Good day, ladies and gentlemen. And welcome to the Red Violet's Fourth Quarter and Full Year 2020 Earnings Conference Call. [Operator instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Camilo Ramirez, Director of Finance and Investor Relations. Please go ahead.

Good afternoon and welcome. Thank you for joining us today to discuss our fourth quarter and full year 2020 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. To access the webcast, please visit our investor's page on our website at 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 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'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 and adjusted EBITDA. Reconciliations of these non-GAAP financial measures to their most directly comparable to GAAP financial measures 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. And good afternoon to those joining us today to discuss our fourth quarter and full year 2020 results. Red Violet delivered another strong quarter as we close out a very unique year. It was a year full of challenges, in which the Red Violet team executed brilliantly. Throughout, we remain focused on the key drivers of our business, leveraging our business model to not only bolster our financial strength, but also positioning ourselves for the recovery. We've demonstrated the power and versatility of our innovative technology and critical solutions. We performed better in all key financial metrics in 2020 as compared to the prior year. Turning out to the numbers; fourth quarter revenue was $9 million, a 1% decrease from prior year, adjusted gross profit increased 11% to $6.3 million and adjusted gross margin increased to 70% from 62%, compared to the same period of 2019. Adjusted EBITDA increased 49% to $1.2 million. Of key importance, our high margin platform revenue increased 12% to $8.6 million for the quarter. In the fourth quarter, we set a new record for contractual revenue at 77% backing out the spike that occurred in the second quarter of 2020 as a result of our accommodations granted to certain pandemic impacted customers. For the full year 2020, total revenue increased 14% to $34.6 million. Platform revenue increased 26% to $32.5 million and adjusted EBITDA increased 213% to $5.9 million. Evidencing the strength of our business model; our high margin platform revenue allowed us to generate over 90% contribution of total incremental revenue to adjusted EBITDA with a $4.3 million increase in total revenue in 2020, generating a $4 million increase in adjusted EBITDA. While the fourth quarter traditionally faces seasonal headwinds, our business is firing on all cylinders. Platform revenue is strong. With…

Thank you, Derek, and good afternoon. With the pandemic related challenges faced this past year like most of us, I'm happy that 2020 is solidly behind us. I want to personally thank our team members for their dedication and hard work, despite the challenges each face both personally and professionally. Notwithstanding these challenges on a global level, our team outperformed, and our business showed continued strength and resilience. The underlying financials of our business are as strong as ever. Looking back to this time last year, I provided some color on the operational leverage of our business. And I would like to revisit that because I believe it speaks volumes of the health of our business, despite the challenges we faced in 2020. For the full year 2020, our $4.3 million increase in total revenue, translated into a $5.3 million increase in adjusted gross profit, underlined by the strength and profitability of our 26% growth in platform revenue. That $5.3 million increase in adjusted gross profit translated into a $4.9 million increase in cash flow from operations, a greater than 90% contribution of incremental adjusted gross profit to cash flow from operations. Looking at this from a P&L perspective, the $5.3 million increase in adjusted gross profit, translated into $4 million of incremental growth and adjusted EBITDA, a greater than 75% contribution of incremental adjusted gross profit to adjusted EBITDA. We are excited about these numbers, because it demonstrates for the second year in a row, the capabilities of our technology platform, our people and our business to drive profitable growth. Moving on to the fourth quarter results, despite the fourth quarter historically being a seasonally slower growth quarter for the business and competing against a healthy pre-COVID comp from last year. I'm pleased to report we capped off the…

[Operator Instructions] And we do have a question from [Pam Nelson from Carter Management.]

Hi, thank you for taking my question. Your platform revenue growth this year was very impressive, given the economic environment. Along those lines, you had some encouraging commentary around the collection space as it relates to platform revenue. So my question is really twofold. Do you believe your collections platform business can be a growth vertical for you in the future? And what percentage today are collections to your overall revenue?

Great, thank you, Pam. And this is Dan. And I appreciate the question. So yes, we're extremely pleased with our 26% platform revenue growth despite the COVID related challenges we faced this year. Our focus has and will continue to be to drive revenue growth on our technology platform, as it provides the greatest amount of leverage for our business. So looking at collections specifically, we're confident it can be a growth vertical for us once some of the government mandated moratoria and forbearance programs subside, and the economic stimulus kind of runs its course. So despite the challenges the collection market has faced as a whole and relative to some of our competitors, conservative commentary on the space, our collections platform revenue has performed well. And we expect to see decent growth trends in the collection space in the second half of 2021. So today, collections revenue is less than 30% of our overall revenue.

And at this time, there are no other questions in the queue.

Thank you all for joining us today. As you can see, we've made significant progress throughout 2020 and not only recovering from the extraordinary economic conditions during the year, but in strengthening our financial and strategic business interests. We are fundamentally strong and we are very well positioned for the foreseeable future. Thank you to our team members. Thank you to our customers and those on the call today supporting us. Good afternoon.