Summary of Red Violet's Q3 2025 Earnings Call

1Key Financial Results and Metrics

Revenue: Achieved a record of $23.1 million, up 21% year-over-year.

Adjusted Gross Profit: Reached $19.4 million, with an adjusted gross margin of 84% (up 1 percentage point).

Adjusted EBITDA: Recorded $9 million, a 35% increase, resulting in an adjusted EBITDA margin of 39% (up 4 percentage points).

Adjusted Net Income: Increased 75% to $5.8 million, translating to adjusted earnings of $0.39 per diluted share.

Free Cash Flow: Generated a record $7.3 million, a 51% increase from the previous year.

Customer Growth: Added over 300 customers to IDI, totaling over 9,800 customers; FOREWARN added over 25,000 users.

2Strategic Updates and Business Highlights

Continued investment in AI integration, platform capabilities, and product advancements.

Strong performance in the investigative vertical, particularly with law enforcement agencies.

Emerging markets, including retail, legal, government, and healthcare, showed robust growth.

Significant wins in the public sector, including contracts with a large state toll authority and a major payroll processor.

Announced a $15 million increase to the share repurchase program, with approximately $18.9 million remaining.

3Forward Guidance and Outlook

Confidence in closing 2025 as another record year, supported by a strong sales pipeline and ongoing customer acquisition.

Anticipated continued growth in the customer base, although seasonal factors may impact Q4 performance.

Expectation for gross margins to remain stable around 82% to 84% in Q4.

4Bad News, Challenges, or Points of Concern

Seasonality: Q4 typically sees a slowdown due to fewer business days in November and December, potentially affecting revenue.

Market Pressures: The real estate vertical (excluding FOREWARN) experienced a slight year-over-year decline due to high home prices and interest rates affecting affordability.

Competitive Landscape: While Red Violet is gaining traction, larger competitors with legacy systems present ongoing challenges.

5Notable Q&A Insights

Management expressed optimism about the replicability of recent public sector wins across other states and sectors.

The background screening industry presents a significant growth opportunity, with ongoing efforts to enhance product offerings and market penetration.

FOREWARN's user base is strong, with high retention rates and potential for future price increases based on added features.

Management remains committed to investing in the business for long-term growth, viewing the stock buyback as a strategic tool rather than a primary focus for capital allocation. Overall, Red Violet reported strong financial performance and strategic growth initiatives while acknowledging potential seasonal impacts and competitive pressures. The outlook remains positive with a focus on leveraging recent successes to drive future growth.