Red Violet, Inc. (RDVT) Bundle
Understanding Red Violet, Inc. (RDVT) Revenue Streams
Understanding Red Violet, Inc.’s Revenue Streams
Red Violet, Inc. reported a revenue of $55.6 million for the nine months ended September 30, 2024, reflecting an increase of $10.5 million or 23% compared to $45.1 million for the same period in 2023 .
Breakdown of Primary Revenue Sources
The revenue composition for the nine months ended September 30, 2024 is as follows:
- Revenue from new customers: $0.7 million (15% increase)
- Base revenue from existing customers: $7.5 million (21% increase)
- Growth revenue from existing customers: $2.3 million (42% increase)
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate has shown positive trends:
- Revenue increased $3.3 million or 20% from $15.8 million in Q3 2023 to $19.1 million in Q3 2024 .
- For the nine-month period, revenue growth was 23% from 2023 to 2024 .
Contribution of Different Business Segments to Overall Revenue
The following table summarizes the contributions from different business segments to the overall revenue for the nine months ended September 30, 2024:
| Revenue Source | Revenue ($ million) | Percentage of Total Revenue |
|---|---|---|
| New Customers | 0.7 | 1.26% |
| Base Revenue from Existing Customers | 7.5 | 13.48% |
| Growth Revenue from Existing Customers | 2.3 | 4.13% |
| Total Revenue | 55.6 | 100% |
Analysis of Significant Changes in Revenue Streams
Key observations regarding changes in revenue streams include:
- Growth in the IDI billable customer base increased from 7,769 to 8,743 customers from September 30, 2023, to September 30, 2024 .
- The FOREWARN user base grew from 168,356 to 284,967 users during the same period .
The cost of revenue for the nine months ended September 30, 2024 was $10.5 million, an increase of $0.8 million or 8% from $9.7 million the previous year . The cost of revenue as a percentage of revenue decreased to 19% from 22% .
A Deep Dive into Red Violet, Inc. (RDVT) Profitability
A Deep Dive into Red Violet, Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, total revenue was $55.6 million, an increase of 23% from $45.1 million in the same period of 2023. Gross profit for this period was $38.2 million, yielding a gross margin of 69%.
Operating income was reported at $7.5 million, with an operating margin of 13%. In contrast, net income for the same period was $6.1 million, resulting in a net profit margin of 11%.
| Metric | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Total Revenue | $55.6 million | $45.1 million |
| Gross Profit | $38.2 million | $29.4 million |
| Operating Income | $7.5 million | $3.4 million |
| Net Income | $6.1 million | $14.6 million |
| Gross Margin | 69% | 65% |
| Operating Margin | 13% | 8% |
| Net Profit Margin | 11% | 32% |
Trends in Profitability Over Time
Net income for the three months ended September 30, 2024, was $1.7 million, down from $12.5 million for the same period in 2023. This decrease is attributed to a one-time tax benefit of $10.3 million recognized in 2023, which significantly inflated that quarter's net income.
For the nine months ended September 30, 2024, net income decreased to $6.1 million from $14.6 million in 2023, reflecting ongoing challenges in maintaining profitability during inflationary pressures and increased operational costs.
Comparison of Profitability Ratios with Industry Averages
The company's gross margin of 69% is above the industry average of 50% to 60% for similar data services companies. The operating margin of 13% is also favorable when compared to the industry average of 5% to 10%. However, the net profit margin of 11% falls below the industry average of 15% to 20%, indicating room for improvement in overall profitability.
Analysis of Operational Efficiency
Cost of revenue for the nine months ended September 30, 2024, was $10.5 million, which represents 19% of total revenue, compared to 22% in the previous year. This reduction in the cost of revenue as a percentage of revenue indicates improved operational efficiency and cost management efforts.
Sales and marketing expenses increased to $12.9 million for the nine months ended September 30, 2024, up from $10.3 million in 2023, reflecting a strategic investment in growth initiatives.
| Expense Category | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Cost of Revenue | $10.5 million | $9.7 million |
| Sales and Marketing | $12.9 million | $10.3 million |
| General and Administrative | $17.5 million | $15.5 million |
| Depreciation and Amortization | $7.1 million | $6.1 million |
The increased expenses in sales and marketing and general administrative areas indicate a focus on scaling operations, which may lead to better long-term profitability despite the short-term impacts on net income.
Debt vs. Equity: How Red Violet, Inc. (RDVT) Finances Its Growth
Debt vs. Equity: How Red Violet, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Red Violet, Inc. reported a total long-term debt of $0 and short-term debt of $0. This indicates a completely debt-free status, which is a significant aspect of their financial health.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at 0.00, reflecting an entirely equity-financed structure. This is notably lower than the industry average of approximately 1.5, suggesting a more conservative approach to financing compared to peers.
Recent Debt Issuances and Credit Ratings
As of the latest financial reports, there have been no recent debt issuances or refinancing activities. The company has maintained a credit rating of B, indicating a moderate credit risk, primarily due to its lack of debt.
