By M. Marin

NASDAQ:VQS | TSX:VQS

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Company views rising backlog as reflective of organic growth …

VIQ Solutions (NASDAQ:VQS) (TSX:VQS) expects rising demand for digital content globally to continue driving demand for its technology solutions to process data rapidly in a secure way. The company attributes this trend as a factor behind its 1Q23 69% year-over-year increase in bookings. The $2.8 million quarterly increase in net new bookings brought total contracted net new bookings to $9.4 million. Of that amount, about 20% had been recognized as of the end of 1Q23. The company’s backlog growth includes sizable new opportunities across targeted segments, particularly the media silo, according to management.

… Bookings span range of solutions across multiple silos & geographies, including new markets…

The company entered the Media vertical with the 2020 acquisition of ASC Services LLC and the segment has subsequently become a key focus vertical. VIQ has grown this sector organically and through M&A. For instance, in 3Q22 VIQ entered into an agreement to expand its technology solutions through the purchase of Carbon™, an AI-powered media technology platform. Carbon is a cloud-based media content and text workflow platform. The transaction and subsequent integration of the VIQ Carbon media platform with Sony Ci Media Cloud is expected to accelerate the company’s ability to produce captioned video/audio elements using AI-generated text, strengthen VIQ‘s Media offering and improve the company’s ability to provide real-time solutions to journalists, global media players and other clients.

In turn, the increase in net new bookings is expected to be a catalyst for revenue growth, have a positive impact on VIQ’s revenue mix and ultimately lead to significant margin improvement. VIQ’s new clients include Fortune 500 organizations. Larger contracts generally take longer to ramp for VIQ and as a result, the company does not expect these backlog agreements to impact overall results before 2H23. The company views net new bookings as a proxy for organic growth from existing and new customers.

… expanding suite of solutions / IP as key driver of backlog, organic growth…

The company believes its expanding suite of products and IP is a key driver of organic growth. For example, the recent Carbon acquisition noted above is consistent with VIQ’s goal of advancing its growth strategy and expanding its suite of product and service offerings. Notably, net new bookings spanned a range of products and services across key targeted silos and geographic regions, including new markets. Specifically, the company signed multiple large SaaS contracts for NetScribe and FirstDraft technologies and a service agreement with one of the top five domestic insurance companies.

VIQ has also launched Velocity and CapturePro Mobile. VIQ describes CapturePro Mobile as a tool to “Simplify Recording, Transcription and Collaboration,” thereby expanding its solutions that integrate video capture and editing in mobile applications. As the company seeks to drive organic growth, its focus is on SaaS to grow recurring revenue. The company has also implemented several cost containment measures that it expects will help margins as revenue ramps. Now that VIQ has gotten the Queensland contract up and running – 1Q23 was the first full quarter of revenue under its new VIQ-Queensland agreement following a transition from the former Auscript one (see below) – the company is optimistic about the revenue outlook in sequential 2023 quarters. Moreover, the company has indicated that subsequent to 1Q23, Queensland volumes are trending up ahead of management’s original expectations, which it expects will be positive for margins and revenue.

Moreover, in terms of geographic expansion, VIQ recently signed a multi-year deal with e24 Technologies in India and has completed the first installation of NetScribe in India. Importantly, the company’s partner in India can now also resell NetScribe throughout the region and VIQ believes it can provide resellers with tools to facilitate the onboarding, training and support of new customers and, in turn, accelerate revenue growth and scale SaaS recurring revenue.

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