What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-06 · 114 added, 128 removed, 134 unchanged (64% of the section changed)

6 unchanged sentences

Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements.

These factors include those contained in this Form 10-Q, as well as the disclosures made in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed on March 7, 2024 (“Form 10-K”), and other filings we make with the Securities and Exchange Commission (the "SEC").

These factors include those contained in this Form 10-Q, as well as the disclosures made in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed on February 27, 2025 (“Form 10-K”), and other filings we make with the Securities and Exchange Commission (the "SEC").

We do not undertake any obligation to update forward-looking statements, except as required by law.

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Organizations are challenged by the structure, volume, and disparity of data.

Our platform and applications transform the way our customers interact with information, presenting connections and relevance of information otherwise unattainable, which drives actionable insights and better outcomes.

Our platform and applications provide real-time analytics, transforming the way our customers interact with information by presenting connections and relevance of information otherwise unattainable, which drives actionable insights and better outcomes.

Leveraging cloud-native proprietary technology and applying machine learning and advanced analytical capabilities, CORE provides essential solutions to public and private sector organizations through intuitive, easy-to-use analytical interfaces.

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FOREWARN is an app-based solution currently tailored for the real estate industry, providing instant knowledge prior to face-to-face engagement with a consumer, helping professionals identify and mitigate risk.

As of September 30, 2024 and 2023, IDI had 8,743 and 7,769 billable customers and FOREWARN had 284,967 and 168,356 users, respectively.

As of March 31, 2025 and 2024, IDI had 9,241 and 8,241 billable customers, respectively, and FOREWARN had 325,336 and 236,639 users, respectively.

We define a billable customer of IDI as a single entity that generated revenue during the last three months of the period.

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

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.

For the three months ended March 31, 2025 and 2024, 74% and 78% of total revenue was attributable to customers with pricing contracts, respectively, versus 26% and 22% attributable to transactional customers, respectively.

We endeavor to understand our customers’ needs at the moment of first engagement.

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See Note 1(b), “ Recently issued accounting standards,” in “Notes to Condensed Consolidated Financial Statements.”

Third Quarter Financial Results

For the three months ended September 30, 2024 as compared to the three months ended September 30, 2023:

First Quarter Financial Results

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024:

• Total revenue increased 26% to $22.0 million.

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Adjusted gross margin increased to 83% from 79%.

• Net income was $1.7 million compared to $12.5 million (inclusive of a one-time deferred income tax benefit of $10.3 million), which resulted in earnings of $0.12 per basic and diluted share.

Net income margin decreased to 9% from 79%.

• Net income increased 93% to $3.4 million, which resulted in earnings of $0.25 and $0.24 per basic and diluted share, respectively.

Net income margin increased to 16% from 10%.

• Adjusted EBITDA increased 47% to $8.4 million.

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• Net cash provided by operating activities increased 16% to $5.0 million.

• Cash and cash equivalents were $35.7 million as of September 30, 2024.

Third Quarter and Recent Business Highlights

• Added 266 customers to IDI during the third quarter, ending the quarter with 8,743 customers.

• Added 21,091 users to FOREWARN during the third quarter, ending the quarter with 284,967 users.

• Cash and cash equivalents were $34.6 million as of March 31, 2025.

First Quarter and Recent Business Highlights

• Added 315 customers to IDI during the first quarter, ending the quarter with 9,241 customers.

• Added 21,918 users to FOREWARN during the first quarter, ending the quarter with 325,336 users.

Over 545 REALTOR ® Associations throughout the U.S.

are now contracted to use FOREWARN.

• Purchased 292,744 shares of the Company’s common stock year to date at an average price of $19.81 per share pursuant to the Company’s $15.0 million Stock Repurchase Program, as amended, that was initially authorized on May 2, 2022.

The Company has $4.6 million remaining under the Stock Repurchase Program.

• Paid out a special cash dividend of $0.30 per share on our common stock to shareholders of record as of January 31, 2025.

