RDVT 10-Q — Smart Summary

• Basis of preparation: Unaudited condensed consolidated financial statements prepared under US GAAP and SEC interim reporting rules; results for interim periods are not necessarily indicative of results for any future interim periods or the full year ending December 31, 2025; should be read in conjunction with the Form 10-K for the year ended December 31, 2024 filed with the SEC on February 27, 2025.
• ASU 2023-09 (Income Taxes): FASB's December 2023 guidance requiring greater disaggregation of the effective tax rate reconciliation and income taxes paid by jurisdiction is effective for annual periods beginning after December 31, 2024; the Company is currently evaluating its impact on the condensed consolidated financial statements.
• ASU 2024-03 (Expense Disaggregation): FASB's November 2024 guidance requiring note-level disclosure of specific expense categories (employee compensation, depreciation, intangible asset amortization) is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027; the Company is currently assessing the impact of adoption.

Dilution source: Diluted weighted average shares outstanding for all periods presented are calculated by inclusion of unvested restricted stock units (RSUs) using the treasury stock method.

• Intangible asset composition: As of September 30, 2025, net intangibles totaled $38.7M, comprising software developed for internal use (5–10 year amortization period; gross $82.7M, accumulated amortization ($46M), net $36.6M) and acquired intangible assets (10-year amortization period; gross $2.2M, accumulated amortization ($119,000), net $2.1M) — the latter category was $0 as of December 31, 2024, reflecting a new acquisition of data assets with perpetual usage rights.
• Amortization expense: Amortization was $2.7M for the three months ended September 30, 2025 (vs. $2.4M in the prior-year quarter) and $7.7M for the nine months ended September 30, 2025 (vs. $6.9M in the prior-year nine-month period), all included in depreciation and amortization expense.
• Capitalized costs: The Company capitalized $3.7M in the three months ended September 30, 2025 (vs. $2.7M) and $10.5M in the nine months ended September 30, 2025 (vs. $8.3M); capitalized costs consist primarily of eligible personnel-related expenses, share-based compensation, travel expenses, and other directly attributable application development stage costs.
• Not-yet-amortizing assets and future schedule: As of September 30, 2025, $5M of gross intangibles had not yet commenced amortization; estimated future amortization is $2.7M (remainder of 2025), $10.4M (2026), $8.8M (2027), $6.4M (2028), $4.4M (2029), and $5.9M (2030 and thereafter).

• Goodwill balance: Goodwill of $5.2M (as stated under the filing's scale) remained unchanged at both September 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 nine months ended September 30, 2025 and 2024, and there was no accumulated goodwill impairment loss as of September 30, 2025; the annual impairment test date is October 1.

• Unbilled receivables: As of September 30, 2025, current and noncurrent unbilled accounts receivable were $1,258 and $1,021, respectively, compared to $937 and $1,080 as of December 31, 2024; these are included within accounts receivable and other noncurrent assets on the condensed consolidated balance sheets.
• Revenue mix: For the three months ended September 30, 2025 and 2024, 75% and 77% of total revenue was attributable to customers with pricing contracts, versus 25% and 23% attributable to transactional customers; for the nine months ended September 30, 2025 and 2024, the split was 75% vs. 25% and 76% vs. 24%, respectively.
• Deferred revenue: As of September 30, 2025, deferred revenue was $859 (vs. $712 as of December 31, 2024), all expected to be realized within the next 12 months; of the December 31, 2024 balance, $123 and $617 was recognized into revenue during the three and nine months ended September 30, 2025, respectively.
• Remaining performance obligations: As of September 30, 2025, $19,820 of revenue is expected to be recognized for unsatisfied or partially unsatisfied performance obligations on pricing contracts with terms exceeding 12 months, with $3,166 in the remainder of 2025, $9,425 in 2026, $5,520 in 2027, $1,402 in 2028, $302 in 2029, and $5 in 2030.

