Red Violet, Inc.

Good day, ladies and gentlemen, and welcome to Red Violet's second quarter 2026 earnings conference call. At this time, all participants are on the listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Camilo Ramirez, Senior Vice President, Finance and Investor Relations. Please go ahead.

Good afternoon and welcome. Thank you for joining us today to discuss our second quarter 2026 financial results. With me today is Derek Dubner, our Chairman and Chief Executive Officer, and Dan MacLachlan, our Chief Financial Officer. Our call today will begin with comments from Derek and Dan, followed by a question and answer session. I would like to remind you that this call is being webcast live and recorded. A replay of the event will be available following the call on our website. To access the webcast, please visit our investors page on our website, www.redviolet.com. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call are forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those stated or implied by our forward-looking statements Due to risk and uncertainties associated with the company's business, the company undertakes no obligation to update the information provided on this call. For a discussion of risk and uncertainties associated with Red Violet's business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the most recent annual report on Form 10-K and subsequent 10-Qs. During the call, we may present certain non-GAAP financial information relating to adjusted gross profit, adjusted gross margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and free cash flow. Reconciliations of these non-GAAP financial measures to their most directly comparable US GAAP financial measure are provided in the earnings press release issued earlier today. In addition, certain supplemental metrics that are not necessarily derived from any underlying financial statement amounts may be discussed, and these metrics and their definitions can also be found in the earnings press release issued earlier today. With that, I am pleased to introduce Red Violet's Chairman and Chief Executive Officer, Derek Dubner.

Good afternoon, everyone, and thank you for joining us. We are pleased to report another exceptional quarter. The identity intelligence market has never been more active, and our results this quarter reflect that reality in full. Q2 was our strongest quarter across every financial metric. Revenue, gross margins, EBITDA, net income, and cash flow from operations all reached new highs simultaneously. Layer on top of that the highest single quarter customer additions in our history and the most significant expansion of forewarned since its founding, and Q2 is a monumental quarter of strong double-digit growth with margins and profitability that continue to set new records. Since our initial listing in 2018, Red Violet has now delivered 31 quarters of double-digit revenue growth, including 22 quarters of 20% or greater. Second quarter revenue was a record $26.7 million, up 23% over prior year. Our adjusted gross margin was a record 86%. Adjusted EBITDA increased 48% to $11.2 million, producing a 42% margin, both new highs. Adjusted net income increased 58% to $7.2 million, resulting in adjusted earnings of 50 cents per diluted share, both records. And cash flow from operations increased 42% to a record high of $10.6 million. Let me walk you through what is driving this performance. Every industry we serve is navigating a world that has become fundamentally harder to operate in without identity intelligence at the center of it. The interactions that matter most, verifying an application, onboarding a customer, processing a claim, Executing a transaction, engaging in in-person interactions, investigating a crime now occur in an environment that has been fundamentally transformed. Fraud and synthetic identity have exploded, fueled by AI tools that have put sophisticated impersonation capabilities within reach of virtually anyone. The in-person channel where human judgment provided a layer of verification has been largely displaced by digital interactions that move instantly and at massive scale. Regulatory and legal exposure for identity failures has increased materially and reputational risk has never been more immediate or more consequential in a world where a single breach makes headlines. And the speed and volume of digital transactions has compressed the window to catch a bad actor to near zero. Organizations are not adding identity intelligence to their workflows as a nice-to-have. They are building it in because the cost of getting identity wrong financially, legally, and reputationally has never been higher. That dynamic is what is driving our growth, and it is not slowing. If anything, AI is accelerating it. As AI-powered interactions become more prevalent, the need to know with certainty who is on the other side of that interaction becomes more urgent, not less. Our platform sits precisely at that intersection, and we believe we are architected for it in ways our competition simply is not. Our proprietary energy resolution engine, Iron, constructs an identity graph that is living and breathing, continuously capturing, normalizing, validating, resolving, and assimilating data. AI is not something we layered on after the fact. It is embedded in the foundation of how the platform operates. The result is a widening structural advantage. Legacy competitors are retrofitting AI onto infrastructure that was never designed for it. We are accelerating on infrastructure that was purpose-built for exactly this moment. We believe that gap widens every quarter, and Q2's results reflect the market recognizing that. I want to spend a moment on the 447 new IDI customers we added in Q2, because I think the number deserves more than a passing reference. 447 new customers in a single quarter is the highest in any quarter in Red Violet's history. It surpasses the 400 we added in Q1, which was itself one of the highest quarterly additions in our history. Back-to-back quarters of new customer additions at this level is not a coincidence. It is a very meaningful indicator. What it indicates is accelerating recognition. Our platform is increasingly being identified as a must-have in our customers' workflows, not a nice-to-have, not one of several options under evaluation, but a foundational capability that organizations are building their operating processes around. When we talk to customers, what we hear consistently is that the depth and accuracy of our identity graph and the speed and scalability of the platform that powers it is simply not replicable elsewhere. And the market is reaching that conclusion at an accelerating rate. We ended Q2 with 10,869 total IDI customers, a customer base built across financial services, insurance, law enforcement, government, healthcare, real estate, collections, background screening, investigative services, and more. Each customer represents an organization that has made an active decision that IDI belongs in their workflow. The strength of Q2 was broad-based. We've spoken in prior quarters about the K-shaped economic environment and how it creates tailwinds for us at both ends of the spectrum in that elevated transaction activity at the higher end drives demand from financial services, insurance, and background screening support, while financial stress at the other end drives demand from collections, repossession, investigative and legal. That dynamic remains fully intact. But what we are increasingly convinced of is that this is not simply a cyclical condition we happen to be benefiting from. It reflects a structural shift in how the economy has stratified. We do not see it changing anytime soon, and we believe it gives our demand profile a durability and breadth that few businesses can claim. Beyond the macro environment, the vertical level results in Q2 were exceptional. Four of our five verticals reached their highest quarterly revenue levels in our company's history. That is not a function of one strong segment carrying the rest. It's a reflection of broad simultaneous demand across the business. I want to turn now to Forewarn because what is happening there is significant as well. Forewarn is the leading proactive safety solution in the marketplace for identity verification prior to face-to-face engagement. That's not a marketing characterization. It's the operational reality for hundreds of thousands of real estate professionals across the country who rely on Forwarn every day before meeting a stranger for the first time. In Q2, we added over 25,000 new users, ending the quarter with over 443,000 users on Forwarn. 660 realtor associations are now contracted nationwide. To frame that, There are approximately 1,300 realtor associations in the country. We are contracted with more than half of them. When more than half of all realtor associations in the country have made ForeWarn available to their members, the absence of that protection is no longer a neutral position. It is a liability exposure to their members and to themselves. ForeWarn has done more than merely establish itself in real estate. It has become the standard bearer for proactive, data-driven identity intelligence and safety before face-to-face engagement. Forewarn is no longer just a product. It is a network. And like the most valuable networks, it grows more powerful with every new participant. Associations adopt Forewarn, establish a new professional norm within their membership, and that norm spreads to peer associations, to neighboring markets, and then to adjacent professions. Each new user makes the network more embedded, more referenced, and harder to displace. That's the definition of a moat, and Forwarn has built one. That network is now expanding beyond real estate in the most significant way since Forwarn's founding. Last month, we announced the expansion of Forwarn into home healthcare. For Warn for Home Healthcare equips home healthcare providers and agencies with pre-visit household insights, giving caregivers real-time safety intelligence before they arrive at a patient's residence, and giving organizations a documented, proactive approach to workplace safety. The parallel to real estate is direct and compelling. Home healthcare workers deliver critical care in environments that are unknown, unpredictable, and uncontrolled, often alone, without the visibility and safeguards that their colleagues in hospitals or other care facilities take for granted. Workplace violence, harassment and unfamiliar household conditions are well-documented occupational hazards in the industry. And many incidents go unreported, leaving agencies with limited insight into the true scope of risk their workforce faces daily. Forworn was purpose-built to close that knowledge gap, and the same solution that became the standard in real estate is now available to an industry facing the identical challenge. The addressable market is substantial. There are an estimated 4 million home health aides and more than 12,000 Medicare-certified home health agencies in the United States. Whether an individual caregiver needs pre-visit insights via a mobile app on the way to a visit, or an agency needs a deeply integrated API solution connecting directly into its scheduling or workforce management system, Forewarn delivers. The benefits extend beyond a single visit, building caregiver confidence, strengthening retention, equipping staff with pre-visit situational awareness and supporting workplace violence prevention efforts at the organizational level. We enter home healthcare with a proven platform, the trusted brand, and an established playbook for scaling through professional and enterprise relationships. The real estate experience taught us how to build adoption, how to shift professional norms, and how to construct a community around a shared safety imperative. We are applying those lessons with intention here. The opportunity is significant. and we are pursuing it with the same disciplined focus that built Forewarn into what it is today. As we recently announced, Red Violet completed a public offering, raising approximately $109 million in net proceeds from both new and existing investors, which we intend to use for working capital, general corporate purposes and connection