Red Violet, Inc. Q2 FY2020 Earnings Call

Good day, ladies and gentlemen, and welcome to Red Violet’s Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. 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 second quarter 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 this event will be available following the call on our website. To access the webcast, please visit our Investors page 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 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 related to adjusted gross profit, adjusted gross margin, and adjusted EBITDA. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the second quarter 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.

Thank you, Camilo, and good afternoon to those joining us today to discuss our second quarter 2020 results. We hope that you and your loved ones are staying safe and healthy during these challenging times. We are pleased to report a very solid quarter, which demonstrated the resilience and operational leverage of our business model through this unprecedented period. I would like to first provide some detail around the circumstances that we faced as the effects of the pandemic set in and our approach throughout the quarter. Coming off one of the most robust periods in economic history in the first quarter, pandemic-related events, including government stay-at-home orders and social distancing measures, caused significant business interruption in the United States, starting in the back half of March and bottoming in the second quarter. As would be expected, small to medium-sized businesses, many of which are our customers, were disproportionately impacted early in the crisis. Not surprisingly, as a result of these impacts, in the beginning of the second quarter, which in hindsight turned out to be for us a bottoming out in April, we saw reduced transactional volumes. Many of our customers just did not have the infrastructure or contingency planning to be forced home. Adding to that, in our collections market, for example, government-imposed moratoria on certain collections activity, a collections industry pause to not aggravate the crisis, and certain forbearance programs reduced overall activity. When faced with these challenges, we maintained our long-term view and implemented a multi-pronged strategy to ensure the success of our business. That strategy consisted of helping our customers, ensuring the health and financial well-being of our team members, gaining market share, continuing advancements in our technology and products, and fortifying our balance sheet. I am pleased to report that due to our next-generation technology platform, mission-critical product suite, differentiated data assets, and incredible team, we delivered sequentially improving financial and business results from the economic troughs that occurred early in the second quarter. Moreover, we continue to experience improving conditions in our business, which are continuing here in the third quarter. Given the present economic and secular tailwinds that we expect to continue, we believe we are well-positioned for the second half of the year and throughout 2021. I want to personally thank our team members for their dedication and hard work. Faced with adversity, they performed at the highest level, knowing the durability of our business model and that with great challenges come great opportunities. It was vital that we not only protect our employees’ health but also their financial well-being and the strength of the teams collectively, so that we are not only intact when conditions improve, but optimally positioned for better times ahead. We took significant pandemic-related precautions at our headquarters, including UVC lighting in our HVAC systems and daily temperature checks to ensure a safe return to the office for our Florida employees. Our Seattle team is still working remotely. All team members across the organization have performed well without any loss in productivity. We did not reduce any compensation or eliminate any positions as a result of the pandemic and, in fact, are strategically adding to the team to capitalize on opportunities. Our customers are also one of the most important groups of stakeholders in our business. We committed early on to support them through this time to demonstrate our goodwill and our commitment to the viability and success of their businesses, and to solidify enduring relationships. This involved temporarily granting requests for reductions or eliminations, where applicable, of minimum monthly contractual commitments on a month-to-month basis during the second quarter. We are pleased to report that concessions we may have granted, both in terms of the number of customers and dollar value, have decreased month over month since April. We have received much positive feedback from appreciative customers about our partnership approach. As I previously mentioned, with great challenges come great opportunities. Priding ourselves on our ability to deliver mission-critical solutions with greater efficiency and return on investment than the competition, due to among other things our cloud-native construct, we have recognized that organizations would now more than ever need these efficiencies within their workflow to counter the negative impacts to their businesses caused by the pandemic. We identified a cohort of customers who for one reason or another expressed resistance in the past to the idea of switching away from competitor products—perhaps just out of the burden of doing so—who are now open to hearing about how we can meet their needs more efficiently. As a result of our efforts, new customer applications in June exceeded pre-pandemic levels and July exceeded June. This metric is a leading indicator of revenue in the next several quarters. We continue to invest in the advancement of our technology and the enhancement of existing products and commercialization of new products. As I have said before, our customer-centric approach always has us engaging with customers to better understand and solve for their complex challenges. By way of example, we recently announced our geospatial search and information retrieval technology within our leading idiCORE investigative platform. This intuitive way to engage with data enables users to explore people, businesses, assets, and interrelationships using a map-based specification of a geographic area and filtering searches based on a period of time and/or geographic region. We believe this functionality will give greater intelligence to not only our existing customer base but especially law enforcement, insurance investigators, and other investigative industries. We are very excited as these are markets that we have only just begun to scratch the surface. Additionally, our strategy demands that we protect and fortify our balance sheet. Today, we have as strong of a balance sheet as we have ever had. Exhibiting the operational leverage of our business model, we more than doubled our adjusted EBITDA on less revenue, generating a record $1.8 million in positive cash flow from operations. A metric that I am very excited about and that Dan will discuss in detail is that our high-margin platform revenue, which makes up the core of our business, was up 11% over the prior year, notwithstanding the pandemic impacts. In sum, I am very pleased with our continued improved performance throughout the second quarter, including revenue growth, cash flow generation, increasing margins, and new customer applications, with transaction volumes increasing over pre-COVID levels, and positive trends that continue here in the third quarter. In July, we saw another strong month of revenue growth. At this point, August is tracking not only to be the strongest month-over-month revenue growth in our history, but also a record month for revenue. I am even more excited about our positioning given not only the improving economic conditions but the secular tailwinds I mentioned that present themselves in the short and long term. The pandemic has accelerated the pace of digital transformation for virtually every business. Businesses of all kinds must transition their operations online. To do so, these businesses will increasingly demand the efficiency and scale of solutions that are already delivered via the cloud and not a traditional IT infrastructure. The move to e-commerce will see increasing online transactions requiring the collection of consumer information in disparate ways and in varying forms. This will inevitably lead to even greater data fragmentation. In other words, consumer data that is both structured and unstructured and spread across the enterprise. With such data fragmentation comes an increased need for transforming this data into intelligence, for purposes including fraud mitigation and consumer modeling. All of these factors—the rapid adoption of e-commerce, demand for cloud efficiency, increased need to identify fraud, the necessity of solving for data fragmentation, and the need for enhanced understanding of consumer risk and financial profiles—are creating a confluence of micro and macro trends that we believe will provide strong momentum for our business for years to come. With that, I will turn it over to Dan to discuss the financials.

