Item 1. Financial Statements
Item 1. Financial Statements.
RED VIOLET, INC.
CONDENSED CONSOLIDA TED BALANCE SHEETS
(Amounts in thousands, except share data)
(unaudited)
September 30, 2024
December 31, 2023
ASSETS:
Current assets:
Cash and cash equivalents
$
35,747
$
32,032
Accounts receivable, net of allowance for doubtful accounts of $ 238 and $ 159 as of
September 30, 2024 and December 31, 2023, respectively
8,459
7,135
Prepaid expenses and other current assets
1,730
1,113
Total current assets
45,936
40,280
Property and equipment, net
581
592
Intangible assets, net
35,731
34,403
Goodwill
5,227
5,227
Right-of-use assets
2,045
2,457
Deferred tax assets
7,463
9,514
Other noncurrent assets
987
517
Total assets
$
97,970
$
92,990
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable
$
2,787
$
1,631
Accrued expenses and other current liabilities
795
1,989
Current portion of operating lease liabilities
469
569
Deferred revenue
565
690
Total current liabilities
4,616
4,879
Noncurrent operating lease liabilities
1,680
1,999
Total liabilities
6,296
6,878
Shareholders' equity:
Preferred stock—$ 0.001 par value, 10,000,000 shares authorized, and 0 shares
issued and outstanding, as of September 30, 2024 and December 31, 2023
-
-
Common stock—$ 0.001 par value, 200,000,000 shares authorized, 13,735,387 and
13,980,274 shares issued, and 13,735,387 and 13,970,846 shares outstanding, as of
September 30, 2024 and December 31, 2023
14
14
Treasury stock, at cost, 0 and 9,428 shares as of September 30, 2024 and
December 31, 2023
-
( 188
)
Additional paid-in capital
93,393
94,159
Accumulated deficit
( 1,733
)
( 7,873
)
Total shareholders' equity
91,674
86,112
Total liabilities and shareholders' equity
$
97,970
$
92,990
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,
2024
2023
2024
2023
Revenue
$
19,057
$
15,837
$
55,624
$
45,143
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization)
3,314
3,313
10,525
9,732
Sales and marketing expenses
4,817
3,365
12,935
10,332
General and administrative expenses
5,994
5,223
17,534
15,539
Depreciation and amortization
2,434
2,171
7,081
6,141
Total costs and expenses
16,559
14,072
48,075
41,744
Income from operations
2,498
1,765
7,549
3,399
Interest income, net
353
346
1,032
947
Income before income taxes
2,851
2,111
8,581
4,346
Income tax expense (benefit)
1,132
( 10,384
)
2,441
( 10,253
)
Net income
$
1,719
$
12,495
$
6,140
$
14,599
Earnings per share:
Basic
$
0.12
$
0.90
$
0.44
$
1.05
Diluted
$
0.12
$
0.87
$
0.43
$
1.03
Weighted average shares outstanding:
Basic
13,782,476
13,952,426
13,852,947
13,970,317
Diluted
14,311,575
14,329,878
14,224,285
14,207,673
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, 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
Balance at June 30, 2024
13,744,189
$
14
( 12,804
)
$
( 236
)
$
91,672
$
( 3,452
)
$
87,998
Vesting of restricted stock units
5,078
-
-
-
-
-
-
Increase in treasury stock resulting
from shares withheld to cover
statutory taxes
-
-
( 1,076
)
( 28
)
-
-
( 28
)
Retirement of treasury stock
( 13,880
)
-
13,880
264
( 264
)
-
-
Share-based compensation
-
-
-
-
1,985
-
1,985
Net income
-
-
-
-
-
1,719
1,719
Balance at September 30, 2024
13,735,387
$
14
-
$
-
$
93,393
$
( 1,733
)
$
91,674
Common stock
Treasury stock
Additional paid-in
Accumulated
Shares
Amount
Shares
Amount
capital
deficit
Total
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
Balance at December 31, 2023
13,980,274
$
14
( 9,428
)
$
( 188
)
$
94,159
$
( 7,873
)
$
86,112
Vesting of restricted stock units
80,187
-
-
-
-
-
-
Increase in treasury stock resulting
from shares withheld to cover
statutory taxes
-
-
( 22,902
)
( 431
)
-
-
( 431
)
Common stock repurchased
-
-
( 292,744
)
( 5,809
)
-
-
( 5,809
)
Retirement of treasury stock
( 325,074
)
-
325,074
6,428
( 6,428
)
-
-
Share-based compensation
-
-
-
-
5,662
-
5,662
Net income
-
-
-
-
-
6,140
6,140
Balance at September 30, 2024
13,735,387
$
14
-
$
-
$
93,393
$
( 1,733
)
