RDVT 10-K & 10-Q changes, risk factors and insider trading

Privacy concerns relating to the collection, use, accuracy, correction and sharing of personal information and any perceived or actual unauthorized disclosure of personal information, whether through breach of our network by an unauthorized party, employee theft, misuse, or error could harm our reputation, impair our ability to attract website visitors and to attract and retain customers, result in a loss of confidence in the security of our products and services, or subject us to claims or litigation arising from damages suffered by consumers, and thereby harm our business and results of operations. In addition, we could incur significant costs which our insurance policies may not adequately cover, and we may need to expend significant resources to protect against security breachesbreaches, comply with any data breach notification provisions contained in our customer contracts, and comply with the multitude of state and federal laws regarding data privacy and data breach notification obligations.

As a nationwide provider of risk and information solutions, we aggregate, store, and process a large amount of sensitive and confidential consumer information including financial information and personal information. This data is often accessed through secure transmissions over public and private networks, including the internet. We have invested significant resources to implement technical and physical security policies, procedures and systems, as well as contractual precautions, that we believe are reasonably designed to identify, detect, and prevent the unauthorized access to and alteration and disclosure of our data. Despite these investments and precautions, we cannot assure you that systems that access our services and databases will not be compromised or disrupted, whether as a result of criminal conduct, DDoS attacks or other advanced persistent attacks by malicious actors, including hackers, nation states, and criminals, breaches due to employee error or malfeasance, or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or utility failures, or natural disasters or other catastrophic events. Due to both the nature and volume of the information we aggregate, store, and process, it is not unusual for efforts to occur (coordinated or otherwise) by unauthorized persons to attempt to obtain access to our systems or data, or to inhibit our ability to deliver products or services to a customer. These efforts are likely becoming more sophisticated over time and may attempt to exploit obscure vulnerabilities. We must regularly monitor and develop our information technology networks and infrastructure to prevent, detect, address, and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. Several recent, highly-publicized data incidents and DDoS attacks have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems. Unauthorized disclosure, loss or corruption of our data or inability of our customers to access our systems could disrupt our operations, subject us to substantial legal liability, result in a material loss of business, and significantly harm our reputation.

We cannot provide assurance that we will successfully implement new technologies, cause customers or data suppliers to implement compatible technologiestechnologies, or adapt our technology to evolving customer, regulatory, and competitive requirements. If we fail to respond, or fail to cause our customers or data suppliers to respond, to changes in technology, regulatory requirements or customer preferences, the demand for our services, the delivery of our services or our market reputation could be adversely affected. Additionally, our failure to implement important updates could affect our ability to successfully meet the timeline for us to generate cost savings resulting from our investments in improved technology. Failure to achieve any of these objectives would impede our ability to deliver strong financial results.

Issues in the development and use of artificial intelligence and generative artificial intelligence may result in reputational harm, liability, or other adverse consequences to our business.

We use certain machine learning and artificial intelligence technologies and processes in our business, including the use of generative artificial intelligence, and we are making continuing investments in this area, including ongoing deployment and improvement of existing machine learning and artificial intelligence technologies. These AI-enabled technologies and processes are complex and continually evolving, and we face significant competition from other companies. Also, lawmakers have proposedcertain laws and rulemakingregulations have been enacted related to the development and use of these technologies.technologies, Likewise,and regulatorymore agencies,are suchlikely asto be enacted in the Federalfuture. TradeAdapting Commission (FTC), have used theirour existing authority to bring legal action against organizations who are alleged to have deceived or harmed consumers through their usage of these technologies. We may be required to comply with new laws and regulations, as well as develop additional policies and practicescontrols forto usingaddress certainthe dataevolving within machine learninglegal and artificialregulatory intelligence technologies, whichlandscape may be costly and time consuming. TheIn introductionaddition, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction and inconsistently with our current policies and practices. Increasing our utilization of machine learning and artificial intelligence technologies within existing products or introducing them into new or existing products may result in increased risks, such as the risk of government scrutiny, lawsuits, security risks, or other issues that could adversely affect our business, our reputation, and/or our financial results.

Also, artificial intelligence and generative artificial intelligence may create content that appears correct but is flawed or erroneous. Any flaws or errors discovered in our products after commercial release could result in loss of revenue or delay in revenue recognition, or loss of customers, any of which could adversely affect our business and results of operations. In addition, we could face claims for product liability. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention. In addition, if our business liability insurance coverage is inadequate or future coverage is unavailable on acceptable terms or at all, our financial condition could be harmed.

Our business is subject to regulation under the GLBA, the DPPA, the FTC Act, and various other federal, state, and local laws and regulations, as well as -as, when we provide services to government agencies -agencies, applicable government procurement regulations and associated contract clauses. These laws and regulations, which generally are designed to protect consumers and to prevent the misuse of personal information are complex, change frequently, and have tended to become more stringent over time. We have already incurred significant expenses in our endeavors to comply with these laws.

