RDVT - Earnings call transcript Q2 2022

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Operator

Good day, ladies and gentlemen, and welcome to Red Violet's Second Quarter 2022 Earnings Conference Call. At this time all aprticipants’ are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Camilo Ramirez, Vice President, Finance and Investor Relations. ahead. go Please

Camilo Ramirez

Officer; welcome. discuss and me for us Chief joining is Financial our Good Officer. second Thank quarter to Executive and Chairman our Dubner, With Dan XXXX today MacLachlan, Derek Chief afternoon, our you and financial today results.

will be comments and call this will call on the following a webcast and live by A on To from is Dan, replay our event that today website, our please access Our session. remind I you Derek the call the followed recorded. www.redviolet.com. of page question-and-answer visit available would begin with like to website. Investors our being webcast,

stated statements begin, by safe harbor covered certain undertakes would materially statements The with I could company Securities differ advise due Actual to provisions this provided to information call. of risks we the on from the and management to forward-looking listeners results implied associated Reform conference discussed this no XXXX. Private Act the of update that forward-looking uncertainties those under Before by during information Litigation our the business. like are obligation call company's or

of discussion business, encourage filings uncertainties Form on to XX-Qs. associated risks with subsequent I including company's and Red with recent review Violet's the Exchange Securities report annual and you the Commission, a most For the XX-K and

press EBITDA earlier EBITDA to adjusted non-GAAP in comparable related measures earnings release adjusted to directly financial and adjusted Reconciliations non-GAAP information margin, present today. financial are the GAAP call, we adjusted certain issued provided most may During gross profit, of the their gross measures financial margin. these

today. their amounts financial and that, and metrics I in Chairman pleased these be derived introduce certain earnings be issued supplemental addition, to am metrics In also can Derek discussed necessarily earlier Dubner. Violet's are release not press may Executive definitions Red the Chief found With from Officer, underlying any statement that and

Derek Dubner

strong discuss to across us second quarter demand our our thank our fraud the Good a for second you afternoon, by today you, for XXXX. and Camilo. and We driven results identity Thank solid joining verticals. delivered of diverse quarter, solutions

economic positioning secular While headwinds marketing our strong. whole some in in as as about vertical, the our for estate a feel we presented our business confident the the real tailwinds remains volatility quarter

We view we is business road deep state executing and are upon product is always and think map, ever business and as sales a has quarter-by-quarter, we just about that importantly, not Most the it a our as been. our long-term as regularly with pipeline converting. robust healthy

technology base platform solutions, in cash operational space, our diverse flow. producing quarter. the With cloud-native that, adjusted a to the us customer and leverage innovative let leading solid With turn and EBITDA strong

XX%, down to quarter were XXXX. from flow in period XX% million, Adjusted was in prior million, revenue year X% for XX, $XX.X at XX% the points was the from period Cash EBITDA million. up to same a a second operations X for Services For up the $X.X a revenue in gross quarter, EBITDA million quarter, Adjusted X% $X.X $XX.X revenue June million. over XX% profit, equivalents quarter, the margin adjusted million Platform same $X.X record cash to from and compared increased ago. resulting year. the of prior for was XXXX. for percentage year. XX% $X.X generated second produced We quarter compared record the margin $XX.X the million year. We a in prior total million increase to in was $X.X generating cash

first our compensation quarter the We this members XXXX. that flow are expense of in full of our first pleased given especially with cash associated team added our strong adjusted generation, initiative with EBITDA hiring and XX was quarter

ending the surpassing at to XXX,XXX. Associations quarter, by grew base now FOREWARN. X,XXX X,XXX during Our second FOREWARN use customer added customers. IDI REALTOR billable second are the XXX users quarter, customers quarter Notably, first XXX contracted from the sequentially

of We in last have changing wages months adapt would including on a rate and business first More Mindful of continued maintain in the any, businesses what estate. conditions across unemployment to for solution estate Reserve solutions on there identity XXXX. continue solutions. inflation, Federal to and and Coming financial the increasing base growth economy. XXX% We've customer to for the six see historically to in be if all we moment. real have quarter that a in had introduced the verticals, association our the to monitoring diverse low high real since determine slowing demand XXXX, renewal fraud we off rapidly and impact, including increased our FOREWARN intent record demand strong and sentiment revenue been on

typical and strong, solutions pipeline add shifting is continue be their process workflow to adopting customers expect will from Our to greater competition is that and we added the strategically have our us as and our we of to customers the platform. migrating often volumes

economic not we Note Additionally, to And delays opportunities multiple we from have of play to ordinary attributable procurement are occur that any in expect these budgeting anticipated the we to QX, as landed QX and/or landscape. while the in course would in opportunities we have see processes. now current today, that and risk do QX.

