VIQ Solutions Inc.

Thank you, Amy. Good morning everyone and welcome to VIQ Solutions third quarter results call.

Before we begin, I would like to point out that certain statements made on today's call may contain forward-looking information, subject to known and unknown risks, uncertainties and other factors. For 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 www.sedar.com and the OTC markets in the United States.

All amounts are in U.S. dollars unless otherwise stated.

With us today, we have Sebastien Paré, President and CEO; Alexie Edwards, Chief Financial Officer; and Susan Sumner, Chief Operating Officer, all of whom will be available for questions following the conversation. I will now turn the call over to Sebastien Paré.

Thank you, Laura. Welcome everyone to our third quarter 2020 earnings call.

Our third quarter release made reference last night to our capacity to solidify the growth platform to the next level. Q3 in terms of financial operational results, and corporate readiness was clearly about preparations and taking our growth enterprise to the next level.

Overall, the third quarter was like preparing for an increase in altitude from 20,000 to 30,000 feet, which always comes with increased pressure. When a plane flies at 20,000 feet its generally in the middle of the clouds, it can be turbulent with less visibility.

During Q3, we completed all of the in-flight safety precautions, making sure the planes will perform as expected at 30,000 feet, the altitude in which we expected to fly out in 2021. Being above the clouds provides for a smoother ride and a much better view.

We're very pleased with a large and sizable rolling backlog announced in October from existing and net new clients, as well as the substantially upsize Bought Deal with high demand from both the U.S. and Canadian investors that closed last week.

This year has been both challenging and rewarding for our team that has shown resilience and agility during the global pandemic. While accelerating digitization and redefining our addressable growth markets.

We continue to deliver on what we said we will do. This includes significantly increasing productivity, adding new clients, expanding existing client volumes and launching new products.

We will speak to several of these deliverables and to how they've contributed to strong financial performance for this year so far, including gross margin expansion. We have solidified our growth platform for the next level by raising 15 million in new equity just last week, adding diversify new investors to the VIQ shareholders in United States and in Canada.

This was part of our upcoming listing on National Exchanges in Canada and the United States. Alexie will speak to the details of our first ever public offering rates, our plan user proceeds, and what's next in our capital markets journey.

Now I would like to speak to our results for the third quarter and the year-to-date periods. Most of you were expecting these results, given we updated our outlook and preannounced Q3 results at the end of October.

During this quarter, our revenue was $8.2 million, which increased 27% versus the prior year revenue of $6.5 million. The increase of $1.7 million included 2.7 million from acquisitions, and was partially offset by $1 million downward exposure of short-term COVID-19 shutdowns during the second and third quarter of 2020 on net organic growth.

Our third quarter gross profit margin was 60.4% of revenue versus 45% of revenue in the third quarter of 2019. Gross profit in 2020 was favorably impacted by $1.4 million in COVID-19 wage subsidies.

Our adjusted EBITDA for the quarter was $1.9 million and increased significantly compared to last year adjusted EBITDA of $500,000. The increase in adjusted EBITDA was driven by higher revenues due to the acquisitions and the productivity gains in transcription services, as well as the COVID-19 wage subsidies received in 2020.

This was partially offset by higher SG&A expenses, as the company continues to invest in innovative technology, artificial intelligence and scalability, while mitigating downward pressure on net organic revenue due to COVID-19 shutdowns than many of our customers were faced during the quarter. Likewise for the first nine months of the year, our revenue was $24 million, an increase of 26% compared to $19 million in revenue for the first nine months of last year.

The $5 million increase in revenue included $7.3 million related to acquisition and was partially offset by $2.3 million downward exposure from temporary COVID-19 shutdowns during the second and the third quarter. One item that is related to organic growth, but is included as growth in revenue for the acquired companies was the increased share of the wallet for acquired customers.

We did see grow for clients in verticals that were less impacted by COVID, such as media, conferencing and law enforcement. And we saw a decrease in volumes in legal courts and insurance sectors due to the temporary COVID shutdowns.

Overall, we still posted exceptional second and third quarters as decrease in two markets was offset by increases in the others. More than ever, the strategic equal segmentation of our revenue into four markets and three regions worldwide has really proven itself during COVID-19 partial shutdowns in terms of operational and financial resilience, making us somewhat recession proof.

