Market Overview

red violet Announces First Quarter 2018 Financial Results

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Revenue Increases 112% to $3.3 Million with Continued Improvement in
Key Financial Indicators on Path to Profitability

Red Violet, Inc. (NASDAQ:RDVT), a leading information solutions
provider, today announced financial results for the quarter ended March
31, 2018.

"We are pleased to report a strong start to 2018," stated Derek Dubner,
red violet's CEO. "With our R&D phase behind us and a robust pipeline of
new business and products to bring to market, we believe that we have
more than ample cash to achieve profitability, which we expect to occur
in the next several quarters. Given the improvement in various financial
metrics and the outlook for our business, we are very optimistic about
the remainder of 2018 and beyond."

First Quarter Financial Results

For the three months ended March 31, 2018, as compared to the three
months ended March 31, 2017:

  • Total revenue increased 112% to $3.3 million.
  • Net loss improved by $0.8 million to $2.1 million.
  • Loss per share improved by $0.08 to $0.20.
  • Adjusted gross profit increased 665% to $1.3 million.
  • Adjusted gross margin increased to 39% from 11%.
  • Adjusted EBITDA improved by $0.3 million to negative $1.4 million.

First Quarter and Recent Business Highlights

  • Successfully completed the spin-off of our business on March 26, 2018,
    with red violet operating as a NASDAQ-listed emerging growth company.
  • Well-capitalized balance sheet, with approximately $20 million in cash
    as of March 31, 2018 and no debt, allowing the Company to intently
    focus on driving the business to profitability.
  • With our early-stage development completed, including our proprietary,
    cloud-based technology platform, CORE™, and our initial suite of
    products released into the marketplace, monthly sales increased at a
    CAGR of 126% from a $5.8 million annual run-rate for the month ended
    January 31, 2017, to a $15.1 million annual run-rate for the month
    ended March 31, 2018.
  • FOREWARN™, our subscription app-based solution for the real estate
    industry, powered by CORE, grew revenue at a CAGR of 660% in the first
    quarter 2018, representing an annual run-rate of $0.3 million for the
    month ended March 31, 2018, with no incremental cost of revenue.
  • Fixed cost of revenue model allows for continued scaling of the
    business with exponential growth in adjusted gross profit, as
    reflected in the 28 percentage point increase in adjusted gross margin
    to 39%, over prior year quarter.

Adjusted gross profit, adjusted gross margin and adjusted EBITDA are
non-GAAP financial measures. Reconciliation of these non-GAAP measures
are provided in the attached tables.

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
data and analytical 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, conducting investigations, identifying fraud and abuse,
and collecting debts. 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 whether red violet's
fixed cost of revenue model allows for continued scaling of the business
with exponential growth in adjusted gross profit; whether red violet has
more than ample cash to achieve profitability, which is expected to
occur in the next several quarters and whether given the improvement in
various financial metrics, red violet is very optimistic about the
remainder of 2018 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
Information Statement filed as Exhibit 99.1 to the Company's Current
Report on Form 8-K filed with the SEC on March 27, 2018, as may be
supplemented or amended by the Company's Quarterly Reports on Form 10-Q
and 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 AND COMBINED BALANCE SHEETS
(Amounts in thousands, except share data)
 
        (unaudited)    
March 31, 2018 December 31, 2017

ASSETS:

 

Current assets:
Cash and cash equivalents $ 19,793 $ 65
Accounts receivable, net of allowance for doubtful accounts of $153
and $228

at March 31, 2018 and December 31, 2017, respectively

2,032 1,650
Prepaid expenses and other current assets   796   559
Total current assets 22,621 2,274
Property and equipment, net 974 1,091
Intangible assets, net 16,531 15,353
Goodwill 5,227 5,227
Other non-current assets   1,182   1,180
Total assets $ 46,535 $ 25,125

LIABILITIES AND SHAREHOLDERS' EQUITY:

