News Column

VIQ Solutions Reports Second Quarter 2013 Results

Aug 19 2013 12:00AM

Marketwire

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MARKHAM, ONTARIO -- (Marketwired) -- 08/19/13 -- 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 six month periods ended June 30, 2013. Results are reported in Canadian dollars and are prepared in accordance with International Financial Reporting Standards ("IFRS").

"During the quarter, we successfully implemented significant cost efficiencies in our wholly-owned subsidiary Spark & Cannon by removing certain non-essential support infrastructure," said David Outhwaite, President and Chief Executive Officer of VIQ Solutions. "These changes will allow us to reduce our overhead expenses significantly while allowing us to continue to execute the strategic initiatives currently underway as we strive for continued growth."

Financial Highlights for the Quarter

-- Revenue was $3.4 million and $7.3 million for the three and six month periods ended June 30, 2013 as compared to $3.7 million and $7.7 million for the same periods in 2012, representing a decrease in revenue of 8% and 5% respectively;-- Gross margin from our transcription and reporting services business unit was 37% for the three and six month periods ended June 30, 2013 as compared to 34% for the same periods in 2012;-- Selling and administrative expenses were $1.4 million and $2.7 million for the three and six month periods ended June 30, 2013, as compared to $1.5 million and $2.8 million for the same periods in 2012;-- Restructuring charges relating to the implementation of certain cost efficiency initiatives in Spark & Cannon were approximately $221,200 for the three month period ended June 30, 2013. As a result of the restructuring, selling and administrative expenses are anticipated to decline substantially in subsequent quarters resulting in future savings of approximately AUS$900,000 annually;-- Research and development expenses were $173,273 and $356,897 for the three and six month periods ended June 30, 2013 as compared to $178,987 and $361,515 for the previous year as we continue to invest in new and existing products and services;-- Adjusted EBITDA loss for the three and six month periods ended June 30, 2013 was $217,466 and $46,290 as compared to $189,218 and $15,699 for the same periods in 2012; and-- Net loss for the three and six month periods ended June 30, 2013 was $496,572 and $383,089 as compared to $246,414 and $132,511 for the same periods in 2012.



Business Highlights for the Quarter

-- Spark & Cannon Australasia Pty Limited ("Spark & Cannon"), the Corporation's wholly-owned Australian subsidiary, was awarded a contract by the Victoria Police for the provision of secure transcription services with an estimated revenue to Spark & Cannon, assuming the options are extended, of AUS $8.9 million over the five year term based on the historical workflow supplied by the Victoria Police;-- 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; and-- Subsequent to the period, the Corporation obtained a short-term bridge loan with a face value of $200,000 bearing interest at a rate of 10% per annum, payable annually. Included with the loan was the issuance of 200,000 non-transferrable common share purchase warrants which have an exercise price of $0.18 per common share and are exercisable for a one year period. The loan is repayable on the one-year anniversary, being July 2014 and is secured by a general security agreement covering all assets of the Corporation.



Non-IFRS Measures

Adjusted EBITDA is a non-IFRS earnings measure which does not have any standardized meaning prescribed by IFRS and therefore may not be comparable to adjusted EBITDA presented by other companies. Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization and restructuring expenses. 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.

Additional Information

The unaudited second quarter 2013 condensed consolidated interim financial statements and results of operations and Management's Discussion and Analysis of Results and Financial Condition for the three and six month periods ended June 30, 2013 will be posted on VIQ Solutions' website (under Investor Relations) at www.viqsolutions.com and on SEDAR's website at www.sedar.com. The financial information included in this release is qualified in its entirety and should be read together with the unaudited second quarter 2013 condensed consolidated interim financial statements and the audited consolidated financial statements for the year ended December 31, 2012, 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.

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, expected future overhead expense reductions, anticipated declines in selling and administrative expenses resulting in future savings to Spark & Cannon of approximately AUS$900,000 annually and estimated revenue to Spark & Cannon from the newly awarded Victoria Police contract in the amount of AUS $8.9 million over the five year term of the contract.

Forward looking statements or information are 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 above described selling and administrative expenses reductions going forward, the workflow provided by the Victoria Police during the term of the contract to Spark & Cannon will be consistent (and not less) with past workflows and the contract with Victoria Police will continue through its initial term and be extended (without material amendment) for the two consecutive 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: unanticipated increases in selling and administrative expenses such that the reductions in expenses differ from those described herein, the Victoria Police contract terminates prior to its initial term or is not renewed as described herein, the workflows provided by Victoria Police are materially lower than previously experienced; and the revenues attributable to Spark & Cannon from this contract 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 contract and the future savings to be realized by Spark & Cannon from the anticipated decline in selling and administrative expenses, 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 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, and represent, to the best of management's knowledge and opinion.

