Red Violet, Inc. (NASDAQ: RDVT) is a leading analytics and information solutions provider, dedicated to making the world a safer place and reducing the cost of doing business. The company's proprietary technologies and advanced analytical capabilities deliver unparalleled identity intelligence, empowering organizations to operate with confidence.
Business Overview Red Violet was incorporated in Delaware in August 2017 as a spin-off from its former parent company, Cogint, Inc. (now known as Fluent, Inc.). The company was formed with the purpose of building proprietary technologies and applying analytical capabilities to deliver identity intelligence solutions. In March 2018, Red Violet became an independent, publicly-traded company after completing its spin-off from Cogint.
The company's core business involves providing real-time identification and location of people, businesses, assets, and their interrelationships through its AIML-driven identity intelligence platform, CORE. Red Violet's solutions are used for purposes such as identity verification, risk mitigation, due diligence, fraud detection and prevention, regulatory compliance, and customer acquisition.
In its early days, Red Violet faced several challenges in establishing itself as a leading provider of identity intelligence solutions. The company had to build brand awareness and credibility in a competitive market dominated by larger players. It also had to navigate a complex regulatory landscape, as its business is subject to various federal, state, and local laws and regulations governing data privacy and security. Additionally, Red Violet had to continuously invest in enhancing its technology and expanding its data assets to stay ahead of the competition.
Despite these challenges, the company has achieved several important milestones. In 2018, Red Violet launched its flagship product, idiCORE, a next-generation investigative solution used by a wide range of industries. In 2019, the company introduced FOREWARN, an app-based solution tailored for the real estate industry, providing real estate professionals with instant knowledge about potential risks before meeting with clients.
Red Violet's solutions enable the real-time identification and location of people, businesses, assets, and their interrelationships, serving a wide range of industries such as financial services, insurance, healthcare, law enforcement, and government. The company's flagship products, idiCORE and FOREWARN, have seen significant adoption, with 8,926 billable customers for IDI and 303,418 users for FOREWARN as of the end of 2024.
Red Violet's AIML-driven identity intelligence platform, CORE, is purpose-built for the enterprise, yet flexible enough for organizations of all sizes. It transforms massive datasets into actionable intelligence, driving workflow efficiency and enabling organizations to make better data-driven decisions. The company's differentiated information and innovative platform deliver identity intelligence on entities, relationships, affiliations, interactions, and events.
Financial Performance In 2024, Red Violet reported record financial results, with revenue increasing 25% to $75.2 million. The company's adjusted gross profit reached $61.2 million, translating to an impressive adjusted gross margin of 81%. Adjusted EBITDA for the year increased 44% to $23.6 million, with an adjusted EBITDA margin of 31%.
The fourth quarter of 2024 was particularly strong, with revenue growing 30% year-over-year to a record $19.6 million. Adjusted gross profit for the quarter reached $16.1 million, with an adjusted gross margin of 82%. Adjusted EBITDA increased 68% to $4.5 million, representing a margin of 23%.
Red Violet's financial performance has been buoyed by its successful land-and-expand strategy, which has enabled the company to deepen its relationships with existing customers while also onboarding new high-tier customers. The company's focus on innovation and product development has been a key driver of its growth, with the introduction of new features and functionalities across its platforms.
For the full year 2024, Red Violet reported a net income of $7.0 million, compared to $13.5 million in the prior year, which included a one-time deferred income tax benefit of $10.3 million. The company's gross profit increased 33% to $51.8 million, with gross margin expanding to 69% from 65% in the prior year. Adjusted net income, a non-GAAP metric, increased 42% to $11.5 million.
Cash Flow and Liquidity Red Violet's robust financial performance has translated into strong cash flow generation. In 2024, the company produced $14.4 million in free cash flow, compared to $5.9 million in 2023, representing a 143% increase. As of December 31, 2024, the company had $36.5 million in cash and cash equivalents, providing ample liquidity to fund its ongoing operations and strategic initiatives.
The company's balance sheet remains healthy, with a current ratio of 4.48 and a debt-to-equity ratio of 0.02 as of the end of 2024. The quick ratio also stands at 4.48, indicating strong short-term liquidity. This financial flexibility allows Red Violet to continue investing in its technology, data assets, and go-to-market capabilities, positioning the company for sustained growth.
Red Violet's annual operating cash flow for 2024 was $24.0 million, further demonstrating the company's ability to generate cash from its operations. In the fourth quarter of 2024 alone, the company generated $6.7 million in operating cash flow and $4.4 million in free cash flow.
Growth Strategies and Outlook Moving forward, Red Violet is poised to capitalize on several key growth drivers. The company's focus on expanding its data assets, enhancing its AI-driven capabilities, and increasing automation across its internal processes are expected to fuel its competitive edge and drive further revenue growth.
Furthermore, Red Violet's strategic initiatives to penetrate new industries, such as government and healthcare, as well as its plans to expand the FOREWARN brand into additional verticals, present significant opportunities for the company to diversify its revenue streams and accelerate its overall growth.
The company's strong sales pipeline and ongoing customer traction across its key verticals, including financial and corporate risk, collections, and investigative services, suggest that Red Violet's momentum is likely to continue in the years ahead.
While Red Violet did not provide specific numerical guidance for 2025, the company expressed confidence in sustaining the strong momentum and growth experienced in 2024. Key initiatives expected to drive continued growth include expanding the competitive edge of their leading cloud-based platform, enhancing the breadth and depth of their data assets, expanding their owned data assets, boosting productivity through automation, and continued investment in AI initiatives.
The data and analytics sector in the United States continues to grow rapidly, with the global big data analytics market projected to rise to $924.4 billion by 2032, exhibiting a CAGR of 13% from 2024 through 2032. The risk analytics market is also projected to grow to $180.9 billion by 2029, representing a CAGR of 24.8% from 2024 through 2029. These market trends provide a favorable backdrop for Red Violet's continued expansion.
Risks and Challenges While Red Violet's prospects appear promising, the company is not without its risks and challenges. The highly competitive nature of the data and analytics sector, with larger players possessing significant resources, could put pressure on the company's pricing and market share.
Additionally, Red Violet's reliance on external data sources, including its largest supplier, which accounted for 45% of its total data acquisition costs in 2024, presents a potential risk. The loss of access to this critical data or a significant increase in costs could have a material impact on the company's operations.
Regulatory changes and evolving privacy concerns surrounding the collection and use of personal information also pose a risk, as Red Violet must navigate a complex compliance landscape to ensure the continued effectiveness of its solutions.
The company faces competition from both start-up and established companies, some of which have significantly greater financial, technical, and marketing resources. To maintain its competitive edge, Red Violet continues to invest in technology, data assets, and go-to-market capabilities.
Conclusion Red Violet's impressive financial performance, robust cash flow generation, and strategic initiatives position the company as a compelling investment opportunity in the identity intelligence space. The company's unwavering focus on innovation, data assets, and customer-centric approach have enabled it to establish a strong competitive position and drive sustainable growth.
As Red Violet continues to execute on its growth strategies, investors will be closely watching the company's ability to further penetrate its target markets, expand its product offerings, and maintain its technological edge. With a solid financial foundation and a clear vision for the future, Red Violet appears well-equipped to capitalize on the growing demand for advanced identity intelligence solutions.
The company's strong performance in 2024, including exceeding past guidance on revenue growth, adjusted EBITDA margin, and free cash flow generation, demonstrates its ability to execute on its strategic objectives. As Red Violet moves into 2025 and beyond, its focus on expanding its competitive edge, enhancing data assets, and investing in AI initiatives positions it well for continued success in the rapidly growing data and analytics market.