RDVT 10-Q — Smart Summary

• Basis of preparation: Unaudited condensed consolidated financial statements prepared under US GAAP; results for interim periods are not necessarily indicative of results for any future interim periods or the full year ending December 31, 2025. The condensed consolidated balance sheet as of December 31, 2024 was derived from audited financial statements included in the Form 10-K filed with the SEC on February 27, 2025.
• Pending standard — income tax disclosures: FASB ASU 2023-09 (issued December 2023) requires greater disaggregation of the effective tax rate reconciliation and income taxes paid by jurisdiction; effective for annual periods beginning after December 31, 2024, with prospective or retrospective application permitted. The Company is currently evaluating the impact.
• Pending standard — expense disaggregation: FASB ASU 2024-03 (issued November 2024) requires note-level disclosure of employee compensation, depreciation, and intangible asset amortization as components of existing income statement expense captions; effective for annual periods in fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027. The Company is currently assessing the impact.

Dilution source: Diluted weighted average shares outstanding for both the three and six months ended June 30, 2025 and 2024 reflect the inclusion of unvested restricted stock units (RSUs), calculated using the treasury stock method.

• Intangible asset composition: As of June 30, 2025, net intangible assets totaled $37.7M, comprising software developed for internal use (gross $79.7M, accumulated amortization ($43.4M), net $36.3M, amortized over 5-10 years) and acquired intangible assets representing perpetual-use data assets added in the period (gross $1.4M, accumulated amortization ($83,000), net $1.4M, amortized over 10 years); at December 31, 2024, only internal-use software existed with a net carrying value of $36M.
• Amortization expense: Amortization was $2.6M for the three months ended June 30, 2025 (vs. $2.3M for the three months ended June 30, 2024) and $5.1M for the six months ended June 30, 2025 (vs. $4.5M for the six months ended June 30, 2024), all included in depreciation and amortization expense.
• Capitalized costs: The Company capitalized $2.8M during the three months ended June 30, 2025 (vs. $2.8M in the prior-year quarter) and $6.8M during the six months ended June 30, 2025 (vs. $5.6M); the gross carrying amount includes eligible personnel-related expenses, share-based compensation, travel, and other directly attributable application-development-stage costs, with $3.8M not yet commenced amortization as of June 30, 2025.
• Future amortization schedule: Estimated amortization expense from the remaining $37.7M net balance is $5.3M (remainder of 2025), $9.8M (2026), $8.2M (2027), $5.8M (2028), $3.8M (2029), and $4.8M (2030 and thereafter).

• Goodwill balance: Goodwill of $5.2M (stated unit not explicitly declared, but figure is as reported) remained unchanged at both June 30, 2025 and December 31, 2024, arising entirely from the acquisition of Interactive Data, LLC, a wholly-owned subsidiary of red violet, effective October 2, 2014.
• Impairment: No goodwill impairment loss was recorded during the three and six months ended June 30, 2025 and 2024, and there was no accumulated goodwill impairment loss as of June 30, 2025; the annual impairment test measurement date is October 1.

Unbilled receivables: As of June 30, 2025, current and noncurrent unbilled accounts receivable were $1.3M and $1.2M, respectively, compared to $937,000 and $1.1M as of December 31, 2024; these are included in accounts receivable and other noncurrent assets on the condensed consolidated balance sheets.

• Revenue mix: For the three months ended June 30, 2025 and 2024, 77% and 74% of total revenue was attributable to customers with pricing contracts, with the remainder (23% and 26%) from transactional customers; for the six months ended June 30, 2025 and 2024, the split was 76% pricing contracts and 24% transactional.
• Deferred revenue: As of June 30, 2025 and December 31, 2024, deferred revenue balances were $806,000 and $712,000, respectively, all expected to be realized within the next 12 months; of the December 31, 2024 balance, $183,000 and $494,000 was recognized into revenue during the three and six months ended June 30, 2025, respectively.
• Remaining performance obligations: As of June 30, 2025, $19.9M of revenue is expected to be recognized for unsatisfied or partially unsatisfied performance obligations on pricing contracts with terms greater than 12 months, with $5.9M in the remainder of 2025, $8.1M in 2026, $4.6M in 2027, $1.1M in 2028, $187,000 in 2029, and $5,000 in 2030.

