0000950170-22-007433 | 10-Q | XBRL Viewer

283,335

Retirement of treasury stock

$ 1,387

$ 2,046

$ 6

$ 0

Minimum

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Vesting period

2 years

Maximum

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Vesting period

4 years

Restricted Stock Units (RSUs) [Member]

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

^[1]

102,500

282,585

^[2]

455,000

Performance Based Restricted Stock Units | Employees And Directors

^[1]

$ 25.40

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Performance Based Restricted Stock Units | Employees And Directors | Minimum

102,500

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Performance Based Restricted Stock Units | Employees And Directors | Maximum

$ 24.42

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Criteria Four | Performance Based Restricted Stock Units

$ 28.75

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

RSU Grant Vested

$ 0

Criteria Four | Performance Based Restricted Stock Units | Non Executive Employee

$ 0

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

120,000

2018 Stock Incentive Plan | Share Based Compensation Award Tranche Two Member | Performance Based Restricted Stock Units | Employees And Directors | Minimum

$ 27.23

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Positive adjusted EBITDA threshold limit for vesting of grants

$ 2,000

2018 Stock Incentive Plan | Share Based Compensation Award Tranche One Member | Performance Based Restricted Stock Units | Employees And Directors

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Gross revenue threshold limit for vesting of grants

$ 12,500

[1]

During the three months ended March 31, 2022, the Company granted an aggregate of 102,500 RSUs to certain employees at grant date fair values ranging from $24.42 to $28.75 per share, with a vesting period ranging from two to four years.

[2]

The amount included in "Vested not delivered" above represents RSUs that have been vested but the delivery of the common stock underlying such RSUs had not occurred as of March 31, 2022. During the period from August 29, 2019 to November 20, 2020, the Company granted an aggregate of 455,000 RSUs. Such RSU grants shall not vest unless and until the Company has, for any fiscal quarter in which the RSUs are outstanding, (i) gross revenue determined in accordance with the Company’s reviewed or audited financial statements in excess of $12.5 million for such fiscal quarter, and (ii) positive adjusted EBITDA of at least $2.0 million, as determined based on amounts derived from the Company’s reviewed or audited financial statements for such fiscal quarter, subject to the recipient continuing to provide services to the Company either as an employee, director or consultant on the last day of the quarter that the performance criteria are met. Provided the respective performance criteria are met, the RSUs will vest in accordance with the time-based requirements contained in the award agreement over three years. In the event of a change of control, all RSUs which have not vested on the date of such change of control shall immediately vest even if the performance criteria have not been met. As of the respective grant dates, the Company determined that it was probable that such performance criteria would be met and therefore, began to record the related amortization expense on the grant dates. The Company determined that the performance criteria were met as of March 31, 2022. As a result, 283,335 RSUs were included in "Vested not delivered" above.

Commitments and Contingencies - Future Minimum Capital Payments under Certain Data Licensing Agreements (Details) $ in Thousands	Mar. 31, 2022 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Remainder of 2021	$ 6,066
2022	7,315
2023	7,166
2024	7,267
2025	3,820
2026 and thereafter	$ 31,634

Leases

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Leases

9. Leases

The Company leases its corporate headquarters of 21,020 rentable square feet in accordance with a non-cancelable 89-month operating lease agreement as amended and effective in January 2017, with an option to extend for an additional 60 months. The Company also leases an additional office space of 6,003 rentable square feet in accordance with a non-cancellable 90-month operating lease agreement entered into in April 2017, with an option to extend for an additional 60 months. The extension option is not included in the determination of the lease term as it is not reasonably certain to be exercised.

For the three months ended March 31, 2022 and 2021, a summary of the Company’s lease information is shown below:


	Three Months Ended March 31,
(In thousands)	2022		2021
Lease cost:
Operating lease costs	$	168	$	168
Other information:
Cash paid for operating leases	$	184	$	179

As of March 31, 2022, the weighted average remaining operating lease term was 2.6 years.

