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VQSLF: 2Q20 Revenue Up 33%; Client Migration Accelerated


By M. Marin



VIQ Solutions (OTC:VQSLF) (TSX:VQS) reported 2Q20 revenue of $8.3 million last week, up 33% year-over-year. VIQ consolidated ASC Services and ZWord for the full quarter. By comparison, the company consolidated their combined revenue for less than a month and a half in 1Q20. ASC and ZWord are expected to add a combined roughly $12 million in annual revenue.

The economic impact of the COVID-19 pandemic has impacted some of the company’s clients. The Australian courts, for example, are experiencing interruptions. As a result, although the company indicated that it remains on-track to meet 2020 revenue guidance of $34 million to $37 million, management now expects revenue to come in at the low end of the range.

In 2Q20, VIQ’s gross margin of 61.2% was significantly better than 40% in 2Q19 and ahead of the company’s targeted roughly 50% by year-end 2020. The 2Q20 margin included some one-time COVID-19 related factors. VIQ believes that it is on-track to reach targeted gross margins of 50% to 55% by the end of 2020.

Focus Can Shift To Leveraging Industry-Specific AI for Client / Sector Customization

By 2Q20, 75% of customers migrated to the digital platform. VIQ expects 100% to have migrated by early 2021. Importantly, as the migration to NetScribe nears completion, VIQ can then focus greater attention on leveraging industry-specific AI to customize the platform for clients and to improve clients’ ability to extract the broad tools that the platform offers. The company also intends to cross-promote its growing portfolio of software products and services to its expanding client base.

The company has simplified its balance sheet in 2020, virtually eliminating warrants and convertible debt. With the PPP funds plus cash from operations, VIQ had cash and equivalents of $5.4 million at the end of 2Q20, up from $1.7 million at December 2019. Separately, we like that VIQ has appointed KPMG as its auditors and believe it adds another dimension of transparency for investors and in advance of a potential uplisting. KPMG is a global, well-recognized firm.

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