Q4 2023 Red Violet Inc Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to Red Violet's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Good day, ladies and gentlemen, and welcome to Red Violets fourth quarter and full year 2023 earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

Operator: Later we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to introduce your host for today's call, Camilo Ramirez, Senior Vice President, Finance and Investor Relations.

And instructions will follow at that time.

Mind you. This call is being recorded I would now like to introduce your host for today's call Camilo Ramirez Senior Vice President Finance and Investor Relations. Please go ahead.

Camilo Ramirez: Good afternoon and welcome. Thank you for joining us today to discuss our fourth quarter and full year 2023 financial results. With me today is Derek Dubner, our chairman and chief executive officer, and Dan MacLachlan, our chief financial officer. Our call today will begin with comments from Derek and Dan, followed by a question and answer session. I would like to remind you that this call is being webcast live and recorded. A replay of the event will be available following the call on our website.

Good afternoon and welcome. Thank you for joining us today to discuss our fourth quarter and full year 2023 financial results with me today is Derek Dubner our chair.

Chief Executive Officer and Dan.

Along with our Chief Financial Officer, our call today will begin with comments from Derek and Dan followed by a question and answer session.

I would like to remind you that this call is.

The webcast.

Slide and recorded a replay of this event will be available following the call on our website to access the webcast. Please visit our investors page on our website www dot red Violet Dot com before we begin I would like to advise listeners that certain information discussed by management. During this conference call are forward looking.

Camilo Ramirez: To access the webcast, please visit our investors page on our website, www.redviolet.com. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call are forward-looking statements covered under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those stated or implied by our forward-looking statements due to risk uncertainties associated with the company's business. The company undertakes no obligation to update the information provided on this call.

<unk> covered under the Safe Harbor provisions of the private Securities Litigation Reform Act of 1009.

Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties associated with the company's business.

<unk> undertakes no obligation to update information provided on this call for a discussion of the risks and uncertainties associated with Red Violet <unk> business I encourage you to review the company's filings with Securities and Exchange Commission, including the most recent annual report on Form 10-K, and subsequent 10-Qs during the call with me.

Camilo Ramirez: For a discussion of the risk uncertainties associated with Red Violet's business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the most recent annual report on Form 10-K and subsequent 10-Qs. During the call, we may present certain non-GAAP financial information relating to adjusted gross profit, adjusted gross margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and free cash. Reconciliations of these non-gas financial measures to their most directly comparable U.S. gas financial measure are provided in the earnings press release issued earlier today. In addition, certain supplemental metrics that are not necessarily derived from any underlying financial statement amounts may be discussed, and these metrics and their definitions can also be found in the earnings press release issued earlier today. With that, I am pleased to introduce Red Violet's Chairman and Chief Executive Officer, Derek Dubner. Thanks, Camilo.

Certain non-GAAP financial information relating to adjusted gross profit adjusted gross margin adjusted EBITDA adjusted EBITDA margin adjusted net income adjusted earnings per share and free cash flow reconciliations of these non-GAAP financial measures to their most directly comparable U S. GAAP.

S. GAAP financial measure are provided in the earnings press release issued earlier today.

In addition, certain supplemental metrics that are not necessarily derived from any underlying financial statement amounts may be discussed and these metrics under definitions can also be found in the earnings press release issued earlier today with that I am pleased to introduce Greg pilots, Chairman and Chief Executive Officer, Derek Dubner.

Thanks Camilo.

Derek Dubner: Good afternoon to those joining us today to discuss our fourth quarter and full year 2023 results. We are pleased to announce a strong fourth quarter, capping off another record year for Red Violet. It was a year of higher financial metrics across the board. Reflecting on the prior year in an economic climate that certainly experienced its ebbs and flows but found its footing as the year progressed, we grew revenue in the mid-teens, generated very strong margins and cash flow, and invested in our business while returning capital to shareholders via our stock repurchase program, our industry-leading AIML-powered platform. Proprietary Linking Algorithm, and Core Identity Graph, continue to be recognized by the industry. And as time passes, more and more customers and prospects are realizing that we do entity resolution better than anybody else. And entity resolution is essential for identity verification.

Good afternoon to those joining us today to discuss our fourth quarter and full year 2023 results.

We are pleased to announce a strong fourth quarter capping off another record year for Red Violet.

It was a year of producing higher financial metrics across the board.

Reflecting on the prior year and an economic climate that certainly experienced it ebbs and flows but found its footing as the year progressed. We grew revenue in the mid teens generated very strong margins and cash flow and invested in our business, while returning capital to shareholders via our stock.

