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red violet Announces Second Quarter 2021 Financial Results
Source: Nasdaq GlobeNewswire / 11 Aug 2021 16:05:02 America/New_York
BOCA RATON, Fla., Aug. 11, 2021 (GLOBE NEWSWIRE) -- Red Violet, Inc. (NASDAQ: RDVT), a leading analytics and information solutions provider, today announced financial results for the quarter ended June 30, 2021.
“In the second quarter, we continued to demonstrate that as economic conditions improve, so does demand for our innovative solutions,” stated Derek Dubner, red violet’s CEO. “I’m extremely proud of the team’s execution expanding customer relationships both up and across markets. As a result, second quarter proved to be another record quarter for us, with revenue increasing 54% to $10.9 million, net income of $1.8 million and adjusted EBITDA increasing 245% to $3.1 million. Our strong balance sheet and cash generation from record revenue continue to drive expansion of our capabilities.”
Second Quarter Financial Results
For the three months ended June 30, 2021 as compared to the three months ended June 30, 2020:
- Total revenue increased 54% to $10.9 million. Platform revenue increased 54% to $10.6 million. Services revenue increased 46% to $0.3 million.
- Net income was $1.8 million, inclusive of a one-time gain of $2.2 million on the extinguishment of debt from the forgiveness of our Cares Act Loan, compared to a loss of $2.5 million.
- Adjusted EBITDA increased 245% to $3.1 million.
- Gross profit increased 95% to $6.9 million. Gross margin increased to 63% from 50%.
- Adjusted gross profit increased 83% to $8.2 million. Adjusted gross margin increased to 75% from 63%.
- Generated $2.3 million in cash from operating activities in the second quarter.
- Cash and cash equivalents were $13.9 million as of June 30, 2021.
Second Quarter and Recent Business Highlights
- Revenue attributable to customer contracts reached a record 81%. Customer contracts are generally annual contracts or longer with auto renewal.
- Added over 230 new customers to idiCORE™ during the second quarter, ending the quarter with 6,141 customers.
- Added over 8,700 users to FOREWARN® during the second quarter, ending the quarter with 67,578 users. Over 150 REALTOR® Associations throughout the U.S. are now contracted to use FOREWARN.
- Continued expansion of leadership talent and depth, with the addition of Jim Greenwell, GM – Identity, and James Frasche, EVP – Property Solutions.
- Appointed Lisa Stanton as an independent director of the Board of Directors, strengthening our corporate governance and providing deep expertise in FinTech, identity and security.
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 EBITDA margin, adjusted gross profit and adjusted gross margin. Adjusted EBITDA is a financial measure equal to net income (loss), the most directly comparable financial measure based on US GAAP, excluding interest expense (income), net, depreciation and amortization, share-based compensation expense, gain on extinguishment of debt, 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.
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 7739599. 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 7739599. 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.