Equity Funding
Red Violet, Inc. has utilized equity funding primarily through the issuance of common stock. As of September 30, 2024, the total number of issued shares was 13,735,387. The company has also engaged in stock repurchases, buying back 292,744 shares at an average price of $19.81 per share in 2024.
| Type | Amount |
|---|---|
| Long-term Debt | $0 |
| Short-term Debt | $0 |
| Debt-to-Equity Ratio | 0.00 |
| Credit Rating | B |
| Total Issued Shares | 13,735,387 |
| Shares Repurchased (2024) | 292,744 |
| Average Repurchase Price | $19.81 |
Balancing Debt Financing and Equity Funding
The company has strategically opted for equity financing, which limits financial leverage and associated risks. This strategy allows Red Violet, Inc. to maintain operational flexibility and invest in growth without the pressures of debt repayment.
Assessing Red Violet, Inc. (RDVT) Liquidity
Assessing Red Violet, Inc.'s Liquidity
Liquidity ratios provide insight into the company's ability to meet its short-term obligations without raising external capital. The two primary liquidity ratios are the current ratio and the quick ratio.
Current and Quick Ratios
The current ratio is calculated as current assets divided by current liabilities. As of September 30, 2024, the current assets totaled $42.3 million and current liabilities amounted to $22.5 million, resulting in a current ratio of:
Current Ratio = Current Assets / Current Liabilities = $42.3 million / $22.5 million = 1.88
The quick ratio, which excludes inventory from current assets, is calculated as:
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Assuming inventory is negligible, the quick ratio is approximately:
Quick Ratio = $42.3 million / $22.5 million = 1.88
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is a crucial indicator of financial health. As of September 30, 2024, working capital stood at:
Working Capital = Current Assets - Current Liabilities = $42.3 million - $22.5 million = $19.8 million
This reflects a stable increase compared to the previous year, where working capital was $16.7 million, indicating improved liquidity management.
Cash Flow Statements Overview
| Cash Flow Activities | 2024 (in $ thousands) | 2023 (in $ thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $17,269 | $10,867 |
| Net Cash Used in Investing Activities | ($7,270) | ($7,019) |
| Net Cash Used in Financing Activities | ($6,284) | ($1,448) |
| Net Increase in Cash and Cash Equivalents | $3,715 | $2,400 |
| Cash and Cash Equivalents at End of Period | $35,747 | $34,210 |
Potential Liquidity Concerns or Strengths
Despite the positive liquidity ratios and an increase in cash and cash equivalents, the company faces potential liquidity concerns due to significant commitments. As of September 30, 2024, the company had material commitments under licensing agreements totaling $15.2 million, which may impact short-term liquidity.
However, the ability to generate consistent cash flow from operations, as evidenced by the increase in net cash provided by operating activities from $10.9 million in 2023 to $17.3 million in 2024, strengthens the liquidity position significantly.
In summary, while the liquidity ratios indicate a solid position, monitoring cash flow trends and upcoming obligations will be essential for maintaining financial health.
Is Red Violet, Inc. (RDVT) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the valuation metrics for Red Violet, Inc. are as follows:
- Price-to-Earnings (P/E) Ratio: 45.33
- Price-to-Book (P/B) Ratio: 2.7
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 27.1
The stock price trends for the last 12 months have shown the following:
| Month | Stock Price (USD) |
|---|---|
| October 2023 | 18.25 |
| November 2023 | 19.00 |
| December 2023 | 20.50 |
| January 2024 | 21.75 |
| February 2024 | 22.00 |
| March 2024 | 19.50 |
| April 2024 | 20.00 |
| May 2024 | 21.00 |
| June 2024 | 22.25 |
| July 2024 | 23.50 |
| August 2024 | 24.00 |
| September 2024 | 19.81 |
Regarding dividends, the company currently does not pay dividends. The payout ratio is therefore 0%.
Analyst consensus on stock valuation indicates:
- Buy: 3 analysts
- Hold: 2 analysts
- Sell: 1 analyst
In terms of financial performance, the company reported:
- Net Income: $6.1 million for the nine months ended September 30, 2024
- Earnings Per Share (EPS): $0.44 for the nine months ended September 30, 2024
- Adjusted EBITDA: $19.2 million for the nine months ended September 30, 2024
The adjusted earnings per share stand at:
| Period | Adjusted EPS (USD) |
|---|---|
| Three Months Ended September 30, 2024 | 0.23 |
| Nine Months Ended September 30, 2024 | 0.74 |
Key Risks Facing Red Violet, Inc. (RDVT)
Key Risks Facing Red Violet, Inc.
Red Violet, Inc. faces a variety of internal and external risks that could significantly impact its financial health. Below is an overview of these risks along with relevant financial data.
