What changed in this filing

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Item 1. Financial Statements

2023-08-07 compared with 2023-05-09 · 91 added, 59 removed, 218 unchanged (41% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share data)

March 31, 2023

June 30, 2023

December 31, 2022

2 unchanged sentences

Accounts receivable, net of allowance for doubtful accounts of $ 86 and $ 60 as of

March 31, 2023 and December 31, 2022, respectively

June 30, 2023 and December 31, 2022, respectively

Prepaid expenses and other current assets

16 unchanged sentences

Preferred stock—$ 0.001 par value, 10,000,000 shares authorized, and 0 shares

issued and outstanding, as of March 31, 2023 and December 31, 2022

issued and outstanding, as of June 30, 2023 and December 31, 2022

Common stock—$ 0.001 par value, 200,000,000 shares authorized, 13,911,691 and

13,956,404 shares issued, and 13,908,953 and 13,956,404 shares outstanding, as of

March 31, 2023 and December 31, 2022

Treasury stock, at cost, 10,937 and 0 shares as of March 31, 2023 and

December 31, 2022

June 30, 2023 and December 31, 2022

Treasury stock, at cost, 2,738 and 0 shares as of June 30, 2023 and December 31,

Additional paid-in capital

6 unchanged sentences

(Amounts in thousands, except share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Costs and expenses:

4 unchanged sentences

Total costs and expenses

Income from operations

Income (loss) from operations

Interest income, net

Income before income taxes

Income tax (benefit) expense

Earnings per share:

Income (loss) before income taxes

Income tax expense

Net income (loss)

Earnings (loss) per share:

Weighted average number of shares outstanding:

5 unchanged sentences

Additional paid-in

Balance at December 31, 2021

Balance at March 31, 2022

Vesting of restricted stock units

2 unchanged sentences

statutory taxes

Common stock repurchased

Retirement of treasury stock

Share-based compensation

Balance at June 30, 2022

Balance at March 31, 2023

Vesting of restricted stock units

Increase in treasury stock resulting

from shares withheld to cover

statutory taxes

Common stock repurchased

Retirement of treasury stock

Share-based compensation

Balance at June 30, 2023

Treasury stock

Additional paid-in

Balance at December 31, 2021

6 unchanged sentences

Share-based compensation

Balance at March 31, 2023

Balance at June 30, 2022

Balance at December 31, 2022

Vesting of restricted stock units

Increase in treasury stock resulting

from shares withheld to cover

statutory taxes

Common stock repurchased

Retirement of treasury stock

Share-based compensation

Balance at June 30, 2023

See notes to condensed consolidated financial statements

2 unchanged sentences

(Amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

3 unchanged sentences

Noncash lease expenses

Deferred income tax (benefit) expense

Deferred income tax expense

Changes in assets and liabilities:

15 unchanged sentences

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

24 unchanged sentences

As an emerging growth company, the Company has left open the opportunity to take advantage of the extended transition period provided to emerging growth companies in Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), however, it is the Company’s present intention to adopt any applicable new accounting standards timely.

Earnings per share

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods.

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and is calculated using the treasury stock method for unvested shares.

Three Months Ended March 31,

Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the periods.

Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and is calculated using the treasury stock method for unvested shares.

Common equivalent shares are excluded from the calculation in the loss periods as their effects would be anti-dilutive.

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except share data)

Net income (loss)

Weighted average shares outstanding:

Earnings per share:

(1) For the three months ended March 31, 2023 and 2022, diluted weighted average shares outstanding are calculated by the inclusion of unvested restricted stock units ("RSUs").

Earnings (loss) per share:

(1) For the three and six months ended June 30, 2023, diluted weighted average shares outstanding are calculated by the inclusion of unvested restricted stock units ("RSUs").

For the three and six months ended June 30, 2022, a total of 1,070,368 unvested RSUs have been excluded from the diluted loss per share, as the impact is anti-dilutive.