As of March 31, 2022, scheduled future maturities and present value of the operating lease liabilities are as follows:


(In thousands)
Year	March 31, 2022
Remainder of 2022	$	559
2023		765
2024		542
2025		77
Total maturities	$	1,943
Present value included in consolidated balance sheet:
Current portion of operating lease liabilities	$	636
Noncurrent operating lease liabilities		1,124
Total operating lease liabilities	$	1,760
Difference between the maturities and the present value of operating lease liabilities	$	183

Earnings (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings (loss) 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. Common equivalent shares are excluded from the calculation in the loss periods as their effects would be anti-dilutive.


	Three Months Ended March 31,
(In thousands, except share data)	2022		2021
Numerator:
Net income (loss)	$	107	$	(578	)
Denominator:
Weighted average shares outstanding:
Basic		13,543,607		12,207,193
Diluted(1)		14,047,635		12,207,193
Earnings (loss) per share:
Basic	$	0.01	$	(0.05	)
Diluted	$	0.01	$	(0.05	)

(1)

For the three months ended March 31, 2022, diluted weighted average shares outstanding are calculated by the inclusion of unvested restricted stock units (“RSUs”). For the three months ended March 31, 2021, a total of 1,686,499 unvested RSUs have been excluded from the diluted loss per share, as the impact is anti-dilutive.

Summary of Significant Accounting Policies (Policies)	3 Months Ended
Summary of Significant Accounting Policies (Policies)	Mar. 31, 2022
Accounting Policies [Abstract]
Basis of Preparation	(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, 2022. 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, 2021 (“Form 10-K”). The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date included in the Form 10-K, but does not include all disclosures required by US GAAP. The Company has only one operating segment, as defined by Accounting Standards Codification (“ASC”) 280, “Segment Reporting.” Principles of consolidation The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant transactions among the Company and its subsidiaries have been eliminated upon consolidation.
Recently Issued Accounting Standards	(b) Recently issued accounting standards As an emerging growth company, the Company has left open the opportunity to take advantage of the extended transition period provided to emerging growth companies in Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), however, it is the Company’s present intention to adopt any applicable new accounting standards timely.

Share-based Compensation - Schedule of Unvested RSU Activity (Detail) - $ / shares

3 Months Ended

15 Months Ended

Mar. 31, 2022

Nov. 20, 2020

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Restricted Stock Units (RSUs)

(283,335)

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Unvested, Number of units Beginning balance

1,306,953

Vested and delivered, Number of units

^[1]

102,500

(34,527)

Withheld as treasury stock, Number of units

(223)

Forfeited, Number of units

(282,585)

^[2]

(455,000)

(16,225)

Unvested, Number of units Ending balance

^[3]

1,075,893

Unvested, Weighted average grant-date fair value, Beginning balance

$ 18.85

Granted, Weighted average grant-date fair value

^[1]

25.40

Vested and delivered, Weighted average grant-date fair value

7.98

Withheld as treasury stock, Weighted average grant-date fair value

7.53

Vested not delivered, Weighted average grant-date fair value

^[2]

14.97

Forfeited, Weighted average grant-date fair value

23.36

Unvested, Weighted average grant-date fair value, Ending balance

^[3]

$ 21.12

[1]	During the three months ended March 31, 2022, the Company granted an aggregate of 102,500 RSUs to certain employees at grant date fair values ranging from $24.42 to $28.75 per share, with a vesting period ranging from two to four years.
[2]	The amount included in "Vested not delivered" above represents RSUs that have been vested but the delivery of the common stock underlying such RSUs had not occurred as of March 31, 2022. During the period from August 29, 2019 to November 20, 2020, the Company granted an aggregate of 455,000 RSUs. Such RSU grants shall not vest unless and until the Company has, for any fiscal quarter in which the RSUs are outstanding, (i) gross revenue determined in accordance with the Company’s reviewed or audited financial statements in excess of $12.5 million for such fiscal quarter, and (ii) positive adjusted EBITDA of at least $2.0 million, as determined based on amounts derived from the Company’s reviewed or audited financial statements for such fiscal quarter, subject to the recipient continuing to provide services to the Company either as an employee, director or consultant on the last day of the quarter that the performance criteria are met. Provided the respective performance criteria are met, the RSUs will vest in accordance with the time-based requirements contained in the award agreement over three years. In the event of a change of control, all RSUs which have not vested on the date of such change of control shall immediately vest even if the performance criteria have not been met. As of the respective grant dates, the Company determined that it was probable that such performance criteria would be met and therefore, began to record the related amortization expense on the grant dates. The Company determined that the performance criteria were met as of March 31, 2022. As a result, 283,335 RSUs were included in "Vested not delivered" above.
[3]	On July 30, 2021, the Company granted 120,000 RSUs, subject to performance-based requirements, to one non-executive employee, which was subsequently modified on February 18, 2022, with a fair value of $27.23 per share as of the modification date. Such RSU grants shall not vest unless and until the Company has achieved certain revenue for a portion of its business prior to the achievement date deadline for each performance milestone. No amortization of share-based compensation expense has been recognized for these RSUs, because, as of March 31, 2022, the Company determined that it is not probable that such performance criteria will be met. The 120,000 RSUs were included in "Unvested as of March 31, 2022" with a fair value of $27.23 per share.

