Earnings call transcript Q4 2022

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Operator

Good day, ladies and gentlemen. And welcome to Red Velvet, sorry, Red Violet’s Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]

call recorded. this reminder, a is being As I today’s Finance conference, like to and host for introduce your Camilo Relations. would now Investor Ramirez, Vice President, Please go ahead.

Camilo Ramirez

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

a with comments from and question-and-answer Our session. today by will begin call Dan, Derek followed

you remind and please to website. I this of call event our live like would the available visit our webcast being that page on call website recorded. the webcast, is Investors To access on replay www.redviolet.com. A our following will be the

certain forward-looking by call the of Before this conference covered during statements Private information Act discussed Harbor we would Securities listeners begin, I provisions are management XXXX. the like under Safe to Reform of Litigation that advise

differ due on undertakes by to those could The company the stated no results and from the business. call. implied with provided information risks associated to update or materially company’s Actual statements this obligation forward-looking our uncertainties

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

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

issued any as be not statement and are definitions these underlying release the financial earlier discussed also may addition, In amount today. supplemental certain that in press can necessarily their earnings metrics be found derived metrics from

With Derek introduce and am Officer, pleased Red Dubner. Executive I to Chairman Chief Violet’s that,

Derek Dubner

results. full And those our good joining to and today XXXX to quarter Camilo. year fourth discuss Thanks, afternoon us

a Violet announce record Violet. while to solid margin produced Red We strong double-digit Red are fourth to while excuse experiencing, XXXX’s percentage gross growth, year expanding continued healthy another pleased flow. for cash environment, which and generating Despite drive economic me, quarter, uncertain revenue

to continue We to made execution and our roadmap our on XXXX, remain pipeline. first we focused Further, outperform. against the sales growing industry-leading robust of our with strategic and in product even plan intently strategically a in GAAP without of long-term our teams full We gain. one-time invest investments continue the execution generated profitability our year

was million, to decreased over revenue Now $X.X Violet. turning revenue $XX.X the to $XX.X increase record quarter million. a to XX% fourth prior increased total year XX% and Platform the Services quarter, a million. Red numbers, for revenue XX% for

gross resulting Adjusted X quarter, produced $X.X for quarter in points. profit, million was the We the $XX percentage in margin in up over adjusted fourth up XX% million, XX% of adjusted year. gross EBITDA prior

are customer the the by users. fourth IDI added grew quarter, use associations XXX from now at X,XXX the customers Our sequentially quarter third base quarter, FOREWARN customers. contracted Over XXX fourth billable quarter over during to FOREWARN. ending XXX,XXX X,XXX at realtor users the ending

gain $X.X million, first our XX% onetime of in income profitability Recall, without full CARES net from forgiveness year of of For our GAAP generating generated million included revenue the a $XX.X XXXX million million in a We to $X.X increased our Act $XX.X the loan. of million. XXXX, income year, net adjusted of $X.X EBITDA gain. onetime

in customers XX% compared our to wins. XXXX, larger We to over XX had We increase, a $XXX,XXX in into revenue customers in contribute continue pipeline prospect convert enterprise XXXX. XX

year-over-year. us our spend As to continue customers well, existing with more

about excited behind XXXX With and are beyond. XXXX us, we

our organizations retrenching of advance being long-term in are we enviable the are companies While many able right-sizing the climate, to given their position and strategic current plan.

flow investments cash penetration. and future of healthy entry pressing of innovative consists profile is of balance growth, maintain increasing into This and sheet solid market delicate enhanced our into business. for prudence our new a balance strong financial This capabilities, while markets solutions, converting financial the to exercising

robust the releases next sector. marketing and in real of and and a identity, roadmap years. planned analytics, support, to screening releases solutions product enhancements solutions throughout have include fraud new background We detection, XXXX These estate and services prevention existing several public commercial

presently to are to market are or current cases use customer outcomes -- and These there customer designed where address for solutions current inadequate. are innovations no they need improve solutions

imagine, complex us participants. and As developing often between and iterations solutions to address you can multiple project pilot problems takes time

remain demand future. foreseeable markets and new target strong solutions our we resilient for the existing expect and Importantly, for

