Red Violet, Inc.

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Good day, ladies and gentlemen, and welcome to Red Violet's third quarter 2022 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. If anyone should require operator assistance, please press star then zero on your phone. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Camilo Ramirez, Vice President, Finance and Investor Relations. Please go ahead.

Good afternoon and welcome. Thank you for joining us today to discuss our third quarter 2022 financial results. With me today is Derek Dubner, our Chairman and Chief Executive Officer, and Dan McLaughlin, 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. 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 statement due to risk 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 risk and uncertainties associated with RedViolet'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, and adjusted EBITDA margin. Reconciliations of these non-GAAP financial measures to their most directly comparable 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 amount 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. Thank you, Camilo. Good afternoon to all, and thank you for joining us today to discuss the results of our third quarter 2022. We are very pleased to report yet another strong quarter, setting records in nearly every key financial metric, driven by continued strong demand for our innovative identity and fraud solutions. We are delivering on a growing sales pipeline, winning head-to-head tests against the competition, and have re-accelerated our investment in our sales and product teams to capitalize on opportunities and to drive our robust product roadmap. With that, let us dive into the quarter. For the quarter, total revenue was a record $15 million, a 29% increase over prior year. We produced a record $12 million in adjusted gross profit, resulting in a record margin of 80% for the third quarter. Adjusted EBITDA for the quarter. was a record $5.2 million, producing a record 35 percent margin. Our net income was a record $2.3 million for the third quarter, an 80 percent increase over prior year. This resulted in record earnings of 16 cents per diluted share. IDI added over 50 customers sequentially from the second quarter. ending the third quarter at 6,873 customers, and Forwarn added over 8,700 users sequentially from the second quarter, ending the third quarter at 110,051 users. Over 225 realtor associations are now contracted to use Forwarn. During last quarter's earnings call, We noted that we had multiple pipeline opportunities in play that we thought would perhaps land in Q2, were delayed due to ordinary course budgeting and procurement processes, and that we expected to land them in Q3 and Q4. As expected, we landed a few of those opportunities here in the third quarter. We are very proud of these wins as they are a result of prospects testing our solutions and capabilities against the much larger competition, and we won the business. We also provided insight last quarter into some softness that we experienced in our real estate marketing segment due to the spike in mortgage rates and volatility in the broader housing market. In the third quarter, we still experienced softness within this segment with revenue remaining relatively flat compared to prior year. To be clear, the segment we are referring to is only a portion of our real estate revenue and is not part of our fraud solutions, and it is not forewarned, both of which saw strong growth in the third quarter. As it has been the case over several quarters now, revenue from our collections vertical was flat. However, we continue to see consumer financial health deteriorating around the edges, especially at below prime status, where they're feeling the most pressure due to sunsetting government subsidies, depleting savings, increasing credit card balances, significantly higher interest rates, and a changing labor market. We remain steadfast in our expectation that collections activity will pick up in the not too distant future, and we will start to see revenue growth from our collections vertical. Yet, despite collections and real estate marketing being relatively flat for the quarter, we grew total revenue 29% over the same period last year. This is a result of strong revenue growth across all other areas of the business within our fraud and identity solutions. As the current economic environment is dynamic, we have remained flexible and willing to pivot quickly as an organization to ensure that we are making and executing upon decisions that are in the best interests of the business long term. As of the end of the second quarter, as we had already added 29 members to the team year-to-date, we determined that it would be prudent to downshift our onboarding and focus primarily on mission-critical positions in strategic areas of the business. Given an evaluation of our ongoing performance, including several larger customer wins and feedback from large prospects and pilot project participants, we re-accelerated our hiring plan a bit in the third quarter with an eye towards our go-to-market capabilities. To that end, we expanded our sales team with seven key new hires focused on strategic areas within fraud and identity where we are seeing solid traction. All in all, this was a terrific quarter. Our record results once again demonstrate the operational leverage of our business. We continue to generate healthy cash flow as we continue to invest in the business for growth. From product development to infrastructure to sales and across the organization, we have the most talented team in the industry. Combine that with our industry-leading cloud-native identity intelligence platform, differentiated data assets, and innovative solutions, and we are well positioned for the future. With that, I will now turn it over to Dan to provide some additional color and to discuss the financials.