and the we past, we during in remainder importance of year countercyclical, prevention As beyond. are fraud for the detection we in positioned have believe well be to very increasing periods. tend the and economic challenging stated Thus,

identity Use and due bit and our customer a We solutions. FOREWARN provide cases real are risk idiCORE in diving segment. include Now, solutions estate primary which addressed two through mitigation diligence, into our risk address and to identifying verification, more acquisition. goals:

forecast Not the the mortgage of these surprisingly, in conditions that reduced And budget and ROI. of consumer conditions matter modeling prices and segment cooling resume market predictable solutions given spiking and that identification. high have will in stable supply, a more makes marketing and changing provide of of way spend a real persistently we difficult rates, against which expressed rapidly low once estate a months, matter of more volumes. Additionally, settle our spend. more in housing the a to simply housing they visibility marketing few customers is to baseline, into it it face Many

collections vertical flat relatively Our quarter. last remained over

balance and high subsidies daily to savings generated past, with a collections shop efforts, As in with first by and of vertical expenses. we was impacting pandemic padded and government the collection foregoing, detailed government-imposed sheets, travel us by out period, and other behind consumer inflation the the on consumers' XX-year Coupled arising impacted at have and forbearance the gas subsidies during food, pandemic programs shutdown. inability moratoria the

experiencing presently has that mounting signs health the We is auto goods consumer personal subprime all-time lower deteriorating. financial of working back usage up the and is the credit undoubtedly consumer purchase and displaying now uptick is is And is of an on The resilience, consumer the where Consumer and sentiment of While stress and at is is low. on the delinquencies levels. cut believe from an The collections evidence card will is increasing. services. at the consumer repossessions. lower-income average pick occur focused first, end, in savings rate decreasing current

balance due XXXX and few last plans have sheet. healthy Lastly, detailed our for quarters, in to cash solid we expansion our the generation

we the additional of personnel these hired As plans, across organization. part

integrate of Specifically, team candidates infrastructure technology, XX including time identifying pace our employment divisions, the members hiring to back pulled own product to And and most across year, current and during exceeded in us as on development, various and environment, expectations. the second quarter give market competitive positioning. given a effectively to as added members mentioned, the new our securing first the economic and quarter, sales, evaluate job in this we team our we of qualified

moving this positioned well with directly plan primarily methodically I teams, very tied on mission-critical and are execution revenue roles. key and various forward, to product to focusing departments. add am We today year-to-date. pleased to and the quarter we team's development in infrastructure And positions

While uncertain keenly economic are we our navigating on focused business. an growing environment,

leading pipeline. innovative upon teams, enhancing bolstering and and executing platform, which solutions converting and includes a developing our are We strategic long-term cloud-native sales deep our our plan, products commercializing

are positioned to some color healthy, for With it is will to the and we additional financials. now I business Our provide growth. turn discuss well over Dan to that, and

Dan MacLachlan

afternoon. Thank you, Derek, and good

pleased to which quarter. Notwithstanding is revenue verticals the the the with currently with strong continue of second of our a expand overall I broader the exception challenges see economy facing, upon in and we both collections We economic are of portion performance key estate, growth shortly. our in all real will

adjusted along produce profitability, EBITDA and business continues Importantly, increasing flow. solid healthy cash growth, nice with the to

becoming As you operational brick-by-brick, strength our business creating path importance has leverage, market this sheet a foundation growth, know, always dollar of the healthy and continue building of stressed balance a company. this cap multibillion for we management as team

ever continue we market on are discipline, multiyear to this fundamentals The our in our positioned overall for history. robust to plan show As growth opportunity and a of solutions our today result growth. increasing than and stronger execute better for

In wins temporary customer in portion areas, headwinds vertical. XXXX addition, seeing for in have a negate these several our which, of of initial half estate throughout product growth are real we of slated and the second a releases with key collections couple will the XXXX, we and

commentary this, to have over has from relatively and the last months. flat programs As our we forbearance pandemic. business XX regarding Because the moratoria provided collections relates government collections of in imposed collections, COVID past resulting it remained the the

same the first XXXX. revenue consumer of quarter XXXX, economic we period for second and demand activity third-party see approximately over slowing Historically, X% solutions and was the For collection increased during times collections up deterioration.

