Q1 2024 Red Violet Inc Earnings Call

Operator: Good day, ladies and gentlemen, and welcome to Red Violet's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. 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 conference, Camilo Ramirez, Senior Vice President, Finance and Investor Relations. Please go ahead.

Good day, ladies and gentlemen, and welcome to run pilots first quarter 'twenty 'twenty four earnings conference call.

Camilo Ramirez: At this time all participants are in a listen only mode.

Operator: Later, we will conduct a question and answer session and instructions will follow at that time.

Operator: As a reminder, this call is being recorded.

Operator: I would now like to introduce your host for today's conference 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 first quarter 2024 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 after the call on our website.

Camilo Ramirez: Good afternoon and welcome. Thank you for joining us today to discuss our first quarter 2024 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.

Camilo Ramirez: Followed by a question and answer session.

Camilo Ramirez: I'd like to remind you that this call.

Camilo Ramirez: Webcast live and recorded a replay of this event will be available on the call on our website to access the webcast. Please visit our investor page on our website www dot red Violet Dot com.

Camilo Ramirez: To access the webcast, please visit our investor 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 forecasting statements due to risk and uncertainties associated with the company's business. The company undertakes no obligation to update the information provided on this call.

Camilo Ramirez: For a discussion of risk and 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 flow Reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures are provided in the earnings press release issued earlier today.

Camilo Ramirez: 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.

Camilo Ramirez: 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 said, I am pleased to introduce Red Violet's Chairman and Chief Executive Officer, Derek Dubner.

Derek Dubner: Risks and uncertainties associated with the company's business. The company undertakes no obligation to update the information provided on this call for a discussion of risks and uncertainties associated with Red Violet business.

Derek Dubner: Marriage, 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.

Derek Dubner: 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 financial measure are provided in the earnings press release issued earlier today.

Camilo Ramirez: In addition, certain supplemental metrics that are 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 <unk>, Chairman and Chief Executive Officer, Derek Dubner.

Derek Dubner: Thanks, Camilo. Good afternoon, and thank you for joining us today to discuss our first quarter 2024 results. 2024 is off to a great start as we posted our highest quarterly revenue and adjusted EBITDA in our company history, driven by broad-based demand across verticals and strong volumes experienced throughout the company. Our strategic initiatives executed over the last 18 months are paying off. We have been investing in our technology, the expansion of our product suite, and our go-to-market capability, and these investments are clearly bearing fruit. Our team executed superbly, capitalizing on the increasing realization by our target market that our innovative solutions are indispensable tools for identity verification. Fraud Prevention and Investigation

Derek Dubner: Thanks, Camilo good afternoon, and thank you for joining us today to discuss our first quarter 2024 results.

Derek Dubner: 2024 is off to a great start as we posted our highest quarterly revenue and adjusted EBITDA in our company history, driven by broad based demand across verticals and strong volumes experienced throughout the quarter.

Derek Dubner: Our strategic initiatives executed over the last 18 months are paying off.

Derek Dubner: We have been investing in our technology.

Derek Dubner: Pension of our product suite and our go to market capabilities.

Derek Dubner: These investments are clearly bearing fruit.

Derek Dubner: Our team executed superbly capitalizing on the increasing realization by our target markets that our innovative solutions are indispensable tools for identity verification.

Derek Dubner: Rod prevention and investigations.

Derek Dubner: Our performance this quarter positions us well for 2024, and in fact, we just closed out the month of April, which produced a record revenue month for Red Violet. Now, turning to the numbers, total revenue for the quarter was a record $17.5 million, a 20% increase over prior years. We produced a record $13.8 million in adjusted gross profit, resulting in a margin of 79% in the first quarter. Adjusted EBITDA for the quarter was a record $5.7 million, up 54% over the prior year, adjusted EBITDA margin of 32%, up 7 percentage points, and adjusted net income increased 36% to $3.2 million for the quarter, resulting in adjusted earnings of $0.22 per diluted share. Our IDI billable customer Ending the first quarter at 8,241 customers.

Derek Dubner: Our performance this quarter positions us well for 2024.

Derek Dubner: And in fact, we just closed out the month of April which produced a record revenue month for Red Violet.

Derek Dubner: Now turning to the numbers.

Derek Dubner: Total revenue for the quarter was a record $17 5 million.

Derek Dubner: A 20% increase over prior year.

Derek Dubner: We produced a record $13 $8 million and adjusted gross profit, resulting in a margin of 79% in the first quarter.

Derek Dubner: Adjusted EBITDA for the quarter was a record $5 $7 million.

Derek Dubner: Up 54% over prior year.

Derek Dubner: Adjusted EBITDA margin was 32% up seven percentage points.