VIQ Solutions Inc.Condensed Consolidated Interim Balance Sheets(Expressed in Canadian dollars)(Unaudited)-------------------------------------------------------------------------------------------------------------------------------------------------------- June 30, December 31, 2013 2012----------------------------------------------------------------------------AssetsCurrent assets Cash $ 1,414,575 $ 1,129,107 Trade and other receivables 1,246,734 1,989,208 Inventories 5,310 6,287 Prepaid expenses 110,830 112,980---------------------------------------------------------------------------- 2,777,449 3,237,582Non-current assets Restricted cash 148,914 155,190 Property and equipment 549,648 700,110 Goodwill 1,555,417 1,614,278 Deferred tax assets 210,519 225,877---------------------------------------------------------------------------- $ 5,241,947 $ 5,933,037--------------------------------------------------------------------------------------------------------------------------------------------------------LiabilitiesCurrent liabilities Trade and other payables $ 1,060,747 $ 1,078,996 Income taxes payable 120,224 128,995 Provisions 417,798 622,727 Unearned revenue 253,196 147,291 Deferred lease incentives 19,251 20,966 Current portion of obligations under finance lease 51,173 60,103 Current portion of long-term debt 22,692 22,692---------------------------------------------------------------------------- 1,945,081 2,081,770Non-current liabilities Provisions 108,347 131,615 Deferred lease incentives 17,801 29,582 Obligations under finance lease 48,972 70,929 Long-term debt 36,716 48,062----------------------------------------------------------------------------Total liabilities 2,156,917 2,361,958----------------------------------------------------------------------------EquityCapital stock 11,578,213 11,578,213Contributed surplus 1,846,954 1,818,206Accumulated other comprehensive income 10,544 142,252Deficit (10,350,681) (9,967,592)---------------------------------------------------------------------------- 3,085,030 3,571,079----------------------------------------------------------------------------Total equity and liabilities $ 5,241,947 $ 5,933,037--------------------------------------------------------------------------------------------------------------------------------------------------------VIQ Solutions Inc.Condensed Consolidated Interim Statements of Comprehensive Income and Loss(Expressed in Canadian dollars)(Unaudited)-------------------------------------------------------------------------------------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 2013 2012 2013 2012----------------------------------------------------------------------------Revenue $ 3,410,418 $ 3,697,996 $ 7,317,080 $ 7,667,210Cost of sales 2,097,863 2,316,915 4,344,024 4,603,504----------------------------------------------------------------------------Gross profit 1,312,555 1,381,081 2,973,056 3,063,706----------------------------------------------------------------------------Expenses Selling and administrative expenses 1,423,000 1,449,469 2,777,314 2,841,223 Restructuring expenses 221,200 - 221,200 - Research and development expenses 173,273 178,987 356,897 361,515---------------------------------------------------------------------------- 1,817,473 1,628,456 3,355,411 3,202,738----------------------------------------------------------------------------Loss from operations (504,918) (247,375) (382,355) (139,032) Interest income 9,472 5,943 16,956 15,367 Interest expense (6,247) (6,557) (13,946) (15,123) Foreign exchange gain (loss) 5,121 1,575 (3,744) 6,277----------------------------------------------------------------------------Net finance income (loss) 8,346 961 (734) 6,521Net loss for the period $ (496,572) $ (246,414) $ (383,089) $ (132,511)Item that may be reclassified to profit or loss:Exchange differences on translating foreign operations (178,141) 13,773 (131,708) (2,227)----------------------------------------------------------------------------Comprehensive loss for the period $ (674,713) $ (232,641) $ (514,797) $ (134,738)----------------------------------------------------------------------------Net loss per share Basic and diluted $ (0.01) $ (0.00) $ (0.01) $ (0.00)--------------------------------------------------------------------------------------------------------------------------------------------------------Weighted average number of common shares outstanding - basic 90,957,000 90,957,000 90,957,000 90,797,769--------------------------------------------------------------------------------------------------------------------------------------------------------Weighted average number of common shares outstanding - diluted 90,957,000 90,957,000 90,957,000 90,797,769--------------------------------------------------------------------------------------------------------------------------------------------------------VIQ Solutions Inc.Condensed Consolidated Interim Statements of Cash Flows(Expressed in Canadian dollars)(Unaudited)-------------------------------------------------------------------------------------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 2013 2012 2013 2012----------------------------------------------------------------------------Cash provided by (used in):Operating activitiesNet loss for the period $ (496,572) $ (246,414) $ (383,089) $ (132,511)Items not affecting cash: Depreciation 51,659 50,639 101,653 101,689 Stock-based compensation 7,093 17,251 28,748 60,537 Loss on disposal of property and equipment 65,580 - 65,580 - Provisions (36,927) 15,426 (23,268) 23,990 Amortization of deferred lease incentive (9,192) (4,974) (13,497) (10,842) Unrealized foreign exchange loss (gain) 6,368 (1,999) 5,551 (6,515) Changes in non-cash operating working capital 374,239 285,149 628,328 (31,526)----------------------------------------------------------------------------Cash from (used in) operating activities (37,752) 115,078 410,006 4,822----------------------------------------------------------------------------Investing activities Purchase of property and equipment (11,991) (25,005) (28,248) (40,442) Increase in restricted cash - (5,250) - (5,250)----------------------------------------------------------------------------Cash used in investing activities (11,991) (30,255) (28,248) (45,692)----------------------------------------------------------------------------Financing activities Repayment of long-term debt (5,673) (5,673) (11,346) (11,346) Proceeds from stock options exercised for cash - - - 81,000 Finance lease payments (14,182) (15,997) (30,140) (33,152)----------------------------------------------------------------------------Cash provided by (used in) financing activities (19,855) (21,670) (41,486) 36,502----------------------------------------------------------------------------Net increase (decrease) in cash during the period (69,598) 63,153 340,272 (4,368)Cash, beginning of period 1,552,655 1,577,303 1,129,107 1,646,138Effect of exchange rate changes on cash (68,482) 4,834 (54,804) 3,520----------------------------------------------------------------------------Cash, end of period $1,414,575 $1,645,290 $1,414,575 $1,645,290--------------------------------------------------------------------------------------------------------------------------------------------------------





Contacts:
VIQ Solutions Inc.
David Outhwaite
President & CEO
(905) 948-8266 ext. 250
douthwaite@viqsolutions.com

VIQ Solutions Inc.
Karen Hersh
Chief Financial Officer
(905) 948-8266 ext. 240
khersh@viqsolutions.com
www.viqsolutions.com





Source: Marketwire


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