VIQ Solutions Inc.

TSX VENTURE : VQS


VIQ Solutions Inc.

April 10, 2014 17:15 ET

VIQ Solutions Reports Fourth Quarter and Full Year 2013 Results

MARKHAM, ONTARIO--(Marketwired - April 10, 2014) - VIQ Solutions Inc. ("VIQ Solutions" or the "Corporation") (TSX VENTURE:VQS), a world leader in computer-based digital audio and video capture and management, today reported its financial results for the three and twelve month periods ended December 31, 2013. Results are reported in Canadian dollars and, except as otherwise noted herein, are prepared in accordance with International Financial Reporting Standards ("IFRS").

"VIQ Solutions underwent many significant changes in 2013 and emerged as a stronger and more dynamic company," said David Outhwaite, President and Chief Executive Officer of VIQ Solutions. "In 2014, with a healthy and focused sales pipeline and an unmatched suite of software and service solutions, we are well positioned for growth and focused on increasing value for our shareholders."

2013 Business Highlights

  • Released our new product VIQ Infinit, an innovative digital media capture and management platform which offers seamless integration with advanced high-definition digital video systems, along with easily accessible industry and language profiles for expanded market coverage worldwide;

  • Awarded a contract by the Scottish Court Service to provide digital recording software and services for 148 criminal courtrooms throughout mainland Scotland and the islands. The contract has a term of three years with two one year renewal options by the Scottish Court Service;

  • Awarded a contract by the Victoria Police for the provision of secure transcription services with an estimated revenue to the Corporation's wholly-owned subsidiary Spark & Cannon, assuming the options are extended, of up to AUS $8.9 million over the five year term based on the historical workflow supplied by the Victoria Police;

  • Awarded a contract by the Australian Capital Territory for the provision of transcription and recording services with an estimated revenue to Spark & Cannon, assuming the options are extended, of up to AUS $4.6 million over the five year term based on the historical workflow supplied by the Australian Capital Territory; and

  • Implemented cost efficiencies to reduce Spark & Cannon's general and administrative expenses by approximately 33%, through a combination of staff count reductions and decreasing the amount of office space to be leased by Spark & Cannon while preserving all of the strategic initiatives surrounding the company's core competencies.

Annual Results

Revenue was $12.7 million for the year ended December 31, 2013 as compared to $15.8 million for the year ended December 31, 2012, representing a decrease in revenue of $3.1 million or 20%. Gross profit for the year ended December 31, 2013 was $4.9 million as compared to $6.3 million for the year ended December 31, 2012, down 22%. Gross profit expressed as a percentage of revenues was 39% in 2013 as compared to 40% in 2012. Net loss was $1,064,397 for the year or $0.01 per share as compared to $246,445 or $0.00 per share for the previous year. EBITDA loss for the year ended December 31, 2013 was $904,887 as compared to positive EBITDA of $130,992 for 2012. Cash flows used in operating activities were $341,292 for the year ended December 31, 2013 as compared to $347,911 for the year ended December 31, 2012.

Fourth Quarter Results

Revenues decreased from $4.2 million in the fourth quarter of 2012 to $2.5 million in the fourth quarter of 2013 or 40% due to the loss of revenue and associated margin from a material contract in Western Australia for our Spark & Cannon business in June 2013, partially offset by an increase in revenue in our computer products and services business unit. Our gross margin for the quarter was 34%, down from 40% for the same period in 2012 primarily due to the lower margins from our Spark & Cannon division. Selling and administrative expenses decreased from $1.5 million for the fourth quarter of 2012 to $1.2 million for the fourth quarter of 2013 due to our second quarter restructuring initiatives in connection with Spark & Cannon. EBITDA loss for the fourth quarter ended December 31, 2013 was $247,016 as compared to positive EBITDA $105,902 for the same period in 2012 due to weaker performance by our transcription businesses. Net loss was $421,495 for the three month period ended December 31, 2013 as compared to $89,652 for the three month period ended December 31, 2012. Cash used in operations was $258,873 for the fourth quarter of 2013 as compared to $299,494 for the same period in 2012 as we reduced our investment in working capital in the fourth quarter of 2013.