Derek Dubner: Adjusted net income increased 36% to $3 $2 million for the quarter.

Derek Dubner: Resulting in adjusted earnings of 22 cents per diluted.

Derek Dubner: <unk> sure.

Derek Dubner: Our IDI billable customer base grew by a very strong 366 customers sequentially from the fourth quarter, which is our largest sequential quarterly increase since 2020 ending.

Derek Dubner: Ending the first quarter at 8241 customers.

Derek Dubner: For Warren, added over 51,000 users during the first quarter, the largest quarterly increase in our history, ending the quarter at 236,639 users. Over 425 realtor associations are now contracted to use ForeWarn.

Derek Dubner: For war added over 51000 users during the first quarter.

Derek Dubner: Larger quarterly increase in our history ending the quarter at 236639 users.

Derek Dubner: Over 425 realtor associations are now contracted to use for war.

Derek Dubner: We saw solid contribution from law enforcement and legal, two segments that we have been very focused on and continue to make substantial progress. We experienced increasing volumes from the diverse identity verification platforms that we power, as financial and corporate risk were also strong contributors. Consistent with the last few quarters, we saw continued progress in our collections vertical, with double-digit percentage growth. We continue to see significant opportunities ahead in both further penetrating existing markets, as well as those where we are still very early stage, including marketing services, background screening, and government.

Derek Dubner: We saw a solid contribution from law enforcement and legal two segments that we have been very focused on and continue to make substantial progress it.

Derek Dubner: We experienced increasing volumes from the diverse identity verification platforms that we power as financial and corporate risk were also strong contributors.

Derek Dubner: Consistent with the last few quarters, we saw continued progress in our collections vertical.

Derek Dubner: With double digit percentage growth.

Derek Dubner: We continue to see significant opportunities ahead in both further penetrating these markets as well as those where we're still very early stage, including marketing services background screening and government.

Derek Dubner: We generated $4.3 million in cash from operating activities in the first quarter, a 181% increase from the same period last year. Given our continued healthy cash generation, as we previously indicated, we've been leaning into these market opportunities. Investing in our technology, various product developments and enhancements, and strategically adding personnel to bolster our go-to-market capability, in addition to investing in our business. We purchased just under 300,000 shares of the company's common stock year to date through April 30th, 2024 at an average price of $19.81 per share, pursuant to the company's $15 million stock repurchase program.

Derek Dubner: We generated $4 $3 million in cash from operating activities in the first quarter, a 181% increase from the same period in 2023.

Derek Dubner: Given our continued healthy cash generation as we previously indicated we've been leaning into these market opportunities investing in our technology.

Derek Dubner: Various product development and enhancements.

Derek Dubner: And strategically adding personnel to bolster our go to market capabilities.

Derek Dubner: In addition to investing in our business. We purchased just under 300000 shares of the company's common stock year to date through April 32024 at an average price of $19 81 per share.

Derek Dubner: Pursuant to the company's $15 million stock repurchase program.

Derek Dubner: The company currently has $4 $6 million remaining under its stock repurchase program.

Derek Dubner: The company currently has $4.6 million remaining under its stock repurchase program. To sum up, Red Violet had a terrific quarter, driven by robust and balanced demand across verticals. Given the continuing momentum we're currently experiencing and the opportunities in front of us, we are very optimistic about the remainder of the year. With that, I turn it over to Dan to discuss finance.

Derek Dubner: To sum up Red Violet had a terrific quarter, driven by robust and balanced demand across verticals.

Dan: Given the continuing momentum, we're currently experiencing and the opportunities in front of us.

Dan: We're very optimistic about the remainder of the year.

Derek Dubner: With that I turn it over to Dan to discuss the financials.

Daniel MacLachlan: Thank you, Derek, and good afternoon. We are pleased to report a great start to the year, led by strong and increasing volume across the customer base. Revenue growth re-accelerated to 20%. We achieved record revenue of $17.5 million and record adjusted EBITDA of $5.7 million in the first quarter, translating nicely into strong EPS and healthy free cash flow. As we discussed last quarter, we continue to see real opportunity in our current endeavors to lean in and accelerate our revenue growth in 2024.

Dan: Thank you Derek and good afternoon.

Daniel MacLachlan: We are pleased to report a great start to the year led by strong and increasing volume across the customer base.

Daniel MacLachlan: Revenue growth re accelerated to 20%.

Daniel MacLachlan: We achieved record revenue of $17 5 million.

Daniel MacLachlan: And record adjusted EBITDA of $5 $7 million in the first quarter translating nicely into strong EPS and healthy free cash flow.

Daniel MacLachlan: As we discussed last quarter, we continue to see real opportunity in our current endeavors to lean in and accelerate our revenue growth in 2024.

