VIQ Solutions Inc. (NASDAQ:VQS) Q4 2021 Earnings Conference Call March 30, 2022 11:00 AM ET
Company Participants
Laura Kiernan – Investor Relations
Sebastien Paré – Chief Executive Officer
Alexie Edwards – Chief Financial Officer
Susan Sumner – President and Chief Operating Officer
Conference Call Participants
Brian Kinstlinger – Alliance Global Partners
Scott Buck – H. C. Wainwright
Daniel Rosenberg – Paradigm Capital
Operator
Good morning, ladies and gentlemen. My name is Chantal, and I’ll be your conference operator. Today, we’ll be hosting a conference call to discuss the fourth quarter and full-year 2021 financial results for VIQ Solutions Inc. At this time, all participants are in a listen-only mode. [Operator Instructions] We will have a question-and-answer session at the end of the call [Operator Instructions]. Please limit yourself to one or two questions so that others may have a chance to ask questions, you may reenter the queue.
Your host for today is Ms. Laura Kiernan, Head of Investor Relations for VIQ. Please go ahead.
Laura Kiernan
Thank you, Chantal, and good morning everyone and welcome to VIQ Solutions’ 2021 fourth quarter and full-year results conference call. Before we begin, I would like to point out that certain statements made on today’s call contain forward-looking information subject to known and unknown risks, uncertainties and other factors. For a complete discussion of the risks and uncertainties facing VIQ, we refer you to the company’s MD&A and other continuous disclosure filings, which are available on SEDAR, at sedar.com and sec.gov. As a reminder, all dollar amounts are in U.S. dollars unless otherwise stated.
And with us today, we have Sebastien Paré, CEO; Alexie Edwards, our CFO; and Susan Sumner, our President, COO of VIQ, all of whom will be available for questions following the prepared remarks.
I will now like to turn the call over to Sebastien Paré to begin.
Sebastien Paré
Thank you, Laura. Welcome, everyone, to our full-year 2021 earnings call. The first order of business today is to congratulate and welcome Susan Sumner and Shing Pan to the Board of Directors. Our Chairman, Larry Taylor stated that he was excited to announce the appointment of these two highly accomplished executives to our Board, and that Shing’s technology experience and leadership in strategic growth will contribute substantially to advancing our goals. And Susan’s extensive operational and management experience in the global transcription industry, including VIQ for the last for years, adds meaningful perspective to our Board. These appointments further our ability to scale globally and achieve our strategic growth plan. Each of these seasoned professionals has an established record of accomplishment for executing strategies to build successful companies. They are the next step in our plan to expand the Board experience and operational acumen, matching the needs of our growing global enterprise.
Now, into our results, the past 12 months have been a remarkable journey for our company, our clients, our society and, for many of us, personally. I am pleased to report that VIQ has not only persevere during one of the most challenging business environments on record, but was able to finish 2021 strong by completing many of our commitments in the areas of cloud infrastructures, cyber security, products, capital and regulator markets, as well as acquisitions that will allow us to scale and our financials to lift significantly throughout 2022. While 2021 was a challenging year, given the fluctuations of COVID recovery in our operating geographies, we have advanced our growth strategy and made extensive strides in overall operational performance.
We’re now ready to scale profitably to the next level. We have enhanced our capture to documentation offerings, and expanded our client relationship by acquiring two key assets, including Auscript, in Australia, and The Transcription Agency, otherwise known as TTA, in the U.K. The strategic acquisitions are a foundation for future global growth in those regions. The pro forma annual recurring revenue for last year increased by 63% to $48.6 million from $29.7 million for the comparative period in 2020. This is a new baseline revenue that we’re working with, with 2022 and beyond. Please note the ARR of $29.7 million is slightly below our total reported revenue of $31.75 million last year, because some of the revenue was not recurring.
A key intellectual property patent was obtained for our artificial intelligent innovations that covers 10 unique aspect of our patent aiAssist automated workflow and analysis platform. The technology productivity impact in insurance and law enforcement was demonstrated last year. In 2022, we expect to achieve productivity improvements in our court vertical, which will further increase the sustainability of our gross margin expansion. Also during late 2021, we capitalized on our global label capacity to lessen the impact of COVID and labor shortages in our operating regions. We did this by rethinking, structurally, how we utilize this asset while still providing our secure end-to-end solutions without compromising speed and accuracy of the content.
With our two most recent acquisitions, our court segment is forecasted to represent 65% of our 2022 revenue globally, which is an increase from 34% in 2021. We expect most of our existing courts and media clients, as well as the ones gained from these two most recent acquisitions, will migrate into NetScribe platform, which is powered by aiAssist over the course of 2022. The shift towards legal courts is expected to enable higher productivity and further gross margin expansion. Susan will get into a lot of those topics when she speaks. We also expect the shift in revenue towards Australia following the completion of the Auscript acquisition, with approximately 50% of 2022 derived from Australia, versus 31% last year.