The cybercrimes and that transformation more. efficiency infancy, solutions demand has omnipresent, business its are that our secular in fraud digital firmly drive in and integrated a tailwinds are for that place,

Our efficiency in They especially challenging essential acquire solutions are used are mission-critical. a manage risk, environment. to all gain customers, and economic

we are and our making plan view strategic On with and altered against Notwithstanding progress markets. XXXX. expectations the are by in whole, product nothing adoption we solid economy, around our pleased target our regarding the our our roadmap performance has our

strong to in beyond. remain months, two XXXX we optimistic Given for we the year first and very the start our and about the this here are prospects experiencing

financials. With Dan I it discuss turn over that, to to the

Dan MacLachlan

beginning We planned year and of Violet. was Derek, initiatives the you, XXXX year. laid afternoon. great for out at well good executed the Red our Thank against a

the business, and strategically margins in to flow. we cash continuing solidly While while grew revenue, healthy invest maintaining

development verticals go-to-market tactically out We and our in several and added strategic built key resources. hires product

across will These team including sales members enable technology significant As marketing we in scalability XX and in an XX product and organization. XX added in organization, additions the XXXX, and development.

healthy explained of human flow and the in the and leverage This our business sheet would that we capital, form last to we cash capabilities, balance the of in our depth reinvest strong team. year, expanding time efficiency

million these adjusted to expectation. EBITDA. $XX.X $XX.X in the to a We in well We XX% by EBITDA of million while maintaining revenue adjusted over investments, which in XXXX, adjusted We margin, maintaining executed could against explained produced make XX% XX% we range XX%. margin that grew EBITDA

Importantly, resulted $X.XX of full first of our per $X.X net diluted a basic without year and one-time earnings GAAP generating profitability gain, in XXXX income, share. million in was which

The opportunity. to continue show and strong markets for increasing fundamentals solutions our

We and are developing and commercial property address use background support on to marketing services. identity, additional solutions new solutions, solutions and new features screening releasing in current cases enhancements

With to our higher tier in opportunity strong pipeline growing, make size upmarket progress both we significant volume and in potential. continue moving and

XX beyond. XXXX higher increase our drive strong in confident and We ability competing a over successfully, to in over sector converting We $XXX,XXX public private are had revenue contribute remain We in those XX% to wins. XXXX, year. opportunities customers prior and growth in tier

quarter a million. all of comparisons decreased the XX% revenue the discuss XXXX Platform will clarity, increase to today prior year. our revenue to to otherwise. revenue million. will be fourth results, noted I was now increased against XX% over million, XX% unless for Total $X.X Services $XX.X Turning fourth quarter $XX.X

profit, million, produced of for consistent quarter adjusted prior gross resulting a in XX% up points. year. in up million EBITDA in quarter, for Adjusted XX% was We the the fourth the XX% at $XX EBITDA percentage remained over quarter. $X.X margin Adjusted X margin

base fourth customers gross from $XX.X as new our mentioned, customers $X.X revenue customers $X.X the existing and million, details million. from the revenue million for million was of $XX.X consisting revenue existing of quarter, from Continuing of P&L, of revenue of through

the Our third at FOREWARN customers. the realtor quarter quarter, during fourth IDI quarter, at added to use ending customers X,XXX X,XXX the billable now ending users. FOREWARN. associations Over customer base from users the grew over XXX are XXX,XXX by fourth sequentially XXX quarter contracted

the percentage contractual points Our prior from down revenue quarter, year. was XX% X for

X% to compared X%, was prior percentage attrition revenue in Our year.

