Q2 2020 Red Violet Inc Earnings Call
As a reminder, this call is being recorded I would now like to introduce your host for todays conference call Me linear director of Finance and Investor Relations. Please go ahead.
Good afternoon and welcome. Thank you for joining us today to discuss our second quarter 2020 financial results with me today is there do there our chairman and Chief Executive Officer, Dan Mclaughlin, Our Chief Financial Officer, our call today, we'll begin with comments from Derek and Dan followed by.
Question and answer session.
I would like to remind you that didn't call is being webcast live and recorded a replay of the then we'll be available following the call on our website to access the webcast. Please visit our investor is paid on our website www dot right violent dotcom.
Before we begin I would like to advise listeners that certain information discussed by management during this conference call.
Looking statements covered under the Safe Harbor provision of the private Securities Litigation Reform Act of 1995.
Actual actual results could differ materially from those stated or implied by our forward looking statement due to risks and uncertainties associated with the company's business.
The company undertakes no obligation to update information provided on this call for a discussion of risks and uncertainties associated with Red pilots business I encourage you to review the company's filings with the Securities Exchange Commission, including the most recent annual report on form 10-K and stuff.
[music] during the call when they present certain non-GAAP financial information related to adjusted gross profit adjusted gross margin and adjusted EBITDA Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measure are provided in the second quarter earnings press release.
Issued earlier today.
In addition, certain supplemental metrics are not necessarily derived from any underlying financial statement amount, maybe discuss and these metrics and their definition can also be found in the earnings press release issued earlier today.
With that I'm pleased to introduce Red mileage, Chairman and Chief Executive Officer, Derek do there.
Thank you Camilla and good afternoon to those joining us today to discuss our second quarter 2020 results.
We hope that you and your loved ones are staying safe and healthy during these challenging times.
We're pleased to report a very solid quarter, which demonstrated the resilience and operational leverage of our business model through this unprecedented period.
I'd like to first provide some detail around the circumstances that we faced as the effects of the pandemic sedan and our approach throughout the quarter.
Coming off of one of the most robust periods in economic history in the first quarter.
Endemic related events, including government stay at home orders and social distancing measures caused significant business interruption in the United States starting in the back half of March and bottoming in the second quarter.
As would be expected small to medium sized businesses, many of which being customers were disproportionately impacted early in the crisis.
Not surprisingly as a result of these impacts in the beginning of the second quarter, which in hindsight turned out to be for us a bottoming out in April we saw reduced transactional volumes.
Many of our customers just did not have the infrastructure or contingency planning to be forced hello.
Adding to that in our collections market for example, government imposed moratoria on certain collections activity a collection industry pause to not aggravate the crisis and certain forbearance programs reduced overall activity.
When faced with these challenges we maintained our long term view and implemented a multi prong strategy to ensure the success of our business.
That strategy consisted of helping our customers, ensuring the health and financial well being of our team members.
Gaining market share.
Continuing advancement in our technology and products and fortifying our balance sheet.
I am pleased to report that due to our next generation technology platform mission critical products suite differentiated data assets and incredible team, we delivered sequentially improving financial and business results from the economic trough that occurred early in the south.
Second quarter.
Moreover, we continue to experience improving conditions in our business, which are continuing here in the third quarter and given the present economic and secular tailwinds that we expect to continue we believe we are well positioned for the second half of the year and throughout 2021.
I want to personally think our team members for their dedication and hard work.
Faced with adversity, they performed at the highest level.
[noise], knowing the durability of our business model and that with great challenges come great opportunities. It was vital that we not only protect our employees health, but also their financial well being and the strength of the team collectively so that we are not only intact when conditions improve but optimally position.
Question for better times ahead.
We took significant pandemic related precautions at our headquarters, including you BC lighting in our H.B.A.C. systems and daily temperature checks to ensure a safe returned to office of our Florida employees.
Our Seattle team is still working remotely.
All team members across the organization have performed well without any loss to productivity.
We did not reduce any compensation or eliminate any positions as a result of the pandemic and in fact, our strategically adding to the team to capitalize on opportunities.
Our customers are also of the most important group of stakeholders in our business.
We committed early on to support them through this time to demonstrate our goodwill and our commitment to the viability and success of their businesses and to solidify enduring relationships.
This involves temporarily granting request for reductions or eliminations, where applicable of minimum monthly contractual commitments on a month to month basis during the second quarter.