• Effective tax rates: The effective income tax rate was 13% and 22% for the three months ended June 30, 2025 and 2024, respectively, and 19% and 23% for the six months ended June 30, 2025 and 2024, respectively, versus the U.S. statutory corporate federal income tax rate of 21%; the 2025 rates fell below statutory primarily due to research and development tax credits (partially offset by state income taxes and nondeductible permanent differences), while 2024 rates exceeded statutory primarily due to state income taxes and nondeductible permanent differences (partially offset by R&D credits).
• Deferred tax assets: The Company concluded that realization of deferred tax assets as of June 30, 2025 was more likely than not, based on established historical cumulative positive income before income taxes plus permanent differences, projections of future taxable income, and the reversal of taxable temporary differences.
• Unrecognized tax benefits: The Company does not have any material unrecognized tax benefits as of June 30, 2025 and December 31, 2024; due to net operating loss carryforwards since inception, all income tax filings remain open for examination.
• OBBBA legislation: The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, makes permanent key elements of the Tax Cuts and Jobs Act including full expensing of domestic research and experimentation expenditures; the Company is currently evaluating its impact and does not expect it to have a material impact on the Company's effective tax rate.

• Common shares issued: Issued shares increased from 13,936,329 as of December 31, 2024 to 13,976,841 as of June 30, 2025; 58,117 shares were issued from RSU vesting, of which 17,605 shares were withheld to cover withholding taxes at a cost of $727,000 and subsequently retired, leaving no treasury stock as of either date.
• Special dividend: On December 3, 2024, the Company declared a special cash dividend of $0.30 per share to shareholders of record as of January 31, 2025; the aggregate amount of approximately $4.2M was paid on February 14, 2025.

• Plan authorization: On June 10, 2025, stockholders approved an amendment and restatement of the 2018 Stock Incentive Plan increasing authorized shares from 6,500,000 to 7,500,000; as of June 30, 2025, 2,657,597 shares remained available for future issuance.
• RSU activity: Unvested RSUs totaled 895,819 as of June 30, 2025 (vs. 887,268 as of December 31, 2024) at a weighted average grant-date fair value of $23.42; during the six months ended June 30, 2025, 107,050 RSUs were granted at fair values ranging from $34.18 to $49.67 per share with vesting periods of three to four years, while 40,512 units vested and delivered, 17,605 were withheld as treasury stock, and 40,382 were forfeited.
• Performance-based RSUs: Of 130,000 performance-based RSUs granted March 18, 2024 at $18.30 per share (vesting contingent on achieving certain revenue prior to December 31, 2030), the Company determined as of June 30, 2025 that it is not probable that the performance criteria for 70,000 of those RSUs will be met; accordingly, no share-based compensation expense has been recognized for those 70,000 units, which remain included in the unvested total.
• Unrecognized expense: As of June 30, 2025, unrecognized share-based compensation expense was $15.3M, expected to be recognized over a remaining weighted average period of 2.5 years.

• Lease portfolio: The Company holds 2 active non-cancellable operating leases — its 21,020 sq ft corporate headquarters (extended through June 30, 2029 with an option for a further 60-month extension) and a new 6,709 sq ft Seattle office under an 80-month lease commencing May 1, 2025; the prior 6,003 sq ft Seattle office lease expired in March 2025.
• New Seattle Lease: The New Seattle Lease Agreement resulted in recognition of $1.2M in right-of-use assets obtained in exchange for operating lease liabilities as of May 1, 2025, using a 6.0% discount rate (the Company's estimated incremental borrowing rate, as the implicit rate was not readily determinable).
• Lease metrics: Weighted-average remaining lease term was 5.0 years as of June 30, 2025 (vs. 4.3 years as of December 31, 2024); weighted-average discount rate was 8.36% as of June 30, 2025 (vs. 9.94% as of December 31, 2024).
• Maturity profile: Total future maturities of operating lease liabilities as of June 30, 2025 were $3.6M, with $2.9M recorded as the present value of operating lease liabilities ($411,000 current, $2.5M noncurrent) and a discount of $699,000.