• Effective tax rates: The effective income tax rate was 15% and 40% for the three months ended September 30, 2025 and 2024, respectively, and 18% and 28% for the nine months ended September 30, 2025 and 2024, respectively, versus the U.S. statutory corporate federal income tax rate of 21%.
• Rate drivers: For the three and nine months ended September 30, 2025, rates were below statutory primarily due to research and development tax credits and excess tax benefit from share-based compensation, partially offset by state income taxes and nondeductible permanent differences; for the comparable 2024 periods, rates exceeded statutory primarily driven by state income taxes and nondeductible permanent differences, partially offset by research and development tax credits.
• Deferred tax assets: The Company concluded that realization of deferred tax assets as of September 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.
• OBBBA: The One Big Beautiful Bill Act, 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 concluded it does not have a material impact on the Company's effective tax rate. The Company has no material unrecognized tax benefits as of September 30, 2025 and December 31, 2024, and all income tax filings remain open for examination due to net operating loss carryforwards since inception.

• Share issuances and repurchases: During the nine months ended September 30, 2025, 66,767 shares were issued from RSU vesting, of which 20,442 shares were withheld for withholding taxes at a cost of $860,000 and subsequently retired; additionally, 15,437 shares were repurchased under the Stock Repurchase Program at a cost of $653,000 and also retired, bringing issued shares from 13,936,329 (December 31, 2024) to 13,967,217 (September 30, 2025) with no treasury shares held at either date.
• Stock Repurchase Program: The Board originally authorized up to $5M on May 2, 2022, with additional $5M authorizations on December 19, 2023 and March 28, 2024, bringing the total to $15M; on November 3, 2025, the Board further authorized an additional $15M, bringing the total authorization to $30M. The program does not obligate the Company to repurchase any shares and may be modified, suspended, or terminated at any time.
• 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, with the aggregate amount of approximately $4.2M paid on February 14, 2025.

• Plan capacity: The Amended and Restated Plan (approved by stockholders on June 10, 2025) increased authorized shares from 6,500,000 to 7,500,000; as of September 30, 2025, 2,652,597 shares remained available for future issuance, with all awards to date issued as RSUs vesting over three or four years on a time-based or time-and-performance basis.
• RSU activity: Unvested RSUs moved from 887,268 units (weighted average grant-date fair value $21.67) at December 31, 2024 to 892,169 units ($23.54) at September 30, 2025, after 112,050 units were granted at values ranging from $34.18 to $49.67 per share, 46,325 vested and delivered ($20.37), 20,442 withheld as treasury stock ($20.56), and 40,382 forfeited ($23.54).
• Performance RSUs: Of the 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 September 30, 2025 that it is not probable the performance criteria for 70,000 of those RSUs will be met; no share-based compensation expense has been recognized for those 70,000 RSUs, which remain in the unvested count.
• Unrecognized expense: Unrecognized share-based compensation expense was $13.4M as of September 30, 2025, expected to be recognized over a remaining weighted average period of 2.4 years.

• Lease portfolio: The Company holds 2 active non-cancellable operating leases — corporate headquarters of 21,020 rentable square feet (amended through June 30, 2029, with an option to extend an additional 60 months) and a new Seattle office of 6,709 rentable square feet under an 80-month lease that commenced May 1, 2025; the prior Seattle office of 6,003 rentable square feet expired in March 2025.
• New Seattle Lease (ROU asset): 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% incremental borrowing rate (the implicit rate was not readily determinable).
• Lease metrics: Weighted-average remaining term was 4.8 years as of September 30, 2025 (vs. 4.3 years as of December 31, 2024); weighted-average discount rate was 8.30% as of September 30, 2025 (vs. 9.94% as of December 31, 2024).
• Balance sheet: Total operating lease liabilities were $2.9M as of September 30, 2025, split between current portion of $403,000 and noncurrent of $2.5M, against total undiscounted maturities of $3.5M (implied discount of $640,000).