Thank you, Derek, and good afternoon. Looking back at our first quarter earnings call and being in the early innings of the pandemic, nearly every business in the U.S. faced headwinds never before experienced. As Derek discussed, we took a number of proactive steps to navigate the uncertainty and positioned this fitness for what we hoped would be a strong recovery and ultimately to avail ourselves of the multi-year tailwind for the industries we serve and the solutions we provide. Knowing where we are today, that thesis is taking shape, and we believe those operational steps have positioned us well to take advantage of the opportunities in the marketplace. Business trends for the quarter were positive since our April low. We experienced sequential monthly revenue growth from April through June, increasing 12% over the period. This trend has continued through the start of the third quarter, with another strong month of sequential revenue growth in July. July also experienced our strongest month year-to-date of new customer applications. August is off to a phenomenal start with early indications suggesting that August will not only be the strongest month-over-month revenue growth in our history but also a record month for revenue. With that said, we remain cautiously optimistic as we continue to navigate these unprecedented times. Our business has shown resilience. Our team is focused, and we are incredibly confident in our ability to navigate challenges and leverage opportunities. Before I start with our quarterly results, I want to identify some additional supplemental metrics we included in the earnings press release today. We have included a breakout of revenue by what we call platform revenue and services revenue. Platform revenue consists of both contractual and transactional revenue generated from our data fusion platform. It includes all revenues generated through idiCORE and FOREWARN. The cost to generate this revenue consists primarily of data acquisition costs, which remain relatively fixed irrespective of revenue generation, meaning that every incremental dollar of platform revenue provides nearly 100% incremental contribution margin. Services revenue consists of transactional revenue generated from our idiVERIFIED service. idiVERIFIED is an ancillary solution we provide to the collections market to complement our collections solution suite. It provides customers a manual verification of employment that requires third-party servicer costs and thus does not have the same margin profile as our platform revenue. As a result, the cost of revenue is variable, and the contribution margin remains consistent irrespective of revenue generation. We believe these additional metrics will provide greater clarity into the resilience, growth, and profitability of our core business. In addition, it will allow for a better understanding of a business's margin profile historically and into the future. Now, let’s get into our second-quarter results. For clarity, all comparisons I will discuss today will be against the second quarter of 2019 unless noted otherwise. Total revenue was $7.1 million, a 3% decrease over the prior year. Platform revenue grew 11% to $6.9 million, which represented 97% of our total revenue. Despite strong pandemic headwinds that resulted in reduced economic activity during the period, we were able to add new customers and maintain a strong base of contractual revenue and transactional volume from our idiCORE and FOREWARN solutions. We were extremely pleased with our platform growth rate given the pandemic. Because our platform revenue provides nearly 100% contribution margin with each incremental dollar, we more than doubled our adjusted EBITDA, increasing 155% to $0.9 million for the quarter on less total revenue. We felt the most COVID-related impact in our services revenue, which was $0.2 million for the quarter, an 82% decrease over prior year. Services revenue experienced sharp volume declines in the first half of the quarter, followed by slower recovery in the second half, a result of temporary government-imposed collections moratoria, forbearance programs, and government stimulus. We believe our services revenue will begin to return to normal in the fourth quarter as temporary government collections moratoria are lifted. We expect to see strong tailwinds for our services revenue throughout 2021 as forbearance programs and government stimulus subside, creating pent-up demand and increased collections activity as a result of deteriorated customer financial profiles. Continuing through the details of our P&L, as mentioned, revenue was $7.1 million for the second quarter. Revenue from new customers was $0.9 million, base revenue from existing customers was $5.1 million, and gross revenue from existing customers was $1.1 million. Notwithstanding a portion of concession customers, as well as transactional customers who paused volume—both of which are not counted as