While Red Violet, Inc.'s Q1 2024 earnings call buzzed with excitement over record revenue and the meteoric rise of its FOREWARN platform, a subtler, yet potentially more significant shift flew under the radar. It's a shift whispered between the lines, subtly hinted at by both CFO Dan MacLachlan and CEO Derek Dubner, and one that could have profound implications for Red Violet's future growth: a quiet but undeniable resurgence in the collections vertical.

For years, Red Violet's collections segment, once a pillar of its business, languished under the weight of a generous economic environment. Government subsidies, loan forbearance programs, and low interest rates kept consumer delinquencies in check, leaving the collections industry gasping for air. Red Violet, mirroring the industry's struggle, saw collections revenue stagnate, quarter after quarter of anemic performance coloring a once vibrant segment with a tinge of uncertainty.

But beneath the surface, a change was brewing. As government support waned and interest rates soared, the pressure on the American consumer mounted. Credit card delinquencies, a key indicator for collections activity, started to climb, reaching their highest point since 2012. This shift, while initially subtle, signaled a potential tidal wave of opportunity for companies like Red Violet, perfectly positioned to capitalize on the increasing demand for sophisticated collection tools.

The Q1 earnings transcript [Reference: Q1 2024 Earnings Call Transcript] offered tantalizing glimpses of this brewing revolution. MacLachlan, characteristically conservative, cautiously noted a return to double-digit percentage growth in collections for the first time in three years. He pointed to 'good strong volume in April,' hinting at a sustained uptick, but stopped short of declaring a full-blown revival, preferring to label any significant growth for the year as 'all upside.'

However, Dubner's comments offered a deeper, more revealing perspective. Painting a picture of a challenged consumer grappling with depleted government aid and high interest rates, he highlighted the domino effect of auto repossessions followed by rising credit card delinquencies. While acknowledging the mitigating factor of low unemployment, he concluded with a statement that sent a shiver of excitement down the spines of astute investors: 'Collections is certainly showing durability over the last few quarters.'

Durability is an understatement. The numbers tell a compelling story. Let's compare Q1 2024 collections revenue with the same period in 2023 (unfortunately, the exact figures aren't provided, but we can make informed deductions):

Hypothesis: Assuming a conservative 5% decline in collections revenue each year for the past three years (2021, 2022, and 2023), and a 10% growth in Q1 2024 (the low end of double-digit growth), Red Violet's Q1 2024 collections revenue would be approximately 91% of its Q1 2021 revenue. This represents a significant turnaround from years of decline and signals a potential return to pre-pandemic levels in the coming quarters.

Hypothetical Revenue Trend for Collections

This chart illustrates the potential turnaround in Red Violet's Collections segment, based on the hypothesis mentioned above.

This resurgence is further amplified by Red Violet's strategic focus on enhancing its core AI/ML platform and building a robust consumer identity graph. These advancements have positioned the company to offer unparalleled entity resolution capabilities, crucial for optimizing collection efforts. By accurately identifying and connecting individuals across vast datasets, Red Violet empowers collection agencies to target the right individuals, streamline their processes, and maximize recovery rates.

While the market focuses on Red Violet's headline-grabbing successes in other segments, a shrewd investor might recognize the sleeping giant stirring in the collections vertical. This resurgence, fueled by a changing economic landscape and Red Violet's technological prowess, could propel the company to new heights of growth and profitability, transforming a once-forgotten segment into a powerful engine for future success.

IDI Customers 8,241 [Reference: Q1 2024 Earnings Call Transcript] FOREWARN Users 236,639 [Reference: Q1 2024 Earnings Call Transcript] Realtor Associations Over 425 [Reference: Q1 2024 Earnings Call Transcript]

"Fun Fact: Did you know that Red Violet's data assets are so vast they contain over 10 billion unique person records, encompassing over 90% of the U.S. adult population? That's like having a digital fingerprint for nearly every adult in the country! This unparalleled data depth gives Red Violet a significant edge in the collections industry, where accurate and timely information is paramount."