The repurchase program.

Our industry, leading AI ml powered platform proprietary linking algorithms and core identity graph continue to be recognized by industry and as time passes more and more customers and prospects are realizing that we do entity resolution better than.

Anybody else.

And entity resolution is essential for identity verification.

Derek Dubner: Fraud Detection and Prevention and Risk Mitigation Across Industries and The Cross Transaction. As a case in point, our solutions are now an integral component of the solutions of a number of the leading identity verification platform companies in the market today. These companies rely on our entity resolution capabilities to serve their many end markets. Our differentiated assets and capabilities have us very well positioned for 2024 and beyond. Given the continuing expansion of our product suite and with 2024 revenue to date off to a record start, we are very optimistic and highly focused on accelerating our business and continuing to deliver exceptional customer and shareholder value. Now, turning to the numbers.

Rod detection, and prevention and risk mitigation across industries and across transactions.

Case in point.

Our solutions are now an integral component of the solutions of a number of the leading identity verification platform companies in the market today.

These companies rely on our entity resolution capabilities to serve there are many end markets.

Our differentiated assets and capabilities have us very well positioned for 2024 and beyond.

Given the continuing expansion of our product suite and with 2020 for revenue to date off to a record start we are very optimistic and highly focused on accelerating our business and continuing to deliver exceptional customer and shareholder value.

Now turning to the numbers.

Derek Dubner: Total revenue for the fourth quarter was $15.1 million, a 15% increase over the prior year. We produced $11.7 million in adjusted gross profit, resulting in a margin of 78% in the fourth quarter, up one percentage point. Suggested EBITDA for the quarter was $2.7 million, up 76% over the prior year. The adjusted EBITDA margin was 18%, up 6%.

Total revenue for the fourth quarter was $15 1, million% to 15% increase over prior year.

We produced $11 $7 million and adjusted gross profit, resulting in a margin of 78% in the fourth quarter up one percentage point.

Adjusted EBITDA for the quarter was $2 $7 million up 76% over prior year.

Adjusted EBITDA margin was 18% up six percentage points.

Derek Dubner: The adjusted net income increased 157% to $0.3 million for the quarter, resulting in adjusted earnings of $0.02 per share. Cash and cash equivalents were $32 million at December 31, 2023. Our contractual revenue was 82% for the quarter, up 5 percentage points from the prior year. For those that are new to our story, it always bears mention that the fourth quarter presents some seasonality just due to the fact that there are fewer business days to transact around the holiday period, which impacts our transactional revenue.

Adjusted net income increased 157% to point $3 million for the quarter, resulting in adjusted earnings of <unk> <unk> per share.

Cash and cash equivalents were $32 million at December 31, 2023.

Our contractual revenue was 82% for the quarter up five percentage points from prior year.

For those that are new to our story. It always bears mentioned that the fourth quarter presents some seasonality just due to the fact that there are less business days to transact around the holiday periods, which impacts our transactional revenue.

Derek Dubner: Our IDI billable customer base grew by 106 customers sequentially from the 3rd quarter, ending the 4th quarter at 7,875 customers. For Warren, we added over 17,000 users during the fourth quarter, ending the quarter at 185,380 users. Over 400 realtor associations are now contracted to use Warren for war.

Our IDI billable customer base grew by 106 customers sequentially from the third quarter ending the fourth quarter at 7875 customers.

For war added over 17000 users during the fourth quarter ending the quarter at 185380 users.

Over 400 realtor associations are now contracted to use for ward.

Derek Dubner: We continue to hear personal stories from appreciative, Forewarned subscribers about how impactful Forewarn is in ensuring their safety as they meet unknown prospects in often isolated locations. We are working urgently to get this essential safety tool into the hands of all real estate professionals. For the year, total revenue increased 13% to $60.2 million, generating an adjusted gross profit of $47.1 million and adjusted EBITDA of $16.4 million. Eve at the margin was 27%, up 3 percentage points. We saw strong customer onboarding throughout the year, with continued growth in the onboarding of higher-tier customers, with 72 customers contributing over $100,000 of revenue in 2023, compared to 67 customers in 2022. We generated $5.9 million in free cash flow in 2023 compared to generating $3.6 million in 2020.

We continue to hear personal stories from appreciative for warrants subscribers about how impactful for warrant is ensuring their safety as they meet unknown prospects and often isolated locations.

We are working urgently to get this essential safety tool into the hands of all real estate professionals.

For the year total revenue increased 13% to $68 2 million generating an adjusted gross profit of $47 $1 million and adjusted EBITDA of $16 $4 million.

