Red Violet(RDVT) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q4 2022 was $13.1 million, a 16$10 million, resulting in an adjusted gross margin of 77%, up 3 percentage points from the previous year [16][26] - Adjusted EBITDA for Q4 was $1.5 million, a 16$0.6 million [42][48] Business Line Data and Key Metrics Changes - Platform revenue increased by 19% to $12.9 million in Q4, while services revenue decreased by 54$0.2 million [41][23] - The IDI billable customer base grew by 148 customers sequentially, ending Q4 with 7,021 customers [51] - FOREWARN added over 6,900 users during Q4, bringing the total to 116,960 users [51] Market Data and Key Metrics Changes - The company reported a revenue attrition percentage of 5%, up from 4% in the prior year, and expects this to trend between 5% and 10% in the foreseeable future [25] - The markets for the company's solutions continue to show strong fundamentals and increasing opportunities, particularly in identity and fraud prevention [22] Company Strategy and Development Direction - The company is focused on executing its long-term strategic plan while continuing to invest in product development and market expansion [7][9] - A robust product roadmap is in place for 2023 and beyond, including enhancements to existing solutions and new offerings in various sectors [18][19] - The company aims to leverage its strong balance sheet and cash flow to reinvest in business growth while maintaining financial prudence [43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2023, highlighting strong demand for existing and new solutions despite the uncertain economic environment [10][32] - The company is well-positioned to advance its strategic plan while many competitors are downsizing [9][10] - Management noted that the digital transformation and the omnipresence of cybercrimes and fraud present significant opportunities for growth [19] Other Important Information - General and administrative expenses increased by 14% to $7.1 million in Q4, primarily due to higher employee salaries and benefits [27] - Cash and cash equivalents were$31.8 million at the end of 2022, down from 34.3 million at the end of 2021 [29] Q&A Session Summary Question: Can you remind me what the dollar value of the headwind you faced this year was? - The headwind was approximately 0.5 million per quarter due to a customer acquisition [35][65] Question: Can you give me a feel for the repo market and the real estate market? - There has been an uptick in the repo market, and the real estate market has stabilized after initial impacts from rising mortgage rates [70][88] Question: Are you ready for this year with the current headcount? - The company does not plan to significantly increase headcount in 2023, as it is well-positioned with current staff [97] Question: Is it fair to expect that Q1 revenues will be above Q4 revenues? - Management indicated that it is a fair expectation for Q1 revenues to exceed Q4 revenues [86] Question: What are the expectations for margins in 2023? - Margins are expected to remain consistent with 2022, in the mid-20s range, with potential for improvement as revenue grows [78][100]