VQS: Accretive Acquisitions & Product Rollouts

By M. Marin

NASDAQ:VQS | TSX:VQS

READ THE FULL VQS RESEARCH REPORT

VIQ Solutions VQS VQS recently announced agreements to acquire Auscript Australasia Pty Ltd in Australia and The Transcription Agency (TTA) in the U.K. VIQ historically has maintained a disciplined approach to acquisitions and both deals were done at multiples that are consistent with those VIQ has paid for other recent M&A transactions, according to the company. Both are expected to be accretive and strategic in terms of strengthening the company's footprint and market position and accelerating growth.

Following the TTA deal, VIQ introduced NetScribe in the U.K. and Canada. As demand for digital transcription and documentation services continues to rise, VIQ expects to transition existing TTA and prospective customers to the digital platform. In turn, this is also expected to facilitate the company's ability to cross-promote and cross-sell its growing suite of digital products and SaaS model.

M&A Pipeline; Funds in-hand

The company recently raised US$18 million through a registered direct offering, in part, for continued development of its product and service offerings and for M&A. VIQ has other acquisition candidates in the pipeline and another one or more transactions might close over the next several quarters, we believe.

Optimistic About Growth Outlook

Courts and legal entities in several of VIQ's key markets have experienced intermittent closures, as a result of the pandemic and delays, including Australia, that have led to revenue delays for VIQ. Criminal justice, legal entities and insurance carriers are verticals that comprise nearly 75% of VIQ's total revenue. The media vertical represents about 27%. The pro forma contribution from this vertical could be higher; the company recently announced that VIQ Media has entered into two new contracts with leading global news agencies and the five-year renewal with its largest media client.

We remain optimistic about the contribution from recent acquisitions to revenue and in terms of VIQ's strategic market position. VIQ is also evaluating and plans to respond to a growing number of new RFPs. We also note that VIQ expects the ongoing roll-out of FirstDraft to accelerate revenue growth and shift the product mix towards higher margins.

Backlog reached record levels…

We believe the growing backlog supports our optimistic outlook. The company's backlog has reached record levels, reflecting organic growth from new orders. Demand from existing and new customers has grown, while some delays as a result of the pandemic moved a portion of revenue into backlog. In addition, the Queensland, Australia contract is in backlog. This contract represents the largest contract in the company's history and underscores the advantages of the VIQ AI technology platform, in our view.

In addition to backlog, VIQ is evaluating and plans to respond to a growing number of new RFPs by courts and insurance carriers in its geographic footprint, with many for multiple products. With its expanding product portfolio, the company believes it is well-positioned to help customers with multiple product needs and also address a greater portion of its addressable market.

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