Adjusted EBITDA margin was 27% up three percentage points.

We saw strong customer onboarding throughout the year with continued growth in the onboarding of higher tier customers with 72 customers contributing over $100000 of revenue in 2023 <unk>.

Compared to <unk> 67 customers in 2022.

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<unk> $5 $9 million in free cash flow in 2023 compared to generating $3 6 million in 2022.

Derek Dubner: Throughout the year, we continued our expansion within existing verticals and our move into larger enterprises, experiencing solid demand across financial and corporate risk as we continued to evolve our KYC verification platform with intelligent fraud signals and scoring capabilities. We completed the integration of our leading background screening support solutions, IDI-CRIM, IDI-TRACED, and IDI-ALIAS, which provide an essential informed view of the consumer prior to the commencement of the background screening process.

Throughout the year, we continued our expansion within existing verticals and our move into larger enterprise experiencing solid demand across financial and corporate risk as we continued to evolve our ky seed verification platform with intelligent <unk>.

<unk> signals and scoring capabilities.

We completed the integration of our leading background screening support solutions IDI crim.

Trace and IDI alias, which provide an essential informed view of the consumer prior to the commencement of the background screening process.

Derek Dubner: Our focus on law enforcement within our investigative vertical has driven increased agency onboarding due to the accuracy and currentness of our data, our differentiated interface, leading mobile app, and unique search functionality, including our map-based criminal search, real-time arrest search, and Arrest Monitoring. In the last two quarters of the year, we saw signs of recovery in our collections vertical, and that progress continues throughout the first quarter to date. Closing out the year, we completed our IDI marketing data integration with our holistic core consumer identity graph. We added hundreds of data attributes to the graph, with IDI marketing products now in market to inform a vast set of industries in identity verification across the entire customer journey, from prospecting to onboarding. AppLogin

Our focus on law enforcement within our investigative vertical has driven increased agency onboarding due to the accuracy and current <unk> of our data.

Our differentiated interface, leading mobile app and unique search functionality, including our map based criminal search real time arrest search and arrest monitoring.

And the last two quarters of the year, we saw signs of recovery in our collections vertical.

And that progress continues throughout the first quarter to date.

Closing out the year, we completed our IDI marketing data integration with our holistic core consumer identity graph.

We added hundreds of data attributes to the graph with IDI marketing products now in market to inform a vast set of industries and identity verification across the entire customer journey.

From prospecting Onboarding.

Derek Dubner: Purchase, transfer, and more. We are highly focused on these areas for 2024 with the goal of accelerating revenue by way of identity verification, and background screening support for government.

<unk> login purchase transfer and more.

We are highly focused on these areas for 2024 with the goal of accelerating revenue by way of identity verification background.

Background screening support.

Derek Dubner: Law Enforcement, and Marketing Services, as we will roll out new products and expanded capabilities throughout 2024 and beyond. Given the economic climate last year, we likely sacrificed a bit of top-line growth as we tilted conservatively in managing the business and ensuring a very healthy bottom line. We, of course, will remain focused on the health of our business, but we see real opportunities in our current endeavors to lean in and accelerate revenue growth in 24 and to position ourselves for continued acceleration in subsequent years. Given our announcement today on the appointment of Jonathan McDonald, I do want to take a little time to discuss the public sector. It is a large market opportunity for us, and we have proven, when given the chance to test against larger competition, that our platform, core consumer identity graph, and superior API functionality are differentiating in generating insights needed by government agencies to solve their complex problems, as government is a unique industry with its own complexities and as an example of where we are leaning in to accelerate our path. We are excited to welcome Jonathan McDonald to the Red Violet team.

Government.

<unk> enforcement and marketing services.

We will rollout new products and expanded capabilities throughout 2024 and beyond.

Given the economic climate last year, we likely sacrificed a bit of topline growth as we tilted conservatively and managing the business and ensuring a very healthy bottom line.

We of course, we will remain focused on the health of our business, but we see real opportunities in our current endeavors to lean in and accelerate revenue growth and 24 and to position ourselves for continued acceleration in subsequent years.

Given our announcement today on the appointment of Jonathan Macdonald I do want to take a little time to discuss the public sector.

It is a large market opportunity for us and we have proven when given the chance to test against larger competition that our platform core consumer identity graph and superior API functionality are differentiating and generating insights needed by government agencies to solve for their complex problems.

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As government is a unique industry with its own complexities and as an example of where we are leaning in to accelerate our path.

We are excited to welcome Jonathan Mcdonald to the Red Violet team.

