Red Violet's Q1 2025: Unraveling Contradictions in Growth Strategies, Margin Expectations, and AI Investments

Customer Acquisition and Growth Strategy, EBITDA Margin Expectations, Growth Drivers and Market Penetration, Customer Acquisition and Market Strategy, and Investment in AI and Product Enhancements are the key contradictions discussed in Red Violet, Inc.'s latest 2025Q1 earnings call.



Revenue and Operational Growth:
- Red Violet, Inc. reported a record revenue of $22 million for Q1 2025, up 26% from the prior year.
- The growth was driven by strong performance across all verticals, particularly in the emerging markets, financial and corporate risk, and investigative segments.

IDI Billable Customer Base Expansion:
- Red Violet's Identity Decision Intelligence (IDI) billable customer base increased by 315 customers sequentially, ending the first quarter at 9,241 customers.
- This expansion was fueled by new customer wins and sustained demand from existing clients.

FOREWARN User Growth and Contractual Expansion:
- FOREWARN added 21,918 users during the first quarter, ending the quarter with 325,336 users, marking its 20th consecutive quarter of sequential revenue growth.
- Growth was attributed to the addition of over 545 realtor associations contracted to use FOREWARN, which enhanced its reach and user base.

Earnings and Profitability Improvement:
- Adjusted net income increased 53% to a record $4.8 million for the quarter, resulting in record adjusted earnings of $0.33 per diluted share.
- The improvement was supported by a 47% increase in adjusted EBITDA, reaching a record $8.4 million, and an 83% adjusted gross margin, up 4 percentage points from the previous year.

Operational Efficiency and Strategic Investments:
- Despite macroeconomic volatility, Red Violet maintained a strong gross revenue retention rate of 96%, an increase of 3 percentage points over the prior year.
- The company's focus on productivity, automation, and proprietary data generation, along with investments in artificial intelligence, enhanced internal capabilities and positioned the business for long-term growth.