VIQ Solutions Inc.

Ladies and gentlemen, and welcome to VIQ Solutions 2017 First Quarter Early Conference Call. Currently, all participants are in a listen-only mode. For those that dialed in, should require any assistance during the call, please press star then zero on your touchtone phone. For questions and answers regarding your ship's disclosure or any other matter, please reach out directly to the company using the contact details on the company website. Your host for today is R.J. Liu, corporate finance controller for VIQ. Please go ahead.

Thank you. Before we begin, please note that certain statements made on today's call are forward-looking within the meaning of a political securities law. These statements involve risks and uncertainties that may cause actual results to differ materially. Please refer to the forward-looking statements, section and our touch release and the company's filing on cdarpus.ca. As a reminder, all dollar amounts or in US dollars are must otherwise be stated. With us today are Mr. Batchem Pare, chief executive officer and Alexei Edwards, chief financial officer. I will now turn the call over to Sebastian.

Thank you Audrey, and good morning everyone. At VIQ we're always at it, not just about where we're going, it's also about how we're getting there. And Q1 would deliver clear measurable proofs that our we enter 2025 with a strong momentum across all regions, especially in Australia, where the impact of our platform strategy is now unquestionable. First draft output in Australia grew over 232 percent the 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 buyer workflow, worsening the results in our margin. In the UK, first-track usage for human editing increased by over 80 percent. In the US, we saw steady growth across every first draft metric. Overall, first draft adoption increased by 39 percent the over year as a 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 US and the UK in prior year, was incidental. 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 US and the UK are now consistently operating at about 60 percent 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 assured 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 flying capacity fluctuate exceedingly. Thanks for expanding gross margin, we are tracking towards a sustainable operation and its ability to generate pre-cash for leaders of care, assuming term productivity levels and volumes will stay. That matters because it reduced our reliance on capital to fund operations going forward. To be clear, technical fluctuation and backlogs will continue to appear from time to time, but the structural improvements we've made give us the tools to manage through them. In Q1, we're delivering adjusted EBITDA of almost $900,000. That's a meaningful improvement from the loss of $83,000 a year ago and merely doubled what we reported last quarter in Q4. On a cost insurance basis, revenue was flat the over year. The 3.5 percent 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 is 51.9 percent, which is up to 7.6 percent from 44.3 percent in Q1 of last year. That's a strong indicator that our model is scaling and that the free cash going fiscal 2025 is within reach. We're not done. We believe there's still room to extend 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 one-time gains. In automation and AI at the center of our model, we will continue to improve our cost per unit profitability and expand our lead in every region we service. These results also prove that our strategy is not just working, it's accelerating. Provide your little industry to take on the next big projects ahead of the AGM in June. The evidence and transition industry is undergoing a fundamental transformation, shifting from manual labor-intensive workflow to AI-powered platform that offers speed, accuracy, security, and compliance at scale. At the core of this evolution is a hybrid model where -the-loop oversight continues to play a critical role tailored to the precision, context, and accountability required by each client and use case. So let's bring the pace of change. Today most events can transcribe over a 90-minute long audio file in less than 30 seconds. A path that traditionally before any technology took five to six hours of manual effort depending on the complexity and the number of speakers involved. -to-text accuracy is no longer the barrier. The real challenge and the real opportunity lies in the downstream steps. Client-specific formatting, diaritization, 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's basically very based on the content and the risk profile of each organization. This is more than the mythology of grace. It's a structural shift in how transcription services are delivered at scale. It demands new tools, new workflow, and a collaborative approach between people and machines. Our team are bracing it, leveraging the AI-enabled processes to enhance productivity, shorten turnaround times, and deliver miserable time value. Our enterprise clients are also evolving. They now expect secure self-service mobile and audit workflow, team-led integration, verify accuracy, summarization, multi-lingual capabilities, and fast reliable delivery, all governed by strict SLA and APIs. 