Additional Information

Detailed financial information and Management's Discussion and Analysis of Results and Financial Condition for the year ended December 31, 2013 will be posted on VIQ Solution's website (under Investor Relations) at www.viqsolutions.com and on the SEDAR website at www.sedar.com. The financial information included in this news release is qualified in its entirety and should be read together with the audited consolidated financial statements for the year ended December 31, 2013, including the notes thereto.

About VIQ Solutions Inc.

VIQ Solutions is a global leader in computer-based digital audio and video capture and management. We develop software solutions that capture, digitize, and compress audio and video data, which is securely stored in a multi-tiered server system where it is easily searchable and shareable. Our innovative media processor technology allows users to remotely control audio-video capture in multiple locations from a single satellite location, allowing large-scale and complex installations to be managed efficiently by fewer resources. VIQ Solutions' technologies are installed in courts, legislative assemblies, law enforcement and hearing rooms around the world.

Non-IFRS Measures

EBITDA is a non-IFRS earnings measure which does not have any standardized meaning prescribed by IFRS and therefore may not be comparable to EBITDA presented by other companies. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. This measure is important to management since it is used by potential investors to evaluate the Corporation's operating performance and ability to incur and service debt, and as a valuation metric. Investors are cautioned that this non-IFRS financial measure should not be construed as an alternative to other measures of financial performance calculated in accordance with IFRS.

Forward-looking Statements

Certain statements included in this news release constitute forward looking statements or forward looking information under applicable securities legislation. Such forward looking statements or information are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes. Forward looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward looking statements or information in this news release include, but are not limited to, management's targets for the Corporation's growth in 2014 and estimated revenue to Spark & Cannon from the awarded Victoria Police and Australian Capital Territory contracts.

Forward looking statements or information is based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although VIQ Solutions believes that the expectations reflected in such forward looking statements or information are reasonable, undue reliance should not be placed on forward looking statements because VIQ Solutions can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this news release, assumptions have been made regarding, among other things, the Corporation's recent initiatives, sales and prospects may provide incremental value for shareholders, the workflow provided by the Victoria Police and the Australian Capital Territory during the term of the contract to Spark & Cannon will be consistent (and not less) with past workflows and the contracts will continue through its initial term and be extended (without material amendment) for the maximum renewal periods. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.

Forward looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by VIQ Solutions and described in the forward looking statements or information. These risks and uncertainties which may cause actual results to differ materially from the forward looking statements or information include, among other things: the Corporation is not able to realize any increased value to shareholders, the contracts described herein terminate prior to their initial term or are not renewed as described herein, the workflows provided are materially lower than previously experienced; and the revenues attributable to Spark & Cannon from these contracts differ from those described herein. Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties.

The forward looking statements or information contained in this news release are made as of the date hereof and VIQ Solutions undertakes no obligation to update publicly or revise any forward looking statements or information, whether as a result of new information, future events or otherwise unless required by applicable securities laws. The forward looking statements or information contained in this news release are expressly qualified by this cautionary statement.

This press release, in particular the information in respect of anticipated revenues of Spark & Cannon from the Victoria Police and Australia Capital Territory contracts, may contain Future Oriented Financial Information ("FOFI") within the meaning of applicable securities laws. The FOFI has been prepared by management of the Corporation to provide an outlook of the Corporation's activities and results. The FOFI has been prepared based on a number of assumptions including the assumptions discussed under the heading "Forward-Looking Statements". The actual results of operations of the Corporation and the resulting financial results, including revenue associated from such contracts, may vary from the amounts set forth herein, and such variation may be material. The Corporation and its management believe that the FOFI has been prepared on a reasonable basis, reflecting the best estimates and judgments.

