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red violet Announces Third Quarter 2023 Financial Results
المصدر: Nasdaq GlobeNewswire / 07 نوفمبر 2023 16:05:01 America/New_York
BOCA RATON, Fla., Nov. 07, 2023 (GLOBE NEWSWIRE) -- Red Violet, Inc. (NASDAQ: RDVT), a leading analytics and information solutions provider, today announced financial results for the quarter ended September 30, 2023.
“We are pleased to report record revenue and profitability for the third quarter. Our strong performance, given the uncertain economic environment, reflects the underlying strength of the business and the ongoing value proposition we provide for our customers,” stated Derek Dubner, red violet’s CEO. “I am extremely proud of our team’s performance as these results follow a tough comparison from the prior year period that included approximately $1.8 million in one-time transactional revenue. Despite broader macroeconomic challenges, we continue to see strong demand from new and existing customers driven by the differentiation of our technology platform and innovative solutions.”
Third Quarter Financial Results
For the three months ended September 30, 2023, as compared to the three months ended September 30, 2022:
- Total revenue increased 5% to $15.8 million.
- Gross profit increased 1% to $10.4 million. Gross margin decreased to 66% from 69%.
- Adjusted gross profit increased 5% to $12.5 million. Adjusted gross margin decreased to 79% from 80%.
- Net income increased 453% to $12.5 million, which resulted in earnings of $0.90 and $0.87 per basic and diluted share, respectively. Net income margin increased to 79% from 15%.
- Adjusted EBITDA increased 3% to $5.4 million. Adjusted EBITDA margin decreased to 34% from 35%.
- Net cash provided by operating activities increased 84% to $5.8 million.
- Cash and cash equivalents were $34.2 million as of September 30, 2023.
Third Quarter and Recent Business Highlights
- Added 272 customers to IDI™ during the third quarter, ending the quarter with 7,769 customers.
- Added 21,819 users to FOREWARN® during the third quarter, ending the quarter with 168,356 users. Over 330 REALTOR® Associations throughout the U.S. are now contracted to use FOREWARN.
- Announced agreement with Florida Realtors®, the largest state REALTOR Association in the United States, to purchase FOREWARN services for its 238,000 members beginning January 2024.
- As a result of our cumulative taxable income for the recent years, projections of future taxable income, and the reversal of taxable temporary differences, the Company released its valuation allowance recorded against its deferred tax assets under ASC 740, resulting in a one-time $10.4 million tax benefit realized in the third quarter.
- Purchased 97,181 shares of the Company’s common stock year to date through November 3, 2023, at an average price of $18.29 per share pursuant to the Company’s $5.0 million Stock Repurchase Program that was authorized on May 2, 2022. The Company has $2.3 million remaining under the Stock Repurchase Program.
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. Please click here to pre-register for the conference call and obtain your dial in number and passcode. 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, 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 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.
Company Contact:
Camilo Ramirez
Red Violet, Inc.
561-757-4500
ir@redviolet.comInvestor Relations Contacts:
Steven Hooser/Phillip Kupper
Three Part Advisors
214-872-2710
ir@redviolet.comUse 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 EBITDA margin, adjusted gross profit, adjusted gross margin and free cash flow ("FCF"). Adjusted EBITDA is a financial measure equal to net income, the most directly comparable financial measure based on US GAAP, excluding interest income, net, income tax (benefit) expense, depreciation and amortization, share-based compensation expense, litigation costs, and write-off of long-lived assets and others. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue. 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. We define FCF as net cash provided by operating activities reduced by purchase of property and equipment and capitalized costs included in intangible assets.