Now, I will hand it over to Alexie who will provide a high-level overview of our financial results and goals for 2022. When he’s finished, Susan will provide additional insight into our operating results. Then we’ll open up the lines for answering your questions, and I’ll come back to you for closing remarks. Alexie?
Alexie Edwards
Thank you, Sebastien, and good morning, good afternoon, and good evening to everyone. Rather than rehash the content published in our press release, I would like to make remarks on a few key highlights from our results last year, and reaffirm our goals for 2022. We reported total revenue of $31 million in 2021, which decreased 2% versus the prior year. However, when comParéd to 2019, or the last year before the pandemic, we saw meaningful trends in revenue. For example, our U.S. revenue was only $14.5 million in 2019, but increased to $22.2 million in 2020, and declined to $19 million in 2021. The U.S. decline in 2021 versus 2020 was driven by several factors, including some difficult comparisons.
Our U.S. media revenue was significantly lower due to skewed year-over-year comparisons. During 2020, the completed a large one-time archive project that was not repeated in 2021. 2020 also included additional volumes relating to the election cycle that weren’t repeated in 2021. Combined with the COVID-19 impact on the traditional conferencing business throughout the year, media, corporate, and government was negatively impacted in what has otherwise been a growth vertical through the addition of two major new broadcast clients, in Q4, and a significant Q1 ’22 ramp up by our largest media client in financial earnings work.
Lower U.S. insurance claims in 2021 attributed to slowed U.S. recovery in car accident claims due to reduced movement of people and traffic from the lockdowns and decreased local policing activities from government mandated lockdowns in various states and local communities. These resulted in lower volumes of insurance, recorded statements, police interviews, and transcription revenue in insurance and law enforcement segments. In Australia, our revenue went from about $9 million in 2019, to $8.5 million in 2020, and was about $9.5 million in 2021. In Australia, our growth was hampered and revenues were deferred as a result of having 163 billing days that were negatively impacted by COVID-19 lockdowns during 2021.
And these factors are partially offset by one acquisition-related revenue in U.K. and Australia which contributed about $900,000 for the year, and adoption of FirstDraft technology. Please note, the late December close of Auscript was tied to the delayed clearance by the Australian competitive bureau, and subsequently had an estimated $2 million impact on planned revenues versus reported results.
We expect that U.S., Australia, and U.K. revenues to normalize in ’22, including the acquisitions. Now on to our gross margin, our gross profit of $14.9 million was 48% of revenue versus 51% for the same period in 2020. The decrease in gross profit was primarily due to the reduction of COVID-19 with subsidies and delayed revenue resulting from the pandemic.
Excluding the COVID-19 wage subsidies impact, gross margin for the full-year would be 46% comParéd to 42% for the full-year 2020, represented an increase of approximately 295 basis points. Please note that we have referenced the gross margins excluding subsidies on the presentation. Driving the increase of about four percentage points in gross margin, excluding the impact of COVID-19 with subsidies, this past year were the following factors.
One, the migration of technology services, particularly in the insurance and law enforcement verticals, two proven labor force efficiency gains from the implementation of NetScribe and aiAssist Technologies enabled a reduction in rates paid per unit of production for certain segments. Three, the migration to a global labor force to better utilize access to labor across the VIQ entities. Fourthly, the stabilization of the labor force in the U.S. post COVID-19, reducing requirements for bonus payments to incentivize the contract labor. Fifthly, we believe the shift towards legal or courts will be a driver of improvements planned for next year. And finally, the company expects to continue to trend further towards predictable recurring, higher margin revenue as first draft is adopted and more clients leverage higher margin machine drafts.
We have reaffirmed our goals for 2022. Our financial expectations include generating at least $50 million in revenue, while gross margin expected to be between 47% to 55%. As Sebastien mentioned, our pro forma annual recurring revenue rate at the end of last year was about $49 million, when you include a full-year of 2021, base recurring revenue, and TTA and Auscript acquired annualized revenue of approximately $14 million, and the major court contracts of approximately $6 million, which effectively began in December 2021 upon the close of the Auscript acquisition. This really means that at least $50 million in revenue for this year is achievable, almost with no additional organic growth. We do expect to pursue additional organic growth especially in light of the recovery following the real meaning of the economy as COVID-19 restrictions subside. We’re allocating capital towards the highest and best use including acquisitions, organic growth drivers such as investment in technology, sales and marketing and infrastructure development.