billable customers for the quarter—our idiCORE billable customer base grew by 50 during the period to 5,375 as a result of continuing to add new customers. Under normal conditions, we expect to trend between 250 to 350 additions to our idiCORE billable customer base on a sequential quarter basis. We expect a reversion to these normal levels in the third quarter, with the potential for higher than normal additions from pent-up demand as existing customers who temporarily paused volumes return to our billable base. User adoption of FOREWARN remains strong throughout the period, adding over 4,300 users during the quarter. Our contractual revenue was 79% for the quarter, the highest quarter in our history, a result of strong growth in base revenue from existing customers. We saw our net revenue attrition percentage increase, ending the quarter at 11% compared to 5% in the prior year. In revenue dollars, this represents a difference of $180,000. Under normal conditions, we would expect net revenue attrition to trend between 5% and 10%. However, owing to the pandemic-related customer concessions we provided during the period and transactional customers who temporarily paused volume, we saw this metric trend a little higher than historical levels. Because net revenue attrition is calculated on a trailing 12-month basis, we would expect to see a reversion to normal levels beginning in the first quarter of 2021. Moving on from our revenue metrics and down the P&L, our cost of revenue decreased $0.5 million, or 15%, to $2.6 million. This $0.5 million decrease was a result of a decrease in third-party servicer costs associated with services revenue, partially offset by an increase in data acquisition costs. Adjusted gross profit increased 7% to $4.5 million, producing an adjusted gross margin of 63%, a 5 percentage point increase over the second quarter of 2019. Sales and marketing expenses decreased $0.3 million, or 13%, to $1.7 million for the quarter. The decrease was due primarily to a decrease in sales commissions resulting from less growth revenue in the quarter. The $1.7 million of sales and marketing expense for the quarter consisted primarily of $1.1 million in employee salary and benefits and $0.3 million in sales commissions. General and administrative expenses decreased $1.1 million, or 21%, to $4.3 million for the quarter. This decrease was primarily the result of a $1.3 million decrease in share-based compensation expense. The $4.3 million in general and administrative expenses for the quarter consisted primarily of $2.2 million of non-cash share-based compensation, $1 million of employee salary and benefits, and $0.5 million in accounting, IT, and other professional fees. Depreciation and amortization increased $0.3 million, or 46%, to $1 million for the quarter. This increase was primarily the result of the amortization of internally developed software. Net loss narrowed $1.4 million, or 34%, to $2.5 million for the quarter. This improvement in net loss was primarily the result of a decrease in non-cash share-based compensation expense of $1.3 million. We reported a loss of $0.22 per share for the quarter based on a weighted average share count of 11.6 million shares. Moving on to the balance sheet, cash and cash equivalents were $13.8 million at June 30, 2020, compared to $11.8 million at December 31, 2019. Current assets were $17.3 million compared to $16 million, and current liabilities were $4.7 million compared to $4.3 million. We generated $3 million in cash from operating activities for the six months ended June 30, 2020, compared to using $1.1 million in cash for operating activities for the same period in 2019. Internally, we track our operational cash earned versus burned on a monthly basis by calculating adjusted EBITDA and subtracting the cash we use for the development of internal-use software and other capital expenses both found on our statement of cash flows. Based on this earn/burn analysis, we have earned $0.7 million in cash for the second quarter of 2020 compared to burning $1.1 million for the second quarter of 2019. Cash used in investing activities was $3.1 million for the six months ended June 30, 2020, mainly the result of $3.1 million used for software developed for internal use. In closing, I would like to reiterate and emphasize that we are extremely pleased with how well the core business performed during this unprecedented period, both from a revenue perspective and a profitability standpoint. While not immune from the COVID-19 crisis, all results validate the strength of our business model and the capabilities of the entire Red Violet team. We continue to experience positive trends as we have recovered from the pandemic-related impacts. I believe we are well positioned to take advantage of the economic and secular tailwinds we are seeing, and believe those tailwinds will last for many years to come. With that, our operator will now open the line for Q&A.