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 we will continue to see strong demand from new and existing customers driven by differentiation of our technology platform and innovative solutions. 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, 2022 filed on March 8, 2023, 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, 2023 December 31, 2022 ASSETS: Current assets: Cash and cash equivalents $ 34,210 $ 31,810 Accounts receivable, net of allowance for doubtful accounts of $109 and $60 as of
September 30, 2023 and December 31, 2022, respectively6,805 5,535 Prepaid expenses and other current assets 1,178 771 Total current assets 42,193 38,116 Property and equipment, net 627 709 Intangible assets, net 33,992 31,647 Goodwill 5,227 5,227 Right-of-use assets 2,589 1,114 Deferred tax assets 10,021 - Other noncurrent assets 627 601 Total assets $ 95,276 $ 77,414 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 1,989 $ 2,229 Accrued expenses and other current liabilities 372 1,845 Current portion of operating lease liabilities 548 692 Deferred revenue 527 670 Total current liabilities 3,436 5,436 Noncurrent operating lease liabilities 2,149 598 Deferred tax liabilities - 287 Total liabilities 5,585 6,321 Shareholders' equity: Preferred stock—$0.001 par value, 10,000,000 shares authorized, and 0 shares
issued and outstanding, as of September 30, 2023 and December 31, 2022- - Common stock—$0.001 par value, 200,000,000 shares authorized, 13,920,370 and
13,956,404 shares issued, and 13,912,390 and 13,956,404 shares outstanding, as of
September 30, 2023 and December 31, 202214 14 Treasury stock, at cost, 7,980 and 0 shares as of September 30, 2023 and December 31,
2022(168 ) - Additional paid-in capital 96,648 92,481 Accumulated deficit (6,803 ) (21,402 ) Total shareholders' equity 89,691 71,093 Total liabilities and shareholders' equity $ 95,276 $ 77,414 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, 2023 2022 2023 2022 Revenue $ 15,837 $ 15,026 $ 45,143 $ 40,249 Costs and expenses(1): Cost of revenue (exclusive of depreciation and amortization) 3,313 3,067 9,732 9,157 Sales and marketing expenses 3,365 2,623 10,332 7,836 General and administrative expenses 5,223 5,465 15,539 16,118 Depreciation and amortization 2,171 1,713 6,141 4,860 Total costs and expenses 14,072 12,868 41,744 37,971 Income from operations 1,765 2,158 3,399 2,278 Interest income, net 346 125 947 126 Income before income taxes 2,111 2,283 4,346 2,404 Income tax (benefit) expense (10,384 ) 25 (10,253 ) 244 Net income $ 12,495 $ 2,258 $ 14,599 $ 2,160 Earnings per share: Basic $ 0.90 $ 0.16 $ 1.05 $ 0.16 Diluted $ 0.87 $ 0.16 $ 1.03 $ 0.16 Weighted average number of shares outstanding: Basic 13,952,426 13,748,587 13,970,317 13,690,309 Diluted 14,329,878 13,764,262 14,207,673 13,872,596 (1) Share-based compensation expense in each category: Sales and marketing expenses $ 116 $ 92 $ 348 $ 247 General and administrative expenses 1,253 1,181 3,710 3,819 Total $ 1,369 $ 1,273 $ 4,058 $ 4,066 RED VIOLET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)Nine Months Ended September 30, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 14,599 $ 2,160 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,141 4,860 Share-based compensation expense 4,058 4,066 Write-off of long-lived assets 4 6 Provision for bad debts 913 96 Noncash lease expenses 444 406 Deferred income tax (benefit) expense (10,308 ) 207 Changes in assets and liabilities: Accounts receivable (2,183 ) (2,833 ) Prepaid expenses and other current assets (407 ) (250 ) Other noncurrent assets (26 ) - Accounts payable (240 ) (9 ) Accrued expenses and other current liabilities (1,473 ) 149 Deferred revenue (143 ) (302 ) Operating lease liabilities (512 ) (456 ) Net cash provided by operating activities 10,867 8,100 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (98 ) (271 ) Capitalized costs included in intangible assets (6,921 ) (6,139 ) Net cash used in investing activities (7,019 ) (6,410 ) CASH FLOWS FROM FINANCING ACTIVITIES: Taxes paid related to net share settlement of vesting of restricted stock units (197 ) (4,310 ) Repurchases of common stock (1,251 ) (365 ) Net cash used in financing activities (1,448 ) (4,675 ) Net increase (decrease) in cash and cash equivalents $ 2,400 $ (2,985 ) Cash and cash equivalents at beginning of period 31,810 34,258 Cash and cash equivalents at end of period $ 34,210 $ 31,273 SUPPLEMENTAL DISCLOSURE INFORMATION: Cash paid for interest $ - $ - Cash paid for income taxes $ 55 $ 37 Share-based compensation capitalized in intangible assets $ 1,389 $ 1,193 Retirement of treasury stock $ 1,280 $ 4,675 Right-of -use assets obtained in exchange of operating lease liabilities $ 1,919 $ - Operating lease liabilities arising from obtaining right-of-use assets $ 1,919 $ - 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 EBITDA margin, adjusted gross profit, adjusted gross margin and FCF. Adjusted EBITDA is a financial measure equal to net income, the most directly comparable financial measure based on GAAP, excluding interest income, net, income tax (benefit) expense, depreciation and amortization, share-based compensation expense, litigation costs, and write-off of long-lived assets and others, as noted in the tables below. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue. 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. We define FCF as net cash provided by operating activities reduced by purchase of property and equipment and capitalized costs included in intangible assets.