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

metrics revenue result million X% of was cost amortization million. costs. down acquisition an our from and exclusive of $X.X $X.X million This P&L, our depreciation increase or in a of revenue, on Moving increased the and increase $X.X data to

quarter a profit adjusted margin over million, increased XXXX. gross increase XX% Adjusted producing $XX to XX%, gross X-percentage-point of fourth an

$X.X employee XX% Sales commissions. for in and expenses benefits $X million million million $X of primarily was in million due and of increase The the million and quarter for an increased marketing and in or benefits and The increase $X.X commissions. consisted sales salaries marketing $X.X primarily quarter. salaries to sales the sales and expense to

the $X.X expense for the as the quarter XX% and salaries $X.X and primarily and million consisted professional expenses salaries in primarily million and of $X.X and part million of bonus general long-lived and increase compensation million $X.X other million fees. million $X.X accounting, million administrative employee was plans, for administrative in bonuses discretionary and benefits of employee increase of This year-end a a expenses share-based increased of write-off of General or in which assets. non-cash company’s included $X.X $X.X million quarter. IT our result $X.X to benefits, The

primarily the developed of million million of $X.X Depreciation for quarter. $X.X amortization the This was XX% or software. and to increase increased internally the amortization result

or the Our quarter to XX% $X.X million net million. loss for $X.X narrowed

of reported for a share count quarter based We shares. of $X.XX million loss a the share basic diluted per on weighted and XX average

on million Moving cash at current $XX.X million. $XX.X to $X.X XX, December XXXX. compared and $XX.X XXXX, cash December million, equivalents balance assets $XX.X million the Current million at were liabilities compared to sheet, to compared million, to XX, and were were $X.X

in XXXX. ended generating in flow million million activities free operating for to XXXX, cash from the We for XXXX, cash same $X.X compared period December activities compared million million generated year cash from XXXX. in in $X.X We to the generated generating $XX.X $X.X operating in XX, in

million $X.X was the used ended the year XXXX, internal result for developed million Cash in activities use. December activities mainly $X.X for prior million. used investing year in used investing software of for Cash XX, $X.X was in

purchasing stock XXXX, and employee result two, from at of company repurchase of prior for per XX,XXX $X.X was $X.X program of XX, treasury one, stock activities our in stock were $XX.XX year. stock financing average withheld net restricted tax units; share the of for XXX,XXX ended in end used approximately the under of the the $X.X million two price mainly of company settlement December share. year Cash the and items; million These shares million an to shares shares retired for acquiring

XXXX, a net price company was stock financing result from gross per used the through This share acquire settlement offset restricted shares of approximately the of cash financing of cash stock of This XXX,XXX was shares $XX.X million units. in $XX During a share. $X.X raised at to stock by proceeds $XX.X tax of XXX,XXX employee of the net activities by of was provided sale million million. common the same period from

repurchase As the monitor that we or use repurchase with for it relates to our and we will accordance balances, additional program. cash our as of and strategically in other conditions acquire stock investment prevailing opportunities to shares continue program, have our market applicable,

great pleased year what in seeing are another and the this the full environment, first are we closing, we In months quarter and about year for fourth year economic with XXXX we two uncertain results. of Violet. Despite are Red to our expect excited be

Operator our that, line open With the Q&A. for will now

Operator

[Operator for first our Instructions] moment One question.

the will first Our from question come Venator. from Brandon Osten line of

Your open. line is

Brandon Osten

Hey, New guys. Happy Year.

Derek Dubner

Hey, Brandon. you? are How

Brandon Osten

am good in I poorly am guys ridiculous somewhat really it I put mean, compares good. I quarter, only quarter a good. up to you Obviously, the QX.

second So quarter best ever.

Derek Dubner

Correct.

Brandon Osten

because growth got the grew better or that questions growth how million you A much it year, amount guys the than can’t remind is here, couple $X.X me by you acquired, faced value the just you year, stated customer just know remember? I headwind a maybe -- remind can’t guys I what good what of loss, something, you dollar of rate I probably was can remember rate like is. can this that because this that

Dan MacLachlan

million. quarter, right? million It So annualized Yeah. $X.X $X about a was roughly

Brandon Osten

Okay. Oh!

