Breaking Down Red Violet, Inc. (RDVT) Financial Health: Key Insights for Investors

You're looking at Red Violet, Inc. (RDVT) and seeing the massive jump in their Q3 numbers, and you're defintely right to pay attention-the data intelligence provider is showing real operating leverage, but we need to map the valuation risk against that growth. The direct takeaway is that Red Violet is executing flawlessly on its growth strategy, posting a record third quarter for 2025 with revenue hitting $23.1 million, a 21% year-over-year increase, and net income surging 145% to $4.2 million. That kind of performance is why analysts have a Strong Buy consensus and a price target as high as $61, plus the company is backing its own stock, boosting its share repurchase authorization by $15.0 million to a total of $30.0 million. Still, the trailing price-to-earnings ratio (P/E) of 68.47 is high, so you need to understand if the projected full-year 2025 revenue of $87.97 million and EPS of $1.16 can justify that premium, especially with operating cash flow already at a record $10.2 million in Q3. We'll break down the financial health, from the 73% gross margin to the strategic investments in AI, to see if this is a durable growth story or a valuation trap.

Revenue Analysis

You're looking for a clear picture of where Red Violet, Inc. (RDVT) actually makes its money, and that's the right place to start. A company's revenue streams tell you everything about its business model's durability. The direct takeaway here is that Red Violet is a high-growth, data-driven analytics provider, with a strong shift toward predictable, contractual revenue that anchors its impressive 20%+ year-over-year (YoY) growth.

For the trailing twelve months (TTM) ended Q3 2025, Red Violet, Inc. generated approximately $86.43 million in total revenue, reflecting a solid 22.27% growth rate over the prior year period. That's a defintely healthy clip, driven not by a one-off product, but by two core platforms.

Here's a quick look at the primary revenue sources and how they feed the top line:

• IDI™ Platform: This is the core identity intelligence and data analytics engine, providing services for identity verification, risk mitigation, and fraud prevention across key verticals like law enforcement, government, and financial services.
• FOREWARN®: A specialized, proactive safety solution, primarily for face-to-face engagement professionals, with a strong foothold in the U.S. real estate market, contracting with over 590 REALTOR® Associations as of Q3 2025.

The company's stability comes from the nature of this revenue. In Q3 2025, contractual revenue accounted for 75% of the total, meaning three-quarters of their sales are recurring, subscription-based, or volume-based under long-term agreements, not just one-time transactions. This high percentage of recurring revenue is a strong indicator of a sticky customer base and reliable cash flow.

To be fair, while the segment-by-segment dollar breakdown isn't public, the growth trajectory is clear. FOREWARN®, for instance, has consistently delivered strong double-digit revenue growth, reflecting its growing adoption and importance in the market. The balanced growth across all verticals-from law enforcement to collections-shows the CORE™ technology platform is versatile.

Here's the quick math on the near-term revenue performance for 2025, showing this consistent momentum:

The slight dip in the Q2 2025 growth rate was largely due to a tough comparison against a prior-year quarter that included a $1.0 million one-time transactional revenue boost, which is exactly why you focus on the underlying contractual base. The Q3 2025 revenue of $23.1 million beat analyst expectations, proving the model is working. This is a business built on data-as-a-service, and the key change is the successful expansion of both the IDI customer base (over 9,800 customers in Q3 2025) and the FOREWARN user count (over 372,000 users), which drives volume expansion across the existing base. You need to understand the people behind these numbers; for a deeper dive, check out Exploring Red Violet, Inc. (RDVT) Investor Profile: Who's Buying and Why?

Profitability Metrics

You're looking at Red Violet, Inc. (RDVT) because you see the potential in their identity intelligence and data analytics platform, but the real question is whether that strong revenue growth translates into durable profit. The short answer for Q3 2025 is yes, the margins are expanding, showing the business model is gaining leverage, but the operating profit still lags the broader tech sector, which is a key risk to monitor.

