By M. Marin
READ THE FULL VQS RESEARCH REPORT
Reiterated 2022 goals & financial guidance …
VIQ (NASDAQ:VQS) (TSX:VQS) reported 2Q22 results last week, with 2Q22 revenue of $12.4M advanced 51% y/y, placing the company on track to reach targeted revenue of about $50M or more in 2022. Importantly in our view, bookings, the number of active VIQ clients (more than 3,400 – reflecting both existing clients and new accounts), production volumes, and annual delivered content all reached record levels in 2Q22.
Moreover, two new technology services contracts that the company signed in 1Q22 to support court recording and transcription services are valued at a combined roughly $1.9 million per annum. In addition, the contract to provide courtroom monitoring and transcription services to about half the Queensland, Australia court cases has started, after being delayed during the pandemic. We believe the resumption of operations in Australia's courts and in key verticals generally and supports the company's 2022 positive outlook. The company also expects revenue to shift towards higher margins, as it advances its goal to shift to high margin revenue and SaaS bundled / hybrid solutions.
VIQ's bookings of $4.4 million represented an increase of 159% sequentially compared to 1Q22 and a 20% net gain in the number of new clients during the quarter. VIQ's active clients base exceed a record 3,400, reflecting both existing clients and new accounts, VIQ expects gross margins ranging from 47% to 55%. The ongoing roll-out of FirstDraft and other high margin products is expected to accelerate revenue growth and enhance margins.
Importantly, the transition to recurring revenue under SaaS contracts instead of up-front licensing contracts is progressing. The company is advancing its goal of shifting to SaaS bundled and / or hybrid solutions and expects to continue shifting its revenue base toward recurring, higher margin technology revenue. VIQ expects to transition existing and prospective customers to the digital platform, which further facilitates the goal to cross-promote and cross-sell its growing suite of digital products and SaaS model.
Tuck-in acquisitions strengthen company position in key verticals
The Legal (Courts) vertical continues to represent the company's largest one, contributing 64% of 2Q22 total revenue. The Criminal Justice (including Law Enforcement) vertical represented 12%, Insurance was 12% and the Media, Corporate and Government vertical added another 12%. Although VIQ's 2022 focus is on consolidating operations and will likely not include a large M&A transaction, the company has indicated that it will make small strategic tuck-n acquisitions that make sense.
For instance, towards the goal of advancing its growth strategy and expanding its suite of product and service offerings, VIQ's recent acquisition of the Carbon™ technology platform is expected to improve its ability to service real-time needs of journalists and global media clients. We believe the Media, Corporate & Government vertical illustrates the growth potential facing VIQ, as various industries move towards digital data delivery and archiving. The company entered the Media vertical within the past two years with the 2020 acquisition of ASC Services LLC and it has subsequently become a key focus vertical for VIQ that is expected to continue growing.
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