The company’s capital allocation is centered on generating organic growth, investment in technologies, mergers and acquisition and balance sheet deleveraging. Our goal with capital allocation is to increase the earning power of the company and reinvest the free cash flow of the business to generate more cash. We plan to demonstrate to our shareholders that flywheel post-pandemic started in Q2 throughout ’22, with a key priority being using cash to pay down debt. In the last five annual reports, we have demonstrated incremental increases in gross margin and revenue. While results may appear lumpy in the last two years due to the societal disruptions from the pandemic that incremental progression over time is moving in a very solid direction.
Now, I’d like to hand it over to Susan.
Susan Sumner
Thank you, Alexie. I’m honored to have been appointed to the Board of Directors along with Shing, and I’d like to thank the board. The board like VIQ is committed to diversity and both the actual representation of the directors and the leadership team, but also diversity and skill approach and thinking to support to challenge our strategies in technology, segmentation and global expansion. I know I speak for the board, Sebastien and Alexie in saying that we are committed to continuing this journey of diversity and inclusion across all of VIQ.
Since Alexie has covered much of the high level financial trends, I would like to get a little more granular on our operational improvements, M&A migration and newly introduced KPIs. Let me pivot to the operational achievements of 2021 as there certainly were many. We committed to expanding our sales and distribution organizations and we have. In 2021, we added incremental sales and distribution resources in North America and the U.K. and now it’s expanded partnerships around the world. We have established those key partnerships of world in 2021 that will help us to drive organic growth in 2022. And here are few highlights, we were awarded the integrated digital court reporting systems through the Supreme Court of Florida, which gives VIQ the ability to market and so capture for us suite of solutions to the Florida court without individual RFPs. This award validates the value of our innovative technologies, our global expertise to provide accurate and secure digital recording solutions that meet and exceed the needs of that client base. [D’Agostino] [Ph] Electronic Systems is a U.S. based full service technology integrator and became a VIQ partner in 2021.
VIQ will see a new value in it’s new partnership in two key areas. We are now able to put the VIQ suite of solutions on the costar’s contract for the state of Pennsylvania as well as utilize their expertise in audio and video to help us consult, design and implement court rooms of the future around the world. As technology plays an increasing role in the transformation of court workflow, court personnel recognized the need to innovation, solutions to keep pace with a vast amount of courtroom evidence that is being produced and shared.
The Law and Order VIQ Solutions partnership brings together significant industry knowledge, technological solutions and professional Client Services organization to support successful client transformations in the courtroom. And finally, we signed a strategic partnership agreement with LegalCraft to create an integrated solution using the [Lexo] [Ph] platform, which optimizes legal case analysis, trial preparation and real-time transcription to assist legal professionals globally. Given our history with the district attorney and public defenders law firms are a natural extension of our court focus, and our current client base. VIQ was the first LegalCraft strategic partnership to offer Lexo’s robust, collaborative case management platform in the United States.
All of these partnerships and frameworks bolster our ability to expand our reach in selling our end-to-end solution to the legal and media protocol. This pivots the court is driven by successful acquisitions of Auscript, and TTA, which 65 of our revenue — or 65% of our revenue is now tied to port services, positioning us to lead in this sector. We committed to consistently improving gross margins in 2021. And as presented by Alexie earlier, we delivered on those improvements.
Notice subsidies, resulting in a 395 basis point improvement. Much of this game is a result of the maturity of our technology and the scale we have gained from the deployment of that technology. During 2020 and 2021, there was a focus given to migration of the insurance and law enforcement segments in the U.S., but the biggest impact on gross margin will be in 2022 when the technology is now ready to take on media imports, which is expected to represent nearly two-thirds of our overall revenue.
While incremental R&D was required in 2021, due to the level of complexity to manage our core documents. The productivity gains in that space will be significant. Also contributing to the games was a shift to utilize our global workforce to address the challenges associated with the availability of our U.S. labor port and the management of the velocity required to maintain and grow our business. We took advantage of the available labor from closures in Australia and to cross train the organization to share work, while still maintaining the security requirement of our clients. This is where we really see the advantage of the combination of our workflow technology platform layered with the flexibility of our language models and our AI. Regardless of where the work is done on a platform, the work is secure and the platform can adapt to the language nuances and customization requirements of the client.
Over 2022, we will continue to expand our global aspect to labor by expanding our footprint into new geographies that will provide opportunities for both transcription and administrative labor. We call this project Titan, and we expect to see the full benefit of these efforts in 2023. We also committed to continuing with aggressive M&A pursuits in 2021 to build scale around our declared infrastructure. In October, we completed the purchase of TTA in the U.K. and this is strategic because it provided VIQ services footprint in geographies, where we share our largest capture client. This coincided with the launch of our NetScribe technology, putting secured infrastructure within the borders of the U.K. to allow us to rapidly grow.
