Red Violet, Inc. 10-Q

Item 1. Financial Statements. RED VIOLET, INC. CONDENSED CONSOLIDA TED BALANCE SHEETS (Amounts in thousands, except share data) (unaudited) June 30, 2025 December 31, 2024 ASSETS: Current assets: Cash and cash equivalents $ 38,848 $ 36,504 Accounts receivable, net of allowance for doubtful accounts of $ 179 and $ 188 as of June 30, 2025 and December 31, 2024, respectively 9,811 8,061 Prepaid expenses and other current assets 2,137 1,627 Total current assets 50,796 46,192 Property and equipment, net 693 545 Intangible assets, net 37,677 35,997 Goodwill 5,227 5,227 Right-of-use assets 2,822 1,901 Deferred tax assets 6,309 7,496 Other noncurrent assets 1,310 1,173 Total assets $ 104,834 $ 98,531 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 1,834 $ 2,127 Accrued expenses and other current liabilities 2,518 2,881 Current portion of operating lease liabilities 411 406 Deferred revenue 806 712 Dividend payable - 4,181 Total current liabilities 5,569 10,307 Noncurrent operating lease liabilities 2,520 1,592 Other noncurrent liabilities 539 - Total liabilities 8,628 11,899 Shareholders' equity: Preferred stock—$ 0.001 par value, 10,000,000 shares authorized, and 0 shares issued and outstanding, as of June 30, 2025 and December 31, 2024 - - Common stock—$ 0.001 par value, 200,000,000 shares authorized, 13,976,841 and 13,936,329 shares issued and outstanding, as of June 30, 2025 and December 31, 2024 14 14 Additional paid-in capital 90,936 87,488 Retained earnings (accumulated deficit) 5,256 ( 870 ) Total shareholders' equity 96,206 86,632 Total liabilities and shareholders' equity $ 104,834 $ 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 June 30, Six Months Ended June 30, 2025 2024 2025 2024 Revenue $ 21,774 $ 19,056 $ 43,777 $ 36,567 Costs and expenses: Cost of revenue (exclusive of depreciation and amortization) 3,501 3,455 7,162 7,211 Sales and marketing expenses 5,622 4,406 11,029 8,118 General and administrative expenses 7,253 5,750 13,427 11,540 Depreciation and amortization 2,647 2,377 5,197 4,647 Total costs and expenses 19,023 15,988 36,815 31,516 Income from operations 2,751 3,068 6,962 5,051 Interest income 339 314 647 679 Income before income taxes 3,090 3,382 7,609 5,730 Income tax expense 404 745 1,483 1,309 Net income $ 2,686 $ 2,637 $ 6,126 $ 4,421 Earnings per share: Basic $ 0.19 $ 0.19 $ 0.44 $ 0.32 Diluted $ 0.18 $ 0.19 $ 0.42 $ 0.31 Weighted average shares outstanding: Basic 14,018,629 13,780,074 14,008,385 13,888,569 Diluted 14,553,282 14,051,466 14,528,789 14,129,262 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 Retained earnings Shares Amount Shares Amount capital (accumulated deficit) Total Balance at March 31, 2024 13,942,164 $ 14 ( 202,000 ) $ ( 4,143 ) $ 94,065 $ ( 6,089 ) $ 83,847 Vesting of restricted stock units 7,984 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 959 ) ( 20 ) - - ( 20 ) Common stock repurchased - - ( 15,804 ) ( 295 ) - - ( 295 ) Retirement of treasury stock ( 205,959 ) - 205,959 4,222 ( 4,222 ) - - Share-based compensation - - - - 1,829 - 1,829 Net income - - - - - 2,637 2,637 Balance at June 30, 2024 13,744,189 $ 14 ( 12,804 ) $ ( 236 ) $ 91,672 $ ( 3,452 ) $ 87,998 Balance at March 31, 2025 13,950,797 $ 14 - $ - $ 89,264 $ 2,570 $ 91,848 Vesting of restricted stock units 38,617 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 12,573 ) ( 525 ) - - ( 525 ) Retirement of treasury stock ( 12,573 ) - 12,573 525 ( 525 ) - - Share-based compensation - - - - 2,197 - 2,197 Net income - - - - - 2,686 2,686 Balance at June 30, 2025 13,976,841 $ 14 - $ - $ 90,936 $ 5,256 $ 96,206 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 75,109 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 21,826 ) ( 403 ) - - ( 403 ) Common stock repurchased - - ( 292,744 ) ( 5,809 ) - - ( 5,809 ) Retirement of treasury stock ( 311,194 ) - 311,194 6,164 ( 6,164 ) - - Share-based compensation - - - - 3,677 - 3,677 Net income - - - - - 4,421 4,421 Balance at June 30, 2024 13,744,189 $ 14 ( 12,804 ) $ ( 236 ) $ 91,672 $ ( 3,452 ) $ 87,998 Balance at December 31, 2024 13,936,329 $ 14 - $ - $ 87,488 $ ( 870 ) $ 86,632 Vesting of restricted stock units 58,117 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 17,605 ) ( 727 ) - - ( 727 ) Retirement of treasury stock ( 17,605 ) - 17,605 727 ( 727 ) - - Share-based compensation - - - - 4,175 - 4,175 Net income - - - - - 6,126 6,126 Balance at June 30, 2025 13,976,841 $ 14 - $ - $ 90,936 $ 5,256 $ 96,206 See notes to condensed consolidated financial statements. 