with potential strategic acquisitions. I want to spend a moment on what that means and why now. Since our spinoff in 2018, we've been intentionally conservative in how we built this business. Building a cash generative, self-sustaining business was always the goal. And while we did raise modest capital twice along the way, $7.5 million in 2019 and $21 million in 2021, those were targeted, purposeful raises that accelerated specific initiatives and were quickly absorbed into a self-funding model. From that point forward, our own cash flow generation funded the business, investing in the platform, the data, the team, and the go-to-market capabilities that have produced the financial results we reported today. The conservative path we took was a deliberate choice, and we are proud of it. It is not the path every company takes, and the results speak for themselves. But the opportunity in front of us today is of a different magnitude. We've spent years building the leading technology platform for identity intelligence, a proprietary, layered, AI embedded architecture built on a foundation that competitors cannot replicate quickly or cheaply or even at all. And that foundation is what makes our opportunity already in motion. Let me be specific about what that means. We have a multi-year, well-defined product roadmap significantly underway. Our organic opportunity is enormous. AI has compressed our development cycles materially. What once required multiple engineering resources and extended timelines can now be accomplished faster and with greater precision. That acceleration does not just mean we build existing roadmap items faster. It expands what's on the roadmap itself. Vertical application layers, purpose-built for specific industries. Natural language interfaces that give customers new ways to access our intelligence beyond traditional UI searches or API calls. Products that would not have been feasible to build at our scale two years ago are now within reach. At the same time, we continue to invest in the organic expansion of our data and platform capabilities. Our entity resolution engine is not static. It continuously captures, normalizes, validates, resolves, and assimilates data into the graph and generates proprietary data and signals from our own platform activity. Each new data source we bring in to fuel the engine and each new linkage we establish opens additional verticals to serve and new use cases within verticals we already serve. This is an organic, self-reinforcing growth engine that compounds over time. We are also observing inorganic opportunities in the way of strategic acquisitions, and we have defined a clear framework for how we will evaluate them. We are looking for targets that meet one or more of three criteria. First, acquiring unique data assets that expand our longitudinal identity graph and drive new use cases. Second, acquiring enabling technology that accelerates product development or brings differentiated capabilities where a build versus buy analysis favors acquisition. Third, expanding our vertical market presence by adding industry expertise, customer relationships, and accelerating penetration into adjacent verticals where we've targeted or are beginning to establish a foothold. We have significant runway remaining in the United States, competing against much larger but far less differentiated incumbents across a TAM we have just begun to penetrate, and that is where our primary focus lies. That said, where a target meeting one or more of these criteria also brings an established international presence, that is a meaningful added dimension we will weigh in our evaluation. What I want to be equally clear about is our discipline. We evaluate acquisitions first on strategic fit and synergies. Does it advance the roadmap? Does it strengthen the platform? Does it serve a customer base we want to serve? Valuation and accretion follow from that. We have a high bar. We've walked away from potential transactions in the past, and we will continue to do so if the fit is not right. The capital we have raised gives us the capacity to act when the right opportunity presents itself, not the obligation to act for its own sake. Against all of that, the AI opportunity we have constructed is the force multiplier. We see five distinct dimensions. First, risk signal intelligence. The continued use of AI to analyze our identity graph and massive transaction volumes to surface risk signals that only our foundational data can generate. Second, intelligent data aggregation. AI-driven ingestion of publicly available unstructured data, continuously identifying, extracting, and assimilating new signals into the identity graph in real time. Third, as discussed, new customer interaction layers, moving beyond static interfaces and API calls to vertical application layers and natural language interfaces, giving customers new modalities to access our intelligence. Fourth, enterprise workflow automation. AI-driven automation across internal operations, including compliance, new customer onboarding, and customer support, increasing productivity enterprise-wide without proportional headcount growth. The goal, operating leverage expands as AI replaces manual processes across the enterprise. Fifth, AI augmented development. AI augmented coding that compresses our development cycles, enabling faster product iteration, broader roadmap execution, and higher engineering output without linear team expansion. More features, faster. The same proprietary foundation expanded into new products and verticals at a pace competitors are unlikely to match. The capital we have raised positions us to pursue these opportunities with the urgency and scale they deserve while maintaining the financial discipline that has defined this company since its founding. We remain disciplined in how we deploy capital. We have the strongest set of strategic growth factors in the company's history, and we have never been more confident in the opportunities ahead. Thank you to our team, Our customers, our partners, and our current investors, and a welcome to our new investors. With that, I will turn it over to Dan.