The following is a reconciliation of net income, the most directly comparable US GAAP financial measure, to adjusted EBITDA:
Three Months Ended September 30, Nine Months Ended September 30, (Dollars in thousands) 2023 2022 2023 2022 Net income $ 12,495 $ 2,258 $ 14,599 $ 2,160 Interest income, net (346 ) (125 ) (947 ) (126 ) Income tax (benefit) expense (10,384 ) 25 (10,253 ) 244 Depreciation and amortization 2,171 1,713 6,141 4,860 Share-based compensation expense 1,369 1,273 4,058 4,066 Litigation costs 1 37 49 128 Write-off of long-lived assets and others 56 4 58 7 Adjusted EBITDA $ 5,362 $ 5,185 $ 13,705 $ 11,339 Revenue $ 15,837 $ 15,026 $ 45,143 $ 40,249 Net income margin 79 % 15 % 32 % 5 % Adjusted EBITDA margin 34 % 35 % 30 % 28 % The following is a reconciliation of gross profit, the most directly comparable US GAAP financial measure, to adjusted gross profit:
Three Months Ended September 30, Nine Months Ended September 30, (Dollars in thousands) 2023 2022 2023 2022 Revenue $ 15,837 $ 15,026 $ 45,143 $ 40,249 Cost of revenue (exclusive of depreciation and
amortization)(3,313 ) (3,067 ) (9,732 ) (9,157 ) Depreciation and amortization of intangible assets (2,112 ) (1,659 ) (5,965 ) (4,682 ) Gross profit 10,412 10,300 29,446 26,410 Depreciation and amortization of intangible assets 2,112 1,659 5,965 4,682 Adjusted gross profit $ 12,524 $ 11,959 $ 35,411 $ 31,092 Gross margin 66 % 69 % 65 % 66 % Adjusted gross margin 79 % 80 % 78 % 77 % The following is a reconciliation of net cash provided by operating activities, the most directly comparable US GAAP financial measure, to FCF:
Three Months Ended September 30, Nine Months Ended September 30, (Dollars in thousands) 2023 2022 2023 2022 Net cash provided by operating activities $ 5,789 $ 3,145 $ 10,867 $ 8,100 Less: Purchase of property and equipment (47 ) (50 ) (98 ) (271 ) Capitalized costs included in intangible assets (2,412 ) (2,246 ) (6,921 ) (6,139 ) Free cash flow $ 3,330 $ 849 $ 3,848 $ 1,690 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 EBITDA margin, adjusted gross profit, adjusted gross margin and FCF 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 EBITDA margin, adjusted gross profit, adjusted gross margin and FCF 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. Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of revenue. Our adjusted gross profit is a measure used by management in evaluating the business’ 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. We believe FCF is an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business. FCF is a measure used by management to understand and evaluate the business’s operating performance and trends over time. FCF is calculated by using net cash provided by operating activities, less purchase of property and equipment and capitalized costs included in intangible assets.
Adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit, adjusted gross margin and FCF 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 US GAAP. In addition, FCF is not intended to represent our residual cash flow available for discretionary expenses and is not necessarily a measure of our ability to fund our cash needs. The way we measure adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit, adjusted gross margin and FCF 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 METRICSThe 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) Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Customer metrics IDI - billable customers(1) 6,548 6,592 6,817 6,873 7,021 7,256 7,497 7,769 FOREWARN - users(2) 82,419 91,490 101,261 110,051 116,960 131,348 146,537 168,356 Revenue metrics Contractual revenue %(3) 79 % 77 % 80 % 68 % 77 % 75 % 79 % 79 % Gross revenue retention %(4) 96 % 97 % 95 % 94 % 95 % 94 % 94 % 94 % Revenue from new customers(5) $ 920 $ 1,014 $ 805 $ 2,016 $ 1,216 $ 1,869 $ 1,147 $ 1,363 Base revenue from existing customers(6) $ 9,114 $ 9,721 $ 10,164 $ 10,839 $ 10,574 $ 11,121 $ 11,707 $ 12,399 Growth revenue from existing customers(7) $ 1,224 $ 1,994 $ 1,525 $ 2,171 $ 1,279 $ 1,636 $ 1,826 $ 2,075 Other metrics Employees - sales and marketing 54 59 57 64 68 61 63 65 Employees - support 10 10 9 10 10 10 9 9 Employees - infrastructure 18 23 25 25 28 27 26 27 Employees - engineering 37 50 52 52 54 47 47 47 Employees - administration 22 26 27 26 27 25 25 25 (1) We define a billable customer of IDI 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) Gross revenue retention is defined as the revenue retained from existing customers, net of reinstated revenue, and excluding expansion revenue. 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. Gross revenue retention percentage is calculated on a trailing twelve-month basis. The numerator of which is 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, with the quotient subtracted from one. Prior to Q1’22, FOREWARN revenue was excluded from our gross revenue retention calculation. Beginning Q4’22, our gross revenue retention calculation excludes revenue from idiVERIFIED, which is purely transactional and currently represents less than 3% of total revenue.
(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.