Daniel MacLachlan: The team continues to execute well on these endeavors, increasing the opportunity pipeline and converting that pipeline to win. Turning now to our first quarter results, for clarity, all the comparisons I will discuss today will be against the first quarter of 2023, unless noted otherwise.

Daniel MacLachlan: The team continues to execute well on these endeavors with increasing opportunity pipeline and converting that pipeline to wins.

Daniel MacLachlan: Total revenue was a record $17.5 million, a 20% increase over prior years. We produced a record $13.8 million in adjusted gross profits, resulting in a margin of 79% in the first quarter, up 1 percentage point. Adjusted EBITDA for the quarter was a record $5.7 million, up 54% over prior years; adjusted EBITDA margin was 32%, up seven percentage points; adjusted net income increased 36 percent, to $3.2 million for the quarter; resulting in adjusted earnings of $0.22 per diluted share.

Daniel MacLachlan: Turning now to our first quarter results for clarity all the comparisons I will discuss today will be against the first quarter of 2023 unless noted otherwise.

Daniel MacLachlan: Total revenue was a record $17 5 million a.

Daniel MacLachlan: A 20% increase over prior year.

Daniel MacLachlan: We produced a record $13 $8 million and adjusted gross profit.

Daniel MacLachlan: Resulting in a margin of 79% in the first quarter up one percentage point.

Daniel MacLachlan: Adjusted EBITDA for the quarter was a record $5 $7 million up 54% over prior year.

Daniel MacLachlan: Adjusted EBITDA margin was 32% up seven percentage points.

Daniel MacLachlan: Adjusted net income increased 36% to $3 2 million for the quarter, resulting in adjusted earnings of 22 cents per diluted share.

Daniel MacLachlan: Moving through the details of our P&L, as mentioned, revenue was $17.5 million for the first quarter. Within IDI, we saw strong growth across verticals. Collections, for the first time in three years, broke into double-digit percentage revenue growth. Our investigative vertical continues to perform well, led again by our law enforcement sector.

Daniel MacLachlan: Moving through the details of our P&L as mentioned revenue was $17 $5 million for the first quarter.

Daniel MacLachlan: Within <unk>, we saw strong growth across verticals collections for the first time in three years broke into double digit percentage revenue growth.

Daniel MacLachlan: Our investigative vertical continues to perform well led again by our law enforcement segment.

Daniel MacLachlan: The first quarter of 2024 represents the ninth consecutive quarter of sequential revenue growth for our investigative vertical. Our Emerging Markets vertical also experienced nice growth in the first quarter, with strong contribution from our legal sector within financial and corporate risk. We had a tough comp from last year as the first quarter of 2023 included $0.7 million in one-time, non-recurring batch revenue. Excluding this one-time revenue, financial and corporate risk was up double digits on a percentage basis.

Daniel MacLachlan: The first quarter of 2024 represents the ninth consecutive quarter of sequential revenue growth for our investigative vertical.

Daniel MacLachlan: Our emerging markets vertical also experienced nice growth in the first quarter.

Daniel MacLachlan: With strong contribution from our legal segment.

Daniel MacLachlan: Within financial and corporate risk, we had a tough comp from last year as the first quarter of 2023 included $7 million in one time nonrecurring batch revenue.

Daniel MacLachlan: Excluding this one time revenue financial and corporate risk was up double digits on a percentage basis.

Daniel MacLachlan: IDI's real estate vertical, which does not include Forewarn, was down a few percentage points. However, our IDI billable customer base grew by 366 customers sequentially from the fourth quarter, our largest sequential quarter increase since the third quarter of 2020. We ended the first quarter at 8,241 IDI customers, as it relates to Forewarned. We added 51,259 users during the first quarter, the largest quarterly increase in our history, led by the initial onboarding of Florida Realtors, the largest state realtor association in the United States. Forewarned revenue growth remained strong, with the first quarter of 2024 representing the 16th consecutive quarter of sequential revenue growth. Over 425 Realtor Associations are now contracted to use ForeWarn.

Daniel MacLachlan: <unk> real estate vertical which does not include four one was down a few percentage points.

Daniel MacLachlan: Or IDI billable customer base grew by 366 customers sequentially from the fourth quarter, our largest sequential quarter increase since the third quarter of 2020.

Daniel MacLachlan: Yeah.

Daniel MacLachlan: We ended the first quarter at 8241 IDI customers.

Daniel MacLachlan: As it relates to four warm we added 51259 users during the first quarter the largest quarterly increase in our history.

Daniel MacLachlan: Led by the initial Onboarding of Florida, <unk>, the largest state regulatory association in the United States.

