I am a reporter writing about Forewarn and Red Violet and would love to talk to you about the product. Please call me at 202-409-7714 or write to suzanne.smalley@therecord.media to connect. Thanks, Suzanne
As a broker, there are pros and cons. It took me three years to get erroneous information off my personal FOREWARN report. Impossible to deal with as they have ZERO customer service and/or follow through.
Thank you for the thoughtful write up. 1. How do you handicap the court cases? I would put it as a watch/ negative, but with data on 300mil+ some of these have to be put into cost of doing business (not to down play the personal agony of the plaintiff). 2. Culture is very important and takes time to turnaround. I usually discount Glassdoor and either grab a call or go through LinkedIn to former or current employees. Is it improving or getting worse? 3. The last earnings call was pretty fantastic and they offered 3 year guidance that, to use technical language, was pretty freakin' awesome. The concerns you mention may not make it an ideal long, but going short here could be a mistake if they are able to execute their guidance. On the plus side, anything in the SC tech space is out of favor the last five months and anything that is reinvesting in itself is being punished. That could easily continue.
Thanks Tim for the well-thought out questions. I'll try and answer them as best I can and appreciate any rebuttal or insight into my thought process here:
1. I'd handicap the court cases as a slight negative here. It's the first time Interactive Data is being sued for providing a false consumer report. Obviously you chalk it up to a cost of doing business but legal fees and/or settlement/favorable ruling for the plaintiff doesn't bode well for Red Violet's bottom line. Interactive Data does millions of these searches a year and chances are a few will be wrong & negatively affect the outcome of people's lives. If blood in the water gets stirred up from this lawsuit, I'd anticipate more cases come up a result. If the judge rules that Interactive Data is selling consumer reports, that's a legal shit storm that'll force the business to severely pivot. It's not every day an employee attorney gets to go after a publicly trade company.
2. Culture here appears churn & burn. Sales reps seemed to get sucked in on a big commission deal but you're competing in what I would consider to be a nearly perfect competition market. If growth expectations continue to grow, obviously the culture is making a turn for the better. Talented reps aren't going to stick here for long though--more comp in other industries.
3. I listened to the Q4 earnings call and it was what originally made me a bull. The outlook of $100M revenue seems doable if FOREWARN is able to pick up steam. The issue here is realtors are not opting into the product at a super high clip rate like I originally thought. They have 82k users right now; base scenario I think they capture 10% of the Realtor market for FOREWARN which would be around 160k users. Growth over on the Interactive Data is going to be difficult to come by; they're better platforms to use albeit they pretty much get their data from the source. When we modeled it out, we came to the assumption that Interactive Data will be the laggard in trying to hit the top line number of $100M. If they want to continue growing and hit the $100M number, the EBIT margin of 40% is unreasonable given sales/marketing expenses will be astronomical.
As you mention, short-term this space is out of favor. Flow seems to be pushing from growth to value, if Red Violet can't produce profitable quarters it's going to be a difficult path forward.
Happy to compare notes and/or discuss further. I appreciate the insight
I am a reporter writing about Forewarn and Red Violet and would love to talk to you about the product. Please call me at 202-409-7714 or write to suzanne.smalley@therecord.media to connect. Thanks, Suzanne
I posted a comment also, FOREWARN is horrible to deal with.
As a broker, there are pros and cons. It took me three years to get erroneous information off my personal FOREWARN report. Impossible to deal with as they have ZERO customer service and/or follow through.
Thank you for the thoughtful write up. 1. How do you handicap the court cases? I would put it as a watch/ negative, but with data on 300mil+ some of these have to be put into cost of doing business (not to down play the personal agony of the plaintiff). 2. Culture is very important and takes time to turnaround. I usually discount Glassdoor and either grab a call or go through LinkedIn to former or current employees. Is it improving or getting worse? 3. The last earnings call was pretty fantastic and they offered 3 year guidance that, to use technical language, was pretty freakin' awesome. The concerns you mention may not make it an ideal long, but going short here could be a mistake if they are able to execute their guidance. On the plus side, anything in the SC tech space is out of favor the last five months and anything that is reinvesting in itself is being punished. That could easily continue.
Thanks Tim for the well-thought out questions. I'll try and answer them as best I can and appreciate any rebuttal or insight into my thought process here:
1. I'd handicap the court cases as a slight negative here. It's the first time Interactive Data is being sued for providing a false consumer report. Obviously you chalk it up to a cost of doing business but legal fees and/or settlement/favorable ruling for the plaintiff doesn't bode well for Red Violet's bottom line. Interactive Data does millions of these searches a year and chances are a few will be wrong & negatively affect the outcome of people's lives. If blood in the water gets stirred up from this lawsuit, I'd anticipate more cases come up a result. If the judge rules that Interactive Data is selling consumer reports, that's a legal shit storm that'll force the business to severely pivot. It's not every day an employee attorney gets to go after a publicly trade company.
2. Culture here appears churn & burn. Sales reps seemed to get sucked in on a big commission deal but you're competing in what I would consider to be a nearly perfect competition market. If growth expectations continue to grow, obviously the culture is making a turn for the better. Talented reps aren't going to stick here for long though--more comp in other industries.
3. I listened to the Q4 earnings call and it was what originally made me a bull. The outlook of $100M revenue seems doable if FOREWARN is able to pick up steam. The issue here is realtors are not opting into the product at a super high clip rate like I originally thought. They have 82k users right now; base scenario I think they capture 10% of the Realtor market for FOREWARN which would be around 160k users. Growth over on the Interactive Data is going to be difficult to come by; they're better platforms to use albeit they pretty much get their data from the source. When we modeled it out, we came to the assumption that Interactive Data will be the laggard in trying to hit the top line number of $100M. If they want to continue growing and hit the $100M number, the EBIT margin of 40% is unreasonable given sales/marketing expenses will be astronomical.
As you mention, short-term this space is out of favor. Flow seems to be pushing from growth to value, if Red Violet can't produce profitable quarters it's going to be a difficult path forward.
Happy to compare notes and/or discuss further. I appreciate the insight
Amazing short find, stock already down 31% YTD.
Thanks, company up 42% past year. What valuation would you put on Red Violet?