, expanded SaaS adoption by 72% and some multilingual margin rise to 26%. Our Australia margin jumped from the low 20s to the mid-40s and The UK and The United States are now exceeding 60%. That’s progress. Importantly, these are not short term costs.

They are structural improvement from an increasingly improving mature tech platform, deeper automation and clearly a well defined blueprint for execution. We review multiple strategic path this quarter, including a number of go private offers and concluded that the best way to build value at this time is to remain public and keep executing. That said, we remain open to opportunities to accelerate growth and shareholder value creation. Our story is very simple. We’re turning a manual high volume industry on its head, and VnacQ is setting the benchmark for secure, scalable AI driven content services.

We look forward to sharing our Q2 results in August. The AGM is scheduled for June. For any follow-up questions, please do not hesitate to contact the company directly. Operator, I’ll leave that to you for the closing. Thank you.

Everyone, this concludes today’s call. You may now disconnect your lines. Thank you for your participation.

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