Red Violet, Inc. (RDVT) Earnings

Management highlights

### Core Financial Performance - All major consolidated financial metrics hit new record highs simultaneously in Q2 26: total revenue ($26.7 million, +23% YoY), adjusted gross margin (86%, +2pp YoY), adjusted EBITDA ($11.2 million, +48% YoY, 42% margin, +7pp YoY), adjusted net income ($7.2 million, +58% YoY), adjusted diluted EPS ($0.50), and operating cash flow ($10.6 million, +42% YoY). - Red Violet has delivered 31 consecutive quarters of double-digit revenue growth since its 2018 listing, 22 of which have been 20% growth or higher. ### Market Demand & Competitive Position - Growing structural demand tailwind: exploding AI-fueled fraud and synthetic identity, displacement of in-person verification with high-volume digital interactions, increasing regulatory/reputational risk for identity failures, and compressed timelines to catch bad actors have made identity intelligence a foundational, must-have capability for organizations across industries. - Red Violet's proprietary IRON entity resolution engine has AI embedded in its core architecture (rather than retrofitted on legacy infrastructure), creating a widening structural competitive advantage over incumbents. ### IDI Segment Growth Highlights - Added a record 447 new IDI customers in Q2 26, following 400 additions in Q1 26, marking back-to-back record quarters of new customer growth that reflects accelerating market recognition of the platform's unique value. - Ended Q2 with 10.9 thousand total IDI customers spanning 8+ industries, with growth evenly distributed across small, medium, and large customer cohorts, with particularly strong growth in the medium and large enterprise segment pipeline. ### FOREWARN Expansion Update - FOREWARN has become the standard for proactive safety for real estate professionals, building a wide network moat that grows as adoption spreads across professional associations and adjacent markets. - The segment completed its largest expansion since founding with the launch of FOREWARN for home health care, a new vertical with 4 million estimated home health aides and 12 thousand Medicare-certified agencies in the U.S. that faces identical uncontrolled environment safety challenges to real estate. ### Capital Raising & Strategic Deployment - Red Violet recently completed a public offering raising $109 million in net proceeds, giving the company increased capital flexibility to pursue its expanded opportunity set while maintaining its longstanding financial discipline. - The company will use capital for three core strategic priorities: - Accelerate organic product roadmap expansion: AI has compressed development timelines, opening new feasible products including vertical-specific application layers, natural language customer interfaces, and expanded data ingestion for the identity graph. - Pursue strategic acquisitions that meet one or more of three clear criteria: add unique data assets to expand the identity graph, acquire enabling technology that accelerates development more efficiently than building in-house, or expand vertical market penetration and add customer relationships in adjacent verticals. Acquisitions that add an established international presence will be considered as an added benefit, but the primary focus remains on the large underpenetrated U.S. market. - Five key AI-powered opportunity areas: risk signal intelligence, AI-driven intelligent data aggregation, new customer interaction layers, enterprise workflow automation for operating leverage, and AI-augmented product development to compress development cycles. ### Balance Sheet & Capital Return - The company ended the quarter with a strengthened balance sheet, with $50 million in cash and cash equivalents, and has repurchased 74.5 thousand shares year-to-date at an average price of $41.87 per share, with $15.5 million remaining in the repurchase program as of Q2 end.

Guidance

- Management reaffirms its prior expectation that full year adjusted EBITDA margin will land in the high 30% range, consistent with seasonal trends that push margin lower in Q4 due to year-end incentive compensation accrual. - Management expects to continue steady incremental investment in personnel, product development, and go-to-market capabilities, similar to historical annual investment pace of adding 30-40 new team members per year, while still delivering incremental margin expansion over time due to the business model's inherent operating leverage. - Management frames the current opportunity set as the largest in the company's history, with significant remaining runway for growth in the underpenetrated U.S. market for identity intelligence.