The company's Q3 2025 financial results, reported in November 2025, show a clear trend of increasing profitability. Revenue hit a record $23.1 million, a 21% year-over-year (YoY) increase, but the real story is how much of that revenue is sticking. The gross profit margin is excellent, and the net margin has more than doubled, which is defintely a strong signal.

Gross, Operating, and Net Profit Margins

Red Violet, Inc. operates with a high-margin model typical of data and software providers. Their ability to deliver data solutions via the CORE™ platform without significant variable costs is a major structural advantage. Here's the quick math on their Q3 2025 profitability:

• Gross Profit Margin: At 73% (on $16.8 million in gross profit), this is a 3 percentage point improvement from 70% a year ago, reflecting better cost management and scale.
• Operating Profit Margin (EBIT Margin): The calculated Operating Profit (Earnings Before Interest and Taxes) was approximately $1.9 million (Gross Profit of $16.8M minus Operating Expenses of $14.9M), yielding an Operating Margin of about 8.22%.
• Net Profit Margin: The net income of $4.2 million resulted in a Net Profit Margin of 18%, a significant jump from 9% in Q3 2024.

The jump in net income is substantial-a 145% increase YoY. This tells you the company is not just growing revenue, they are converting it into real bottom-line profit at an accelerating pace. For a deeper look at who is driving this performance, you can check out Exploring Red Violet, Inc. (RDVT) Investor Profile: Who's Buying and Why?

Operational Efficiency and Industry Benchmarks

When we look at operational efficiency, the gap between the Gross Margin (73%) and the Operating Margin (8.22%) shows where the money is going: operating expenses, specifically Sales & Marketing ($5.4 million) and General & Administrative ($6.8 million). This is the cost of scaling a high-growth tech business. The company's Adjusted EBITDA margin of 39% is a better measure of core operational performance, as it strips out non-cash items like Depreciation and Amortization ($2.7 million) and stock-based compensation.

To be fair, you have to compare Red Violet, Inc. against its peers in the Information Technology (IT) and data services space. While RDVT's Gross Margin of 73% is right in line with the high end of the software industry (where margins can hit around 71.52%), the Operating Margin is a different story.

Here's how their profitability stacks up against general sector averages for Q3 2025:

The takeaway is clear: Red Violet, Inc. has a premium Gross Margin, but its Operating and Net Margins are currently below the S&P 500 IT sector average of 27.7% net margin. This indicates that while the core product is highly profitable, the company is spending aggressively on growth-$14.9 million in operating expenses-to capture market share and scale its platform. The opportunity for investors is the eventual operating leverage: as revenue grows faster than these fixed operating costs, the Operating Margin should climb sharply toward that 22% industry benchmark.

Debt vs. Equity Structure

You're looking at Red Violet, Inc. (RDVT) and wondering how they fund their growth-is it through borrowing or shareholder money? The short answer is: almost entirely through equity. This company is a classic example of a cash-generating technology business with a minimal reliance on debt. This low-leverage model is a significant strength, especially in the current high-interest-rate environment.

As of the most recent reporting period in Q3 2025, Red Violet, Inc. (RDVT) reported a remarkably low total debt of approximately $2.86 million. When you stack that against their total shareholder equity of about $101.7 million as of September 29, 2025, the picture is clear. The company's Debt-to-Equity (D/E) ratio is a mere 2.81% (or 0.03), which is exceptionally low.

• Total Debt (Q3 2025): About $2.86 million.
• Total Equity (Q3 2025): About $101.7 million.
• Debt-to-Equity Ratio: 0.03 (or 2.81%).

Here's the quick math: for every dollar of shareholder equity, Red Violet, Inc. (RDVT) uses only about three cents of debt. This is far below the average D/E ratio for many comparable technology and data-focused sectors, which often hover around 0.20 to 0.50. This low ratio means the company is defintely not over-leveraged, and its interest coverage is not a concern, which is a major plus for financial stability. You can see more about the ownership structure by Exploring Red Violet, Inc. (RDVT) Investor Profile: Who's Buying and Why?

