Press Release

Press Release

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November 10, 2020 at 4:05 PM EST

red violet Announces Third Quarter 2020 Financial Results

Strong Sequential Revenue Growth Fuels Record Gross Profit

BOCA RATON, Fla., Nov. 10, 2020 (GLOBE NEWSWIRE) -- Red Violet, Inc. (NASDAQ: RDVT), a leading analytics and information solutions provider, today announced financial results for the quarter ended September 30, 2020.

“We delivered another strong quarter during an incredibly challenging time, further demonstrating the applicability of our technology and solutions across diverse markets and industries, as well as the necessity of integrating our solutions to enable better data-driven decisioning,” stated Derek Dubner, red violet’s CEO. “The momentum we experienced exiting the second quarter continued throughout the third quarter, generating a 31% sequential increase in revenue to $9.3 million and 130% sequential increase in adjusted EBITDA to a record $2.1 million. I am extremely proud of the performance of our team and remain optimistic in our ability to continue to drive growth for the foreseeable future.”

Third Quarter Financial Results

For the three months ended September 30, 2020 as compared to the three months ended September 30, 2019:

  • Total revenue increased 12% to $9.3 million. Platform revenue increased 27% to $9.0 million. Services revenue decreased 75% to $0.3 million.
  • Net loss narrowed 7% to $0.9 million.
  • Adjusted EBITDA increased 84% to $2.1 million.
  • Gross profit increased 24% to $5.5 million. Gross margin increased to 59% from 54%.
  • Adjusted gross profit increased 28% to $6.6 million. Adjusted gross margin increased to 71% from 62%.
  • Generated $1.7 million in cash from operating activities in the third quarter.
  • Cash and cash equivalents were $12.4 million as of September 30, 2020.

Third Quarter and Recent Business Highlights

  • Our high-margin, platform revenue demonstrated accelerated growth throughout the third quarter. As a result, we generated a record 71% adjusted gross margin, producing a record adjusted gross profit of $6.6 million. Adjusted EBITDA increased 84% over prior year and increased 130% on a sequential quarter basis to $2.1 million.
  • Increased customer adoption of idiCORE™ with over 380 new customers added to the platform in the third quarter.
  • FOREWARN®, our subscription app-based real estate solution, added over 4,000 users in the third quarter.
  • Strong revenue growth from existing customer expansion. Growth revenue from existing customers increased 116% over prior year and 151% on a sequential quarter basis.

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 GAAP, excluding interest expense (income), net, depreciation and amortization, share-based compensation expense, and write-off of long-lived assets and others. 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 4:30pm ET to discuss its quarterly results and provide a business update. To listen to the call, please dial (877) 665-6635 for domestic callers or (602) 563-8608 for international callers, using the passcode 1356743. To access the live audio webcast, visit the Investors section of the red violet website at www.redviolet.com. Please login at least 15 minutes prior to the start of the call to ensure adequate time for any downloads that may be required. Following the completion of the conference call, a replay will be available for approximately one week by dialing (855) 859-2056 or (404) 537-3406 with the replay passcode 1356743. An archived webcast of the conference call will be available on the Investors section of the red violet website at www.redviolet.com.

About red violet®

At red violet, we believe that time is your most valuable asset. Through powerful analytics, we transform data into intelligence, in a fast and efficient manner, so that our clients can spend their time on what matters most - running their organizations with confidence. Through leading-edge, proprietary technology and a massive data repository, our analytics and information solutions harness the power of data fusion, uncovering the relevance of disparate data points and converting them into comprehensive and insightful views of people, businesses, assets and their interrelationships. We empower clients across markets and industries to better execute all aspects of their business, from managing risk, recovering debt, identifying fraud and abuse, and ensuring legislative compliance, to identifying and acquiring customers. At red violet, we are dedicated to making the world a safer place and reducing the cost of doing business. 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 the impact of the Covid-19 pandemic on our current and future results of operations and whether we will continue to drive growth for the foreseeable future. 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 December 31, 2019 filed on March 12, 2020, as may be supplemented or amended by the Company's other SEC filings. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.


