Red Violet Q1 2025 Earnings Report

Red Violet EPS Results

• Actual EPS: $0.22
• Consensus EPS: $0.23
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Red Violet Revenue Results

• Actual Revenue: $22.00 million
• Expected Revenue: $20.43 million
• Beat/Miss: Beat by +$1.57 million
• YoY Revenue Growth: N/A

Red Violet Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 4:30PM ET

Red Violet (NASDAQ:RDVT) (NASDAQ: RDVT) is a provider of advanced data, analytics and technology solutions designed to help organizations mitigate financial crime, fraud and security risks. The company’s cloud-native platform consolidates and enriches data from proprietary, public and third-party sources, applying artificial intelligence and machine learning to deliver insights across the risk-management lifecycle. Red Violet’s suite of services includes behavior-based transaction monitoring, automated watchlist and negative-news screening, enhanced due diligence and real-time geospatial threat intelligence.

Leveraging proprietary algorithms, Red Violet offers products that enable compliance teams to streamline anti-money laundering processes, improve fraud detection and respond swiftly to emerging threats. The platform’s modular design allows clients to adopt individual solutions or deploy the full suite in an integrated environment, supporting seamless workflow orchestration and regulatory reporting. Red Violet also provides customizable alerts, case-management tools and expert analytics to help institutions meet evolving compliance requirements and reduce operational costs.

Headquartered in New York, Red Violet serves a global customer base that includes banks, insurers, capital-markets firms, corporate risk groups and government agencies. The company maintains regional offices and data centers in North America, Europe and Asia-Pacific to support around-the-clock operations and ensure data sovereignty. Through strategic partnerships and targeted acquisitions, Red Violet continues to expand its data assets and technology footprint, supporting clients in more than 50 countries worldwide.

Red Violet Q1 2025 Earnings Call Transcript

Key Takeaways

• Record first-quarter performance: Revenue grew 26% to $22.0 M with adjusted gross margin of 83%, adjusted EBITDA up 47% to $8.4 M, and adjusted EPS of $0.33, all setting new quarterly highs.
• Robust customer and user growth: IDI billable customers rose to 9,241 (up 315 sequentially) while FORWARN added 21,918 users, totaling 325,336 users across 545 realtor associations.
• Resilient, countercyclical model: Despite macroeconomic volatility, demand remained strong across financial services, investigations, collections and real-estate, demonstrating the durability of Red Violet’s solutions through economic cycles.
• Strategic investments underway: The company is prioritizing automation, productivity improvements, proprietary data aggregation and AI-driven enhancements to its core identity graph to fuel medium- and long-term growth.
• Quality of growth: Even after excluding $1.2 M of one-time transactional revenue, underlying revenue still rose a healthy 19%, underscoring broad-based demand across verticals.

Presentation

[Operator]

Good day, ladies and gentlemen, and welcome to Red Violet's First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Camilo Ramirez, Senior Vice President, Finance and Investor Relations. Please go ahead.

[Camilo Ramirez, Senior Vice President, Finance & Investor Relations at Red Violet]

Good afternoon, and welcome. Thank you for joining us today to discuss our first quarter twenty twenty five financial results. With me today is Derek Dubner, our Chairman and Chief Executive Officer and Dan McLaughlin, 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.

[Camilo Ramirez, Senior Vice President, Finance & Investor Relations at Red Violet]

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 ks and the subsequent 10 Qs. During the call, we may present certain non GAAP financial information relating to adjusted gross profit, adjusted gross margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and free cash flow. Reconciliations of these non GAAP financial measures to their most directly comparable U. S.

[Camilo Ramirez, Senior Vice President, Finance & Investor Relations at Red Violet]

GAAP financial measure 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.

[Derek Dubner, Chairman & CEO at Red Violet]

Good afternoon, everyone, and thank you for joining us today to discuss our first quarter financial results. We are pleased to report another strong quarter marked by solid execution and continued demand across our business. Our results reflect sustained strength across our diversified customer base, with performance driven by both existing relationships and new customer wins. Despite the persistent volatility in the macroeconomic environment, volumes have remained solid, underscoring the durability and relevance of our solutions. Now, let's briefly run through the numbers.