Shortly after the acquisition, we began to deploy the award for the houses of parliament. We are also undertaking a major trial with a key judicial customer and our local partners to innovate the content that summarized and made available to users. In October, we also announced the acquisition of Auscript in Australia. I cannot overstate the enforcements of this addition to the VIQ enterprise. Important not only in size, but also in scale, it brings to the vertical — to the court vertical, which has now become so critical to VIQ, the marriage of the complex requirements of core documentation workflow, and content with efficiency gains from our technology. This is very exciting. The result of our AI’s trials and migrations, which was only touched on in 2021 in legal and court’s vertical, was better than expected and significantly better than we have seen in other segments.
It is that success that gave us the push to conclude the acquisition as neither TTA nor Auscript have deployed aiAssist like solutions. The timing of the Auscript acquisition is certainly not optimum as the time required to regulatory approval was unexpected. The commencement of the contract occurred late at the beginning of the holiday shutdown. So, our first month placed acquisitions drive the highest customer [service] [Ph] revenue. Now the holidays and COVID firmly behind us, the organization is back to pre-COVID levels, and will now focus on the migration and our technologies over later this year. Our pivot to the court segment will not only accelerate our gross margin goals in 2022, but it will also allow us to take advantage of our key investments in technology around the world.
As we look at our technology gains in 2021, the commercial launch of those NetScribe and first draft, particularly with the court enable customization accelerates our competitive advantage in delivering our end-to-end solution that enable our clients to getting the most value from capture workflow and speech recognition technologies. We also plan to expand our hybrid technology services portfolio to include NetScribe live. This will take on traditional capture and transcript creation and turn it to a new level, enabling real-time capture and editing in both courts and media. This access to fast edit will change the overall concept of turnaround time and delivery, creating a new competitive advantage for VIQ. Some of our competitors focus on speech from their capture technology while others focus on editing and speech detects to wrong. We believe that the core value of our strategy within the integration installed.
Whether a court or a media outlet chooses to capture or edit via their own infrastructure or petition any element of that workflow, we need them now with the enhancements that allow them to use VIQ for some or all of their requirements. And while the labor shortage is impacting court resourcing particularly in the U.S., we believe that our NetScribe to NetScribe live will allow governmental agencies to improve their throughput with existing resources, while reducing costs, but also improving the security and the usability of the content they create.
In 2021, we also invested in security and IT infrastructure to ensure that we comply with governmental requirements that vary across the globe, and to prepare for running an integrated cloud architecture. We have preserved our ISO 27001 standard within our media and U.K. operations, and expect to be globally certified later in 2022. In 2021, we also committed to establishing the baseline for tracking KPIs to provide consistent methodology, to provide measurable tracking of our operating performance. We will outline in detail, along with definitions of both metrics in our MD&A, so I will not specifically list them today. We will however provide the first comparables of Q1 2021 to Q1 2022 in our Q1 earnings release in the next few months. I will highlight a few of those metrics and why they are important in evaluating the health and the progress of the company. First, the annual recurring revenue, ARR, this is a critical metric in evaluating the ongoing stability of the client base and the impact of our organic growth and churn.
While we certainly will evolve our ability to distinguish between organic growth versus churn in our reporting, the run rate will provide the baseline year trend of recurring revenue to track the required progress of organic growth through the year. As previously discussed, our 2021 year-end pro forma run rate was approximately $49 million. Another important metric is our average cost to produce a minute of transcription. This provides visibility into the cost efficiencies gained from the improvement in our technology and the related cost reductions tied to variable labor. This is an important metric to be used in conjunction with gross margin as it is not influenced by pricing, but much more aligned with the scale, and the performance, and the efficiency gains of the platform.
While no one could have anticipated the impacts associated with the extended COVID and regulatory delays that impacted our results in 2021, there were significant measurable achievements that allowed us to prepare for our future. We look forward to 2022. We are excited about the ongoing execution of our strategy in continuing to deliver the innovation to the industries that we serve.
Now, I would like to hand it over to the operator for the Q&A session.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from Brian Kinstlinger with Alliance Global Partners. Your line is open.
Brian Kinstlinger
Hi, good morning, guys. Thanks for taking my questions.
Sebastien Paré
Good morning, Brian.
Susan Sumner
Morning.
Brian Kinstlinger
Hi, Sebastien. Hi, Susan. I wanted to start with business development. I mean you said this too, from your disclosures, you’ve got $48.6 million in annual recurring revenue on hand. So, even you said it’s not going to take a lot of growth to get you to $50 million. Can you talk about your pipeline in terms of how it comParés to a year ago, and also pre-COVID maybe in total contract value or number of procurements, in which verticals you’re seeing the most near-term opportunity, of course, excluding the Queensland contract which we know is already in the numbers?