We're pleased to report that concessions, we may have granted both in number of customers and dollar value have decreased month over month since April.
We have heard much positive feedback from appreciative customers about our partnership approach.
As I previously mentioned with great challenges come great opportunities.
Priding ourselves on our ability to deliver mission critical solutions with greater efficiency and ROI than the competition due to among other things are cloud native construct we recognize that organizations with now more than ever need these efficiencies within their workflow to counter the negative impact.
Tax did their businesses caused by the pandemic.
We identified a cohort of customers who for one reason or another expressed resistance in the past to the idea of switching away from competitor products, perhaps just out of the burden of doing so who were now open to hearing about how we can meet their needs and more efficiently.
As a result of our efforts new customer applications in June exceeded pre pandemic levels and July exceeded June.
This metric is a leading indicator of revenue in the next several quarters.
We continue to invest in the advancement of our technology and the enhancement of existing products and commercialization of new products.
As I've said before our customer centric approach always has us engaging with customers to better understand and solve for their complex challenges.
By way of example, we recently announced our Geo spatial search and information retrieval technology. We then our leading I'd I core investigative platform.
This intuitive way to engage with data enables users to explore people businesses assets and into relationships using a map based specification of a geographic area and filtering searches based on a period of time indoor geographic region.
We believe this functionality will give greater intelligence to not only our existing customer base, but especially law enforcement insurance investigators and other investigative industries. We're very excited as these are markets that we have only just begun to scratch the surface.
Additionally, our strategy demand that we protect and fortify our balance sheet.
Today, we have had strong of a balance sheet as we ever have.
Exhibiting the operational leverage of our business model, we more than doubled our adjusted EBITDA on less revenue generating a record $1.8 million in positive cash flow from operations.
A metric that I'm very excited about and that Dan will discuss in detail is that our high margin platform revenue, which makes up the core of our business was up 11% over prior year, notwithstanding the pandemic impacts.
In sum I'm very pleased with our continued improvement improved performance throughout the second quarter, including revenue growth cash flow generation.
Increasing margins and new customer applications and transaction volumes, increasing over pre cobot levels.
With positive trends that continue here in the third quarter.
In July we saw another strong month of revenue growth.
At this point.
August is tracking to not only be the strongest month over month revenue growth in our history, but also a record month for revenue.
I'm, even more excited about our positioning given not only the improving economic conditions, but the secular tailwinds that I mentioned that present themselves in the short and long term.
The pandemic has accelerated the pace of digital transformation for virtually every business.
Businesses of all kinds must transition their businesses online.
To do so these businesses will increasingly demand the efficiency and scale of solutions that are only delivered via the cloud and not a traditional I T infrastructure.
The move to E Commerce, we'll see increasing online transactions, requiring the collection of consumer information in disparate ways and in varying forms.
This will inevitably lead to even greater data fragmentation in other words consumer data that is both structured and unstructured and spread across the enterprise.
And with such data fragmentation comes increased need for transforming this data into intelligence as we say for purposes, including fraud mitigation and consumer modeling.
All of these factors the rapid adoption of ecommerce demand for cloud efficiency increased need to identify fraud.
The necessity of solving for data fragmentation and the need for enhanced understanding of consumer risk and financial profiles are creating a confluence of micro and macro trends that we believe will provide strong momentum for our business for years to come.
With that I'll turn it over to Dan to discuss the financials.
Thank you Derek and good afternoon looking back at our first quarter earnings call and being in the early innings of the pandemic nearly every business in the USA headwind never before experience.
As Derek discussed we took a number of proactive steps to navigate the uncertainty and positioned this business for what we hope would be a strong recovery and ultimately to avail ourselves of the multi year tailwind for the industries, we serve and the solutions we provide.
Knowing where we are today that thesis is taking shape and we believe those operational steps have positioned us well to take advantage of the opportunity in the marketplace.
Business trends for the quarter were positive since our April low.
We experienced sequential monthly revenue growth April through June increasing 12% over the period.
This trend has continued through the start of the third quarter with another strong month, a sequential revenue growth in July and July also experienced our strongest month year to date of new customer application.
August is off to a phenomenal start with early indications at this point that August will not only be the strongest month over month revenue growth in our history, but also a record month for revenue.
With that said, we remain cautiously optimistic as we continue to navigate these unprecedented times our business has shown resilient. Our team is focused and we are incredibly confident in our ability to navigate challenges and leverage opportunities.