RED VIOLET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(unaudited)
 
  September 30, 2020     December 31, 2019  
ASSETS:              
Current assets:              
Cash and cash equivalents $ 12,441     $ 11,776  
Accounts receivable, net of allowance for doubtful accounts of $20 and $40
as of September 30, 2020 and December 31, 2019, respectively
  2,920       3,543  
Prepaid expenses and other current assets   616       722  
Total current assets   15,977       16,041  
Property and equipment, net   555       660  
Intangible assets, net   26,977       24,034  
Goodwill   5,227       5,227  
Right-of-use assets   2,279       2,620  
Other noncurrent assets   93       289  
Total assets $ 51,108     $ 48,871  
LIABILITIES AND SHAREHOLDERS' EQUITY:              
Current liabilities:              
Accounts payable $ 2,199     $ 2,138  
Accrued expenses and other current liabilities   775       1,571  
Current portion of operating lease liabilities   536       491  
Current portion of long-term loan   1,059       -  
Deferred revenue   180       128  
Total current liabilities   4,749       4,328  
Noncurrent operating lease liabilities   2,052       2,459  
Long-term loan   1,093       -  
Total liabilities   7,894       6,787  
Shareholders' equity:              
Preferred stock—$0.001 par value, 10,000,000 shares authorized, and 0 shares
issued and outstanding, as of September 30, 2020 and December 31, 2019
  -       -  
Common stock—$0.001 par value, 200,000,000 shares authorized, 12,371,665 and
11,657,912 shares issued, 12,146,910 and 11,554,765 shares outstanding, as of
September 30, 2020 and December 31, 2019
  13       12  
Treasury stock, at cost, 224,755 and 103,147 shares as of September 30, 2020 and
December 31, 2019
  (3,083 )     (1,255 )
Additional paid-in capital   67,082       59,187  
Accumulated deficit   (20,798 )     (15,860 )
Total shareholders' equity   43,214       42,084  
Total liabilities and shareholders' equity $ 51,108     $ 48,871  




RED VIOLET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share data)
(unaudited)
 
  Three Months Ended September 30,     Nine Months Ended September 30,  
  2020     2019     2020     2019  
Revenue $ 9,267     $ 8,257     $ 25,623     $ 21,236  
Costs and expenses(1):                              
Cost of revenue (exclusive of depreciation and amortization)   2,703       3,122       8,582       8,843  
Sales and marketing expenses   2,217       1,925       6,139       5,428  
General and administrative expenses   4,147       3,498       12,844       11,259  
Depreciation and amortization   1,118       750       3,020       2,049  
Total costs and expenses   10,185       9,295       30,585       27,579  
Loss from operations   (918 )     (1,038 )     (4,962 )     (6,343 )
Interest (expense) income, net   (7 )     46       24       123  
Loss before income taxes   (925 )     (992 )     (4,938 )     (6,220 )
Income taxes   -       -       -       -  
Net loss $ (925 )   $ (992 )   $ (4,938 )   $ (6,220 )
Loss per share:                              
Basic and diluted $ (0.08 )   $ (0.09 )   $ (0.42 )   $ (0.59 )
Weighted average number of shares outstanding:                              
Basic and diluted   12,072,716       10,917,673       11,758,907       10,497,036  
                               
                               
(1) Share-based compensation expense in each category:                              
Sales and marketing expenses $ 151     $ 114     $ 460     $ 290  
General and administrative expenses   1,702       1,293       5,956       5,000  
Total $ 1,853     $ 1,407     $ 6,416     $ 5,290  





RED VIOLET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
 
  Nine Months Ended September 30,  
  2020     2019  
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net loss $ (4,938 )   $ (6,220 )
Adjustments to reconcile net loss to net cash provided by operating activities:              
Depreciation and amortization   3,020       2,049  
Share-based compensation expense   6,416       5,290  
Write-off of long-lived assets   117       30  
Provision for bad debts   360       398  
Noncash lease expenses   341       313  
Interest expense   7       -  
Changes in assets and liabilities:              
Accounts receivable   263       (1,458 )
Prepaid expenses and other current assets   106       40  
Other noncurrent assets   109       254  
Accounts payable   61       235  
Accrued expenses and other current liabilities   (803 )     (183 )
Deferred revenue   52       9  
Operating lease liabilities   (362 )     (322 )
Net cash provided by operating activities   4,749       435  
CASH FLOWS FROM INVESTING ACTIVITIES:              
Purchase of property and equipment   (98 )     (71 )
Capitalized costs included in intangible assets   (4,310 )     (4,413 )
Net cash used in investing activities   (4,408 )     (4,484 )
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 )     -  
Net cash provided by financing activities   324       7,436  
Net increase in cash and cash equivalents $ 665     $ 3,387  
Cash and cash equivalents at beginning of period   11,776       9,950  
Cash and cash equivalents at end of period $ 12,441     $ 13,337  
SUPPLEMENTAL DISCLOSURE INFORMATION              
Cash paid for interest $ -     $ -  
Cash paid for income taxes $ -     $ -  
Share-based compensation capitalized in intangible assets $ 1,480     $ 526  
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 GAAP, excluding interest expense (income), net, depreciation and amortization, share-based compensation expense, and write-off of long-lived assets and others, 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 September 30,     Three Months Ended     Nine Months Ended September 30,  
(In thousands) 2020     2019     June 30, 2020     2020     2019  
Net loss $ (925 )   $ (992 )   $ (2,532 )   $ (4,938 )   $ (6,220 )
Interest expense (income), net   7       (46 )     -       (24 )     (123 )
Depreciation and amortization   1,118       750       992       3,020       2,049  
Share-based compensation expense   1,853       1,407       2,342       6,416       5,290  
Write-off of long-lived assets and others   35       18       106       252       95  
Adjusted EBITDA $ 2,088     $ 1,137     $ 908     $ 4,726     $ 1,091  

