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red violet Announces Second Quarter 2018 Financial Results

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Revenue Increases 96% to $3.9 Million with Continued Margin Expansion
as Key Financial Indicators Show Strong Path to Profitability

Red Violet, Inc. (NASDAQ:RDVT), a leading information solutions
provider, today announced financial results for the quarter ended June
30, 2018.

"With continued strong growth in all of our key financial indicators, we
are as confident as ever in our path to profitability," stated Derek
Dubner, red violet's CEO. "As our cost of revenue remains relatively
fixed, we are intently focused on driving revenue with nearly 100% of
each incremental dollar in revenue growth flowing through to the bottom
line as evidenced by our $0.6 million increase in revenue resulting in a
$0.6 million reduction in our net loss over first quarter 2018."

Second Quarter Financial Results

For the three months ended June 30, 2018, as compared to the three
months ended June 30, 2017:

  • Total revenue increased 96% to $3.9 million.
  • Net loss improved by $10.6 million to $1.5 million.
  • Loss per share improved by $1.03 to $0.15.
  • Adjusted gross profit increased 1,117% to $1.8 million.
  • Adjusted gross margin increased to 47% from 8%.
  • Adjusted EBITDA improved by $1.3 million to negative $1.1 million.

Second Quarter and Recent Business Highlights

  • Monthly revenue increased at a CAGR of 126% over the first six months
    of 2018 with an annual revenue run rate of $17.2 million for the month
    ended June 30, 2018.
  • Recurring revenue continues to expand with 60% of monthly revenue
    attributable to customer contracts versus transactional usage.
    Contracts are generally annual contracts with auto renewal.
  • Business continues to scale towards profitability as adjusted gross
    profit grew at a CAGR of 532% over the first six months of 2018,
    resulting in an annual adjusted gross profit run rate of $9.2 million
    for the month ended June 30, 2018.
  • FOREWARN®, our subscription app-based solution for the real
    estate industry, powered by CORE™, grew revenue at a CAGR of 642% over
    the first six months of 2018, with an annual run rate of $0.5 million
    for the month ended June 30, 2018.

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, due to strong
growth in red violet's key financial indicators, red violet will become
profitable. 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 BALANCE SHEETS

(Amounts in thousands, except share data)

 
(unaudited)
June 30, 2018 December 31, 2017

ASSETS:

Current assets:
Cash and cash equivalents $ 15,837 $ 65
Accounts receivable, net of allowance for doubtful accounts of $115
and

$228 at June 30, 2018 and December 31, 2017, respectively

2,031 1,650
Prepaid expenses and other current assets   843   559
Total current assets 18,711 2,274
Property and equipment, net 928 1,091
Intangible assets, net 17,632 15,353
Goodwill 5,227 5,227
Other non-current assets   1,098   1,180
Total assets $ 43,596 $ 25,125

LIABILITIES AND SHAREHOLDERS' EQUITY:

Current liabilities:
Trade accounts payable $ 1,390 $ 919
Accrued expenses and other current liabilities 3,144 6,437
Deferred revenue   56   33
Total current liabilities 4,590 7,389
Other non-current liabilities   189   -
Total liabilities 4,779 7,389
Shareholders' equity:
Preferred stock—$0.001 par value, 10,000,000 and 0 authorized, and 0
shares

issued and outstanding, at June 30, 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 June 30,
2018 and

December 31, 2017, respectively

10 -
Additional paid-in capital 40,301 -
Accumulated deficit (1,494 ) -
Member's capital   -   17,736
Total shareholders' equity   38,817   17,736
Total liabilities and shareholders' equity $ 43,596 $ 25,125
   

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,
2018   2017 2018   2017
Revenue $ 3,909 $ 1,993 $ 7,234 $ 3,565
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization) 2,084 1,843 4,101 3,244
Sales and marketing expenses 1,228 1,165 2,317 1,983
General and administrative expenses 1,742 10,898 3,594 12,928
Depreciation and amortization   478   220   929   436
Total costs and expenses   5,532   14,126   10,941   18,591
Loss from operations (1,623 ) (12,133 ) (3,707 ) (15,026 )
Other income, net   129   -   129   -
Loss before income taxes (1,494 ) (12,133 ) (3,578 ) (15,026 )
Income taxes   -   -   -   -
Net loss $ (1,494 ) $ (12,133 ) $ (3,578 ) $ (15,026 )
Loss per share:
Basic and diluted $ (0.15 ) $ (1.18 ) $ (0.35 ) $ (1.46 )
Weighted average number of shares outstanding:
Basic and diluted   10,266,613   10,266,613   10,266,613   10,266,613
 
 

RED VIOLET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(unaudited)

 
Six Months Ended June 30,
2018   2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,578 ) $ (15,026 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 929 436
Share-based compensation expense 214 1,683
Write-off of long-lived assets 61 -
Provision for bad debts 155 94
Allocation of expenses from Fluent, Inc. 325 1,888
Changes in assets and liabilities: -
Accounts receivable (536 ) (311 )
Prepaid expenses and other current assets (284 ) (50 )
Other non-current assets 82 93
Trade accounts payable 471 50
Accrued expenses and other current liabilities (3,293 ) 6,837
Deferred revenue 23 (30 )
Other non-current liabilities   189   500
Net cash used in operating activities   (5,242 )   (3,836 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (37 ) (289 )
Capitalized costs included in intangible assets   (2,888 )   (3,281 )
Net cash used in investing activities   (2,925 )   (3,570 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributed by Fluent, Inc.   23,939     7,354
Net cash provided by financing activities   23,939   7,354
Net increase (decrease) in cash and cash equivalents $ 15,772 $ (52 )
Cash and cash equivalents at beginning of period   65   226
Cash and cash equivalents at end of period $ 15,837 $ 174
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
Share-based compensation capitalized in intangible assets $ 181 $ 393
 

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, excluding income tax, depreciation
and amortization, share-based compensation expense, litigation costs,
transition service income, 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 June 30, Six Months Ended June 30,
(In thousands) 2018   2017 2018   2017
Net loss $ (1,494 ) $ (12,133 ) $ (3,578 ) $ (15,026 )
Depreciation and amortization 478 220 929 436
Share-based compensation expense 49 1,225 214 1,683
Litigation costs - 8,325 - 8,829
Transition service income (158 ) - (158 ) -
Write-off of long-lived assets and others   44   -   99   -
Adjusted EBITDA $ (1,081 ) $ (2,363 ) $ (2,494 ) $ (4,078 )
 
   
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2018   2017 2018   2017
Revenue $ 3,909 $ 1,993 $ 7,234 $ 3,565
Cost of revenue (exclusive of depreciation and amortization)   2,084   1,843   4,101   3,244
Adjusted gross profit $ 1,825 $ 150 $ 3,133 $ 321
Adjusted gross margin   47 %   8 %   43 %   9 %
 

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 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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