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spk04: Good day, ladies and gentlemen. Today, we are hosting a conference call to discuss the 2023 fourth quarter and full year financial results for VIQ Solutions, Inc. Currently, all participants are in a listen-only mode. For those that dialed in, should you require any assistance during the call, please press star then zero on your touchtone phone. 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 Audrey Liu, Corporate Finance Controller for VIQ. Please go ahead.
spk03: Thank you. Good morning, everyone, and welcome to VIQ Solutions' 2023 Fourth Quarter and Full Year Results Conference Call. Before we begin, I would like to point out that 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&A and other continuous disclosure filings, which are available on CDAR at cdar.com. As a reminder, all dollar amounts are in U.S. dollars unless otherwise stated. With us today, we have Sebastian Paré, CEO, Susan Sumner, President and COO, and Alexi Edwards, CFO of VIQ. I will now turn the call over to Sebastian Paré to begin.
spk00: Thank you, André. Welcome, everyone, to our fourth quarter of 2024 earning calls. I would like to call 2023 the year of tearing the way forward to 2024. While the year's results reflect the challenges of the year, Q4 represents the way forward to our return to positive EBITDA in 2024. This progression was not a small feat. We pulled through the remaining legacy of the pandemic with capacity adjustments that rebounded in Q4. We committed and executed aggressive cutting measures to meet our commitments to positive EBITDA. We began AI migrations in late 2023 to meet our commitment to increase productivity and gross margin attainment in Australia to be consistent with other regions globally. All of this while ensuring that we remain fully committed to preserving and growing profitable revenue and continuing to invest in innovation that protect our competitiveness advantage in our core segments. with particular focus on technologies that are disruptive in the courts, law firms and legal, insurance, and criminal justice space. We're particularly excited about the market penetration for our SaaS product, First Draft. Everyone can route an audio and video file into a speech-to-text. Yet, speech-to-text is a very small step in our AI workflow. You need a lot more intelligence and continuous supervised learnings with human experts built in to bring sophisticated multi-speaker first act products to meet the market demands of stringent legal requirements for evidence purposes for our clients. Our clients rely on documentation recorded and produced by VIQ for a range of legal activities, including interviews, testimonies, depositions, trial, litigation, and settlement. Our unique domain-specific language models Alongside our post-processing roles engines per industry, by region, and recently by customer, I've evolved leaps and bounds with the volume that have been migrated in 2023 that are now flowing to the platform globally 24-7. This is partially what we mean by technologies that are disruptive in the court, legal, insurance, and criminal justice space. We enable our clients to be more productive and more responsive to the evolving needs of their complex clients who value accuracy. Our entire industry has been challenged with growth during the pandemic and the year that followed. Our industry is adapting to emerging AI technologies and the unavoidable catch-up that the government entities that we're dealing with. Following the annual court recess seasonality late December and early January in the United Kingdom in Australia, February results, while not a long runway, will likely bring in further evidence to the markets that the company actions from 2023, both cost reductions and productivity gains, alongside a steadier revenue post-pandemic and net new bookings, are gradually reshaping favorably the financial foundation of VIQ going forward in 2024, at a time when the addressable market is growing much faster than our customers can handle to their legacy manual workflow. Capital markets, particularly in the micro-cap space, have certainly shown volatility, but we're very proud that despite market headwinds, we were able to close successfully a private placement, which ended up being oversubscribed. It was made possible through the support of many tech AI savvy investors alongside my partners, Beatty, who took a hard look at the company progression towards positive EBITDA in 2024, alongside latest industry trends and the results. Their support reaffirmed their commitment to VIQ and is a testament to the belief that we're off to a very strong 2024. We have remained focused on our two main core objectives. requiring to emerge in 2024. Number one, yielding the results of the cost reductions, and number two, an accelerated return to profitability. We're very pleased to say that our results in Q1 of 2024 will likely show the results of that focus is on track. And now I will turn it over to Susan Sumner for the operational updates. Susan?
