Red Violet, Inc. 10-Q

Item 1. Financial Statements. RED VIOLET, INC. CONDENSED CONSOLIDA TED BALANCE SHEETS (Amounts in thousands, except share data) (unaudited) September 30, 2023 December 31, 2022 ASSETS: Current assets: Cash and cash equivalents $ 34,210 $ 31,810 Accounts receivable, net of allowance for doubtful accounts of $ 109 and $ 60 as of September 30, 2023 and December 31, 2022, respectively 6,805 5,535 Prepaid expenses and other current assets 1,178 771 Total current assets 42,193 38,116 Property and equipment, net 627 709 Intangible assets, net 33,992 31,647 Goodwill 5,227 5,227 Right-of-use assets 2,589 1,114 Deferred tax assets 10,021 - Other noncurrent assets 627 601 Total assets $ 95,276 $ 77,414 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 1,989 $ 2,229 Accrued expenses and other current liabilities 372 1,845 Current portion of operating lease liabilities 548 692 Deferred revenue 527 670 Total current liabilities 3,436 5,436 Noncurrent operating lease liabilities 2,149 598 Deferred tax liabilities - 287 Total liabilities 5,585 6,321 Shareholders' equity: Preferred stock—$ 0.001 par value, 10,000,000 shares authorized, and 0 shares 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 September 30, 2023 and December 31, 2022 14 14 Treasury stock, at cost, 7,980 and 0 shares as of September 30, 2023 and December 31, 2022 ( 168 ) - Additional paid-in capital 96,648 92,481 Accumulated deficit ( 6,803 ) ( 21,402 ) Total shareholders' equity 89,691 71,093 Total liabilities and shareholders' equity $ 95,276 $ 77,414 See notes to condensed consolidated financial statements. 1 RED VIOLET, INC. CONDENSED CONSOLIDATED STATEMENTS O F OPERATIONS (Amounts in thousands, except share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenue $ 15,837 $ 15,026 $ 45,143 $ 40,249 Costs and expenses: Cost of revenue (exclusive of depreciation and amortization) 3,313 3,067 9,732 9,157 Sales and marketing expenses 3,365 2,623 10,332 7,836 General and administrative expenses 5,223 5,465 15,539 16,118 Depreciation and amortization 2,171 1,713 6,141 4,860 Total costs and expenses 14,072 12,868 41,744 37,971 Income from operations 1,765 2,158 3,399 2,278 Interest income, net 346 125 947 126 Income before income taxes 2,111 2,283 4,346 2,404 Income tax (benefit) expense ( 10,384 ) 25 ( 10,253 ) 244 Net income $ 12,495 $ 2,258 $ 14,599 $ 2,160 Earnings per share: Basic $ 0.90 $ 0.16 $ 1.05 $ 0.16 Diluted $ 0.87 $ 0.16 $ 1.03 $ 0.16 Weighted average number of shares outstanding: Basic 13,952,426 13,748,587 13,970,317 13,690,309 Diluted 14,329,878 13,764,262 14,207,673 13,872,596 See notes to condensed consolidated financial statements. 2 RED VIOLET, INC. CONDENSED CONSOLIDATED STATEMENTS O F CHANGES IN SHAREHOLDERS’ EQUITY (Amounts in thousands, except share data) (unaudited) Common stock Treasury stock Additional paid-in Accumulated Shares Amount Shares Amount capital deficit Total Balance at June 30, 2022 13,702,796 $ 14 ( 7,031 ) $ ( 134 ) $ 92,178 $ ( 22,116 ) $ 69,942 Vesting of restricted stock units 285,389 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 93,779 ) ( 1,539 ) - - ( 1,539 ) Common stock repurchased - - ( 13,969 ) ( 249 ) - - ( 249 ) Retirement of treasury stock ( 113,779 ) - 113,779 1,904 ( 1,904 ) - - Share-based compensation - - - - 1,743 - 1,743 Net income - - - - - 2,258 2,258 Balance at September 30, 2022 13,874,406 $ 14 ( 1,000 ) $ ( 18 ) $ 92,017 $ ( 19,858 ) $ 72,155 Balance at June 30, 2023 13,911,691 $ 14 ( 2,738 ) $ ( 52 ) $ 95,104 $ ( 19,298 ) $ 75,768 Vesting of restricted stock units 25,693 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 7,237 ) ( 147 ) - - ( 147 ) Common stock repurchased - - ( 15,019 ) ( 311 ) - - ( 311 ) Retirement of treasury stock ( 17,014 ) - 17,014 342 ( 342 ) - - Share-based compensation - - - - 1,886 - 1,886 Net income - - - - - 12,495 12,495 Balance at September 30, 2023 13,920,370 $ 14 ( 7,980 ) $ ( 168 ) $ 96,648 $ ( 6,803 ) $ 89,691 Common stock Treasury stock Additional paid-in Accumulated Shares Amount Shares Amount capital deficit Total Balance at December 31, 2021 13,488,540 $ 13 - $ - $ 91,434 $ ( 22,018 ) $ 69,429 Vesting of restricted stock units 605,899 1 - - ( 1 ) - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 200,033 ) ( 4,310 ) - - ( 4,310 ) Common stock repurchased - - ( 21,000 ) ( 383 ) - - ( 383 ) Retirement of treasury stock ( 220,033 ) - 220,033 4,675 ( 4,675 ) - - Share-based compensation - - - - 5,259 - 5,259 Net income - - - - - 2,160 2,160 Balance at September 30, 2022 13,874,406 $ 14 ( 1,000 ) $ ( 18 ) $ 92,017 $ ( 19,858 ) $ 72,155 Balance at December 31, 2022 13,956,404 $ 14 - $ - $ 92,481 $ ( 21,402 ) $ 71,093 Vesting of restricted stock units 35,893 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 9,870 ) ( 197 ) - - ( 197 ) Common stock repurchased - - ( 70,037 ) ( 1,251 ) - - ( 1,251 ) Retirement of treasury stock ( 71,927 ) - 71,927 1,280 ( 1,280 ) - - Share-based compensation - - - - 5,447 - 5,447 Net income - - - - - 14,599 14,599 Balance at September 30, 2023 13,920,370 $ 14 ( 7,980 ) $ ( 168 ) $ 96,648 $ ( 6,803 ) $ 89,691 See notes to condensed consolidated financial statements. 3 RED VIOLET, INC. CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS (Amounts in thousands) (unaudited) Nine Months Ended September 30, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 14,599 $ 2,160 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,141 4,860 Share-based compensation expense 4,058 4,066 Write-off of long-lived assets 4 6 Provision for bad debts 913 96 Noncash lease expenses 444 406 Deferred income tax (benefit) expense ( 10,308 ) 207 Changes in assets and liabilities: Accounts receivable ( 2,183 ) ( 2,833 ) Prepaid expenses and other current assets ( 407 ) ( 250 ) Other noncurrent assets ( 26 ) - Accounts payable ( 240 ) ( 9 ) Accrued expenses and other current liabilities ( 1,473 ) 149 Deferred revenue ( 143 ) ( 302 ) Operating lease liabilities ( 512 ) ( 456 ) Net cash provided by operating activities 10,867 8,100 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 98 ) ( 271 ) Capitalized costs included in intangible assets ( 6,921 ) ( 6,139 ) Net cash used in investing activities ( 7,019 ) ( 6,410 ) CASH FLOWS FROM FINANCING ACTIVITIES: Taxes paid related to net share settlement of vesting of restricted stock units ( 197 ) ( 4,310 ) Repurchases of common stock ( 1,251 ) ( 365 ) Net cash used in financing activities ( 1,448 ) ( 4,675 ) Net increase (decrease) in cash and cash equivalents $ 2,400 $ ( 2,985 ) Cash and cash equivalents at beginning of period 31,810 34,258 Cash and cash equivalents at end of period $ 34,210 $ 31,273 SUPPLEMENTAL DISCLOSURE INFORMATION: Cash paid for interest $ - $ - Cash paid for income taxes $ 55 $ 37 Share-based compensation capitalized in intangible assets $ 1,389 $ 1,193 Retirement of treasury stock $ 1,280 $ 4,675 Right-of -use assets obtained in exchange of operating lease liabilities $ 1,919 $ - Operating lease liabilities arising from obtaining right-of-use assets $ 1,919 $ - See notes to condensed consolidated financial statements. 4 RED VIOLET, INC. NOTES TO CONDENSED CONSOLID ATED FINANCIAL STATEMENTS (Amounts in thousands, except share data) (unaudited) 1. Summary of significant accounting policies (a) Basis of preparation The accompanying unaudited condensed consolidated financial statements of Red Violet, Inc., a Delaware corporation, and its consolidated subsidiaries (collectively, “red violet” or the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to those rules and regulations. 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 filed with the SEC on March 8, 2023 (“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. The Company has only one operating segment, as defined by Accounting Standards Codification (“ASC”) 280, “ Segment Reporting .” Principles of consolidation The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant transactions among the Company and its subsidiaries have been eliminated upon consolidation. (b) Recently issued accounting standards 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. 2. 