Currently, public concern is high with regard to the collection, use, accuracy, correction, and sharing of personal information, including Social Security numbers, dates of birth, financial information, department of motor vehicle data, and other data which is personally identifiable or may be considered sensitive. In addition, many advocacy groups as well as some legislatures and government regulators believe that existing laws and regulations do not adequately protect privacy, and are otherwise concerned with businesses’ collection, storage, and use of personal information. There are calls to limit the availability of data made available for customer use cases that we may currently serve, such as for marketing purposes or for law enforcement purposes. Relatedly, several U.S. states have introduced and passed legislation to provide consumers with greater transparency and control over their personal information. Laws may allow consumers to request that businesses disclose to them what personal information is collected about them, delete or correct such personal information, and opt-them out of the sale or sharing of their personal information. There are approximately 20 states that have enacted some form of comprehensive data privacy legislation similar to the California Consumer Privacy Act and/or the Virginia Consumer Data Protection Act. While these laws include specific exemptions, including exemptions for practices and activities conducted pursuant to the GLBA and DPPA, they apply to other portions of our business that are not conducted pursuant to these laws. California has recently enacted the Delete Act, intending to make it easier for consumers to request the deletion of their personal information. Other states are actively considering privacy and security bills, and may pass laws, either similar or dissimilar to existing state privacy laws in the future. Furthermore, the U.S. Congress is considering legislation and several administrative agencies are considering or have proposed rulemaking, each with respect to data privacy and security. At this time, it is unclear whether Congress will pass a law or whether any administrative agencies will proceed with regulatory action. At this time, it is also unclear whether any federal requirements will supplement or preempt state-level data privacy and security laws. In the absence of additional federal legislation or rulemaking, federal administrative agencies such as the FTC and the Consumer Financial Protection Bureau (CFPB) have increasingly used their existing authority to bring legal action against organizations who are alleged to have violated consumers’ privacy rights or failed to maintain adequate security measures.

Legal proceedings arise as part of the normal course of our business. These may include actions between us and a current or former employee, actions between us and a current or former customer, individual consumer cases, class action lawsuits and inquiries, investigations, examinations, regulatory proceedings, or other actions brought by federal (e.g., the FTC or CFPB) or state (e.g., state attorneys general) authorities. The scope and outcome of these proceedings is often difficult to assess or quantify. Plaintiffs in lawsuits may seek recovery of large amounts and the cost to defend such litigation may be significant. There may also be adverse publicity and uncertainty associated with investigations, litigation, and orders (whether pertaining to us, our customers or our competitors) that could decrease customer acceptance of our services or result in material discovery expenses. In addition, a court-ordered injunction or an administrative cease-and-desist order or settlement may require us to modify our business practices or may prohibit conduct that would otherwise be legal and in which our competitors may engage. Many of the technical and complex statutes to which we are subject, including state and federal financial privacy requirements, may provide for civil and criminal penalties and may permit consumers to maintain individual or class action lawsuits against us and obtain statutorily prescribed damages. Additionally, our customers might face similar proceedings, actions, or inquiries which could affect their business and, in turn, our ability to do business with those customers.

Our customers, and therefore our business and revenue, sometimes depend on favorable macroeconomic conditions and are impacted by the availability of credit, the level and volatility of interest rates, inflation, tariffs, employment levels, consumer confidence, and housing demand. In addition, a significant amount of our revenue is concentrated in the U.S. market across a broad range of industries. Our customer base suffers when financial markets experience volatility, illiquidity, and disruption, which has occurred in the past and which could reoccur. Such market developments, and the potential for increased and continuing disruptions going forward, present considerable risks to our business and operations. Changes in the economy have resulted, and may continue to result, in fluctuations in volumes, pricing, and operating margins for our services. Recent inflation, and higher interest rates imposed to combat inflation, may reduce the demand for various commercial transactions. The imposition of tariffs by the United States on foreign goods, tensions over the imposition of such tariffs, and (both actual and anticipated) retaliation from other countries may exasperate these issues. This, in turn, may lead to a decline in the volume of services we provide to our customers in the banking or financial industry, or other industries that are affected by these types of disruptions. If businesses in these industries experience economic hardship, we cannot assure you that we will be able to generate future revenue growth and these types of disruptions could negatively impact our revenue and results of operations.