The dividend, totaling $4.2 million, was paid on February 14, 2025.

Use and Reconciliation of Non-GAAP Financial Measures

Management evaluates the financial performance of our business on a variety of key indicators, including non-GAAP metrics of adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, adjusted gross profit, adjusted gross margin, and free cash flow ("FCF").

Adjusted EBITDA is a non-GAAP financial measure equal to net income, the most directly comparable financial measure based on US GAAP, excluding interest income, net, income tax expense (benefit), depreciation and amortization, share-based compensation expense, litigation costs, and write-off of long-lived assets and others.

Adjusted EBITDA is a non-GAAP financial measure equal to net income, the most directly comparable financial measure based on US GAAP, excluding interest income, income tax expense, depreciation and amortization, share-based compensation expense, litigation costs, and write-off of long-lived assets and others.

We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue.

Adjusted net income is a non-GAAP financial measure equal to net income, the most directly comparable financial measure based on US GAAP, excluding share-based compensation expense, amortization of share-based compensation capitalized in intangible assets, and discrete tax items, and including the tax effect of adjustments.

Adjusted net income is a non-GAAP financial measure equal to net income, the most directly comparable financial measure based on US GAAP, adjusted to exclude share-based compensation expense, and amortization of share-based compensation capitalized in intangible assets, and to include the tax effect of adjustments.

We define adjusted earnings per share as adjusted net income divided by the weighted average shares outstanding.

We define adjusted gross profit as revenue less cost of revenue (exclusive of depreciation and amortization), and adjusted gross margin as adjusted gross profit as a percentage of revenue.

We define adjusted gross profit as gross profit plus depreciation and amortization of certain intangible assets, and adjusted gross margin as adjusted gross profit as a percentage of revenue.

We define FCF as net cash provided by operating activities reduced by purchase of property and equipment and capitalized costs included in intangible assets.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

Interest income, net

Income tax expense (benefit)

Interest income

Income tax expense

Depreciation and amortization

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands, except share data)

2 unchanged sentences

capitalized in intangible assets

Discrete tax items (1)

Tax effect of adjustments (1)

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Weighted average shares outstanding:

(1) During the three months ended September 30, 2023, $10.3 million of income tax benefit was recognized as a result of the release of the valuation allowance previously recorded on our deferred tax asset and the cumulative research and development tax credit, which were excluded to calculate the adjusted net income.

(1) The tax effect of adjustments is calculated using the expected federal and state statutory tax rate.

The expected federal and state income tax rate was approximately 26.00% for the three and nine months ended September 30, 2024, and 25.75% for the three and nine months ended September 30, 2023.

The expected federal and state income tax rate was approximately 26.00% and 25.75% for the three months ended March 31, 2025 and 2024, respectively.

The following is a reconciliation of gross profit, the most directly comparable US GAAP financial measure, to adjusted gross profit:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

Cost of revenue (exclusive of depreciation and amortization)

Depreciation and amortization of intangible assets

Depreciation and amortization related to cost of revenue

Depreciation and amortization of certain intangible assets (1)

Adjusted gross profit

Adjusted gross margin

(1) Depreciation and amortization of certain intangible assets primarily consists of the amortization of capitalized internal-use software development costs, which are included within intangible assets and amortized over their estimated useful lives.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

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We believe adjusted net income provides additional means of evaluating period-over-period operating performance by eliminating certain non-cash expenses and other items that might otherwise make comparisons of our ongoing business with prior periods more difficult and obscure trends in ongoing operations.

Adjusted net income is a non-GAAP financial measure equal to net income, excluding share-based compensation expense, and amortization of share-based compensation capitalized in intangible assets, and including the tax effect of adjustments.

Adjusted net income is a non-GAAP financial measure equal to net income, adjusted to exclude share-based compensation expense, and amortization of share-based compensation capitalized in intangible assets, and to include the tax effect of adjustments.

We define adjusted earnings per share as adjusted net income divided by the weighted average shares outstanding.