Intangible Assets, Net - Intangible Assets Other than Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Finite Lived Intangible Assets [Line Items]
Intangible Assets, Net	$ 28,804	$ 28,181
Software Developed for Internal Use
Finite Lived Intangible Assets [Line Items]
Intangible Assets, Gross Amount	45,077	42,982
Intangible Assets, Accumulated Amortization	(16,273)	(14,801)
Intangible Assets, Net	$ 28,804	$ 28,181
Software Developed for Internal Use \| Minimum
Finite Lived Intangible Assets [Line Items]
Amortization Period	5 years
Software Developed for Internal Use \| Maximum
Finite Lived Intangible Assets [Line Items]
Amortization Period	10 years

Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Income Tax Disclosure [Abstract]
Effective income tax rate, percentage	62.00%	0.00%
Statutory federal income tax rate	21.00%	21.00%
Percentage of tax benefits likelihood of being realized upon settlement of tax authority	greater than 50%
Unrecognized tax benefits	$ 0		$ 0

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 22	$ 28
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	13,523,067	13,488,540
Common stock, shares outstanding	13,523,067	13,488,540

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 107	$ (578)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	1,534	1,258
Share-based compensation expense	1,387	2,046
Write-off of long-lived assets	3	19
Provision for bad debts	37	59
Noncash lease expenses	132	121
Interest expense	0	5
Deferred income tax expense	175	0
Changes in assets and liabilities:
Accounts receivable	(862)	(440)
Prepaid expenses and other current assets	(482)	(392)
Other noncurrent assets	0	2
Accounts payable	628	(101)
Accrued expenses and other current liabilities	47	(583)
Deferred revenue	(128)	(51)
Operating lease liabilities	(148)	(133)
Net cash provided by operating activities	2,430	1,232
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(113)	(46)
Capitalized costs included in intangible assets	(1,794)	(1,247)
Net cash used in investing activities	(1,907)	(1,293)
CASH FLOWS FROM FINANCING ACTIVITIES:
Taxes paid related to net share settlement of vesting of restricted stock units	(6)	0
Net cash (used in) provided by financing activities	(6)	0
Net increase (decrease) in cash and cash equivalents	517	(61)
Cash and cash equivalents at beginning of period	34,258	12,957
Cash and cash equivalents at end of period	34,775	12,896
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest	0	0
Cash paid for income taxes	0	0
Share-based compensation capitalized in intangible assets	301	351
Retirement of treasury stock	$ 6	$ 0

Earnings (Loss) Per Share - Additional Information (Details)	3 Months Ended
	Mar. 31, 2022 shares
Restricted Stock Units (RSUs)
Earnings Per Share [Line Items]
Shares excluded from the diluted loss per share calculation	1,686,499

Intangible Assets, Net - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Finite Lived Intangible Assets [Line Items]
Amortization expenses	$ 1,472	$ 1,203
Software Developed for Internal Use
Finite Lived Intangible Assets [Line Items]
Intangible assets that have not started amortization	3,780
Capitalized costs of internally-developed software	$ 2,095	$ 1,598

Share-based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Share-based Compensation

7. 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, approved the Red Violet, Inc. 2018 Stock Incentive Plan (the “2018 Plan”), which became effective immediately prior to the spin-off. A total of 3,000,000 shares of common stock were authorized to be issued under the 2018 Plan. On June 3, 2020, the Company’s stockholders approved an amendment to the 2018 Plan to increase the number of shares of common stock authorized for issuance under the 2018 Plan from 3,000,000 shares to 4,500,000 shares. On April 11, 2022, the board of directors of the Company approved, subject to stockholder approval, an amendment to the 2018 Plan to further increase the number of shares of common stock authorized for issuance under the 2018 Plan from 4,500,000 shares to 6,500,000 shares.

