By M. Marin
TSXV: VQS.V
READ THE FULL VQS.V RESEARCH REPORT
Toronto, Canada-based VIQ Solutions (TSXV: VQS.V), which operates a technology platform that offers AI-enabled video capture software and audio recording with voice-to-text capabilities, reported strong 2Q26 results that we believe underscore resumed growth and margin expansion ex-VIQ Australia. Management had determined in March 2026 that placing VIQ Australia into voluntary administration would best enable the company to focus on optimizing and expanding operations in other core markets.
VIQ generated positive adjusted EBITDA and positive cash flow in 2Q26, and gross margins improved. The company has implemented a cost reduction program, with the majority of savings expected to be realized by the end of 3Q26. With VIQ Australia’s operational closure primarily completed by June 2026, we estimate that the segment continued to constrain consolidated margins for much of 2Q26, and higher operating efficiencies in remaining VIQ markets likely will become more apparent in future quarters, we believe. Moreover, VIQ expects cost reductions to contribute to increased EBITDA and cash flow going forward. The company is focused on its North American and UK operations, where it will primarily allocate capital resources going forward. Historically, these have been VIQ’s best-performing business segments.
The company reported consolidated 2Q26 revenue of $11.5 million, up 10.2% year-over-year. In part, this reflects that Australian operations completed as much backlog as possible during the period. Excluding VIQ Australia, revenue of $5.1 million was consistent with revenue generated in 2Q25, although VIQ expects growth in core markets, particularly as the company expands its product portfolio and engages with new and prospective customers. The company believes its clients attain significant benefits from adopting VIQ technology as it continues to innovate, expand, and upgrade its portfolio of technology solutions. Introducing new solutions has been a consistent element of VIQ’s strategy to provide an end-to-end suite of transcription solutions, often in response to customer feedback or requests.
The company continues to introduce new solutions to expand the tools it offers existing and prospective clients. Near-term R&D investments will primarily focus on targeted automation, advanced diarization (i.e., separating and identifying voices of different speakers for accurate transcription either by name or label), formatting automation, and standardizing quality assurance. VIQ’s plans to expand and upgrade its product portfolio follow what it calls its multi-year technology roadmap. The company’s strategy is to increase accuracy and strengthen the quality and consistency of its delivered solutions and customer service across its global footprint by leveraging its existing technology and extending and upgrading its offerings by introducing new solutions. For example, VIQ recently announced the upcoming release of what it terms a new approach to audio capture to combine recording, streaming, transcription, and translation and offer secure remote access. The product is designed to enable clients to capture, stream, and access live proceedings on-site or remotely and subsequently accelerate workflows.
VIQ’s 2Q26 gross margin expanded to 57.8%, up from 48% in 2Q25. In addition, VIQ generated adjusted EBITDA of $2.9 million, compared to $0.96 million in the same period of the prior year. Excluding VIQ Australia, pro forma gross margin was 65.5%, up from 64.1%, driven primarily by higher license revenue, and adjusted EBITDA was $1.0 million, up 89% compared to $0.6 million in 2Q25, primarily reflecting lower operating expenses. The company’s U.K. and North American operations consistently exceed 60% gross margins, according to VIQ, which attributes this to the scalability of its platform. For 1H26, revenue increased 6.3% year-over-year to $21.3 million, the gross margin expanded to 54.6% from 49.9%, and adjusted EBITDA reached $4.2 million, up from $1.9 million in 1H25.
Customers benefit from VIQ tools, with improvements in efficiency
VIQ believes that when clients use its technology tools are streamlining their production costs and shortening turnaround times. VIQ cites regular daily use of NetScribe as contributing to up to 30% improvements in efficiency. Moreover, with a growing portfolio of tools and solutions, VIQ is optimistic that it can continue to expand its customer base and boost stickiness with existing customers. VIQ is also optimistic about its prospects to expand the Software-as-a-Service (SaaS) model, which gives clients access to VIQ software and services solutions, while generating consistent recurring revenue for the company. Importantly, the SaaS model generates recurring and predictable monthly revenue and also helps offset revenue fluctuations that arise from fluctuations in volumes.
As proof-of-concept that its tools enhance clients’ productivity and efficiency, VIQ recently extended two multi-year, multi-million-dollar contracts in its key U.S. and U.K. business units. The first extension is with a client in the Media space. The agreement extends the contract through 2Q 2029. It represents about US $1.6 million in annual revenue. The second extension is with a UK government client. The agreement extends the contract until 3Q 2028 and represents about US $800k in annual revenue. VIQ has also renewed multiple client contracts in courts, law enforcement, and other government agencies in the U.S.
Much of the company’s revenue comes from long-term contracts with government agencies and Fortune 500 companies, according to VIQ, and the company believes its long-term relationships with clients form a strong foundation for future growth and market penetration. High-profile companies that have been or are clients of VIQ's media business unit include Bloomberg, Fox News and CNN, among others. The company continues to grow its customer base in its key verticals organically and via strategic acquisitions.
Company is focused on strengthening its balance sheet
The company is focused on strengthening its balance sheet and obtaining a new credit agreement. VIQ obtained a loan from Beedie Investment in 2023 and amended its loan agreement in August 2025, in conjunction with broader operating and restructuring measures. Beedie agreed to extend the forbearance period. It would not surprise us if the two agreed to further extend the forbearance, as VIQ seeks opportunities to restructure and eventually replace the debt. VIQ also intends to reduce the debt. VIQ had cash of $5.5 million as of June 30, 2026.
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