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Good day, ladies and gentlemen. Today, we are hosting a conference call to discuss the 2023 second quarter financial results for VIQ Solutions Inc. Currently, all participants are in a listen-only mode. [Operator Instructions] Your host for today is Audrey Liu, Corporate Finance Controller for VIQ. Please go ahead.
Thank you. Good morning, everyone, and welcome to VIQ Solutions 2023 Second Quarter 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 on sec.gov. As a reminder, all dollar amounts are in US dollars unless otherwise stated.
With us today, we have Sebastien Pare, CEO; Susan Sumner, President and COO; and Sandy Keung, VP, Finance of VIQ. They will be available for questions following their prepared remarks.
I will now turn the call over to Sebastien Pare to begin. Sebastien?
Thank you, Audrey. Welcome, everyone, to our second quarter of 2023 earnings call. I'll provide some high-level remarks on our results, then I'll hand it over to Susan, who will discuss our operating results. Unfortunately, Alexie Edwards, our CFO, is not able to attend the call today as he is attending a personal matter. Sandy Keung, VP of Finance, will discuss the financial results. We'll then open up for questions.
As announced in July, we secured $1 million draw from the Beedie investment loan facility initiated in January. As a result of the productivity gains realized by the rollout of our AI-powered workflow technology in the United States and in the UK, the draw is an important part of our restructuring, which is expected to yield between $2 million and $2.5 million in reduced expenses over the next 12 months. The planned restructuring is scheduled to be substantially completed by December 31, 2023.
Following the $1 million draw, we successfully closed on an oversubscribed non-broker private placement of $1.8 million. While we plan to bring back positive EBITDA in the second half of 2023, the placement was an important part of our AI acceleration to further expand our competitiveness and competitive lead in our domain-specific AI models for the verticals and the region in which we operate.
As of June 30, we set a record for the net new organic bookings of $8.9 million in the last 12 months. Many of these new larger contracts are taking longer to ramp up than before COVID due to project and IT capacity within Fortune 500 companies and many governmental agencies. These delays negatively impacted Q3 revenue -- Q2 revenue, but we're seeing increased volumes in June and in July. The organic wins validate that we've got the right offering at the right time for our industry segments. The agencies we serve are evolving rapidly towards cloud workflow, AI and SaaS solutions.
The private placement will accelerate the commercialization of the AI models to further strengthen accuracy and usability FirstDraft and continue to increase margins. Our winning track record for SaaS offering with new and existing clients is directly tied to the usability and accuracy of the AI-generated draft documents. Our FirstDraft and AI workflow derive their value from the domain-specific AI models that we've developed, which further improves gross margin.
AI is no longer in the hands of a few mega caps with billions in revenue and unlimited cash balances. Access to AI has been democratized in 2023. AI is going broader and deeper into specific industry applications right for automation. More flexible, smaller and mid-cap companies with deep reach into specific global industries are driving commercial AI adoption. VIQ is one of them. The change to the Queensland contract, as previously disclosed, continue to negatively impact some of our key metrics when compared to prior quarters. Decreases in revenue and gross margin are largely due to the contract changes. In fact, normalized Q2 results, when factoring the new Queensland contract and foreign exchange rates, were up by 3% compared to Q2 2022.
We see tailwinds from improved business optimism and increased interest in applying VIQ Solutions to address business needs [or either a lengthening plan for main cycle] (ph). As of our top 20 clients are trending higher in volume compared to same period of last year. We're seeing expansion in our insurance client base in July, and the backlog in law enforcement from Q2 has been clear.
During Q2, we continued to make great strides in our transition to SaaS. We grew our partner ecosystem in the United States and in Europe. We expanded our pipeline, and we won several new contracts, which will make their way into our disclosures in the coming months.
I'll now pass it over to Susan to discuss some of our operating results in greater detail. Susan?
Thank you, Seb. During the quarter, we continued to see stabilization of the Queensland contract, growth in new client contracts in Australia, and the beginning of transcription services volume for two large insurance companies booked in Q1 of 2023. We have also started the critical migrations of our Australian client base. This migration will span 2023 and early 2024. The scope of this migration is fast, including the largest court system in Australia. While we developed the highly complex requirements to transform court workflows over three years ago, the Auscript acquisition helped us to further refine the requirements to create our highly effective technology.
In Q2, we began delivering on our commitment to drive margin improvement from this client base, and the results we see in terms of productivity enhancements are the highest of any segment we have migrated. While this is not without challenge or risk with our highly constrained capacity, we believe that taking on this challenge now reduces longer-term exposure in this critical market. Our teams are very excited to bring this new technology to this segment.
After a successful trial, one of the largest insurance companies made the decision not only to pivot to utilizing FirstDraft technology to support the recorded statements, but they also committed to sole-source this contract to VIQ. This is a net new customer for VIQ. This serves as validation of the usability of our technology. When business requirements mandate a professionally edited transcript, this client will purchase additional services for us.
We began testing FirstDraft in a multi-language environment and expect to deliver Spanish to Spanish, Spanish to English, German to German, and German to English, French to French, and French to English, Dutch to Dutch, and Dutch to English, and Swahili to Swahili, and Swahili to English within this calendar year. This will also include languages in mixed language use as well. We will also be localizing NetScribe as this expansion continues.
We announced two patent applications that augment our speech engine-agnostic workflows, improving documentation accuracy and usability of documentation. Both workflows utilize DSLM, domain-specific language models, to improve the quality of the draft transcript. DSLM uses vast databases to unleash a new task-specific model that is trained on knowledge within large language models. It leverages knowledge learned during the documentation editing process to improve its performance, resulting in increased efficiency and even greater usability of our draft documents.
The accuracy and usability of FirstDraft is expected to increase and become even more competitive when enhanced with a series of extra training routes and our AI assisted workflow, resulting in continuously trained VIQ DSLM. Fewer edits equal greater efficiency and higher productivity and more capacity for a turnaround of orders, time savings and cost reductions. Security is a requirement that is top of mind for all of our clients. And as such, security is the first design parameter that we consider when our products and features are deployed. We are proud to have been selected as the 2023 Fortress Cyber Security winner in the Data Protection category.
The court reporter shortage continues to plague the US courts. Our new partnership with JAVS, a global provider of court recording and AV services to courtrooms, will drive the expansion of VIQ's technologies into courtrooms to provide automated draft transcripts of courtroom proceedings. This will save legal and professional time and improve accessibility of all information for all interested parties. By combining JAVS expertise and recording and AV support with our advanced transcription workflow technology powered by AI, we can provide a powerful solution that transforms the user experience and enhances courtroom efficiency.
We remain focused on stabilizing capacity while aggressively deploying NetScribe globally to recognize the margin expansion that we have seen in the US. This will allow us to improve gross profit and create a more efficient production environment to expand and manage capacity. We plan to utilize global resourcing where allowed by our clients via our secure platform to drive incremental volumes and margin expansion.
I will now pass the call over to Sandy to discuss our financial results in greater detail as well as the cost containment initiatives and related impacts on our cash. Sandy?
Thank you, Susan. Let me recap a few of our second quarter 2023 financial highlights for you. Our revenue was $10.5 million, a decrease of $1.8 million or 15% in the same period of the prior year. The decrease was primarily due to the expected contractual change in the Queensland contract. Normalized for the Queensland effect and foreign exchange, our revenue growth for the second quarter would have been up by $400,000 or 3.6% in comparison to the same period last year.
Our gross profit was $4.6 million or 41% of revenue compared to 49.3% of revenue in the same period of the prior year. The decrease in gross margin percentage was primarily due to the change in the Queensland contract and foreign exchange. Normalized for the Queensland contract and foreign exchange, our gross margin growth for the second quarter would have been a 0.7% increase in comparison to the same period last year. Our net loss was $3.6 million or $0.10 per diluted share versus a net loss of $3.2 million or $0.11 per diluted share last year.
And finally, our adjusted EBITDA was negative $0.9 million versus negative adjusted EBITDA of $0.7 million in the same period last year. The items that impacted our adjusted EBITDA included delays in ramping up some of our largest new insurance and disposition wins from earlier in the year, decreased gross profit, as previously mentioned, partially offset by decreased selling and administrative expenses, primarily due to lower insurance premiums, reduction in IT-related costs because of system integrations and lower headcount-related costs due to organizational restructuring.
As of June 30, 2023, we had $1.8 million in cash. In July 2023, we drew on our debt facility, which will be utilized as part of the optimization of our workforce and for working capital. We also recently completed a private placement offering to fund domain-specific AI models, product development and general working capital to catalyze the next stage of our growth. We believe that ongoing operations, working capital and associated cash flows, in addition to our cash resources, provide sufficient liquidity to support our ongoing business operation and satisfy our obligation as they become due for at least the next 12 months.
Excluding the impact of the Queensland contract change and foreign exchange, Q2 results indicate a trend towards higher volumes and an accelerated adoption of vertical AI-based workflow. One of our key indicators is the health of our top 20 accounts. After a tough cycle for the pandemic and Great Resignation, our customers are back on their feet and processing again to normal cadence. Volumes are all trending higher than last year among these top 20 customers. We are looking forward to activating and accelerating the ramp-up of clients to convert the current $8.9 million bookings to revenue as we continue to welcome significant new wins.
Our solid net new bookings, combined with the planned restructuring and migration in Australia, supports a clear path to return to adjusted EBITDA profitability by end of the year.
Now I'd like to hand it over to the operator for our Q&A session.
[Operator Instructions] We do have a question from the line of Brian Kinstlinger from Alliance Global Partners. Please go ahead.
Hey, guys. Thanks for taking my questions. I guess one of the questions would be help to clarify is March is a seasonally weak quarter. Obviously, June should be stronger. And while it was a little bit, even if you're not onboarding contracts, I would assume the run rate of revenue is stronger than -- 5% more than the March quarter. So take us through the puts and takes. Is there just less volume? Did some contracts fall off? I'm just trying to understand comparing March to June on seasonality.
Hey, Seb, do you want me to take that one?
Yeah, go ahead, Susan.
Yeah. Brian, seasonality that we're used to in the United States is a little different. Q2 is [wrought] (ph) with some challenges in terms of seasonality, particularly in June in Australia where they begin the court shutdowns at the end of the month, and that continues into the first month of July. You also have in April, all of the holidays that are associated with Easter. So June has a lot of public holidays. They also had several, what I would call, unexpected events within Australia that impacted the run rate there as well. As an example, there was a new Supreme Court Justice that was appointed in Australia, which caused the courts to shut down for a three-day recess while he was brought into office. So it was a combination of the scheduled court shutdowns, along with a couple of unexpected recesses within the courts in Australia that had major impacts on June.
So notwithstanding new contracts starting, which I'd love to hear about, have they actually started…
Yeah.
…that $8.9 million in bookings? As you think about that portfolio of contracts that you have in the June quarter, are those going to produce more revenue in the second half of the year or is your ability to generate more revenue dependent only on new contracts ramping?
The answer is yes to both. We are accelerating growth from current customers, and we -- to go back to one of your first questions, we have not lost any customers. All of our top 20 accounts, which represent a very high percentage of our overall revenue, are trending ahead of last year. Capacity constraints that bled into Q2 restricted our ability to expand, but there is more demand, certainly from our clients than we were able to take in Q2. As that capacity has been resolved, you'll see that acceleration in Q3 and Q4 of the current customer base.
In terms of the new contracts, it was -- they both have -- the major contracts have all started. The unfortunate thing about the two very large ones is that project management on the part of the customer, not on our ability to accelerate those ramps, has been significantly slower than we had hoped. It is -- they are ramping, but they are ramping at a much more slower pace than we had anticipated. But again, every day, it gets better. And we believe that where we thought we would be at the end of Q2, we’ll probably end at the end of Q4 in terms of the acceleration of those ramps, but it is steady as she goes.
Yeah. Some of those contracts, Brian, are fairly large, and they involve obviously a number of large regions. So that process took a little bit longer than expected. But at this point, as of end of June and then obviously through July, now they're all ramping according to the initial schedule.
Okay. Thank you.
Thank you, Brian.
Thank you for joining our call today. If there are any additional questions, consistent with the company's practice, please reach out directly to arrange one-on-ones. This now concludes our conference call. You may disconnect.
Thank you.