• 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 the basis of segmentation or in the basis of measurement of segment profit since the last annual report.
• CODM metric: The chief operating decision maker 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 nine months ended September 30, 2025 include $358,000 of acquisition-related costs incurred in connection with due diligence of potential strategic targets, compared to $7,000 for the nine months ended September 30, 2024.
• 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 (remaining minimum $24.6M, through April 30, 2031): Amendment with largest data supplier effective May 1, 2025 extends term to April 30, 2031, with option for one additional twelve-month extension.
• Cloud services agreement ($3M annual minimum, five-year non-cancellable): Entered April 2025 with third-party provider beginning May 1, 2025; costs expensed as infrastructure fees or capitalized as internal-use software.
• Total capital commitments ($44.9M as of September 30, 2025): Combined data licensing and cloud service obligations: $2.7M (remainder 2025), $10.2M (2026), $8.6M (2027), $7.9M (2028), $8M (2029), $7.5M (2030 and thereafter).

Legal Proceedings

• Atlas Data Privacy Corp. et al. v. Company (filed February 7, 2024): Plaintiffs allege violation of New Jersey Daniel's Law for failure to suppress home addresses and unpublished phone numbers within 10 business days; pending in Superior Court of New Jersey, no trial date scheduled; insurer confirmed coverage subject to policy limits.

• Business description: Red Violet operates an AI/ML-driven identity intelligence platform called CORE™, marketed primarily through two brands — IDI (flagship product: idiCORE) serving financial services, insurance, healthcare, law enforcement, government, and other industries, and FOREWARN®, an app-based solution for the real estate industry providing pre-engagement consumer risk identification.
• Customer growth: As of September 30, 2025, IDI had 9,853 billable customers (vs. 8,743 as of September 30, 2024) and FOREWARN had 372,209 users (vs. 284,967 as of September 30, 2024); a billable IDI customer is defined as a single entity generating revenue during the last three months of the period, while a FOREWARN user is a unique person with an active subscription on the last day of the period.
• Revenue mix: For the three months ended September 30, 2025, 75% of total revenue was attributable to customers with pricing contracts and 25% to transactional customers, compared to 77% and 23%, respectively, in the prior-year quarter; for the nine months ended September 30, 2025, the split was 75% pricing contracts and 25% transactional, versus 76% and 24% in the nine months ended September 30, 2024.
• Growth requirements: Management states that continued development of new products, growth of existing business, and expansion into additional markets requires generating and sustaining sufficient operating profits and cash flow, which in turn requires additional sales from current and pipeline products.

• IDI customer growth: Added 304 customers to IDI during the third quarter, ending the quarter with 9,853 customers.
• FOREWARN user growth: Added 25,538 users to FOREWARN during the third quarter, ending the quarter with 372,209 users; over 590 REALTOR® Associations throughout the U.S. are now contracted to use FOREWARN.
• Stock repurchase authorization: Increased the Stock Repurchase Program authorization by $15M, bringing the total authorized to $30M, with $18.9M remaining under the program.
• Share repurchases: Purchased 15,437 shares of the Company's common stock during the third quarter at an average price of $42.26 per share pursuant to the Company's Stock Repurchase Program.

• Non-GAAP definitions: Adjusted EBITDA excludes interest income, income tax expense, depreciation and amortization, share-based compensation expense, acquisition-related costs, litigation costs, and write-off of long-lived assets from net income; adjusted net income makes the same exclusions plus amortization of share-based compensation capitalized in intangible assets and adds the tax effect of adjustments at an expected federal and state statutory rate of approximately 26.00% for all periods presented; adjusted gross profit adds back depreciation and amortization of certain intangible assets (primarily amortization of capitalized internal-use software) to GAAP gross profit; FCF equals net cash provided by operating activities less purchase of property and equipment and capitalized costs included in intangible assets.
• Adjusted EBITDA and margin: Adjusted EBITDA was $9M (39% margin) for the three months ended September 30, 2025 vs. $6.7M (35% margin) in the prior-year quarter; for the nine months ended September 30, 2025, adjusted EBITDA was $25M (37% margin) vs. $19.2M (34% margin), compared to GAAP net income margins of 18% / 15% vs. 9% / 11% in the respective periods.
• Adjusted net income and EPS: Adjusted net income was $5.8M (Q3 2025) vs. $3.3M (Q3 2024), with adjusted diluted EPS of $0.39 vs. $0.23; for the nine months, adjusted net income was $15M vs. $10.5M, and adjusted diluted EPS was $1.03 vs. $0.74, against GAAP diluted EPS of $0.29 / $0.71 vs. $0.12 / $0.43.
• Adjusted gross margin and FCF: Adjusted gross margin was 84% for Q3 2025 (vs. 83% in Q3 2024) and 84% for the nine months (vs. 81%); FCF was $7.3M in Q3 2025 vs. $4.8M in Q3 2024, and $14.5M for the nine months vs. $10M, with capital deductions consisting of property and equipment purchases of $187,000 and $439,000 and capitalized intangible asset costs of $2.7M and $7.7M for the three and nine month periods, respectively.