$
91,674
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,
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
6,140
$
14,599
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
7,081
6,141
Share-based compensation expense
4,452
4,058
Write-off of long-lived assets
82
4
Provision for bad debts
323
913
Noncash lease expenses
412
444
Deferred income tax expense (benefit)
2,051
( 10,308
)
Changes in assets and liabilities:
Accounts receivable
( 1,647
)
( 2,183
)
Prepaid expenses and other current assets
( 617
)
( 407
)
Other noncurrent assets
( 470
)
( 26
)
Accounts payable
1,156
( 240
)
Accrued expenses and other current liabilities
( 1,150
)
( 1,473
)
Deferred revenue
( 125
)
( 143
)
Operating lease liabilities
( 419
)
( 512
)
Net cash provided by operating activities
17,269
10,867
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
( 152
)
( 98
)
Capitalized costs included in intangible assets
( 7,118
)
( 6,921
)
Net cash used in investing activities
( 7,270
)
( 7,019
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Taxes paid related to net share settlement of vesting of restricted stock units
( 431
)
( 197
)
Repurchases of common stock
( 5,853
)
( 1,251
)
Net cash used in financing activities
( 6,284
)
( 1,448
)
Net increase in cash and cash equivalents
$
3,715
$
2,400
Cash and cash equivalents at beginning of period
32,032
31,810
Cash and cash equivalents at end of period
$
35,747
$
34,210
SUPPLEMENTAL DISCLOSURE INFORMATION:
Cash paid for interest
$
-
$
-
Cash paid for income taxes
$
524
$
55
Share-based compensation capitalized in intangible assets
$
1,210
$
1,389
Retirement of treasury stock
$
6,428
$
1,280
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, 2024.
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, 2023 filed with the SEC on March 7, 2024 (“Form 10-K”).
The condensed consolidated balance sheet as of December 31, 2023 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
In November 2023, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standard Updates (“ASU”) No. 2023-07, " Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07") ," which requires a public entity to disclose significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), a description of other segment items by reportable segment, and an explanation of any additional measures the CODM uses in deciding how to allocate resources, and extend nearly all annual segment reporting requirements to quarterly reporting requirements. In addition, entities with a single reportable segment must now provide all segment disclosures required in Accounting Standard Codification ("ASC") 280, including the new disclosures for reportable segments under the amendments in ASU 2023-07. The new guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. The guidance will be applied on a retrospective basis, with such disclosures to be made in regard to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on its condensed consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU No. 2023-09, " Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09) ," which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning after December 31, 2024. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The Company is currently evaluating the guidance to determine its impact on our condensed consolidated financial statements and related disclosures.
5
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)
2024
2023
2024
2023
Numerator:
Net income
$
1,719
$
12,495
$
6,140
$
14,599
Denominator:
Weighted average shares outstanding:
Basic
13,782,476
13,952,426
13,852,947
13,970,317
Diluted (1)
14,311,575
14,329,878
14,224,285
14,207,673
Earnings per share:
Basic
$
0.12
$
0.90
$
0.44
$
1.05
Diluted
$
0.12
$
0.87
$
0.43
$
1.03
(1) For the three and nine months ended September 30, 2024 and 2023, diluted weighted average shares outstanding are calculated by the inclusion of unvested restricted stock units ("RSUs").
