Red Violet, Inc. 10-Q

Item 1. Financial Statements. RED VIOLET, INC. CONDENSED CONSOLIDA TED BALANCE SHEETS (Amounts in thousands, except share data) (unaudited) March 31, 2025 December 31, 2024 ASSETS: Current assets: Cash and cash equivalents $ 34,603 $ 36,504 Accounts receivable, net of allowance for doubtful accounts of $ 166 and $ 188 as of March 31, 2025 and December 31, 2024, respectively 9,646 8,061 Prepaid expenses and other current assets 1,653 1,627 Total current assets 45,902 46,192 Property and equipment, net 543 545 Intangible assets, net 37,488 35,997 Goodwill 5,227 5,227 Right-of-use assets 1,753 1,901 Deferred tax assets 6,597 7,496 Other noncurrent assets 1,579 1,173 Total assets $ 99,089 $ 98,531 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 2,013 $ 2,127 Accrued expenses and other current liabilities 1,989 2,881 Current portion of operating lease liabilities 343 406 Deferred revenue 754 712 Dividend payable - 4,181 Total current liabilities 5,099 10,307 Noncurrent operating lease liabilities 1,502 1,592 Other noncurrent liabilities 640 - Total liabilities 7,241 11,899 Shareholders' equity: Preferred stock—$ 0.001 par value, 10,000,000 shares authorized, and 0 shares issued and outstanding, as of March 31, 2025 and December 31, 2024 - - Common stock—$ 0.001 par value, 200,000,000 shares authorized, 13,950,797 and 13,936,329 shares issued and outstanding, as of March 31, 2025 and December 31, 2024 14 14 Additional paid-in capital 89,264 87,488 Retained earnings (accumulated deficit) 2,570 ( 870 ) Total shareholders' equity 91,848 86,632 Total liabilities and shareholders' equity $ 99,089 $ 98,531 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 March 31, 2025 2024 Revenue $ 22,003 $ 17,511 Costs and expenses: Cost of revenue (exclusive of depreciation and amortization) 3,661 3,756 Sales and marketing expenses 5,407 3,712 General and administrative expenses 6,174 5,790 Depreciation and amortization 2,550 2,270 Total costs and expenses 17,792 15,528 Income from operations 4,211 1,983 Interest income 308 365 Income before income taxes 4,519 2,348 Income tax expense 1,079 564 Net income $ 3,440 $ 1,784 Earnings per share: Basic $ 0.25 $ 0.13 Diluted $ 0.24 $ 0.13 Weighted average shares outstanding: Basic 13,998,028 13,997,064 Diluted 14,491,713 14,164,506 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 Retained earnings Shares Amount Shares Amount paid-in capital (accumulated deficit) Total Balance at December 31, 2023 13,980,274 $ 14 ( 9,428 ) $ ( 188 ) $ 94,159 $ ( 7,873 ) $ 86,112 Vesting of restricted stock units 67,125 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 20,867 ) ( 383 ) - - ( 383 ) Common stock repurchased - - ( 276,940 ) ( 5,514 ) - - ( 5,514 ) Retirement of treasury stock ( 105,235 ) - 105,235 1,942 ( 1,942 ) - - Share-based compensation - - - - 1,848 - 1,848 Net income - - - - - 1,784 1,784 Balance at March 31, 2024 13,942,164 $ 14 ( 202,000 ) $ ( 4,143 ) $ 94,065 $ ( 6,089 ) $ 83,847 Balance at December 31, 2024 13,936,329 $ 14 - $ - $ 87,488 $ ( 870 ) $ 86,632 Vesting of restricted stock units 19,500 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 5,032 ) ( 202 ) - - ( 202 ) Retirement of treasury stock ( 5,032 ) - 5,032 202 ( 202 ) - - Share-based compensation - - - - 1,978 - 1,978 Net income - - - - - 3,440 3,440 Balance at March 31, 2025 13,950,797 $ 14 - $ - $ 89,264 $ 2,570 $ 91,848 See notes to condensed consolidated financial statements. 3 RED VIOLET, INC. CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS (Amounts in thousands) (unaudited) Three Months Ended March 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,440 $ 1,784 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,550 2,270 Share-based compensation expense 1,596 1,402 Write-off of long-lived assets 2 - Provision for bad debts 62 70 Noncash lease expenses 148 134 Deferred income tax expense 899 471 Changes in assets and liabilities: Accounts receivable ( 1,647 ) ( 806 ) Prepaid expenses and other current assets ( 26 ) ( 378 ) Other noncurrent assets ( 406 ) 156 Accounts payable ( 114 ) 722 Accrued expenses and other current liabilities ( 1,392 ) ( 1,347 ) Deferred revenue 42 ( 38 ) Operating lease liabilities ( 153 ) ( 135 ) Net cash provided by operating activities 5,001 4,305 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 50 ) ( 65 ) Capitalized costs included in intangible assets ( 2,469 ) ( 2,327 ) Net cash used in investing activities ( 2,519 ) ( 2,392 ) CASH FLOWS FROM FINANCING ACTIVITIES: Taxes paid related to net share settlement of vesting of restricted stock units ( 202 ) ( 383 ) Repurchases of common stock - ( 1,415 ) Dividend payable ( 4,181 ) - Net cash used in financing activities ( 4,383 ) ( 1,798 ) Net (decrease) increase in cash and cash equivalents $ ( 1,901 ) $ 115 Cash and cash equivalents at beginning of period 36,504 32,032 Cash and cash equivalents at end of period $ 34,603 $ 32,147 SUPPLEMENTAL DISCLOSURE INFORMATION: Cash paid for interest $ - $ - Cash paid for income taxes $ - $ - Share-based compensation capitalized in intangible assets $ 382 $ 446 Retirement of treasury stock $ 202 $ 1,942 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, 2025. 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, 2024 filed with the SEC on February 27, 2025 (“Form 10-K”). The condensed consolidated balance sheet as of December 31, 2024 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. 