spk02: Thank you, Sebastian. As Shep mentioned, 2023 was a year of recovery and forward movement, which has created the foundation for our acceleration in 2024. While the first three quarters of 2023 were full of challenges related to capacity and reduced volumes tied to that capacity, Q4 showed the beginning of the reversal of that trend. We cleared the U.S. backlog in criminal justice and we saw a significant uplift in insurance volumes that are trending to pre-pandemic rates. We cleared much of the backlog in criminal justice in Australia, as well as we began the acceleration of the court work that had been hindered by capacity constraints in our prior quarters. While Q4 was still negatively impacted by abatements and discounts, we were able to favorably renegotiate terms with key customers in Australia that will reduce the risk of abatements as well as provide significant price increases. These changes commence in Q1 of 2024. We are committed to aligning with our customers to deliver exceptional service, but to also pricing our services to ensure profitability and aligning our pricing structures with the value that we deliver to our customers. We believe our customers recognize this value and hence, have allowed us to successfully better position these critical contracts. In Q3, we began the migration to NETScribe for the Australian courts. This was a major milestone. This migration was long in coming and required enhancements to our technology to maximize both the efficiency and the reliability of this huge undertaking. As previously discussed, This migration began approximately a year later than expected. The reason for this was twofold. First, we didn't feel that the operational organization could undertake this level of disruption during the critical capacity challenges, and the nuances that were required to create the efficiency of the technology for court applications were highly complex. In the end, The decisions to delay the migrations and the expanded investment in this technology were both sound. We created a collaboration with our transcription and client organizations that allowed them not only to embrace the technology, but also to influence it. No technology is ever static, but the best execution is fluid and improved by user feedback. And that is absolutely the case in Australia. We are excited to now have over 50% of our available work on NetScrub in Australia, and the impact on key performance indicators provides us with confidence that this migration will be consistent with the results we've seen in other regions. In Q4, we also saw the expansion of our commercial bundles at the enterprise level, driving what we believe will be representative of the hybrid AI commercial mix that will drive our growth. the combination of technology to manage internal workflow, draft documentation to deliver expanded access to digitized content with the option to self-edit, while adding the additional access to professional editors to finalize the last mile of critical content. And all the while, translation is available through every step of this workflow. This has always been where we believe this industry will land. And based on our bookings and enterprise growth, our customers agree. Each of these pillars are critical to our segments as they evolve. This is where VIQ stands out as we have invested in and continue to invest in the modernization of our segments. Historically, our customers would hand off an audio file to a transcription organization and trust that it would be returned. Now the power of this documentation creation sits with the customer, how it is created, how it is managed from the priority of the matter to the status in the workflow, how it is formatted, and to what degree of accuracy they choose. The power of this modular approach to documentation capture, creation, and distribution sits with the customer and is enabled by NetScribe. In 2023, We focused on key elements of the court and legal technology for the Australian and UK markets. In 2024, we will augment that work with expansion on automation and formatting requirements for the highly complex U.S. and Canadian court markets as well. We look forward to expanding on these achievements in our Q1 2024 release. And now I will hand it over to Alexi Edwards for a review of the financial results.
spk01: Thank you, Susan. Good morning, good afternoon, or good evening to everyone, depending on where you are. Let me recap a few of our fourth quarter 2023 financial highlights for you. Revenue of $10.3 million, an increase of $0.2 million, or 1.7% from the same period in the prior year. Including the DJAC contract change and impact of foreign currency exchange, we would have reported revenue growth over the same period in the prior year of 3%. Growth profits of 4.7 million, which was similar to the same period in the prior year. Net loss of 2.9 million, an increase of 0.8 million from the same period in the prior year. An adjusted EBITDA of negative 0.7 million, an improvement of 0.5 million, or 45%, from the same period in the prior year. The decrease in EBITDA deficit was primarily due to reduced selling and G&A expenses. Now for our full year 2023 financial highlights. Revenue of $41 million, a decrease of $4.8 million, or 11%, from the same period in the prior year. Excluding the DJAC contract change and impact of foreign currency exchange, we would have reported revenue growth over the same period in the prior year of 2%. Growth profit of $18.1 million, a decrease of $3.8 million, or 17%, from the same period in the prior year. The decrease in growth margin was primarily due to the DJAR contract change, which had a reduction in volume from the high margin DJAR contract that ended in 2022. net loss of $14.3 million, an increase of $5.6 million, or 65% for the same period in the prior year. And adjusted EBITDA was negative $4 million, an increase of $0.6 million, or 18% from the same period in the prior year. The increase in adjusted EBITDA deficit was primarily due to the decreased gross margin as a result of the expected change in the DJAC contract. and the negative impact of foreign currency exchange, partially offset by decreased selling and G&A expenses. In 2023, the company's selling and G&A expenses were $21.7 million, a decrease of $2.8 million compared to $24.5 million in 2022. We are on track to realize even further reductions in SG&A in 2024. We continue to align our global resources to evolve into a leaner company to improve our operating performance and adjusted EBITDA. Improving VIQ's EBITDA performance continues to be a top priority, and we are encouraged by our fourth quarter of 2023 and the start of fiscal 2024. Additionally, we have implemented a series of measures aimed at improving EBITDA performance including further cost reductions. We're also proud that we completed a 1.2 million oversubscribed private placement in February for working capital and general corporate purposes. Now, I would like to hand it over to the operator.
spk04: Thank you. 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.
spk00: We look forward to mid-May very shortly to bring forward results from Q1 2024 and further update our shareholders on the latest trends, including the rolling impacts throughout 2024 of the technology migration in Australia in our legal and court segments, which represents 55% of our global revenue today. Until then, thank you everyone for listening today. Goodbye.
spk04: Thank you for joining our call today. This now concludes our conference call and you may disconnect.
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