3 RED VIOLET, INC. CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS (Amounts in thousands) (unaudited) Six Months Ended June 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 6,126 $ 4,421 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,197 4,647 Share-based compensation expense 3,423 2,795 Write-off of long-lived assets 2 - Provision for bad debts 274 224 Noncash lease expenses 257 272 Deferred income tax expense 1,187 1,081 Changes in assets and liabilities: Accounts receivable ( 2,024 ) ( 1,052 ) Prepaid expenses and other current assets ( 510 ) ( 370 ) Other noncurrent assets ( 162 ) ( 616 ) Accounts payable ( 293 ) 338 Accrued expenses and other current liabilities ( 863 ) ( 1,351 ) Deferred revenue 94 ( 93 ) Operating lease liabilities ( 220 ) ( 274 ) Net cash provided by operating activities 12,488 10,022 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 252 ) ( 117 ) Capitalized costs included in intangible assets ( 4,984 ) ( 4,738 ) Net cash used in investing activities ( 5,236 ) ( 4,855 ) CASH FLOWS FROM FINANCING ACTIVITIES: Taxes paid related to net share settlement of vesting of restricted stock units ( 727 ) ( 403 ) Repurchases of common stock - ( 5,853 ) Dividend payable ( 4,181 ) - Net cash used in financing activities ( 4,908 ) ( 6,256 ) Net increase (decrease) in cash and cash equivalents $ 2,344 $ ( 1,089 ) Cash and cash equivalents at beginning of period 36,504 32,032 Cash and cash equivalents at end of period $ 38,848 $ 30,943 SUPPLEMENTAL DISCLOSURE INFORMATION: Cash paid for interest $ - $ - Cash paid for income taxes $ 681 $ 439 Share-based compensation capitalized in intangible assets $ 752 $ 882 Retirement of treasury stock $ 727 $ 6,164 Right-of-use assets obtained in exchange of operating lease liabilities $ 1,153 $ - 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 June 30, Six Months Ended June 30, (In thousands, except share data) 2025 2024 2025 2024 Numerator: Net income $ 2,686 $ 2,637 $ 6,126 $ 4,421 Denominator: Weighted average shares outstanding: Basic 14,018,629 13,780,074 14,008,385 13,888,569 Diluted (1) 14,553,282 14,051,466 14,528,789 14,129,262 Earnings per share: Basic $ 0.19 $ 0.19 $ 0.44 $ 0.32 Diluted $ 0.18 $ 0.19 $ 0.42 $ 0.31 (1) For the three and six months ended June 30, 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: June 30, 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 $ 79,737 $ ( 43,424 ) $ 36,313 $ 74,409 $ ( 38,412 ) $ 35,997 Acquired intangible assets 10 years 1,447 ( 83 ) 1,364 - - - Total $ 81,184 $ ( 43,507 ) $ 37,677 $ 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 $ 2,595 and $ 2,322 for the three months ended June 30, 2025 and 2024, respectively, and $ 5,095 and $ 4,536 for the six months ended June 30, 2025 and 2024, respectively, were included in depreciation and amortization expense. As of June 30, 2025, intangible assets of $ 3,766 , included in the gross carrying amounts of software developed for internal use, have not yet commenced amortization, as they are not ready for their intended use. The Company capitalized intangible asset costs of $ 2,784 and $ 2,847 during the three months ended June 30, 2025 and 2024, respectively , and $ 6,775 and $ 5,620 during the six months ended June 30, 2025 and 2024, respectively . As of June 30, 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 June 30, 2025 Remainder of 2025 5,345 2026 9,807 2027 8,192 2028 5,759 2029 3,797 2030 and thereafter 4,777 Total $ 37,677 4. Goodwill Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination. As of June 30, 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 and six months ended June 30, 2025 and 2024, and there was no accumulated goodwill impairment loss as of June 30, 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 June 30, 2025, the current and noncurrent portion unbilled accounts receivable of $ 1,344 and $ 1,241 , 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 June 30, 2025 and 2024, 77 % and 74 % of total revenue was attributable to customers with pricing contracts, respectively, versus 23 % and 26 % attributable to transactional customers, respectively. For the six months ended June 30, 2025 and 2024, 76 % of total revenue was attributable to customers with pricing contracts, versus 24 % attributable to transactional customers. Pricing contracts are generally annual contracts or longer, with auto renewal. If a customer pays consideration before the Company transfers services to the customer, those amounts are classified as deferred revenue. As of June 30, 2025 and December 31, 2024, the balance of deferred revenue was $ 806 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, $ 183 and $ 494 was recognized into revenue during the three and six months ended June 30, 2025, respectively. As of June 30, 2025, $ 19,931 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, $ 5,902 of revenue will be recognized in the remainder of 2025, $ 8,113 in 2026, $ 4,641 in 2027, $ 1,083 in 2028, $ 187 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. 