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VQSLF: Strengthening Balance Sheet & Momentum Support Optimistic Outlook

04/21/2021

By M. Marin

OTC:VQSLF | TSX:VQS.V

READ THE FULL VQSLF RESEARCH REPORT

VIQ Solutions (OTC:VQSLF) (TSX:VQS.V) reported 4Q20 results earlier this month, with revenue of $7.8 million up 28% year-over-year. The economic influence of the COVID-19 pandemic continues to have an impact on results and contributed to lower gross margins (38.1% versus 39.3% in 4Q19). For the full year, however, VIQ registered a gross profit margin of 50.9% compared to 43.1% in 2019.

VIQ met its four key objectives in 2020, which included cross-selling a range of products and services to increase wallet share from existing customers. The company’s new $30M contract with Queensland, Australia is an example.

Objectives:

➢ Improve the quality of its revenue by further transitioning to recurring SaaS accounts

➢ Grow its client base organically and via strategic M&A

➢ Cross-sell a range of products and services to increase wallet share from existing customers

➢ Migrate customers to the VIQ cloud computing infrastructure

VIQ has made substantial investments in technology and infrastructure in order to strengthen the platform and enable scale as the company grows in its four key targeted verticals and to launch what the company calls “VIQ 3.0,” the next-gen phase of the company and its growth strategy. The company has broadened its product portfolio with the introduction of FirstDraft, CapturePro Conference, CapturePro On-the-Go, and MobileMic Pro. VIQ believes it can capture a greater share of wallet from existing customers and add new customers with its expanding product portfolio.

VIQ has also restructured and strengthened its management team in order to support anticipated growth. VIQ also consolidated its global operations to obtain operating efficiencies and ensure standardization across its various business and geographic operations, resulting in estimated annual cost saving of about $1 million.

Strengthened Balance Sheet Enhances Financial Flexibility

The company also strengthened its balance sheet in 2020 through the conversion of convertible notes from debt to equity and a November 2020 capital raise. VIQ ended 2020 with $16.8 million in cash, which we believe provides enhanced flexibility to support anticipated growth in 2021 and ahead of a targeted uplisting to a U.S. national exchange. The company has met several NASDAQ listing requirements; VIQ;s goal is to complete the uplisting to NASDAQ this year.

Anticipate Further M&A in 2021

Consistent with VIQ’s long-term strategy to enhance organic growth with complementary acquisitions, the company targets at least two acquisitions in 2021 to add transformative technology that will enable VIQ to accelerate the monetization of the digital content its platform generates and possibly expand its geographic footprint.

The company has indicated the likelihood that more than a third of the recent capital raised would be earmarked for potential strategic accretive acquisitions to enhance and accelerate growth.

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