Daniel MacLachlan: For Warren revenue growth remained strong with the first quarter of 2024, representing the 16th consecutive quarter of sequential revenue growth.

Daniel MacLachlan: Over 425 regulatory associations are now contracted to use for Warner.

Daniel MacLachlan: Our contractual revenue was 78% for the quarter, up 3 percentage points from the prior year; our gross revenue retention percentage was 93% compared to 94% in prior years. 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 $0.6 million, or 18%, to $3.8 million. This $0.6 million increase was primarily a result of an increase in data acquisition costs from the addition of new data assets.

Daniel MacLachlan: Our contractual revenue was 78% for the quarter up three percentage points from prior year.

Daniel MacLachlan: Our gross revenue retention percentage was 93% compared to 94% in prior year.

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

Daniel MacLachlan: Yes.

Daniel MacLachlan: Moving back to the P&L, our cost of revenue exclusive of depreciation and amortization increased <unk> 6 million or 18% to $3 $8 million.

Daniel MacLachlan: This $6 million increase was primarily a result of an increase in data acquisition costs from the addition of new data assets.

Daniel MacLachlan: Adjusted gross profit increased 20% to $13.8 million, producing an adjusted gross margin of 79%, a one percentage point increase over first quarter 2023. Sales and marketing expenses decreased $0.2 million, or 5%, to $3.7 million for the quarter. This decrease was due primarily to a decrease in the provision for bad debts, partially offset by an increase in salaries and benefits.

Daniel MacLachlan: Adjusted gross profit increased 20% to $13 8 million producing an adjusted gross margin of 79% a one percentage point increase over first quarter 2023.

Daniel MacLachlan: Sales and marketing expenses decreased $2 million or 5% to $3 $7 million for the quarter.

Daniel MacLachlan: The $3.7 million of sales and marketing expense for the quarter consisted primarily of $2.2 million in employee salaries and benefits and $0.8 million in sales commission. General and administrative expenses increased $0.6 million, or 10%, to $5.8 million for the quarter. This increase was primarily the result of a $0.6 million increase in professional fees.

Daniel MacLachlan: This decrease was due primarily to a decrease in the provision for bad debts, partially offset by an increase in salaries and benefits.

Daniel MacLachlan: The $3 $7 million of sales and marketing expense for the quarter consisted primarily of $2 $2 million in employee salaries and benefits and <unk> $8 million and sales commissions.

Daniel MacLachlan: General and administrative expenses increased $6 million or 10%.

Daniel MacLachlan: To $5 8 million for the quarter.

Daniel MacLachlan: This increase was primarily the result of $8 $6 million increase in professional fees.

Daniel MacLachlan: The $5.8 million in general and administrative expenses for the quarter consisted primarily of $2.7 million of employee salaries and benefits, $1.3 million of non-cash share-based compensation expense, and $1.2 million in accounting, IT, and other professional services. Depreciation and amortization increased $0.4 million, or 18%, to $2.3 million for the quarter. This increase was primarily the result of the amortization of internally developed software.

Daniel MacLachlan: The $5 8 million and general and administrative expenses for the quarter consisted primarily of $2 $7 million of employee salaries and benefits $1 3 million of noncash share based compensation expense and $1 $2 million in accounting.

Daniel MacLachlan: It and other professional fees.

Daniel MacLachlan: Depreciation and amortization increased <unk> 4 million or 18, 18% to $2 $3 million for the quarter.

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

Daniel MacLachlan: Our net income for the quarter increased $1.1 million, or 149%, to $1.8 million. We reported earnings of 13 cents per basic and diluted share for the quarter based on a weighted average share count of 14 million shares basic and 14.2 million shares diluted. Adjusted net income for the quarter increased $0.8 million, or 36%, to $3.2 million, which resulted in adjusted earnings per share of $0.23 basic and $0.22 diluted

Daniel MacLachlan: Our net income for the quarter increased $1 $1 million or 149% to $1 8 million.

Daniel MacLachlan: We reported earnings of <unk> 13 per basic and diluted share for the quarter based on a weighted average share count of 14 million shares basic and $14 2 million shares diluted.

Daniel MacLachlan: Adjusted net income for the quarter increased $8 million or 36% to $3 2 million, which resulted in adjusted earnings per share of 23 basic and 22 cents diluted.

Daniel MacLachlan: Moving on to the balance sheet, cash and cash equivalents were $32.1 million at March 31, 2024 compared to $32 million at December 31, 2023. Current assets were $41.5 million, compared to $40.3 million, and current liabilities were $8.3 million, compared to $4.9 million. Of note, the $8.3 million in current liabilities included $4.1 million due for the purchase of 200,000 shares of company stock from the Greater Miami Jewish Federation that settled on April 1, 2024. Following the repurchase, the Greater Miami Jewish Federation was no longer a beneficial holder of any securities of the company.