the have more to at with our debt. quickly defer cycle government debt line is should we collections and However, customers levels. collection double-digit to The increased believe of first the two assume of revenue repayment up continued pre-COVID that the ability issues: are end volumes nearly facing consumers’ growth potential of issue intervention this propping are our We and realize in the today

in high, at is margins primarily our third-party to and can deals their facing the issue second quality Because limited collections customers which any acquire contracting work customers debt. collections portfolios is debt debt ability of been time. our debt for and given the cost The they customers volume acquire to our extremely third-party limiting have quality supply, with collection

acquire to a As this cost reversion to the constraint begins see availability levels. supply should and will historical of the ease, debt back induced such artificially debt quickly to increase quality

we away positioned have As collections strategically this a this as been our acquiring reversion of customers take company, from competition are period. well extremely during we advantage to

quickly As a meaningful expect result. as to third-party revenue our customers, volumes increase collections see begin we growth across to

we cases: second serviced generate use only relates And estate, and case, assessment by and it case, serviced IDI both use prevention. fraud, the fraud risk FOREWARN, is identification. from by real IDI, verification, two is modeling and use includes includes which As identity revenue to primarily first marketing which The consumer

in and solutions we fraud continue our real what the We our side temporary all demand conditions strong volumes to we is and increasing are marketing are prevailing cooling where impacting market of broader The verticals, economy headwinds, see because housing seeing that the market. are including for estate. the believe

For created result first issues: of The a of earnings issue some perspective, customers compared give our the XXXX same revenue loss XXXX, from the throughout marketing was of quarter a quarter year-over-year our one call. two our approximately real This revenue was our fourth real estate to previously increased period discussed XX% headwind XX% strategic down the integration that we on approximately being marketing XXXX. quarterly To decrease XX%, XXXX. second larger estate revenue

real for The in the decrease second is residential estate revenue dynamics market of issue result marketing the current housing. causing

volume estate to temporary continued normalize buy-sell approach targeted As customers softening at the interest real home level taken areas a as have we more to for their our Inflation We cautious other the have level. and and within values transaction They the new prices mortgage believe marketing and in of new become in off. seeing solutions. see consumers growth, normalize rates and/or begins strong start begins business, all have term continue to norm we rates overall to to will and growth identity more until fraud slowed, have near revenue increasing in overall to volumes In our rates. spend. improve, address rise are increased start real is improving to and the demand estate of home high residential a marketing in face this residential

moving that pipeline well of only extremely our customers the larger of to in recent We started our larger wins their as customers are competition. These customers size our number excited from growing about as key volumes have just and are platform.

new of with second the to solutions half for markets with addition product excitement current and of XXXX. us. we several release for the solutions, our other and are releases the revenue slated In new thrilled These open recent key idiTRACE opportunities

we develop Commercial risk customers us to and generate solutions, to months. management working several XX unique XX valuation For for $XX example, potential next annual will the Property large tools partners within that in million have been fraud, we revenue million and with $XX to estimate within

us a XX new strong solutions screening market. release upcoming with recent to the believe background and We our This time us made the solution have players Crem, for million push will annual to We background $XX to opportune in step forward within after generate the idiTRACE for $XX the with in revenue connection million consolidation of release several into the months. XX of our of an in next is IDI use screening in for space.

strong. business Our is

We are generating cash.

balance. of that, let's opportunity second results. review quarter our With and laser-focused is team Our

unless quarter in today $XX.X Total discuss margin for XX% $X.X million. million quarter, from to year. record percentage over for increase noted XXXX, Adjusted a up Services against $X.X quarter clarity, gross was X For the increased second EBITDA the XX% million, to a EBITDA was of will X% Platform points. prior million, to profit, up XX% $X.X XX%, record comparisons X% the for be revenue $XX.X resulting in all will quarter prior down of million. was year. revenue was produced adjusted Adjusted second XX% otherwise. prior compared the We revenue I in margin a the year.

XXXX. team was first a full hiring saw compensation quarter of As in initiative members our that added the expense reminder, our first quarter this XX of after

adjusted pleased strong healthy with EBITDA are our the quarter. cash second in and flow We

on P&L. Moving of details to our the

million gross $XX.X revenue of revenue $X.X of of $XX.X of the existing was revenue new from $X.X base million revenue from mentioned, quarter, for As existing second consisting million. customers customers million, customers and from

