Earnings call transcript Q1 2023

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Operator

Good day, ladies and gentlemen, and welcome to Red Violet's First Quarter Earnings Conference Call. [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. Please go ahead.

Camilo Ramirez

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

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

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

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

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

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

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

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

Derek Dubner

to results discuss Thanks, good the today quarter of joining afternoon to for XXXX. first our Camilo, us and those

generation growth quarter across product and our We generated performance, of fraud of revenue are report the bottom solid suite. flowing to line, profitability. are We strong nicely result identity healthy and to the another and cash these pleased dollars broad-based demand driving

We advance map. continue business in our penetrate road product markets and invest our to target our

the Finally, maximum efficiency organization to during going we quarter, forward. and the productivity fine-tuned drive

Now to the turning numbers.

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

$XXX,XXX later. Additionally, write-off we of a will which onetime debt, bad detail Dan had

Excluding adjusted million this onetime margin. expense, our have produced $X.X would adjusted quarter EBITDA a have would XX% EBITDA for the and been

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

first customer solid We fraud -- new their are highs. XX-month Further, and for seeing demand saw each excuse identity our at me, the month of applications our our quarter solutions.

contribute on not initiatives marketing of are leading our yielding to productivity, that immediate indicator high is do an While applications results. focus execution our revenue, launches these product new customer early-stage the new they and sales encouraging

our we identity several the In last months, expanded have intelligence suite.

and done significantly solutions have in idiCREM. garnering The we have and enhanced screening branded background so combined the to idiTRACE recently interoperability. our the solution marketplace. verification we other screening the With industry, release of solutions launched improved the from feedback support background background identity continue version providing an screening present of While industry, for functionality serving XXXX industry, of powering been in in solutions the scenes, serve and our behind traditionally we've

efficiency all alias identity industry-leading In combined search organizations and and drive filters. address screening with and associated background nonobvious information, records customized search enable by parameters criminal combination, access through uncovering to solutions speeds these history increased

suite bolster and fill, greater signals the fraud itself giving coreIDENTITY, of more. for addressing the comprehensive These form needs your larger and organization's additional risk product customer we intelligence launched uses, a addition, identity an identity verification to including in identity or be In know identity private our sectors. in both of launches verification, workflow and integrated leveraged enterprise in depth and suite, into individually us public

best-in-class around a solutions ML the fourth markets the serve. believe and to solutions proprietary platform, the by data of assets was powered AI that customer our algorithms quarter information top XXXX provided we large acquired some Recall and We detail unified from linking value provide we provider.

acquirers As utilize that much the revenue sought approximately At quarter. contributed And the less part upon time, lost customer revenue. that this of own initiatives, cross-cutting and ours. we substantially in acquirer acquisition, its to the all $XXX,XXX of data of per

stated could eventually we we quality degradation time, firmly believe would throughput and and that solutions. our back revert the increasingly customer At to in data experience that the a

are recently a report to We into during containing term. minimum commitment with customer agreement pleased this we a the entered X-year quarterly that $XXX,XXX

well not back does of example but breadth our to and customer's While in the guarantee of more previous platform's meaningful our differentiation, competitive performance. accuracy, reversion X depth this is our data demonstrating the as a volume, it as superiority

with will that grow passage of optimistic this are time. We the relationship

the we us foundation. frequently, a plan. economic healthy that its discuss landscape a perspective, continually business of long-term this long-term the to foundation execution and uncertainty. growth With strong continue of economic impact to any on with potential A the of strategic weather upon will take we monitor goal As view we enable our

in investments significant sales. hired Last people, and We additional technology business in the of year, made primarily XX we the headcount. in way

would any to organization small to and achieved drive positioning. steps exercise, that greater the significant we when attrition with we our be our and economic evaluated we natural productivity to onboarding given some take our efficiency, desire As there onboarding Notwithstanding, target even goals. the environment optimize knew necessary current

from count a current baseline results. solid in employees first count total of reduced plenty forward. our cost savings During for to the this exercise Note head reflected are the leverage with We the employees. quarter not our XXX XXX the provides first head moving associated current quarter, believe we

