Red Violet, Inc. Q3 FY2024 earnings call

• Derek highlighted record revenue, gross profit, and cash flow in Q3, with strong new customer onboarding and existing customer growth. FOREWARN added 21,091 users, over 500 Realtor Associations contracted. Added 13 team members in Q3.
• Dan discussed financials: Revenue up 20% to $19.1M, adjusted gross profit up 26% to $15.7M, adjusted EBITDA up 25% to $6.7M. Cost of revenue (excluding D&A) flat at $3.3M. Sales and marketing expenses up $1.4M (43%) to $4.8M due to additional employees and commissions. G&A expenses up $0.8M (15%) to $6M. D&A up $0.2M (12%) to $2.4M. Income before taxes up $0.8M (35%) to $2.9M.

Total revenue for the third quarter was a record $19.1 million, up 20% from the prior year. Adjusted gross profit was a record $15.7 million, with an adjusted gross margin of 83% (up 4 percentage points from prior year). Adjusted EBITDA was $6.7 million, with an adjusted EBITDA margin of 35% (up 1 percentage point). Adjusted net income was $3.1 million, resulting in adjusted earnings of $0.22 per diluted share. Free cash flow was a record $4.8 million. Within IDI: Investigative vertical (led by law enforcement) had 11th consecutive quarter of sequential revenue growth. Emerging markets, financial and corporate risk verticals had double-digit revenue growth. Collections vertical had third consecutive quarter of double-digit growth. Real estate vertical (excluding FOREWARN) was down ~10%. FOREWARN: 18th consecutive quarter of sequential revenue growth, contractual revenue 77% (down 2 percentage points from prior year), gross revenue retention percentage unchanged at 94%. Revenue contribution: IDI and FOREWARN segments contributed to the overall growth, with IDI having various verticals and FOREWARN showing consistent growth.

• Expect favorable environment to continue benefiting the business through the remainder of 2024 and throughout 2025. Optimistic about closing a record 2024 and driving continued momentum in 2025. Anticipate continued momentum in Q4 and 2025.

• No specific risks detailed in the transcript, but general risks associated with business operations, market conditions, and unforeseen circumstances as mentioned in the opening regarding forward-looking statements and SEC filings.

Q: How should we think about the split between new customer adds and land and expand strategy with existing customers?

A: Dan MacLachlan responded that revenue growth is a good combination of new customer revenue and existing customer growth. There's opportunity to move up to larger enterprise and government customers for further expansion.

Q: Where is FOREWARN in terms of penetration and remaining opportunities in the real estate market and beyond?

A: Dan MacLachlan stated there are ~1100 Realtor Associations in the US, with over 500 currently contracted for FOREWARN, and there's still room for penetration in real estate. Also, looking to expand FOREWARN's brand and concept into additional industries for other use cases.