Our first question comes from Jennifer from Carter Partners. Your line is now open.

Thank you. Good evening. Although revenue was down over the prior year, you guys had a gross margin up five percentage points. How should we think about incremental margins going forward? And maybe what does the margin profile look like for the longer term?

Yes, thank you, Jennifer, and this is Dan. Thank you for the question. One of the reasons we added the additional supplemental metrics of platform revenue and service revenue, which provide a clear picture of the margin profile of the business. Our core business, which is where we have always focused our resources for growth, is our platform revenue, which as I discussed earlier, is a pure margin business. Because we were able to grow that business even during the pandemic, you saw healthy margin growth and increased profitability on that total revenue. We expect to continue to see continued margin growth as revenue scales over the next several quarters, clipping the 70 percentage point mark for total company adjusted gross margin in the fourth quarter of this year or first quarter of 2021. Looking at the end of 2021, we would expect to see total company adjusted gross margin trend somewhere around the 80% mark.

Okay, great. Thank you for that color. If I can ask one more question. I saw that stock-based compensation expense remained consistent as compared to the first quarter. How do we expect to see that expense trend over time?

Sure, again, this is Dan, and I appreciate the question. Shortly prior to our ability to generate positive cash flow, we leveraged our equity from a competitive standpoint and, as we thought, kind of technology talent to bring our platform to market in Seattle, where our product development team is housed. We are competing against the likes of Microsoft and Amazon for technology personnel. Our infrastructure team, which maintains our platform to the AWS Cloud, are some of the best and brightest I have worked with. We have strategically leveraged our long-term equity incentive plan to motivate our teams and align with the goals of dramatically increasing the value of this company. Today, as it worked out well for us, I am pleased with the value of the company and ultimately the shareholders have received relative to that equity investment made into our people. Additionally, when we talk about the equity when we spun off in early 2018, we put some significant milestones in place for the company, tying a good portion of equity compensation to those milestones as a way to align and retain our team. We believe that if we hit those milestones, our market cap would be substantially higher, and the ROI on that equity comp would prove to be a very efficient use of investment. Looking back at that timeframe, which was around the second quarter of 2018, we had a market cap of about $90 million. Today, our market cap is approximately $220 million. So, we're very pleased with that ROI. So what does that mean going forward from an equity comp perspective? I believe with the fourth quarter earnings call in 2019, where I provided some guidance in which I said equity comp trends between $2.3 million and $2.5 million per quarter over the next several quarters, and this quarter we came in at the lower end of that guidance, just about $2.3 million. I would reiterate that we expect our share-based expense to continue to trend between $2.3 million and $2.5 million per quarter over the next several quarters. As a percentage of revenue over time, you will see our share-based comp expense significantly decrease.

Thank you. That makes sense. Thanks a lot.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Jeff Parks from Venator. Your line is now open.

I am not sure exactly that you guys said August was the biggest revenue month you have seen in the history of the company?

Hey, Jeff, it’s Derek. Thanks for the question. Yes. Obviously, we can only report to you what we’re seeing through August 11. But given how we’re trending, yes, we’re seeing that as the largest month-over-month revenue increase. If we were to continue to track this progress right here, August will be a record revenue month for us.

If you continue to pace the way that you’re pacing right now in this third quarter, do you think you can surpass Q1 revenues of 2020?

Yes, I can say in advance. Look, Q1 was a record revenue period for us. As Derek explained, we talked a little bit about hitting a pretty deep trough in April, but we have sequentially recovered from that period. I think we’re hitting a revenue mark of about $9.3 million in the third quarter. The business is performing brilliantly, and if we come in a little above or a little below that, the business is still showing great growth. We are very excited about what we’ve seen in August, and we’re looking to continue and clip that growth and then continually grow the business on a sequential quarter basis. So that’s what we’re shooting for.

