RDVT - Earnings call 3 2023 | Red Violet, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to Red Violet's Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce you to our host for today's conference call, Camilo Ramirez, Vice President of Finance and Investor Relations. Please go ahead.

Camilo Ramirez

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

Reform I our to safe with of by company's the and are forward-looking could results Before by would we from XXXX. information conference uncertainties risks statements associated certain forward-looking listeners harbor discussed provisions begin, stated Actual during call Act this or materially like implied Litigation differ statements advise of under that those the to the covered due management Securities Private business.

obligation information to The company update this undertakes provided call. the no on

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

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

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

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

Derek Dubner

third afternoon, Good XXXX results. our quarter today Thanks, everyone discuss you us and to to joining Camilo. thank

the volumes pleased onboarding the quarter strength robust, new consistent quarter. uncertainty, and to Notwithstanding customer in report of and to economic profitability. are continue a throughout revenue solid record we see We

We a additional of prior revenue in recall, our year comparison we million quarter, revenue, provide of generated some on percentage last a that $X.X revenue you perspective year-over-year to tough the XXXX included over increase, increase XX% in may as from transactional To which, reduced onetime the a as X% this record third of quarter quarter. contractual $XX.X million year. had

the record This contractual revenue generated any revenue quarter, revenue, reverted XX%. still without to benefit onetime and we our of percentage material

continued commitment profitability. nicely Our flow operational margins, and into to free translated management, including cash excellence, expense high

map still performance, Given cash while our to on growing continue consistent our and repurchasing in balance shares we road product sheet. our invest

another yet is This quarter foundation strategic further plan. executing of the our long-term while the strengthening business upon

on the Now numbers. to

for profit, total EBITDA $XX.X third XX%. was in of margin sheet. quarter. quarter, $X.X ended We was in Adjusted and $XX.X $X.X generated quarter in adjusted million balance We margin produced quarter resulting the the cash the million million revenue with adjusted a the with cash the $XX.X For million on million. XX% in gross for in free of gross the flow quarter

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

a As we corporate and bit identity to and by double-digit relates and percentage volumes consistent solutions. quarter. growth, driven risk, segments. for continue fraud it the IDI, our financial to solid demand throughout solid drove In see we revenue on in Diving

the variety retail, in consumer that greater concentration have such that of volumes of slowdown We experienced did by auto, are set as by competitors a inflation, heavily in end our our for in of cases. that financial solutions rates use highly are given interest experience impacted of half and disparate not high Some third transactions a slowdown diverse and mortgage a back the used quarter. users that and

points. from increased focused revenue revenue area over nice of solid mark this vertical, was highest the we strong Collections, with growth and enforcement, year law are to saw an highly on be our that traction. we collections a Note, In few the quarter where and we Within making XXXX. quarterly quarter percentage first investigative contribution will a in have first continue been revenue the since and growth of

things, was becoming worked government on With higher moratoria off discussed reliant certain adversely delinquencies pandemic, consumers are and credit impacts, rising repossessions are have and consumers excess among to, consumer of those costs populations. we certain impacted have much and previously, and low during borrowing more savings, on Collections Collections subsidies As the activity. due to other in inflationary credit

premature for this vertical. in we in time, now have higher turnaround Collections been some repossessions a recovery evidence our vertical, for are increasing While durable trending predicting of seeing and a

versus transactional which onetime the previously. Markets, largely Emerging a I prior Our basis industries, down to is by multiple revenue on attributable comprised percentage was double mentioned year, digits of that

IDI's include real relatively does flat. FOREWARN vertical, estate remained which not

services solution throughout the members As proactive now estate States to January U.S. to the XXX,XXX state for as the to safety strength FOREWARN, industry. are Florida Realtors, United the its beginning Over largest to realtor XXXX. use an association contracted real for purchase with proudly FOREWARN we the XXX demonstrate recently agreement FOREWARN, FOREWARN only continues in announced realtor associations

month, October, Multiple MLS realtors As contracted MLSs of in MLS States, its and announced services largest FOREWARN well, of Florida the XX,XXX-plus in the Service, November to Georgia State Listing the the January largest MLS one recognizing XXXX, for provide begin to and United that XXXX. subscribers. We we of for Georgia in Georgia this in revenue

repurchase We purchased XXXX common remaining November company's at $XX.XX $X we year-to-date stock stock average repurchase have the per of program. As stock the XX,XXX through under X, of program, currently to million shares $X.X our price have an million company's share.

period strong am in investing a our our stock. and quarters, of consistently economic navigate continuing and proud our of I all balance sheet ability quarter, very demonstrate business, sum, while which in strength growing team's back buying delivering to our third In strengthening performance an uncertain solid a

and customer to commitment XXXX. sustaining long-term We our throughout momentum satisfaction These for in our exceptional year focus the this and out to unwavering delivering deliver shareholders. continuing our results results reflect forward look our and team's to on closing dedication, value

turn Now Dan over it the I to discuss will to financials.