identity We are pleased redesigned design, greater more modern websites as applicability our functionality, the will with solutions. provide is of initiatives The navigation redesigned recently detail launched more improved of and and on markets. experience report informative our breadth to further and but valuable one a our provide corporate user easier a experience penetrate we websites. XXXX This several and marketing engaging for we

providing to Lastly, repurchase $X program. stock million update our an

an $XX.XX X, company per XX,XXX shares stock stock XX,XXX program. repurchase million has an remaining purchased share. price In the shares addition under we we of in average $X.X to of have The XXXX, company's additional common May at year-to-date through repurchased the the

part conditions, market good of purchase broader strategy our current of is a shares our returning these strategic the of Given as capital use to our shareholders. capital allocation we believe value in

we are with a year. quarter, the in off and are we pleased start all, performance strong to the first our in All to

larger and upon and healthy We product are to seeing solid All our road new productivity. optimized execute winning while for map. customer enterprise acquisition, generation cash and prospects driving our high continue with testing and

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

Dan MacLachlan

Derek, you, afternoon. and Thank good

with pleased We year. to the our are start solid

our broader some tier our to opportunity over pipeline growth added extremely progress with outperforming key were new prospects. building in in economic XX,XXX the pleased resulting our the including from and consistently environment, challenges the higher wins in first to head-to-head IDI are Despite with we meaningful customer FOREWARN, the customers ongoing We relationship solutions and quarter. users XXX We testing. competition seeing

verticals. prior estate identity within compared we marketing these fraud collections board see to to X on Both nice areas in previous across growth Outside quarter our negative solutions. and year. with softness calls, have and areas, our the As saw discussed for growth real we we experienced slightly demand continue the increased first

increasing of Derek throughout commentary productivity. optimizing quarter, of employee head our provided efficiency some we the teams focused to that Adding on the the first on earlier count, while

head As of we with most reduction the end quarter. a first saw result, in happening towards a of reduction the that count

a and our While beyond. for a current quarter developed and SG&A internally continued expenses the believe approximately a XXXX mark, $X.X baseline and provides in employee count should we remainder in approximately expenses $X.X year, XXX growth savings million count of plenty Meaning head and cash-related will we of scale and current million around our the flow bit for leverage do head that of employee for software. the quarter see employee-related ebb

now quarter results. Turning our to first

prior for Adjusted margin gross of quarter percentage X XX% the adjusted was quarter. will up in million margin over adjusted points. remained EBITDA year. comparisons for in consistent XX% up all I quarter against the otherwise. the today We noted $XX.X a revenue discuss will first produced XX% of For $XX.X was profit Adjusted EBITDA Total the first clarity, million prior XX% quarter, year. $X.X gross resulted the be over XXXX, at unless in million, increase

our through Continuing of the P&L. details

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

base Our IDI quarter billable quarter sequentially the from the X,XXX customers. customers XXX by at ending grew fourth first customer

the users, now over FOREWARN. associations FOREWARN the XXX,XXX over are during XXX XX,XXX users at added ending quarter first realtor contracted quarter use to

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

was retention prior Our and XX% gross XX% to years. compared revenue in

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

supplemental I metrics. to to would like our discuss X we this time, updates At have made

total our Previously, The platform by revenue we revenue services services first supplemental broken from update revenue. is removed that had we out have revenue metrics. and

reminder, As purely margin ancillary of profile. offering revenue a consists which idiVERIFIED services a that is service an collection transactional from and revenue market generated our is lower of

of for the of X.X% X% of approximately represented revenue revenue Services revenue in and first total XXXX approximately quarter total XXXX.

expect believe presentation total to is of decrease we meaningful. the as to As not services metric percentage of we continued revenue this a continue revenue,

we that with The have update revenue revenue retention. second replaced attrition is gross

feel basically updated metric allowing industry with calculations the metric industry is and we to former, evaluate the performance with better investors the vernacular relative revised this of competitors. inverse aligns While better