Our products and services depend extensively upon continued access to and receipt of data from external sources, including data received from strategic partners and various government and public record databases. In some cases, we compete with our data suppliers. Our data suppliers could stop providing data, impose more stringent contractual restrictions on our use of data, provide untimely data or increase the costs for their data for a variety of reasons, including a perception that our systems are insecure as a result of a data security breach, budgetary constraints, a desire to generate additional revenue, or for regulatory or competitive reasons. We could also become subject to increased legislative, regulatory, or judicial restrictions or mandates on the collection, disclosure, or use of such data, in particular if such data is not collected by our providers in a way that allows us to legally use the data. If we were to lose access to this external data or if our access or use were restricted or were to become less economical or desirable, our ability to provide services could be negatively impacted, which would adversely affect our reputation, business, financial condition, and results of operations. We cannot provide assurance that we will be successful in maintaining our relationships with these external data source providers or that we will be able to continue to obtain data from them on acceptable terms or at all. Furthermore, we cannot provide assurance that we will be able to obtain data from alternative sources if our current sources become unavailable.

The foregoing risks are heightened with respect to our largest data supplier, with whom we have expanded our relationship while securing favorable business terms over the years. If we are unable to maintain our current relationship with our largest data supplier, the term of our agreement with which was extended during 2025 through April 30, 2031, our ability to provide services could be negatively impacted, as we would need to secure comparable data on similar terms, which would require significant time, expense, and resources, and may in the short-term adversely affect our reputation, business, financial condition, and results of operations and, if we are unable to establish a similar relationship with other data suppliers over time, could have a long-term material impact on our business and financial condition. Also see “Concentration of Suppliers” above.

The market for our products and services is intensely competitive. There are numerous companies competing with us in various segments of the data and analytics sector, and their products and services may have advantages over our products and services in areas such as conformity to existing and emerging industry standards, the use of artificial intelligence, performance, price, ease of use, scalability, reliability, flexibility, product features, and technical support.

Our products haveand beensolutions may experience varying sales cycles depending on industry, customer size, and implementation complexity, and in thecertain marketplacemarkets for a limited period of time andcompetitors may have longer salesoperating cycleshistories thanor competitivemore products.established customer relationships. Accordingly, we may not achieve the meaningful revenue growth needed to sustain operations. We cannot provide any assurances that sales of our newer products will continue to grow or generate sufficient revenues to sustain our business. If we are unable to recognize revenues due to longer sales cycles or other problems, our results of operations could be adversely affected.

We depend on a number of service providers and key vendors such as telecommunication companies, software engineers, cloud providers, data processors, and software and hardware vendors, who are critical to our operations. These service providers and vendors are involved with our service offerings, communications and networking equipment, computer hardware and software and related support and maintenance. Although we have implemented service-level agreements and have established monitoring controls, our operations could be disrupted if we do not successfully manage relationships with our service providers, if they do not perform or are unable to perform agreed-upon service levels, or if they are unwilling to make their services available to us at reasonable prices. If our service providers and vendors do not perform their service obligations, it could adversely affect our reputation, business, financial condition, and results of operations.

changes in governmentallaws or regulations or in the status ofaffecting our regulatory approvalsindustry;

any major change in our boardBoard of Directors or management;

Since the Spin-off and through December 31, 2024,2025, we issued an aggregate of 3,831,4834,182,714 shares of our common stock in connection with vesting of awards made under the Red Violet, Inc. 2018 Stock Incentive Plan, as amended and restated (the “2018 Plan”), 857,198972,971 shares of which were retired and cancelled. Also, as of December 31, 2024,2025, 56,98463,717 shares underlying awards made under the 2018 Plan have vested but the delivery has been deferred by the recipients, and an additional 887,268769,227 shares underlying awards made under the 2018 Plan are scheduled to vest and be delivered through 2030. Pursuant to the 2018 Plan, our Board of Directors may grant stock options, restricted stock units (“RSUs”), or other equity awards to our directors and employees. Future stock incentive plans may also allow our Board of Directors to issue these equity awards to our directors and employees. When these awards vest or are exercised, the issuance of shares of common stock underlying these awards will have a dilutive effect on our common stock. Future acquisitions may involve the issuance of our common stock as payment, in part or in full, for the business or assets acquired. The benefits derived by us from an acquisition might not exceed the dilutive effect of the shares issued as part of the acquisition. Additionally, we filed a shelf registration statement on Form S-3, which was declared effective on November 25, 2025 (the "Shelf Registration Statement"), allowing us to offer and sell our registered common stock, preferred stock, debt securities, depository shares, warrants and/or units from time to time pursuant to one or more offerings of up to $150.0 million. While we have not issued any shares under the Shelf Registration Statement, any issuance could have a dilutive effect. Future issuances of our common stock or other equity securities, or the perception that such sales may occur, could adversely affect the trading price of our common stock and impair our ability to raise capital through future offerings of shares or equity securities. No prediction can be made as to the effect, if any, that future sales of common stock or the availability of common stock for future sales will have on the trading price of our common stock.