XXX% users base are now use the customers. FOREWARN. first the users. as continued at And billable surpassing a we XXX second quarter, grew realtor XXX,XXX renewal since FOREWARN during call, Derek IDI rate X,XXX the sequentially ending association on the solution XXXX. by quarter have X,XXX associations XXX earlier customers XXX,XXX users stated contracted introduced quarter FOREWARN maintain to our we from in to Our at customer second ending quarter, the added and

to Our XX% contractual year. revenue was for XX% compared prior the in quarter

Our revenue X% attrition percentage X%. to was compared

We expect X% future. revenue between percentage our trend XX% attrition foreseeable and to for the

revenue our down and P&L. metrics Moving the on from

members, for good of road evidenced deliberate huge over solutions increased tactical time, XXXX. XXXX In result we half members key the of the XX% as well economic was and P&L. million had At additional primarily seeing We within of amortization several $X.X course we dividends to $X.X by and for million be $X.X volatility, P&L sales of in net of second our The point on our was quarter the Based over $X.X quarter. our our sales and CARES million we to $X.X for Depreciation the the Back $X.X maintain internally million Sales to of slated our million million, primarily exclusive compared consisted $X.X would accounting, of salaries in primarily increased second idiTRACE quarter to other time these very noncash on expense salaries forgiveness million to expense. increase for $X.X the XXXX. prior call. $X.X in million primarily in revenue, increase have year. $X.X to the benefits of we are to and million over The however, professional administrative of and XXXX software. of paid an million or remainder in amortization loan. benefits, a was the and million record employee quarter onetime sales fourth first million in in to expenses expenses during data Our costs and developed an quarter XX% General X XXXX desire to a noncash released increase release and our which This professional good employee increase discussed XX percentage benefits gain the This amortization $X.X team our net or a primarily for quarter expenses million. result revisit in increased share-based Adjusted decrease increase a administrative expense margin $X.X and $X.X of was salaries for increased and $X.X a commissions. infrastructure record million compensation IT by $X.X to cost of the of portion $X.X of and marketing in a to hiring of X% million $X.X hiring This million of adds year, quarter consisted acquisition will XX% from the plan $X.X product or in that million offset included a technology. of loss X% adding depreciation $X.X increase million employee the team adjusted fees of of map million an be second $X.X quarter a first and benefits was salaries or the of a marketing million. Note, The which be $X.X fees. the million. gross result producing XXXX. the and $X.X in This extinguishment recent million XX%, increase fees. compensation as increase discussed general the during These hires added of $X.X third-party income and share-based of profit gross to of a Act million second this commissions. of and in a we increased the and million due and the of from XXXX. $X.X productivity net XX quarter increase income as and times debt of discipline

Excluding per share that and count loss million $X.XX gain, based diluted quarter improvement of shares. reported XXXX. second on over basic average we weighted had a $X.X share a of XX.X We million a

for units. generating calculate activities to equivalents XXXX. the taxes no for compared period assets to for second million. $X.X to the $XX.X use from shares and from XXXX, compared XXX,XXX the resulting the used million ended $X.X ended There Cash for compared liabilities We stock prior activities were Cash generated we months cash in six settlement cash million June capital for six and was $XX.X shares investing $X.X found the the operating to software intangible were financing XXXX, Moving second used to withheld These quarter, XX, internal same as Cash Cash period to We were for generated generating June from months mainly retired to in balance adjusted paid cash million the and end cash such period XX, the quarter. period XX, the operating for $XX.X on of for used the our in the developed $X.X net and June in used investing million We flows. XX, in was current million, in by activities XXXX. and restricted the for compared free share six cash million. at expenses activities $XX.X property, subtracting of treasury were sheet. XXXX, the in for in same from Current at financing $X.X same were the XXXX. XX, for million June activities EBITDA $X.X million of same use. in $X.X $X.X million the compared of million December $X.X result statement activities using million million flow flow free costs our ended XXXX, XXXX was asset capitalized cash equipment $X months in cash million on XXXX.

share. our second of an quarter program of stock under at During of shares X,XXX we purchased the XXXX, average $XX.XX common our stock price per repurchase

share. an at shares quarter X,XXX the price per we date, to third additional of purchased $XX.XX an During average

additional half our to continue that and or use for repurchase program. are of With will closing, excited the we and other year with in market accordance the opportunities that, first We prevailing investment our as shares second now line more accomplish us, and solid a of applicable, in XXXX Q&A. cash we with conditions beyond. In open the for strategically balances the acquire half monitor will of behind our much operator to have

Operator

you. Thank

question-and-answer begin turn At Instructions] to We will I'd Dubner this the now [Operator to the Derek time, remarks. closing like call for session. over

Derek Dubner

We Thank model. quarter, business delivered the and you to for of second solutions operational the once and again a those who resilience leverage joined demand demonstrating powerful our our today. strong us

positioned Good volatility second and impacted fraud the portion year day. revenue a are expand, identity, economic remainder is of to quarter, the business, the While of we well and our in and of majority the continued which beyond. for

Operator

Thank Thank you. this today's gentlemen, Ladies and for concludes you participating. conference.

disconnect. now may You

Red Violet (RDVT) 13 Aug 222022 Q2 Earnings call transcript