Derek Dubner: Jonathan will be joining us as EVP of Public Sector. Jonathan has over twenty years of experience leading public sector divisions of global information solution providers responsible for product development, go-to-market strategy, sales, and contract procurement. Jonathan's prior experience includes his role as EVP, U.S. Public Sector, at TransUnion, where he was instrumental in TransUnion's entrance into, and expansion within, the U.S. Public Sector. Previously, Jonathan held relationship roles, and leadership roles, excuse me, at Clarivate. Pivotal Software. Gow.

Jonathan will be joining us as EVP of public sector.

Jonathan has over two decades of experience, leading public sector divisions of global information solution providers responsible for product development go to market strategy sales and contract procurement.

Jonathan's prior experience includes his role as EVP U S public sector at Trans Union, where he was instrumental in trans unions entrance into and expansion within the U S public sector.

Previously Jonathan held relationship Rolls leadership roles excuse me at Clair of eight.

Pivotal software.

Derek Dubner: IBM, and LexisNexis Risk Solutions. Another area that we had previously said we would lean in is AI, specifically deep learning. As you may recall, we discussed a few quarters ago that we are in a unique position to expand our AI capabilities, given our valuable assets, namely our AI ML driven platform, and our high confidence core consumer identity graph. We are investing in this area. And at present, we have added two individuals with expertise in deep learning, who are leading the charge in training transformer models to identify fraud signals across massive amounts of data, in utilizing generative AI to develop new ways of interacting with our high-confidence data assets, in using large language models to analyze data and to identify patterns and relationships to assimilate into our core identity graph, and in providing deep learning models to diverse industries, to extract valuable insights and intelligence from the large volumes of data within our Identity Graph.

Del <unk>.

IBM and Lexisnexis risk solutions.

Another area that we had previously said we would lean in is AI, specifically deep learning.

As you May recall, we discussed a few quarters ago that we are in a unique position to expand our AI capabilities, given our valuable assets, namely our AI ml driven platform and our high confidence core consumer identity graph.

We are investing in this area and at present, we have added two individuals with expertise in deep learning who are leading the charge in training transformer models to identify fraud signals across massive amounts of data.

And utilizing generative AI to develop new ways of interacting with our high confidence data assets.

And using large language models to analyze data and to identify patterns and relationships to assimilate into our core identity graph.

And didn't providing deep learning models to diverse industries to extract valuable insights and intelligence from the large volumes of data within our identity graph.

Derek Dubner: We believe our key assets, combined with the natural language processing capabilities of large language models, as well as the analytical advantages of deep learning, will prove invaluable to any business or organization in making more informed decisions, driving innovation, and gaining a competitive edge in today's data-driven world. On the corporate governance front, it's important to the company that as the company and the business landscape evolve, so must our board of directors to ensure that we can adapt to emerging opportunities and challenges, drive innovation, and solidify the long-term sustainability and growth of the company. We recently announced the appointment of Bill Livick to our board of directors. Bill's multi-decade career building platform-driven solutions to drive consumer insights has established him as a leading innovator in the information services space, and we are pleased to have Bill on the Red Violet board of directors. Turning now to our Stock Repurchase Program. As you may recall, on December 19, 2023, our Board of Directors authorized the repurchase of an additional $5 million of the company's common stock. During the fourth quarter, the company purchased 125,703 shares at an average price of $19.89 per share.

We believe our key assets combined with the natural language processing capabilities of large language models.

As well as the analytical advantages of deep learning will prove invaluable to any business organization and making more informed decisions driving innovation.

And gaining a competitive edge in todays data driven world.

Yeah.

On the corporate governance front. It is important to the company that as the company and the business landscape evolve so much to our board of directors to ensure that we can adapt to emerging opportunities and challenges drive innovation and solidify the long term sustainability and growth of the company.

We recently announced the appointment of Bill Levek to our board of Directors Bill.

<unk> multi decade career building platform driven solutions to drive consumer insights as established him as a leading innovator in the information services space and.

And we are pleased to have bill on the Red Violet Board of directors.

Turning now to our stock repurchase program.

As you May recall on December 19, 2023, our board of directors authorized the repurchase of an additional $5 million of the company's common stock.

During the fourth quarter. The company purchased 125703 shares at an average price of $19 89 per share.

Derek Dubner: Since inception in May of 2022 through February 29th of 2024, the company purchased a total of 289,340 shares at an average price of $18.73 per share. As of March 2024, the company had approximately $4.6 million dollars remaining under the stock repurchase program. With that, I'll turn it over to Dan to discuss the financials. Thank you, Derek, and good afternoon.

