What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-07 · 85 added, 75 removed, 234 unchanged (41% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share data)

June 30, 2023

September 30, 2023

December 31, 2022

2 unchanged sentences

Accounts receivable, net of allowance for doubtful accounts of $ 109 and $ 60 as of

June 30, 2023 and December 31, 2022, respectively

September 30, 2023 and December 31, 2022, respectively

Prepaid expenses and other current assets

3 unchanged sentences

Right-of-use assets

Deferred tax assets

Other noncurrent assets

11 unchanged sentences

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

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

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

Common stock—$ 0.001 par value, 200,000,000 shares authorized, 13,920,370 and

13,956,404 shares issued, and 13,912,390 and 13,956,404 shares outstanding, as of

June 30, 2023 and December 31, 2022

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

September 30, 2023 and December 31, 2022

Treasury stock, at cost, 7,980 and 0 shares as of September 30, 2023 and December 31,

Additional paid-in capital

6 unchanged sentences

(Amounts in thousands, except share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Costs and expenses:

4 unchanged sentences

Total costs and expenses

Income (loss) from operations

Income from operations

Interest income, net

Income (loss) before income taxes

Income tax expense

Net income (loss)

Earnings (loss) per share:

Income before income taxes

Income tax (benefit) expense

Earnings per share:

Weighted average number of shares outstanding:

5 unchanged sentences

Additional paid-in

Balance at March 31, 2022

Balance at June 30, 2022

Vesting of restricted stock units

5 unchanged sentences

Share-based compensation

Balance at September 30, 2022

Balance at June 30, 2023

Balance at March 31, 2023

Vesting of restricted stock units

5 unchanged sentences

Share-based compensation

Balance at June 30, 2023

Balance at September 30, 2023

Treasury stock

8 unchanged sentences

Share-based compensation

Balance at June 30, 2022

Balance at September 30, 2022

Balance at December 31, 2022

6 unchanged sentences

Share-based compensation

Balance at June 30, 2023

Balance at September 30, 2023

See notes to condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

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

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

Depreciation and amortization

3 unchanged sentences

Noncash lease expenses

Deferred income tax expense

Deferred income tax (benefit) expense

Changes in assets and liabilities:

15 unchanged sentences

Net cash used in financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

5 unchanged sentences

Retirement of treasury stock

Right-of -use assets obtained in exchange of operating lease liabilities

Operating lease liabilities arising from obtaining right-of-use assets

See notes to condensed consolidated financial statements.

8 unchanged sentences

The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for any future interim periods or for the full year ending December 31, 2023.

The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (“Form 10-K”).

The condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date included in the Form 10-K, but does not include all disclosures required by US GAAP.

6 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 (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,

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 September 30,

Nine Months Ended September 30,

(In thousands, except share data)

Net income (loss)

Weighted average shares outstanding:

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.

Earnings per share:

(1) For the three and nine months ended September 30, 2023 and 2022, diluted weighted average shares outstanding are calculated by the inclusion of unvested restricted stock units ("RSUs").

Intangible assets, net

Intangible assets other than goodwill consist of the following:

June 30, 2023

September 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 $ 1,995 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:

Amortization expenses of $ 2,112 and $ 1,659 for the three months ended September 30, 2023 and 2022, respectively, and $ 5,965 and $ 4,682 for the nine months ended September 30, 2023 and 2022, respectively, were included in depreciation and amortization expense.

As of September 30, 2023, intangible assets of $ 5,370 , 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 $ 2,929 and $ 2,716 during the three months ended September 30, 2023 and 2022, respectively, and $ 8,310 and $ 7,332 during the nine months ended September 30, 2023 and 2022, respectively .

As of September 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)

June 30, 2023

September 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 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.

As of September 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 and six months ended June 30, 2023 and 2022, and as of June 30, 2023, there was no accumulated goodwill impairment loss.

The Company did no t record a goodwill impairment loss during the three and nine months ended September 30, 2023 and 2022, and as of September 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 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 .

As of September 30, 2023, the current and noncurrent portion unbilled accounts receivable of $ 778 and $ 481 , 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 sheet .

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

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.

For the three months ended September 30, 2023 and 2022, 79 % and 68 % of total revenue was attributable to customers with pricing contracts, respectively, versus 21 % and 32 % attributable to transactional customers, respectively.

For the nine months ended September 30, 2023 and 2022, 78 % and 74 % of total revenue was attributable to customers with pricing contracts, respectively, versus 22 % and 26 % 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 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.

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

As of September 30, 2023 and December 31, 2022, the balance of deferred revenue was $ 527 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, $ 102 and $ 502 was recognized into revenue during the three and nine months ended September 30, 2023, respectively.

As of September 30, 2023, $ 11,823 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, $ 2,367 of revenue will be recognized in the remainder of 2023, $ 6,063 in 2024, $ 2,237 in 2025, $ 850 in 2026, and $ 306 in 2027.

