VIQ Solutions Reports Fourth Quarter and Full Year 2012 Results

MARKHAM, ONTARIO--(Marketwired - April 11, 2013) - 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 twelve month periods ended December 31, 2012. Results are reported in Canadian dollars and are prepared in accordance with International Financial Reporting Standards ("IFRS").

"We have started to see a resurgence in business activity in the global market for the computer products and services after a quiet second half in 2012. We are now seeing increased market demand for digital recording solutions that address the necessity to manage large volumes of digital data," said David Outhwaite, President and Chief Executive Officer of VIQ Solutions. "We believe that VIQ's Infinit suite directly addresses governments' imperative to decrease operational costs and increase efficiencies across the justice system by offering a solution that provides secure remote processing control and seamless integration with third-party digital video and content management providers."

Annual Results

Revenue was $15.8 million for the year ended December 31, 2012 as compared to $15.3 million for the previous year, representing an increase of 4%. Gross profit for 2012 was $6.3 million as compared to $6.5 million in 2011, representing a decrease of 2%. Gross profit expressed as a percentage of revenues was 40% in 2012 as compared to 42% in 2011. Net loss was $246,445 for the year or $0.00 per share as compared to a net income of $75,094 or $0.00 per share for the previous year. EBITDA⁽¹⁾ was $157,750 for the year ended December 31, 2012 as compared to an EBITDA $487,309 for the same period in 2011. Cash flow used in operations was $347,911 for the year ended December 31, 2012 as compared to a cash inflow of $614,033 for the same period in 2011.

Fourth Quarter Results

Revenues increased from $3.4 million in the fourth quarter of 2011 to $4.2 million in the fourth quarter of 2012 or 24% due to an increase in business activity for both our computer products and services and transcription businesses. Gross margin for the quarter was 40%, up from 35% for the same period in 2011 primarily due to the improved margins from our Spark and Cannon division. Selling and administrative expenses increased from $1.4 million for the fourth quarter of 2011 to $1.5 million for the fourth quarter of 2012 due to increased business activity in the quarter. EBITDA for the fourth quarter ended December 31, 2012 was $105,902 as compared to an EBITDA loss of $424,673 for the same period in 2011 due to stronger performance by both of our business units. Net loss was $89,652 for the three month period ended December 31, 2012 as compared to $528,280 for the three month period ended December 31, 2011. Cash used in operations was $299,494 for the fourth quarter of 2012 as compared to a cash inflow of $69,013 for the same period in 2011 as we invested in working capital in support of higher revenue in the fourth quarter of 2012.

2012 Financial Highlights

• Increased revenue in 2012 with strong revenue growth from our transcription and recording business units;
  
  
• Achieved positive EBITDA for the year;
  
  
• Successfully completed the national roll-out of 536 installations of our multi-year digital audio recording and storage project in the United Kingdom with Atos. The Corporation continues to earn on-going revenue from the project from related software support, installation and professional development services;
  
  
• Awarded a contract for digital audio and video capture in Mexico with local reseller Dyntra, S.A de C.V. to provide Encompass RPC software and Cisco hardware to the federal courthouse in Mérida in the Mexican state of Yucatán and successfully installed a pilot system; and
  
  
• Awarded a Canadian contract for digital audio capture and management by the Courts Administration Service to supply bilingual digital audio recording software and hardware for 48 fixed and mobile recording workstations for the Federal Court and Tax Court of Canada across the country.
  

Note

1. EBITDA is a non-IFRS earnings measure which does not have any standardized meaning prescribed by IFRS and therefore may not be comparable to EBITDA presented by other companies. EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization. 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. Please refer to VIQ Solutions' 2012 Management's Discussion and Analysis for a reconciliation and definition of non-IFRS measures.

Additional Information

Detailed financial information and Management's Discussion and Analysis of Results and Financial Condition for the year ended December 31, 2012 will be posted on VIQ Solution's 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 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

This release contains forward-looking statements and other statements concerning the Corporation's objectives and strategies and management's beliefs, plans and intentions about our achievements, goals, performance and other future events. These statements involve risks and uncertainties, which may cause actual results to differ materially from the statements made. When used in this press release, the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "will," "would" and similar expressions are intended to identify forward-looking statements. Such statements reflect VIQ Solutions' current views with respect to future events and are subject to such risks and uncertainties. Many factors could cause our actual results to differ materially from the statements made due to a number of factors including risks related to our ability to successfully execute our business plan which includes our revenue growth, our liquidity, our operating results, our technology and products. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated or expected. VIQ Solutions does not intend and does not assume any obligation to update these forward-looking statements.

VIQ Solutions Inc.