Sebastien Paré
So, maybe I’ll just — I’ll start, that’s a good question on our side. So, overall, we want to come out of the two years of COVID conservatively. And I think it was important for people to appreciate what that new run rate is about. So, what we’ve done now is the pipeline, there was a lot of delays. We talk about the backlog last year. All of this now is being activated. And we’re actually going to be doing quite well on that side of it. But we wanted to be conservative in our forward-looking guidance for this year, and purposely we are focusing now on the run rate. And then quarter-over-quarter, we will provide you with a little bit more visibility towards our progression towards the organic growth in terms of that.
Susan?
Susan Sumner
Yes, thanks, Brian. The pipeline is building in a way that’s kind of hard to comprehend just because, what I would say, the sleeping giants, globally, around the court space are now firmly awake and active in both RFPs as well as changing the way they do business for a couple of reasons. One, they have a significant backlog from their closures, and they have to be innovative in the way they look at courtroom efficiency. And also that they had — they had extensions and renewals that didn’t allow them to actually execute on new evaluation during the shutdown phase, and they’re also adjusting, by the way, I mentioned it in my statements, to labor shortages which are impacting their own in-house transcription resources.
So, we are growing the pipeline all over the globe, but particular growth which is really interesting to us in the U.S. market, where there is much more demand for that end-to-end solution that I talked about in my comments. So, the pipeline is very robust. It’s certainly higher than it was in 2020 or 2021, and we’re seeing accelerated growth from there. I think answered all of your questions, Brian, maybe there was something else — [multiple speakers]…
Brian Kinstlinger
You did. You did a great job, thanks.
Sebastien Paré
Thank you, Brian.
Susan Sumner
Thanks.
Brian Kinstlinger
And then you mentioned a trial with a key judicial customer, kind of said that quickly, but I figure you wouldn’t say that if it wasn’t meaningful. So, are you able at all to give — to size the opportunity in how you expect to trial to last? And then my next question, then I’ll get back in the queue, is as you look at your portfolio of contracts, are any of them experiencing lower volumes or COVID restrictions or is there any headwinds to your business still in the first-half of the year? I guess I’m just trying to understand if we’re at the steady state of run rate or there still is more headwinds to the business right now?
Susan Sumner
Seb, do you want me to take that?
Sebastien Paré
Yes, go ahead.
Susan Sumner
So, the first — well, I’ll kind of answer them in reverse. Are there incremental headwinds and are we feeling that we’re kind of past the COVID. I’ll — I’m going to talk to each of the segments, but I will start with courts, which is courts are interesting. They have accelerated in the spring because they are fully out of the, what I would call, the COVID fog operationally. The challenge that you have with courts, and we talked about this earlier, is that it’s hard for them to make up lost volume because they have a fixed number of courtrooms. So, we’re working collaboratively with them to help them bring capture and technology in new ways. That also speaks to what we’re doing in the U.K., Brian.
I can’t effectively size this because we are in the early stages of the trial. But if the trial is successful it would be material not only in the offering with this particular client, but also to all of our judicial around the world. In terms of the insurance space, the insurance space has been interesting. You may have seen there were a couple of challenges. One of our largest insurance clients is climbing back, and they’re climbing back quickly. The GEICO contract was heavily impacted in 2020 and 2021, and we’re seeing good steady recovery on that account.
When we look at the rest of the insurance space, just the nature of the business is that the recorded statements that we do relate to work that was done either six to nine months prior to the accident. So, if you’re in a car accident you’re going to have conflict with your insurance company, it’s probably going to take six to nine months to get to the point where they’re actually determining if they’re going to litigate. So, we are in that recovery stage, but we’re still seeing some lumpiness in the insurance space. But in the way that we’re looking at the business in terms of the steady climb of the average revenue per day, which is one of the metrics you’re going to see us talk more about, we’re seeing absolute improvements month-over-month.
So, I think that with insurance and law enforcement, we’re adapting to some of the legacy stuff from 2021. I wouldn’t call it a headwind, I would say we’re seeing a very healthy and steady improvement in the average daily volume that will get us back to the steady state this year, probably closer to midyear than — and it’s growing aggressively.
Brian Kinstlinger
Great, thanks. I’ll get back in the queue, a few more questions.
Sebastien Paré
Thanks.
Operator
Your next question comes from Scott Buck with H. C. Wainwright. Your line is open.
Scott Buck
Hi, good morning, guys. Thank you for taking my questions. First, I was hoping you could help reconcile 4Q revenue of $7.5 million with the $11 million or so that was embedded in the full-year guidance. I know the Auscript closing being pushed was about $2 million of that, but it’s still a $1.5 million to $2 million that’s kind of unaccounted for. Could you kind of give us some color around that?