• Revenue growth: Revenue increased $4M, or 21%, to $23.1M for the three months ended September 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 detail: Revenue from existing customers (customers in their seventh full calendar month of revenue contribution or beyond) increased $4.1M, or 24%, while revenue from new customers (customers in their first six full calendar months) decreased $100,000, or 6%.
• Customer base expansion: As of September 30, 2025, the IDI billable customer base increased to 9,853 customers, up from 8,743 customers a year earlier, and the FOREWARN user base increased to 372,209 users, up from 284,967 users a year earlier.
• Metric reclassification: Beginning in the first quarter of 2025, the company consolidated its prior base revenue and growth revenue categories into a single revenue from existing customers metric.

• Cost of revenue: Increased $300,000, or 9%, to $3.6M for the three months ended September 30, 2025, compared to $3.3M for the same period in 2024; as a % of revenue, declined to 16% from 17% due to the fixed-cost nature of the primary data licensing structure.
• Composition: Primarily data acquisition costs under flat-fee licensing agreements (including unlimited usage arrangements) and transactional purchases, with additional components of cloud infrastructure fees and personnel-related costs.
• Largest data supplier: Accounted for 46% of total data acquisition costs for the three months ended September 30, 2025 (vs. 48% in the prior-year period); on May 1, 2025, the company entered into an amendment extending the term of the agreement through April 30, 2031.
• Management outlook: Management expects cost of revenue as a % of revenue to continue to decline over time as revenue increases.

• Expense growth: Sales and marketing expenses increased $600,000, or 12%, to $5.4M for the three months ended September 30, 2025, compared to $4.8M for the same period in 2024, primarily driven by a $300,000 increase in personnel-related expenses and a $100,000 increase in advertising, marketing and agency expenses.
• Category composition: Sales and marketing expenses include personnel-related expenses, advertising, marketing and agency expenses, travel expenses, share-based compensation expense incurred by the sales team, and provision for bad debts.

• G&A increase: General and administrative expenses rose $800,000, or 13%, to $6.8M for the three months ended September 30, 2025, compared to $6M for the same period in 2024, driven by higher personnel-related expenses to support continued business growth.
• Cost composition: For the three months ended September 30, 2025 and 2024, G&A consisted primarily of personnel-related expenses of $3.5M and $2.9M, respectively; share-based compensation of $1.5M and $1.5M, respectively; and professional fees of $1.2M and $900,000, respectively.

• D&A increase: Depreciation and amortization expenses increased $300,000, or 11%, to $2.7M for the three months ended September 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 September 30, 2024.

• Three-month performance: Interest income remained consistent at $400,000 for the three months ended September 30, 2025 and 2024, primarily attributable to yields on money market fund investments.
• Nine-month performance: Interest income remained consistent at $1M for the nine months ended September 30, 2025 and 2024, also primarily attributable to yields on money market fund investments.

• Income before income taxes: Increased $4M, or 46%, to $12.6M for the nine months ended September 30, 2025, compared to $8.6M for the same period in 2024.
• Primary driver: The increase was primarily driven by an increase of $11.3M in revenue.
• Offsetting increases: Partially offset by an increase of $4.4M in personnel-related expenses, $800,000 in depreciation and amortization expense, $700,000 in professional fees, $700,000 in share-based compensation expense, and $300,000 in cost of revenue (exclusive of depreciation and amortization).