Consolidated Balance Sheets

(Expressed in Canadian dollars)

(Audited)

		December 31,			December 31,
		2012			2011
Assets
Current assets
	Cash	$	1,129,107		$	1,646,138
	Trade and other receivables		1,989,208			1,330,474
	Inventories		6,287			7,025
	Prepaid expenses		112,980			123,228
			3,237,582			3,106,865
Non-current assets
	Restricted cash		155,190			151,215
	Property and equipment		700,110			754,397
	Goodwill		1,614,278			1,621,395
	Deferred tax assets		225,877			260,001
Total assets		$	5,933,037		$	5,893,873
Liabilities
Current liabilities
	Trade and other payables	$	1,078,996		$	951,687
	Income taxes payable		128,995			-
	Provisions		622,727			584,870
	Short-term debt		-			75,000
	Unearned revenue		147,291			187,179
	Deferred lease incentives		20,966			21,766
	Current portion of obligations under finance lease		60,103			59,266
	Current portion of long-term debt		22,692			22,692
			2,081,770			1,902,460
Non-current liabilities
	Provisions		131,615			165,974
	Deferred lease incentives		29,582			50,964
	Obligations under finance lease		70,929			45,528
	Long-term debt		48,062			70,754
Total liabilities			2,361,958			2,235,680
Equity
Capital stock			11,578,213			11,438,947
Contributed surplus			1,818,206			1,781,433
Accumulated other comprehensive income			142,252			158,960
Deficit			(9,967,592	)		(9,721,147	)
			3,571,079			3,658,193
Total equity and liabilities		$	5,933,037		$	5,893,873

VIQ Solutions Inc.

Consolidated Statements of Comprehensive Income and Loss

(Expressed in Canadian dollars)

(Audited)

		2012			2011
Revenue		$	15,840,411		$	15,288,417
Cost of sales			9,496,968			8,810,326
Gross profit			6,343,443			6,478,091
Expenses
	Selling, general and administrative expenses		5,797,216			5,575,740
	Research and development expenses		666,815			725,651
			6,464,031			6,301,391
Income (loss) from operations			(120,588	)		176,700
	Interest income		31,664			21,394
	Interest expense		(37,770	)		(133,724	)
	Foreign exchange gain		416			41,197
Net finance loss			(5,690	)		(71,133	)
Net income (loss) before income taxes			(126,278	)		105,567
Provision for income taxes			120,167			30,473
Net income (loss)		$	(246,445	)	$	75,094
Exchange differences on translating foreign operations			(16,708	)		44,588
Comprehensive income (loss)		$	(263,153	)	$	119,682
Net income (loss) per share
	Basic and diluted	$	0.00		$	0.00
Weighted average number of common shares outstanding - basic			90,877,820			89,048,501
Weighted average number of common shares outstanding - diluted			90,877,820			90,786,137

VIQ Solutions Inc.

Consolidated Statements of Cash Flows

(Expressed in Canadian dollars)

(Audited)

		2012			2011
Cash provided by (used in):
Operating activities
Net income (loss) for the year		$	(246,445	)	$	75,094
Items not affecting cash:
	Depreciation		219,500			248,018
	Stock-based compensation		95,039			223,198
	Provisions		(34,359	)		19,543
	Loss (gain) on sale of property and equipment		2,341			(4,826	)
	Interest accretion on bridge loans		-			6,875
	Amortization of deferred lease incentive		(20,992	)		(21,765	)
	Deferred income tax benefits		28,966			7,085
	Unrealized foreign exchange loss (gain)		(14,119	)		6,462
	Changes in non-cash operating working capital		(377,842	)		54,349
Cash from (used in) operating activities			(347,911	)		614,033
Investing activities
	Purchase of property and equipment		(76,466	)		(99,590	)
	Proceeds from disposal of property and equipment		600			7,119
	Change in restricted cash		(5,212	)		15,212
Cash used in investing activities			(81,078	)		(77,259	)
Financing activities
	Advances in short-term debt		-			575,000
	Repayment of short-term debt		(75,000	)		(1,690,000	)
	Repayment of long-term debt		(22,692	)		(522,692	)
	Proceeds from stock options exercised for cash		81,000			420,589
	Proceeds from private placement, net of issuance costs		-			1,989,198
	Finance lease payments		(67,016	)		(58,258	)
Cash provided by (used in) financing activities			(83,708	)		713,837
Net increase (decrease) in cash during the year			(512,697	)		1,250,611
Cash, beginning of year			1,646,138			381,543
Effect of exchange rate changes on cash			(4,334	)		13,984
Cash, end of year		$	1,129,107		$	1,646,138