Yes. Just to add, Dan and Jeff, it’s Derek. We are cautiously optimistic. I think that's the best we can say. These are obviously very strange times. As Dan said, we’re very pleased with the progress. The economics of everything have been sort of tailwinds, and certainly, we all hope for all businesses that continues. Again, here we are, August 11. If trends continue, yes, I think we’re very positive on the third quarter and the type of numbers you’re speaking about.

It was the biggest setback in Q2 just sort of a moratorium on basically going out and individuals being in collections?

So, that was a good part of it. Understand there was, we saw that a lot of what I would call small and medium-sized businesses, right. Not all businesses have the technology capability to really transition from a work-from-office to a work-from-home environment in an efficient manner. In the second half of March, and then flowing through April, we started the second quarter with many of these small and medium-sized businesses trying to adjust to the new norm. They came to us, they said, Look, we are transitioning, and need some help with our minimum commitment work or transactional customers, who looked to pause for a temporary period. When we saw that trough at the April low, it was really a result of those pandemic headwinds. Additionally, there were a number of moratoria that impacted our services revenue, as we’ve disclosed. We continue to provide insight into our platform revenue versus services revenue. From a profitability perspective, the impact on services revenue didn’t provide much incremental contribution margin, but from a top-line perspective, that is where our biggest impact was—a result of the collections moratoria. As those start to subside towards the middle to end of the third quarter leading into the fourth, we believe we will experience some pent-up demand, which will flow into 2021 with forbearance and government stimulus easing, as consumer financial profiles have deteriorated as a result of these factors. This leads to even greater transactional volume, and we are excited about those tailwinds.

So the way that you are pacing, you could beat Q1 of 2020 and then actually accelerate growth into Q4 of 2020 as well?

Yes, I think we absolutely could. This phase that we are experiencing is a quick phase, and we hope for it to be shorter and not longer. However, this phase has really affected how the companies with which we deal view the market. As I mentioned several times earlier, they are now more than ever looking at how to gain efficiencies in their businesses to compensate for the negative impacts they have endured. We are very excited that new customer applications have been above pre-COVID levels, with July topping that and August trending favorably. As I mentioned, those are all nice indicators giving us visibility into revenue moving forward. We feel like we have got great things happening, notwithstanding the pandemic.

Do you feel like it’s a blip and that basically you are back on your feet and getting back to a sprint right now?

Yes, I think that’s a correct statement. It’s really encouraging to see where the growth is coming from. We are seeing the growth coming out of this trough in our platform revenue, which if you look at the first quarter’s $9.3 million, and compare that to where our margin profile is today on the platform revenue and how we are trending – if we are back at $9.3 million in the third quarter, our adjusted EBITDA is going to be between $2.5 million and $3 million for the quarter, producing an adjusted EBITDA margin of 25% to 30% on the same revenue dollar. That’s very exciting for us because where we are seeing the business drivers is where we are focusing our efforts on the platform revenue side.

Are your competitors working with their clients and helping them through this as much as you guys are, or are you seeing any of them migrate to your platform?

We are definitely seeing competitor customers transition to our platform. We are also experiencing the ability to engage with these customers; as Derek stated earlier, sometimes those customers were less effective at changing. They were using a Blackberry for years and saw no reason to switch to an iPhone or Android simply because it works well. However, when we present them with a platform that we feel is superior, more efficient, and demonstrates ROI, customers are becoming more open to switching. We do a really good job of understanding our customer needs and working towards their use case. Additionally, our pricing model for specific customers is significantly better than the competition. We have also seen indications that competitors are working with some of their customers differently. While some of them say they will work with you, that involves signing a two-year commitment. We believe this strategy is employed to retain these customers. We feel we did a great job working with our clients, and we are receiving positive feedback in the marketplace. Over the next several quarters, we believe this commitment will pay dividends.

That’s all for me, guys. Appreciate the time.

Thanks very much. Appreciate the questions.

Thank you. Our next question comes from the line of Brian Bythrow from Wasatch. Your line is now open.

Hi, guys. Good job. So would you—just looking at July, if the government restrictions had not been in place, what would you estimate revenue would be at, or what kind of growth rate would you have been able to put up in July?

Luckily, we were going to be a little cautious in regard to forward-looking guidance. As we have mentioned, we saw a nice recovery sequentially from a revenue perspective after our April low, looking at revenue from April through June. We were able to grow monthly revenue during that period by 12%. In July, we were up again by 8-9% in monthly revenue. Where we’re trending today for August, again, as Derek discussed, we’re seeing our highest monthly gross revenue month-to-month as well as a record revenue month for us. It’s trending between 25% to 30% growth. We are very excited about how we have recovered, and that’s with a number of moratoria and forbearance still in place. As those subside, which we expect to occur closer to the end of the third quarter transitioning into the fourth quarter, we anticipate a promising snapback within our services revenue as well as within some of our platform revenue in the collections marketplace.