The primary purpose of the 2018 Plan 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, 2022, there were 719,187 shares of common stock available for future issuance under the 2018 Plan, as amended.

To date, all stock incentives issued under the 2018 Plan have been in the form of RSUs. RSUs granted under the 2018 Plan vest and settle upon the satisfaction of a time-based condition or with both time- and performance-based conditions. The time-based condition for these awards is generally satisfied over three or four years with annual vesting. Details of unvested RSU activity during the three months ended March 31, 2022 were as follows:


	Number of units			Weighted average grant-date fair value
Unvested as of December 31, 2021		1,306,953		$	18.85
Granted(1)		102,500		$	25.40
Vested and delivered		(34,527	)	$	7.98
Withheld as treasury stock		(223	)	$	7.53
Vested not delivered(2)		(282,585	)	$	14.97
Forfeited		(16,225	)	$	23.36
Unvested as of March 31, 2022(3)		1,075,893		$	21.12

(1)

(2)

(3)

On July 30, 2021, the Company granted 120,000 RSUs, subject to performance-based requirements, to one non-executive employee, which was subsequently modified on February 18, 2022, with a fair value of $27.23 per share as of the modification date. Such RSU grants shall not vest unless and until the Company has achieved certain revenue for a portion of its business prior to the achievement date deadline for each performance milestone. No amortization of share-based compensation expense has been recognized for these RSUs, because, as of March 31, 2022, the Company determined that it is not probable that such performance criteria will be met. The 120,000 RSUs were included in "Unvested as of March 31, 2022" with a fair value of $27.23 per share.

As of March 31, 2022, unrecognized share-based compensation expense associated with the granted RSUs amounted to $17,904, which is expected to be recognized over a remaining weighted average period of 3.0 years.

Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(In thousands)	2022		2021
Sales and marketing expenses	$	47	$	156
General and administrative expenses		1,340		1,890
Share-based compensation expense		1,387		2,046
Capitalized in intangible assets		301		351
Total	$	1,688	$	2,397

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 34,775	$ 34,258
Accounts receivable, net of allowance for doubtful accounts of $22 and $28 as of March 31, 2022 and December 31, 2021, respectively	4,561	3,736
Prepaid expenses and other current assets	1,081	599
Total current assets	40,417	38,593
Property and equipment, net	625	577
Intangible assets, net	28,804	28,181
Goodwill	5,227	5,227
Right-of-use assets	1,529	1,661
Other noncurrent assets	137	137
Total assets	76,739	74,376
Current liabilities:
Accounts payable	2,233	1,605
Accrued expenses and other current liabilities	442	395
Current portion of operating lease liabilities	636	617
Deferred revenue	713	841
Total current liabilities	4,024	3,458
Noncurrent operating lease liabilities	1,124	1,291
Deferred tax liabilities	373	198
Total liabilities	5,521	4,947
Shareholders' equity:
Preferred stock-$0.001 par value, 10,000,000 shares authorized, and 0 shares issued and outstanding, as of March 31, 2022 and December 31, 2021
Common stock-$0.001 par value, 200,000,000 shares authorized, 13,523,067 and 13,488,540 shares issued and outstanding, as of March 31, 2022 and December 31, 2021	14	13
Additional paid-in capital	93,115	91,434
Accumulated deficit	(21,911)	(22,018)
Total shareholders' equity	71,218	69,429
Total liabilities and shareholders' equity	$ 76,739	$ 74,376

Revenue Recognition - Additional Information (Details 1) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-04-01
Revenue Recognition [Line Items]
Estimated revenue expected to be recognized in the future	$ 4,925
Revenue, remaining performance obligation, expected timing of satisfaction, period	9 months
Revenue For Future Outstanding Performance Obligations	$ 9,962
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-01-01
Revenue Recognition [Line Items]
Estimated revenue expected to be recognized in the future	$ 4,232
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2024-01-01
Revenue Recognition [Line Items]
Estimated revenue expected to be recognized in the future	$ 797
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2025-01-01
Revenue Recognition [Line Items]
Estimated revenue expected to be recognized in the future	$ 8
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year

Share-based Compensation (Tables)

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Schedule of Unvested Restricted Stock Units

Details of unvested RSU activity during the three months ended March 31, 2022 were as follows:


	Number of units			Weighted average grant-date fair value
Unvested as of December 31, 2021		1,306,953		$	18.85
Granted(1)		102,500		$	25.40
Vested and delivered		(34,527	)	$	7.98
Withheld as treasury stock		(223	)	$	7.53
Vested not delivered(2)		(282,585	)	$	14.97
Forfeited		(16,225	)	$	23.36
Unvested as of March 31, 2022(3)		1,075,893		$	21.12

(1)

(2)

(3)

Summary of Allocated Share-based Compensation

Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(In thousands)	2022		2021
Sales and marketing expenses	$	47	$	156
General and administrative expenses		1,340		1,890
Share-based compensation expense		1,387		2,046
Capitalized in intangible assets		301		351
Total	$	1,688	$	2,397

Goodwill

3 Months Ended

Mar. 31, 2022

Goodwill Disclosure [Abstract]

Goodwill

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, 2022 and December 31, 2021, the balance of goodwill of $5,227 was as a result of the acquisition of Interactive Data, LLC, a wholly-owned subsidiary of red violet, effective on October 2, 2014.

In accordance with ASC 350, “Intangibles - Goodwill and Other,” goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value. The measurement date of the Company’s annual goodwill impairment test is October 1.

For the periods ended March 31, 2022 and 2021, no goodwill impairment charges were recorded.

Leases - Summary of Company's Lease Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Lease cost:
Operating lease costs	$ 168	$ 168
Other information:
Cash paid for operating leases	$ 184	$ 179

Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

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. For the three months ended March 31, 2022, the Company concluded that it was in a cumulative loss with a full valuation allowance booked against that loss.

For the three months ended March 31, 2022 and 2021, the Company’s effective income tax rate was 62% and 0%, respectively, differing from the U.S. corporate statutory federal income tax rate of 21%, and the difference is primarily the result of the valuation allowance applied to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized.

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. All of the Company’s income tax filings since 2018 remain open for tax examinations.

The Company does not have any material unrecognized tax benefits as of March 31, 2022 and December 31, 2021.

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
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Related Party Transactions

Summary of Significant Accounting Policies - Additional Information (Details)	3 Months Ended
	Mar. 31, 2022 Segment
Accounting Policies [Abstract]
Operating segments	1

Summary of Significant Accounting Policies	3 Months Ended
Summary of Significant Accounting Policies	Mar. 31, 2022
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	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, 2022. 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, 2021 (“Form 10-K”). The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date included in the Form 10-K, but does not include all disclosures required by US GAAP. The Company has only one operating segment, as defined by Accounting Standards Codification (“ASC”) 280, “Segment Reporting.” Principles of consolidation The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant transactions among the Company and its subsidiaries have been eliminated upon consolidation. (b) Recently issued accounting standards As an emerging growth company, the Company has left open the opportunity to take advantage of the extended transition period provided to emerging growth companies in Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), however, it is the Company’s present intention to adopt any applicable new accounting standards timely.

Related Party Transactions

3 Months Ended

Mar. 31, 2022

8. Related party transactions

Services Agreement

On August 7, 2018, the Company entered into a services agreement (the “Services Agreement”) with Mr. Michael Brauser (the “Consultant”), a greater than 10% stockholder, pursuant to which, the Consultant received cash compensation of $30 per month and was entitled to participate in the Company’s incentive compensation plan. The Services Agreement terminated on August 6, 2021, as further detailed below.

On February 16, 2021, the Company entered into a Separation Agreement (the "Separation Agreement") with the Consultant. Pursuant to the Separation Agreement, the parties agreed that the Services Agreement which expired on August 6, 2021 (“Expiration Date”), would not be renewed, but would continue in force and effect until the Expiration Date. As part of the Separation Agreement, the Consultant agreed (i) to certain non-solicitation obligations contained therein, (ii) that he and his affiliates would not disparage or assist or cooperate with any person or entity seeking to publicly disparage or economically harm the Company, (iii) that the Consultant and his affiliates would not initiate any lawsuit, claim, or proceeding with respect to any claims against the Company, except (with designated exceptions) for any legal proceeding initiated solely to remedy a breach of or to enforce the Separation Agreement, and (iv) with respect to each annual or special meeting of the Company's stockholders until the Expiration Date of the Separation Agreement, the Consultant agreed to vote the shares of the Company's common stock or any other securities entitled to vote then held by him or his affiliates in accordance with the board of directors' recommendations on director proposals (subject to certain board of directors change thresholds), and the ratification of the appointment of the Company’s independent registered public accounting firm.

The Company agreed (i) that the remaining unvested 166,666 RSUs previously granted to Consultant in accordance with the 2018 RSU agreement would continue to vest on July 1, 2021, in accordance with and subject to all other provisions and conditions of such grant, (ii) to amend the 2020 RSU agreement, previously granting Consultant 30,000 RSUs such that the 30,000 RSUs would continue to vest 33-1/3% on November 1, 2021, 66-2/3% on November 1, 2022, and 100% on November 1, 2023, without certain Company performance criteria, subject to all other provisions and conditions of such grant, (iii) to include shares of the Company's common stock held by the Consultant or his affiliates in any registration statement the Company files for the benefit of selling stockholders at any time when the Consultant or his affiliates beneficially own 10% or more of the Company's common stock, and (iv) to not initiate any lawsuit, claim, or proceeding with respect to any claims against the Consultant and his affiliates, except (with designated exceptions) for any legal proceeding initiated solely to remedy a breach of or to enforce the Separation Agreement. As a result of the modification to the 2020 RSU agreement, beginning February 16, 2021, the Company recognized an aggregate of $723 in share-based compensation expense over the remaining service period which ended on the Expiration Date.

The Company recognized consulting service fees relating to the Services Agreement of a total of $0 and $90 during the three months ended March 31, 2022 and 2021, respectively. In addition, amortization of share-based compensation expense of $0 and $548 (inclusive of the amortization of share-based compensation expense in relation with the modification of RSUs mentioned above) for the three months ended December 31, 2022 and 2021, respectively, was recognized in relation to the RSUs previously granted to the Consultant.

Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

. Commitments and contingencies

(a) Capital commitment


(In thousands)
Year	March 31, 2022
Remainder of 2022		6,066
2023		7,315
2024		7,166
2025		7,267
2026		3,820
Total	$	31,634

(b) Contingencies

The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for its financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated.

The Company may be involved in litigation from time to time in the ordinary course of business. The Company does not believe that the ultimate resolution of any such matters will have a material adverse effect on its business, financial condition, results of operations or cash flows. However, the results of such matters cannot be predicted with certainty and the Company cannot assure you that the ultimate resolution of any legal or administrative proceeding or dispute will not have a material adverse effect on its business, financial condition, results of operations and cash flows.

During 2020, the Company experienced significantly reduced commercial activity in numerous aspects of its business as a result of the preventative and protective actions taken by federal, state and local governments to combat Covid-19, including the implementation of stay-at-home orders, social distancing policies and certain temporary government-imposed moratoria on collection customers’ activities. During 2021 and the first quarter of 2022, the Company saw ongoing improvement in its results of operations, with the exception of the Company's idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin profile. The Company expects its idiVERIFIED service volume to return to pre-Covid levels in the first half of 2023. Given the ongoing uncertainty and the unpredictable nature of the pandemic, including the emergence of new variants and the development, availability, distribution and effectiveness of vaccines, the full impact of the Covid-19 pandemic on the Company's ongoing business, results of operations and overall financial performance cannot be reasonably estimated at this time.

To further support the Company’s liquidity, beginning April 1, 2020, the Company elected, under Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), to defer payment of the employer portion of Social Security payroll tax. Under the CARES Act, employers could forgo timely payment of the employer portion of Social Security taxes that would otherwise be due from March 27, 2020 through December 31, 2020, without penalty or interest charges. Employers must pay 50% of the deferred amount by December 31, 2021, and the remainder by December 31, 2022. The Company paid 50% of the deferred amount in December 2021. On May 5, 2020, the Company received funding under a promissory note dated May 5, 2020 evidencing an unsecured non-recourse loan under the CARES Act, which was fully forgiven by Legacy Bank of Florida and the U.S. Small Business Administration in June 2021, resulting in a gain on extinguishment of debt of $2,175 during the year ended December 31, 2021. The Company will continue to assess the CARES Act and other applicable government legislation aimed at assisting businesses during the Covid-19 pandemic.

Revenue Recognition

3 Months Ended

Mar. 31, 2022

Revenue from Contract with Customer [Abstract]

Revenue Recognition

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. The Company's revenue arrangements do not contain significant financing components.

For the three months ended March 31, 2022 and 2021, 77% and 80% of total revenue was attributable to customers with pricing contracts, respectively, versus 23% and 20% 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, 2022 and December 31, 2021, the balance of deferred revenue was $713 and $841, 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, 2021, $323 was recognized into revenue during the three months ended March 31, 2022.

As of March 31, 2022, $9,962 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, $4,925 of revenue will be recognized in the remainder of 2022, $4,232 in 2023, $797 in 2024, and $8 in 2025. 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.

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

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Weighted average shares outstanding:

Earnings (Loss) Per Share - Schedule of Basic and Diluted Loss Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands

3 Months Ended

Mar. 31, 2022

Mar. 31, 2021

Earnings Per Share [Abstract]

Net income (loss)

$ 107

$ (578)

13,543,607

12,207,193

^[1]

14,047,635

12,207,193

Earnings (loss) per share:

$ 0.01

$ (0.05)

$ 0.01

$ (0.05)

[1]

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets, Net (Tables)

3 Months Ended

Mar. 31, 2022

Intangible Assets Other than Goodwill

Intangible assets other than goodwill consist of the following:


		March 31, 2022							December 31, 2021
(In thousands)	Amortization Period	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Software developed for internal use	5-10 years	$	45,077	$	(16,273	)	$	28,804	$	42,982	$	(14,801	)	$	28,181

Schedule of Estimated Amortization Expense

As of March 31, 2022, estimated amortization expense related to the Company’s intangible assets for the remainder of 2022 through 2027 and thereafter are as follows:


(In thousands)
Year	March 31, 2022
Remainder of 2022		4,746
2023		6,666
2024		6,039
2025		4,835
2026		3,377
2027 and thereafter		3,141
Total	$	28,804

Revenue Recognition - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Revenue Recognition [Line Items]
Deferred revenue	$ 713		$ 841
Deferred revenue realization period	12 months
Revenue recognized, previously reported as deferred	$ 323
Period over which subscription contract terms exceed	12 months
Customers With Pricing Contracts
Revenue Recognition [Line Items]
Percentage of Revenue	77.00%	80.00%
Transactional Customers
Revenue Recognition [Line Items]
Percentage of Revenue	23.00%	20.00%

Leases - Scheduled Future Maturities and Present Value of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Leases [Abstract]
Remainder of 2022	$ 559
2023	765
2024	542
2025	77
Total maturities	1,943
Present value included in consolidated balance sheet:
Current portion of operating lease liabilities	636	$ 617
Noncurrent operating lease liabilities	1,124	$ 1,291
Total operating lease liabilities	1,760
Difference between the maturities and the present value of operating lease liabilities	$ 183

Intangible Assets, Net

3 Months Ended

Mar. 31, 2022

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets, Net

3. Intangible assets, net

Intangible assets other than goodwill consist of the following:


		March 31, 2022							December 31, 2021
(In thousands)	Amortization Period	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Software developed for internal use	5-10 years	$	45,077	$	(16,273	)	$	28,804	$	42,982	$	(14,801	)	$	28,181

The gross amount associated with software developed for internal use represents capitalized costs of internally-developed software, including eligible salaries and staff benefits, share-based compensation, travel expenses incurred by relevant employees, and other relevant costs.

Amortization expenses of $1,472 and $1,203 for the three months ended March 31, 2022 and 2021, respectively, were included in depreciation and amortization expense. As of March 31, 2022, intangible assets of $3,780, included in the gross amounts of software developed for internal use, have not started amortization, as they are not ready for their intended use.