As of December 31, 2024,2025, officers and directors of the Company owned approximately 10%9% of our common stock (approximately 12%10% on a fully diluted basis). In addition, one other significant stockholder of the Company owned approximately 11% of our common stock. As a result, these stockholders may be in a position to exert significant influence over all matters requiring stockholder approval, including the election of directors and determination of significant corporate actions. The interests of these stockholders may not always coincide with the interests of other stockholders, and these stockholders may act in a manner that advances their interests and not necessarily those of other stockholders, and might affect the prevailing market price for our securities.

We are no longer an “emerging growth company,” however, we are still a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

AlthoughWe we ceased to be an “emerging growth company” on December 31, 2023, as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, we remainare a “smaller reporting company.company” Weand may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. As a smaller reporting company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

On December 3, 2024, we declared a special cash dividend of $0.30 per share on our common stock of $0.30 per share (the "Special Cash Dividend"), payable on or about February 14, 2025, to shareholders of record as of theJanuary close31, of2025. businessThe Dividend, totaling $4.2 million, was paid on JanuaryFebruary 31,14, 2025. However, there is no assurance that we will continue to declare or pay cash dividends in the future. Any future dividend payments are within the discretion of our Board of Directors and will depend upon, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial condition, level of indebtedness, any contractual restrictions with respect to payment of dividends, business opportunities, anticipated cash needs, provisions of applicable law, and other factors that our Board of Directors may deem relevant.

Red Violet, Inc., a Delaware corporation, is dedicated to making the world a safer place and reducing the cost of doing business. We build proprietary technologies and apply analytical capabilities to deliver identity intelligence. Our technology powers critical solutions, which empower organizations to operate with confidence. Our solutions enable the real-time identification and location of people, businesses, assets, and their interrelationships. These solutions are used for purposes including identity verification, risk mitigation, due diligence, fraud detection and prevention, regulatory compliance, and customer acquisition. Our AI/ML-drivencloud-native, AI-enabled identity intelligence platform, CORETM, is purpose-built for the enterprise, yet flexible enough for organizations of all sizes, bringing clarity to massive datasets by transforming data into intelligence. We drive workflow efficiency and enable organizations to make better data-driven decisions.

Organizations are challenged by the structure, volume, velocity, and disparity of data. Our platform and applications provide real-time analytics, transforming the way our customers interact with information by presenting connections and relevance of information otherwise unattainable, which drives actionable insights and better outcomes. Leveraging cloud-native proprietary technology and applying machine learning and advanced analytical capabilities, CORE provides essential solutions to public and private sector organizations through intuitive, easy-to-use analytical interfaces. With massiveextensive data assets consisting of public record, proprietary, and publicly-available data, our differentiated information and innovative platform and solutions deliver identity intelligence – entities, relationships, affiliations, interactions, and events. Our solutions are used today to enable frictionless commerce, to ensureenhance safety, and to reducemitigate fraud and the concomitantrelated expensefinancial bornelosses byacross society.the markets we serve.

While our platform powers a vast array of solutions for our customers, we presently market our solutions primarily through two brands, IDI™ and FOREWARN®. IDI is a leading-edge, analytics and information solutions provider delivering actionable intelligence to an expansive and diverse set of industries in support of use cases such as the verification and authentication of consumer identities, due diligence, prevention of fraud and abuse, legislative compliance, and debt recovery. idiCORE™ is IDI's flagship product. idiCORE is a next-generation, investigative solution used to address a variety of organizational challenges, including, but not limited to, due diligence, risk mitigation, identity authentication, and regulatory compliance, by financial services companies, insurance companies, healthcare companies, law enforcement and government, identity verification platforms, collections, law firms, retail, telecommunication companies, corporate security, and investigative firms. FOREWARN is an app-based solution currently tailored for the real estate industry, providing instant knowledge prior to face-to-face engagement with a consumer, helping professionals identify and mitigate risk. As of December 31, 20242025 and 2023,2024, IDI had 8,92610,022 and 7,8758,926 billable customerscustomers, respectively, and FOREWARN had 303,418390,018 and 185,380303,418 users, respectively. We define a billable customer of IDI as a single entity that generated revenue during the last three months of the period. Billable customers are typically corporate organizations. In most cases, corporate organizations will have multiple users and/or departments purchasing our solutions, however, we count the entire organization as a discrete customer. We define a user of FOREWARN as a unique person that has a subscription to use the FOREWARN service as of the last day of the period. A unique person can only have one user account.

The enactment of new or amended legislationlaws or industry regulations pertaining to consumer or private sector privacy issues or further limiting the use of certain technologies (such as, but not limited to, artificial intelligence) could have a material adverse impact on information and marketing services. LegislationLaws or industry regulations regarding consumer or private sector privacy issues could place restrictions upon the collection, sharing, and use of information that is currently legally available, which could materially increase our cost of collecting and maintaining some data. TheseNew types of legislationlaws or industry regulations could also prohibit us from collecting or disseminating certain types of data, restrict our ability to utilize certain technologies, or prevent us from licensing our services in support of particular customer use cases, which could adversely affect our ability to meet our customers’ requirements and our profitability and cash flow targets.