Since inception in May of 2022 through February 29th of 2024. The company purchased a total of 289340 shares at an average price of $18 73 per share.

As of March 2024, the company had approximately $4 $6 million remaining under the stock repurchase program.

With that I'll turn it over to Dan to discuss the financials.

Thank you Derek and good afternoon, 2023, with a strong year for Red Violet again, producing yearly records in revenue gross profit net income adjusted EBITDA and free cash flow.

Daniel MacLachlan: 2023 was a strong year for Red, again producing yearly records in revenue, gross profit, net income, adjusted EBITDA, and free cash. Reflecting back to the first quarter of 2023, in the shadow of some broader economic uncertainty, our goals were to advance our long-term strategic plan by converting our healthy cash flow and solid balance sheet into innovative solutions, enhanced capabilities, and entry into new markets and increasing market penetration. I'm happy to report that we executed well against those goals with several product releases in 2020, including enhanced KYC functionality with fraud signals and scoring for the broader identity market, robust background screening support, which now includes IDI Trace, IDI CRIM, and IDI Alias, and enhanced criminal information capabilities for law enforcement and our investigative vertical that includes map-based criminal search functionality, real-time arrest search, and arrest monitoring. We are now hitting the IDI Marketing, along with our core identity solution, allows us the opportunity to capture the entire identity journey and corresponding wallet share from our customers through Protecting and Acquisition, Verification and Onboarding, and Protecting and Personalizing.

Reflecting back to the first quarter of 2023 in the shadow of some broader economic uncertainty.

Our goals were to advance our long term strategic plan by converting our healthy cash flow and solid balance sheet into innovative solutions enhanced capabilities entry into new markets and increasing market penetration.

I am happy to report that we executed well against those goals with several product releases in 2023, including enhanced <unk> functionality with fraud signals and scoring for the broader identity market.

A robust background screening support suite that now include IDI trace IDI crim in IDI Elliot.

And enhanced criminal information capabilities for our law enforcement and our investigative vertical that includes math based criminal search functionality real time arrest search and arrest monitor.

Yes.

We are now hitting the market with our IDI marketing solution, providing more than 400 attributes across more than 260 million U S consumers.

Rei marketing along with our core identity solution.

Allows us the opportunity to capture the entire identity journey and corresponding wallet share from our customers.

Through protecting an acquisition verification and onboarding.

And protecting and personalizing.

Daniel MacLachlan: These combined solutions encompass the full customer identity. Closing out the year, we launched several AI and machine learning initiatives, including enhanced AI driven entity resolution, predictive analytics driven by deep learning, and improved data extraction using large language models.

These combined solutions encompass the full customer identity lifecycle.

Closing out the year, we launched several AI initiatives, including enhanced AI driven entity resolution.

Predictive analytics, driven by deep learning and improved data extraction using large language models.

Daniel MacLachlan: Moving into 2024, we are extremely excited about our solutions and the expanding applicability to the markets we serve. And, as Derek discussed, we have the opportunity to lean in a bit to accelerate our revenue in 2024 because of our incremental margin on every growth dollar. We believe we can accomplish this acceleration while still generating increasing profitability with an adjusted EBITDA margin nearing 30% and producing strong free cash. At this time, I would like to discuss two updates we have made to our reporting. The first update is that we have started reporting two additional non-GAAP measures.

Moving into 2024, we are extremely excited about our solutions suite and the expanding applicability to the markets we serve.

And as Derek discussed our opportunity to lean in a bit to accelerate our revenue in 2024.

Because of our incremental margin on every growth dollar. We believe we can accomplish this acceleration, while still generating increasing profitability with adjusted EBITDA margin nearing 30% and producing strong free cash flow.

At this time I would like to discuss two updates we have made to our reporting.

The first update is that we have started reporting two additional non-GAAP measures.

Daniel MacLachlan: Adjusted Net Income and Adjusted Earnings per Share. We believe Adjusted Net Income and Adjusted Earnings per Share provide additional means of evaluating period-over-period operating performance by eliminating certain non-cash expenses and other items that might obscure trends in our operations and otherwise make comparisons of our ongoing business more difficult. The second update relates to our supplemental metrics. Beginning with the first quarter of 2020, we will no longer provide revenue from new customers, base revenue from existing customers, and growth revenue from existing customers as supplemental metrics. As we periodically review and refine the definition, methodology, and the appropriateness of our supplemental metrics,

Adjusted net income and adjusted earnings per share.

We believe adjusted net income and adjusted earnings per share provides additional means of evaluating period over period operating performance.