Daniel MacLachlan

from quarter. Thank we gaining quarter existing you, challenges, Derek, good revenue and new afternoon. posted customers seeing that our continued record a broader with healthy flow. in saw those Despite and We strength the third and strength solid cash macroeconomic and throughout volumes volumes both are profitability

third flowed recognized in up XXX%. generated adjusted ASC P&L, $X.X XXX. quarter quarter, tax for the We gross in valuation $X.X recorded with free nearly onetime a the million our that benefit of release EBITDA. record record against the our cash and Our revenue producing assets was million in in $XX.X adjusted in We the allowance million $XX.X nicely deferred down million $XX.X under profit flow a tax million

allowance projections the benefit. was valuation future The tax reversal income generating and of taxable released $XX.X taxable the as differences the years, of result our cumulative million of income for recent of inclusive onetime temporary a taxable

was for and $X.XX per $XX.X income basic of Our third earnings net diluted. million, $X.XX representing the quarter share

results. that, third With quarter our into let's jump

prior quarter of noted comparisons the gross third in in I of margin year. all million, down produced Total unless point. today gross quarter, revenue the XXXX, adjusted otherwise. be third in million X clarity, We will will profit against increase adjusted $XX.X percentage a For was $XX.X discuss resulted XX% over X% the

to generated point. a for XX%, We $X.X EBITDA generating record X% down Adjusted up for quarter percentage prior compared was was EBITDA margin prior in X free million, flow in year. over $X.X the $X.X cash year. quarter million Adjusted the million

Continuing our P&L. through the details of

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

year. quarter, Our points was XX% prior XX a a perspective, revenue up represented or this prior the $X.X XX% million from From dollar year. contractual increase percentage for from

Our gross XX%. retention revenue at the for consistent remained quarter

Moving the P&L. back to

exclusive was from and in $X.X decrease an This or gross revenue costs increased XX%, an data and infrastructure third amortization X% result point a million X% of of increase million X margin million of quarter of $X.X gross depreciation third-party profit Adjusted $XX.X producing cost increase acquisition a to increased percentage to XXXX. fees. million. $X.X adjusted Our

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

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

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

Our compared was income net income for to prior $X.X in million net million year. quarter the $XX.X of

million recognized quarter average As I release valuation discussed earnings $X.XX basic earlier, a tax We and shares count shares our and the against of million upon onetime allowance share was reported a our per for million included $X.XX weighted basic on the of diluted. XX of that share deferred tax recorded $XX.X previously assets. income benefit our net diluted XX.X based

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

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

in settlement restricted of stock was employee result financing common used net stock share same XXX,XXX activities cash the $X.X from period units. acquiring company the the million, shares XXXX, of of During tax

$XX.XX third to of share. As stock the of during we it repurchase shares XX,XXX our stock price at purchased per relates common program, average an quarter, our

price Through million $X our May XXXX, repurchase November common an shares X, total of on our average XXX,XXX that of pursuant $XX.XX program at stock X, authorized to share a have of we purchased XXXX. per was

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

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

we closing, quarter. pleased with the for third are results our In

Our pipeline. robust is we sheet are income generating balance across our seeing cash within great opportunity solid, remain flow. development we verticals, and Volumes are and healthy

out the close the looking start we to in forward we of XXXX. As rest great a strong, year are

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

Operator

Thank over you call the would much. Instructions] very [Operator I now Dubner. to hand to Derek like

question comes Investments first LLC. from of Our Polansky David Immersion

David Polansky

Good the year. you with that of especially had from tough that XQ job really comp on quarter, last

those statements. surprised that those financial X think and ago, like Georgia P&L that? when Florida the you your that. pretty seeing should material that's we deal you and impacts impact the by start those On and announced So pleasantly I of of I then talk on -- on deals for the flow-through Can seem the FOREWARN, results about a which signed weeks couple deal, you was

Daniel MacLachlan

Thanks the David. Sure, Dan. question. for is This

being industry. And really of large into so that But place are contracts within revenue such imagine, we Georgia really can agreements of obviously, overall broader excited get for with were able you MLS, We into kind to pricing as confidentiality wins such, the or back the without Florida organizations numbers. State X those significant those and announce with us. Association to can't our the and in and kind

as MLS a recognizing company, month this actually So revenue recognition from we'll November. a Georgia revenue for standpoint, begin in

relates in January it Florida will As of realtors, XXXX. to that begin

you'll 'XX, the So that quarter to flow revenue our through. with quarterly for see of expectation report the first start

contracts. about materiality really can't amount those a get and really contracts, excited of from those in I because sized overall rev rec the But the And we're into standpoint, are decent confidentiality, dollar of it. revenue,

David Polansky

you make terms mean, those, mean In talk though, assumptions I just Can per of incremental that? on about of terms incrementals user, some on what I we costs, your that. thinking revenue are in on I if

Daniel MacLachlan

Sure.

cost a margin. dollar comes kind XXX% from know, about -- contribution in When blue to FOREWARN. and and margin, going I a of individual bring user, talk per we out from So every about perspective, obviously, to if mean, charge the we're $XX price to we're us, is agent an to if talking access comes a the as you month of us right we them

about the of talk monthly volume less associations we association, and When on obviously, from standpoint, it much a a that than size from depending the gets perspective.

So specifics of excited that QX the much into you'll really revenue to to 'XX. these the pricing agreements, without too is be of and getting, recognizing again, able in see expectation X start come through we're

Derek Dubner

wins Derek. it's sentiment the obviously, very yes, David, Obviously, you. are FOREWARN. from echoing And These of significant I'm both for

have As contracted for XXX FOREWARN. I mentioned times, a couple associations of

industry. deem we best course, this for proactive estate Of safety real solution the the

estate definitely country. several of broad to need their the recognition real them of to largest provide to to the associations members the enable There's safer in us have engagements. a this amongst for to tool So community the win

excited it. So we're very about

David Polansky

your you're Excellent. make few on don't my Great. a pretty but probably clip, what FOREWARN I'm been but I It of looks know looking numbers at IDI exactly I'm then you're years. a -- if spend And if now, past decent guess. the IDI, per customer could number because know past -- on couple is, I I doing growing the pretty don't quarters, revenue obviously, decent you've just not like right

IDI to solution? up Or to more due I spending want your existing that you're know, larger? on So customers that new signing accounts be are is

Daniel MacLachlan

is base. historically XX we've a really The done grow again. tier. and about focusing and Yes, adopters. we're been is start have great to you And standpoint, within over the moving a even And David, Obviously, part on the with small months, more combination good and both. you of opportunity job our we've customer larger revenue kind historically, of of a it's medium dealing base. this from talked model, last we've up Dan an then XX this businesses, But with with enterprise, when existing growing lot that early medium-sized

look percentage past when it growing per months, contributed that been IDI And at both from customer XX, size the at that's look side we XX of XX, annual from to So over and revenue has basis. traditionally, the the nicely their not grow larger enterprise volume you the within the capacity that win new customer bringing all medium we're get in, customer base. the Because right to a but also an going or bat. to off you're necessarily when customer,

but for within Obviously, you look grow you with them in potentially land their current and allows also use cases expand. the that use then to and additional case, organization understand you

a in able both So grow well being size of we're bringing the base. it's to new as combination been as the existing customer

David Polansky

of I so. hires But know new within the government larger unreasonable on expectations update X going are or sort the we any much sort guess, of, setting made where you months without or some business customers. last customers that is sort after or -- medium because penetrating know with enterprises I your some sales I have longer cycles. And you're you of give can

that? So can you say anything about

Derek Dubner

Sure, It's on Derek. still early David. that. We're innings

the to X longer we're us, with still early X those And sales or months, While XX all sort lead of we larger last into we've our over We're for course, very excited us if over in that, front we had have public sector cycles. which, -- path, inroads example. been the thought innings. the example, they've very have leaders years you we've months for making added opportunity years, will. of the certain and divisions to talked are break of growth about with, or certain enterprise larger identity to enterprises, But we've formulating last about for notwithstanding XX been given