• Single segment: The Company operates as one single operating and reporting segment, 'identity and information solutions,' as defined by ASC 280. There have been no significant changes in basis of segmentation or measurement of segment profit since the last annual report.
• CODM metric: The chief operating decision maker (CODM) assesses performance and allocates resources based on net income, which is the same figure reported on the condensed consolidated statements of operations. Segment assets equal total assets on the condensed consolidated balance sheet.
• Acquisition-related costs: Professional fees for the three and six months ended June 30, 2025 include $370,000 of acquisition-related costs for due diligence of potential strategic targets; comparable costs were $0 and $7,000 for the three and six months ended June 30, 2024, respectively.
• Other segment items: Other segment items consist primarily of travel and entertainment, write-off of long-lived assets, and other selling, general and administrative expenses.

Commitments

• Data licensing agreements + cloud services agreement ($44M as of June 30, 2025): Total material capital commitments payable as $5.6M (remainder of 2025), $9.5M (2026), $7.6M (2027), $7.3M (2028), $7.3M (2029), and $6.7M (2030 and thereafter).
• Largest data supplier amendment (extended through April 30, 2031): Accounts for 46% of data acquisition costs for Q2 2025; remaining minimum purchase commitment is $24.7M as of June 30, 2025.
• Five-year cloud services agreement (effective May 1, 2025): Non-cancellable, with a minimum annual purchase commitment of $3M.

Legal Proceedings

• Atlas Data Privacy Corporation et al. v. Company (filed February 7, 2024): Alleges failure to suppress home addresses and phone numbers within 10 business days under New Jersey's Daniel's Law; matter pending in Superior Court of New Jersey after remand (November 21, 2024); no trial date scheduled; insurer confirmed coverage subject to policy limits.

• Business focus: Red Violet operates an AI/ML-driven identity intelligence platform, CORE™, marketed primarily through 2 brands — IDI (flagship product: idiCORE, serving financial services, insurance, healthcare, law enforcement, government, and other enterprise customers) and FOREWARN® (app-based solution for the real estate industry providing pre-engagement consumer risk identification).
• Customer growth: As of June 30, 2025, IDI had 9,549 billable customers (vs. 8,477 as of June 30, 2024) and FOREWARN had 346,671 users (vs. 263,876 as of June 30, 2024).
• Revenue mix: For the three months ended June 30, 2025, 77% of total revenue was attributable to pricing-contract customers vs. 23% transactional; for the three months ended June 30, 2024, the split was 74% and 26%, respectively. For the six months ended June 30, 2025 and 2024, the split was 76% pricing-contract vs. 24% transactional in both periods.
• Growth requirements: Management states the company must generate and sustain sufficient operating profits and cash flow to develop new products, grow existing business, and expand into additional markets, requiring additional sales from current and new products under development.

• IDI customer growth: Added 308 customers to IDI during the second quarter, ending the quarter with 9,549 customers.
• FOREWARN user growth: Added 21,335 users to FOREWARN during the second quarter, ending the quarter with 346,671 users; over 575 REALTOR® Associations throughout the U.S. are now contracted to use FOREWARN.
• Higher-tier customer momentum: Continued to win higher-tier customers at an accelerated pace, with total customer spend outpacing prior-year levels across each key revenue cohort, including $10,000 to $25,000, $25,000 to $100,000, and over $100,000, in trailing twelve-month revenue.

• Non-GAAP metrics defined: Adjusted EBITDA excludes interest income, income tax expense, depreciation and amortization, share-based compensation expense, litigation costs, acquisition-related costs, and write-off of long-lived assets; adjusted net income excludes share-based compensation expense and amortization of share-based compensation capitalized in intangible assets, with tax effect of adjustments applied at ~26.00% for 2025 and ~25.75% for 2024; adjusted gross profit adds back depreciation and amortization of certain intangible assets (primarily amortization of capitalized internal-use software); FCF equals net cash from operations less purchase of property and equipment and capitalized costs included in intangible assets.
• Adjusted EBITDA: $7.6M (35% margin) for Q2 2025 vs. $6.8M (36% margin) for Q2 2024; $16M (36% margin) for the six months ended June 30, 2025 vs. $12.5M (34% margin) for the six months ended June 30, 2024; GAAP net income margin was 12% in Q2 2025 vs. 14% in Q2 2024, and 14% vs. 12% for the respective six-month periods.
• Adjusted net income and EPS: Adjusted net income was $4.1M ($0.29 basic / $0.28 diluted adjusted EPS) in Q2 2025 vs. $3.9M ($0.28 basic and diluted) in Q2 2024; for the six months ended June 30, 2025, adjusted net income was $8.9M ($0.64 basic / $0.62 diluted) vs. $7M ($0.51 basic / $0.50 diluted) in the prior-year period.
• Adjusted gross margin and FCF: Adjusted gross margin was 84% in Q2 2025 vs. 82% in Q2 2024 (GAAP gross margin: 72% vs. 70%); FCF was $4.8M in Q2 2025 vs. $3.3M in Q2 2024, and $7.3M for the six months ended June 30, 2025 vs. $5.2M in the prior-year period, with Q2 2025 capex and capitalized software totaling $202,000 and $2.5M respectively.