I So, guess XX.X should does XX.X or more we that does to are make does something, I at, like with that basically, apples-to-apples? this really comparing make I mean, be XX XX.X, that sense than looking like, or XX.X

Dan MacLachlan

it, that needed we a way at that’s get. look customer And good go larger was that think $XXX,XXX quarter I right? to that was Look, so right? a to a Yeah. It discussed, we

for way it, good sure. to that’s a So look at

Brandon Osten

Okay.

that the me And a a in put seasonal management ones you is because bonuses short just so impact here, anyways. few lot Can and year-end just employees? QX, Okay. EBITDA you of of detail out for -- guys remind the just

Dan MacLachlan

and plan based quarter a of on that So, the yeah, fourth the lot discretionary bonus nature, and falls into because such. have a we company performance discretionary of

Brandon Osten

Okay.

Dan MacLachlan

then seasonality with are And on said we a before, fourth have right, just from dealing the based we when and of always business this quarter days, topline little less bit businesses. see in we perspective a

still portion business the less of see happening at -- end revenue less business as towards we do With the right? still some transactional, of a is As days year, the topline and our well. seasonality we

Brandon Osten

of know a Okay. couple we alluded you guess, a like bag? above And mean, and revenues guys I revenues, is got start that I to QX year. strong to of guys fair to much out left fair guide. But to you letting don’t expect QX be a I only too weeks I expectation is have without is the QX that it mean will -- the

Dan MacLachlan

a Yeah. Brandon, Yes. I think, fair that’s statement.

Brandon Osten

Okay.

well? Okay. would consider are you you hand, you impacted you me are what but material which a particularly repo me can the rules two market, me to you law to the on on do And seeing Can sense here, I the can I come starting feeling like you somewhat you markets I customers somewhat isn’t adding, there, should how questions be that are as be by feel which about other of mean, market, cyclical, seem real give And a adding mean, regulations. on but that estate give side really and enforcement a have up? you give and other for, sense cyclical two cyclical,

Derek Dubner

Thanks, Absolutely. Brandon. Yes. Sure.

in and seen and that not from low you have lot will, on if the the you is seeing they course. off of collections sort are way seeing sub-prime, consumer and standoff of subsidies support having uptick end, is the them, and government those as mortgage repo evictions, surprising are of you difficulty. on payments and call you What market, an moratorium wear on seeing COVID are of We a the the rather in

you that more And impacted seeing moving savings Inflation up. credit as has and delinquencies does significantly, of significantly them card are credit depleted. everybody, base turning it to but cards, to they are type are

seeing also that COVID during autos the bought of reported are were repossessions times you many And period.

of those autos, difficult supply, in so paying -- shortage finding so and much probably, with And too for themselves positions.

move seeing is repossession there. volumes So the market relatively and are strong we so up

X%, last some real real talk rates did about as mortgage estate about of from estate, slow That’s year, and/or business. where believe for estate, I mid-X% will year -- real in power far As down March purchase. -- or it, move of certain the I that or identify to the did propensity to it to we solutions last of in swift software marketing we call identity demographics side the of sell very

a in a age, a So et cetera. multi-homeowner, think of identifying home, disease

some with translate they mortgage ROI? What how pause. had us, estate So and matter that real when stabilized. there spend information? in ROI. It back when And did they getting? we can so spiked, customers pick with they a are that rates all it’s a throughout they And do the of into the segment was bit can What that up year a

different a product. so That is that’s It’s different, than I tool identity and is effective, very want FOREWARN. our safety it’s FOREWARN FOREWARN FOREWARN contractual by different highly realtors. is very risk to entirely and used be product. clear, a from

since we last but that have QX stability So, estate the in relative market impact in year. seen real

Brandon Osten

know Yeah. estate they article don’t Also, one News real London when at. ask they counterparty, then the I I stupid of or face I and it’s to a saw before for that a Apple ones Times my the last agents out the dangers looking anyway… that European it and showings ask, worth I of maybe ask stupid question, I but am dangers, question going will question physical know And like

Derek Dubner

No problem.