Balancing Equity and Future Debt Strategy

The company's financing strategy is heavily weighted toward equity and internally generated cash flow, which is a hallmark of a mature, profitable software and information services model. Still, they are not sitting idle. Their recent actions show a clear plan to use both sides of the capital structure for future growth and shareholder returns.

The most telling move is the filing of a mixed-securities shelf registration (Form S-3) on November 19, 2025. This allows them to raise up to $150,000,000 in various securities, including debt and common stock, over time. This isn't an immediate debt issuance, but it gives management the flexibility to act fast for strategic purposes, like a potential acquisition, which they have publicly stated they are exploring.

What this estimate hides is the company's recent focus on returning capital to shareholders, which is an equity action. On November 3, 2025, the board authorized a $15 million increase to the stock repurchase program, leaving $18.9 million remaining for buybacks. They also paid out a special cash dividend of $0.30 per share in February 2025. This dual focus-preparing for opportunistic debt-funded growth while actively rewarding shareholders-suggests a confident management team.

Your action item here is to monitor the use of that $150 million shelf registration. If they issue debt, it will likely be for a specific, accretive acquisition, which would be a positive signal, but you'd want to check the terms. If they issue equity, it will dilute shareholders, so the acquisition would need to be a slam dunk.

Liquidity and Solvency

You want to know if Red Violet, Inc. (RDVT) can cover its near-term obligations, and the short answer is a resounding yes. The company's liquidity profile is defintely one of its most compelling strengths right now, showing a significant buffer against operational risks.

Looking at the trailing twelve months (TTM) ended September 30, 2025, the key liquidity ratios are exceptionally high. The Current Ratio, which measures current assets against current liabilities, stands at a stellar 9.12. The Quick Ratio, which is a stricter test that excludes less liquid assets like inventory, is also 9.12. This tells you that Red Violet, Inc. has virtually no inventory and can cover its short-term debt over nine times with its most liquid assets. That's a fortress balance sheet.

The trend in working capital (Net Current Asset Value) also reinforces this strength. Over the last year, working capital has seen a strong increase, rising to approximately $42.17 million TTM, up from $33.40 million in fiscal year 2024. This upward trajectory means the company is generating and retaining significant capital after covering its immediate costs, giving management serious flexibility for strategic moves.

Here's the quick math on their recent cash generation, which is the engine driving this liquidity:

• Net Cash from Operating Activities (Q3 2025): $10.2 million.
• Cash and Cash Equivalents (as of 09/30/2025): $45.4 million.
• Operating Cash Flow Year-over-Year Growth (Q3 2025): 40% increase.

The 40% jump in net cash provided by operating activities to a record $10.2 million in the third quarter of 2025 is the real story here. It shows the core business is highly cash-generative. Plus, this operational strength allows for shareholder-friendly financing decisions, like the recent boost to their share repurchase program by $15.0 million, bringing the total authorization to $30.0 million.

What this estimate hides is the breakdown of investing and financing cash flows, but the operational cash flow is so strong it overshadows most minor uses of cash. The company's minimal debt load, with a TTM Debt-to-Equity Ratio of just 0.03, means solvency risk is practically non-existent. They aren't spending cash servicing debt; they're generating it and returning it to shareholders. If you are interested in who is buying the stock, you should be Exploring Red Violet, Inc. (RDVT) Investor Profile: Who's Buying and Why?

For a clearer view of the Q3 2025 cash flow movements, see the table below:

The clear action here is recognizing that Red Violet, Inc. is not a company struggling for capital; it is a company with significant internal funding capacity and a balance sheet built for stability and opportunistic growth.