Sebastien Paré
Yes, so there’s really two components to the bridge, Scott. One is obviously the delay in that closing, I mean, we ended up closing two months, almost behind schedule, because of the reasons we discussed. So, that’s a $2 million and back. So, that will have taken us to that $33 million, and also that there was about 163 billing days last year that were negatively impacted with COVID and things. So, and that was worth about $1.2 million, based on all the audited work that we’ve done. So, that’s the bridge to the $34 million. So, if those two things will have unfolded as plan, basically we will have basically met our targets of last year.
Scott Buck
All right. That’s helpful, Sebastien. And then, can we talk a little bit about longer-term gross margin expectations or targets. It looks like the midpoint there’s a nice sequential move up in the guide for 2022. But where could we be three or four years from now? Could we push 60%?
Sebastien Paré
Yes, so I think that’s a direction differently we’re taking. And if you look back at what we’ve shown I mean, really we took the technology commercially, really early 2019. And then, we’ve acknowledged early on that the bulk of that year, there were some obviously some early hiccups related to the deployment and all of that, but really the migration got accelerated in ’20 and then ’21 we really, really went to town of migrating all our insurance and law enforcement. And you could look at it in terms of the gross margin implications, we’ve been able to live that, what we’re seeing now is none of our courts revenue has been fully migrated yet. And now this represents 65% of our global revenue moving forward, based on the early trials that we’ve been working on with our courts customers, the productivity gains that Susan was alluding to, is actually very significant.
It’s above expectations. So, what we want to do now is with that confidence, and say listen, we will have met last year’s revenue, subject to the bridge that we talked about. And just remember that none of the courts productivity gains, i.e. gross margins in the courts have started to flow to our P&L, never mind lifting the financials. So, it’s really on the back of that. And that’s why we were more than ever determined last year, to close on the TTA and the Auscript because of now we saw the implication of the AI within that court revenue. So, it’s a very significant piece of what it means for 2022 onwards, as far as what we want to be is corporately, across all verticals, that basically we’re aiming towards 47 to 55 last year and that will be significant.
What we want to do now is obviously we’re getting closer to 60, and I think that’s really what we’re going for 2023 because remember behind the scene and Susan made comment about it, the technology is gaining maturity, the language models and all the different things that we do with aiAssist is now being able to process, you saw that in the press release, our AI revenue process, our AI is now up by to almost 24.5%. So, the volume is really starting to go true, we’re going to get the bulk of the media and the revenue volume to the AI this year. So, it’s on the back of that, that I feel really comfortable that in 2023 onwards, that we’re going to be talking about the 60%, 62%, 63%. And it will be an incremental growth. But that will be really significant if you actually start modeling that against the financials on that side of it.
Scott Buck
That’s really great color, Sebastien. Thank you for that. And then, last one for me, you call out organic growth opportunities in 2022 as part of the goals, but there’s nothing in there about inorganic growth. Are we taking a pause from M&A at the moment?
Sebastien Paré
Yes, so what we said is really, look, we — obviously if we do the math, it will be a significant growth year this year regardless, what we’re seeing is we’re approaching organically conservatively. And we’re wanting to basically be able to prove to everybody that organic growth and we will adjust as we’re moving forward, but overall the answer is our pipeline is still very active, but the direction that we’re taking right now is because of the impact of the court revenue on the gross margin, everybody’s all hands on deck right now to accelerate the migration of the TTA court revenue into NetScribe, aiAssist that was during the heavy lifting in Q1. This should be up and running next week. That’s a big nut, if you remember historically, Scott, it took us anywhere between nine and 10 months historically, to migrate an asset. In the case of TTA, we did it in four months.
So, that’s how much gain and how much productivity now we’re gaining our methodology. So, and obviously after that is the Auscript, so right now our directions globally, is we’re still obviously entertaining a lot of different assets, but because of the significant growth that we set up for 2022, really we want to focus where we’re going to do the biggest lift in terms of restoring our profitability and restoring our gross margin, and that’s in the courts revenue. That’s what right now for the next basically several quarters, you’re going to hear the three of us all hands on deck on accelerating integration, because that’s how we get back to profitability, moving forward very quickly, and I think in the market that we’re in, it’s a very important aspect of it.
Scott Buck
That’s very helpful. Thank you for taking my questions, guys.
Operator
Our next question comes from Daniel Rosenberg with Paradigm Capital. Your line is open. Daniel Rosenberg, your line is open.
Daniel Rosenberg
Hi, good afternoon, Sebastien, Susan and Alexie. I just want to follow-up on the COVID impact. You mentioned affecting numbers last year. So, of the 163 days that were impacted, I was wondering kind of, which quarters got impacted most and may be just what was the Q4 impact in terms of number of days.