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, constant type, and operational risk. Some rely on the fully verified transcript for evidence purposes. Others use first draft outputs with minimal 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 that is for evidence transcript. Government agencies, on the opposite, may process internal briefing and procedural records with first draft first model, while applying oversight for policy and compliance amendments. Media organizations may prioritize speed for live coverage and real-time publishing, while collectively applying editorial review for writing literary content. Insurance reliver often automate routine documentation and claims and tape with additional scrutiny reserved for disputed or litigated related files. Line-forced units may also use first draft generated transcript for internal investigation, escalating to the full human review for interviews going for court proceedings. This practical, -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. VIQ is exceptionally well positioned to meet that demand. Adoption of our first draft platform, NETS-5 and first draft, continues to grow, driven by measurable gains in speed, efficiency, security, and compliance across complex volume environments. Looking ahead, our product roadmap includes deeper, regional expertise, multilingual automation, real-time dialization, and immense capabilities, all designed to give our clients more control and more stability based on their unique operational demands. We're not just deploying next generation of tools, we're enabling the new standards for secure, scalable, AI-driven content services, and VIQ is leading that evolution. Q1 market strategic and pension points have the expected for cost civilization to margin-led execution. First in Australia, first draft volume increased by 232 percent -over-year, following the platform migration. Productivity gained accelerated as NETS-5 adoption increased. This type elevated volume and across system backlog for low quality audio from search and police clients. From December to March, editing efficiency improved by 13.25 percent, reflecting continued workforce optimization and a growing impact of the automated workflow. These gains have strengthened our ability to take on more short-term human work while it ends in margin resilience. First draft, also dispersed for staff usage without professional editing by VIQ, rose 72 percent -over-year, underscoring its value in delivering fast, accurate, and compliant transcript for high-volume complex content. Adoption was strictly strong among governance and line enforcement clients, where mobile users perished 96.4 percent. In March, we had over 300 active users on first draft, reflecting deeper integration into client workflow and growing reliance on our AI-tire workflow. Foreign languages, our multiple multi-language capabilities rolled out late last year. We're now a meaningful driver of the margin expansion that we've seen in Q1 results. As the platform adoption at scale, we've seen an average of 26 percent -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 multi-language specialists now operating on Next.by platform. This transition alone has contributed to a 17 percent up list in overall margin, reinforcing the value of our platform's central delivery model in driving sustainable cost efficiency and scalability. In the United Kingdom, the weekly true-foot post transition to the platform rose 64 percent, driven by increased automation and better resource alignment. We also successfully completed the IOS of the 2001 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 close to becoming a keystone in our largest account for each of those verticals. In Q1, we completed a formal CED review, led by an independent special committee of the board with external financial and legal advisors. The committee evaluated multiple paths, including a number of private proposal receives, 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 our automation first strategy. The cost related to the strategic review and special committee has 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 to the -of-year for that specific purpose. It does not include future strategic actions. The company remains open to opportunities that strengthen our capital position,