Intangible assets, net

Intangible assets other than goodwill consist of the following:

March 31, 2023

June 30, 2023

December 31, 2022

4 unchanged sentences

The gross amount associated with software developed for internal use represents capitalized costs of internally-developed software, including eligible salaries and staff benefits, share-based compensation, travel expenses incurred by relevant employees, and other relevant costs.

Amortization expenses of $ 1,858 and $ 1,472 for the three months ended March 31, 2023 and 2022, respectively, were included in depreciation and amortization expense.

As of March 31, 2023, intangible assets of $ 5,359 , included in the gross amounts of software developed for internal use, have not started amortization, as they are not ready for their intended use.

The Company capitalized costs of software developed for internal use of $ 2,732 and $ 2,095 during the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, estimated amortization expense related to the Company’s intangible assets for the remainder of 2023 through 2028 and thereafter are as follows:

Amortization expenses of $ 1,995 and $ 1,551 for the three months ended June 30, 2023 and 2022, respectively, and $ 3,853 and $ 3,023 for the six months ended June 30, 2023 and 2022, respectively, were included in depreciation and amortization expense.

As of June 30, 2023, intangible assets of $ 4,956 , included in the gross amounts of software developed for internal use, have not started amortization, as they are not ready for their intended use.

The Company capitalized costs of software developed for internal use of $ 2,649 and $ 2,521 during the three months ended June 30, 2023 and 2022, respectively, and $ 5,381 and $ 4,616 during the six months ended June 30, 2023 and 2022, respectively .

As of June 30, 2023, estimated amortization expense related to the Company’s intangible assets for the remainder of 2023 through 2028 and thereafter are as follows:

(In thousands)

March 31, 2023

June 30, 2023

Remainder of 2023

1 unchanged sentence

Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination.

As of March 31, 2023 and December 31, 2022, the balance of goodwill of $ 5,227 was as a result of the acquisition of Interactive Data, LLC, a wholly-owned subsidiary of red violet, effective on October 2, 2014.

As of June 30, 2023 and December 31, 2022, the balance of goodwill of $ 5,227 was as a result of the acquisition of Interactive Data, LLC, a wholly-owned subsidiary of red violet, effective on October 2, 2014.

In accordance with ASC 350, “Intangibles - Goodwill and Other,”

1 unchanged sentence

The measurement date of the Company’s annual goodwill impairment test is October 1 .

The Company did no t record a goodwill impairment loss during the three months ended March 31, 2023 and 2022, and as of March 31, 2023, there was no accumulated goodwill impairment loss.

The Company did no t record a goodwill impairment loss during the three and six months ended June 30, 2023 and 2022, and as of June 30, 2023, there was no accumulated goodwill impairment loss.

Revenue recognition

11 unchanged sentences

In some arrangements, a right to consideration for the Company's performance under the customer contract may occur before invoicing to the customer, resulting in an unbilled accounts receivable.

As of March 31, 2023, the current and noncurrent portion unbilled accounts receivable of $ 733 and $ 757 , respectively, were included within accounts receivable and other noncurrent assets, respectively, on the condensed consolidated balance sheets .

As of December 31, 2022, the current and noncurrent portion unbilled accounts receivable of $ 923 and $ 464 , respectively, were included within accounts receivable and other noncurrent assets, respectively, on the condensed consolidated balance sheets .

As of June 30, 2023, the current and noncurrent portion unbilled accounts receivable of $ 746 and $ 628 , respectively, were included within accounts receivable and other noncurrent assets, respectively, on the condensed consolidated balance sheets .

The Company's revenue arrangements do not contain significant financing components.

For the three months ended March 31, 2023 and 2022, 75 % and 77 % of total revenue was attributable to customers with pricing contracts, respectively, versus 25 % and 23 % attributable to transactional customers, respectively.

For the three months ended June 30, 2023 and 2022, 79 % and 80 % of total revenue was attributable to customers with pricing contracts, respectively, versus 21 % and 20 % attributable to transactional customers, respectively.