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 our strong balance sheet and cash generation from record revenue continue to drive expansion of our capabilities. 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, 2020 filed on March 10, 2021, 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)June 30, 2021 December 31, 2020 ASSETS: Current assets: Cash and cash equivalents $ 13,915 $ 12,957 Accounts receivable, net of allowance for doubtful accounts of $11 and $38 as of June 30, 2021 and December 31, 2020, respectively 3,386 3,201 Prepaid expenses and other current assets 1,265 581 Total current assets 18,566 16,739 Property and equipment, net 576 558 Intangible assets, net 27,810 27,170 Goodwill 5,227 5,227 Right-of-use assets 1,916 2,161 Other noncurrent assets 137 139 Total assets $ 54,232 $ 51,994 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 1,418 $ 2,075 Accrued expenses and other current liabilities 761 1,458 Current portion of operating lease liabilities 584 552 Current portion of long-term loan - 449 Deferred revenue 427 504 Total current liabilities 3,190 5,038 Noncurrent operating lease liabilities 1,608 1,908 Long-term loan - 1,703 Total liabilities 4,798 8,649 Shareholders' equity: Preferred stock—$0.001 par value, 10,000,000 shares authorized, and 0 shares issued and outstanding, as of June 30, 2021 and December 31, 2020 - - Common stock—$0.001 par value, 200,000,000 shares authorized, 12,248,794 and 12,167,327 shares issued and outstanding, as of June 30, 2021 and December 31, 2020 13 13 Additional paid-in capital 70,911 66,005 Accumulated deficit (21,490 ) (22,673 ) Total shareholders' equity 49,434 43,345 Total liabilities and shareholders' equity $ 54,232 $ 51,994 RED VIOLET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share data)
(unaudited)Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue $ 10,879 $ 7,056 $ 21,096 $ 16,356 Costs and expenses(1): Cost of revenue (exclusive of depreciation and amortization) 2,720 2,587 5,481 5,879 Sales and marketing expenses 2,349 1,746 4,570 3,922 General and administrative expenses 4,890 4,263 9,440 8,697 Depreciation and amortization 1,330 992 2,588 1,902 Total costs and expenses 11,289 9,588 22,079 20,400 Loss from operations (410 ) (2,532 ) (983 ) (4,044 ) Interest (expense) income, net (4 ) - (9 ) 31 Gain on extinguishment of debt 2,175 - 2,175 - Income (loss) before income taxes 1,761 (2,532 ) 1,183 (4,013 ) Income taxes - - - - Net income (loss) $ 1,761 $ (2,532 ) $ 1,183 $ (4,013 ) Earnings (loss) per share: Basic $ 0.14 $ (0.22 ) $ 0.10 $ (0.35 ) Diluted $ 0.13 $ (0.22 ) $ 0.09 $ (0.35 ) Weighted average number of shares outstanding: Basic 12,269,412 11,617,342 12,238,475 11,600,278 Diluted 13,560,714 11,617,342 13,487,806 11,600,278 (1) Share-based compensation expense in each category: Sales and marketing expenses $ 158 $ 155 $ 314 $ 309 General and administrative expenses 2,007 2,187 3,897 4,254 Total $ 2,165 $ 2,342 $ 4,211 $ 4,563 RED VIOLET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)Six Months Ended June 30, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 1,183 $ (4,013 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 2,588 1,902 Share-based compensation expense 4,211 4,563 Write-off of long-lived assets 24 104 Provision for bad debts 62 265 Noncash lease expenses 245 225 Interest expense 11 - Gain on extinguishment of debt (2,175 ) - Changes in assets and liabilities: Accounts receivable (247 ) 587 Prepaid expenses and other current assets (684 ) (139 ) Other noncurrent assets 2 65 Accounts payable (657 ) 585 Accrued expenses and other current liabilities (685 ) (927 ) Deferred revenue (77 ) 23 Operating lease liabilities (268 ) (237 ) Net cash provided by operating activities 3,533 3,003 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (155 ) (61 ) Capitalized costs included in intangible assets (2,420 ) (3,088 ) Net cash used in investing activities (2,575 ) (3,149 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term loan - 2,152 Net cash provided by financing activities - 2,152 Net increase in cash and cash equivalents $ 958 $ 2,006 Cash and cash equivalents at beginning of period 12,957 11,776 Cash and cash equivalents at end of period $ 13,915 $ 13,782 SUPPLEMENTAL DISCLOSURE INFORMATION Cash paid for interest $ - $ - Cash paid for income taxes $ - $ - Share-based compensation capitalized in intangible assets $ 695 $ 1,056
Use and Reconciliation of Non-GAAP Financial MeasuresManagement 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 and adjusted gross margin. Adjusted EBITDA is a financial measure equal to net income (loss), the most directly comparable financial measure based on GAAP, excluding interest expense (income), net, depreciation and amortization, share-based compensation expense, gain on extinguishment of debt, 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.
Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2021 2020 2021 2020 Net income (loss) $ 1,761 $ (2,532 ) $ 1,183 $ (4,013 ) Interest expense (income), net 4 - 9 (31 ) Depreciation and amortization 1,330 992 2,588 1,902 Share-based compensation expense 2,165 2,342 4,211 4,563 Gain on extinguishment of debt (2,175 ) - (2,175 ) - Litigation costs 6 - 126 - Write-off of long-lived assets and others 41 106 61 217 Adjusted EBITDA $ 3,132 $ 908 $ 6,003 $ 2,638 Revenue $ 10,879 $ 7,056 $ 21,096 $ 16,356 Net income (loss) margin 16 % (36 %) 6 % (25 %) Adjusted EBITDA margin 29 % 13 % 28 % 16 %
The following is a reconciliation of gross profit, the most directly comparable GAAP financial measure, to adjusted gross profit:Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2021 2020 2021 2020 Revenue $ 10,879 $ 7,056 $ 21,096 $ 16,356 Cost of revenue (exclusive of depreciation and amortization) (2,720 ) (2,587 ) (5,481 ) (5,879 ) Depreciation and amortization of intangible assets (1,272 ) (934 ) (2,475 ) (1,784 ) Gross profit 6,887 3,535 13,140 8,693 Depreciation and amortization of intangible assets 1,272 934 2,475 1,784 Adjusted gross profit $ 8,159 $ 4,469 $ 15,615 $ 10,477 Gross margin 63 % 50 % 62 % 53 % Adjusted gross margin 75 % 63 % 74 % 64 %
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 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 EBITDA margin, 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. 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’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 EBITDA margin, 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 EBITDA margin, 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 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) Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Customer metrics idiCORE - billable customers(1) 4,781 5,064 5,326 5,375 5,758 5,726 5,902 6,141 FOREWARN - users(2) 23,853 30,577 36,506 40,857 44,927 48,377 58,831 67,578 Revenue metrics Contractual revenue %(3) 66 % 66 % 69 % 79 % 68 % 77 % 80 % 81 % Revenue attrition %(4) 6 % 6 % 8 % 11 % 10 % 11 % 7 % 6 % Revenue from new customers(5) $ 1,406 $ 1,018 $ 1,417 $ 916 $ 726 $ 877 $ 967 $ 929 Base revenue from existing customers(6) $ 5,578 $ 6,690 $ 6,629 $ 5,047 $ 5,797 $ 6,678 $ 7,351 $ 8,354 Growth revenue from existing customers(7) $ 1,273 $ 1,342 $ 1,254 $ 1,093 $ 2,744 $ 1,408 $ 1,899 $ 1,596 Platform financial metrics Platform revenue(8) $ 7,086 $ 7,651 $ 8,109 $ 6,856 $ 8,968 $ 8,603 $ 9,813 $ 10,588 Cost of revenue (exclusive of depreciation and amortization) $ 2,286 $ 2,431 $ 2,498 $ 2,428 $ 2,489 $ 2,448 $ 2,488 $ 2,529 Adjusted gross margin 68 % 68 % 69 % 65 % 72 % 72 % 75 % 76 % Services financial metrics Services revenue(9) $ 1,171 $ 1,399 $ 1,191 $ 200 $ 299 $ 360 $ 404 $ 291 Cost of revenue (exclusive of depreciation and amortization) $ 836 $ 983 $ 794 $ 159 $ 214 $ 246 $ 273 $ 191 Adjusted gross margin 29 % 30 % 33 % 21 % 28 % 32 % 32 % 34 % Other metrics Employees - sales and marketing 48 51 51 53 52 53 56 57 Employees - support 8 7 8 8 9 9 9 9 Employees - infrastructure 13 11 13 12 12 14 15 16 Employees - engineering 25 23 26 27 27 32 31 33 Employees - administration 13 16 15 14 15 18 16 19 (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:
Camilo Ramirez
Red Violet, Inc.
561-757-4500
ir@redviolet.com