Our adjusted gross profit is a measure used by management in evaluating the business’s current operating performance by excluding the impact of prior historical costs of assets that are expensed systematically and allocated over the estimated useful lives of the assets, which may not be indicative of the current operating activity.

Our adjusted gross profit is calculated by using revenue, less cost of revenue (exclusive of depreciation and amortization).

We believe adjusted gross profit provides useful information to our investors by eliminating the impact of non-cash depreciation and amortization, and specifically the amortization of software developed for internal use, providing a baseline of our core operating results that allow for analyzing trends in our underlying business consistently over multiple periods.

We define adjusted gross profit as gross profit plus depreciation and amortization of certain intangible assets.

We believe adjusted gross profit provides useful information to our investors by eliminating the impact of certain non-cash depreciation and amortization, and primarily the amortization of software developed for internal use, providing a baseline of our core operating results that allow for analyzing trends in our underlying business consistently over multiple periods.

Adjusted gross margin is calculated as adjusted gross profit as a percentage of revenue.

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Results of Operations

Three months ended September 30, 2024 compared to three months ended September 30, 2023

Revenue increased $3.3 million or 20% to $19.1 million for the three months ended September 30, 2024 from $15.8 million for the three months ended September 30, 2023.

Revenue from new customers increased $0.3 million or 19%, base revenue from existing customers increased $2.9 million or 23%, and growth revenue from existing customers increased $0.1 million or 3%.

Our IDI billable customer base grew from 7,769 customers as of September 30, 2023 to 8,743 customers as of September 30, 2024, and our FOREWARN user base grew from 168,356 users to 284,967 users during that same period.

Revenue from new customers represents the total monthly revenue generated from new customers in a given period.

A customer is defined as a new customer during the first six months of revenue generation.

Base revenue from existing customers represents the total monthly revenue generated from existing customers in a given period that does not exceed the customers' trailing six-month average revenue.

A customer is defined as an existing customer six months after their initial month of revenue.

Growth revenue from existing customers represents the total monthly revenue generated from existing customers in a given period in excess of the customers' trailing six-month average revenue.

Cost of revenue (exclusive of depreciation and amortization) .

Cost of revenue remained consistent at $3.3 million for the three months ended September 30, 2024 and 2023.

Our cost of revenue primarily includes data acquisition costs.

Data acquisition costs consist primarily of the costs to acquire data either on a transactional basis or through flat-fee data licensing agreements, including unlimited usage agreements.

We continue to enhance the breadth and depth of our data through the addition and expansion of relationships with key data suppliers, including our largest data supplier, which accounted for 48% and 47% of our total data acquisition costs for the three months ended September 30, 2024 and 2023, respectively.

Other cost of revenue items include expenses related to third-party infrastructure fees and pertinent personnel costs.

As the construct of our data costs is primarily a flat-fee, unlimited usage model, the cost of revenue as a percentage of revenue decreased to 17% for the three months ended September 30, 2024 from 21% for the three months ended September 30, 2023.

We expect that cost of revenue as a percentage of revenue will continue to decrease over the coming years as our revenue increases.

Historically, at scale, the industry business model’s cost of revenue will trend between 15% and 30% as a percentage of revenue.

Sales and marketing expenses .

Sales and marketing expenses increased $1.4 million or 43% to $4.8 million for the three months ended September 30, 2024 from $3.4 million for the three months ended September 30, 2023.

Sales and marketing expenses consist of salaries and benefits, advertising and marketing, travel expenses, and share-based compensation expense, incurred by our sales team, and provision for bad debts.

The increase during the three months ended September 30, 2024 was primarily attributable to the increase of $1.3 million in salaries and benefits, and sales commission.

General and administrative expenses .

General and administrative expenses increased $0.8 million or 15% to $6.0 million for the three months ended September 30, 2024 from $5.2 million for the three months ended September 30, 2023.

For the three months ended September 30, 2024 and 2023, our general and administrative expenses consisted primarily of employee salaries and benefits of $2.9 million and $2.4 million, respectively, share-based compensation expense of $1.5 million and $1.3 million, respectively, and professional fees of $0.9 million and $0.9 million, respectively.

Depreciation and amortization .

Depreciation and amortization expenses increased $0.2 million or 12% to $2.4 million for the three months ended September 30, 2024 from $2.2 million for the three months ended September 30, 2023.

The increase in depreciation and amortization for the three months ended September 30, 2024 resulted primarily from the amortization of software developed for internal use that became ready for its intended use after September 30, 2023.

Interest income, net .

Interest income, net increased $0.1 million or 1% to $0.4 million for the three months ended September 30, 2024 from $0.3 million for the three months ended September 30, 2023.

This was primarily due to interest income earned on investments in certain money market funds.

Income before income taxes .

Income before income taxes increased $0.8 million or 35% to $2.9 million for the three months ended September 30, 2024 from $2.1 million for the three months ended September 30, 2023.

The increase was primarily attributable to the increase in revenue, and decrease in our cost of revenue as a percentage of revenue, which was partially offset by the increase in employee salaries and benefits and sales commissions of $1.8 million, share-based compensation expense of $0.3 million, and depreciation and amortization of $0.2 million.

Income taxes .

Income tax expense of $1.1 million was recognized for the three months ended September 30, 2024 compared to income tax benefit of $10.4 million, inclusive of a one-time deferred income tax benefit of $10.3 million as a result of the release of the valuation allowance previously recorded on deferred tax asset and the cumulative research and development tax credit, for the three months ended September 30, 2023.

During the three months ended September 30, 2023, the Company released the valuation allowance previously recorded against its deferred tax assets as the Company concluded that the realization of the deferred tax assets as of September 30, 2023 is more likely than not.

See Note 6, “Income taxes,” included in “Notes to Condensed Consolidated Financial Statements.”

Net income was $1.7 million for the three months ended September 30, 2024 compared to $12.5 million for the three months ended September 30, 2023, as a result of the foregoing.

Nine months ended September 30, 2024 compared to nine months ended September 30, 2023

Revenue increased $10.5 million or 23% to $55.6 million for the nine months ended September 30, 2024 from $45.1 million for the nine months ended September 30, 2023.

Revenue from new customers increased $0.7 million or 15%, base revenue from existing customers increased $7.5 million or 21%, and growth revenue from existing customers increased $2.3 million or 42%.

Revenue from new customers represents the total monthly revenue generated from new customers in a given period.

A customer is defined as a new customer during the first six months of revenue generation.

Base revenue from existing customers represents the total monthly revenue generated from existing customers in a given period that does not exceed the customers' trailing six-month average revenue.

A customer is defined as an existing customer six months after their initial month of revenue.

Growth revenue from existing customers represents the total monthly revenue generated from existing customers in a given period in excess of the customers' trailing six-month average revenue.

Three months ended March 31, 2025 compared to three months ended March 31, 2024

Revenue increased $4.5 million, or 26%, to $22.0 million for the three months ended March 31, 2025, compared to $17.5 million for the same period in 2024.

The increase was driven by strong onboarding of new customers and stable recurring revenue from our existing customer base.

• Revenue from new customers increased $1.3 million, or 80%.

• Revenue from existing customers increased $3.2 million, or 20%.

Revenue from new customers represents total monthly revenue generated from customers during their first six full calendar months of revenue contribution.

Revenue from existing customers represents total monthly revenue generated from customers beginning in their seventh full calendar month of revenue contribution.

Beginning in the first quarter of 2025, we consolidated our prior base revenue and growth revenue categories into a single revenue from existing customers metric to provide a more streamlined and meaningful view of ongoing customer contribution.

As of March 31, 2025, our IDI billable customer base increased to 9,241 customers, up from 8,241 customers a year earlier.

Our FOREWARN user base increased to 325,336 users, up from 236,639 users a year earlier.

Cost of revenue (exclusive of depreciation and amortization)

Cost of revenue increased $0.8 million or 8% to $10.5 million for the nine months ended September 30, 2024 from $9.7 million for the nine months ended September 30, 2023.

Our cost of revenue primarily includes data acquisition costs.

Data acquisition costs consist primarily of the costs to acquire data either on a transactional basis or through flat-fee data licensing agreements, including unlimited usage agreements.

We continue to enhance the breadth and depth of our data through the addition and expansion of relationships with key data suppliers, including our largest data supplier, which accounted for 45% and 48% of our total data acquisition costs for the nine months ended September 30, 2024 and 2023, respectively.

Other cost of revenue items include expenses related to third-party infrastructure fees and pertinent personnel costs.

As the construct of our data costs is primarily a flat-fee, unlimited usage model, the cost of revenue as a percentage of revenue decreased to 19% for the nine months ended September 30, 2024 from 22% for the nine months ended September 30, 2023.

We expect that cost of revenue as a percentage of revenue will continue to decrease over the coming years as our revenue increases.

Historically, at scale, the industry business model’s cost of revenue will trend between 15% and 30% as a percentage of revenue.

Cost of revenue (exclusive of depreciation and amortization) decreased $0.1 million, or 3%, to $3.7 million for the three months ended March 31, 2025, compared to $3.8 million for the same period in 2024.

Our cost of revenue primarily consists of data acquisition costs, which includes the cost to acquire data under flat-fee licensing agreements, including unlimited usage arrangements, as well as purchases on a transactional basis.

We continue to enhance the breadth and depth of our data by the addition and expansion of relationships with key data suppliers, including our largest data supplier, which accounted for 43% and 41% of our total data acquisition costs for the three months ended March 31, 2025 and 2024, respectively.

Additional components of our cost of revenue include cloud infrastructure fees and pertinent personnel-related costs.

Due to the fixed-cost nature of our primary data licensing structure, cost of revenue as a percentage of revenue decreased to 17% for the three months ended March 31, 2025, compared to 21% for the same period in 2024.

We expect this percentage to continue to decline over time as our revenue increases.

Sales and marketing expenses

Sales and marketing expenses increased $2.6 million or 25% to $12.9 million for the nine months ended September 30, 2024 from $10.3 million for the nine months ended September 30, 2023.

The increase during the nine months ended September 30, 2024 was primarily attributable to the increase of $2.8 million in salaries and benefits, and sales commission, which was offset by the decrease of $0.6 million in provision for bad debts.

Sales and marketing expenses increased $1.7 million, or 46%, to $5.4 million for the three months ended March 31, 2025, compared to $3.7 million for the same period in 2024.

The increase reflects our continued investment in expanding our go-to-market capabilities to support long-term revenue growth.

Sales and marketing expenses include personnel-related expenses, advertising, marketing and agency expenses, travel expenses, and share-based compensation expense incurred by our sales team, and provision for bad debts.

The increase was primarily driven by:

• an increase of $1.6 million in personnel-related expenses;

• an increase of $0.1 million in share-based compensation expense.

General and administrative expenses

General and administrative expenses increased $2.0 million or 13% to $17.5 million for the nine months ended September 30, 2024 from $15.5 million for the nine months ended September 30, 2023.

For the nine months ended September 30, 2024 and 2023, our general and administrative expenses consisted primarily of employee salaries and benefits of $8.5 million and $7.7 million, respectively, share-based compensation expense of $4.0 million and $3.7 million, respectively, and professional fees of $3.1 million and $2.3 million, respectively.

General and administrative expenses increased $0.4 million, or 7%, to $6.2 million for the three months ended March 31, 2025, compared to $5.8 million for the same period in 2024.

The increase reflects higher personnel-related expenses and share-based compensation expense to support the continued growth of the business.

For the three months ended March 31, 2025 and 2024, general and administrative expenses consisted primarily of:

• personnel-related expenses of $3.1 million and $2.7 million, respectively;

• share-based compensation expense of $1.4 million and $1.3 million, respectively;

• professional fees of $1.1 million and $1.2 million, respectively.

Depreciation and amortization

Depreciation and amortization expenses increased $1.0 million or 15% to $7.1 million for the nine months ended September 30, 2024 from $6.1 million for the nine months ended September 30, 2023.

The increase in depreciation and amortization for the nine months ended September 30, 2024 resulted primarily from the amortization of software developed for internal use that became ready for its intended use after September 30, 2023.

Interest income, net .

Interest income, net increased $0.1 million or 9% to $1.0 million for the nine months ended September 30, 2024 from $0.9 million for the nine months ended September 30, 2023.

This was primarily due to interest income earned on investments in certain money market funds.

Depreciation and amortization expenses increased $0.3 million, or 12%, to $2.6 million for the three months ended March 31, 2025, compared to $2.3 million for the same period in 2024.

The increase was primarily driven by the amortization of intangible assets that became ready for their intended use after March 31, 2024.

Interest income

Interest income decreased $0.1 million, or 16%, to $0.3 million for the three months ended March 31, 2025, compared to $0.4 million for the same period in 2024.

The decrease was primarily attributable to lower yields on money market fund investments during the quarter.

Income before income taxes

Income before income taxes increased $4.3 million or 97% to $8.6 million for the nine months ended September 30, 2024 from $4.3 million for the nine months ended September 30, 2023.

The increase was primarily attributable to the increase in revenue, decrease in our cost of revenue as a percentage of revenue, and decrease in provision for bad debts of $0.6 million, which was partially offset by the increase in employee salaries and benefits and sales commissions of $3.6 million, share-based compensation expense of $0.4 million, professional fees of $0.8 million, and depreciation and amortization of $1.0 million.

Income taxes .

Income tax expense of $2.4 million was recognized for the nine months ended September 30, 2024 compared to income tax benefit of $10.3 million, primarily a one-time deferred income tax benefit as a result of the release of the valuation allowance previously recorded on deferred tax asset and the cumulative research and development tax credit, for the nine months ended September 30, 2023.

Beginning from the three months ended September 30, 2023, the Company released the valuation allowance previously recorded against its deferred tax assets as the Company concluded that the realization of the deferred tax assets as of

September 30, 2023 is more likely than not.

See Note 6, “Income taxes,” included in “Notes to Condensed Consolidated Financial Statements.”

Net income was $6.1 million for the nine months ended September 30, 2024 compared to $14.6 million for the nine months ended September 30, 2023, as a result of the foregoing.

Income before income taxes increased $2.2 million, or 92%, to $4.5 million for the three months ended March 31, 2025, compared to $2.3 million for the same period in 2024.

The increase was primarily driven by:

• an increase of $4.5 million in revenue;

• a decrease of $0.1 million in cost of revenue (exclusive of depreciation and amortization),

partially offset by:

• an increase of $2.0 million in personnel-related expenses;

• an increase of $0.3 million in depreciation and amortization expense;

• an increase of $0.2 million in share-based compensation expense.

Income tax expense

Income tax expense was $1.1 million for the three months ended March 31, 2025, compared to $0.6 million for the same period in 2024.

The increase in income tax expense was primarily attributable to higher pre-tax income, as the Company’s effective tax rate remained consistent at 24% in both periods.

For additional information, refer to Note 6, “Income taxes,” in the “Notes to Condensed Consolidated Financial Statements.”

Net income increased $1.6 million, or 93%, to $3.4 million for the three months ended March 31, 2025, compared to $1.8 million for the same period in 2024, as a result of the foregoing.

Effect of Inflation

We believe that the persistent inflationary pressure throughout 2023 and up to September 30, 2024 has contributed to deteriorating macroeconomic conditions and increased recession fears, causing businesses to slow their spending over the last several months, which have resulted, and may continue to result, in fluctuations in volumes, pricing and operating margins for our services.

Also, higher interest rates imposed to combat inflation, may reduce the demand for credit, which may lead to a decline in the volume of services we provide to our customers in the banking or financial industry, or other industries that are affected by these types of disruptions.