Earlier COVID-19 restrictions, mainly in courts, law enforcement and insurance, briefly caused delays in customers’ migration in new rollouts. Rollouts have partially resumed, as COVID-19 restrictions are lifted, starting with Australia and now in the United Kingdom.

The company estimates that approximately $2.5 million to $3.4 million of previously planned 2020 revenues are delayed to 2021 due to COVID-19. Our trend with past quarters our year-to-date geography mix of revenue was 72% in United States, 26% in Australia, and a growing 2% in EMEA.

Our gross profit was $13.3 million year-to-date or 51.1% of revenue versus $8.4 million or 44.1% of revenue last year. In addition to efficiency gains in our revenue, our gross profit in 2020 was favorably impacted by $2.8 million in COVID-19 wage subsidies.

Please note that there are no wage subsidies anticipated for the fourth quarter. Our adjusted EBITDA was $4.2 million versus adjusted EBITDA of $1.2 million for the previous year.

The $3 million increase in adjusted EBITDA was driven by higher revenues and productivity gains in transcription services, as well as some of the subsidies received during the second and the third quarter and it was partially offset by higher SG&A expenses and downward pressure on organic growth due to the short-lived shutdowns. Now I would like to hand it over to Susan to speak to productivity gains and bolsters our growth platform for the next level.

Then Alexie will talk about the equity raise in our capital markets journey. Then I'll speak about the overall strategy.

And then we'll go into a Q&A. Susan?

Thanks Seb. As Sebastien stated we have delivered on several key initiatives this year.

First, was proving the productivity improvements of our technology, the migration and integration of our first three acquisitions was key, securely activating over 500 customers and over 550 transcriptionist to editors in roughly three months showed not only the quality of our technology in terms of ease of use but also the transparency of the client experience within the platform. These are both key to launching a new platform but also to changing the way we reshape with industry.

It is essential that we provide a platform that allows our key customers to experience the same levels of service that they have experienced with small custom operations. It is also critical to the transcriptionists that they're able to maintain their earnings per hour.

These standards not only drive long-term relationships, but lead to margin improvements and scale in our acquisition model. We can now activate clients and editors much faster than even last quarter with reduced time to normalize productivity.

The learnings from these migrations, combined with the depth of content gained in key sectors provide the foundation to accelerate productivity enhancements to our transcription workflows and to improve product delivery to customers, where the drive for faster and more accurate draft content is essential to their competitive positioning. Second, was validating the segments we serve see value in our end-to-end story.

We've received this validation and meaningful growth from some of our largest customers globally, not only in the current services that we deliver, but also in the number of products that we deliver to those customers. The sizable rolling backlog announced in October validates our strategy and positions us well for organic growth as we enter 2021.

While 2020 has been challenging for several of our segments, the overall growth from new named customers in all segments, as well as growth in new geographies, has offset most of those challenges. We are cautiously optimistic that even those markets that were constrained by COVID are beginning to rebound favorably, impacting the volumes on our services side, but also on the contracts for our capture technology.

We launched CapturePro On-the-Go in October and has already delivered two key customers in North America with prospects in all of our strategic geography. And finally, we are setting the stage to elevate our global brand by rebranding Spark & Cannon in Australia as VIQ Solutions for the Asia Pac region.

The brand unifies the collective strength of our teams and solidifies our stance as an industry leader, offering innovative technology, professional transcription services, and an unparalleled client experience. We have invested in acquisitions that helped us to support the marquee standards that we have established for VIQ.

In 2021, we will invest further in supporting the awareness of both the brand and attributes associated with VIQ Solutions, and our overall expansion strategy. We remain confident in the trends that we see in the performance of our technology and our people to execute against our plan and to deliver value to our customers, partners and the investment community.

Now over to you Alexie to give you an update on the financial strategy.

Thank you, Susan. Susan and Sebastien mentioned, we're accelerating our growth plan.

To support this growth plan, last week we completed a $15 million Bought Deal public offering. This resulted in issuance of 4.7 million shares at a price of CAD$4.25 or USD$3.24 per share.

Net of fees, we currently have approximately $17 million on hand as of November 30 to fund our growth plan. As we noted in our prospectus, we intend to use the proceeds of the offering to accelerate our technology a next level of AI directly tied to the ongoing increase in productivity gains and gross margins, invest in our sales infrastructure and to fund potential future acquisitions.

The fact that this was a Bought Deal is significant. It showed the high level of confidence the market has in VIQ Solutions and its prospects for future growth.