Segment performance

Red Violet operates two core segments: Identity Intelligence (IDI) and FOREWARN. Within IDI, there are 5 vertical segments, four of which hit all-time quarterly revenue records in Q2 26: 1. **Financial and Corporate Risk**: Strong, well-diversified growth, with background screening growing at an outsized pace, solid growth from financial services driven by expanded existing customer usage, and healthy gains in the insurance vertical following the recent addition of dedicated sales resources. 2. **Investigative**: IDI's fastest growing vertical by percentage, with all sub-verticals (law enforcement, private investigators, bail bonds, process servers) posting strong double-digit growth; law enforcement has delivered sequential revenue growth in every quarter since Q4 2021. 3. **Collections**: Another strong quarter with growth exceeding 20%, driven by sustained high consumer delinquencies that increase volume for existing customers. This vertical contributes 0% to total revenue growth, as all IDI verticals combined account for 100% of IDI revenue, with FOREWARN contributing the remaining 23% of total company revenue. 4. **Emerging Markets**: Strong growth led by retail, repossession, and legal, with additional contributions from marketing and education. 5. **IDI Real Estate (excludes FOREWARN)**: Declined modestly, as the industry continues to face headwinds from limited inventory, elevated interest rates, and high home prices. For the **FOREWARN** proactive safety segment: Q2 26 delivered strong double-digit revenue growth, added 25,500 new users to end the quarter at 443,000 total users, and holds 100% renewal rate among its 660 contracted realtor associations (covering more than half of all U.S. realtor associations). Consolidated Q2 26 results: Total revenue hit a record $26.7 million, up 23% year-over-year. 77% of total revenue is contractual, consistent with prior year; gross revenue retention was 95%, down 2 percentage points year-over-year.

Risks & headwinds

- Forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from projected outcomes, as detailed in the company's periodic SEC filings (including Form 10-K and 10-Q). - IDI's standalone real estate vertical (separate from FOREWARN) faces continued near-term headwinds from ongoing industry challenges including limited housing inventory, elevated interest rates, and stubbornly high home prices. - Federal public sector sales have longer, slower conversion timelines due to extended procurement, budgeting, and technology implementation processes, creating uncertainty around the timing of projected growth in this segment. - The company maintains a high strategic bar for acquisitions, and there is no guarantee that attractive acquisition targets meeting the company's strategic and valuation criteria will become available for transaction.

Analyst Q&A

• Q: Are the new record IDI customer additions coming more from greenfield expansion or from taking share from competitors? What is the update on the public sector pipeline, particularly federal? /

  A: New customers come from a healthy mix of both greenfield growth from new industry use cases and competitive share gains. New digital technologies and transaction models consistently create new demand for identity intelligence, expanding the total market. The pipeline for medium and large enterprise customers has grown dramatically and is converting well, with strong growth across all customer size cohorts, not just the largest accounts. For public sector, the company has made strong progress displacing incumbents and winning new business at the state and local law enforcement level, including a recent win for one of the nation's largest law enforcement agencies, where the agency chose Red Violet's superior product even after the incumbent offered a steep price cut. Federal public sector growth is slower to convert due to long procurement cycles, but the pipeline is growing and testing is delivering positive results, so growth is a matter of when, not if.

• Q: What is the size of the FOREWARN home health care market opportunity relative to real estate, will pricing be similar, and will you exercise pricing power in real estate now that you are the established standard? /

  A: The home health care market is extremely sizable, with 4 million licensed workers and 12 thousand agencies, matching the core use case characteristics of real estate: workers enter uncontrolled, unpredictable environments, and both individual workers and large agencies have strong demand for proactive safety solutions. New occupational safety regulations are also increasing demand at the agency level, which often requires integrated API solutions rather than just individual mobile access, similar to the association model that drove FOREWARN's success in real estate. The company declined to share specific revenue estimates to avoid revealing its penetration strategy to competitors.

• Q: Given accelerating growth, will you step up product or personnel investment, or do you have sufficient resources for the next 18 months? /

  A: The company will continue to invest at a steady incremental pace similar to historical trends, adding roughly 30-40 new team members per year focused on product development, AI engineering, infrastructure, and go-to-market. The business model's inherent operating leverage allows the company to invest for growth while still expanding margins over time, a dynamic that has held consistently through past investment cycles. Management emphasized that this is the largest opportunity set the company has ever had, and it is leaning in to pursue growth while maintaining healthy EBITDA margins, as the business model has consistently proven it can do. The company remains in an early stage of growth with substantial untapped opportunity to scale from its current $100 million annual revenue run rate.