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) 2023 2022 2023 2022 Numerator: Net income $ 12,495 $ 2,258 $ 14,599 $ 2,160 Denominator: Weighted average shares outstanding: Basic 13,952,426 13,748,587 13,970,317 13,690,309 Diluted (1) 14,329,878 13,764,262 14,207,673 13,872,596 Earnings per share: Basic $ 0.90 $ 0.16 $ 1.05 $ 0.16 Diluted $ 0.87 $ 0.16 $ 1.03 $ 0.16 (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"). 5 3. Intangible assets, net Intangible assets other than goodwill consist of the following: September 30, 2023 December 31, 2022 (In thousands) Amortization period Gross amount Accumulated amortization Net Gross amount Accumulated amortization Net Software developed for internal use 5 - 10 years $ 60,988 $ ( 26,996 ) $ 33,992 $ 52,678 $ ( 21,031 ) $ 31,647 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 $ 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) Year September 30, 2023 Remainder of 2023 2,168 2024 9,002 2025 7,836 2026 6,383 2027 4,767 2028 and thereafter 3,836 Total $ 33,992 4. Goodwill Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination. 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,” goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value. 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 nine months ended September 30, 2023 and 2022, and as of September 30, 2023, there was no accumulated goodwill impairment loss. 5. Revenue recognition The Company recognized 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’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s performance obligation is to provide on demand information and identity intelligence solutions to its customers by leveraging its proprietary technology and applying machine learning and advanced analytics to its massive data repository. The pricing for the customer contracts is based on usage, a monthly fee, or a combination of both. Available within Topic 606, the Company has applied the portfolio approach practical expedient in accounting for customer revenue as one collective group, rather than individual contracts. Based on the Company’s historical knowledge of the contracts contained in this portfolio and the similar nature and characteristics of the customers, the Company has concluded the financial statement effects are not materially different than if accounting for revenue on a contract by contract basis. 6 Revenue is recognized over a period of time. The Company’s customers simultaneously receive and consume the benefits provided by the Company’s performance as and when provided. Furthermore, the Company has elected the “right to invoice” practical expedient, available within Topic 606, as its measure of progress, since it has a right to payment from a customer in an amount that corresponds directly with the value of its performance completed-to-date. 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 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 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 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. The Company excludes variable consideration related entirely to wholly unsatisfied performance obligations and contracts and recognizes such variable consideration based upon the right to invoice the customer. Sales commissions are incurred and recorded on an ongoing basis over the term of the customer relationship. 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. 6. Income taxes The Company is subject to federal and state income taxes in the United States. The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter, unless a reliable estimate of ordinary income or the related tax expense/benefit cannot be made or the Company is in cumulative losses for which the benefit cannot be realized. 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. 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 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. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the Company’s financial statements. 7 The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. 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 September 30, 2023 and December 31, 2022. 