Daniel MacLachlan: Moving on to the balance sheet cash and cash equivalents were $32 1 million at March 31, 2024, compared to $32 million at December 31, 2023.

Daniel MacLachlan: Current assets were $41 5 million compared to $43 million and current liabilities were $8 3 million compared to $4 9 million.

Daniel MacLachlan: Of note the $8 $3 million and current liabilities included $4 $1 million due for the purchase of 200000 shares of company stock from the Greater Miami Jewish Federation that settled on April one 2024.

Daniel MacLachlan: Following the repurchase the greater Miami Jewish Federation was no longer a beneficial holder of any securities of the company.

Daniel MacLachlan: We generated $4.3 million in cash from operating activities in the first quarter compared to generating $1.5 million in cash from operating activities for the same period in 2023. We generated $1.9 million in free cash flow in the first quarter compared to negative free cash flow of $0.8 million in the same period in 2023. Cash used in investing activities was $2.4 million for the first quarter, mainly the result of $2.3 million used for software developed for internal use. Cash used in investing activities was $2.3 million for the same period, 2023. Cash used in financing activities was $1.8 million for the first quarter, mainly as a result of two items.

Daniel MacLachlan: We generated $4 $3 million in cash from operating activities in the first quarter compared to generating $1 $5 million in cash from operating activities for the same period in 2023.

Daniel MacLachlan: We generated $1 9 million and free cash flow in the first quarter compared to negative free cash flow of $8 million in the same period 2023.

Daniel MacLachlan: Cash used in investing activities was $2 $4 million for the first quarter, mainly the result of a $2 $3 million used for software developed for internal use.

Daniel MacLachlan: Cash used in investing activities was $2 3 million for the same period 2023.

Daniel MacLachlan: Cash used in financing activities was $1 8 million for the first quarter, mainly the result of two items first the purchase and settlement of 77149 shares of company stock for $1 $4 million under our stock repurchase program at an average price of <unk>.

Operator: First, the purchase and settlement of 77,149 shares of company stock for $1.4 million under our Stock Repurchase Program at an average price of $18.30 per share. Second, we acquired 20,867 shares of company stock for $0.4 million from the net share tax settlement of employee restricted stock units. These shares were withheld in Treasury and retired prior to the end of the quarter. During the same period, 2023, cash used in financing activities was $0.2 million.

Operator: $18 30 per share.

Operator: Second we acquired 20867 shares of company stock for $4 million from the net share tax settlement of employee restricted stock units.

Operator: These shares were withheld and treasury and retired prior to the end of the quarter.

Operator: During the same period 2023 cash used in financing activities was <unk> 2 million.

Operator: 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. Currently, we have approximately $4.6 million remaining under our stock repurchase program. In closing, 2024 is off to a great start. Revenue is accelerating, we are investing in product and market expansion, our profitability and cash flow remain strong, and we continue to convert a growing opportunity pipeline to win. We expect 2024 to be an exciting year for Red Violet. With that, our operator will now open the line for Q&A. Thank you.

Operator: 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 our investment of our cash balances and as applicable strategically acquire additional shares in accordance with our repurchase program.

Operator: Currently we have approximately $4 $6 million remaining under our stock repurchase program.

Operator: In closing 2024 is off to a great start.

Operator: Revenue is accelerating we are investing for product and market expansion, our profitability and cash flow remains strong and we continue to convert a growing opportunity pipeline to wins.

Operator: We expect 2024 to be an exciting year for red Violet.

Operator: With that operator, we will now open the line for Q&A.

Operator: Thank you. At this time, we will conduct a question and answer session. To ask a question, you will need to press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Thank you. Our first question comes from the line of Josh Nichols of B Riley. Your line is now open.

Operator: Okay.

Speaker Change: Thank you.

Josh Nichols: This time, we will conduct a question and answer session.

Operator: To ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

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

Operator: Okay.

Josh Nichols: Thank you.

Operator: Our first question comes from the line of Josh Nichols of B Riley. Your line is now open.

Josh Nichols: Yeah, thanks for taking my question. And great to see, you know, essentially record quarters, particularly for IDI, and also core warrant customer ads. This quarter, I was curious if you could dive a little bit more into the details specifically for IDI, where you're seeing such strength to get this acceleration and sub growth. And also, if any of these customers are potentially going to be these $100,000 plus annual revenue accounts that you've kind of been talking about going after more and more as you expand your marketing budget a little bit.

Josh Nichols: Yeah. Thanks for taking my question and great to see.

Josh Nichols: Essentially record quarters, particularly for <unk> and also <unk> customer adds.