VIQ Solutions Inc.
Consolidated Balance Sheets
(Expressed in Canadian dollars)
(Audited)
December 31, December 31,
2013 2012
Assets
Current assets
Cash $ 789,197 $ 1,129,107
Trade and other receivables 1,166,612 1,989,208
Inventories 4,880 6,287
Prepaid expenses 73,913 112,980
2,034,602 3,237,582
Non-current assets
Restricted cash 146,753 155,190
Property and equipment 668,832 700,110
Goodwill 1,543,695 1,614,278
Deferred tax assets 282,993 225,877
$ 4,676,875 $ 5,933,037
Liabilities
Current liabilities
Trade and other payables $ 983,364 $ 1,078,996
Short-term debt 197,994 -
Income taxes payable - 128,995
Provisions 434,108 622,727
Unearned revenue 219,769 147,291
Deferred lease incentives 18,685 20,966
Current portion of obligations under finance lease 98,396 60,103
Current portion of long-term debt 22,692 22,692
1,975,008 2,081,770
Non-current liabilities
Provisions 106,752 131,615
Deferred lease incentives 8,485 29,582
Obligations under finance lease 157,502 70,929
Long-term debt 25,370 48,062
Total liabilities 2,273,117 2,361,958
Equity
Capital stock 11,578,213 11,578,213
Contributed surplus 1,865,695 1,818,206
Accumulated other comprehensive income (loss) (8,161 ) 142,252
Deficit (11,031,989 ) (9,967,592 )
2,403,758 3,571,079
Total equity and liabilities $ 4,676,875 $ 5,933,037
VIQ Solutions Inc.
Consolidated Statements of Comprehensive Income and Loss
(Expressed in Canadian dollars)
(Audited)
2013 2012
Revenue $ 12,704,897 $ 15,840,411
Cost of sales 7,757,959 9,496,968
Gross profit 4,946,938 6,343,443
Expenses
Selling and administrative expenses 5,181,357 5,797,216
Restructuring costs 221,200 -
Research and development expenses 690,913 666,815
6,093,470 6,464,031
Loss from operations (1,146,532 ) (120,588 )
Finance income (loss)
Interest income 26,229 31,664
Interest expense (37,546 ) (37,770 )
Foreign exchange gain 16,048 416
Net finance gain (loss) 4,731 (5,690 )
Net loss before income taxes (1,141,801 ) (126,278 )
Recovery of (provision for) income taxes 77,404 (120,167 )
Net loss (1,064,397 ) (246,445 )
Exchange differences on translating foreign operations (150,413 ) (16,708 )
Comprehensive loss for the year $ (1,214,810 ) $ (263,153 )
Net loss per share
Basic and diluted $ (0.01 ) $ (0.00 )
Weighted average number of common shares outstanding - basic 90,957,000 90,877,820
Weighted average number of common shares outstanding - diluted 90,957,000 90,877,820
VIQ Solutions Inc.
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
(Audited)
2013 2012
Cash provided by (used in):
Operating activities
Net loss for the year $ (1,064,397 ) $ (246,445 )
Items not affecting cash:
Depreciation 199,369 219,500
Stock-based compensation 43,918 95,039
Provisions (24,863 ) (34,359 )
Loss on disposal of property and equipment 64,877 2,341
Interest accretion on bridge loans 1,565 -
Amortization of deferred lease incentive (23,378 ) (20,992 )
Deferred income tax benefits (45,982 ) 28,966
Unrealized foreign exchange gain (29,694 ) (14,119 )
Changes in non-cash operating working capital 537,293 (377,842 )
Cash used in operating activities (341,292 ) (347,911 )
Investing activities
Purchase of property and equipment, net (75,776 ) (76,466 )
Proceeds from disposal of property and equipment - 600
Change in restricted cash (4,246 ) (5,212 )
Cash used in investing activities (80,022 ) (81,078 )
Financing activities
Advances in short-term debt 200,000 -
Repayment of short-term debt - (75,000 )
Repayment of long-term debt (22,692 ) (22,692 )
Proceeds from stock options exercised for cash - 81,000
Finance lease payments (61,365 ) (67,016 )
Cash provided by (used in) financing activities 115,943 (83,708 )
Net decrease in cash during the year (305,371 ) (512,697 )
Cash, beginning of year 1,129,107 1,646,138
Effect of exchange rate changes on cash (34,539 ) (4,334 )
Cash, end of year $ 789,197 $ 1,129,107

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