Brandon Osten

because Yeah, everyone to wants something. everyone …just hear. hear to wants

So call whatever regards, of mean, hype artificial to intelligence, it. all just recently want around, with terms learning, call you I machine it, the in

-- has a major that a You have platform a has significant database.

guys, the you maybe fact the but output that an also there’s component, for have So you database. there’s

of all who to sort given the the thought they who’s got right? process you spits middle So input how Have one or of FOREWARN data data. database in behalf other on behalf the out strategically I component, even there’s base? somewhat on side, customer data predictive side any what an the your is transaction. and mean you guys of on It’s the your about of terms how customer of a in looking on system a might your use be of

people what are you So I don’t thoughts when there, -- just detail, just asked? telling any any need

Derek Dubner

question. Sure. appreciate right the talk, of really that’s AI the the buzzword aside Setting It’s all I hot Derek. now.

in the have is this space. we street have many the we third platform built this As told times,

cloud as with really was this it, learning it we and looking from machine platform platform platform -- always ground from only the cloud way the that as the the competitors we goal built built was up This is it far and built have in data, that the commonalities, the anomalies. for with analyzing into for of built looking

with leave trail, with behind with. multiyear data you As we interact judgments, lives affiliations with data leave know, transfers, as asset grows in we name footprint bankruptcies, criminal we The and every businesses and society day. it, in our those within those histories, history, address our with with businesses liens, events you consumers, our formed the

to of we that’s really out end competitive use we always So our as be believe making there to what’s actionable. believe platform, the users what’s out actually the generating lot a of data -- and and a big and far of underlying component advantage there more it intelligent for ability interface taking knowledge, well than our and creating significant with what that a platform

So we telling platform. a our have been story That’s for view we while. how that’s how our quite

platform advantages We are and into customers only have their small, customers X,XXX are still getting workflow. realizing our we the and of solutions our those

feel are from great feel what’s our and out differentiated very we there future. about competitively So we

Brandon Osten

Great. Thanks, guys. Keep moving forward.

Derek Dubner

Thanks, Brandon.

Operator

question. next our for moment One you. Thank

Our from from will of next question line come David the Investments. Polansky Immersion

open. is line Your

David Polansky

I about guys. bit. want for little Thanks talk headcount taking Hey, a questions. to my

can may impact you should margin year not XX profile may biggest current hiring discuss you I similar net hiring, about patterns gross XXXX, think that or ever people. your the year EBITDA? adjusted you new that, on off going in margin headcount you and Are or and expect this ready off your we with are for hired capping of how then for

Derek Dubner

David. Thanks, Sure.

significant the look, You in as around and looked and are the opportunity as significant expand We hires roadmap we roll product organization year last new we we enter as made verticals certain we and and we right. see said, out markets.

of infrastructure. we So various organization hires in the bolster to, parts our for made example,

team While and our market. to to to solutions we add product marketing, data and development to team, to science get tell those these fantastic bring story sales build products there our to our add and to and out

So additions going number to be is to the I there of would no that did. we repeat say

as I pretty far added. we have well-positioned are we as think already who

insignificant nice -- significantly we that we there’s even than traction. no or have to adding So intention too insignificantly position see where of other

said have little spend really traction that to a going. talk you we into bit a don’t why will and about expect? We always what get can you Dan, margins bit

Dan MacLachlan

Strategically, Sure. kind of Yeah. we leverage look us to year. think, start of Derek will, Thanks, that if we of this lean several expectation next areas we traction, years. David. to kind kind at maintain said, from gain over Great of you. level, this us hear I that the but the where for of most a new as level the potentially for in, around is, sets lot Look, would will you gives

past, if XX%. starting talked see profile leverage to targets have going start margin, XXXX, in the margins in what we that with to means start expectation then, and relatively that really hit see you you will for into seeing about saw that closer that towards those profile would nice this increasing that in we XXXX, the consistent revenue, for in to What be the XXXX and are to extraction margin leaving is, margin year, ultimately, as and will we

what is XXXX XXXX. of for going kind expectation that’s XXXX then and the So into leaving

David Polansky

mid-XXs say in is right? mean that the consistent, of range, So you when sort maybe you do

Dan MacLachlan

Correct.