• Revenue growth: Revenue increased $2.7M, or 14%, to $21.8M for the three months ended June 30, 2025, compared to $19.1M for the same period in 2024, driven by volume expansion across the existing customer base, partially offset by a decrease in revenue from new customers.
• Customer cohort mix: Revenue from existing customers increased $3.1M, or 18%, while revenue from new customers decreased $400,000, or 19%; the prior-year period included $1M in one-time transactional revenue from a large opportunity win from an existing customer, with no comparable one-time transactional revenue in the current period.
• Customer base expansion: As of June 30, 2025, the IDI billable customer base increased to 9,549 customers, up from 8,477 customers a year earlier, and the FOREWARN user base increased to 346,671 users, up from 263,876 users a year earlier.
• Metric consolidation: Beginning in the first quarter of 2025, the prior base revenue and growth revenue categories were consolidated into a single revenue from existing customers metric; existing customers are defined as those beginning their seventh full calendar month of revenue contribution, while new customers represent those in their first six full calendar months.

• Cost of revenue flat: Cost of revenue remained consistent at $3.5M for the three months ended June 30, 2025 and 2024, consisting primarily of data acquisition costs under flat-fee licensing and unlimited usage arrangements, as well as transactional purchases, plus cloud infrastructure fees and personnel-related costs.
• Largest supplier concentration: The largest data supplier accounted for 46% of total data acquisition costs for the three months ended June 30, 2025 and 2024; effective May 1, 2025, the company entered into an amendment extending that agreement through April 30, 2031.
• Cost as % of revenue declining: Due to the fixed-cost nature of the primary data licensing structure, cost of revenue as a % of revenue decreased to 16% for the three months ended June 30, 2025, from 18% for the same period in 2024; management expects this percentage to continue to decline as revenue increases.

• Expense growth: Sales and marketing expenses increased $1.2M, or 28%, to $5.6M for the three months ended June 30, 2025, compared to $4.4M for the same period in 2024, driven primarily by a $1M increase in personnel-related expenses and a $100,000 increase in advertising, marketing and agency expenses.
• Cost composition: Sales and marketing expenses consist of personnel-related expenses, advertising, marketing and agency expenses, travel expenses, share-based compensation expense incurred by the sales team, and provision for bad debts.
• Strategic rationale: The increase reflects continued investment in expanding go-to-market capabilities to support long-term revenue growth.

• Overall change: General and administrative expenses increased $1.5M, or 26%, to $7.3M for the three months ended June 30, 2025, compared to $5.8M for the same period in 2024, driven by higher personnel-related expenses and share-based compensation expense.
• Personnel and comp: Personnel-related expenses were $3.5M (vs. $2.9M) and share-based compensation expense was $1.6M (vs. $1.2M).
• Professional fees: Professional fees rose to $1.6M from $1M, including $400,000 of acquisition-related costs tied to due diligence of potential strategic targets (vs. $0 in the prior period).

• Q2 2025 D&A: Depreciation and amortization expenses increased $200,000, or 11%, to $2.6M for the three months ended June 30, 2025, compared to $2.4M for the same period in 2024, primarily driven by the amortization of intangible assets that became ready for their intended use after June 30, 2024.
• Six-month D&A: Depreciation and amortization expenses increased $600,000, or 12%, to $5.2M for the six months ended June 30, 2025, compared to $4.6M for the same period in 2024, with the same driver — amortization of intangible assets that became ready for their intended use after June 30, 2024.