[Derek Dubner, Chairman & CEO at Red Violet]

Revenue for the quarter was up 26% to a record $22,000,000 producing a record adjusted gross profit of $18,300,000 and a record adjusted gross margin of 83%. Adjusted EBITDA for the quarter was up 47% to a record 8,400,000 producing a record adjusted EBITDA margin of 38%, up six percentage points. Adjusted net income increased 53% to a record $4,800,000 for the quarter, resulting in a record adjusted earnings of $0.33 per diluted share. Our IDI billable customer base increased by three fifteen customers sequentially from the fourth quarter, ending the first quarter at 9,241 customers. Within FORWARN, we added 21,918 users during the first quarter, ending the quarter with 325,336 users.

[Derek Dubner, Chairman & CEO at Red Violet]

Over five forty five realtor associations are now contracted to use ForeWarn. We continue to experience strong receptivity from prospective customers, which reinforces the value proposition of our platform. Clients are increasingly turning to us not just for innovation, but for cost effective, scalable solutions that address mission critical needs. Our ability to simultaneously deliver innovation and efficiency is clearly resonating. As we look at the broader environment, specifically the economic volatility and uncertainty beginning in the first quarter, it is important to again underscore the durability of our business model, which has consistently proven its strength through multiple economic cycles.

[Derek Dubner, Chairman & CEO at Red Violet]

From the dot com bubble, the housing crisis and the Great Recession to the unprecedented challenges of the pandemic, this model has proven resilient and even opportunistic during times of stress. This resilience is driven by the diversity of the industries we serve and the critical nature of our solutions. In a strong economic environment, many of our customers, particularly within corporate sectors and financial services, rely on our technology and solutions to support front end growth use cases, such as new account openings, onboarding and customer engagement. Conversely, in a more challenging economic climate, when financial pressures mount for consumers and businesses alike, other segments of our customer base become more active. In such times, we see heightened demand from clients focused on legal workflows, investigations, collections, process serving, repossession and related functions.

[Derek Dubner, Chairman & CEO at Red Violet]

Additionally, in times of uncertainty, the need for fraud prevention and risk mitigation only increases and our solutions are essential in helping organizations across the spectrum protect their operations. This countercyclical balance in demand ensures that we remain relevant and mission critical regardless of market conditions. It also gives us strong confidence in our ability to continue performing through economic fluctuations while supporting our customers' evolving needs. Over the last few years, we've observed a structural shift in consumer dynamics, where the middle class is no longer anchored in the center, but rather drawn toward the financial extremes that have traditionally defined our core use cases. It is the first time in decades that I've seen this level of activity from both ends of the economic spectrum converge to this degree, where a rising tide is lifting nearly all boats with our business positioned right at the intersection of these trends.

[Derek Dubner, Chairman & CEO at Red Violet]

Today, our focus remains on a set of strategic priorities, which we've touched on previously, designed to drive long term value. These include increasing productivity across the organization, analyzing and implementing automation to streamline operations as we scale and intensifying our efforts around proprietary data generation and aggregation, which includes our continued use of AI to derive insights from our core identity graph. We believe these initiatives will further leverage our business model, strengthen our competitive position and support even stronger financial performance in the medium to long term. Thank you again to our employees, partners and customers for your continued trust and collaboration. We look forward to building on this momentum in the quarters ahead.

[Derek Dubner, Chairman & CEO at Red Violet]

Now, I'll turn it over to Dan to discuss the financials.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

Thank you, Derek, and good afternoon, everyone. We are excited to kick off 2025 with another record quarter, building on the momentum we established throughout 2024. Our first quarter performance reflects solid execution, broad based demand across our verticals and the efficiency of our operating model. As we move into the year, we remain focused on our priorities: delivering consistent results, deepening customer relationships and continuing to invest where we see the greatest return. With a strong foundation and growing leverage in the business, we are well positioned to deliver another year of healthy, sustainable growth.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

Turning now to our first quarter results. For clarity, all the comparisons I will discuss today will be against the first quarter of twenty twenty four, unless noted otherwise. Total revenue was a record $22,000,000 representing a 26% increase over the prior year. We generated a record $18,300,000 in adjusted gross profit, resulting in a record adjusted gross margin of 83%, up four percentage points. Adjusted EBITDA for the quarter was also a record at $8,400,000 an increase of 47% over the prior year.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

Adjusted EBITDA margin reached a record 38%, up six percentage points. Adjusted net income increased 53% to a record 4,800,000 resulting in record adjusted earnings of $0.33 per diluted share. Moving through the details of our P and L. As mentioned, revenue was $22,000,000 for the first quarter. This total includes $1,200,000 in one time transactional revenue associated with two significant opportunity wins from two new customers.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