7. Common stock and treasury stock 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 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 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. 8. Share-based compensation On March 22, 2018, the board of directors of the Company and Cogint, Inc. (“cogint”) (now known as Fluent, Inc.), in its capacity as sole stockholder of the Company prior to the Company’s spin-off from cogint on March 26, 2018 (the “Spin-off”), approved the Red Violet, Inc. 2018 Stock Incentive Plan (the “2018 Plan”), which became effective immediately prior to the Spin-off. A total of 3,000,000 shares of common stock were authorized to be issued under the 2018 Plan. On June 3, 2020, the Company’s stockholders approved an amendment to the 2018 Plan to increase the number of shares of common stock authorized for issuance under the 2018 Plan from 3,000,000 shares to 4,500,000 shares, and on May 25, 2022, the Company's stockholders approved an amendment to the 2018 Plan to increase the number of shares of common stock authorized for issuance under the 2018 Plan from 4,500,000 shares to 6,500,000 shares. 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 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. RSUs granted under the 2018 Plan vest and settle upon the satisfaction of a time-based condition or with both time- and performance-based conditions. 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 September 30, 2023 were as follows: Number of units Weighted average grant-date fair value Unvested as of December 31, 2022 1,044,132 $ 20.64 Granted (1) 36,000 $ 19.22 Vested and delivered ( 26,023 ) $ 18.94 Withheld as treasury stock (2) ( 9,870 ) $ 18.15 Forfeited ( 78,511 ) $ 22.01 Unvested as of September 30, 2023 965,728 $ 20.39 8 (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 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) 2023 2022 2023 2022 Sales and marketing expenses $ 116 $ 92 $ 348 $ 247 General and administrative expenses 1,253 1,181 3,710 3,819 Share-based compensation expense 1,369 1,273 4,058 4,066 Capitalized in intangible assets 517 470 1,389 1,193 Total $ 1,886 $ 1,743 $ 5,447 $ 5,259 9. Leases 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 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) 2023 2022 2023 2022 Lease cost: Operating lease costs $ 168 $ 168 $ 504 $ 504 Other information: Cash paid for operating leases $ 192 $ 186 $ 573 $ 555 Right-of-use assets obtained in exchange for operating lease liabilities (1) $ 1,919 $ - $ 1,919 $ - Weighted average discount rate for operating leases (2) 10 % - 10 % - (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. 9 As of September 30, 2023, scheduled future maturities and present value of the operating lease liabilities are as follows: (In thousands) Year September 30, 2023 Remainder of 2023 192 2024 790 2025 580 2026 519 2027 535 2028 and thereafter 830 Total maturities $ 3,446 Present value included in condensed consolidated balance sheet: Current portion of operating lease liabilities $ 548 Noncurrent operating lease liabilities 2,149 Total operating lease liabilities $ 2,697 Difference between the maturities and the present value of operating lease liabilities $ 749 10. Commitments and contingencies (a) Capital commitment 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) Year September 30, 2023 Remainder of 2023 2,339 2024 8,150 2025 7,702 2026 3,950 Total $ 22,141 (b) Contingencies The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for its financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. The Company may be involved in litigation from time to time in the ordinary course of business. The Company does not believe that the ultimate resolution of any such matters will have a material adverse effect on its business, financial condition, results of operations or cash flows. However, the results of such matters cannot be predicted with certainty and the Company cannot assure you that the ultimate resolution of any legal or administrative proceeding or dispute will not have a material adverse effect on its business, financial condition, results of operations and cash flows. 10