3. Intangible assets, net
Intangible assets other than goodwill consist of the following:
September 30, 2024
December 31, 2023
(In thousands)
Amortization
period
Gross amount
Accumulated amortization
Net
Gross amount
Accumulated amortization
Net
Software developed for internal use
5 - 10 years
$
71,712
$
( 35,981
)
$
35,731
$
63,545
$
( 29,142
)
$
34,403
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 $ 2,382 and $ 2,112 for the three months ended September 30, 2024 and 2023, respectively, and $ 6,918 and $ 5,965 for the nine months ended September 30, 2024 and 2023, respectively, were included in depreciation and amortization expense. As of September 30, 2024, intangible assets of $ 5,939 , 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 $ 2,708 and $ 2,929 during the three months ended September 30, 2024 and 2023, respectively, and $ 8,328 and $ 8,310 during the nine months ended September 30, 2024 and 2023, respectively .
As of September 30, 2024, estimated amortization expense related to the Company’s intangible assets for the remainder of 2024 through 2029 and thereafter are as follows:
(In thousands)
Year
September 30, 2024
Remainder of 2024
$
2,448
2025
9,748
2026
8,361
2027
6,745
2028
4,313
2029 and thereafter
4,116
Total
$
35,731
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, 2024 and December 31, 2023, 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.
6
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, 2024 and 2023, and there was no accumulated goodwill impairment loss as of September 30, 2024.
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.
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, 2024, the current and noncurrent portion unbilled accounts receivable of $ 918 and $ 892 , respectively, were included within accounts receivable and other noncurrent assets, respectively, on the condensed consolidated balance sheets . As of December 31, 2023, the current and noncurrent portion unbilled accounts receivable of $ 829 and $ 371 , respectively, were included within accounts receivable and other noncurrent assets, respectively , on the consolidated balance sheets. The Company's revenue arrangements do not contain significant financing components.
For the three months ended September 30, 2024 and 2023, 77 % and 79 % of total revenue was attributable to customers with pricing contracts, respectively, versus 23 % and 21 % attributable to transactional customers, respectively. For the nine months ended September 30, 2024 and 2023, 76 % and 78 % of total revenue was attributable to customers with pricing contracts, respectively, versus 24 % 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 September 30, 2024 and December 31, 2023, the balance of deferred revenue was $ 565 and $ 690 , 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, $ 147 and $ 577 was recognized into revenue during the three and nine months ended September 30, 2024, respectively.
As of September 30, 2024, $ 22,098 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, $ 3,284 of revenue will be recognized in the remainder of 2024, $ 9,946 in 2025, $ 5,207 in 2026, $ 3,252 in 2027, $ 364 in 2028, and $ 45 in 2029. 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.
7
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. 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, 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 deferred tax assets as of September 30, 2024 was more likely than not.
The Company’s effective income tax rate was 40 % and ( 492 %) for the three months ended September 30, 2024 and 2023, respectively, and 28 % and ( 236 %) for the nine months ended September 30, 2024 and 2023, respectively, differing from the U.S. corporate statutory federal income tax rate of 21 %. T he difference for the three and nine months ended September 30, 2024 was primarily the effect of state income taxes and certain nondeductible permanent differences, partially offset by the utilization of research and development tax credits. The difference for the three and nine months ended September 30, 2023 was primarily the result of release of the valuation allowance, recognition of research and development tax credit, 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.
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, 2024 and December 31, 2023.
7. Common stock and treasury stock
As of September 30, 2024 and December 31, 2023, the number of issued shares of common stock was 13,735,387 and 13,980,274 , respectively, which included shares of treasury stock of 0 and 9,428 , respectively. The changes in the number of issued shares of common stock and treasury stock were due to the following factors:
• An aggregate of 80,187 shares of common stock were issued as a result of the vesting of RSUs, of which, 22,902 shares of common stock were withheld to pay withholding taxes upon such vesting, which were reflected in treasury stock, with a cost of $ 431 . Related treasury stock of 22,902 shares was then retired during the nine months ended September 30, 2024.
• 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, and subsequently on each of December 19, 2023 and March 28, 2024, the board of directors authorized the repurchase of an additional $ 5.0 million of the Company's common stock (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, 2024, the Company repurchased 292,744 shares of common stock under the Stock Repurchase Program, which was reflected in treasury stock, with a cost of $ 5,809 . Related treasury stock of 302,172 shares as a result of the repurchases, with a cost of $ 5,997 , was retired during the nine months ended September 30, 2024, resulting in no treasury stock balance as of September 30, 2024. The Company has $ 4,577 remaining under the Stock Repurchase Program as of September 30, 2024.