Before I start with our quarterly results I want to identify some additional supplemental metrics. We included in the earnings press release today.
We have included a breakout of revenue by what we call platform revenue and services revenue.
Platform revenue consists of both contractual and transactional revenue generated from our data fusion platform.
It includes all revenue generated through IDI core and for warm.
The cost to generate this revenue consists primarily of data acquisition costs, which remain relatively fixed irrespective of revenue generation, which means every incremental dollar a platform revenue provides nearly 100% incremental contribution margin.
Services revenue consists of trends actual revenue generated from our IDI verified service.
I verified is an ancillary solution, we provide to the collections market to complement our collections solutions suite.
It provides customers in manual verification of employment that requires third party service or cost and thoughts does not have the same margin profile as our platform revenue.
As a result, the cost of revenue is variable and the contribution margin remains consistent.
Irrespective of revenue generation.
We believe these additional metrics will provide greater clarity into the resilience growth and profitability of our core business. In addition, it will allow for better understanding of the businesses margin profile historically and into the future.
Now, let's get into our second quarter results.
For clarity all the comparisons I will discuss today will be against the second quarter 2019, unless noted otherwise.
Total revenue was 7.1 million.
3% decrease over prior year.
Platform revenue grew 11% to 6.9 million, which represented 97% of our total revenue.
Despite strong pandemic headwinds that resulted in reduced economic activity. During the period, we were able to add new customers and maintaining strong base of contractual revenue and transactional volume from our I'd add core and for worn solutions.
We were extremely pleased with our platform growth rate given the pandemic.
Because our platform revenue provides nearly 100% contribution margin with each incremental dollar we more than doubled our adjusted EBITDA, increasing a 155% the point 9 million for the quarter on less total revenue.
We felt the most cobot related impact in our services revenue.
Services revenue was point 2 million for the quarter and 82% decrease over prior year.
Services revenue experienced sharp volume declines in the first half of the quarter followed by slower recovery in the second half.
Result of temporary government imposed collections Moratoria forbearance program and government stimulus.
We believe our services revenue will begin to return to normal in the fourth quarter as temporary government collections Moratoria are lifted.
We expect to see strong tailwinds for our services revenue throughout 2021, as forbearance program and government stimulus subside, creating pent up demand and increased collections activity as a result of deteriorated customer financial profile.
Continuing through the details of our PML as mentioned revenue was 7.1 million for the second quarter.
Revenue from new customers would point 9 million.
Phase revenue from existing customers was 5.1 million and growth revenue from existing customers was 1.1 million.
Notwithstanding a portion of concession customers as well as transactional customers, who pause volume.
Both of which are not counted as a billable customer for the quarter, our ipi core billable customer base grew by 50 during the period to 5375 as a result of continuing to add new customers during the period.
Under normal conditions, we expect to trend between 250 to 350 additions to our core billable customer base on a sequential quarter basis.
We expect a reversion to the normal levels in the third quarter with the potential for higher than normal additions from pent up demand as existing customers, who temporarily paused volume return to our billable base.
User adoption of four one remained strong throughout the period, adding over 4300 users during the quarter.
Our contractual revenue was 79% for the quarter the highest quarter in our history. A result of strong growth in based revenue from existing customers.
We saw our net revenue attrition percentage increase ending the quarter at 11% compared to 5% in prior year.
In revenue dollars. This represents a difference of 101100 $80000.
Under normal conditions, we would expect net revenue attrition the trend between five and 10%.
However, as a result of the pandemic related customer concessions, we provided during the period and transactional customers, who temporarily paused volume. We saw this metric trend a little higher than our historical levels.
Because net revenue attrition is calculated on a trailing 12 month basis, we would expect to see a reversion to normal levels beginning in the first quarter of 2021.
Moving on from our revenue metrics and down the PNM, our cost of revenue decreased 2.5 million or 15% to 2.6 million.
At this point 5 million dollar decrease was the result of a decrease in third party service or cost associated with services revenue.
Partially offset by an increase in data acquisition cost.
Adjusted gross profit increased 7% the 4.5 million producing an adjusted gross margin of 63% a five percentage point increase over second quarter 2019.
Sales and marketing expenses decreased 2.3 million or 13% to 1.7 million for the quarter.
The decrease was due primarily to a decrease in sales commissions, resulting from less growth revenue in the quarter.