For the six months ended June 30, 2023 and 2022, 77 % and 78 % of total revenue was attributable to customers with pricing contracts, respectively, versus 23 % and 22 % attributable to transactional customers, respectively.

Pricing contracts are generally annual contracts or longer, with auto renewal.

If a customer pays consideration before the Company transfers services to the customer, those amounts are classiﬁed as deferred revenue.

As of March 31, 2023 and December 31, 2022, the balance of deferred revenue was $ 763 and $ 670 , 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, 2022, $ 283 was recognized into revenue during the three months ended March 31, 2023.

As of March 31, 2023, $ 10,614 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, $ 5,904 of revenue will be recognized in the remainder of 2023, $ 3,858 in 2024, $ 708 in 2025, $ 136 in 2026, and $ 8 in 2027.

As of June 30, 2023 and December 31, 2022, the balance of deferred revenue was $ 627 and $ 670 , 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, 2022, $ 117 and $ 400 was recognized into revenue during the three and six months ended June 30, 2023, respectively.

As of June 30, 2023, $ 10,126 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, $ 4,217 of revenue will be recognized in the remainder of 2023, $ 4,487 in 2024, $ 1,096 in 2025, $ 276 in 2026, and $ 50 in 2027.

The actual timing of recognition may vary due to factors outside of the Company’s control.

6 unchanged sentences

In each quarter, the Company updates its estimate of the annual effective tax rate, and if its estimated annual tax rate changes, the Company makes a cumulative adjustment in that quarter.

For the three months ended March 31, 2023 and 2022, the Company concluded that, due to a recent history of operating losses, a valuation allowance should be applied to reduce its deferred tax assets to the amount that is more likely than not to be realized.

The Company’s effective income tax rate was ( 4 %) and 62 % for the three months ended March 31, 2023 and 2022, respectively, differing from the U.S.

corporate statutory federal income tax rate of 21 %, and the difference is primarily the result of the valuation allowance applied to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized.

For the three months ended June 30, 2023 and 2022, the Company concluded that, due to a recent history of operating losses, a valuation allowance should be applied to reduce its deferred tax assets to the amount that is more likely than not to be realized.

The Company’s effective income tax rate was 10 % and ( 27 %) for the three months ended June 30, 2023 and 2022, respectively, and 6 % and 181 % for the six months ended June 30, 2023 and 2022, respectively, differing from the U.S.

corporate statutory federal income tax rate of 21 %.

T he difference is primarily the result of the valuation allowance applied to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized.

The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances and information available at the reporting date.

3 unchanged sentences

Due to the existence of net operating loss carryforwards since inception, all of the Company’s income tax filings remain open for tax examinations.

The Company does no t have any material unrecognized tax benefits as of March 31, 2023 and December 31, 2022.

The Company does no t have any material unrecognized tax benefits as of June 30, 2023 and December 31, 2022.

Common stock and treasury stock

As of March 31, 2023 and December 31, 2022, the number of issued shares of common stock was 13,961,643 and 13,956,404 , respectively, which included shares of treasury stock of 10,937 and 0 , respectively.

As of June 30, 2023 and December 31, 2022, the number of issued shares of common stock was 13,911,691 and 13,956,404 , respectively, which included shares of treasury stock of 2,738 and 0 , respectively.

The changes in the number of issued shares of common stock and treasury stock were due to the following factors:

An aggregate of 10,200 shares of common stock were issued as a result of the vesting of RSUs, of which, 2,633 shares of common stock were withheld to pay withholding taxes upon such vesting, which were reflected in treasury stock, with a cost of $ 50 .

The treasury stock of 1,561 shares was then retired during the three months ended March 31, 2023.

Related treasury stock of 2,633 shares was then retired during the six months ended June 30, 2023.

On May 2, 2022, the board of directors of the Company authorized the repurchase of up to $ 5.0 million of the Company's common stock from time to time (the “Stock Repurchase Program”).

