A weaker than expected quarter has Paradigm Capital analyst Daniel Rosenberg revising his analysis of Artificial Intelligence company VIQ Solutions (VIQ Solutions Stock Quote, Chart, News, Analysts, Financials TSX:VQS). Although he maintained a “Buy” rating in a Thursday report to clients, Rosenberg lowered his target price from $6.50/share to $5.75/share, reflecting a projected one-year return of 179.1 per cent. Mississauga-based VIQ Solutions operates as a technology and service platform provider for digital evidence capture, retrieval and content management in two segments: Technology and Related Revenue (develops, distributes, and licenses computer-based digital solutions based on its technology) and Technology Services (provides recording and transcription services), with operations in Australia, the United States, the United Kingdom, Canada and internationally. The company's AI-driven digital voice and video capture technology is aimed at regulated and compliance-heavy sectors like law enforcement, legal, insurance and court systems. Rosenberg’s updated analysis comes after VIQ released its fourth quarter financial results for 2021, which he counted as lower than expected on account of regulatory delays in closing its acquisition of Auscript, along with prolonged lockdowns in Australia. VIQ’s financials for the fourth quarter were headlined by $7.5 million in revenue (all report figures are in US dollars) for a 3.4 per cent year-over-year decrease and a miss on the $11 million estimate set by Paradigm Capital and the $12.3 million consensus expectation, with an impact of approximately $2 million stemming from the Auscript delays. Meanwhile, the company reported gross profit of $3.3 million in the quarter to increase its margin from 38.1 per cent to 43.7 per cent, though it missed on the PCI estimate of $5.5 million and a 50 per cent margin, as well as the consensus expectation of $5.9 million and a 48 per cent margin. VIQ also had a slight miss on its adjusted EBITDA, reporting a $1.8 million loss to come in behind the Paradigm Capital expectation of a $100,000 loss, as well as the consensus estimate of $200,000 in positive adjusted EBITDA. According to Rosenberg, management is currently focusing on resuming organic growth and profitability in the coming quarters despite having an active and robust acquisition pipeline to go with $10.6 million in cash in the bank, paired with $13.1 million in debt. “VIQ advanced its business strategy in 2021 and made significant progress in overall operational performance during a challenging year given the ebb and flow of COVID-19 recovery in our operating geographies, and the completion of our largest acquisition to date in late December 2021,” said Sebastien Paré, VIQ Chief Executive Officer in the company’s March 30 press release. “We are now poised to scale profitability to the next level.” With the fourth quarter financials now accounted for, Rosenberg has made a few changes to his financial projections, particularly in the 2022 fiscal year. “We are conservative with our forecast in light of management’s guidance, as we would prefer to see signs of organic growth before becoming more aggressive with our expectations,” Rosenberg said. After posting 2021 year-end revenue of $31 million, Rosenberg has raised his 2022 projection from $44.5 million to $47.6 million for a year-over-year increase of 53.5 per cent while coming in ahead of the consensus estimate of $45 million. Looking ahead to 2023, Rosenberg has not published a projection as of yet, though the consensus forecasts $58.5 million for a 33.3 per cent year-over-year increase. From a valuation perspective, Rosenberg forecasts the company’s EV/Sales multiple for 2022 to be 1.3x, in line with the consensus projection of 1.4x and below the projected peer group average of 5x. Rosenberg raised his gross profit expectation from $23.7 million to $24.1 million, though the implied gross margin decreases from 53.3 per cent to 50.8 per cent, slightly behind the implied margin of 51.3 per cent from the consensus projection of $23.1 million in gross profit. By contrast, Rosenberg’s adjusted EBITDA projection goes in the opposite direction, dropping from an estimated $3.8 million to $1.8 million in 2022 and reducing the implied adjusted EBITDA margin from nine per cent to 3.7 per cent, though it still represents a positive turn after a $5 million loss in 2021. In terms of valuation, Rosenberg forecasts the company’s EV/EBITDA multiple to be 35.2x in 2022, though the consensus is much more optimistic with a 20x projection for 2022 and 8x projection in 2023, with both figures coming in below the peer group averages of 34.3x for 2022 and 26.2x in 2023. VIQ’s stock value has dropped by 69.3 per cent over the last 12 months, with a 77.4 per cent decrease since hitting its 52-week high of $9/share on July 28. More recently, the stock’s value has dropped 27.7 per cent since the start of 2022, punctuated by its present price of $2.03/share, which represents a 52-week low for the company.