The following is a reconciliation of gross profit, the most directly comparable GAAP financial measure, to adjusted gross profit:

  Three Months Ended September 30,     Three Months Ended     Nine Months Ended September 30,  
(In thousands) 2020     2019     June 30, 2020     2020     2019  
Revenue $ 9,267     $ 8,257     $ 7,056     $ 25,623     $ 21,236  
Cost of revenue (exclusive of depreciation
and amortization)
  (2,703 )     (3,122 )     (2,587 )     (8,582 )     (8,843 )
Depreciation and amortization of intangible
assets
  (1,063 )     (689 )     (934 )     (2,847 )     (1,860 )
Gross profit   5,501       4,446       3,535       14,194       10,533  
Depreciation and amortization of intangible
assets
  1,063       689       934       2,847       1,860  
Adjusted gross profit $ 6,564     $ 5,135     $ 4,469     $ 17,041     $ 12,393  
                                       
Gross margin   59 %     54 %     50 %     55 %     50 %
Adjusted gross margin   71 %     62 %     63 %     67 %     58 %

In order to assist readers of our condensed 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 SEC. These supplemental metrics are not necessarily derived from any underlying financial statement amounts. We believe these supplemental metrics help investors understand trends within our business and evaluate the performance of such trends quickly and effectively. In the event of discrepancies between amounts in these tables and the Company's historical disclosures or financial statements, readers should rely on the Company's filings with the SEC and financial statements in the Company's most recent earnings release.

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) Q4'18     Q1'19     Q2'19     Q3'19     Q4'19     Q1'20     Q2'20     Q3'20  
Customer metrics                                                              
idiCORE - billable customers(1)   3,627       4,020       4,370       4,781       5,064       5,326       5,375       5,758  
FOREWARN - users(2)   11,397       15,444       19,721       23,853       30,577       36,506       40,857       44,927  
Revenue metrics                                                              
Contractual revenue %(3)   66 %     67 %     62 %     66 %     66 %     69 %     79 %     68 %
Revenue attrition %(4)   5 %     5 %     5 %     6 %     6 %     8 %     11 %     10 %
Revenue from new customers(5) $ 1,096     $ 1,285     $ 1,596     $ 1,406     $ 1,018     $ 1,417     $ 916     $ 726  
Base revenue from existing customers(6) $ 3,127     $ 3,593     $ 4,480     $ 5,578     $ 6,690     $ 6,629     $ 5,047     $ 5,797  
Growth revenue from existing customers(7) $ 485     $ 856     $ 1,169     $ 1,273     $ 1,342     $ 1,254     $ 1,093     $ 2,744  
Platform financial metrics                                                              
Platform revenue(8) $ 4,112     $ 4,894     $ 6,153     $ 7,085     $ 7,652     $ 8,108     $ 6,857     $ 8,968  
Cost of revenue (exclusive of depreciation and amortization) $ 1,883     $ 2,069     $ 2,287     $ 2,286     $ 2,431     $ 2,498     $ 2,427     $ 2,489  
Adjusted gross margin   54 %     58 %     63 %     68 %     68 %     69 %     65 %     72 %
Services financial metrics                                                              
Services revenue(9) $ 595     $ 839     $ 1,093     $ 1,171     $ 1,399     $ 1,191     $ 200     $ 299  
Cost of revenue (exclusive of depreciation and amortization) $ 421     $ 600     $ 765     $ 836     $ 983     $ 794     $ 159     $ 214  
Adjusted gross margin   29 %     29 %     30 %     29 %     30 %     33 %     20 %     28 %
Other metrics                                                              
Employees - sales and marketing 46     47     48     48     51     51     53     52  
Employees - support 6     6     7     8     7     8     8     9  
Employees - infrastructure 11     12     12     13     11     13     12     12  
Employees - engineering 21     20     20     25     23     26     27     27  
Employees - administration 14     14     14     13     16     15     14     15  


(1)   We define a billable customer of idiCORE as a single entity that generated revenue in the last month 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 data fusion 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:
Camilo Ramirez
Red Violet, Inc.
561-757-4500
ir@redviolet.com



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Source: Red Violet, Inc.