We recognize revenue in accordance with ASC 606, “Revenue from Contracts with Customers” (“Topic 606”). Under this standard, revenue is recognized when control of goods or services is transferred to the Company’sour customers, in an amount that reflects the consideration thewe Company expectsexpect to be entitled to in exchange for those goods or services. Our performance obligation is to provide on demand information and identity intelligence solutions to our customers by leveraging our proprietary technology and applying machine learning and advanced analytics to our massiveextensive data repository. The pricing for the customer contracts is based on usage, a monthly fee, or a combination of both.

Revenue is recognized over a period of time. Our customers simultaneously receive and consume the benefits provided by our performance as and when provided. Furthermore, we have elected the “right to invoice” practical expedient, available within Topic 606, as our measure of progress, since we have a right to payment from a customer in an amount that corresponds directly with the value of our performance completed-to-date. In some arrangements, a right to consideration for our performance under the customer contract may occur before invoicing to the customer, resulting in an unbilled accounts receivable. As of December 31, 2025, the current and noncurrent portion unbilled accounts receivable of $1.1 million and $0.9 million, respectively, were included within accounts receivable and other noncurrent assets, respectively, on the consolidated balance sheets. As of December 31, 2024, the current and noncurrent portion unbilled accounts receivable of $0.9 million and $1.1 million, respectively, were included within accounts receivable and other noncurrent assets, respectively, on the consolidated balance sheets. As of December 31, 2023, the current and noncurrent portion unbilled accounts receivable of $0.8 and $0.4, respectively, were included within accounts receivable and other noncurrent assets, respectively, on the consolidated balance sheets. Our revenue arrangements do not contain significant financing components.

If a customer pays consideration before we transfer services to the customer, those amounts are classified as deferred revenue. As of December 31, 2025, 2024 and 2023, the balance of deferred revenue was $1.0 million, $0.7 million and $0.7 million, respectively, all of which is expected to be realized in the next 12 months. In relation to the deferred revenue balance as of December 31, 2023,2024, $0.7 million was recognized into revenue during the year ended December 31, 2024.2025.

As of December 31, 2024,2025, $22.3$23.8 million of revenue is expected to be recognized in the future for performance obligations that are unsatisfied or partially unsatisfied, related to pricing contracts that have a term of more than 12 months, of which $11.3$12.7 million of revenue will be recognized in 2025, $6.5 million in 2026, $3.8$8.0 million in 2027, $2.4 million in 2028, $0.6 million in 2028,2029, and $0.1 million in 2029.2030 and thereafter. The actual timing of recognition may vary due to factors outside of our control. We exclude variable consideration related entirely to wholly unsatisfied performance obligations and contracts and recognizes such variable consideration based upon the right to invoice the customer.

We maintain allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Management determines whether an allowance needs to be provided for an amount due from a customer depending on the aging of the individual receivable balance, recent payment history, contractual terms and other qualitative factors such as status of business relationship with the customer. Historically, our estimates for doubtful accounts have not differed materially from actual results. The amount of the allowance for doubtful accounts was $0.2 million as of December 31, 20242025 and 2023,2024, which was included within accounts receivable, net, inon the consolidated balance sheets.

We account for income taxes in accordance with ASC 740, “Income Taxes,” which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Prior to the third quarter of 2023, primarily due to cumulative pre-tax losses, management determined a full valuation allowance was necessary to reduce the deferred tax assets to the amount that is more likely than not to be realized. During the third quarter of 2023, we released the valuation allowance previously recorded on our deferred tax assets. We concluded that, due to our established historical cumulative positive income before income taxes plus permanent differences for the recent years, projections of future taxable income, and the reversal of taxable temporary differences, the realization of the deferred tax assets as of December 31, 20242025 and 20232024 is more likely than not.

Our intangible assets are initially recorded at the capitalized actual costs incurred, their acquisition cost, or fair value if acquired as part of a business combination, and amortized on a straight-line basis over their respective estimated useful lives, which are the periods over which the assets are expected to contribute directly or indirectly to the future cash flows of the Company. The Company’s intangible assets representinclude software developed for internal use.use and acquired intangible assets. Intangible assets have estimated useful lives of 5-10 years.

In accordance with ASC 350-40, “Software—internal use software,” we capitalize eligible costs, including personnel-related expenses, share-based compensation, and travel expenses incurred by relevant employees, and other relevantdirectly attributable costs of developing internal-use software that are incurred induring the application development stage when developing or obtaining software for internal use.stage. Once the software developed for internal use is ready for its intended use, it is amortized on a straight-line basis over its useful life. The acquired intangible assets reflect the acquisition cost of certain data assets for which we have obtained perpetual usage rights.

