red violet Announces Fourth Quarter and Full Year 2020 Financial Results
Strong Finish to the Year Produces Record
Full Year 2020 Revenue up 14% to
“red violet delivered a solid quarter, concluding a year in which we performed better in all key financial metrics compared to 2019 despite pandemic impacts,” stated
Fourth Quarter Financial Results
For the three months ended
- Total revenue decreased 1% to
$9.0 million . Platform revenue increased 12% to$8.6 million . Services revenue decreased 74% to$0.4 million . - Net loss narrowed 61% to
$1.9 million . - Adjusted EBITDA increased 49% to
$1.2 million . - Gross profit increased 5% to
$5.1 million . Gross margin increased to 57% from 54%. - Adjusted gross profit increased 11% to
$6.3 million . Adjusted gross margin increased to 70% from 62%. - Generated
$1.8 million in cash from operating activities in the fourth quarter. - Cash and cash equivalents were
$13.0 million as ofDecember 31, 2020 .
Full Year Financial Results
For the year ended
- Total revenue increased 14% to
$34.6 million . Platform revenue increased 26% to$32.5 million . Services revenue decreased 54% to$2.0 million . - Net loss narrowed 38% to
$6.8 million . - Adjusted EBITDA increased 213% to
$5.9 million . - Gross profit increased 26% to
$19.3 million . Gross margin increased to 56% from 51%. - Adjusted gross profit increased 29% to
$23.3 million . Adjusted gross margin increased to 67% from 60%. - Generated
$6.5 million in cash from operating activities in 2020.
Fourth Quarter and Recent Business Highlights
- Despite pandemic headwinds, strong growth in our high-margin platform revenue allowed us to generate over 90% contribution of total incremental revenue to adjusted EBITDA, with a
$4.3 million increase in total revenue in 2020 generating a$4.0 million increase in adjusted EBITDA. - idiCORE™ ended the fourth quarter 2020 with 5,726 customers, a 13% increase from the fourth quarter 2019.
- FOREWARN® ended the fourth quarter 2020 with 48,377 users, a 58% increase from the fourth quarter of 2019.
- Added 12 product development and infrastructure members to the technology team to address growth opportunities.
Use of Non-GAAP Financial Measures
Management evaluates the financial performance of our business on a variety of key indicators, including non-GAAP metrics of adjusted EBITDA, adjusted gross profit and adjusted gross margin. Adjusted EBITDA is a financial measure equal to net loss, the most directly comparable financial measure based on US GAAP, excluding interest expense (income), net, depreciation and amortization, share-based compensation expense, write-off of long-lived assets and others, and sales and use tax expense. We define adjusted gross profit as revenue less cost of revenue (exclusive of depreciation and amortization), and adjusted gross margin as adjusted gross profit as a percentage of revenue.
Conference Call
In conjunction with this release, red violet will host a conference call and webcast today at
About red violet®
At red violet, we build proprietary technologies and apply analytical capabilities to deliver identity intelligence. Our technology powers critical solutions, which empower organizations to operate with confidence. Our solutions enable the real-time identification and location of people, businesses, assets and their interrelationships. These solutions are used for purposes including risk mitigation, due diligence, fraud detection and prevention, regulatory compliance, and customer acquisition. Our intelligent platform, CORE™, is purpose-built for the enterprise, yet flexible enough for organizations of all sizes, bringing clarity to massive datasets by transforming data into intelligence. Our solutions are used today to enable frictionless commerce, to ensure safety, and to reduce fraud and the concomitant expense borne by society. For more information, please visit www.redviolet.com.
FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements," as that term is defined under the Private Securities Litigation Reform Act of 1995 (PSLRA), which statements may be identified by words such as "expects," "plans," "projects," "will," "may," "anticipate," "believes," "should," "intends," "estimates," and other words of similar meaning. Such forward looking statements are subject to risks and uncertainties that are often difficult to predict, are beyond our control and which may cause results to differ materially from expectations, including whether 2021 is off to a great start with the first quarter pacing towards record revenue and adjusted EBITDA and whether our innovative technology and customer-centric solutions are well positioned to continue to drive strong growth in 2021 and beyond. Readers are cautioned not to place undue reliance on these forward-looking statements, which are based on our expectations as of the date of this press release and speak only as of the date of this press release and are advised to consider the factors listed above together with the additional factors under the heading "Forward-Looking Statements" and "Risk Factors" in red violet's Form 10-K for the year ended
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
| ASSETS: | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 12,957 | $ | 11,776 | ||||
| Accounts receivable, net of allowance for doubtful accounts of as of |
3,201 | 3,543 | ||||||
| Prepaid expenses and other current assets | 581 | 722 | ||||||
| Total current assets | 16,739 | 16,041 | ||||||
| Property and equipment, net | 558 | 660 | ||||||
| Intangible assets, net | 27,170 | 24,034 | ||||||
| 5,227 | 5,227 | |||||||
| Right-of-use assets | 2,161 | 2,620 | ||||||
| Other noncurrent assets | 139 | 289 | ||||||
| Total assets | $ | 51,994 | $ | 48,871 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,075 | $ | 2,138 | ||||
| Accrued expenses and other current liabilities | 1,458 | 1,571 | ||||||
| Current portion of operating lease liabilities | 552 | 491 | ||||||
| Current portion of long-term loan | 449 | - | ||||||
| Deferred revenue | 504 | 128 | ||||||
| Total current liabilities | 5,038 | 4,328 | ||||||
| Noncurrent operating lease liabilities | 1,908 | 2,459 | ||||||
| Long-term loan | 1,703 | - | ||||||
| Total liabilities | 8,649 | 6,787 | ||||||
| Shareholders' equity: | ||||||||
| Preferred stock—$0.001 par value, 10,000,000 shares authorized, and 0 shares issued and outstanding, as of |
- | - | ||||||
| Common stock—$0.001 par value, 200,000,000 shares authorized, 12,167,327 and 11,657,912 shares issued, 12,167,327 and 11,554,765 shares outstanding, as of |
13 | 12 | ||||||
| - | (1,255 | ) | ||||||
| Additional paid-in capital | 66,005 | 59,187 | ||||||
| Accumulated deficit | (22,673 | ) | (15,860 | ) | ||||
| Total shareholders' equity | 43,345 | 42,084 | ||||||
| Total liabilities and shareholders' equity | $ | 51,994 | $ | 48,871 | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share data)
| Year Ended |
||||||||
| 2020 | 2019 | |||||||
| Revenue | $ | 34,586 | $ | 30,286 | ||||
| Costs and expenses(1): | ||||||||
| Cost of revenue (exclusive of depreciation and amortization) | 11,276 | 12,257 | ||||||
| Sales and marketing expenses | 8,098 | 7,528 | ||||||
| General and administrative expenses | 17,827 | 18,824 | ||||||
| Depreciation and amortization | 4,216 | 2,889 | ||||||
| Total costs and expenses | 41,417 | 41,498 | ||||||
| Loss from operations | (6,831 | ) | (11,212 | ) | ||||
| Interest income, net | 18 | 136 | ||||||
| Loss before income taxes | (6,813 | ) | (11,076 | ) | ||||
| Income taxes | - | - | ||||||
| Net loss | $ | (6,813 | ) | $ | (11,076 | ) | ||
| Loss per share: | ||||||||
| Basic and diluted | $ | (0.57 | ) | $ | (1.03 | ) | ||
| Weighted average number of shares outstanding: | ||||||||
| Basic and diluted | 11,863,413 | 10,762,881 | ||||||
| (1) Share-based compensation expense in each category: | ||||||||
| Sales and marketing expenses | $ | 609 | $ | 454 | ||||
| General and administrative expenses | 7,455 | 9,459 | ||||||
| Total | $ | 8,064 | $ | 9,913 | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
| Year Ended |
||||||||
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (6,813 | ) | $ | (11,076 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 4,216 | 2,889 | ||||||
| Share-based compensation expense | 8,064 | 9,913 | ||||||
| Write-off of long-lived assets | 337 | 30 | ||||||
| Provision for bad debts | 406 | 582 | ||||||
| Noncash lease expenses | 459 | 422 | ||||||