Valuation Analysis

Is Red Violet, Inc. (RDVT) overvalued right now? The quick answer is that traditional metrics suggest a premium valuation, but the strong analyst consensus and growth trajectory point to a 'Buy' rating, implying the market expects continued outperformance. You're looking at a classic growth stock scenario: high multiples today for anticipated future earnings, so the stock is defintely priced for perfection.

The stock price trend over the last 12 months reflects this optimism, with Red Violet, Inc. shares climbing over 52.61%. This strong run has pushed the price to around $53.64 as of November 2025, well above its 52-week low of $32.23, but still below the 52-week high of $64.14. This momentum is a clear sign that investors are rewarding the company's record Q3 2025 revenue of $23.1 million and Adjusted EBITDA of $9.0 million.

When we map the near-term risks and opportunities, the valuation ratios are the first place to look. Here's the quick math on Red Violet, Inc.'s key multiples based on 2025 fiscal year estimates:

A P/E ratio of 92.4x is steep, especially when the forward EPS estimate for FY 2025 is around $1.16 per share. This is what we call a growth premium-you are paying for future earnings growth, not just current results. The high EV/EBITDA of 27.3x also reinforces this, showing a high price relative to operating cash flow before non-cash charges. For comparison, a 'fairly valued' company in a mature industry might sit closer to 10x EV/EBITDA.

Still, Wall Street analysts are bullish. The consensus rating on Red Violet, Inc. is a strong 'Buy,' with all 3 covering analysts issuing this rating. The average 12-month price target is $62.00, which suggests an upside of about 18.16% from recent trading levels. This tells you that the analysts believe the company's growth in its core IDI and FOREWARN platforms will justify these high multiples, making the stock undervalued relative to its growth potential.

As for income investors, Red Violet, Inc. is not a dividend play. The company does not currently pay a regular dividend, with a TTM dividend yield of 0.00% as of November 2025. This is typical for a growth company focused on reinvesting all earnings back into expansion, like adding over 300 customers to its IDI platform in Q3 2025.

If you want a deeper dive into the company's operational strength, you can check out our full report on Breaking Down Red Violet, Inc. (RDVT) Financial Health: Key Insights for Investors. Your immediate next step should be to model a discounted cash flow (DCF) valuation using a conservative growth rate to see if your own analysis supports the $62.00 price target.

Risk Factors

You've seen the headlines: Red Violet, Inc. (RDVT) is having a fantastic 2025, with Q3 revenue hitting a record $23.1 million and net income soaring to $4.2 million. That's great, but as a seasoned analyst, I focus on what could derail that momentum. The biggest risks aren't financial-the balance sheet is strong with $45.4 million in cash as of September 30, 2025-but rather external and operational, centered on data access and regulation.

Here's the quick math: the business model relies on a clean, compliant data supply chain, and that chain is under constant threat from evolving privacy laws and intense competition. We need to map these near-term risks to understand the path ahead.

• Regulatory and Legislative Shift: New state-level data privacy laws, like the California Consumer Privacy Act (CCPA), keep chipping away at how data can be sourced and used. The risk is that a new federal law or a major state regulation could require a costly, immediate overhaul of the CORE™ platform's data aggregation process.
• Third-Party Data Reliance: RDVT's identity intelligence solutions, including IDI™ and FOREWARN®, depend on aggregating massive amounts of public and proprietary data from third-party providers. If a key provider changes its terms, suffers a breach, or simply loses access to a critical data stream, the accuracy and comprehensiveness of RDVT's product could suffer instantly.
• Cybersecurity and Data Integrity: Handling billions of records for identity verification makes the company a prime target. A significant data breach, even if it happens to a third-party vendor, would not only incur massive financial penalties but also severely damage customer trust, which is the defintely most valuable asset in the identity intelligence space.

The operational and strategic risks are less about a sudden crash and more about a slow, competitive squeeze. The data analytics industry is highly competitive, pitting Red Violet, Inc. against much larger, established players like TransUnion and Thomson Reuters. These giants have vast resources to acquire data and invest in artificial intelligence (AI) to enhance their platforms, potentially commoditizing some of RDVT's core offerings.