We have issued share-based awards with performance-based vesting criteria. Achievement of the milestones must be probable before we begin recording share-based compensation expense. When the performance-based vesting criteria is considered probable, we begin to recognize compensation expense at that time. In the period that achievement of the performance-based criteria is deemed probable, US GAAP requires the immediate recognition of all previously unrecognized compensation since the original grant date. As a result, compensation expense recorded in the period that achievement is deemed probable could include a substantial amount of previously unrecorded compensation expense related to the prior periods. For any share-based awards where performance-based vesting criteria is no longer considered probable, previously recognized compensation cost would be reversed. As of December 31, 2024,2025, no amortization of share-based compensation expense has been recognized for 95,00070,000 RSUs subject to Criteriathe Four,2024 Performance Criteria, as defined in Note 10, “Share-based compensation,” included in “Notes to Consolidated Financial Statements,” because the Company determined that it is not probable that related performance criteria will be met.

Adjusted netNet income increased 390%226% to $1.3$2.8 million, which resulted in adjusted earnings of $0.10$0.20 and $0.09$0.19 per basic and diluted share, respectively. Net income margin increased to 12% from 4%.

Cash from operating activities increasedremained 59%consistent toat $6.7 million.

Adjusted netNet income increased 42%88% to $11.5$13.2 million, which resulted in adjusted earnings of $0.83$0.94 and $0.82$0.91 per basic and diluted share, respectively. Net income margin increased to 15% from 9%.

Management evaluates the financial performance of our business on a variety of key indicators, including non-GAAP metrics of adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, adjusted gross profit, adjusted gross margin, and free cash flow ("FCF"). Adjusted EBITDA is a non-GAAP financial measure equal to net income (loss),income, the most directly comparable financial measure based on US GAAP, excluding interest income, income tax (benefit) expense, depreciation and amortization, share-based compensation expense, acquisition-related costs, litigation costs, and write-off of long-lived assets and others.assets. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue. Adjusted net income is a non-GAAP financial measure equal to net income (loss),income, the most directly comparable financial measure based on US GAAP, excludingadjusted to exclude share-based compensation expense, amortization of share-based compensation capitalized in intangible assets, andacquisition-related discretecosts, taxlitigation items,costs, and includingwrite-off of long-lived assets, and to include the tax effect of adjustments. We define adjusted earnings per share as adjusted net income divided by the weighted average shares outstanding. We define adjusted gross profit as revenuegross lessprofit cost of revenue (exclusive ofplus depreciation and amortization), of certain intangible assets, and adjusted gross margin as adjusted gross profit as a percentage of revenue. We define FCF as net cash provided by operating activities reduced by purchase of property and equipment and capitalized costs included in intangible assets.

The following is a reconciliation of net income (loss),income, the most directly comparable US GAAP financial measure, to adjusted EBITDA:

The following is a reconciliation of net income (loss),income, the most directly comparable US GAAP financial measure, to adjusted net income:

(21) The tax effect of adjustments is calculated using the expected combined federal and state statutory tax rate. The expected federal and state income tax raterate, which was approximately 26.00%26.0% for the three months and twelvethe monthsyears ended December 31, 2024,2025 and 25.75% for the three and twelve months ended December 31, 2023.2024.

The following is a reconciliation of net cash provided by operating activities, the most directly comparable US GAAP financial measure, to FCF:

We believe adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, adjusted gross profit, adjusted gross margin, and FCF are relevant and provide useful information frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours and are indicators of the operational strength of our business. We believe adjusted EBITDA eliminates the uneven effect of considerable amounts of non-cash depreciation and amortization, and share-based compensation expense, and the impact of other non-recurringitems items,not providingindicative usefulof comparisonsour versusongoing prioroperating periods or forecasts.performance. Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of revenue. We believe adjusted net income provides additional means of evaluating period-over-period operating performance by eliminating certain non-cash expenses and other items that might otherwise make comparisons of our ongoing business with prior periods more difficult and obscure trends in ongoing operations. Adjusted net income is a non-GAAP financial measure equal to net incomeincome, (loss),adjusted excludingto exclude share-based compensation expense, amortization of share-based compensation capitalized in intangible assets, and discreteother taxitems items,not indicative of our ongoing operating performance, and includingto include the tax effect of adjustments. We define adjusted earnings per share as adjusted net income divided by the weighted average shares outstanding. Our adjusted gross profit is a measure used by management in evaluating the business’s current operating performance by excluding the impact of prior historical costs of assets that are expensed systematically and allocated over the estimated useful lives of the assets, which may not be indicative of the current operating activity. OurWe define adjusted gross profit isas calculatedgross byprofit using revenue, less cost of revenue (exclusive ofplus depreciation and amortization). of certain intangible assets. We believe adjusted gross profit provides useful information to our investors by eliminating the impact of certain non-cash depreciation and amortization, and specificallyprimarily the amortization of software developed for internal use, providing a baseline of our core operating results that allow for analyzing trends in our underlying business consistently over multiple periods. Adjusted gross margin is calculated as adjusted gross profit as a percentage of revenue. We believe FCF is an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business. FCF is a measure used by management to understand and evaluate the business’s operating performance and trends over time. FCF is calculated by using net cash provided by operating activities, less purchase of property and equipment and capitalized costs included in intangible assets.