Following the announcement of the Bought Deal that was preceded by exceptional Q2 and Q3 results, the company is well positioned to aggressively pursue alternative financing options and potential listed on the TSX and NASDAQ. We're still in the early stage of our enterprise growth platform, to fly and operate at a higher altitude as Sebastien mentioned earlier.

As part of the process with OSC and with the assistance of our new audit firm KPMG, we worked with the regulators to significantly enhance our quarterly filings to match the high quality disclosures that are typical of our year end filings. We also added easy to understand tables for analysts and investors throughout our quarterly filings.

This allowed us to quickly obtain approval from the regulators for all prospectives and required that we file amended and restated disclosures to match the format normally included in our year end filings. It should be noted that the company's revenue and adjusted EBITDA remain unchanged.

We anticipate that these changes will contribute to a faster review process, as part of a potential listing so our U.S. National of Exchange next year.

Now, I'd like to provide you with some information about our outlook for 2020, which remained the same since our October 28 announcement other than to tighten our adjusted EBITDA range. We expect full year revenue to range between USD31 million to USD32 million, representing growth of approximately 24% to 27% versus the prior year.

Our full year gross margin should be between 50% and 55%. And as Sebastien mentioned, the company does not expect wage subsidies to impact gross margin in the fourth quarter.

Our full year adjusted EBITDA range has been tightened to between $4.4 and $4.5 million. We're on track to qualify for both the TSX later this year and in NASDAQ next year.

The regulator procedures have already been initiated. We have the fundamentals, included a stronger balance sheet and a track record, including the execution discipline, and financial strength behind us to prosper at that level.

Similar to how we have excelled on the TSXV and OTCQX debt markets in the U.S. Now I'd like to pass it back to Sebastien, who can speak to our overall long-term strategy.

And then we'll take your questions.

Thank you very much, Alexie. In conclusion, we continue our steady upward trajectory to 30,000 feet with progress on our long-term strategy to create shareholder value.

We respect our shareholder confidence in our plan, where we start as a growth stock and continue to elevate to a value stock. Our growth, both organic and to acquisition are entrenched in the use of technology and artificial intelligence to transform a very specific, antiquated end-to-end workflow in a very large addressable market that is clearly right for a digital modernization.

Just to restate what we've been saying all along this year. Our long-term strategic goals are number one, improve our revenue quality by transitioning towards recurring SaaS accounts, where VIQ industry specific solutions are delivered seamlessly, driving sticky top-line revenue and enabling multiple expansion.

Number two, generate double-digit organic growth annually by cross-selling a range of purpose-built software and documentation services to our existing client base, net new customers directly and to partners worldwide. These past two quarters have challenged some of our organic growth targets given COVID-19 restrictions.

Yet, the sizeable rolling backlog announced in October represents organic and substantial wins for VIQ, but we won't see that revenue until 2021. Number three, grow our client and talent base to strategic non-diluted acquisitions, which drive top-line growth and enable gross margin productivity gains on larger data volumes, enabling profitable scaling to $50 million and $100 million in revenue over the next couple of years.

Number four, continue increasing gross margin to 50%, 55% plus by year end and higher next year to our own IP and technology stack, and expanded AI specific tools that continue creating meaningful productivity gains. These solutions significantly differentiate VIQ from competitors by providing superior workflow, cybersecurity, and service quality.

We believe this long-term growth strategy have and will continue to drive shareholder value creation. And all of VIQ achievements are positioning us well for 2021 when we expect to continue generating significant top-line growth, and positive net income in earnings per share.

We look forward to keeping you informed of what we're achieving in 2020 and beyond. This concludes our formal updates.

Operator, please open the line for questions.

Thank you. So it seems to me, given you know where things are in 2020 and as reflected in your results, it seems that COVID might be having a near-term negative impact.

But I'm sort of wondering whether it also might not have a positive longer term impact in terms of, as so many businesses have been forced to move to addressing their business operations in a digital way. Are you seeing any, indications that longer term, this might ultimately actually help expand the addressable market in the longer term?

That's a great question Marla. And for the benefit for everybody else on this call, I did make reference to this - the last two quarters, including the impact of COVID-19, one of the favorable thing has been a drastic expansion of our addressable market.

I made reference in the script the part of the call today on redefining the addressable market. And that's exactly what we were referring to.