Eliminating certain noncash expenses and other items that might obscure trends in our operations and otherwise make comparisons of our ongoing business more difficult.

The second update relates to our supplemental metrics bigger.

Beginning with the first quarter of 2024.

We will no longer provide revenue from new customers base revenue from existing customers and growth revenue from existing customers as supplemental metrics.

As we periodically review and refine the definition methodology and appropriateness of our supplemental metrics.

Daniel MacLachlan: The way these supplemental revenue metrics are currently defined, and Schrapp, they have become less relevant to management internally, and we believe they no longer provide meaningful information to understand or evaluate the trends in our. Turning now to our fourth-quarter results, for clarity, all the comparisons I will discuss today will be against the fourth quarter of 2022, unless noted otherwise. Total revenue was $15.1 million, a 15% increase over the prior year. We produced $11.7 million in adjusted gross profit, resulting in a margin of 78% in the fourth quarter, up one percentage point. Adjusted EBITDA for the quarter was $2.7 million, up 76% over prior years, adjusted EBITDA margin was 18%, up 6 percentage points, and adjusted net income increased 157 percent to 0.3 million dollars for the quarter, resulting in adjusted earnings of two cents per share.

These supplemental revenue metrics are currently defined and track have become less relevant to management internally and we believe they no longer provide meaningful information to understand or evaluate the trends in our business.

Turning now to our fourth quarter results for clarity all the comparisons I will discuss today will be against the fourth quarter of 2022 unless noted otherwise.

Total revenue was $15 1 million.

A 15% increase over prior year.

We produced $11 $7 million and adjusted gross profit, resulting in a margin of 78% in the fourth quarter up one percentage point.

Adjusted EBITDA for the quarter was $2 7 million up 76% over prior year.

Adjusted EBITDA margin was 18% up six percentage points.

Adjusted net income increased 157% to <unk> 3 million for the quarter, resulting in adjusted earnings of <unk> <unk> per share.

Daniel MacLachlan: Moving through the details of our P&L, as mentioned, revenue was $15.1 million for the fourth quarter. Digging in a bit to IDI's Revenue Center, we saw strong double-digit percentage revenue growth in financial and corporate risk, as well as within our investigative, which was led by law enforcement, where we continue to focus sales resources and are making nice traffic. Continuing the trend we saw last quarter, collections revenue as a percentage over prior year grew We have now had two consecutive quarters of year-over-year quarterly growth in our collection. We remain cautiously optimistic regarding these recent trends, as we are starting to see stronger, consistent volumes across our collection's customer base. Rounding out IDI, both emerging markets, which are comprised of multiple industries, and real estate, which does not include forwards, were down a few percentage points over prior years.

Moving through the details of our P&L as mentioned revenue was $15 1 million for the fourth quarter digging.

Digging in a bit to <unk> revenue segments we.

We saw strong double digit percentage revenue growth in financial and corporate risk.

As well as within our investigators segment, which was led by law enforcement, where we continue to focus sales resources and are making nice traction.

Continuing the trend we saw last quarter collections revenue as a percentage over prior year grew in the high single digits.

After a year of negative year over year quarterly growth.

We have now had two consecutive quarters of year over year quarterly growth within our collections vertical.

We remain cautiously optimistic regarding these recent trends as we are starting to see stronger consistent volumes across our collections customer base.

Rounding out ibi.

Both emerging market, which is comprised of multiple industries and real estate, which does not include 41 were down a few percentage points over prior year.

Daniel MacLachlan: Our IDI billable customer base grew by 106 customers sequentially from the third quarter, ending the fourth quarter at 7,875 customers, as it relates to ForeWarn revenue. We continue to see strong adoption from associations, which drove solid growth in the. As we discussed on our last earnings call, we proudly announced an agreement with Florida Real Estate, the largest state realtor association in the United States, to begin using ForeWarn in January 2024.

Or IDI billable customer base grew by 106 customers sequentially from the third quarter ending the fourth quarter at 7875 customers.

As it relates to four one revenue.

We continue to see strong adoption from association, which drove solid growth in the quarter.

As we discussed on our last earnings call, we proudly announced an agreement with Florida <unk> the largest state regulatory association in the United States.

To begin using for warrant in January 2024.

Daniel MacLachlan: While Florida's revenue is not included in our fourth quarter results presented today, this win is indicative of the continued progress in market penetration for ForeWarn. ForeWarn added over 17,000 users during the fourth quarter, ending the quarter at 185,380 users. Additionally, over 400 Realtor Associations are now contracted to use For Warmth.