Josh Nichols: This quarter I was curious if you could dive a little bit more into the detail specifically for ibi, where youre seeing such strength to get these this acceleration in sub growth.

Josh Nichols: And also if any of these customers are potentially going to be the $100000 plus annual revenue accounts that you've kind of been talking about going after more and more as you expand your marketing budget is a little bit.

Derek Dubner: Yeah, thanks, Josh. It's Derek.

Josh Nichols: Yeah. Thanks, Josh it's Derek Great data great to talk to you.

Derek Dubner: Great to talk to you. We saw very strong activity within IDI throughout the quarter. It was broad-based, as we mentioned. We've had a focus for the last 12 to 18 months on legal and law enforcement. And we've made substantial progress there, onboarding new customers and seeing good volume there. Aside from that, we also mentioned that, as you know, due to the uniqueness of our AIML-powered platform and the consumer identity graph that we have built out and the accuracy of that identity graph and the way that organizations of all types can access that identity graph through various channels in performing their work, we've seen robust activity, strong volumes from the identity verification platforms, where we have become an integral part of their solutions in serving many use cases and in serving a diverse set of industries.

Derek Dubner: We saw very strong.

Derek Dubner: Activity within IDI throughout the quarter. It was broad based as we mentioned we've had a focus for the last 12 to 18 months.

Derek Dubner: Legal and law enforcement and we've made substantial progress there onboarding, new customers and seeing good volume there.

Derek Dubner: Aside from that we also mentioned that as you know due to the.

Derek Dubner: The uniqueness of our AI ml powered platform and the consumer identity graph that we have built out and.

Derek Dubner: And the accuracy of that identity graph and the way that organizations of all types can access that identity graph through various channels.

Derek Dubner: In performing their work, we've seen robust activity strong volumes from the identity verification platforms, where we have become an integral part of their solutions in serving many use cases and in serving a diverse set of industries. So we've genuine.

Derek Dubner: So we've genuinely saw some very good strength and it was very consistent throughout the quarter what I would add there is Sentiment seems to be pretty strong within the verticals that we serve with the outbound sales with some of the subject matter expert sales that we have we're seeing some real nice sentiment in Wanting to hear more about our solutions what we can do for the end-user how Differentiated we are and so that that's very positive and we believe that's going to be a tailwind We've also invested a bit as you know Josh in some of our marketing as in the early days We did very little marketing of our products and solutions and so we've been building building out our marketing capabilities over the last 12 months and that market awareness has Definitely improved and done well for us Dan perhaps can comment upon size of customer Dan if you will. Yeah, sure Josh size

Derek Dubner: Lee saw some very good strength and it was very consistent throughout the quarter.

Dan: What I would add there is.

Derek Dubner: Sentiment seems to be pretty strong within the verticals that we serve.

Dan: With the outbound sales with some of the subject matter expert sales that we have.

Dan: We're seeing some real nice sentiment and wanted to hear more about our solutions. What we can do for the end user how differentiated differentiated we are and so that's very positive and we believe that's going to be a tailwind.

Derek Dubner: We've also invested a bit as you know Josh in some of our marketing as in the early days, we did very little marketing of our products and solutions and so we've been building and building out our marketing capabilities over the last 12 months and that market awareness has definitely improved and done well for us Dan perhaps you can comment upon.

Daniel MacLachlan: Sure. Josh, hi, this is Dan. Great to talk to you again.

Dan: Size of customer density will yes, sure Josh side has been great to talk to you again.

Daniel MacLachlan: Yeah, I mean, when we look at the ads in the first quarter on the IDI side, really good logos across the board, across industries, a lot of opportunity potential within those customers. As it relates to customers who are generating over 100,000 on a yearly basis, if we look at Q1 on a trailing 12-month basis compared to what we reported at the end of the fourth quarter, we have approximately 10 additional customers that are now within that 100,000 or over cohort.

Daniel MacLachlan: Yes, I mean, when we look at the ads in the first quarter on the <unk> side.

Daniel MacLachlan: Really good logos across the board across industries, a lot of opportunity potential within those customers as it relates to customers who are generating over 100000.

Daniel MacLachlan: And in a yearly basis, if we look at Q1 on a trailing 12 month basis compared to what we reported at the end of fourth quarter.

Daniel MacLachlan: We have approximately 10 additional customers that are now within that 100000 or over <unk>.

Daniel MacLachlan: Cohorts, so seeing nice additions there as well as the cohort between 25 to 50000, a year, but when we look at the ads of the 300 plus customers in the first quarter quality logos across the board across industries with a lot of potential for future growth.

Daniel MacLachlan: So we're seeing nice additions there, as well as the cohort between 25,000 to 50,000 a year. But when we look at the ads for the 300-plus customers in the first quarter, quality logos across the board, across industries, with a lot of potential for future growth.