There is all kinds of new verticals that are starting to open up as businesses and some of our large agencies like ourselves have adjusted, and now they have a hybrid work environment, where everything now is being done virtually. But with that, comes a very, very significant pressure on that customer base Marla, to deliver high end, highly accurate, highly secure documentation, because now it's no longer just your standard evidence material.

We're talking about operational business meetings, we're talking about settlement claims meetings that used to be done in-person all being done remotely. And with that comes a tremendous amount of pressure for a faster turnaround on that absolute accurate delivery.

So Susan, you probably could add a little bit but you made reference Susan, about the first draft. So maybe this is a great way for you to kind of paint a picture for everybody on this call on where we're going with that first draft.

I think actually - well I think you're exactly right. First, we did experience a negative impact, when for example, the courts in Australia shutdown.

They've now rebounded, and while we know it was not lost revenue, it was delayed revenue, it certainly did negatively impact some of the results that we had in the second and the third quarters. But to your point, do we rebound stronger, absolutely, not only in terms of our expandable market.

So we know that there's going to be a percentage of the market that will recover from COVID with a much more cost constrained environment. We are announcing a first draft product that will allow the customers to be able to receive an unedited version of the document that is critical to our 2021 strategy.

We believe that our positioning to be able to be priced adaptive in 2021 because of our technologies it is also incredibly - more favorable than our competitors. But most important, is the influence that we're seeing of the requirement for high security digitization in all geographies, not just North America.

We've just been awarded a major contract in Africa. And we are highly competitive right now in a couple of bids.

In geographies where we've never played before, where emerging markets have made the decision that they have to change their infrastructure to be able to enhance - mobile courtrooms and mobile interrogation spaces. So I think that it not only solidifies our positioning in terms of the services that we're delivering through the Netscribe suite of services, but it also solidifies the end-to-end story that we tell because they want the security and the connectivity of the capture technologies included in the service delivery model.

Thank you for that. So, I think it seems to me what we're looking at is not just the potential for a vertical expansion, but also as you've talked about many times, and I think you remarked on earlier in the call in the scripted comments, gaining a greater share of spent with existing clients.

So can you talk a little bit about - what you've seen so far in the third quarter, and maybe earlier quarters in 2020? How you see that playing out over the next several quarters in terms of gaining share of spending with clients that are already on board?

That's a great question. We're all nodding our heads Marla, that's a great question.

And so kind of if I could bring it back quickly to the scripted portion of it. We've talked about wallet share expansion that we've seen drastically, particularly with our existing customer base, the Fortune 500 on the insurance and law enforcement, as well as media.

We've seen drastic expansion, and that was exactly what it was in reference to. So what we've done, like any other company, is I made reference to the fact that our four markets and the three major worldwide regions have really proven themselves in terms of resilience.

And I think in the context of COVID-19, in the context of what happened there that really overall offset, we posted the best two quarters in our history in the midst of the pandemic. So I think it speaks volumes for that.

And then a big part of what's driving that, the ability to kind of fall back into servicing our existing customer base is what Susan was referring to quality of the experience, the migration from being handled by a small company to a much larger company like VIQ. And the fact is, we've been able to retain all-that customer base.

And now what we're starting to see is commitments coming in from some of those Fortune 500 in the form of expanded contracts, more volumes, new divisions now that are starting to flow our way. And maybe Susan without mentioning the name of the customers, I think adding a bit of color from your perspective, but that has been absolutely fundamental to how this year we've been expanding from our existing customer base.

And how much of that is now starting to be reflected in our revenue, so Susan?

Yes I mean, I'll give you a couple of examples. We received a call a couple of weeks ago from one of our I mean as you know the legacy base of customers from VIQ in the courtroom footprint whether delivering software to capture technologies is extraordinary, right.

And the premise that we have always had is that that those customers will need transcription services. And they will need improved workflows regardless of whether they're outsourcing or whether they're in-sourcing that documentation.

And it's been validated, right. Like two weeks ago - we had a call from one of our largest U.S.

government customers that really doesn't want to be - they don't have the time and they certainly don't have the funding right now to be able to go through an extreme process where they're looking at replacing services, they want to enhance the services what they have with us so proving out our strategy. They have a - base product with us through the CapturePro technologies.

They now want us to work with critical vendors to integrate into their video conferencing systems to use that technology for courtroom capture in immigration situation. So that's one prime example of exactly the way this is playing out real-time and what we're seeing.

We are selling more services in the services industry in the insurance space, simply because we have capacity. Many of the smaller transcription companies have just not made it right.