Excluding this one time transactional revenue, first quarter revenue growth would have still been a healthy 19%. Within IDI, we saw growth across verticals. IDI's billable customer base increased by over 300 customers sequentially from the fourth quarter, ending the quarter at over 9,200 customers. Our emerging markets vertical led all verticals on a percentage basis, delivering strong double digit revenue growth, inclusive of the $1,200,000 in one time transactional revenue. Our Investigative vertical continues to perform well, driven by law enforcement, which has now grown sequentially in every quarter since Q4 of twenty twenty one.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

We also saw strong double digit revenue growth in our financial and corporate risk vertical, led by the banking and financial industry. The collections vertical delivered mid single digit growth. Note that the prior year quarter included outsized transactional revenue related to our IDI Verified product. Normalizing for that impact, this quarter's growth would have been in the mid teens, representing the highest year over year revenue growth rate in the collections vertical since 2020. We continue to see healthy trends and improving performance in the collections industry.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

IDI's real estate vertical, which excludes Fortworn, declined by low single digits, still impacted by affordability issues of strong home prices and elevated interest rates. With over five forty five realtor associations under contract across The US, Forewarned delivered another quarter of strong double digit revenue growth, adding more than 20,000 users during the quarter. This marks FORWARN's twentieth consecutive quarter of sequential revenue growth. Contractual revenue represented 74% of total revenue for the quarter, down four percentage points from the prior year. This decline was attributable to the $1,200,000 in one time transactional revenue referenced earlier.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

Gross revenue retention was 96% for the quarter, an increase of three percentage points over the prior year. Moving back to the P and L, our cost of revenue, exclusive of depreciation and amortization, decreased $100,000 or 3% to $3,700,000 Adjusted gross profit increased 33% to $18,300,000 resulting in an adjusted gross margin of 83%, a four percentage point increase over the prior year. Sales and marketing expenses increased $1,700,000 or 46% to $5,400,000 for the quarter, driven primarily by higher personnel related expenses. General and administrative expenses increased $400,000 or 7% to $6,200,000 for the quarter, also driven primarily by higher personnel related expenses. Depreciation and amortization increased $300,000 or 12% to $2,600,000 for the quarter.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

Our net income increased $1,600,000 or 93% to $3,400,000 for the quarter. Adjusted net income for the quarter increased 1,600,000 or 53% to $4,800,000 resulting in adjusted earnings of $0.33 per diluted share. Moving on to the balance sheet. Cash and cash equivalents were $34,600,000 at 03/31/2025, compared to $36,500,000 at 12/31/2024. Current assets totaled $45,900,000 compared to $46,200,000 at year end, while current liabilities were $5,100,000 compared to $10,300,000 We generated $5,000,000 in cash from operating activities in the first quarter, compared to $4,300,000 for the same period in 2024.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

We generated $2,500,000 in fee in free cash flow in the first quarter, compared to 1,900,000 for the same period in 2024. We did not purchase any shares of company stock under our stock repurchase program during the first quarter. We paid out a special cash dividend of $0.30 per share on the company's common stock to shareholders of record as of 01/31/2025. The dividend, totaling $4,200,000 was distributed on 02/14/2025. To wrap up, 2025 is off to a great start.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

This quarter reflects solid execution across the business and reinforces the strength of our model, one that delivers profitable growth, strong cash flow and high levels of customer retention. We are investing with intention, leaning into the areas of the greatest opportunity, while maintaining the operational discipline that underpins our performance. As we progress through 2025, we remain focused on sustaining our momentum, expanding our reach, and creating long term value for our shareholders. With that, our operator will now open the line for Q and A.

[Operator]

Thank you. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. Please stand by while we compile the Q and A roster. The first question comes from the line of Josh Nichols of B. Riley. Josh, please go ahead.

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

Yeah. Thank you for taking my question, and great to see another quarter with a lot of records being set yet again. Quick question for me. I mean, quite strong growth when you look at, like, the IDI customers this quarter. Is there any color that you could provide with a little bit more granularity on what's driving that specifically?

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

Or how you think that those trends are going to play out through the remainder of the year?