The 1.7 million of sales and marketing expense for the quarter consisted primarily of 1.1 million and employee salary and benefits and point 3 million in sales Commission.
General and administrative expenses decreased 1.1 million or 21% the 4.3 million for the quarter.
This decrease was primarily the result of a 1.3 million dollar decrease and share based compensation expense.
The $4.3 million in general and administrative expenses for the quarter consisted primarily of 2.2 million of noncash share based compensation.
1 million of employee salary and benefit and point 5 million in an accounting I T and other professional fees.
So the.
Asian, and amortization increased 8.3 million for 46% to 1 million for the quarter.
This increase was primarily the result of the amortization of internally developed software.
Net loss narrowed 1.4 million for 34% to 2.5 million for the quarter.
This improvement in net loss was primarily the result of a decrease in noncash share based compensation expense of 1.3 million.
We reported a loss of 22 cents per share for the quarter based on a weighted average share count of 11.6 million shares.
Moving on the balance sheet cash and cash equivalents were 13.8 million at June 32020, compared to 11.8 million at December 31 2019.
Current assets were 17.3 million compared to 16 million and current liabilities were 4.7 million compared to 4.3 million.
We generated $3 million in cash from operating activities for the six month ended June 32020, compared to using 1.1 million in cash for operating activities for the same period in 2019.
Internally, we track our operational cash earned versus burn on a monthly basis by calculating adjusted EBITDA and subtracting the cash we use for the development of internal use software and other capital expenses. Both found on our statement of cash flows.
Based on the earn burn analysis, we burned point $7 million in cash for the second quarter 2020, compared to burning 1.1 million for the second quarter 2019.
Cash used in investing activities was 3.1 million for the six month ended June 32020, mainly the result of 3.1 million used for software developed for internal use.
In closing I would like to read into rate and emphasize that we're extremely pleased with how well the core business perform during this unprecedented period, both from a revenue perspective, and a profitability standpoint.
While not immune from the co mid 19 crisis, our results validate the strength of our business model and the capability of the entire read by the team.
We continue to experience positive trends as we recover from the pandemic related impact and I believe we are well positioned to take advantage of the economic and secular Tailwinds. We are seeing and believe those tailwinds will last for many years to come.
With that operator, we'll now open the line for QNX.
As a reminder, task a question you will need to press star one on your telephone.
Withdraw your question press the pound Kane, please stand by what we compile the Q1 a roster.
Mark.
Okay.
Our first question comes from the line of Jennifer will hurt from Carter Partners. Your line is now open.
Thank you good evening.
Although revenue was down a little over the prior year.
You guys.
Gross margin.
Five percentage points, how should we think about increments incremental margins going forward and maybe what you said margin profile look like for the longer term.
Yes. Thank you Jennifer this is Dan. Thank you for the question.
One of the reasons, we added the additional supplemental metrics platform revenue and service revenue, which provide a clear picture of the margin profile of the business.
Our core business, which is where we have always focus our resources for growth is our platform revenue, which as I discussed earlier, the pure margin business and because we were able to grow that business. Even during the pandemic you saw healthy margin growth and increased profitability on left total revenue.
We expect to can continue we expect to see continued margin growth.
As revenue scales over the next several quarters clipping the 70 percentage.
Mark for total company adjusted gross margin in the fourth quarter of this year for first quarter of 2021 looking at the end of 2021.
We would expect to see total company adjusted gross margin to trend somewhere around the 80% Mark.
Okay, great. Thank you thanks for that color.
If I could ask one more question.
So that stock based comp expense remained consistent.
Compared the first quarter, how how should we expect to see that expense trend over time.
Sure again this is Dan and I. Appreciate the question. So look historically prior to our ability to to generate positive cash flow. We we leveraged our equity from a competitive standpoint, and and as we sought kind of technology talent to bring our platform the market.
Battle, where our product development team is how we're competing against the likes of Microsoft and Amazon for technology personnel, our infrastructure team, which maintains our platform in the ADW as clouds or some of the best and brightest I've worked with and so we've strategically leveraged our long term equity incentive plan to motivate our teams and aligned with the goals of dramatically.
Increasing the value of this company. So today is that worked out well for us as I'm pleased with the value the company and ultimately the shareholders have received relative to that equity investment made into our people. So in addition, when we talk about the equity when we spun off in early 2018, we put some significant milestones in place for that.