There has been - when the volumes dropped, they didn't have the scale to manage through that downward trend. And they're also losing resources, because transcriptionists are coming from legacy technologies to become editors on our platform, because they believe that that's the emerging space that the industry is heading in.

So I think it's a two step to kind of answer Marla, I think it's one, that we have the integration of technologies that makes it less cumbersome and less expensive for very large customers to deploy our end-to-end solutions, because they are fully integrated when you buy them off the shelf. And the second is, our massive capacity allows us - to be able to manage through those peaks and valleys of volumes that affect many industries, like the insurance space.

Okay, thank you. And then my last question is a follow-up really, to what you just said, in terms of the engine solution and integration capabilities.

When you are working with a customer that requires some customized solutions - furlough solution, I'm guessing - but what is your comment that you retain the voice to VIQ that comes out of, coming up with a solution for one particular customer that you were saying like VIQ and [indiscernible] perhaps extrapolate it and use it for product launches or to tailor custom solutions for - our clients?

Yes, so let me go first Susan so the answer is yes, we are - like we are notoriously known for, if there is any enhancements with the discipline that we've now put in place. You can appreciate that we've got an expansive R&D roadmap that is being played out.

Everybody on this call is aware how much has been deployed on the technology side in the AI and that roadmap is several miles long. So we are going very carefully knock it down every one of those milestones.

And so, we're very aware Marla, if customization from one particular customer shall happen, then we have to embedded through that roadmap. And if we deem that it's appropriate, then we retain the IP, but we will incorporate on our roadmap.

We are notoriously good at this, which is always vet any customers requirement against our roadmap. Because we're fully aware, as a growing company, every dollar that goes against the technology has to be basically servicing and leverage the whole end-to-end platform between the capturing of the audio and video, as well as the documentation services and how we render those documentation back to the customer.

So the answer is yes and but we have a very, very clear discipline process along the way, Susan?

I mean, I think you nailed it Seb, you know if you look at our R&D roadmap from four years ago till today, we had probably 50% of the deals that we did required significant levels of customization on the product that we delivered to the customers. I would say that that is pivoted to probably 90% off the shelf.

We are rigorous in the way that we evaluate the commercialization of any enhancement that is a customized feature for the customer. We have to believe that our roadmap serves the best solution for the industries we provide.

But that's not to say that for a huge court infrastructure in Australia that we're not going to have to do some level of customization and we certainly will. I will say from our largest customer that we're in the middle of deploying right now, there is a reasonable amount of customization that is required for that.

But I would say 97% of what we are building for that particular court will make us competitive in every other deal that we sell in 2021. So it is a discipline it is a rigor, but it is absolutely a position we’re prepared to take whether it is to say yes, we will or more importantly no, we won't.

Hi this is Mark, thank you so much for taking my question. So in the press release, you mentioned an acceleration of the productivity gains this quarter.

So I just have two part question if I may, one is a - what are some of the drivers of this acceleration and maybe two - in fact we are thinking towards a future M&A plan? Thank you.

Now Mark, pleasure to meet you from JMP, great question and obviously, there's two key words that really stood up when you were asking that question. The number one is data - what we have not recorded on yet.

But Susan and I have been - made it very clear, with the 500 plus migrations, from the offline world to the online world in the cloud into NetScribe, then the ongoing, basically training to cross train those traditional transcriptionists to become proficient. And as editors in the cloud, you can appreciate the amount of data that we now have access to.

So a big part of our strength moving forward, is how do we start harvesting? How do we start leveraging that amount of data that is now flowing in from all our Fortune 500 on insurance, and media, all our court customers, all our law enforcement customers.

So we now starting to add a store, if I could summarize it, and that store has gone from nothing to a massive, unique store for the industry that we serve. But with that comes our competitive advantage and how much the R&D is now all about taking NetScribe aiAssist and the capturing product to the next level by starting to leverage that massive data set that comes with it in order to reroute the workflow internally for better efficiencies, in order to basically analyze and diagnose that data early on, for maximum processing in the cloud.

So it's all around that and without going into all the technical aspect of our roadmap. The prospect is, as quite a bit of details on some of those high level milestones on that.

And I think that's really, from our perspective, what really is the revolution that is going on behind the scene today and tomorrow, we'll be talking about software. But moving forward, you're going to hear Alexie, Susan and I talking to you Mark more and more about the data that comes with it.