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

2 unchanged sentences

These costs are recorded in sales and marketing expenses.

In addition, the Company elected the practical expedient to not disclose the value of unsatisﬁed performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

In addition, the Company elected the practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

The Company is subject to federal and state income taxes in the United States.

1 unchanged sentence

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 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.

During the three months ended September 30, 2023, the Company released the valuation allowance previously recorded on its deferred tax assets.

The Company concluded that, due to its 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 September 30, 2023 is more likely than not.

The Company’s effective income tax rate was ( 492 %) and 1 % for the three months ended September 30, 2023 and 2022, respectively, and ( 236 %) and 10 % for the nine months ended September 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.

T he difference is primarily the result of the release of the valuation allowance, recognition of credit for increasing research activities, state income taxes and permanent differences.

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 June 30, 2023 and December 31, 2022.

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

Common stock and treasury stock

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.

As of September 30, 2023 and December 31, 2022, the number of issued shares of common stock was 13,920,370 and 13,956,404 , respectively, which included shares of treasury stock of 7,980 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 35,893 shares of common stock were issued as a result of the vesting of RSUs, of which, 9,870 shares of common stock were withheld to pay withholding taxes upon such vesting, which were reflected in treasury stock, with a cost of $ 197 .

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

Related treasury stock of 9,870 shares was then retired during the nine months ended September 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 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.

During the nine months ended September 30, 2023, the Company repurchased 70,037 shares of common stock under the Stock Repurchase Program, which was reflected in treasury stock, with a cost of $ 1,251 .

Related treasury stock of 62,057 shares, with a cost of $ 1,083 , was retired during the nine months ended September 30, 2023, which resulted in a treasury stock balance of $ 168 as of September 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 June 30, 2023, there were 2,340,668 shares of common stock available for future issuance under the 2018 Plan, as amended.

As of September 30, 2023, there were 2,331,868 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 June 30, 2023 were as follows:

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

Number of units

4 unchanged sentences

Withheld as treasury stock (2)

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 .

Unvested as of September 30, 2023

(1) In September 2023, the Company granted 12,000 RSUs, subject to performance-based requirements, to one non-executive employee at a grant date fair value of $ 20.39 per share.

Such RSU grant shall not vest unless and until the Company has achieved certain revenue for a portion of its business prior to December 31, 2023, the achievement date deadline.

No amortization of share-based compensation expense has been recognized for these RSUs, because, as of September 30, 2023, the Company determined that it is not probable that such performance criteria will be met.

In addition to the 12,000 RSUs discussed above, the Company granted, during the nine months ended September 30, 2023, an aggregate of 24,000 RSUs to certain employees at grant date fair values ranging from $ 16.17 to $ 20.77 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 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,

As of September 30, 2023, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 11,402 , which is expected to be recognized over a remaining weighted average period of 2.0 years.

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

3 unchanged sentences

Capitalized in intangible assets

The Company leases its corporate headquarters of 21,020 rentable square feet in accordance with a non-cancelable 89 -month operating lease agreement as amended and effective in January 2017, with an option to extend for an additional 60 months.

The Company leases its corporate headquarters of 21,020 rentable square feet in accordance with a non-cancellable 89 -month operating lease agreement as amended and effective in January 2017, with an option to extend for an additional 60 months.

On September 20, 2023, the Company entered into an amendment to the corporate headquarters lease agreement to exercise the extension option for an additional 60 months up to June 30, 2029 (the "Amended Lease"), with an option to further extend for an additional 60 months.

The Company also leases an additional office space of 6,003 rentable square feet in accordance with a non-cancellable 90 -month operating lease agreement entered into in April 2017, with an option to extend for an additional 60 months.

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 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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2 unchanged sentences

Cash paid for operating leases

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:

Right-of-use assets obtained in exchange for operating

lease liabilities (1)

Weighted average discount rate for operating leases (2)

(1) The Amended Lease resulted in an addition of $ 1,919 to right-of-use assets and operating lease liabilities, as of September 20, 2023 (the "Remeasurement Date").

(2) The Company used 10.0 %, its estimated incremental borrowing rate for similar secured assets, as the discount rate for the Amended Lease to determine the present value of the lease payments because the implicit rate in each lease is not readily determinable.

The discount rate was calculated on the basis of information available as of the Remeasurement Date.

As of September 30, 2023, the weighted average remaining operating lease term was 5.1 years.

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

(In thousands)

June 30, 2023

September 30, 2023

Remainder of 2023

2028 and thereafter

Total maturities

6 unchanged sentences

(a) Capital commitment

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:

The Company incurred data costs of $ 2,367 and $ 2,332 for the three months ended September 30, 2023 and 2022, respectively , and $ 7,086 and $ 6,832 for the nine months ended September 30, 2023 and 2022, respectively, under certain data licensing agreements.

As of September 30, 2023, material capital commitments under certain data licensing agreements were $ 22,141 , shown as follows:

(In thousands)

June 30, 2023

September 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