accelerated

growth, or enhance shareholder value. The external interest we receive and the outcome of our strategic review reaffirms that we're on the right path in making measurable progress. With four consecutive quarters of positive EBITDAs, strengthening right-flowing revenue, and a more efficient cost structure, we are well positioned to preserve and expand our strategic option of moving forward. Alexi, over to you.

Thank you Sebastian. Good morning, good afternoon, or good night, depending on where you are. I'd like to recap our 2021-2025 financial highlights. Revenue for the quarter was $9.6 million, a .5% -over-year decline, driven primarily by unfavorable foreign exchange. On a constant currency basis and accounting for typical January quarter seasonality, revenue held steady -over-year, reflecting stable volumes and targeted price increases. Growth profit rose 13% to $5 million, aided by cost efficiencies and a $152,000 onerous contract reversal. Including this one-time item, growth margin remains strong at 60.4%. SCNA declined 12%, reflecting ongoing restructuring and discipline expense and expense. Adjusted EBITDA was $872,000, up from negative adjusted EBITDA of $83,000 in Q1 of 2024, and higher than the positive adjusted EBITDA of $494,000 in Q4 of 2024. Net loss was $1.8 million, same as comprising the period in 2024. The company reported an adjusted operating loss of $0.7 million, representing a -over-year improvement of $1.1 million from a loss of $1.8 million in the same period of 2024. This figure excludes non-recurring costs relating to the strategic review, including a $900,000 contingent amount paid to the capital, only in the event of a debt default by the company. We ended the quarter with $1.6 million in cash, generation $62,000 in part of capital from the company. We are very excited about the clear trends we have established on growth margin, increases -over-year. For Q1 2025, we increased growth margin to 51.9%, which is up .6% from .3% in Q1 of 2024. Growth margin expansion is a critical element in our goal of reaching free cash flows during fiscal 2025. Why are we so confident in our ability to continue to expand growth margin? Firstly, Q1 2025 marked another successful quarter of the IQ demonstration of 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 one-time improvements. We believe we can continue to leverage automation and AI-level workflow to further strengthen unit economics on continuous to expand growth margin. Secondly, through growth 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 the IQ to become less reliant on finding sources of capital to fund operations, providing there are no material variations of revenue through that period and the company continues to achieve the desired growth margin level.

To

summarize, we are very excited about the trends established in Q1 with respect to growth margin expansion. Secondly, we are confident that we will continue to expand growth margin to automation and AI-level workflow. And finally, growth margin will allow us to achieve sustainable operations and free cash flow. Back to you, Professor.

Thank you, Alexis. Looking ahead, our priorities are very, very clear. Number one, sustain the growth margin gains to expanded adoption of Netscribe in the first class, moving next level of automation to the core of all our workflows. Streamlining on a paragraph in the UK operations where delivery models are now entirely aligned to client demand, driving a sustained reduction in cost to serve. Both regions consistently deliver growth margin above 60 percent, underscoring the scalability efficiency of the platform and the operating model. Drive through the efficiency in Australia where growth margin has moved from the low 20s to the 20s, and we expect to see a higher level of growth margin in the next year. We are also planning to deploy resources with disciplines, prioritizing margin expansion, scalable fast growth, and adjusting high margin revenue streams. Currently, there are several measures accelerating the fast adoption and unblocking connected sources of recurring revenue, stressing 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 landing covenants. The goal is to modify returns to reflect where we are today and avoid the drag of ongoing short-term waivers tied to the company operating progress. The discussions are progressing. In closing remarks, Q1 delivered a strong and strategically meaningful start to 2025, the best ever in the history of the company. In Q1, we're not just recovering, we're sailing towards profitability. We've delivered four straight quarters of positive adjusted EBITDA and expanded growth margin to over 51 percent, proving that our platform automation per strategy is working. The industry is moving fast. From manual transmission to AI power workflow, the accuracy front with NETSCRIBE and FURSTRAFT is 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 marked a turning point. Automation is now driving the real financial gains. We've improved editing efficiencies, expanded adoption by 72 percent, and multilingual margin rise to 26 percent. Our Australia margin jumped from the low 20s to the mid 40s, and the UK and the United States are now exceeding 60 percent. That's progress. Unfortunately, these are not short-term costs. Cuts. They are structural improvement from an increasingly improved and mature tech platform, deeper automation, and clearly a well-defined blueprint for execution. We review multiple strategic path at this quarter, including a number of gold private offers, and conclude that the best way to build value at this time is to remain public and keep executing. That said, we remain open for opportunities for accelerated growth and shareholder value creation. Our story is very simple. We're turning the manual, high-volume industry on its head, and we're not setting the benchmark for secure, scalable, AI-driven content services. We look forward to sharing our future results in August. The APM is scheduled for June the 13th. For any follow-up questions, please do not add to the list. We encourage you to contact the company directly.

Operator, I'll be back to you for the closing. Thank you. Everyone who disconnected today's call, you may now disconnect your lines. Thank you for your participation.