David Polansky

are… if So you

Derek Dubner

Correct.

David Polansky

head you revenue flow spending, not in not sort a pretty if significant spending, not largely thought it sure you be and if through see make pretty mid-XXs where, is to we understand you that but be would growing are should this, if high and want should we but the margin, cost I like you are of that some a count, operating incremental because range. will leverage, just where my in I hires at still business fixed presumably sounds are you are making good

that you about little can then a So bit? talk

Dan MacLachlan

Yeah.

we it, at look a it from at we look conservative when look, standpoint. So,

this kind are when that As I XXXX leverage, is expectation year of will said, you out of XXXX see the last start you versus to leaving So year. look right? nice we at

third the run of added leaving add second of out year, the a half Obviously, of half into that year, rate is good the quarter XX of probably, of we half portion moving quarter the and so really the second beginning in in based quarter, year. in fourth on kind the the

from a to is, that. have expectation lot we But, the a of of think think mid-XXs. revenue, ultimately, kind we to be I the as I will upside yeah, in grow we standpoint, conservative So, look

in on mean, would have growth. of than came on year, margin I side to revenue that, I XX%, high that we around last to XX%. we that the the XX% our we guided expectation closer downside more based obviously, have upside

David Polansky

is of Okay. your bit excited, just anything to on talked I’d organically this that know topline, think gets of bunch and because get a And little we commentary business some have around front great? of be still to on you these am I some like targets laid you the long-term that then intent your just out a would to but M&A that, of trying and bridge you about are I times, grow seeing this that

Derek Dubner

Derek. always every business opportunities with we look banking is the day organically. office We to Thanks, have nice do This this relationships, with That us that come provide into the of Yeah. David. relationships said, building goal at.

well in that be where have can branded would We in a before perhaps, some interest interesting and/or an us. if data technology and we scenario, a areas you some market solution unique or acquisition might that build thought have unique for will, buy acquire said some process, front-facing user assets, be may be end of couple facing in or already we that

some the always we last valuations interesting very way in the we of have are that, couple have been, sellers Given the years not of of of from seen. the mindful dilution, the have and been of assets and expectations

to come down, than public is faster valuations capital. market here getting and market, XXXX throughout access but know, private they where market in have there XXXX, you need certainly probably private those As

we But build absent again at review will key It’s the that right our So this got needs be eyes keep to to to be time some organically. we We valuation the at open. time. to it. at from assets opportunities we price, do will right and look it very and continue

of present the like from but We if believe as are this and we we and an short-, the have expand we -- obviously, enterprise medium-sized us we and revenue clip, public move latter just economy and multiyear smaller- half larger and private have a feel medium- faster real will, the opportunities you customers have talked front continue we long-term even very opportunities in the customers, the at into got meeting we customers, targets and about sector, to that move about. market both in strong cooperating, runway of where excited

David Polansky

out the That’s great. the call but some and about analysts not maybe get and on be relationships maybe on And liquidity some estimates stock banking use cute get up it, little those to to good bit. too some you the there can of a

Derek Dubner

your hear comments. We

David Polansky

All right. guys. I will Thanks, pass.

Derek Dubner

you very much. Thank

Operator

further in remarks. turn queue. now to Thank Derek conference would showing you. I am any the for I closing like not the back to questions

Derek Dubner

you. Thank

long-term view. strong and Notwithstanding a a to for with operating quarter record our We we the business pleased have climate, year are steadfast remain Red reported in another Violet.

We continue that this is and been execute plan strategic to discussing financially we have our multiyear against strong. business

XXXX afternoon. beyond. for prospects Good and excited We are about very the

Operator

this today’s you This for conference. participating. -- Thank concludes conference

great have now may a day. Everyone disconnect. You

Red Violet (RDVT) 8 Mar 232022 Q4 Earnings call transcript