Current liabilities:
Trade accounts payable $ 1,063 $ 919
Accrued expenses and other current liabilities 5,189 6,437
Deferred revenue   21   33
Total liabilities 6,273 7,389
Shareholders' equity:
Preferred stock—$0.001 par value, 10,000,000 and 0 authorized, and 0
shares issued and

outstanding, at March 31, 2018 and December 31, 2017, respectively

- -
Common stock—$0.001 par value, 200,000,000 and 5,000 shares
authorized, and

10,266,613 and 1,000 shares issued and outstanding, at March 31,
2018 and

December 31, 2017, respectively

10 -
Additional paid-in capital 40,252 -
Member's capital   -   17,736
Total shareholders' equity   40,262   17,736
Total liabilities and shareholders' equity $ 46,535 $ 25,125
 
RED VIOLET, INC.
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share data)
(unaudited)
 
      Three Months Ended March 31,
2018   2017
Revenue $ 3,325 $ 1,572
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization) 2,017 1,401
Sales and marketing expenses 1,089 818
General and administrative expenses 1,852 2,030
Depreciation and amortization   451   216
Total costs and expenses   5,409   4,465
Loss before income taxes (2,084 ) (2,893 )
Income taxes   -   -
Net loss $ (2,084 ) $ (2,893 )
Loss per share:
Basic and diluted $ (0.20 ) $ (0.28 )
Weighted average number of shares outstanding:
Basic and diluted   10,266,613   10,266,613
 
RED VIOLET, INC.
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
         
Three Months Ended March 31,
2018   2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,084 ) $ (2,893 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 451 216
Share-based compensation expense 165 458
Write-off of long-lived assets 55 -
Provision for (recovery of) bad debts (56 ) 6
Allocation of expenses from Fluent, Inc. 325 840
Changes in assets and liabilities:
Accounts receivable (326 ) (202 )
Prepaid expenses and other current assets (237 ) (12 )
Other non-current assets (2 ) 85
Trade accounts payable 144 (29 )
Accrued expenses and other current liabilities (1,248 ) (14 )
Deferred revenue   (12 )   (17 )
Net cash used in operating activities   (2,825 )   (1,562 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (16 ) (225 )
Capitalized costs included in intangible assets   (1,370 )   (1,702 )
Net cash used in investing activities   (1,386 )   (1,927 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributed by Fluent, Inc.   23,939     3,263
Net cash provided by financing activities   23,939   3,263
Net increase (decrease) in cash and cash equivalents $ 19,728 $ (226 )
Cash and cash equivalents at beginning of period   65   226
Cash and cash equivalents at end of period $ 19,793 $ -
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
Share-based compensation capitalized in intangible assets $ 181 $ 191
 

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, adding back income tax, depreciation
and amortization, share-based compensation expense, litigation costs,
and write-off of long-lived assets, 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 March 31,
(In thousands) 2018   2017
Net loss $ (2,084 ) $ (2,893 )
Depreciation and amortization 451 216
Share-based compensation expense 165 458
Litigation costs - 504
Write-off of long-lived assets   55   -
Adjusted EBITDA $ (1,413 ) $ (1,715 )
 
        Three Months Ended March 31,
(In thousands) 2018   2017
Revenue $ 3,325 $ 1,572
Cost of revenue (exclusive of depreciation and amortization)   2,017   1,401
Adjusted gross profit $ 1,308 $ 171
Adjusted gross margin   39 %   11 %

We present adjusted EBITDA, adjusted gross profit and adjusted gross
margin as supplemental measures of our operating performance because 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 of our business, evaluate the performance of our senior
management and measure the operating strength of our business.

Adjusted EBITDA, adjusted gross profit and adjusted gross margin are
measures 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. Adjusted EBITDA eliminates the uneven effect of
considerable amounts of non-cash depreciation and amortization,
share-based compensation expense and write-off of long-lived assets, and
the impact of other items. Adjusted gross profit and adjusted gross
margin are calculated by using cost of revenue (exclusive of
depreciation and amortization).

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, either loss before income taxes
or net loss as indicators of operating performance or to cash flows from
operating activities as a measure of liquidity. 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.

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