Company, and we tied what would be a good portion of equity comp to those milestones as a way to align and retain our team, believing that we hit those milestones our market cap would be substantially higher and the ROI on that equity comp would prove to be very efficient use of investment so looking back at that time frame.
Which was around the second quarter of 2018, we probably had a market cap of maybe around 90 million today, our market cap at approximately 220 million. So we're very pleased with that ROI. So what does that mean going forward from an equity comp perspective, but I believe it was the fourth quarter earnings call in 2019.
Were provided some guidance and which I said equity comp would trend between 2.3 2.5 million per quarter over the next several quarters in this quarter. We came in on the lower end of that guidance. Just just above 2.3 million. So I would reiterate that we expect our share based expense to continue to trend between 2.3 2.5 million.
Per quarter over the next several quarters and what that means from a percentage of revenue over time, you'll see our share based comp expense significantly decreased as a percentage of revenue.
Thank you that makes sense. Thanks a lot.
Thank you. Thank you.
Thank you. Our next question comes from the line of Jeff parts from the Nader. Your line is now open.
Sure sure correctly that you guys said August was the biggest revenue month, you've seen history the company.
Hey, Jeff it's Derek Thanks for the question.
Yes, obviously, we can only report to you what we're seeing through a August 11, but given how we're trending yes, we're seeing the largest month over month revenue increase and if we were to continue to track. This progress right here August will be a record revenue month for us.
If you continue to pave the way that your pacing right now in this third quarter do you think you can surpass Q1 revenues of 2000 22020.
Yeah, Jeff and this is Dan So looking at Q1 was that was a record revenue period for US we hit a Derek explained we talk a little bit about we had a pretty deep trough in April, but we have subs sequentially recovered from that period. So.
I think if we're hitting a revenue mark of about 9.3 million in the third quarter. The business is performing brilliantly if we comment a little above or a little below that the business is still doing some some some great growth. So that that's what we're we're shooting for we're driving the business as quickly as we can from a growth perspective, where we're very.
Excited about what we've seen in August.
And so we're looking to continue and clip that growth and then continually grow the business on a sequential quarter basis. So that's what we're shooting for yeah, just add again, Jeff It's Derek.
We're cautiously optimistic I think thats the best we can say it either obviously very strange times we're in.
Very as Dan said, we're very pleased with the progress obviously, the economics of everything have have been sort of tailwinds.
And certainly we all hope for all businesses if that continues and again here. We are August 11. So.
If trends continue yet I think we're very positive on the third quarter and the type of numbers you're speaking about.
And was the biggest set back in Q2, just sort of the moratorium basically going out and individuals being you collections.
So yes that was there was a good part of it I understand there was we serve as a lot of what I would call small and medium sized businesses right and not all those businesses have the technology capability to really transition from a work from office to a work from home environment in an efficient manner. So what we see saw kind.
In the second half of March and then flowing through April starting the second quarter with a lot of these small and medium sized businesses trying to adjust to the new norm and they came to us. They said look we're transitioning we need them, we need some help on our minimum commitments or if there were transactional customers. They look to pause for a for a temporary period.
So that's why we say when we saw that trough that April low it was really a result of condos those pandemic.
Headwind in addition.
Theres, a number of kind of moratoria out there from a collection standpoint that really affected our services revenue.
As we've disclosed today and we're going to continue to provide we've really broken out platform revenue versus services revenue. So from a dollar profitability perspective, you know we didn't see much impact in the services revenue it doesn't provide as much incremental contribution margin, but from a top line perspective, that's where our biggest impact was in.
Thats really a result of the collections moratorium such so as those start to subside towards the middle to end the third quarter, leading into fourth quarter. We believe we're going to experience. Some pent up demand and then really flowing in the 2021 with the forbearance the government stimulus all starting to subside as the consumer.
Financial profile is kind of deteriorated as a result of all these things were going to see a much increase transactional volume. So we're excited about some of those tailwinds, but yes. It was important for us on this call to break out platform revenue and services revenue because we wanted to give some real good insight into what is the majority of our business.
Being the platform revenue business, where we were actually up year over year. That's the high margin part of our business. So it's very important that we finally distinguished between those two sectors. If you will or segments. If you will that maybe not segments were an accounting perspective, but from looking at it at the business do you have a true picture of how Weve rebound.
Funded from what is.
Obviously, we keep saying unprecedented that terms being thrown around at every company, but it truly wise and we want to give a good picture some insight into the company.