[Dan MacLachlan, Chief Financial Officer at Red Violet]

Yeah, Josh. Hi, this is Dan, and thanks for the questions. And it kind of just builds on what we talked about last quarter that in the fourth quarter, we saw just strong consistent volume across the customer base and across verticals, whether that be financial and corporate risk, collections, for worn, investigative or emerging markets. And in the first quarter, we saw the same thing again. Obviously, there's a bit of uncertainty in the broader economic activity, but from our businesses' perspective, we didn't see any impact from that whatsoever.

[Dan MacLachlan, Chief Financial Officer at Red Violet]

We continue to see good onboarding across customer verticals and customer size, including medium and larger enterprise. And so, we expect that to continue over the remainder of the year. And again, just very excited about the opportunity pipeline that is built and our ability to convert that pipeline.

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

Thanks. And just to follow-up, because you mentioned it, just I know the company has been securing a growing number of larger customers. Any data or highlights that you could provide? Are they slowing down? Are they picking up with the macro uncertainty?

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

Or what are you seeing in terms of large customers, whether it's like governments or more some of these public sector awards that you're still in the early days going after?

[Dan MacLachlan, Chief Financial Officer at Red Violet]

Yes. Look, I mean, from a pure kind of metric perspective, we gave some color in fourth quarter, just being right around 96 customers that were generating in excess of $100,000 in revenue a year. I can say after the first quarter, that has grown nicely to well in excess of 100,000 close to 110 customers today in the trailing twelve months are spending over $100,000 So, we continue to see that dynamic of the medium and larger enterprise customers and our investment to move up tier significantly pay off.

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

Appreciate the context. And then last question for me. Derek, maybe you can provide a little bit more color on this since you've talked about it. Specifically, if you had to touch on one or two of the areas that you think for like internal or external technology investments that you think could really help grow the business longer term beyond just like a quarter or two, what is it that you're most focused on doing as you continue to build out this core identity graph for the consumer?

[Derek Dubner, Chairman & CEO at Red Violet]

Yeah, thanks, Josh. Great question. Well, we have a multi year product roadmap that we're working on. We continue to invest in not only financially, but human resource in expanding the moat around the capabilities around our platform. It's highly differentiated against anything we've created in the past and against competition.

[Derek Dubner, Chairman & CEO at Red Violet]

And I think that's what you're seeing. It's translating to customer wins and receptivity around what we can bring. I would remark that in a time of volatility, we're seeing greater receptivity from prospective customers wanting to understand how we can process their workflows, which we can do and we believe better than the competition. But we can do so because of the construct of our platform, cloud, etcetera, in a much more efficient manner. And so they are definitely listening and wanting to understand the opportunity there.

[Derek Dubner, Chairman & CEO at Red Violet]

So we continue to invest in our identity graph. We're looking to enhance, as I mentioned, some of the strategic priorities, enhance the proprietary data generation and aggregation internally and that includes with some of our initiatives around artificial intelligence. We continue to expand our capabilities to be in bring new solutions out in the way of know your business, KYB, account monitoring and really driving more risk signals out of the data that we see, which is extremely helpful and informative for our customers. And we want to be able to teach them what we're seeing. And we believe those are insights that they are not seeing perhaps at that time.

[Derek Dubner, Chairman & CEO at Red Violet]

So really very current risk signals that alert them to risks. And so we're very excited and we continue to invest also in the strategic priorities I mentioned of enhancing our productivity and really increasing automation across the enterprise. So that as we scale in the out years, you're going to see even greater financial performance, even greater than what we're performing today.

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

Great to hear. Look forward to seeing you guys in a couple of weeks. I'll jump back in the queue.

[Derek Dubner, Chairman & CEO at Red Violet]

Likewise. Thanks, Josh.

[Operator]

This concludes the question and answer session. I would now like to turn it back over to Derek Dubner for closing remarks.

[Derek Dubner, Chairman & CEO at Red Violet]

In closing, we're proud of our performance this quarter and encouraged by the momentum we're seeing across the business. As we continue to execute upon our strategic priorities, we remain focused on delivering long term value for our customers, our employees and our shareholders. Thank you for your continued support and for joining us today.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Participants

Executives

• Camilo Ramirez, Senior Vice President, Finance & Investor Relations
• Derek Dubner, Chairman & CEO
• Dan MacLachlan, Chief Financial Officer

Analysts

• Josh Nichols, Senior Research Analyst at B.Riley Securities