P&L. the to back Moving

quarter exclusive single marketing Sales gross an increase of increased or and due $X.X cost and of customer debt. recover amortization due the $X.X attributed X-percentage-point have the to profit revenue flow Our remained to for to producing million of depreciation million, $XX.X million onetime was quarter consistent outstanding quarter. at and and XX% million commissions taken was increased to $X.X for we million. benefits the to expense $X.X Adjusted increase a million challenges Derek sales and business expenses first the write-off to to increase their a XX% earlier. cash the adjusted legal $X.X dynamics, gross facing This million margin over $X.X XX% of primarily XXXX. This an salaries, alluded action specific in

employees' in sales million $X.X quarter of on The and economic this sales $X.X have any sales outstanding primarily and from debt. challenges. marketing of million $X.X due consisted we to million for commissions in our days effects $X.X experienced not bad and isolated provision salaries the Apart negative any broader expense benefits, in million case, for

for a benefits, expenses quarter administrative and $X.X compensation million primarily noncash and $X.X was decrease accounting, This administrative to result in or decrease The million $X.X million and $X.X of million primarily $X.X in and the and decreased salaries expenses fees. million million professional the employees' $X.X $X.X million General in fees. of general for IT other the of quarter. of consisted professional expense share-based X%

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

count a or million. $X.X per on XX.X earnings share for Our basic weighted XX shares increased reported average diluted of for XXX% diluted. quarter basic and quarter the million the We million share $X.X million based shares and net to of $X.XX income

million the We XX, to December million compared and on $XX.X at were XXXX. Current XXXX for were activities compared to from XXXX. equivalents $X.X cash for in million $XX.X at $XX.X and operating the period cash balance compared XX, generating generated Cash to assets from compared $XX.X current to $X.X to liabilities first million the Moving $X.X in same quarter were million sheet. cash million March million in million. activities $X.X operating

compared first for Our period the generating $X.X free XXXX. cash quarter million million same the for negative to flow $X.X was

quarter stock program an result the used first in in was of $X.X million. used for of the the purchasing for share. XX,XXX use. XXXX price mainly Cash our $X.X the common Cash the shares for investing million in used was for under used $X.X was internal first average software result million of of Cash financing activities at million $XX.XX per repurchase activities developed same for period investing $X.X activities company stock mainly quarter,

period had financing During the XXXX, activities. same we meaningful no

X, during XXXX, XX,XXX of the stock have it relates shares quarter. April common per first of our at we XXXX, common $XX.XX stock an at an share to we as repurchase previously Beginning and XX,XXX price As of our program, stated, an shares average share. purchased per of X, $XX.XX average through stock price May additional purchased

we was our total, to May that have on pursuant program shares In authorized million purchased $X XX,XXX repurchase X, XXXX.

remaining million for under the $X.X have purchases program. We additional

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

great pleased forward In the and expanding We open operator for with in start profitability line now our position strong closing, sorry, driving the we in look and growth are to our market the will to the that, XXXX driving strong -- profitable beyond. With year. Q&A.

Operator

Immersion first David Polansky Our Investment question comes from at Instructions] [Operator LLC.

David Polansky

importantly, from? sort been a several at years. journey IDI your enterprise high we've most the base. after they what know side, new you on customer on are that's and of of the customers where this industries SMB to relative size as historic I in seeing you've the you're then QX level talk, base? on job those are think I guess, had Can of client sort strengthen an amount coming Good customer side IDI what the going adds, more I from And of

you So XXX the just those talk customers? about IDI makeup of can new

Dan MacLachlan

look board the seeing when Thanks sure. markets this the in Yes, right? good when sector customer exception financial is of kind David, those we appreciate, at good question. is very Great. nice uptake broad See, had services, enforcement portion we law for of board public some Really the the some we're look serve, we area the that mix, of Broadly, good across base and a across you within seeing we're collections. portion within So broad-based, the within at Dan. space, added of with investigative well. and customers, as the wins the XXX it

it for pretty But other within -- board identity, ultimately, we know stagnant pickup investigative, background been financial services, good that times, number some screening stated across and number we a we're many a As market of almost has seeing now. years of some seeing the in areas.