So the way that your pacing you could be Q1 of 2020, and then actually accelerate growth into Q4 of 2020 as well.
Yes, I think we absolutely could and its just.
The new customer applications, we've really made an effort here to go out an attack the market as I mentioned.
Yes. This phase that we're going through let's hope, it's a very quick phase one that some shorter not longer but this phase has really affected how the company is the size of companies that we deal with thats prospects and customers how they look at the market and as I mentioned several times in my transcript.
They are now more than ever looking at how to get efficiencies in their own business, because they've got to make up for the negative impacts that they just endured and so we're very excited by that June as we said new customer applications were above pre cobot levels July top that.
August is trending very nicely I'll, just say it that way and as I mentioned again those are all nice indicators, giving us some visibility into revenue moving forward. So yes, we feel like we've got some great things going on notwithstanding this quarter and look I I'm very hopeful and.
We will look back on this on a long chart on the performance of this company and say this was hopefully a blip.
If you like a blip in basically you're back on your feet and like Youre getting back to the sprint right now.
Yes, I think that the this is Dan I think that the correct statement and what's really encouraging is where we're seeing the growth coming out of this trough is all in our platform revenue, which if you look at first quarter 9.3 million and you compare it to where our margin profile is today on the platform revenue and how we're trying.
Ending.
If we are back at 9.3 million in the third quarter, our adjusted EBITDA is going to be somewhere between two and a half and 3 million for the quarter, which would put us the adjusted EBITDA margin of 25% to 30% on the same revenue dollars. So that's very exciting for us because again, the where we're seeing the business drive is where we put the focus on the platform revenue.
Right.
In where your competitors working with.
Which their clients in like helping them through this as much as you guys were like are you seeing any of them migrate to your platform.
So you were definitely seeing.
Competitor customers come over to our platform. We're also seeing the ability to actually engage with those customers as Derek said before sometimes when those customers were a little less receptive to change you know they've been using a blackberry for years and yes. There's no reason to switch to a two an iPhone or Android just because it works well when we present them with a platform that weve.
Neal is superior and more efficient and get them ROI.
The the Apple iPhone or the Android the user interface that the capability, they're going to they're going to look to potentially switch so.
We do a really good job of understanding our customer and their needs and working their use case and the pricing model for a particular customers. We think we do a much better job than the competition. So.
There are some indications that the competition was working with some of their customers, but in a different way, whereas we were saying what do you guys need lets help you out during this period and lets get you back on your feet. Some of the competitors out there was saying yeah, we'll work with you, but you're going to sign a two year commitment now we feel the reason why they did that would because they.
I don't want to lose them to us. So yeah, I think we did a really good job working with the customers. It's very appreciative, we're getting kind of good feedback within the marketplace I think ultimately over the next several quarters.
Going to see that pay dividends.
That's all from you guys appreciate the time.
Thanks, very much appreciate the questions.
Thank you. Our next question comes from the line of brine by throw from.
Your line is now open.
Hi, guys that hey, good good job all things considered.
So what you just.
Just looking at July not to government restrictions had not been in place what what would you estimate.
Revenue would be at or what kind of growth rate, what you've been able to put up in July.
Look I mean, where I guess, we're going to be a little bit causes in regard to kind of kind of forward looking guidance and such but.
As as we've mentioned we saw nice recovery sequentially from a revenue perspective. After our April low looking April through June we were able to grow monthly revenue during that period, 12%.
July we were up again somewhere between eight and 9% in monthly revenue and where we're trending today for August again, as Derek talked about you know our highest monthly growth growth revenue from month to month as well as a record monthly revenue for us, it's somewhere between 25% to 30% growth. So.
We're really excited how we recovered and that's with a number of these moratoria and forbearance that still havent subsided as those subside, which we think will happen closer to the end of third quarter really into fourth quarter Thats. When we think we'll see a good snap back within our services revenue and also.
A good snap back within some of our platform revenue in the collections marketplace.
Okay.
I mean as it is it a good estimate to say maybe.
20% of your customers experienced some.
Some pain on this moratoriums.
I think actually that's probably a little bit higher than that when you talk about overall now a lot of our collections customer they're diversified to a certain degree. So they may have moratorium on student loan debt and can't collect on that debt, but they may be able to collect on some retail debt and such so I would say you know probably.
25, 30% felt some impact from this.
This moratorium that was put down within the collection space and some of the other kind of like retail pauses in and.