However, the rates of inflation experienced in recent years have had no material impact on our financial statements as we have attempted to recover increased costs by increasing prices for our services, to the extent permitted by contracts and competition.

We believe that persistent inflationary pressures throughout 2024 and into the first quarter of 2025 have contributed to a more challenging macroeconomic environment, increasing recessionary concerns and prompting some businesses to moderate discretionary spending.

These conditions have resulted in — and may continue to contribute to — fluctuations in transaction volumes, pricing dynamics, and operating margins across our services.

In addition, elevated interest rates implemented to curb inflation may reduce the demand for credit, which could in turn lead to lower usage of our services by customers in the banking, financial services, and adjacent industries.

Despite these broader market dynamics, inflation has not had a material impact on our financial results to date.

Where feasible, we have taken proactive steps to mitigate inflation-related cost increases, including implementing pricing adjustments where permitted under contract terms and competitive conditions.

Liquidity and Capital Resources

Cash flows provided by operating activities

For the nine months ended September 30, 2024, net cash provided by operating activities was $17.3 million, primarily the result of the net income of $6.1 million, adjusted for certain non-cash items (consisting of share-based compensation expense, depreciation and amortization, write-off of long-lived assets, provision for bad debts, noncash lease expenses, and deferred income tax expense (benefit)) totaling $14.4 million, and the cash used as a result of changes in assets and liabilities of $3.3 million, primarily the result of the increase in accounts receivable, prepaid expenses and other current assets, and other noncurrent assets, and the decrease in accrued expenses and other current liabilities, and operating lease liabilities, which was partially offset by the increase in accounts payable.

For the nine months ended September 30, 2023, net cash provided by operating activities was $10.9 million, primarily the result of the net income of $14.6 million, adjusted for certain non-cash items, as mentioned above, totaling $(1.3) million, and the cash used as a result of changes in assets and liabilities of $5.0 million, primarily the result of the increase in accounts receivable, and prepaid expenses and other current assets, and the decrease in accounts payable, accrued expenses and other current liabilities, and operating lease liabilities.

For the three months ended March 31, 2025, net cash provided by operating activities was $5.0 million.

This was primarily driven by:

• net income of $3.4 million;

• non-cash adjustments totaling $5.3 million, including share-based compensation expense, depreciation and amortization, write-off of long-lived assets, provision for bad debts, noncash lease expenses, and deferred income tax expense;

• changes in operating assets and liabilities, which resulted in a net use of cash of $3.7 million, primarily due to an increase in accounts receivable and other noncurrent assets, and a decrease in accrued expenses and other current liabilities.

For the three months ended March 31, 2024, net cash provided by operating activities was $4.3 million.

This was primarily driven by:

• net income of $1.8 million;

• non-cash adjustments totaling $4.3 million, including share-based compensation expense, depreciation and amortization, provision for bad debts, noncash lease expenses, and deferred income tax expense;

• changes in operating assets and liabilities, which resulted in a net use of cash of $1.8 million, primarily due to an increase in accounts receivable and prepaid expenses and other noncurrent assets, and a decrease in accrued expenses and other current liabilities, partially offset by the increase in accounts payable.

Cash flows used in investing activities

For the nine months ended September 30, 2024 and 2023, net cash used in investing activities was $7.3 million and $7.0 million, respectively, primarily as a result of capitalized costs included in intangible assets.

For the three months ended March 31, 2025 and 2024, net cash used in investing activities was $2.5 million and $2.4 million, respectively, primarily as a result of capitalized costs included in intangible assets.

Cash flows used in financing activities

For the nine months ended September 30, 2024, net cash used in financing activities was $6.3 million, resulting from the taxes paid related to the net share settlement of vesting of RSUs of $0.4 million, and the result of $5.9 million paid in aggregate for the repurchase of common stock pursuant to a stock repurchase program that the board of directors authorized on May 2, 2022 (the "Stock Repurchase Program"), authorizing the repurchase of up to $5.0 million of our common stock.

