This article first appeared on GuruFocus .
Release Date: November 04, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Record Q3 2026 revenue of $27.8 million, up 20% year-over-year, with trailing 12-month revenue surpassing $100 million for the first time.
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Adjusted EBITDA increased 22% to $11 million, with a 40% margin, and adjusted net income rose 23% to $7.3 million, or $0.47 per diluted share.
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Record operating cash flow of $12.7 million, up 25%, and free cash flow of $8.8 million, up 21%, demonstrating strong cash generation.
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Added 383 billable IDI customers, bringing total to 11,252, and Forewarn added 19,688 users, ending with 462,861 users, showing robust customer growth.
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Contractual revenue represented 78% of total revenue, up 3 percentage points, with gross revenue retention at 96%, indicating a stable and predictable revenue base.
Negative Points
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IDI's real estate business declined at a high single-digit rate year-over-year due to a difficult housing backdrop, and softness is expected to persist until market conditions improve.
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General and administrative expenses increased 32% to $9 million, driven by higher personnel-related expenses and acquisition-related activity, which could pressure margins if not managed carefully.
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Sales and marketing expenses increased 14% to $6.2 million, primarily due to increased personnel-related expenses and higher provision for bad debt, which may impact profitability.
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The company did not repurchase any shares during the third quarter, potentially signaling a lack of immediate capital return to shareholders despite a strong balance sheet.
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While the company is investing in AI and engineering, there is no guarantee that these investments will yield the expected returns, and they could weigh on near-term margins if productivity gains are not realized as anticipated.
Q & A Highlights
Q: Can you update us on the upmarket push, including the new statewide public sector contract, and what you're seeing in new logo deal sizes and sales cycles versus a year ago? A: Dan McLaughlin (CFO) said the company is seeing strength in both pipeline and conversion, highlighted by the recent Secretary of State win. He noted Red Violet tracks customer cohorts ($10,000$25,000, $25,000$100,000, and $100,000+) quarterly and is seeing "incredible strength across the board," including movement up into larger tiers and strong growth among mid-sized customers.
Q: What drove the uptick in contractual revenue mix to 78% of total revenue conversion of transactional customers or new logo growth with guaranteed pricing? A: Dan McLaughlin (CFO) said it is a combination of both. Most new customers are medium and larger enterprises that typically sign contracts, which also creates cross-sell opportunities across the organization. He emphasized there were no material one-time transactional revenue contributions in the quarter, calling it "sound foundational structural revenue" that provides clarity into Q4 and 2027.
Q: How are identity orchestration platform customers contributing to growth relative to the rest of the business? A: Derek Dubner (CEO) said Red Violet is integrated into key aspects of many identity orchestration platforms' solutions, so as their volumes increase, demand flows through to Red Violet. He cited secular tailwinds exponentially rising digital transactions and increasingly sophisticated AI-driven fraud and said the company continues adding incremental data sets to its engine to capture more wallet share and solve more identity use cases.
Q: Given the demand environment, does it make sense to ramp up sales hiring, and how do you weigh the near-term EBITDA margin trade-off, including hiring for the Forewarn home healthcare opportunity? A: Dan McLaughlin (CFO) said the company will continue investing in go-to-market, infrastructure, and product development, with incremental headcount added in sales and marketing and in engineering and infrastructure. He noted that even with this investment, Red Violet has continued to grow margins nicely due to operational leverage, and that the company manages the business for the long term rather than quarter-to-quarter.
Q: With engineering hiring and AI investment ramping, how much more investment do you plan, and how do you balance that against the strong 40% EBITDA margin? A: Derek Dubner (CEO) said the opportunity is very large and Red Violet has been increasing investment in its AI and deep learning teams. AI is used to aggregate and analyze massive data volumes, accelerate new feature development, and boost employee productivity he said products are being developed at "10x" the prior pace. He described the approach as "turning dials," pointing resources at clear opportunities and dialing back quickly if needed, while still delivering extraordinarily healthy margins.
Q: Has the $109 million net equity raise opened up the aperture for M&A, and is there increased appetite for unique data sets or technologies? A: Derek Dubner (CEO) said Red Violet has always evaluated tuck-ins for data assets and unique technologies, and would act on a company with a well-established vertical presence, great brand, and extraordinary synergy. He noted private-market conditions are creating more opportunities as founder-led businesses struggle to raise capital, but the company maintains a very high bar and is willing to walk away from deals that don't meet its synergy or valuation expectations.
Q: Is Forewarn's new Community Alerts feature a free benefit or is there a monetization element? A: Derek Dubner (CEO) said Community Alerts is currently a free benefit within the Forewarn subscription. With over 460,000 users, the network creates "safety in numbers" a subscriber can flag a concerning interaction and alert the local community around that phone number. He said the feature aligns with Forewarn's mission of "essential safety for all," and the company is excited to offer it at no cost.
Q: Which verticals drove growth in the quarter, and what is the outlook for collections and real estate? A: Dan McLaughlin (CFO) said all five revenue verticals contributed solid growth. Investigative was the fastest-growing vertical on a percentage basis, with law enforcement now serving more than 1,000 agencies out of over 17,000 nationwide. Collections delivered one of its strongest quarters amid elevated consumer delinquencies. Real estate grew on Forewarn strength, partially offset by high-single-digit declines in IDI's real estate business, which is expected to remain soft until housing market conditions improve.
Q: What is the status of the public sector opportunity, including state and federal government? A: Derek Dubner (CEO) said Red Violet continues winning and onboarding law enforcement agencies and is advancing at the state level, including a multi-year contract signed in October with another Secretary of State. At the federal level, the company is educating agencies about IDI and its platform capabilities. He noted these relationships take time to develop but expressed encouragement about the long-term opportunity.
Q: Can you provide more detail on the balance sheet, cash flow, and capital allocation priorities? A: Dan McLaughlin (CFO) reported cash and cash equivalents of $68.1 million and total cash plus U.S. Treasury investments of $165.7 million as of September 30, 2026, with no debt. Operating cash flow was a record $12.7 million, up 25%, and free cash flow was a record $8.8 million, up 21%. Year-to-date, the company repurchased 74,500 shares at an average price of $41.87, with $15.5 million remaining under the program. Capital allocation priorities remain investment in the business, including platform, data assets, product development, and go-to-market, plus disciplined strategic M&A.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