• Interest income decline: Interest income decreased $100,000, or 5%, to $600,000 for the six months ended June 30, 2025, compared to $700,000 for the same period in 2024, primarily attributable to lower yields on money market fund investments during the current period.

• Tax expense and rate: Income tax expense was $1.5M for the six months ended June 30, 2025, up from $1.3M for the same period in 2024, driven by higher pre-tax income; the effective tax rate decreased to 19% from 23% over the same periods.
• OBBBA legislation: On July 4, 2025, the OBBBA was enacted into law, making permanent key elements of the Tax Cuts and Jobs Act, including the full expensing of domestic research and experimentation expenditures.

Net income: Net income increased $1.7M, or 39%, to $6.1M for the six months ended June 30, 2025, compared to $4.4M for the same period in 2024.

• Macroeconomic impact: Management states that persistent inflationary pressures throughout 2024 and into the first half of 2025 have contributed to a more challenging macroeconomic environment, increasing recessionary concerns and prompting some businesses to moderate discretionary spending, which has resulted in — and may continue to contribute to — fluctuations in transaction volumes, pricing dynamics, and operating margins across the company's services.
• Interest rate risk: Elevated interest rates implemented to curb inflation may reduce demand for credit, which could lead to lower usage of services by customers in the banking, financial services, and adjacent industries.
• Financial results to date: Despite these conditions, inflation has not had a material impact on the company's financial results to date; where feasible, the company has taken proactive steps to mitigate inflation-related cost increases, including implementing pricing adjustments where permitted under contract terms and competitive conditions.

• Operating cash flow (2025): Net cash provided by operating activities was $12.5M for the six months ended June 30, 2025, driven by net income of $6.1M and non-cash adjustments of $10.3M (including share-based compensation, depreciation and amortization, write-off of long-lived assets, provision for bad debts, noncash lease expenses, and deferred income tax expense), partially offset by a net use of cash of $4M from changes in operating assets and liabilities.
• Operating cash flow (2024): Net cash provided by operating activities was $10M for the six months ended June 30, 2024, driven by net income of $4.4M and non-cash adjustments of $9M, partially offset by a net use of cash of $3.4M from changes in operating assets and liabilities.

Investing outflows: Net cash used in investing activities was $5.2M for the six months ended June 30, 2025, compared to $4.9M for the six months ended June 30, 2024, primarily driven by capitalized costs included in intangible assets.

• Six months ended June 30, 2025: Net cash used in financing activities was $4.9M, driven by a special cash dividend totaling $4.2M (declared December 3, 2024 at $0.30 per share, paid February 14, 2025) and $700,000 in taxes paid for net share settlement of vesting RSUs.
• Six months ended June 30, 2024: Net cash used in financing activities was $6.3M, driven by $5.9M in common stock repurchases under the Stock Repurchase Program and $400,000 in taxes paid for net share settlement of vesting RSUs.
• Stock Repurchase Program: Originally authorized May 2, 2022 for up to $5M; the Board approved two additional $5M authorizations on December 19, 2023 and March 28, 2024, expanding the total program size.

Material commitments: As of June 30, 2025, commitments under certain data licensing agreements and a cloud service agreement totaled $44M.

• Funding outlook: Management expects to fund these commitments, as well as ongoing operating and capital requirements, using available cash on hand and cash flows generated from operations over the next twelve months.

• Net income and equity: Net income was $2.7M for the three months ended June 30, 2025 (vs. $2.6M in the prior-year period) and $6.1M for the six months ended June 30, 2025 (vs. $4.4M); total shareholders' equity was $96.2M and cash and cash equivalents were $38.8M as of June 30, 2025.
• Liquidity adequacy: Management believes existing resources will be sufficient to fund operations and expected capital expenditures for at least the next twelve months, based on projected revenue growth and available cash on hand.
• Future capital needs: While internally generated cash flows are expected to be the primary funding source, future needs may arise from the pace of revenue growth, technology investment, or strategic initiatives, in which case the company may seek additional capital through equity and/or debt issuances, which could result in dilution to existing stockholders.