Red Violet(RDVT) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's analysis of financial condition and results of operations Financial Statements This section presents Red Violet, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and notes, for Q2 and H1 2025 Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $38,848 | $36,504 | | Total current assets | $50,796 | $46,192 | | Total assets | $104,834 | $98,531 | | Liabilities & Equity | | | | Total current liabilities | $5,569 | $10,307 | | Total liabilities | $8,628 | $11,899 | | Total shareholders' equity | $96,206 | $86,632 | Condensed Consolidated Statements of Operations This section outlines the company's financial performance, including revenue, income from operations, net income, and diluted EPS for Q2 and H1 2025 and 2024 Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | H1 2025 (in thousands) | H1 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $21,774 | $19,056 | $43,777 | $36,567 | | Income from operations | $2,751 | $3,068 | $6,962 | $5,051 | | Net income | $2,686 | $2,637 | $6,126 | $4,421 | | Diluted EPS | $0.18 | $0.19 | $0.42 | $0.31 | Condensed Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,488 | $10,022 | | Net cash used in investing activities | ($5,236) | ($4,855) | | Net cash used in financing activities | ($4,908) | ($6,256) | | Net increase (decrease) in cash | $2,344 | ($1,089) | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of significant accounting policies, revenue recognition, income taxes, and other material financial disclosures - For Q2 2025, 77% of total revenue was from customers with pricing contracts, compared to 74% in Q2 2024. The remaining revenue was from transactional customers[37] - As of June 30, 2025, the company expects to recognize $19.9 million in future revenue from unsatisfied performance obligations related to long-term pricing contracts[39] - The effective income tax rate was 13% for Q2 2025 and 19% for H1 2025, compared to 22% and 23% for the same periods in 2024, respectively. The decrease in 2025 is primarily due to the benefit of R&D tax credits[42][43] - A special cash dividend of $0.30 per share, totaling approximately $4.2 million, was paid on February 14, 2025[48] - As of June 30, 2025, the company has material capital commitments of $44.0 million under data licensing and cloud service agreements[65][131] - The company is a defendant in a lawsuit filed by Atlas Data Privacy Corporation concerning compliance with New Jersey's "Daniel's Law." The company is vigorously defending itself and anticipates its insurer will cover defense costs and potential liability, subject to policy limits[67][68] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the company's financial condition and results of operations for Q2 and H1 2025, covering performance drivers, liquidity, and non-GAAP reconciliations Overview This section provides an overview of the company's business model, identity intelligence solutions, and key operational metrics including customer and user growth - The company delivers identity intelligence solutions through its AI/ML-driven platform, CORE™, marketed primarily under two brands: IDI™ for various industries and FOREWARN® for the real estate industry[72][74] Customer and User Growth (Year-over-Year) | Brand | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | IDI | Billable Customers | 9,549 | 8,477 | | FOREWARN | Users | 346,671 | 263,876 | Results of Operations This section details the company's financial performance, including revenue, expenses, and net income, for Q2 and H1 2025 compared to the prior year Q2 2025 vs Q2 2024 Performance (in millions) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $21.8 | $19.1 | +14% | | Cost of Revenue | $3.5 | $3.5 | 0% | | Sales & Marketing Exp. | $5.6 | $4.4 | +28% | | General & Admin Exp. | $7.3 | $5.8 | +26% | | Net Income | $2.7 | $2.6 | +2% | - The 14% revenue growth in Q2 2025 was driven by an 18% increase in revenue from existing customers, which offset a 19% decrease from new customers. Q2 2024 revenue included $1.0 million in one-time transactional revenue not present in Q2 2025[91][92][94] H1 2025 vs H1 2024 Performance (in millions) | Metric | H1 2025 (in millions) | H1 2024 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $43.8 | $36.6 | +20% | | Cost of Revenue | $7.2 | $7.2 | 0% | | Sales & Marketing Exp. | $11.0 | $8.1 | +36% | | General & Admin Exp. | $13.4 | $11.5 | +16% | | Net Income | $6.1 | $4.4 | +39% | - The 20% revenue growth in H1 2025 was driven by a 28% increase from new customers and a 19% increase from existing customers[107][111] Use and Reconciliation of Non-GAAP Financial Measures This section explains the use of non-GAAP financial measures like Adjusted EBITDA and provides their reconciliation to GAAP equivalents - Management uses non-GAAP metrics such as adjusted EBITDA, adjusted net income, and free cash flow to evaluate financial performance, believing they provide useful information by eliminating the impact of certain non-cash or non-recurring items[82][88] Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q2 2025 (in thousands) | Q2 2024 (in thousands) | H1 2025 (in thousands) | H1 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net income | $2,686 | $2,637 | $6,126 | $4,421 | | Adjustments | $4,914 | $4,174 | $9,842 | $8,079 | | Adjusted EBITDA | $7,600 | $6,811 | $15,968 | $12,500 | | Adjusted EBITDA margin | 35% | 36% | 36% | 34% | Liquidity and Capital Resources This section assesses the company's cash position, operating cash flows, and capital commitments, outlining its ability to fund future operations - As of June 30, 2025, the company had $38.8 million in cash and cash equivalents and $96.2 million in total shareholders' equity[132] - Net cash provided by operating activities was $12.5 million for the first six months of 2025, an increase from $10.0 million in the same period of 2024[127][129] - Management believes that existing cash and projected cash flows from operations will be sufficient to fund operations and capital expenditures for at least the next twelve months[133] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Red Violet, Inc. is not required to provide the information for this item - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[138] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[140] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[141] PART II - OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and other corporate disclosures Legal Proceedings This section refers to Note 11 of the financial statements for details on legal proceedings, specifically a lawsuit regarding New Jersey's "Daniel's Law" - Information regarding legal proceedings is detailed in Note 11 of the financial statements[143] Risk Factors No material changes to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported since the last Annual Report on Form 10-K[144] Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased in Q2 2025 under the Stock Repurchase Program, with $4.6 million remaining for future repurchases - No common stock was repurchased in Q2 2025 under the authorized Stock Repurchase Program[146] - The approximate dollar value of shares that may yet be purchased under the program is $4.6 million[146] Other Information James P. Reilly was appointed Principal Operating Officer effective August 1, 2025, and no officers or directors had Rule 10b5-1 trading plans - Effective August 1, 2025, James P. Reilly was appointed as the company's Principal Operating Officer[150] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL data files - The report includes exhibits such as the Amended and Restated 2018 Stock Incentive Plan, CEO/CFO certifications, and XBRL data[153]