InterestCost income,of net.revenue Interest(exclusive incomeof depreciation and amortization) increased $0.1$0.7 millionmillion, or 5%5%, to $1.4$14.7 million for the year ended December 31, 20242025, fromcompared $1.3to $14.0 million for the year ended December 31, 2023. This was primarily due to interest income earned on investments in certain money market funds.2024.

There have been no material changes to the risk factors previously disclosed in the Company’s 2025 Form 10-K.

You should read the following discussion and analysis in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”). This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), about our expectations, beliefs, or intentions regarding our business, financial condition, results of operations, strategies, or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those contained in this Form 10-Q, as well as the disclosures made in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed on March 4, 2026 (the “2025 Form 10-K”), and other filings we make with the Securities and Exchange Commission (the "SEC"). We do not undertake any obligation to update forward-looking statements, except as required by law. We intend that all forward-looking statements be subject to the safe harbor provisions of PSLRA. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance.

While our platform powers a vast array of solutions for our customers, we presently market our solutions primarily through two brands, IDI™ and FOREWARN®. IDI is a leading-edge, analytics and information solutions provider delivering actionable intelligence to an expansive and diverse set of industries in support of use cases such as the verification and authentication of consumer identities, due diligence, prevention of fraud and abuse, legislative compliance, and debt recovery. idiCORE™ is IDI's flagship product. idiCORE is a next-generation, investigative solution used to address a variety of organizational challenges, including, but not limited to, due diligence, risk mitigation, identity authentication, and regulatory compliance, by financial services companies, insurance companies, healthcare companies, law enforcement and government, identity verification platforms, collections, law firms, retail, telecommunication companies, corporate security, and investigative firms. FOREWARN is an app-based solution currently tailored for the real estate industry, providing instant knowledge prior to face-to-face engagement with a consumer, helping professionals identify and mitigate risk. As of MarchJune 31,30, 2026 and 2025, IDI had 10,42210,869 and 9,2419,549 billable customers, respectively, and FOREWARN had 417,680443,173 and 325,336346,671 users, respectively. We define a billable customer of IDI as a single entity that generated revenue during the last three months of the period. Billable customers are typically corporate organizations. In most cases, corporate organizations will have multiple users and/or departments purchasing our solutions; however, we count the entire organization as a discrete customer. We define a user of FOREWARN as a unique person that has a subscription to use the FOREWARN service as of the last day of the period. A unique person can only have one user account.

We generate substantially all of our revenue from licensing our solutions. Customers access our solutions through a hosted environment using an online interface, batch processing, API, and custom integrations. We recognize revenue from licensing fees (a) on a transactional basis determined by the customer’s usage, (b) via a monthly fee or (c) from a combination of both. Revenue pursuant to pricing contracts containing a monthly fee is recognized ratably over the contract period. Pricing contracts are generally annual contracts or longer, with auto renewal. For each of the three months ended MarchJune 31,30, 2026 and 2025, 75% and 74%77% of total revenue was attributable to customers with pricing contracts, respectively, versus 25% and 26%23% attributable to transactional customers,customers. respectively.For each of the six months ended June 30, 2026 and 2025, 76% of total revenue was attributable to customers with pricing contracts, versus 24% attributable to transactional customers.

For additional information, please refer to our 2025 Form 10-K. There have been no material changes to Critical Accounting Policies and Estimates disclosed in our 2025 Form 10-K.

FirstSecond Quarter Financial Results

For the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025:

Adjusted net income increased 29%58% to $6.6$7.2 million, which resulted in adjusted earnings of $0.46$0.51 and $0.50 per basic and diluted share.share, respectively.

Cash and cash equivalents were $43.5$50.0 million as of MarchJune 31,30, 2026.

FirstSecond Quarter and Recent Business Highlights

Added 400447 customers to IDI during the firstsecond quarter, ending the quarter with 10,42210,869 customers.

Added 27,66225,493 users to FOREWARN during the firstsecond quarter, ending the quarter with 417,680443,173 users. Over 640660 REALTOR® Associations throughout the U.S. are now contracted to use FOREWARN.

Purchased 73,25074,500 shares of the Company’s common stock year to date through AprilJune 30, 2026, at an average price of $41.90$41.87 per share pursuant to the Company’s Stock Repurchase Program. As of AprilJune 30, 2026, the Company had $15.6$15.5 million remaining under the Stock Repurchase Program.