8
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. Subsequently on June 3, 2020 and May 25, 2022, the Company’s stockholders approved amendments to the 2018 Plan to increase the number of shares of common stock authorized for issuance under the 2018 Plan to 4,500,000 shares and 6,500,000 shares, respectively.
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, 2024, there were 1,908,864 shares of common stock available for future issuance under the 2018 Plan, as amended.
To date, all stock incentives issued under the 2018 Plan, as amended, have been in the form of RSUs. RSUs granted under the 2018 Plan, as amended, 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 nine months ended September 30, 2024 were as follows:
Number of units
Weighted average
grant-date fair value
Unvested as of December 31, 2023
1,017,718
$
20.10
Granted (1)
263,985
$
19.14
Vested and delivered
( 57,285
)
$
24.93
Withheld as treasury stock (2)
( 22,902
)
$
25.19
Forfeited
( 175,394
)
$
17.68
Unvested as of September 30, 2024
1,026,122
$
19.88
(1) In March 2024, the Company granted 130,000 RSUs, subject to performance-based requirements, to one non-executive employee at a grant date fair value of $ 18.30 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, 2030, the last achievement date deadline. No amortization of share-based compensation expense has been recognized for 95,000 RSUs among the above-mentioned grant, because, as of September 30, 2024, the Company determined that it is not probable that related performance criteria will be met. In addition to the 130,000 RSUs discussed above, the Company granted, during the nine months ended September 30, 2024, an aggregate of 133,985 RSUs to certain employees and directors at grant date fair values ranging from $ 17.00 to $ 28.50 per share, with a vesting period ranging from one 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, 2024, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 12,770 , which is expected to be recognized over a remaining weighted average period of 2.7 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, 2024 and 2023:
Three Months Ended September 30,
Nine Months Ended September 30,
(In thousands)
2024
2023
2024
2023
Sales and marketing expenses
$
148
$
116
$
444
$
348
General and administrative expenses
1,509
1,253
4,008
3,710
Share-based compensation expense
1,657
1,369
4,452
4,058
Capitalized in intangible assets
328
517
1,210
1,389
Total
$
1,985
$
1,886
$
5,662
$
5,447
9
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 its corporate headquarters lease agreement to exercise the extension option for an additional 60 months through 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, 2024 and 2023, a summary of the Company’s lease information is shown below:
Three Months Ended September 30,
Nine Months Ended September 30,
(In thousands)
2024
2023
2024
2023
Lease cost:
Operating lease costs
$
194
$
168
$
583
$
504
Other information:
Cash paid for operating leases
$
199
$
192
$
589
$
573
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 %, 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, 2024, the weighted average remaining operating lease term was 4.5 years.
As of September 30, 2024, scheduled future maturities and present value of the operating lease liabilities are as follows:
(In thousands)
Year
September 30, 2024
Remainder of 2024
201
2025
580
2026
519
2027
535
2028
551
2029 and thereafter
279
Total maturities
$
2,665
Present value included in condensed consolidated balance sheet:
Current portion of operating lease liabilities
$
469
Noncurrent operating lease liabilities
1,680
Total operating lease liabilities
$
2,149
Difference between the maturities and the present value of operating lease liabilities
$
516
10
10. Commitments and contingencies
(a) Capital commitment
The Company incurred data costs of $ 2,328 and $ 2,367 for the three months ended September 30, 2024 and 2023, respectively , and $ 7,168 and $ 7,086 for the nine months ended September 30, 2024 and 2023, under certain data licensing agreements. As of September 30, 2024, material capital commitments under certain data licensing agreements were $ 15,215 , shown as follows:
(In thousands)
Year
September 30, 2024
Remainder of 2024
$
2,183
2025
8,349
2026
4,512
2027
171
Total
$
15,215
(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.
In addition to the foregoing, 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.
11
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.