Daniel MacLachlan: Thanks. It's great to hear that you're also adding some larger potential revenue generators to that pot as well. I wanted to touch on 4Warn for a minute. It's not talked about as much, but you've had so many positive press releases about some of the wins. I'm just curious what your expectation for the trajectory going forward is for adding new subscribers to the platform given the number of wins that you've announced just over the last 90 days or so.

Daniel MacLachlan: Yeah.

Speaker Change: Thanks, that's great to hear that you are also adding some some larger.

Daniel MacLachlan: Potential revenue generators.

Daniel MacLachlan: As well I wanted to touch on for a warm for a minute, it's not talked about as much but you had so many positive press releases about some of the wins I'm just curious what your expectation for the <unk>.

Daniel MacLachlan: Factory going forward is for adding new subs to the platform given the number of wins that you announced just over the last 90 days or so.

Daniel MacLachlan: Yeah, sure. This is Dan again.

Daniel MacLachlan: Yes sure. This is Dan again, yes, when we talk about for warrant over the last several years, we've seen great expansion within the market.

Daniel MacLachlan: Yeah, when we talk about forewarn, you know, over the last several years, we've seen, you know, great expansion within the market, really saw last year a tremendous uptake with associations across the board and acceleration, if you will, on the amount of associations that we had wins last year. We would expect to continue to see that trend throughout 24 and into 25. When we look at kind of the overall level, you know, there are approximately 11 to 1,200 associations throughout the U.S. As we just reported, you know, we have over 425 associations today, so plenty of opportunities to go-get.

Daniel MacLachlan: Really saw last year tremendous uptake with associations across the board and acceleration. If you will on the amount of associations that we headwinds last year, we would expect to continue to see that trend throughout 'twenty four and into 25, when we look at kind of the overall level.

Daniel MacLachlan: Approximately about 11% to 1200 associations throughout the U S. As we just reported we have over 425 association's today. So plenty of go get when we think about it from a real leader perspective, there's.

Daniel MacLachlan: When we think about it from a realtor perspective, you know, there are approximately 1.6 million realtors under the National Association of Realtors. Of that, I would probably say, you know, close to 800 to 900,000 are active realtors. They were selling more than one house a year and so on and so forth. And so, you know, I think where we're at today with the number of users, we still have plenty of go-getters. So, in 2024, we would expect to continue to see that acceleration and the onboarding of associations and carry that into 25.

Daniel MacLachlan: There is approximately one 6 million real leaders under the National Association of Realtors.

Daniel MacLachlan: That's I would probably say close to 800 to 900000.

Daniel MacLachlan: Our active reorders, there were selling more than one house, a year and so on and so forth and so.

Daniel MacLachlan: I think where we're at today with the number of users still have plenty of go get so 2024, we would expect to continue to see that acceleration in the onboarding of associations.

Daniel MacLachlan: And carry that into 'twenty five.

Josh Nichols: Thanks. So the last question for me, then I'll pass the torch here.

Speaker Change: Thanks to the last question for me then our pass the torch here.

Josh Nichols: It sounds like really all the end markets are doing pretty well. I guess collections have been like the one piece of the business that for the last few years has kind of been facing some challenges. But now that's back to double digit growth. Do you think the collections business is likely to continue growing this year?

Speaker Change: Sounds like really all the end markets are doing pretty well I guess <unk>.

Josh Nichols: <unk> had been like the one piece of the business, but that for the last few years, we've kind of been facing some challenges, but now thats back to double digit growth.

Josh Nichols: Do you think the collections businesses is likely to continue growing this year.

Daniel MacLachlan: So throughout the year, we've seen, you know, good signs. We've talked about it over the last several quarters, anecdotally, hearing from our customers, you know, seeing good metrics come through that vertical, and we're starting to see that actually turn into revenue. You know, we're very conservative when we look at the business.

Josh Nichols: So throughout the year, we've seen good signs we've talked about it over the last several quarters anecdotally hearing from our customers.

Daniel MacLachlan: Seeing good metrics come through that.

Daniel MacLachlan: That vertical and we're starting to see that actually turn into revenue.

Daniel MacLachlan: And I think conservatively, as we look at collections, you know, we're looking at that as any significant growth this year as all upside. But the first quarter, you know, saw great numbers, good, strong volume in April as well. And so the expectation is, you know, we're gonna see a nice reversion in that industry. The expectation, it would be probably leaving 24 when we start to see real solid, significant, continued growth. But everything we're seeing now gives us a really good indication that, you know, the next few quarters should be pretty healthy for collections compared to being flat or down over the last three years.

Daniel MacLachlan: We are very conservative when we look at the business and I think conservatively as we look at collections.

Daniel MacLachlan: We're looking that as any significant growth this year as all upside.

Daniel MacLachlan: But first quarter saw great numbers, good strong volume in April as well and so the expectation is.

Daniel MacLachlan: We're going to see a nice reversion in that industry. The expectation it would be probably leaving 24, when we'll start to see real solid significant continued growth.

Daniel MacLachlan: But everything we're seeing now gives us really good indication that the next few quarters should be pretty healthy for collections compared to being flat or down over the last three years.

Derek Dubner: Yes, Josh, it's Derek. Just adding to that, as you probably know and as many see, that, you know, the consumer, a certain section of the consumer is challenged. Government subsidies have worn off, and, you know, they're now having to pay their bills. Forbearance is gone.

Derek Dubner: Yes, Josh it's Derek just adding to that.

Derek Dubner: As you probably know and as many see that.

Derek Dubner: The consumer a certain section.

Derek Dubner: The consumer is challenged.

Derek Dubner: <unk> subsidies have worn off and.

Derek Dubner: They are not having to pay their bills.

Derek Dubner: And therefore, first, what we saw were the autos coming back, where many bought autos. Consumers have peaked, or not peaked, but at least they hit a high level. It looks like we're going to be higher for longer, perhaps, or at least until that changes. And so consumers have definitely been challenged there. After autos, credit card delinquencies have moved up. They're at the highest they've been since probably 2012 or so. And so, given those indications and the fact that inflation, at least as of right now, seems to be a little sticky as the deceleration has slowed, it appears that the consumer will continue to be challenged, or at least a good number of consumers.

Derek Dubner: Forbearance is gone and therefore first what we saw where the auto is going back where many bought autos rates have peaked or not peaked about at least hit a high level. It looks like we're going to be higher for longer.

Derek Dubner: <unk> or at least until that changes and so consumers have definitely been challenged there after autos credit card delinquencies have moved up there at the highest they've been since probably 2012 or so and so we've given those indications and the fact that.

Derek Dubner: Inflation at least as of right now it seems to be a little sticky as the deceleration has slowed it appears that the consumer will continue to be challenged or at least a good number of consumers and as we know it takes a little bit of a process where.

Derek Dubner: And as we know, it takes a little bit of a process where a consumer goes through that process, and it ends up being a collection effort. Now, given that unemployment is still relatively low, and as long as the consumer is working and able to pay some bills and continue to be the American consumer who's always been a robust spender, that may continue for some time. So the jury's out a little bit on collections, but it's certainly showing durability over the last few quarters.

Derek Dubner: Consumer goes through that process and it ends up being a collection effort now given that unemployment is still relatively low and as long as the consumer is working.

Derek Dubner: <unk> to pay some bills and continue to be the American consumer who has always been a robust spender that may continue for some time so.

Derek Dubner: Jerry is out a little bit on collections, but it's certainly showing durability over the last few quarters.

Josh Nichols: I appreciate the update. Glad to see everything's off to such a good start for the first quarter. Thanks, guys.

Speaker Change: I appreciate the update glad to see everything is off to such a good start for the first quarter. Thanks guys.

Derek Dubner: Thank you, Josh. Thanks, Josh.

Speaker Change: Thank you Josh Thanks, Jeff.

Operator: I am showing no further questions at this time. I would now like to turn it back to Derek Dubner for closing remarks.

Speaker Change: I am showing no further questions at this time I would now like to turn it back to Derek <unk> for closing remarks.

Derek Dubner: Thank you all for joining us today to report our first quarter financial results. We reported another record revenue quarter, the highest in our company history, and a reacceleration of our business. The investments we've made over the past 18 months are translating to better market awareness, better use and volumes of our solutions, enhancing our product suite, and increasing our go-to-market capabilities as we continue to execute upon our strategic plan. Given our highly leverageable fixed cost model and healthy cash generation, we are well positioned to continue investing in our business and enhancing shareholder value. We're excited about the remainder of 2024 and beyond.

Derek Dubner: Thank you all for joining us today.

Derek Dubner: To report our first quarter financial results, we reported another record revenue quarter, the highest in our company history and a reacceleration of our business. The investments we've made over the past 18 months are translating to better market awareness.

Derek Dubner: Better use and volumes of our solutions enhancing our product suite and increasing our go to market capabilities as we continue to execute upon our strategic plan.

Derek Dubner: Given our highly leverage able fixed cost model and healthy cash generation, we are well positioned to continue investing in our business and enhancing shareholder value.

Derek Dubner: We're excited about the remainder of 2024 and beyond.

Speaker Change: Good afternoon.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Operator: Okay.

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