Subsequently on each of December 19, 2023 and March 28, 2024, the board of directors approved the repurchases of an additional $5.0 million of our common stock under the Stock Repurchase Program.

For the nine months ended September 30, 2023, net cash used in financing activities was $1.4 million, mainly the result of $1.3 million paid in aggregate for the repurchase of common stock pursuant to the Stock Repurchase Program.

As of September 30, 2024, we had material commitments under certain data licensing agreements of $15.2 million.

We anticipate funding our operations using available cash and cash flow generated from operations within the next twelve months.

We reported net income of $1.7 million and $12.5 million (inclusive of a one-time deferred income tax benefit of $10.3 million as a result of the release of valuation allowance previously recorded against our deferred tax assets and the cumulative research and development tax credit) for the three months ended September 30, 2024 and 2023, respectively, and $6.1 million and $14.6 million (inclusive of a one-time deferred income tax benefit of $10.3 million as a result of the release of valuation allowance previously recorded against our deferred tax assets and the cumulative research and development tax credit) for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, we had a total shareholders’ equity balance of $91.7 million.

As of September 30, 2024, we had cash and cash equivalents of approximately $35.7 million.

Based on projections of growth in revenue and operating results in the next twelve months, and the available cash and cash equivalents held by us, we believe that we will have sufficient cash resources to finance our operations and expected capital expenditures for the next twelve months.

Subject to revenue growth and our ability to generate positive cash flow, we may have to raise capital through the issuance of additional equity and/or debt, which, if we are able to obtain, could have the effect of diluting stockholders.

Any equity or debt financings, if available at all, may be on terms which are not favorable to us.

For the three months ended March 31, 2025, net cash used in financing activities was $4.4 million.

This was primarily driven by:

• the payment of a special cash dividend totaling $4.2 million;

• taxes paid in connection with the net share settlement of vesting RSUs totaling $0.2 million.

On December 3, 2024, we declared a special cash dividend of $0.30 per share on our common stock to shareholders of record as of January 31, 2025.

The dividend, totaling $4.2 million, was paid on February 14, 2025.

For the three months ended March 31, 2024, net cash used in financing activities was $1.8 million.

This was primarily driven by:

• common stock repurchases totaling $1.4 million, conducted pursuant to the Company’s Stock Repurchase Program;

• taxes paid in connection with the net share settlement of vesting RSUs totaling $0.4 million.

The Stock Repurchase Program was originally authorized by the Board of Directors on May 2, 2022, permitting repurchases of up to $5.0 million of the Company’s common stock.

On December 19, 2023, and again on March 28, 2024, the Board approved additional authorizations of $5.0 million each, expanding the total program size.

As of March 31, 2025, we had material commitments under certain data licensing agreements totaling $11.5 million.

We expect to fund these commitments, as well as our ongoing operating and capital requirements, using available cash on hand and cash flows generated from operations over the next twelve months.

Capital Resources

We reported net income of $3.4 million and $1.8 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, we had total shareholders’ equity of $91.8 million and cash and cash equivalents of $34.6 million.

Based on our projected growth in revenue and operating results over the next twelve months, and the available cash on hand, we believe that our existing resources will be sufficient to fund operations and expected capital expenditures for at least the next twelve months.

While we anticipate continuing to fund our business through internally generated cash flows, future capital needs may arise based on the pace of revenue growth, investment in technology, or strategic initiatives.

In such cases, we may seek to raise additional capital through the issuance of equity and/or debt securities.

However, any such financing, if available, could result in dilution to existing stockholders and may involve terms that are not favorable to the Company.

Off-Balance Sheet Arrangements

As of September 30, 2024, we did not have any off-balance sheet arrangements, as defined in Item 303 of Regulation S-K.

As of March 31, 2025, we did not have any off-balance sheet arrangements, as defined in Item 303 of Regulation S-K.

Quantitative and Qualitati ve Disclosures About Market Risk.

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Item 2. Management’s Discussion and Analysis