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 December 2023, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standard Updates (“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 the impact on its condensed consolidated financial statements and related disclosures. In November, 2024, the FASB issued ASU No. 2024-03, " Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-04), Disaggregation of Income Statement Expenses (ASU 2024-03), " which requires disclosure within the notes to financial statements of specific information about certain costs and expenses including more detailed disclosures of certain categories of expenses such as employee compensation, depreciation, and intangible asset amortization that are components of existing expense captions presented on the face of the income statement. The update is effective for annual periods for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027 on a prospective or retrospective basis. Early adoption is permitted. The Company is currently assessing the impact adopting this ASU will have on its condensed consolidated financial statements. 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. 5 Three Months Ended March 31, (In thousands, except share data) 2025 2024 Numerator: Net income $ 3,440 $ 1,784 Denominator: Weighted average shares outstanding: Basic 13,998,028 13,997,064 Diluted (1) 14,491,713 14,164,506 Earnings per share: Basic $ 0.25 $ 0.13 Diluted $ 0.24 $ 0.13 (1) For the three months ended March 31, 2025 and 2024, 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: March 31, 2025 December 31, 2024 (In thousands) Amortization period Gross amount Accumulated amortization Net Gross amount Accumulated amortization Net Software developed for internal use 5 - 10 years $ 77,075 $ ( 40,864 ) $ 36,211 $ 74,409 $ ( 38,412 ) $ 35,997 Acquired intangible assets 10 years 1,325 ( 48 ) 1,277 - - - Total $ 78,400 $ ( 40,912 ) $ 37,488 $ 74,409 $ ( 38,412 ) $ 35,997 The gross carrying amount of software developed for internal use includes capitalized costs related to the design, development, and testing of internal-use software. These costs primarily consist of eligible personnel-related expenses, share-based compensation, travel expenses, and other directly attributable costs incurred during the application development stage. The gross carrying amount of acquired intangible assets reflects the acquisition cost of certain data assets for which the Company has obtained perpetual usage rights . Amortization expenses of $ 2,500 and $ 2,214 for the three months ended March 31, 2025 and 2024, respectively, were included in depreciation and amortization expense. As of March 31, 2025, intangible assets of $ 6,692 , included in the gross carrying 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 intangible assets of $ 3,991 and $ 2,773 during the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, estimated amortization expense related to the Company’s intangible assets for the remainder of 2025 through 2030 and thereafter are as follows: (In thousands) Year March 31, 2025 Remainder of 2025 7,748 2026 9,571 2027 7,955 2028 5,523 2029 3,560 2030 and thereafter 3,131 Total $ 37,488 4. Goodwill Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination. As of March 31, 2025 and December 31, 2024, 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 months ended March 31, 2025 and 2024, and there was no accumulated goodwill impairment loss as of March 31, 2025. 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 March 31, 2025, the current and noncurrent portion unbilled accounts receivable of $ 1,334 and $ 1,484 , respectively, were included within accounts receivable and other noncurrent assets, respectively, on the condensed consolidated balance sheets . As of December 31, 2024, the current and noncurrent portion unbilled accounts receivable of $ 937 and $ 1,080 , 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 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. Pricing contracts are generally annual contracts or longer, with auto renewal. If a customer pays consideration before the Company transfers services to the customer, those amounts are classified as deferred revenue. As of March 31, 2025 and December 31, 2024, the balance of deferred revenue was $ 754 and $ 712 , 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, 2024, $ 311 was recognized into revenue during the three months ended March 31, 2025. As of March 31, 2025, $ 22,035 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, $ 8,888 of revenue will be recognized in the remainder of 2025, $ 7,800 in 2026, $ 4,322 in 2027, $ 875 in 2028, $ 145 in 2029, and $ 5 in 2030. 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. 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 March 31, 2025 was more likely than not. The Company’s effective income tax rate was 24 % for the three months ended March 31, 2025 and 2024, differing from the U.S. corporate statutory federal income tax rate of 21 %. T he differences for the three months ended March 31, 2025 and 2024 were primarily the effect of state income taxes and certain nondeductible permanent differences, partially offset by the utilization of research and development tax credits. 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 March 31, 2025 and December 31, 2024. 7. Shareholders' equity Common stock and treasury stock As of March 31, 2025 and December 31, 2024, the number of issued shares of common stock was 13,950,797 and 13,936,329 , respectively. The Company held no shares of treasury stock as of either date. The changes in the number of issued shares of common stock and treasury stock were due to the following factor: an aggregate of 19,500 shares of common stock were issued as a result of the vesting of RSUs, of which, 5,032 shares of common stock were withheld to pay withholding taxes upon such vesting, which were reflected in treasury stock, with a cost of $202. All 5,032 shares of treasury stock were retired during the period. Dividend On December 3, 2024, the Company declared a special cash dividend on its common stock of $ 0.30 per share (the “Dividend”) to shareholders of record as of January 31, 2025, and the aggregate amount of approximately $ 4.2 million was paid on February 14, 2025. 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. On April 17, 2025, the Board of Directors of the Company approved, subject to stockholder approval at the Company's 2025 Annual Meeting, an amendment and restatement to the 2018 Plan to, among other things, further increase the number of shares of common stock authorized for issuance under the 2018 Plan from 6,500,000 shares to 7,500,000 shares. 8 The primary purpose of the 2018 Plan, as amended, is to attract, retain, reward and motivate certain individuals by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effort for the growth and success of the Company, so as to strengthen the mutuality of the interests between such individuals and the stockholders of the Company. As of March 31, 2025, there were 1,655,452 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 three months ended March 31, 2025 were as follows: Number of units Weighted average grant-date fair value Unvested as of December 31, 2024 887,268 $ 21.67 Granted (1) 95,650 $ 35.80 Vested and delivered ( 14,468 ) $ 21.68 Withheld as treasury stock (2) ( 5,032 ) $ 23.06 Forfeited ( 26,837 ) $ 22.77 Unvested as of March 31, 2025 936,581 $ 23.07 (1) During the three months ended March 31, 2025, the Company granted an aggregate of 95,650 RSUs to certain employees and directors at grant date fair values ranging from $ 34.18 to $ 38.72 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 for details. As of March 31, 2025, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 17,364 , 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 months ended March 31, 2025 and 2024: Three Months Ended March 31, (In thousands) 2025 2024 Sales and marketing expenses $ 195 $ 138 General and administrative expenses 1,401 1,264 Share-based compensation expense 1,596 1,402 Capitalized in intangible assets 382 446 Total $ 1,978 $ 1,848 9. Leases The Company leases its corporate headquarters of 21,020 rentable square feet in accordance with a non-cancellable operating lease agreement as amended and effective in January 2017, and the Company entered into a further amendment on September 20, 2023 to exercise the extension option for an additional 60 months through June 30, 2029, 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 operating lease agreement entered into in April 2017, which expired in March 2025. The extension options of such agreements were not included in the determination of the lease terms. On December 20, 2024, the Company entered into a non-cancellable 80-month operating lease agreement for its new Seattle office space of 6,709 rentable square feet (the "New Seattle Lease Agreement"), with the lease term preliminarily set to commence on May 1, 2025. For the three months ended March 31, 2025 and 2024, a summary of the Company’s lease information is shown below: Three Months Ended March 31, (In thousands) 2025 2024 Lease cost: Operating lease costs $ 194 $ 194 Other information: Cash paid for operating leases $ 201 $ 194 9 As of March 31, 2025, the weighted average remaining operating lease term was 4.2 years. As of March 31, 2025, scheduled future maturities and present value of the operating lease liabilities are as follows: (In thousands) Year March 31, 2025 Remainder of 2025 380 2026 519 2027 737 2028 859 2029 596 2030 and thereafter 663 Total maturities $ 3,754 Less: Lease not yet commenced (1) 1,491 Total maturities, excluding lease not yet commenced $ 2,263 Present value included in consolidated balance sheet: Current portion of operating lease liabilities $ 343 Noncurrent operating lease liabilities 1,502 Total operating lease liabilities $ 1,845 Difference between the maturities, excluding lease not yet commenced, and related present value of operating lease liabilities $ 418 (1) On December 20, 2024, the Company entered into the New Seattle Lease Agreement, with the lease term preliminarily set to commence on May 1, 2025, at which point the Company will recognize a right-of-use asset and a corresponding lease liability on its consolidated balance sheet under ASC 842. The right-of-use asset and lease liability will be determined based on the pertinent information available as of the commencement date. As of March 31, 2025, the total undiscounted future lease payments for this lease are included into total maturities as presented in the table above, but its lease liability has not been recognized. 10. Segment information The Company currently has one single operating and reporting segment, identity and information solutions, as defined by ASC 280, “Segment Reporting.” The Company adopted ASU 2023-07 as of December 31, 2024. There have been no significant changes in the basis of segmentation or in the basis of measurement of segment profit since the last annual report. The Company’s chief operating decision maker (the “CODM”) assesses performance for the identity and information solutions segment and decides how to allocate resources based on net income that also is reported on the condensed consolidated statements of operations as net income. The measure of segment assets is reported on the condensed consolidated balance sheet as total assets. 10 Information about reported segment revenue, segment net income, and significant segment expenses is shown as follows: Three Months Ended March 31, (Dollars in thousands) 2025 2024 Revenue $ 22,003 $ 17,511 Less: Cost of revenue (exclusive of depreciation and amortization) 3,661 3,756 Personnel-related expenses 7,693 5,789 Advertising, marketing and agency expenses 224 159 Provision for bad debts 62 70 Share-based compensation expense 1,596 1,402 Occupancy expenses 306 306 Professional fees 1,051 1,198 Other segment items (1) 649 578 Depreciation and amortization 2,550 2,270 Interest income ( 308 ) ( 365 ) Income tax expense 1,079 564 Segment net income $ 3,440 $ 1,784 Consolidated net income $ 3,440 $ 1,784 (1) Other segment items included in segment net income includes primarily travel and entertainments, acquisition costs, write-off of long-lived assets, and other selling, general and administrative expenses. 11. Commitments and contingencies (a) Capital commitment The Company incurred data costs of $ 2,542 and $ 2,434 for the three months ended March 31, 2025 and 2024, respectively , under certain data licensing agreements. As of March 31, 2025, material capital commitments under certain data licensing agreements were $ 11,533 , shown as follows: (In thousands) Year March 31, 2025 Remainder of 2025 $ 6,596 2026 4,512 2027 383 2028 42 Total $ 11,533 In April 2025, the Company entered into a five-year , non-cancellable cloud services agreement with a third-party provider. The agreement includes a minimum annual purchase commitment of $ 3.0 million, beginning May 1, 2025. Costs incurred under this agreement are either (i) expensed as infrastructure fees and included in cost of revenue (exclusive of depreciation and amortization) when used in the delivery of our services to customers, or (ii) capitalized as internal-use software costs within intangible assets when consumed in the development or enhancement of the Company’s internal-use software. (b) Contingencies Other than as described below, the Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of management, is likely to have a material adverse effect on the business, financial condition, results of operations, or cash flows. Legal fees associated with such legal proceedings are expensed as incurred. The Company reviews legal proceedings and claims on an ongoing basis and follow appropriate accounting guidance, including ASC 450, when making accrual and disclosure decisions. 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. 11 On February 7, 2024 , the Company was named as a defendant by Atlas Data Privacy Corporation (“Atlas”), Jane Doe-1, Jane Doe-2, Edwin Maldonado, Scott Maloney, Justyna Maloney, Patrick Colligan, and William Sullivan in an action filed in the Superior Court of New Jersey, Law Division, Monmouth County (the “Action”). Each plaintiff, other than Atlas, alleges that they are a covered person under a New Jersey state statute known as “Daniel’s Law”; Atlas alleges it is the assignee of claims from covered persons who allege Daniel’s Law was violated as to them. Each plaintiff, on their own behalf, and Atlas, on behalf of the alleged assignors, alleges the Company failed to comply with Daniel’s Law by not suppressing their home address and unpublished telephone number within 10 business days of receiving a suppression request. The Company is one of over 150 companies sued by Atlas and a combination of individual plaintiffs in actions containing nearly identical allegations and seeking similar damages. The Company removed the matter to the United States District Court for the District of New Jersey, but the matter was remanded back to the Superior Court of New Jersey, Law Division, Monmouth County by order dated November 21, 2024, where the Action is pending. No trial date has been scheduled. Each plaintiff and Atlas seek to recover actual damages that are not less than liquidated damages under Daniel’s Law, punitive damages, pre- and post-judgment interest, attorneys’ fees and costs and injunctive relief. The Company is vigorously defending itself in the Action. Should the case be tried, an adverse ruling could have an immediate near-term impact on the Company's business, financial position, and/or operations. The Company has notified its insurer of the Action and has confirmed that the claim falls within the scope of its insurance coverage. As such, the Company anticipates that the insurer will cover defense costs and any potential liability, subject to policy limits and customary exclusions. 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. 12