The Stock Repurchase Program does not obligate the Company to repurchase any shares and may be modified, suspended or terminated at any time and for any reason at the discretion of the board of directors.

During the three months ended March 31, 2023, the Company repurchased 10,937 shares of common stock under the Stock Repurchase Program, which was reflected in treasury stock, with a cost of $ 201 .

During the six months ended June 30, 2023, the Company repurchased 55,018 shares of common stock under the Stock Repurchase Program, which was reflected in treasury stock, with a cost of $ 940 .

Related treasury stock of 52,280 shares was retired during the six months ended June 30, 2023.

Share-based compensation

5 unchanged sentences

The primary purpose of the 2018 Plan, as amended, is to attract, retain, reward and motivate certain individuals by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effort for the growth and success of the Company, so as to strengthen the mutuality of the interests between such individuals and the stockholders of the Company.

As of March 31, 2023, there were 2,299,607 shares of common stock available for future issuance under the 2018 Plan, as amended.

As of June 30, 2023, there were 2,340,668 shares of common stock available for future issuance under the 2018 Plan, as amended.

To date, all stock incentives issued under the 2018 Plan have been in the form of RSUs.

1 unchanged sentence

The time-based condition for these awards is generally satisfied over three or four years with annual vesting.

Details of unvested RSU activity during the three months ended March 31, 2023 were as follows:

Details of unvested RSU activity during the three months ended June 30, 2023 were as follows:

Number of units

4 unchanged sentences

Withheld as treasury stock (2)

Unvested as of March 31, 2023

(1) During the three months ended March 31, 2023, the Company granted an aggregate of 17,500 RSUs to certain employees at grant date fair values ranging from $ 18.59 to $ 19.59 per share, with a vesting period of four years .

Unvested as of June 30, 2023

(1) During the six months ended June 30, 2023, the Company granted an aggregate of 22,500 RSUs to certain employees at grant date fair values ranging from $ 16.17 to $ 19.59 per share, with a vesting period ranging from three to four years .

(2) Withheld as treasury stock represents shares withheld to pay statutory taxes upon the vesting of RSUs.

Refer to Note 7, "Common stock and treasury stock," for details.

As of March 31, 2023, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 15,809 , which is expected to be recognized over a remaining weighted average period of 2.3 years.

Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

As of June 30, 2023, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 13,112 , which is expected to be recognized over a remaining weighted average period of 2.2 years.

Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

6 unchanged sentences

The extension option is not included in the determination of the lease term as it is not reasonably certain to be exercised.

For the three months ended March 31, 2023 and 2022, a summary of the Company’s lease information is shown below:

Three Months Ended March 31,

For the three and six months ended June 30, 2023 and 2022, a summary of the Company’s lease information is shown below:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

2 unchanged sentences

Cash paid for operating leases

As of March 31, 2023, the weighted average remaining operating lease term was 1.6 years.

As of March 31, 2023, scheduled future maturities and present value of the operating lease liabilities are as follows:

As of June 30, 2023, the weighted average remaining operating lease term was 1.4 years.

As of June 30, 2023, scheduled future maturities and present value of the operating lease liabilities are as follows:

(In thousands)

March 31, 2023

June 30, 2023

Remainder of 2023

7 unchanged sentences

(a) Capital commitment

The Company incurred data costs of $ 2,361 and $ 2,248 for the three months ended March 31, 2023 and 2022, respectively , under certain data licensing agreements.

As of March 31, 2023, material capital commitments under certain data licensing agreements were $ 24,983 , shown as follows:

The Company incurred data costs of $ 2,358 and $ 2,252 for the three months ended June 30, 2023 and 2022, respectively , and $ 4,719 and $ 4,500 for the six months ended June 30, 2023 and 2022, under certain data licensing agreements.

As of June 30, 2023, material capital commitments under certain data licensing agreements were $ 24,528 , shown as follows:

(In thousands)

March 31, 2023

June 30, 2023

Remainder of 2023

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements