GICS Sector : Technology
Red Violet, Inc., a software and services company, specializes in proprietary technologies and applying analytical capabilities to deliver identity intelligence in the United States.It offers idiCORE, an investigative solution used to address various organizational challenges, which include due diligence, risk mitigation, identity authentication, and regulatory compliance; and FOREWARN, an app-based solution that provides instant knowledge before face-to-face engagement with a consumer, as well as helps professionals to identify and mitigate risk.The company serves financial services, insurance, healthcare, retail, and telecommunication companies; law enforcement and government agencies; and collections, corporate security, and investigative firms, as well as solutions used for purposes, such as risk mitigation, due diligence, fraud detection and prevention, regulatory compliance, and customer acquisition.
Red Violet reported a record-breaking quarter with revenue of $23.1 million, up 21% year-over-year, and adjusted gross profit of $19.4 million, resulting in a record adjusted gross margin of 84%. The company's adjusted EBITDA was a record $9 million, with a record margin of 39%, while adjusted net income was a record $5.8 million, producing record adjusted earnings of $0.39 per diluted share, surpassing analyst estimates of $0.32. The company generated a record $7.3 million in free cash flow and demonstrated significant growth in its customer base, adding over 300 customers to IDI.
Publication Date: Nov -20
The company ended the quarter with over 9,800 customers, and FOREWARN added over 25,000 users, ending the quarter with over 590 realtor associations contracted to use the service. Red Violet has a strong sales pipeline, with an increasing number of larger customer wins across verticals, and is confident in its ability to deliver a strong finish to the year. The company's focus on growing its customer base and expanding profitability is evident in its significant wins, including a large state toll authority and a large payroll processor, demonstrating traction in the public sector and background screening industries.
Red Violet is leveraging AI to advance multiple initiatives that enhance the intelligence and efficiency of its platform, further distancing itself from competitors. The company has seen significant renewals and usage growth over the last 5 years, with most contracts being 1- to 2-year agreements and a strong retention rate. The installed base of close to 400,000 users and the pricing strategy for FOREWARN, which offers unlimited searches for individual professionals, are expected to drive future growth.
With a P/E Ratio of 84.87 and an EV/EBITDA of 34.03, the market is pricing in significant growth expectations. Analysts estimate next year's revenue growth at 14.3%. The company's strong pipeline and confidence in its ability to create meaningful value for customers and shareholders are expected to drive future performance. The management team's opportunistic buyback program, with an average repurchase price of $42.26 in Q3, and the current share price of $54.53, suggest that the company views its shares as attractive.
The company announced a $15 million increase to its share repurchase program, which now has $18.9 million remaining. The management team and Board believe in the company's differentiated assets and competitive advantages, and see the buyback as a useful tool in their capital allocation strategy. The company's Rule of 40 score was 60%, indicating a strong balance between growth and profitability.
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The growth of Red Violet's AI-driven Identity Intelligence Platform is driven by increasing demand for identity verification and fraud prevention, coupled with the adoption of machine learning and artificial intelligence in various industries.
A platform that provides real-time access to public records, allowing users to make informed decisions
An AI-powered platform that provides advanced analytics and visualization tools to help users identify patterns and connections
A data analytics platform that provides access to a vast repository of public records and data
A verification platform that provides real-time identity verification and authentication
Red Violet, Inc. operates in a niche market, providing data analytics and information solutions. While there are some substitutes available, they are not as comprehensive as Red Violet's offerings, reducing the threat of substitutes.
Red Violet, Inc. has a diverse customer base, and no single customer accounts for a significant portion of its revenue, reducing the bargaining power of customers.
Red Violet, Inc. has a diversified supply chain, and its suppliers do not have significant bargaining power, reducing the threat of supplier negotiations.
The data analytics and information solutions market is highly competitive, and new entrants can easily enter the market, posing a significant threat to Red Violet, Inc.'s market share.
The data analytics and information solutions market is highly competitive, with many established players, leading to a high intensity of rivalry among competitors, including Red Violet, Inc.
| Value | |
|---|---|
| Debt Weight | 2.90% |
| Debt Cost | 3.95% |
| Equity Weight | 97.10% |
| Equity Cost | 9.69% |
| WACC | 9.53% |
| Leverage | 2.98% |
Value: 0.9
Growth: 8.7
Quality: 7.6
Yield: 1.0
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