Also, the company's success is largely concentrated in the U.S. market, which exposes it to localized economic downturns or regulatory changes that a geographically diversified competitor might easily shrug off. The strategic challenge is to maintain a competitive edge through innovation, which is why they are focused on AI-driven solutions and expanding into the public sector.

To mitigate the financial risk and signal confidence, management authorized a $15.0 million increase to its share repurchase program in Q3 2025, bringing the total authorization to $30.0 million. This action supports the stock price and uses excess cash, but it doesn't solve the core business risks.

The company's ability to navigate this landscape will depend on how successfully they execute their strategic plan, which you can read more about here: Mission Statement, Vision, & Core Values of Red Violet, Inc. (RDVT).

Growth Opportunities

You're looking for a clear map of where Red Violet, Inc. (RDVT) goes from here, and the short answer is: they are doubling down on what works-their proprietary data platform-and aggressively moving into high-value, sticky markets. The company's focus on identity intelligence (ID-I) is defintely paying off, allowing them to target a long-term 20% top-line growth rate.

The financial results for the 2025 fiscal year underscore this momentum. In Q3 2025 alone, Red Violet reported record revenue of $23.1 million, up 21% year-over-year, and a stellar adjusted gross margin of 84%. This kind of margin efficiency is a huge competitive edge. Analysts are projecting full-year 2025 revenue to land around $87.97 million with an adjusted earnings per share (EPS) of about $1.07. That's a strong foundation for future expansion.

Here's the quick math: their business model is highly scalable, meaning nearly 100% of any additional revenue drops straight to the contribution margin line, making new customer wins extremely profitable.

Key Growth Drivers and Strategic Moves

Red Violet's growth isn't just organic; it's driven by a clear three-pronged strategy: product innovation, market expansion, and strategic capital deployment. The company is leveraging its cloud-native platform, CORE™, to differentiate itself from legacy competitors like TransUnion's TLO. This technological advantage is a core moat.

• AI Integration: They are heavily investing in artificial intelligence (AI) to enhance data gathering, improve operational efficiency, and generate deeper data insights.
• Product Innovation: Targeted product advancements, especially within the background screening industry, have already secured significant new customer wins, including a recent contract with a major payroll processor.
• FOREWARN Expansion: The FOREWARN product, which focuses on agent safety and identity verification, continues to expand its user base, adding over 25,000 users in Q3 2025 alone.

The biggest near-term opportunity is market expansion, especially into the public sector. Management has signaled that this area, along with larger enterprise deals, is creating the strongest pipeline they've seen to date, with significant contributions expected by 2026. Also, they are actively looking to grow externally, having filed a $150 million shelf registration to explore potential acquisitions (M&A) that would expand their market reach and capabilities.

Financial Projections and Competitive Edge

While the 2025 numbers are strong, the forward-looking estimates show continued, albeit slightly moderated, growth. Analysts project next year's earnings to grow by 5.88%, from $0.51 per share to $0.54 per share. The quality of their revenue is high, which matters more than just the top-line number.

Their competitive advantage is rooted in their platform and business structure. With 75% of their Q3 revenue being contractual, and a gross revenue retention rate of 96%, they have a very sticky customer base. Plus, they are sitting on a robust cash position of $45.4 million as of September 30, 2025, and carry virtually no debt, giving them a lot of flexibility for M&A or share repurchases. If you want to dive deeper into who is betting on this model, you can check out Exploring Red Violet, Inc. (RDVT) Investor Profile: Who's Buying and Why?

What this estimate hides is the potential upside from a major acquisition or a large public sector contract win, which could easily push the revenue growth past the 20% target. Still, the current trajectory is one of profitable, high-margin growth. The next step is to monitor their Q4 2025 results for updates on the public sector pipeline.