David Polansky

that Something -- ahead. go sorry, relates

Dan MacLachlan

they As larger of enterprises your more with at those do see do don't we business, we're their a these a The now, when So volume when expectation in time. over size lot expand customers, really that fall of second our lot to medium higher move customers. seen the immediately is of development is medium become and we've it continue and customers near over and over kind around seen they tier to at to new volume these look adding the pipeline in increases fall as especially relates opportunity to of all term. to right? your start ultimately, we'll see know that kind What in. customers we've that starting question today we with to new what land of we a What and is tremendous

it's going But from number we've we're seen new customer the than revenue of growth these lot past we ultimately, XX XXX, on in back most potential, to in more ago. the believe, a with what looking we've months customer historically even or look when seen XX the new standpoint. adds months if be for at you part, a But consistent

David Polansky

right issues going kind the And usual? lot there's moving you business on guess, from I of financial macro any Great. I or obviously mean, just on of a Are sector to seeing guys? of cautiousness -- now? are banking Okay. finance service as sort level, you anything a and you from seeing what customers in

Derek Dubner

question also Derek. your Thanks, customer bit I'll I a prior the the address what new question. to as is growth. drove of David. appreciate Yes. This And

the that exercise With impacted the efficiently using that, the did productivity there we are other strengths given our for our solutions. organization. mentioned, uncertainty conduct have, be internal that, across that into the those some solutions also greater an of we can out As customers and to and that believe, negatively had best discussions drive while out market economic drive could we around strong to we go-to-market in being play we we some fact there

some gained our of advantages feel we marketing we story there, getting combined bit we aggressively. a the like new spoke out So in initiatives there with more of

those So those results. combination strong that in some responsible of for of believe all were we generating

as if the we so that last months. at pipeline medium about not to far discussion we small, and and up the larger that the enterprises attacking much enterprises open climate, As we it been will, larger large to you at enterprise smaller in for out When enterprises. the our have speak new XX down seeing and building medium-sized do a

when of to you on much of hesitation business, a spend. win volume a on there's bit how do do you bit diverted And caution encounter is You the initially.

we winning good volumes how feedback getting in and are executing those from on the But very We're we that testing those coming and as our that feel anticipate solutions well to about strong market. said, as accelerate. do very in are slowly, we're that that

our what launches even optimistic road going that the those and in product are the about the business, some out in So on product year. optimistic seeing we're we're the about later more economy, map be of to given new very coming even

David Polansky

a terms was, And mean, that good quarter Okay. in of Great. net on also FOREWARN, I adds. really

we the know, like that a about roughly to is should I keep broke a XX,XXX of don't you thinking you XX,XXX. sort moving as of XX,XXX Or like adds over forward and quarter? doing as net to about of sort to we kind something like quarter. adds have I been net XX,XXX, think that that this is that think Do push thinking X,XXX like going there's

Derek Dubner

I this that -- Thank David. think you, again. Well, Derek is

to outlook. being understand reaching would of effect is my FOREWARN? receptive also Why a it? initial I call that saying more sort and the have seeing of to that I that perhaps they're from much what What is what fair, should hearing safe a this get safety proactive realtor I am us to snowball Why is other we're solution associations out think call a base that it do more that's conservative associations I essential.

certainly and expectation acceleration. our conservative again, that So it. But toward be viewing efforts geared are our would of a way

Operator

I turn Derek this will the call Dubner closing over At remarks. back time, for now to

Derek Dubner

Thank you.

to pleased We are quarter and solid XXXX. start a report to another

prospects the solutions and testing We drive continue driving growth. optimized in have and across demand traction mentioned, and broad-based enterprise with experience identity productivity fraud our seeing as innovative while larger efficiency to resources our suite, are to market nice

for well positioned Good XXXX and are afternoon. We beyond.

Operator

for you the Thank This today's in does your program. participation conference. conclude

disconnect. now may You

Red Violet (RDVT) 9 May 232023 Q1 Earnings call transcript