While Florida's revenue is not included in our fourth quarter results.

Rented today.

This win is indicative of the continued progress in market penetration for Borgwarner.

<unk> added over 17000 users during the fourth quarter ending the quarter at 185380 users.

Over 400 real it tore associations are now contracted to use for war.

Daniel MacLachlan: Our contractual revenue was 82% for the quarter, up 5 percentage points from the prior year. Our Gross Revenue Retention Percentage was 92 percent, compared to 95% in previous years. We expect our gross revenue retention percentage to trend between 90% and 95% for the foreseeable future. Back to the P&L, our cost of revenue, exclusive of depreciation and amortization, increased $0.2 million, or 9%, to $3.3 million. This $0.2 million increase was primarily a result of an increase in data acquisition costs. Adjusted gross profit increased 17% to $11.7 million, reducing an adjusted gross margin of 78%, a one percentage point increase, over fourth quarter 2022. Sales and marketing expenses increased $0.5 million, or 17%, to $3.5 million for the quarter. This increase was due primarily to an increase in salaries and benefits and advertising and marketing.

Our contractual revenue was 82% for the quarter up five percentage points from prior year.

Our gross revenue retention percentage was 92% compared to 95% in prior year.

We expect our gross revenue retention percentage to trend between 90 and 95% for the foreseeable future.

Moving back to the P&L, our cost of revenue exclusive of depreciation and amortization increased $2 million or 9% to $3 3 million.

This $2 million increase was primarily a result of an increase in data acquisition costs.

Adjusted gross profit increased 17% to $11 7 million producing an adjusted gross margin of 78% a one percentage point increase over fourth quarter 2022.

Sales and marketing expenses increased $5 million or 17% to $3 5 million for the quarter.

This increase was due primarily to an increase in salaries and benefits and advertising and marketing.

Daniel MacLachlan: $3.5 million of sales and marketing expense for the quarter consisted primarily of $1.9 million in employee salaries and benefits and $0.7 million in sales commission. General and administrative expenses decreased $0.2 million, or 3%, to $6.9 million for the quarter. This decrease was primarily the result of a $0.2 million decrease in share-based compensation expense. The $6.9 million in general and administrative expenses for the quarter consisted primarily of $4.1 million of employee salaries and benefits, which included year-end bonuses as part of our company's discretionary bonus program, $1.2 million of non-cash share-based compensation, and $0.9 million in accounting, IT, and other professional fees. Depreciation and amortization increased $0.4 million, or 22%, to $2.2 million for the quarter. This increase was primarily the result of the amortization of internally developed software.

The $3 $5 million of sales and marketing expense for the quarter consisted primarily of $1 9 million in employee salaries and benefits and <unk> 7 million in sales commissions.

General and administrative expenses decreased $2 million or 3% to $6 9 million for the quarter.

This decrease was primarily the result of a $1 $2 million decrease in share based compensation expense.

The $6 9 million and general and administrative expenses for the quarter consisted primarily of $4 $1 million of employee salaries and benefits, which included yearend bonuses as part of our company's discretionary bonus plan.

$1 2 million of noncash share based compensation expense.

And $9 million in accounting.

And other professional fees.

Depreciation and amortization increased <unk> $4 million or 22% to $2 2 million for the quarter.

This increase was primarily the result of the amortization of internally developed software.

Daniel MacLachlan: Our net loss for the quarter narrowed $0.4 million, or 31%, to $1.1 million. We reported a loss of $0.08 per basic and diluted share for the quarter based on a weighted average share count of 14 million shares. Adjusted net income for the quarter increased $0.2 million or 157% to $0.3 million, which resulted in adjusted earnings of two cents per basic and diluted share. Moving on to the balance, cash and cash equivalents were $32 million at December 31, 2023, compared to $31.8 million at December 31, 2022. Current assets were $40.3 million, compared to $38.1 million, and current liabilities were $4.9 million, compared to four, compared to 5.4 million. We generated $15.1 million in cash from operating activities for the year ended December 31, 2021, compared to generating $12.5 million in cash from operating activities for the same period in 2022.

Our net loss for the quarter narrowed to $4 million or 31% to $1 $1 million.

We reported a loss of eight per basic and diluted share for the quarter based on a weighted average share count of 14 14 million shares.

Adjusted net income for the quarter increased $2 million or 157% to <unk> $3 million, which resulted in adjusted earnings of <unk> <unk> per basic and diluted share.

Moving onto the balance sheet cash and cash equivalents were $32 million at December 31, 2023, compared to $31 8 million at December 31, 2022.

