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)
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June 30, December 31,
2013 2012
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Assets
Current 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
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2,777,449 3,237,582
Non-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
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$ 5,241,947 $ 5,933,037
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Liabilities
Current 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
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1,945,081 2,081,770
Non-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
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Total liabilities 2,156,917 2,361,958
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Equity
Capital stock 11,578,213 11,578,213
Contributed surplus 1,846,954 1,818,206
Accumulated other comprehensive income 10,544 142,252
Deficit (10,350,681) (9,967,592)
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3,085,030 3,571,079
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Total equity and liabilities $ 5,241,947 $ 5,933,037
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VIQ Solutions Inc.
Condensed Consolidated Interim Statements of Comprehensive Income and Loss
(Expressed in Canadian dollars)
(Unaudited)
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Three months ended Six months ended
June 30 June 30
2013 2012 2013 2012
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Revenue $ 3,410,418 $ 3,697,996 $ 7,317,080 $ 7,667,210
Cost of sales 2,097,863 2,316,915 4,344,024 4,603,504
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Gross profit 1,312,555 1,381,081 2,973,056 3,063,706
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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
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1,817,473 1,628,456 3,355,411 3,202,738
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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
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Net finance income
(loss) 8,346 961 (734) 6,521
Net 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)
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Comprehensive loss for
the period $ (674,713) $ (232,641) $ (514,797) $ (134,738)
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Net loss per share
Basic and diluted $ (0.01) $ (0.00) $ (0.01) $ (0.00)
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Weighted average number
of common shares
outstanding - basic 90,957,000 90,957,000 90,957,000 90,797,769
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Weighted average number
of common shares
outstanding - diluted 90,957,000 90,957,000 90,957,000 90,797,769
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VIQ Solutions Inc.
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in Canadian dollars)
(Unaudited)
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Three months ended Six months ended
June 30 June 30
2013 2012 2013 2012
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Cash provided by (used in):
Operating activities
Net 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)
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Cash from (used in)
operating activities (37,752) 115,078 410,006 4,822
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Investing activities
Purchase of property and
equipment (11,991) (25,005) (28,248) (40,442)
Increase in restricted
cash - (5,250) - (5,250)
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Cash used in investing
activities (11,991) (30,255) (28,248) (45,692)
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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)
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Cash provided by (used in)
financing activities (19,855) (21,670) (41,486) 36,502
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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 1,646,138
Effect of exchange rate
changes on cash (68,482) 4,834 (54,804) 3,520
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Cash, end of period $1,414,575 $1,645,290 $1,414,575 $1,645,290
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FOR FURTHER INFORMATION PLEASE CONTACT:
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
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