Sebastien Paré
Yes, so that number, Daniel was really throughout the year. And as we mentioned in the prepared statements, it’s been an interesting challenge because while we were out of COVID in one area, then really Australia went back into full lockdown. So, we were managing a number of things, but overall, that impact of 163 days was against 254 billing days last year in Australia. So, that gives you a sense that there were significant implications on the veiling in Australia last year, in terms of that, and what we’ve seen is basically we were able to do all the reconciliation financially, and the impact was over 1.2 million just in Australia alone, as we exited last year. So, we’re very pleased that that period of time is behind us. And, but that’s how it came out. 245 days of billing last year in Australia, 163 were negatively impacted. Alexie.
Alexie Edwards
Yes, just to add, so Dan thanks for your question. Just want to Sebastien comment. We haven’t quantified it, the 163 days, quarter-by-quarter. So, we don’t have information available right now, but we do know based on our calculation, that the 163 days that were negatively impacted amount approximately 1.2 million for the full year.
Daniel Rosenberg
Okay.
Susan Sumner
Daniel, just to add a color that we look across all of the geographies within Australia, there were varying levels of closure, but they didn’t have a full opening up from the August closing until about the 15th of November. So, you see a rather large impact and again, Alexie will need to quantify that for you. But I think you remember me saying in my statements last quarter that they — the bars were opening on the 15th of November, so we expected some kind of some kind of regain to velocity and I think so October and November were certainly heavily weighted.
Daniel Rosenberg
Okay, thanks for that. Second, just turning to the guidance, I didn’t see any comments around adjusted EBITDA; I know 10% to 20% has been a target as is running. Have your thoughts change around that? Are you investing in new initiatives that might take that off the table, any commentary there?
Sebastien Paré
Yes, so what we — what we’ve done is really again, coming out of those two years that we wanted to be very conservative in the way we move forward. We also wanted to take a proactive approach to Q1 and we as far as whether or not there’s going to be any implication, is there any courts in Australia that could be impacted by some lockdown during Omicron phases like we wanted to be very, very conservative that way, and that’s why we basically took an approach, we’re going to focus on the revenue that we know we’ve got a good line of sight on. We will incrementally disclose our tracking against organic growth quarter-over-quarter number two, and then on the other side, basically we’ll be able to show you as we moving forward, what the implications are for the adjusted EBITDA. So, we’re planning to start providing you with a lot more callers as we report Q1, as we go into Q2. But we want to be very conservative, monitoring very carefully and really using our actual results to actually provide you with the right guidance as we emerge from Q1 and as we emerge out of Q2. And I think from that perspective, we made it very clear. Right now, we are returning to profitability, I think you can see from last year, there was a significant amount of one time expenses that hit the bottom line.
And if you look at the bigger context, we came out of COVID in a relatively good shape operationally, it’s just that there’s a lot of one-time expenses that were obviously were added to it. So, all of this is behind us. All of the COVID restrictions are kind of behind us. But we wanted to make sure that we’ve got the ability to talk to you, Daniel, about the adjusted EBITDA guidance, once Q1 results are in. And then, we’ve got to kind of at least the first month of Q2 in the bag. So, we know exactly where we’re trending, post a lot of those one-time expenses. So, it will be coming your way, just going to be a little bit more incrementally done this year.
Daniel Rosenberg
Okay, thanks. Then in your prepared remarks, Susan, you mentioned a number of partnerships that you had established. So, I was curious which ones are most exciting to you? And then in terms of the pricing, if you were to sell through one of those partnerships, is there any differences in the economics that you accrued from those?
Susan Sumner
Second question is a good one. And I don’t, they’re each structured very, very differently because in one case, with [Lexo] [Ph] as an example, we’re actually selling their technologies in our bundle in the framework in Florida and in the partnership in Pennsylvania, we’re selling our services directly. So, it’s a little of both, certainly in alignment with partnerships, we’re paying them in lieu of distribution. So, there is a shared gain model. But it differs, whether it’s our product that they’re selling or their product that we’re selling. We are most excited about, I would say the framework in Florida not because the other partnerships aren’t extraordinary, but because it really gives us a chance to begin to accelerate the court work in the United States.
As you know, historically, and you guys have heard me talk about this. We were very resistant to expand that into portfolio. But to really only capitalize on the courts, as it relates to the — as it relates to the capture technologies, where we’re seeing the demand now in the United States is around the end-to-end solution that will be sold to courts, with a major trial we have going on right now in the Midwest as an example where they are using is the current capture customer, but they are using the NetScribe technology and the first draft technology to be able to support losses of internal staffing.