The Company capitalized costs of software developed for internal use of $2,095 and $1,598 during the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, estimated amortization expense related to the Company’s intangible assets for the remainder of 2022 through 2027 and thereafter are as follows:


(In thousands)
Year	March 31, 2022
Remainder of 2022		4,746
2023		6,666
2024		6,039
2025		4,835
2026		3,377
2027 and thereafter		3,141
Total	$	28,804

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
$ in Thousands

3 Months Ended

Mar. 31, 2022

Mar. 31, 2021

Revenue

$ 12,729

$ 10,217

Costs and expenses:

Sales and marketing expenses

2,391

2,221

General and administrative expenses

5,353

4,550

Depreciation and amortization

1,534

1,258

Total costs and expenses

12,448

10,790

Income (loss) from operations

281

(573)

Interest income (expense), net

(5)

Income (loss) before income taxes

282

(578)

Income tax expense

175

Net income (loss)

$ 107

$ (578)

Earnings (loss) per share:

$ 0.01

$ (0.05)

Weighted average shares outstanding:

$ 0.01

$ (0.05)

13,543,607

12,207,193

Cost of revenue (exclusive of depreciation and amortization)

^[1]

14,047,635

12,207,193

Service [Member]

Costs and expenses:

$ 3,170

$ 2,761

[1]

Leases (Tables)

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Summary of Company's Lease Information

For the three months ended March 31, 2022 and 2021, a summary of the Company’s lease information is shown below:


	Three Months Ended March 31,
(In thousands)	2022		2021
Lease cost:
Operating lease costs	$	168	$	168
Other information:
Cash paid for operating leases	$	184	$	179

Scheduled Future Maturities and Present Value of Operating Lease Liabilities

As of March 31, 2022, scheduled future maturities and present value of the operating lease liabilities are as follows:


(In thousands)
Year	March 31, 2022
Remainder of 2022	$	559
2023		765
2024		542
2025		77
Total maturities	$	1,943
Present value included in consolidated balance sheet:
Current portion of operating lease liabilities	$	636
Noncurrent operating lease liabilities		1,124
Total operating lease liabilities	$	1,760
Difference between the maturities and the present value of operating lease liabilities	$	183

Share-based Compensation - Additional Information (Details) - USD ($) $ in Thousands		3 Months Ended
	Jun. 03, 2020	Mar. 31, 2022	Apr. 11, 2022	Mar. 22, 2018
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized share-based compensation costs in respect of granted RSUs		$ 17,904
Unrecognized share-based compensation remaining weighted average period		3 years
2018 Stock Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of common stock authorized				3,000,000
Common stock available for future issuance		719,187
2018 Stock Incentive Plan \| Minimum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of common stock authorized			4,500,000
Number of common stock authorized increased under amendment	3,000,000
2018 Stock Incentive Plan \| Maximum [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of common stock authorized			6,500,000
Number of common stock authorized increased under amendment	4,500,000

Related Party Transactions - Additional Information (Details) - USD ($)
$ in Thousands

3 Months Ended

Nov. 01, 2023

Nov. 01, 2022

Nov. 01, 2021

Feb. 16, 2021

Aug. 07, 2018

Mar. 31, 2022

Mar. 31, 2021

Restricted Stock Units (RSUs)

$ 1,387

$ 2,046

Unvested shares granted in accodance with 2018 RSU agreement

^[1]

102,500

Services Agreement | Michael Brauser-A Greater Than 10% Stockholder

Related party stockholder, percent

10.00%

Consulting service fee monthly payment

$ 30

Consulting service fee recognized amount

$ 0

Services Agreement | Michael Brauser-A Greater Than 10% Stockholder | Restricted Stock Units (RSUs)

Separation Agreement | Michael Brauser-A Greater Than 10% Stockholder

$ 0

$ 548

Service agreement expiration date

Aug. 06, 2021

Separation Agreement | Michael Brauser-A Greater Than 10% Stockholder | Restricted Stock Units (RSUs)

Unvested shares granted in accodance with 2018 RSU agreement

166,666

Shares granted based on 2020 RSU agreement

30,000