Okay. I mean, is it a good estimate to say maybe 20% of your customers experienced some pain from this moratorium?

I think it’s actually a little bit higher than that when you talk about overall. Now, a lot of our collections customers are diversified to a degree. They may have moratoria on student loan debt and can’t collect on that debt, but they may still be able to collect on some retail debt, etc. I would say probably 25%, 30% felt some impact from the moratoria imposed within the collection space and from other retail pauses in inventory as a result of not wanting to seem overly aggressive during this period. So, yes, I would estimate it’s closer to the 25%, 30% range.

Okay. And you are probably reading the same thing that I am reading, but there’s talk of course extending unemployment benefits. But in terms of the debt collection forbearances, there isn’t much talk in extending that beyond the third quarter, is that correct?

Yes, that’s correct. What we are hearing is that people who unfortunately can’t make payments on their mortgages are in forbearance. Eventually, that bank is going to need to get paid or figure something out. That’s where we are seeing tailwinds. As the consumer financial profile deteriorates, we will see increased volume within the collection space, and it is a large market we serve. From the debt collections perspective, we do not see much extension beyond the end of the third quarter at this point. As for forbearance programs, retail debt within the banks, such as Citibank, JP Morgan, and Bank of America, will want to get paid back or figure out how to refinance that loan. This will increase transaction volume, and again, we are very optimistic about the tailwinds that we believe are beginning to grow within that space.

Okay. Did you have any success making inroads into the enterprise markets?

Yes, for sure. During this period, one of the great things is, as we discussed, some medium to larger customers have been receptive to talking to us. For whatever reason, they may have been on the competitive platform and weren’t really looking to move due to their established relationships. However, as they saw their businesses being impacted, they became more open to discussions with us. When we can go head-to-head competitively, our technology built on a cloud-native foundation provides much more efficiency for applications with respect to APIs and batch processing compared to our competitors. We are seeing our speed and capabilities in the system just providing much better solutions and scale. Therefore, we have been able to make inroads within some enterprise adoption solutions with our strategic partners and have initiated promising discussions with large enterprises where we see good opportunity to land within that enterprise and expand from an adoption standpoint, especially due to how well our technology is performing against the competitors. We expect to continue to see those tailwinds and more risk and revenue generation from medium to larger scale customers than we have in the past.

And has the virus created any other new business opportunities for you?

We are looking at a number of opportunities, working with partners on how we can leverage data and information, right-party contact, if you will—think of contact-tracing opportunities where people need to determine how to get in touch with individuals and have the necessary information, as well as other opportunities concerning how businesses can return to work. Certain industries, like the cruise line industry, are needing to know who is boarding these cruises and where they have been. They are considering how they can utilize both their internal data and our data to potentially develop a clear type of solution. We are exploring several opportunities with our partners and hope to make substantial progress in the third quarter, possibly making some announcements in the fourth quarter about these solutions.

Okay. And then just one last question. With your competitors mainly being private, it sounds like you think you may have picked up some market share during this time period?

What we know is we have definitely onboarded customers and initiated conversations with customers we identified in the past who said, Look, I’m really happy with my current platform. I am not really interested right now. These are customers who, in the past, have been hesitant to switch. Because of our record applications, we are seeing growth, and we know what that means for revenue three to six to nine months down the road. Yes, we are gaining market share from a customer onboarding perspective, and we believe over the next six to twelve months this will translate into increased market share from a revenue perspective with those customers. Yes, in summary, we are winning customers from the competition and are adding new customers, hence the record applications, which is exciting. Overall, as Dan previously articulated, we are seeing positive business trends right now. To the extent any are negative, such as the collections inactivity in the short-term, when those subside, we feel confident that the second half of the year will be even stronger than expected, especially leading into 2021, where we believe we are very well positioned.

Great. Okay, great job. Thanks, guys.

Thanks, Brian.

Thanks, Brian.

Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Derek Dubner for closing remarks.

Thank you very much. We look forward to updating you on our progress on our next quarterly call. Thank you for joining us today and have a nice evening. Bye-bye.

Ladies and gentlemen, this concludes today’s conference call. Thanks for participating. You may now disconnect.