And how much if you look at the R&D roadmap, when we emerge out of November of 2021. Then you will see that a lot of the components of what we're going to be walking through the investment community will be about how that data is really starting to lift the gross margin from 60% to 65% to 70% over time, it's the combination of the software, the human expertise, but how the data gets used early on in the process.

Susan?

Yes, I'll go back to a much simpler answer to that question, which is relative to the productivity announcements that we made. It is not complicated, right?

It is how - the baseline benchmark is how much productivity can a transcriptionist do moving to an editor in an hour or how long does it produce to take a minute of audio content in terms of total productivity time. And we're watching that trend go down and go down rapidly.

We know that it will plateau it's probably going to be a plateau that you hit at about 10 weeks of productivity. But the way that we gauge our success is not only when we get to that plateau, but how quickly we can get to it.

We know for sure that we have to rotate a new kind of editor and that's great news because historically in the transcription industry, you could not hire an English major from the university. You had to hire somebody that had actual relevant transcription industry experience.

We are now just as successful bringing a capable editor in from off the street with great computer and typing skills. We can get them to that plateau just as much as a seasoned transcriptionist.

And why is that meaningful, because the world's population of court reporters and of seasoned transcriptionists is going down. So we're building this silo of people that we can turn the knob and get them really quickly, to be highly effective and to earn what we consider to be the target wage.

So that's the first piece. What does that mean in terms of acquisitions?

Well, kind of divide that into two parts, it means that we have a very good understanding of where we can get a legacy transcription services organization in terms of target gross margins. And in what period now, because we've validated what the productivity enhancements should be.

And second, and maybe even more important to that, we also know from a pricing perspective, how we can respond to RFPs, relative to the cost structure that we now have going into a bidding process versus just estimating what the productivity rates will be. So it's not only - productivity is not only important in terms of servicing gross margin.

It’s very important in terms of the way we look at acquisitions, and even more important in the way that we respond to major global RFPs.

That was a great question Mark.

Yes, and just maybe last one from me so maybe as you look at not only 2021, but through the next five years. So how do you envision the future of the VIQ platform, and maybe why you most excited about for the future?

So as far as the evolution of the platform obviously, we've taken it from an offline to an online world. And that was the initial start on that platform.

But where we're going with this Mark, it's that combination of basically human editing on the back end, high end, high efficient computing power, using the cloud and the cybersecurity. The software required for the capturing of the audio and video, and then the AI involved in not only ingesting the data, analysing that data.

And then make a determination on what's the best workflow, which best tools to use for speech to text and all of that. So that's really where we're going, it's all related to pushing that productivity that Susan was referring to the next level.

And if you kind of map out our R&D roadmap, particularly on the back of the offering, and the Bought Deal that we closed against the productivity improvement. Every single feature that is coming in from the labs into the commercial version of NetScribe aiAssist and CapturePro in the future is all related to that.

So, Susan I don’t know if you've got any other additional comments you want to make on that question?

No, I would just say if you look at the R&D efforts that we will be using for driving the new funds that we were raising. I would say it's wrapped around three core areas.

One is precision, precision of what we do with the audio capture that we get in terms of the speech engine that it sent to in terms of the editing tools that it sent to in terms of the way we look at analyzing the content of the audio file. And in the continuous improvement loop around that - around the best use of making that document as good as we can before it gets sent to a transcriptionists and making sure that the transcriptionists is best suited to be to be matched with the audio document.

Then the second phase of that I would say would be in terms of making sure that the unedited document is usable to multiple addressable markets, beyond what we know today. Meaning that we believe that if we look at the way that we typed today for you know all of the content that is coming from the hill for our media customers, being able to expand that not just from the capital, appropriations hearings, but also into expansion of the EPA, allowing that is critical, but it requires a very, very solid first draft.

So first is precision, second is expansion of addressable market, and third, is making the content we deliver to the customers usable for additional repurposing. So those are the three core areas that I would say that will evolve the platform as we look to 2022.

When I think about cash use for 2021 following the raise you have about $17 million on the balance sheet. What do you need for capital projects and just running the business?

And I guess I'm asking is what about $17 million is actually available for M&A?

Yes, Scott that's a great question. And I know Alexie will clarify some of that.

But overall, if you take a look at the prospectus, and what we went through with the high quality investors that came in. Basically roughly about, I think it was one-third was related to sales and marketing, and the ability to scale to the next level.