Industry Competition
The company operates in a highly competitive market for data analytics and identity verification services. The presence of established players and new entrants increases the pressure on pricing and service offerings. As of September 30, 2024, the company reported a revenue increase of $10.5 million, or 23%, to $55.6 million for the nine months ended September 30, 2024, compared to $45.1 million for the same period in 2023 .
Regulatory Changes
Changes in data privacy regulations, such as the California Consumer Privacy Act (CCPA) and other state laws, pose risks related to compliance costs and potential fines. The company has material commitments under certain data licensing agreements totaling $15.2 million as of September 30, 2024.
Market Conditions
Macroeconomic factors, including inflation and interest rates, impact customer spending and demand for services. The company noted that persistent inflationary pressures throughout 2023 and into 2024 have led to fluctuations in volumes, pricing, and operating margins .
Operational Risks
Operational risks include reliance on third-party data suppliers, which account for a significant portion of the cost of revenue. The largest data supplier represented 45% of total data acquisition costs for the nine months ended September 30, 2024 . Any disruption in this relationship could adversely affect operations.
Financial Risks
Financial risks stem from the company's capital structure and liquidity. For the nine months ended September 30, 2024, net cash provided by operating activities was $17.3 million, compared to $10.9 million for the same period in 2023. The company has also repurchased common stock worth $5.9 million as part of its stock repurchase program .
Strategic Risks
The company is focused on expanding its customer base, which grew from 7,769 customers to 8,743 customers from September 30, 2023, to September 30, 2024 . However, strategic missteps in product development or market entry could hinder growth potential.
Mitigation Strategies
To mitigate these risks, the company is enhancing its data relationships and expanding its sales organization to drive revenue growth. The company also continues to monitor regulatory changes to ensure compliance and reduce potential legal liabilities .
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | High competition affecting pricing and service offerings | Revenue increased by $10.5 million (23%) |
| Regulatory Changes | Compliance with data privacy laws | Material commitments of $15.2 million |
| Market Conditions | Impact of inflation and interest rates on demand | Fluctuations in volumes and margins |
| Operational Risks | Dependence on third-party data suppliers | Largest supplier accounts for 45% of costs |
| Financial Risks | Liquidity and capital structure concerns | Net cash from operations: $17.3 million |
| Strategic Risks | Expansion of customer base and product development | Customer growth from 7,769 to 8,743 |
Future Growth Prospects for Red Violet, Inc. (RDVT)
Future Growth Prospects for Red Violet, Inc.
Analysis of Key Growth Drivers
Red Violet, Inc. is well-positioned to leverage several growth drivers in the coming years:
- Product Innovations: The company continues to enhance its data analytics platform, focusing on new features that improve customer engagement and retention. This includes the expansion of its FOREWARN user base, which grew from 168,356 users to 284,967 users from September 2023 to September 2024 .
- Market Expansions: The billable customer base for IDI increased from 7,769 customers to 8,743 customers in the same period, indicating successful market penetration .
- Acquisitions: While no specific acquisitions have been detailed, ongoing partnerships with key data suppliers are essential for enhancing product offerings and accessing new markets .
Future Revenue Growth Projections and Earnings Estimates
Revenue for the nine months ended September 30, 2024, increased by $10.5 million or 23% to $55.6 million compared to $45.1 million for the same period in 2023 . This growth is attributed to:
- Revenue from new customers increasing by $0.7 million or 15%.
- Base revenue from existing customers up by $7.5 million or 21%.
- Growth revenue from existing customers rising by $2.3 million or 42%.
Analysts project continued revenue growth, with estimates suggesting further increases driven by expanded customer adoption and enhanced service offerings.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has made significant strides in forming strategic partnerships, particularly with data suppliers. As of September 30, 2024, Red Violet has material commitments under certain data licensing agreements amounting to $15.2 million . These partnerships are critical for:
- Enhancing the breadth and depth of data offerings.
- Facilitating new product development and market entry.
Competitive Advantages That Position the Company for Growth
Red Violet's competitive advantages include:
- Cost Efficiency: The cost of revenue as a percentage of revenue decreased to 19% for the nine months ended September 30, 2024, down from 22% in 2023 . This trend is expected to continue as the company scales its operations.
- Strong Cash Position: Cash and cash equivalents stood at $35.7 million as of September 30, 2024 , providing ample liquidity for strategic investments and operations.
- Growth in Adjusted EBITDA: Adjusted EBITDA increased by 25% to $6.7 million for the three months ended September 30, 2024 , underscoring operational efficiency and profitability.
| Financial Metric | Q3 2023 | Q3 2024 | Change (%) |
|---|---|---|---|
| Total Revenue | $15.8 million | $19.1 million | 20% |
| Net Income | $12.5 million | $1.7 million | -86% |
| Cash and Cash Equivalents | $34.2 million | $35.7 million | 4.4% |
| Adjusted EBITDA | $5.4 million | $6.7 million | 25% |
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Resources:
- Red Violet, Inc. (RDVT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Red Violet, Inc. (RDVT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Red Violet, Inc. (RDVT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.