(1) The tax effect of adjustments is calculated using the expected combined federal and state statutory tax rate, which was approximately 26.00% for each of the three and six months ended MarchJune 31,30, 2026 and 2025. The resulting tax effect may differ from applying such rate to total adjustments due to the tax treatment of certain items. Beginning with the 2025 Form 10-K, we updated the methodology for determining the income tax effects of adjustments in calculating non-GAAP adjusted net income. Prior-period amounts have been revised to conform to the current methodology and presentation. These revisions did not affect our previously reported GAAP financial statements.

Three months ended MarchJune 31,30, 2026 compared to three months ended MarchJune 31,30, 2025

Revenue increased $3.8$4.9 million, or 17%,23%, to $25.8$26.7 million for the three months ended MarchJune 31,30, 2026, compared to $22.0$21.8 million for the same period in 2025. The increase was driven by strong onboarding of new customers and volume expansion across the existing customer base, partially offset by the decrease in revenue from new customers.base.

As of MarchJune 31,30, 2026, our IDI billable customer base increased to 10,42210,869 customers, up from 9,2419,549 customers a year earlier. Our FOREWARN user base increased to 417,680443,173 users, up from 325,336346,671 users a year earlier.

Cost of revenue (exclusive of depreciation and amortization) increased $0.1$0.3 million, or 4%,9%, to $3.8 million for the three months ended MarchJune 31,30, 2026, compared to $3.7$3.5 million for the same period in 2025.

Our cost of revenue primarily consists of data acquisition costs, which include the cost to acquire data under flat-fee licensing agreements, including unlimited usage arrangements, as well as purchases on a transactional basis. We continue to enhance the breadth and depth of our data by the addition and expansion of relationships with key data suppliers, including our largest data supplier, which accounted for 46% and 43% of our total data acquisition costs for each of the three months ended MarchJune 31,30, 2026 and 2025, respectively.2025. Effective on May 1, 2025, we entered into an amendment with our largest data supplier, extending the term of the agreement through April 30, 2031.

Due to the fixed-cost nature of our primary data licensing structure, cost of revenue as a percentage of revenue decreased to 15%14% for the three months ended MarchJune 31,30, 2026, compared to 17%16% for the same period in 2025. We expect this percentage to continue to decline over time as our revenue increases.

Sales and marketing expenses increased $0.5$0.2 million, or 8%,2%, to $5.9$5.8 million for the three months ended MarchJune 31,30, 2026, compared to $5.4$5.6 million for the same period in 2025. We continued to invest in expanding our go-to-market capabilities to support long-term revenue growth.

For the three months ended MarchJune 31,30, 2026 and 2025, sales and marketing expenses consisted primarily of:

General and administrative expenses increased $1.7$1.0 million, or 28%,14%, to $7.9$8.3 million for the three months ended MarchJune 31,30, 2026, compared to $6.2$7.3 million for the same period in 2025. The increase reflects higher personnel-related expenses and share-based compensation expense to support the continued growth of the business.

For the three months ended MarchJune 31,30, 2026 and 2025, general and administrative expenses consisted primarily of:

share-based compensation expense of $1.8$2.1 million and $1.4$1.6 million, respectively; and professional fees of $1.5$1.4 million and $1.1$1.6 million, respectively. Professional fees included $0.3$0.05 million and $0,$0.4 million, respectively, of acquisition-related costs incurred in connection with the due diligence of potential strategic targets.

Depreciation and amortization expenses increased $0.2 million, or 10%,5%, to $2.8 million for the three months ended MarchJune 31,30, 2026, compared to $2.6 million for the same period in 2025.

The increase was primarily driven by the amortization of intangible assets that became ready for their intended use after MarchJune 31,30, 2025.

Interest income wasincreased $0.3$0.1 million, or 16%, to $0.4 million for each of the three months ended MarchJune 31,30, 20262026, andcompared to $0.3 million for the three months ended June 30, 2025.

Income before income taxes increased $1.3$3.4 million, or 28%,110%, to $5.8$6.5 million for the three months ended MarchJune 31,30, 2026, compared to $4.5$3.1 million for the same period in 2025.

an increase of $0.4$0.3 million in professional fees; and an increasecost of $0.2revenue million(exclusive inof depreciation and amortization expense.);

Income tax expense was $1.4$1.5 million for the three months ended MarchJune 31,30, 2026, compared to $1.1$0.4 million for the same period in 2025.

The increase in income tax expense was primarily attributable to higher pre-tax income,income asand the increase in the Company’s effective tax rate remained consistent atto 24% for the three months ended June 30, 2026 from 13% for the same period in both periods.2025.

Net income increased $1.0$2.3 million, or 28%,85%, to $4.4$5.0 million for the three months ended MarchJune 31,30, 2026, compared to $3.4$2.7 million for the same period in 2025, as a result of the foregoing.