won't that early So to I they're the those testing still like for economic at to in complex talks way those solutions industry out letting against our what's what say and move our uncertain enterprises, us with excited of begin for solving get it large and innings, so running we environment, ability solve not very unique and teams goal and any are is rather those in And with maybe talks today. quickly. ultimately an problems, there along the let other our of

where we future. in the lot that's good are with again, stuff So today a of

David Polansky

have want sort you economic of that something you when the impact on if economy Because customers parts actually of mentioned you new clause, to But I've delay talk it can of that always environment. signings. you? been hedging -- I as I'm I've up the about at brought being your your -- sure not that using any on thinking And you're a thought if the business countercyclical. of least about

say as months that can but maybe the like I might you a impact, you you how next impact or to think everyone you bad give XX a that when economic on take don't So over necessarily XX refresher so? thing,

Derek Dubner

diligence. as David. way collections rates a use far hiking is in seen cases. We've with question, a going assets one then with balanced significantly. they nice whatever parties the collection going doing really with the use percolating. progress may across firms the a the rise today debt really to or openings, suing tilt see as business in of has then economy is identity after lawsuits We've due like. that the other, do when law as from be seen of account risk economy many, repossessions our strongly And and now way and hot the verification, we and It doing bent upon as across Fed aggressively, cools the That's great mitigation, many, see the there to very of very systems doesn't lot which balanced put way many view great many very you're you. new being industries, When Yes. our are economy. Thank We thing is

and We've we've focused seen law E-Systems, been of enforcement law there, law avid within enforcement. enforcement been increase, making we've are very traction and nice users

more economy, so are a a fraud but even very in tends tilting to into economy, our with on So negative increase. economy the important. with systems more therefore, reliance and a bad a good economy,

So we see those increasing well. as

So side for apart and It's for the months XX fall about the another. again, very business good next our balanced, to those it's of the feel business one of of one to benefit businesses we XX sure. where doesn't

David Polansky

specific the XX%. Great. we're now And for said number I disclose a collections XX%, I pre-COVID, this, you -- that missed did know on we're sorry you you've if did quarter?

of been X what that to for You've willing over growth it's has are or said quarter roughly kind in What talk flat the about percentage years. done you terms business last two?

Daniel MacLachlan

is this David, Dan. Yes,

reasons, starting And X some and will, see, if of mentioned to and highest year. within over as of earlier, over our pre-COVID So relatively it is yes, seen his the publicly first of a we collections as little as competitive increase percentage prior in you for this than of a We're collections the year the as XX% that of revenue right. for say the overall quarter Derek or -- high revenue I have out break the repossession. will a been again, flat explained, today. commentary but bit in saw that we was percolation, couple XX% you're Today, a less past we X mean we indicators don't said quarters. within on verticals, going we've actually probably leading we it's we now where revenue. And our quarter point in was

standpoint, a upside. at is conservative the because vertical for collections us look excited we're we So from all

look to Collections healthy, the which growing just we strong. XXXX, as reversion we when corporate start And in very that at some for if we business. see can space, great includes the upside has very largest get and vertical, risk, been Our financial back

Derek Dubner

again. Derek David, Yes,

the a than are there with those you Just little business to maybe for less add that are. color familiar

if As part it's over the -- base Collections They're always industry, very market. you our of verification the rather recall, our some really of the there of today. business as serve, XX% of our early just is to the adopter you an last And of focus, couple was powering identity rather by days into not brought revenue our years some Collections. nature this products it we was a may will, it's -- solutions. first players and been collections earlier of of out that's when evolution dwarfed We're the these maturity while to leading of wonderful

there the our And identity product accelerating map so background our our screening percentage in business. and be long-term identity as by intelligence Collections road of risk as the moved while pandemic focus continue support out well focus and and corporate on as just that move the revenue, And the of fraud long-term powering and powering and up. will of down nature financial certainly, to Collections verification solutions market, a

Operator

to remarks. you to Derek much. would I like for back the very Thank now call closing turn Dubner over

Derek Dubner

joining thank for again today, Thanks another with record team yet and delivering profitability. I revenue quarter for our us to strong want

challenging Our business well, the environment. performing is quite especially economic given

to our foundation dedicated continued strategic business. are We the plan, our growth which strengthening with includes of of

are XXXX. year-to-date, of our day. well year Good performance positioned the the Given we for remainder and

Operator

This concludes much. call. Thank you very today's

may You disconnect. now

Red Violet (RDVT) 7 Nov 232023 Q3 Earnings call transcript