Current assets were $43 million compared to $38 1 million and current liabilities were $4 9 million compared to four.

Compared to $5 4 million.

We generated $15 $1 million in cash from operating activities for the year ended December 31 2023.

Compared to generating $12 $5 million in cash from operating activities for the same period in 2022.

Daniel MacLachlan: We generated $5.9 million in free cash flow in 2020, compared to generating $3.6 million in 2022. Cash used in investing activities was $9.1 million for the year ended December 31, 2023, mainly the result of $9 million used for software developed or internal use. Cash used in investing activities in the prior year was $8.8 million. Cash used in financing activities was $5.7 million for the year ended December 31, 2023, mainly the result of two items. One, purchasing 195,740 shares of company common stock for $3.7 million under our stock repurchase program at an average price of $19.14 per share, and two, acquiring approximately 99,234 shares of company common stock for $2 million from the net share tax settlement of the Employee Restricted Stock. These shares were withheld in Treasury and retired prior to the end of the year. During the same period, 2022, cash used in financing activities was $

We generated $5 $9 million in free cash flow in 2023 compared to generating $3 $6 million in 2022.

Cash used in investing activities was $9 $1 million for the year ended December 31 2023.

Mainly the result of $9 million used for software developed for internal use.

Cash used in investing activity and prior year was $8 8 million.

Cash used in financing activities was $5 $7 million for the year ended December 31, 2023, mainly the result of two items.

One.

Purchasing purchasing 195.

740 shares of company common stock for $3 $7 million under our stock repurchase program at an average price of $19 14 per share.

And to acquiring approximately 99234 shares of company common stock for $2 million from the net share tax settlement of employee restricted stock units.

These shares were withheld and treasury and retire prior to the end of the year.

During the same period 2022 cash used in financing activities was $6 $1 million.

Daniel MacLachlan: This was the result of mainly two items. One, acquiring approximately 252,000 shares of company common stock for $5.2 million from the net share tax settlement of employee restricted stock, and two, purchasing 50,000 shares of company stock for $0.9 million under our stock repurchase program at an average price of $17.52 per share. These shares were withheld in Treasury and retired prior to the end of the year as relates to our stock repurchase program.

This was the result of mainly two items one acquiring approximately 252000 shares of company common stock for $5 $2 million from the net share tax settlement of employee restricted stock units and to purchasing purchasing 50000 shares of company stock.

For $9 million under our stock repurchase program at an average price of $17 52 per share.

These shares were withheld and treasury and retired prior to the end of the year.

As it relates to our stock repurchase program, we will continue to monitor prevailing market conditions and other opportunities that we have for the use or investment of our cash balances and as applicable strategically acquire additional shares in accordance with our repurchase program.

Daniel MacLachlan: We will continue to monitor prevailing market conditions and other opportunities that we have for the use or investment of our cash balances and, as applicable, strategically acquire additional shares in accordance with our repurchase program. In closing, we are pleased with our fourth quarter and full year results, with revenue off to a record start and additional solutions to penetrate new markets. We are excited to accelerate revenue and produce another record year in 2020. With that, our operator will now open the line. Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question; to remove yourself from the question, you may press star 11 again. Please stand by while we compile the Q&A roster. Again, to ask a question, that's star 11 on your telephone.

In closing we are pleased with our fourth quarter and full year results with revenue off to a record start in.

Increasing opportunity within our current markets and additional solutions to penetrate new markets. We are excited to accelerate revenue and produce another record year in 2024.

With that our operator will now open the line for Q&A.

Thank you as a reminder to ask a question you will need to press star one one on your telephone again Thats Star one one on your telephone to ask a question to remove yourself from the question queue. You May Press Star one again.

Please standby, while we compile the Q&A roster.

Again to ask a question.

<unk> one one on your telephone.

Operator: As there are no questions in queue, I would like to turn the conference back to Derek Dubner for closing remarks. Thank you. We are pleased to have reported another strong quarter and a record year for Red Violet. We are executing upon our strategic plan, which includes our robust product roadmap. We are well positioned to accelerate the business and to deliver exceptional customer and shareholder value.

Okay.

There are no questions in queue I would like to turn the conference back to Derek Dubner for closing remarks, Sir.

Thank you.

We're pleased to have reported another strong quarter and a record year for Red Violet, we are executing upon our strategic plan, which includes our robust product roadmap, we are well positioned to accelerate the business and to deliver exceptional customer and shareholder value.

Operator: Good afternoon. This concludes today's conference call. Thank you for participating. You may now disconnect. Thanks for watching!

Good afternoon.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

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Okay.

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