So, this framework in Florida gives us an opportunity to accelerate growth and certainly to evangelize what we believe is a very important strategy relative to our competitive position. So, I think they’re all exciting. They’re exciting in different ways. But I think in terms of short-term opportunities to accelerate the investments that we’re making in augmenting the technologies to directly impact the court sector, I think that gets me the most excited and by the way, it’s close and I get to go talk to customers, which makes me really happy.
Daniel Rosenberg
All right, thanks for taking my questions. I’ll pass on.
Operator
[Operator Instructions] Our next question comes from Brian Kinstlinger with Alliance Global Partners. Your line is open.
Brian Kinstlinger
Great, thanks. A few more, I wanted to follow-up on the gross margin first. I think you mentioned it, but I missed, what drove the fourth quarter margin to be so much lower than the other three quarters of the year. So, first, if you’ll highlight that one more time, and then with TTA, almost complete on this transition and then you’re moving to Auscript, should we expect the gross margin in the first-half of the year to be at the low end, possibly even lower than the guidance range, and then at the upper-half of the range, in the second-half of the year based on this transition schedule?
Sebastien Paré
Susan, you want to go ahead?
Susan Sumner
Well, I will say that seasonality certainly affected Q4. And also, as I inferred in my discussion, the timing of the close of the Auscript acquisition really couldn’t have been worse. We took on all of the cost and sat with fixed costs in the second half of December, where there was really no court activity. So, that, Brian, I would say is the major driver other than the fact that seasonality does affect our business, it affects the business most profoundly in the month of December and January. And that’s not only in Australia. That certainly affects the U.K. court business as well. So, that’s not new news, right, we’ve seen that in the trends that you could go back to in Australia, in prior Q4, and Q1.
The migration of TTA, we are very excited about, I will caution that we are training a new industry on gross margin. And if we look at the effects of that from historical migrations, it’s a little bit of a hockey stick. We’re supplementing resources that are trained in the United States and around the world to kind of offset some of that downward trend, we certainly are better at training transcriptionists to be editors today than we were when we went through that first migration. But I think that what we have predicted is that it’s not going to be a flash cut. In order to preserve margin, Brian, what we will do is a slower migration to make sure that the resources are gaining velocity and their productivity as we bring new resources on behind them. We’ve gotten pretty good at predicting how long it’s going to take to get a new editor up to full productivity. So, with that, we have a measured migration. So, we’re set, we will start that this quarter. It will certainly, it will be a measured approach toward how we accelerate or decelerate that as we get the editors up to full productivity.
Brian Kinstlinger
Great and then my follow-up is you talked about seasonality. So, that was going to be my next part of the question. Can you tell us based on what is revenue in hand? What’s the weakest quarter you expect this year, the strongest quarter or any details on the seasonality? You said June and December, obviously are the weakest. And then, the first quarter is one day away from being done. Maybe it would be helpful to give us some discussion on revenue and margin expectation, given where through the quarter?
Sebastien Paré
Alexie, do you want to go?
Alexie Edwards
Sure, so to answer your question, Brian, in terms for seasonality, for Q1 is usually our lowest revenue, because of what Susan described earlier, the impact of the courts in Australia. And so, we expect Q1 to be a lowest in terms of trend, and then to pick it up in Q2 and Q3 and then below in Q4. In terms of gross margin, we expect gross margin to be lower in Q1 and increasing as we progress through the year impacted by the migration of the customers. So, that’s probably in Australia and the courts customers.
Brian Kinstlinger
Okay, thank you so much.
Alexie Edwards
Okay, thank you.
Operator
There are no further questions at this time. I would like to turn the conference back over to Sebastien Paré for closing remarks.
Sebastien Paré
Well, thank you, Chantal. Our success as a company continues to be made possible by our global talents. Despite the impact of COVID and the global recovery, labor shortages and great designation that we all heard about. Our global workforce kept the pace in meeting the needs of our clients on their very challenging conditions that continue to achieve critical milestones, demonstrating the resilience, commitments and loyalty of our workforce. I would like to take this occasion to publicly thank each and every one of our employee, editors, software engineers, contractor and partner VIQ for helping us to remain positioned for success as we exit 2021.
I also like to thank our customers globally, for standing by us as we all adjust to the challenges of mid-2021. You have embraced our technology and the adaptability of our model and now we’re all win together in what used to be a very strong year ahead of us. As the business level, we enjoy privileged position with a unique, highly specialized and protected technology platform, a very good revenue visibility in 2022 that will produce positive cash flow as we do with a strong balance sheet and limited debt. We have a chance to lead in an addressable market that is getting larger every year, and all of us get to do extremely important work and complex work.
I thank you for your time today, and your time throughout 2021. We look forward to speaking in a few months to review the results of Q1 2022. Please follow-up with Laura Kiernan with any questions you might have. Thank you everyone for joining us today on the call. Be safe.
Operator
This concludes today’s conference call. You may now disconnect.
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