Good day, ladies and gentlemen, and welcome to the Red Violet's Third Quarter 2021 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 third quarter 2021 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 Investors 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 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, adjusted EBITDA margin and adjusted EBITDA. Reconciliations of these non-GAAP financial measures to their most directly comparable 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. Good afternoon to those joining us today to discuss the results of our third quarter 2021. Red Violet delivered a very strong quarter, hitting records in revenue, gross profit and adjusted EBITDA. We also achieved our first quarter ever of GAAP profitability without a onetime gain. We experienced strong demand for our solutions across the board. Our team performed extremely well, driving and meeting customer demand with the differentiated assets of our cloud-native platform and unified data-driven solutions. I'm especially pleased with our execution against our multi-year strategic road map. As a result of our strong performance, we continue to leverage our cash generation to invest in the expansion of the business. We generated record revenue of $11.7 million, a 26% increase over the third quarter of last year. Platform revenue increased 26% to $11.3 million. Services revenue increased 24% to $0.4 million. Adjusted gross profit increased 35% to $8.9 million and adjusted gross margin increased to 76% from 71% compared to the same period of 2020. Adjusted EBITDA increased 73% to a record $3.6 million. We achieved our first quarter ever of GAAP profitability without a onetime gain, generating $1.3 million in net income, which translated into earnings of $0.09 per diluted share. We generated $3.5 million in cash from operating activities in the third quarter. And as of September 30, 2021, we had $13.4 million in cash and cash equivalents on our balance sheet. We added over 170 new IDI customers during the third quarter, ending the quarter with 6,314 customers. FOREWARN added over 6,700 users ending the quarter with 74,377 users. Over 165 REALTOR Associations throughout the U.S. are now contracted to use FOREWARN. As demonstrated by recent moves we have made, we are executing against our multi-year strategic plan, positioning the business for the…

Thank you, Derek, and good afternoon. As you can tell from Derek's commentary, we are extremely pleased with how the business is performing and very excited about the future. This is our third consecutive quarter hitting records in revenue, gross profit and adjusted EBITDA. As Derek mentioned, we also achieved our first quarter ever of GAAP profitability without a onetime gain, generating $1.3 million in net income, which translated into earnings of $0.09 per diluted share. These record numbers reflect strong demand for our solutions and outstanding execution from the entire Red Violet team. As we invest in talent and leadership to support expansion, we see tremendous opportunity to drive our solutions both up and across markets, which we believe will accelerate our growth in 2022 and beyond. As we talk about expansion and reinvesting our cash generation into the business, I want you to understand what that means to our P&L. We have done a great job driving the business over the past several years, including through the global pandemic. During that time, we have been pleased with the growth of the business both at the top and bottom line. As we have explained before, due to our fixed cost of revenue model, our growth in revenue has shown incredible leverage at the gross margin line, with each dollar of growth contributing nearly 100% in contribution. Those growth dollars translate nicely to the bottom line. You can see that leverage historically in the sequential improvement in our profitability metrics of adjusted EBITDA, cash from operations and net income. We are tactically hardening our infrastructure teams, expanding our sales capabilities and building out new areas for solution and market expansion, positioning us well for accelerated revenue growth in 2022 and beyond. We are confident we can make these investments and…

[Operator Instructions]. Your first question is from James Lee [ph] from Insight.

My name is James. I have a quick question about some of these new verticals. Are you able to provide any color on the fintech and public sector spaces in terms of the upcoming sales pipeline and what the dynamics look like in some of these new verticals?

Thanks, James. Appreciate it. This is Derek Dubner. Nice to meet you, and we appreciate the question. Yes, anybody who has been following the story understands that sort of this is a multi-year evolution of the business of which we are in early days. As we continue to evolve, we are taking our innovative technology platform, 1 that we've built. This is the third time we've done this and successfully sold the platform twice before. And this platform being cloud native with machine learning with the scalability with the throughput involved with this technology and the differentiated data assets that we have today, including those as we like to stress of millennials and the unbanked and underbanked, we have an incredible opportunity to expand the use cases that we're currently serving today into our current customer base. We are just now entering the public sector. We have a small presence there. We have significant market out there to go get, hence bringing on board Justin Cleveland, a thought leader in that space who is advancing our interest there. As far as fintech goes and public sector, as you know, we talked a little bit about the convergence of everything moving online and the need of really every industry, not just public sector or fintech to understand identity, understanding who that person is moving through the system and to make it really a seamless and frictionless experience for the consumer while protecting the interest of the entity in the public or private sector. So we are presently performing much in the way of identity verification for some of the leading platforms out there, if you will, a number of private companies serving various public and private sector end users. Of which they're turning back to us and saying, I need more…

Your next question is from Ryan Notvest from SEMCAP.

Just following up on James' question about expanding into new verticals and use cases. Is there anything in your contract with your largest data provider that would cause a reset of the cost structure to you guys as you expand and kind of repurpose the data that they're providing to you? Anything to be aware of on that front?

No. We have a very flexible term with -- and this is Dan, and thanks for the question. We have very flexible terms with kind of our partnership we have with our largest data provider. And we actually just renewed for another 5 years that contract, so kind of hardened that data provider over the long term in that partnership. But we have a lot of flexibility within the use case and how we serve broader identity and really unlimited use from kind of a fee perspective. We bring the data in-house. Whether we run the transaction onetime or 100 million times, it costs the same to us. So that's what gives us that tremendous leverage. And that will be true as we go into the public sector, that will be true as we go into fintech and be able to leverage that fixed cost model to increase revenue and ultimately continue to drive those profitability numbers all the way down to the bottom line.

Got it. Got it. You said you just renewed that. Anything to call out in terms of how the renewal went and the pricing that you're paying now that we should be aware for modeling purposes?

No, not really. I think when you look at just kind of the cycle, most of these contracts that are kind of long partnerships around that 5-year cycle. And so when you look back when we started just over 5 years ago, it's kind of coming up for the renewal. We've renewed a number of them and are potentially -- particularly our largest data provider that we just renewed for another 5 years. Basically, at the same cost at renewing or ending expense. So from a modeling standpoint, no material change to the data cost anytime in the near or midterm.

There are no further questions at this time. I will now turn the call over back to Mr. Derek Dubner.

Thanks to everyone who joined us today. We delivered a strong third quarter and are very optimistic as we head into 2022 and beyond. We're executing upon a deep product road map that's guided by secular tailwinds of the digital transformation, the increasing need for fraud capture and the ever-present desire to derive actionable insights from data. And as a result of our solid cash generation, we are investing in our valuable assets in the way of people, innovative technology and customer-centric solutions with an eye towards accelerating our path to even greater opportunities. Good afternoon.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day. You may all disconnect.