There was one-third that was related to taking the R&D roadmap to an accelerated play. Now that we've proven the base version, and the productivity gains, there's a clear, clear realization that we want now to accelerate everything that we've been talking about precision, the unedited draft, and the leveraging of the content.

So we know how to do it. And now it will be accelerated on the back of that.

And there's basically a significant component of that Bought Deal that was basically set aside for some of the strategic LOIs that we have in place now with some of our target acquisition so, Alexie over to you for some clarification.

Yes, you nailed it Seb and great question Scott. And as Seb mentioned, we have identified in our prospectus the use of funds for this raise.

And as Seb said - portion of it is going to go to invest in our sales infrastructure, and to fund the development of service offering by advance in our R&D acceleration our R&D so we can maintain competitiveness and be the lead in the space. And thirdly, the most of the funds will be used to fund potential future acquisitions and these acquisitions that we deem to be accretive.

And we have a very discipline approach as to the way we approach acquisition, and we will continue on that path.

Second one I'm curious, when you have conversation - when your sales team has conversations with potential customers around budgets for 2021, are the conversations meaningfully different than what they were a year ago, given COVID. Any other additional restrictions that are in place or additional challenges when you go to sell the business potentially to customers?

Scott, that's an outstanding, we're all basically acknowledging like this is what we do all day long is. So there's a couple of data points that I think need to come up with is, I'm going to allow Susan to give you more colors, but that first draft those three precision unedited version, and making use of the content that were delivered to a next level, all of this is in the context.

There on the tremendous amount of pressure to maintain the accuracy. But to basically cut down the turnaround time and that is starting to add an implication across the entire organization because out of COVID-19 lockdowns, everybody is into a hybrid environment.

So we're no longer talking about just evidence data in the form of an audio and video recording between an adjuster or a claim on an insurance or an interrogation room in the case of insurance. We're now looking at Board meetings.

We're now looking at operational meetings. We're now looking at government's proceedings taking place.

And that documentation in a post COVID economy basically takes a whole other level of meaning on that. And we're starting to see that being reflected in every single discussion we're having with our customers, whether or not it's an existing customers.

Looking to expand their existing volumes with us or adding a more modern way to capture the audio and video or in some cases the RFP, Susan over to you on that one?

I would say the answer is absolutely and - it varies by sector. If you look at our media business, it's had no impact at all those discussions and conversations are absolutely consistent with what they were pre and post COVID.

That business is much more influenced by the political environment in the United States right now. And the expansion of the footprint because of the new administration also expands that business model.

The courts have absolutely been impacted in second quarter and third quarter. It - was just everything was shutdown.

It wasn't that we were having different discussions with them. We weren't having any discussions with them.

Now we're seeing and acceleration because people want to if they had bids on the table, they want to use that money before budgets change in 2021. But they recognize that allocating budget toward a more flexible model that will represent the way the courts will behave in the post COVID environment is stuff that they have to invest in.

If you look at insurance, I don't think it's really changed very much. I will say on the law enforcement side, we are seeing a lack of clarity around where the budgets will be.

We feel that we are very well positioned because as outsourcing is always a less expensive option than in-sourcing. So as they look at headcount reductions within the law enforcement agencies, we feel that we're very well positioned to be able to pick up that work.

And by the way, those people we have a very good outsourced model where we will actually pick up legacy employees, train them on how to become seasoned editors and allow that to be a bridge for the law enforcement agencies to cross so that they don't feel so exposed when they're moving headcount reductions into their budgets for 2021 and 2022.

Thanks for taking my question and congrats on all the progress and it's been a challenging year for everyone. So first off, I was just curious if you could comment a little further about your sales strategy.

What are you guys thinking in terms of direct sales versus channel partners? And maybe if you could give some colors the large contract that you signed - that you announced just a few weeks back and how that came onboard?

No Daniel, it's a very important aspect of what we've been working on. So I’ll let Susan answer, there is really only two data points that I would like to add to start with.

One is by region, it does change by region. And I think Susan will walk you through that.

And also that as we're now growing upscale, in terms of dollar value of those contracts. And I think the last basically time where we announced the rolling backlog in the $25 million plus.

It's all on the back of existing customers and net new customers coming in from that perspective. But as we continue to do upscale, with larger and larger end-to-end offering, the partnership model becomes absolutely crucial so, Susan over to you for that answer.