| Interest expense | 12 | - | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (64 | ) | (1,860 | ) | ||||
| Prepaid expenses and other current assets | 141 | 212 | ||||||
| Other noncurrent assets | 63 | 339 | ||||||
| Accounts payable | (63 | ) | (108 | ) | ||||
| Accrued expenses and other current liabilities | (125 | ) | 639 | |||||
| Deferred revenue | 376 | 102 | ||||||
| Operating lease liabilities | (490 | ) | (437 | ) | ||||
| Net cash provided by operating activities | 6,519 | 1,647 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (154 | ) | (90 | ) | ||||
| Capitalized costs included in intangible assets | (5,508 | ) | (5,912 | ) | ||||
| Net cash used in investing activities | (5,662 | ) | (6,002 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of shares, net of issuance costs | - | 7,436 | ||||||
| Proceeds from long-term loan | 2,152 | - | ||||||
| Taxes paid related to net share settlement of vesting of restricted stock units | (1,828 | ) | (1,255 | ) | ||||
| Net cash provided by financing activities | 324 | 6,181 | ||||||
| Net increase in cash and cash equivalents | $ | 1,181 | $ | 1,826 | ||||
| Cash and cash equivalents at beginning of period | 11,776 | 9,950 | ||||||
| Cash and cash equivalents at end of period | $ | 12,957 | $ | 11,776 | ||||
| SUPPLEMENTAL DISCLOSURE INFORMATION | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Share-based compensation capitalized in intangible assets | $ | 1,838 | $ | 788 | ||||
| Right-of-use assets obtained in exchange of operating lease liabilities | $ | - | $ | 3,042 | ||||
| Operating lease liabilities arising from obtaining right-of-use assets | $ | - | $ | 3,387 | ||||
Use and Reconciliation of Non-GAAP Financial Measures
Management evaluates the financial performance of our business on a variety of key indicators, including non-GAAP metrics of adjusted EBITDA, adjusted gross profit and adjusted gross margin. Adjusted EBITDA is a financial measure equal to net loss, the most directly comparable financial measure based on US GAAP, excluding interest expense (income), net, depreciation and amortization, share-based compensation expense, write-off of long-lived assets and others, and sales and use tax expense, as noted in the tables below. We define adjusted gross profit as revenue less cost of revenue (exclusive of depreciation and amortization), and adjusted gross margin as adjusted gross profit as a percentage of revenue.
| Three Months Ended |
Year Ended |
|||||||||||||||
| (In thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Net loss | $ | (1,875 | ) | $ | (4,856 | ) | $ | (6,813 | ) | $ | (11,076 | ) | ||||
| Interest expense (income), net | 6 | (13 | ) | (18 | ) | (136 | ) | |||||||||
| Depreciation and amortization | 1,196 | 840 | 4,216 | 2,889 | ||||||||||||
| Share-based compensation expense | 1,648 | 4,623 | 8,064 | 9,913 | ||||||||||||
| Write-off of long-lived assets and others | 222 | 3 | 474 | 98 | ||||||||||||
| Sales and use tax expense | - | 205 | - | 205 | ||||||||||||
| Adjusted EBITDA | $ | 1,197 | $ | 802 | $ | 5,923 | $ | 1,893 | ||||||||
The following is a reconciliation of gross profit, the most directly comparable GAAP financial measure, to adjusted gross profit:
| Three Months Ended |
Year Ended |
|||||||||||||||
| (In thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Revenue | $ | 8,963 | $ | 9,050 | $ | 34,586 | $ | 30,286 | ||||||||
| Cost of revenue (exclusive of depreciation and amortization) |
(2,694 | ) | (3,414 | ) | (11,276 | ) | (12,257 | ) | ||||||||
| Depreciation and amortization of intangible assets |
(1,143 | ) | (777 | ) | (3,990 | ) | (2,637 | ) | ||||||||
| Gross profit | 5,126 | 4,859 | 19,320 | 15,392 | ||||||||||||
| Depreciation and amortization of intangible assets |
1,143 | 777 | 3,990 | 2,637 | ||||||||||||
| Adjusted gross profit | $ | 6,269 | $ | 5,636 | $ | 23,310 | $ | 18,029 | ||||||||
| Gross margin | 57 | % | 54 | % | 56 | % | 51 | % | ||||||||
| Adjusted gross margin | 70 | % | 62 | % | 67 | % | 60 | % | ||||||||
In order to assist readers of our consolidated financial statements in understanding the operating results that management uses to evaluate the business and for financial planning purposes, we present non-GAAP measures of adjusted EBITDA, adjusted gross profit and adjusted gross margin as supplemental measures of our operating performance. We believe they provide useful information to our investors as they eliminate the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. In addition, we use them as an integral part of our internal reporting to measure the performance and operating strength of our business.
We believe adjusted EBITDA, adjusted gross profit and adjusted gross margin are relevant and provide useful information frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours and are indicators of the operational strength of our business. We believe adjusted EBITDA eliminates the uneven effect of considerable amounts of non-cash depreciation and amortization, share-based compensation expense and the impact of other non-recurring items, providing useful comparisons versus prior periods or forecasts. Our adjusted gross profit is a measure used by management in evaluating the business’s current operating performance by excluding the impact of prior historical costs of assets that are expensed systematically and allocated over the estimated useful lives of the assets, which may not be indicative of the current operating activity. Our adjusted gross profit is calculated by using revenue, less cost of revenue (exclusive of depreciation and amortization). We believe adjusted gross profit provides useful information to our investors by eliminating the impact of non-cash depreciation and amortization, and specifically the amortization of software developed for internal use, providing a baseline of our core operating results that allow for analyzing trends in our underlying business consistently over multiple periods. Adjusted gross margin is calculated as adjusted gross profit as a percentage of revenue.
Adjusted EBITDA, adjusted gross profit and adjusted gross margin are not intended to be performance measures that should be regarded as an alternative to, or more meaningful than, financial measures presented in accordance with GAAP. The way we measure adjusted EBITDA, adjusted gross profit and adjusted gross margin may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in our various agreements.
SUPPLEMENTAL METRICS
The following metrics are intended as a supplement to the financial statements found in this release and other information furnished or filed with the
We intend to periodically review and refine the definition, methodology and appropriateness of each of these supplemental metrics. As a result, metrics are subject to removal and/or changes, and such changes could be material.
| (Unaudited) | ||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Q1'19 | Q2'19 | Q3'19 | Q4'19 | Q1'20 | Q2'20 | Q3'20 | Q4'20 | ||||||||||||||||||||||||
| Customer metrics | ||||||||||||||||||||||||||||||||
| idiCORE - billable customers(1) | 4,020 | 4,370 | 4,781 | 5,064 | 5,326 | 5,375 | 5,758 | 5,726 | ||||||||||||||||||||||||
| FOREWARN - users(2) | 15,444 | 19,721 | 23,853 | 30,577 | 36,506 | 40,857 | 44,927 | 48,377 | ||||||||||||||||||||||||
| Revenue metrics | ||||||||||||||||||||||||||||||||
| Contractual revenue %(3) | 67 | % | 62 | % | 66 | % | 66 | % | 69 | % | 79 | % | 68 | % | 77 | % | ||||||||||||||||
| Revenue attrition %(4) | 5 | % | 5 | % | 6 | % | 6 | % | 8 | % | 11 | % | 10 | % | 11 | % | ||||||||||||||||
| Revenue from new customers(5) | $ | 1,285 | $ | 1,596 | $ | 1,406 | $ | 1,018 | $ | 1,417 | $ | 916 | $ | 726 | $ | 877 | ||||||||||||||||
| Base revenue from existing customers(6) | $ | 3,593 | $ | 4,480 | $ | 5,578 | $ | 6,690 | $ | 6,629 | $ | 5,047 | $ | 5,797 | $ | 6,678 | ||||||||||||||||
| Growth revenue from existing customers(7) | $ | 856 | $ | 1,169 | $ | 1,273 | $ | 1,342 | $ | 1,254 | $ | 1,093 | $ | 2,744 | $ | 1,408 | ||||||||||||||||
| Platform financial metrics | ||||||||||||||||||||||||||||||||
| Platform revenue(8) | $ | 4,894 | $ | 6,153 | $ | 7,085 | $ | 7,652 | $ | 8,108 | $ | 6,857 | $ | 8,968 | $ | 8,604 | ||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | $ | 2,069 | $ | 2,287 | $ | 2,286 | $ | 2,431 | $ | 2,498 | $ | 2,427 | $ | 2,489 | $ | 2,447 | ||||||||||||||||
| Adjusted gross margin | 58 | % | 63 | % | 68 | % | 68 | % | 69 | % | 65 | % | 72 | % | 72 | % | ||||||||||||||||
| Services financial metrics | ||||||||||||||||||||||||||||||||
| Services revenue(9) | $ | 839 | $ | 1,093 | $ | 1,171 | $ | 1,399 | $ | 1,191 | $ | 200 | $ | 299 | $ | 360 | ||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | $ | 600 | $ | 765 | $ | 836 | $ | 983 | $ | 794 | $ | 159 | $ | 214 | $ | 246 | ||||||||||||||||
| Adjusted gross margin | 29 | % | 30 | % | 29 | % | 30 | % | 33 | % | 20 | % | 28 | % | 31 | % | ||||||||||||||||
| Other metrics | ||||||||||||||||||||||||||||||||
| Employees - sales and marketing | 47 | 48 | 48 | 51 | 51 | 53 | 52 | 53 | ||||||||||||||||||||||||
| Employees - support | 6 | 7 | 8 | 7 | 8 | 8 | 9 | 9 | ||||||||||||||||||||||||
| Employees - infrastructure | 12 | 12 | 13 | 11 | 13 | 12 | 12 | 14 | ||||||||||||||||||||||||
| Employees - engineering | 20 | 20 | 25 | 23 | 26 | 27 | 27 | 32 | ||||||||||||||||||||||||
| Employees - administration | 14 | 14 | 13 | 16 | 15 | 14 | 15 | 18 | ||||||||||||||||||||||||
| (1) | We define a billable customer of idiCORE as a single entity that generated revenue in the last three months of the period. Billable customers are typically corporate organizations. In most cases, corporate organizations will have multiple users and/or departments purchasing our solutions, however, we count the entire organization as a discrete customer. |
| (2) | We define a user of FOREWARN as a unique person that has a subscription to use the FOREWARN service as of the last day of the period. A unique person can only have one user account. |
| (3) | Contractual revenue % represents revenue generated from customers pursuant to pricing contracts containing a monthly fee and any additional overage divided by total revenue. Pricing contracts are generally annual contracts or longer, with auto renewal. |
| (4) | Revenue attrition is defined as the revenue lost as a result of customer attrition, net of reinstated customer revenue. It excludes expansion revenue and revenue from FOREWARN. Revenue is measured once a customer has generated revenue for six consecutive months. Revenue is considered lost when all revenue from a customer ceases for three consecutive months; revenue generated by a customer after the three-month loss period is defined as reinstated revenue. Revenue attrition percentage is calculated on a trailing twelve-month basis, the numerator of which is the revenue lost during the period due to attrition, net of reinstated revenue, and the denominator of which is total revenue based on an average of total revenue at the beginning of each month during the period. |
| (5) | Revenue from new customers represents the total monthly revenue generated from new customers in a given period. A customer is defined as a new customer during the first six months of revenue generation. |
| (6) | Base revenue from existing customers represents the total monthly revenue generated from existing customers in a given period that does not exceed the customers' trailing six-month average revenue. A customer is defined as an existing customer six months after their initial month of revenue. |
| (7) | Growth revenue from existing customers represents the total monthly revenue generated from existing customers in a given period in excess of the customers' trailing six-month average revenue. |
| (8) | Platform revenue consists of both contractual and transactional revenue generated from our technology platform, CORE. It includes all revenue generated through our idiCORE and FOREWARN solutions. The cost of revenue, which consists primarily of data acquisition costs, remains relatively fixed irrespective of revenue generation. |
| (9) | Services revenue consists of transactional revenue generated from our idiVERIFIED service. The cost of revenue, which consists primarily of third-party servicer costs, is variable. |
Investor Relations Contact:
561-757-4500
ir@redviolet.com
Source: Red Violet, Inc.