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 June 30, 2025 was more likely than not. The Company’s effective income tax rate was 13 % and 22 % for the three months ended June 30, 2025 and 2024, respectively, and 19 % and 23 % for the six months ended June 30, 2025 and 2024, respectively, differing from the U.S. statutory corporate federal income tax rate of 21 %. For the three and six months ended June 30, 2025, the effective income tax rates were lower than the statutory rate, primarily attributable to the benefit of research and development tax credits, partially offset by state income taxes and nondeductible permanent differences. In contrast, for the three and six months ended June 30, 2024, the effective income tax rates were higher than the statutory rate, primarily driven by state income taxes and nondeductible permanent differences, partially offset by the benefit 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 June 30, 2025 and December 31, 2024. On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was enacted into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including the full expensing of domestic research and experimentation expenditures. ASC 740, “ Income Taxes ”, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. The Company is currently evaluating the impact of the OBBBA on its financial statements and does not expect it to have a material impact on the Company’s effective tax rate. 7. Shareholders' equity Common stock and treasury stock As of June 30, 2025 and December 31, 2024, the number of issued shares of common stock was 13,976,841 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 58,117 shares of common stock were issued as a result of the vesting of RSUs, of which, 17,605 shares of common stock were withheld to pay withholding taxes upon such vesting, which were reflected in treasury stock, with a cost of $727. All 17,605 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 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 June 10, 2025, the Company's stockholders approved an amendment and restatement to the 2018 Plan (the "Amended and Restated 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. The primary purpose of the Amended and Restated Plan is to attract, retain, reward and motivate certain individuals by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effort for the growth and success of the Company, so as to strengthen the mutuality of the interests between such individuals and the stockholders of the Company. As of June 30, 2025, there were 2,657,597 shares of common stock available for future issuance under the Amended and Restated Plan. To date, all stock incentives issued under the Amended and Restated Plan have been in the form of RSUs. RSUs granted under the Amended and Restated Plan vest and settle upon the satisfaction of a time-based condition or with both time- and performance-based conditions. The time-based condition for these awards is generally satisfied over three or four years with annual vesting. Details of unvested RSU activity during the six months ended June 30, 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) 107,050 $ 36.27 Vested and delivered ( 40,512 ) $ 20.12 Withheld as treasury stock (2) ( 17,605 ) $ 20.32 Forfeited ( 40,382 ) $ 23.54 Unvested as of June 30, 2025 (3) 895,819 $ 23.42 (1) During the six months ended June 30, 2025, the Company granted an aggregate of 107,050 RSUs to certain employees and directors at grant date fair values ranging from $ 34.18 to $ 49.67 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. (3) On March 18, 2024, the Company granted 130,000 RSUs, subject to performance-based vesting conditions, to a non-executive employee, at a grant date fair value of $ 18.30 per share. Such RSU grant will not vest unless and until the Company has achieved certain revenue for a portion of its business prior to December 31, 2030, the final achievement date deadline. As of June 30, 2025, the Company determined that it is not probable that the performance criteria associated with 70,000 of the 130,000 RSUs will be met. Accordingly, no share-based compensation expense has been recognized for these RSUs. The 70,000 RSUs remain unvested and were included in "Unvested as of June 30, 2025" in the table above. As of June 30, 2025, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 15,286 , which is expected to be recognized over a remaining weighted average period of 2.5 years. Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three and six months ended June 30, 2025 and 2024: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2025 2024 2025 2024 Sales and marketing expenses $ 193 $ 158 $ 388 $ 296 General and administrative expenses 1,634 1,235 3,035 2,499 Share-based compensation expense 1,827 1,393 3,423 2,795 Capitalized in intangible assets 370 436 752 882 Total $ 2,197 $ 1,829 $ 4,175 $ 3,677 9 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 for its Seattle office 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 commencement date on May 1, 2025 (the "Commencement Date"). For the three and six months ended June 30, 2025 and 2024, a summary of the Company’s lease information is shown below: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2025 2024 2025 2024 Lease cost: Operating lease costs $ 166 $ 195 $ 360 $ 389 Other information: Cash paid for operating leases $ 148 $ 196 $ 349 $ 390 Right-of-use assets obtained in exchange for new operating lease liabilities (1) $ 1,153 $ - $ 1,153 $ - (1) The New Seattle Lease Agreement resulted in the recognition of $ 1,153 in right-of-use assets obtained in exchange for operating lease liabilities as of May 1, 2025. The Company applied a 6.0 % discount rate, its estimated incremental borrowing rate for similar secured assets, to determine the present value of the lease payments, as the implicit rate in the lease is not readily determinable. The discount rate was based on information available as of the Commencement Date. As of June 30, 2025 and December 31, 2024, the weighted-average remaining term of the Company's operating leases was 5.0 years and 4.3 years, respectively, and the weighted-average discount rate used to measure the operating lease liabilities was 8.36 % and 9.94 %, respectively. As of June 30, 2025, scheduled future maturities and present value of the operating lease liabilities are as follows: (In thousands) Year June 30, 2025 Remainder of 2025 256 2026 519 2027 737 2028 859 2029 596 2030 and thereafter 663 Total maturities $ 3,630 Present value included in condensed consolidated balance sheet: Current portion of operating lease liabilities $ 411 Noncurrent operating lease liabilities 2,520 Total operating lease liabilities $ 2,931 Difference between the maturities and related present value of operating lease liabilities $ 699 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. 10 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. Information about reported segment revenue, segment net income, and significant segment expenses is shown as follows: Three Months Ended June 30, Six Months Ended June 30, (Dollars in thousands) 2025 2024 2025 2024 Revenue $ 21,774 $ 19,056 $ 43,777 $ 36,567 Less: Cost of revenue (exclusive of depreciation and amortization) 3,501 3,455 7,162 7,211 Personnel-related expenses 8,024 6,461 15,717 12,250 Advertising, marketing and agency expenses 287 204 511 363 Provision for bad debts 212 154 274 224 Share-based compensation expense 1,827 1,393 3,423 2,795 Occupancy expenses 265 324 571 630 Professional fees (1) 1,560 961 2,611 2,166 Other segment items (2) 700 659 1,349 1,230 Depreciation and amortization 2,647 2,377 5,197 4,647 Interest income ( 339 ) ( 314 ) ( 647 ) ( 679 ) Income tax expense 404 745 1,483 1,309 Segment net income $ 2,686 $ 2,637 $ 6,126 $ 4,421 Consolidated net income $ 2,686 $ 2,637 $ 6,126 $ 4,421 (1) Professional fees for the three and six months ended June 30, 2025, include $ 370 of acquisition-related costs incurred in connection with the due diligence of potential strategic targets. Comparable acquisition-related costs were $ 0 and $ 7 for the three and six months ended June 30, 2024, respectively. (2) Other segment items include primarily travel and entertainment, 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 $ 2,417 and $ 2,406 for the three months ended June 30, 2025 and 2024, respectively , and $ 4,959 and $ 4,840 for the six months ended June 30, 2025 and 2024, respectively, under certain data licensing agreements. Effective on May 1, 2025, the Company entered into an amendment with its largest data supplier, extending the term of the agreement through April 30, 2031. The Company may elect to extend the term for an additional twelve months upon written notice to this supplier at least 30 days prior to April 30, 2031. This data supplier accounted for 46 % of the Company’s total data acquisition costs for the three months ended June 30, 2025 and 2024, and 45 % and 44 % for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, the remaining minimum purchase commitment of this agreement through the end of the term is $ 24.7 million. 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. 11 As of June 30, 2025, the total material capital commitments under certain data licensing agreements and the cloud service agreement amounted to $ 43,979 , shown as follows: (In thousands) Year June 30, 2025 Remainder of 2025 $ 5,640 2026 9,512 2027 7,558 2028 7,272 2029 7,264 2030 and thereafter 6,733 Total $ 43,979 (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. 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