Sure, in 2021 as it was a very foundation building year, we invested in infrastructure around supporting a new kind of partner distribution model. So we reorganized the contracts, we have changed the criteria for what a partner would be.

We have standardized more of roles and responsibilities relative to compensation structures, such that in 2021, our goal is where we were at about 20% of our revenues coming from indirect sales, you'll see that pivoting almost in the reverse, as we get to the end of 2021. So 2021, we'll start out at about 80% direct, 20% indirect as we exit, we would like those numbers to be more 80% indirect, 20% direct.

We have assigned in each of the regions, business development managers that are specifically tasked with growing distribution relationships and keeping and preserving them in emerging markets in particular not so much in North America. And as it relates to the new contract, I'm hoping that we will be able to have an announcement in the next couple of weeks that will make that much more public.

But you know as with deals like that, they are typically very RFP driven so it was an award. And we believe that we were awarded not only because of our capability to manage a customer that size, which by the way is not inconsequential.

It certainly distinguishes us from most of the others in the geographies that we play, but also in our ability to have connectivity into our legacy technologies, which that customer is also a purchaser of the capture technologies in addition to the services.

So digging a little deeper, that's quite a bit between direct and distribution. I'm sure there are some drivers behind that.

Are there any key partners that you deal or maybe key types of partners that are accelerating that shift?

So there is a…

Yes.

Go ahead Susan.

I’m sorry, go ahead Seb. No, I was just going to say yes, there are I mean, and they vary by segment.

So I will say, part of that number, part of that flip, there is also a little misleading in that it has a lot to do with our pipeline, right. The partners have brought us a lot of pipeline for legacy products that we've just matured.

And because of some of the downward trends in the court industry, you're seeing and uplift in what we will do over the course of 2021. And we're also going to announce some very important key strategic partnerships that will expand the portfolio in 2021.

So to say that it is a complete distribution model is kind of misleading. It is revenues that will come from partnerships and distribution, in addition to what we consider traditional VARs and integrators.

There are new kinds of service models that we're exploring with partners that are not what have been traditional partners in the past. And a lot of that just has to do with where the industry is moving post COVID.

Daniel, does that answer your question?

I think we're going to have to move to the next question.

Okay go ahead.

And final, sorry next and final.

I'll just be brief here. But I did want to just maybe get your thoughts on the M&A pipeline, if there's certain regional or geographic areas that you're focused on in the short term.

And what do you feel, the runway capacity for either number of deals or size of deals, kind of in the next 12 to 24 months might be?

That's a great question, Jim. And from what we said before is, there's really two data points that we like to consider.

I think we've got a very strict metrics, in terms of where does the target company has to be in terms of enterprise value, as well as ability to be migrated into our platform, and then the uplift on the gross margin. So I think we've well defined that.

The current pipeline has expanded drastically, in the context of COVID-19. As many of you could appreciate as Susan referred to, a lot of the smaller companies, between $2 million and $5 million in revenue.

If you were not diversify, and you add all your eggs in one vertical, the last basically nine months, has been pretty a bumpy road from that perspective. So I think that has basically allow us to open up quite a bit, the pipeline.

And then the other thing, Jim, that we like to focus on, is we tend to add targets and geographies where we already have a footprint, both in terms of operational capacity, but also on the front end, capturing technology. So with that, obviously that's what I was mentioning.

Obviously - United States being 72%, a growing number in Australia, but there is also I made reference to a growing percentage of our revenue in the EMEA. And if you look at that whole region, from the U.K.

all the way to Africa, the Middle East, that is growing quite a bit as well. So Susan, from your perspective on that, but those are three data points Jim, that from my end we have institutionalized internally.

I think that we have an obligation to what - you've heard me say this before, right. We will acquire customers, companies, where we can have a favorable impact on the customer experience and on the gross margin of the organization we acquire.

That we now know that we are going - we have the ability to execute not only in North America, but we've built a leadership team that will allow for a growth model globally. And so you will see targets that are larger than we have historically made that are - and certainly more global.

You may also see us looking at non-traditional transcription companies and looking more toward technology companies that may expand our product portfolio more rapidly. So we're very bullish, but I think what you will see less of is, a North American focus and more of a global focus.

Well, thank you for joining us today. It's been a very high quality dialogue, and very high quality Q&A.

And we look forward to speak with you all again, actually next spring, when we expect to report our year-end results. Until then, be safe and wishing you and your family a safe holiday season.

Thank you.