Inventory as a result of not wanting to look kind of aggressive during this period. So yeah, I would say, it's closer to 25, 30%.
Okay.
And your pay rate and same thing I'm reading, but.
I mean, there's there's talk of course, extending unemployment benefits, but in terms of the.
Debt collection Forbearances, there really is a much talk and extending that beyond the third quarter is that correct.
Yes, that's correct it and Thats what were hearing I mean look.
There's people, who unfortunately right now can't make payments on their on their mortgages and there and forbearance and ultimately eventually that bank is going to need to get paid or figure something out and that's where we're seeing tailwinds as the consumer financial profile deteriorates.
That's where we see increased volume within the collection space and that's a large market we serve so.
From a from kind of like debt collections were not seeing much extension outside of kind of the end of the third quarter at least at this point and as some of those forbearance programs. When you think of retail debt within the banks, the Citibank JP Morgans and such a bank of America of the World.
There are eventually going to want to get paid back or figure out how to refinance that loan or do something and that's where we see an increase in transaction volume. So again, we're very optimistic about the tailwinds that we believe are starting to brew within that space.
Okay.
Did you have any success, making inroads into the enterprise markets.
Yes for sure during during this period one of the one of the great things and we talk a little bit about this is some of those medium to larger customers that for whatever reason they maybe we're on the competitive platform and.
Really just kind of what weren't looking to move just because they had a relationship in such as they sell their business being impacted they became more receptive to talking to us and and when we have the ability to go head to head from a competitive standpoint, because our technology is built cloud native we're providing much more efficiency for application.
As when we're talking about we're talking about fast processing, we're seeing our speed, we're seeing our capabilities of the system.
Just providing much better solutions and scale than the competitor. So we were able to make some inroads within some enterprise adoption type of solutions with our strategic partners and also in initial discussions with some large enterprises, where.
We see a good opportunity to land within that enterprise and expand out from an adoption standpoint again because of how well our technology is performing against the competitors I think we're going is going to continue to see those tailwinds and really start to see more lift and revenue generation from a medium to larger scale customer that we have in the past.
And as as the beyond.
Beyond that as the virus created any other new business opportunities for you.
So look we are looking at a number of opportunities working with partners in regards to how we can leverage data information right Party contact. If you will you don't think of contact tracing opportunities where.
People have to figure out how to get in contact with individuals and have the right information as well as other opportunities about how businesses can get back to work, whether it's certain industries like the cruise line industry. How are they going to know who is boarding these crude is and where they've been in and what kind of opportunity that can can they have to use data not only their internal data, but our data.
To potentially work through.
Clearance type of solution. If you will so we're looking at a number of those opportunities working with some large partners.
And hopefully, making some progress here in the third quarter and may be able to make some announcements as early as fourth quarter about some of those solutions.
Okay.
And then just last question I think you sort of alluded to that but what's your competitors being mainly private is used it sounds like you think you may be picked up some market share during this time period.
So what we know is we definitely onboarded customers and started to initiate conversations with customers that we've identified in the past that that look I'm really happy with my current platform I'm not really interested right now so outside of our normal customer additions were seeing customers that in the past have been has.
Tend to just kind of move into that they're used to using the system have been much more receptive and we're getting into product demos, we're getting into the had comparison so from a new customer applications standpoint of Derek talked about we're hitting high and we know what that means it it's a leading indicator for what revenue means three six in.
Nine months.
Down the road. So yes. So we are seeing that we're gaining market share from a a customer onboarding perspective, and we believe over the next six to 12 month that will definitely turn into increased market share from a revenue perspective in those customers, yes, Brian just to sum up yes, obviously, we're winning customers from competition, yes, we're adding three.
Summers.
Hence the record applications, which is exciting.
Overall in some I guess, what Dan was eloquently said are done a good job explaining is that we're seeing very nice positive business trends in the right now.
And to the extent that any or negative such as the collections more three and others as those unwind that gives us even greater confidence that second half a year will be even stronger than we expected hopefully and 2021, we're very well positioned so I think that would just be in a nutshell, who this autumn.
Great Okay, great. Thanks, guys.
Thanks, Brian Thanks.
Thank you at this time is showing no further questions I would like to turn the call back over there for closing remarks.
Thank you very much we look forward to updating you on our progress on our next quarterly call. Thank you for joining us today and have a nice evening bye bye.
Ladies and gentlemen, this concludes today's conference call. Thanks for participating you may now disconnect.
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