• Income tax expense: Income tax expense was $2.2M for the nine months ended September 30, 2025, compared to $2.4M for the same period in 2024, with the decrease primarily driven by a decline in the effective tax rate to 18% from 28%, partially offset by higher pre-tax income.
• 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 $4.2M, or 68%, to $10.3M for the nine months ended September 30, 2025, compared to $6.1M for the same period in 2024.

• Macroeconomic pressure: Management states that persistent inflationary pressures throughout 2024 and into the nine months ended September 30, 2025 have contributed to a more challenging macroeconomic environment, increasing recessionary concerns and prompting some businesses to moderate discretionary spending, resulting in — and potentially continuing to cause — fluctuations in transaction volumes, pricing dynamics, and operating margins.
• 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.
• Mitigation and current impact: Despite these dynamics, inflation has not had a material impact on financial results to date; where feasible, the company has taken proactive steps including implementing pricing adjustments where permitted under contract terms and competitive conditions.

• Operating cash flow (2025): Net cash provided by operating activities was $22.7M for the nine months ended September 30, 2025, driven by net income of $10.3M, non-cash adjustments of $15.8M (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 $3.5M from changes in operating assets and liabilities.
• Operating cash flow (2024): Net cash provided by operating activities was $17.3M for the nine months ended September 30, 2024, driven by net income of $6.1M and non-cash adjustments of $14.4M, partially offset by a net use of cash of $3.3M from changes in operating assets and liabilities.
• Year-over-year comparison: Operating cash flow improved by approximately $5.4M period-over-period, reflecting higher net income ($10.3M vs. $6.1M) and modestly larger non-cash adjustments ($15.8M vs. $14.4M), with working capital consumption roughly stable ($3.5M vs. $3.3M net use).

Investing cash outflows: Net cash used in investing activities was $8.1M for the nine months ended September 30, 2025, compared to $7.3M for the nine months ended September 30, 2024, primarily driven by capitalized costs included in intangible assets.

• Financing cash outflows: Net cash used in financing activities was $5.7M for the nine months ended September 30, 2025, down from $6.3M for the nine months ended September 30, 2024.
• Special dividend: A special cash dividend of $0.30 per share, declared December 3, 2024, was paid February 14, 2025 to shareholders of record as of January 31, 2025, totaling $4.2M — the largest single component of 2025 financing outflows.
• Share repurchases and RSU taxes: Common stock repurchases totaling $700,000 were conducted under the Stock Repurchase Program, alongside $900,000 in taxes paid for net share settlement of vesting RSUs; repurchases were the dominant outflow in the prior-year period at $5.9M.
• Repurchase program authorization: The Stock Repurchase Program was originally authorized May 2, 2022 for up to $5M, with two additional authorizations of $5M each approved December 19, 2023 and March 28, 2024, expanding total program size to $15M.

• Material commitments: As of September 30, 2025, commitments under data licensing agreements and a cloud service agreement totaled $44.9M.
• Funding outlook: Management expects to fund these commitments, along with ongoing operating and capital requirements, using available cash on hand and cash flows generated from operations over the next twelve months.

• Financial position: As of September 30, 2025, total shareholders' equity was $101.7M and cash and cash equivalents were $45.4M; net income was $4.2M for the three months ended September 30, 2025 (vs. $1.7M in the prior-year quarter) and $10.3M for the nine months ended September 30, 2025 (vs. $6.1M in the prior-year period).
• 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 growth in revenue and operating results and available cash on hand.
• Future capital needs: Future capital needs may arise based on the pace of revenue growth, investment in technology, or strategic initiatives, in which case the company may seek to raise additional capital through the issuance of equity and/or debt securities, with the caveat that any such financing could result in dilution to existing stockholders and may involve terms that are not favorable to the Company.
• Off-balance sheet arrangements: As of September 30, 2025, the company had no off-balance sheet arrangements as defined in Item 303 of Regulation S-K.