10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38407

 

RED VIOLET, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

82-2408531

(State or Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

2650 North Military Trail, Suite 300, Boca Raton, Florida 33431

(Address of Principal Executive Offices) (Zip Code)

(561) 757-4000

(Registrant’s Telephone Number, Including Area Code)

None

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol (s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

RDVT

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes No

As of November 3, 2023, the registrant had 13,939,405 shares of common stock outstanding.

 

 

 

 


 

RED VIOLET, INC.

TABLE OF CONTENTS FOR FORM 10-Q

 

 

 

Page

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

 

 

 

Condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022

 

1

 

 

Condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022

 

2

 

 

Condensed consolidated statements of changes in shareholders' equity for the three and nine months ended September 30, 2023 and 2022

 

3

 

 

Condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022

 

4

 

 

Notes to condensed consolidated financial statements

 

5

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

11

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

18

Item 4.

 

Controls and Procedures

 

18

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

19

Item 1A.

 

Risk Factors

 

19

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

19

Item 3.

 

Defaults Upon Senior Securities

 

19

Item 4.

 

Mine Safety Disclosures

 

20

Item 5.

 

Other Information

 

20

Item 6.

 

Exhibits

 

20

 

 

 

 

 

SIGNATURES

 

21

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Unless otherwise indicated or required by the context, all references in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” “red violet,” or the “Company,” refer to Red Violet, Inc. and its consolidated subsidiaries.

Item 1. Financial Statements.

 

RED VIOLET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

(unaudited)

 

 

 

September 30, 2023

 

 

December 31, 2022

 

ASSETS:

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,210

 

 

$

31,810

 

Accounts receivable, net of allowance for doubtful accounts of $109 and $60 as of
  September 30, 2023 and December 31, 2022, respectively

 

 

6,805

 

 

 

5,535

 

Prepaid expenses and other current assets

 

 

1,178

 

 

 

771

 

Total current assets

 

 

42,193

 

 

 

38,116

 

Property and equipment, net

 

 

627

 

 

 

709

 

Intangible assets, net

 

 

33,992

 

 

 

31,647

 

Goodwill

 

 

5,227

 

 

 

5,227

 

Right-of-use assets

 

 

2,589

 

 

 

1,114

 

Deferred tax assets

 

 

10,021

 

 

 

-

 

Other noncurrent assets

 

 

627

 

 

 

601

 

Total assets

 

$

95,276

 

 

$

77,414

 

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,989

 

 

$

2,229

 

Accrued expenses and other current liabilities

 

 

372

 

 

 

1,845

 

Current portion of operating lease liabilities

 

 

548

 

 

 

692

 

Deferred revenue

 

 

527

 

 

 

670

 

Total current liabilities

 

 

3,436

 

 

 

5,436

 

Noncurrent operating lease liabilities

 

 

2,149

 

 

 

598

 

Deferred tax liabilities

 

 

-

 

 

 

287

 

Total liabilities

 

 

5,585

 

 

 

6,321

 

Shareholders' equity:

 

 

 

 

 

 

Preferred stock—$0.001 par value, 10,000,000 shares authorized, and 0 shares
  issued and outstanding, as of September 30, 2023 and December 31, 2022

 

 

-

 

 

 

-

 

Common stock—$0.001 par value, 200,000,000 shares authorized, 13,920,370 and
  
13,956,404 shares issued, and 13,912,390 and 13,956,404 shares outstanding, as of
  September 30, 2023 and December 31, 2022

 

 

14

 

 

 

14

 

Treasury stock, at cost, 7,980 and 0 shares as of September 30, 2023 and December 31,
  2022

 

 

(168

)

 

 

-

 

Additional paid-in capital

 

 

96,648

 

 

 

92,481

 

Accumulated deficit

 

 

(6,803

)

 

 

(21,402

)

Total shareholders' equity

 

 

89,691

 

 

 

71,093

 

Total liabilities and shareholders' equity

 

$

95,276

 

 

$

77,414

 

 

See notes to condensed consolidated financial statements.

1


 

RED VIOLET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share data)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

$

15,837

 

 

$

15,026

 

 

$

45,143

 

 

$

40,249

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue (exclusive of depreciation and amortization)

 

 

3,313

 

 

 

3,067

 

 

 

9,732

 

 

 

9,157

 

Sales and marketing expenses

 

 

3,365

 

 

 

2,623

 

 

 

10,332

 

 

 

7,836

 

General and administrative expenses

 

 

5,223

 

 

 

5,465

 

 

 

15,539

 

 

 

16,118

 

Depreciation and amortization

 

 

2,171

 

 

 

1,713

 

 

 

6,141

 

 

 

4,860

 

Total costs and expenses

 

 

14,072

 

 

 

12,868

 

 

 

41,744

 

 

 

37,971

 

Income from operations

 

 

1,765

 

 

 

2,158

 

 

 

3,399

 

 

 

2,278

 

Interest income, net

 

 

346

 

 

 

125

 

 

 

947

 

 

 

126

 

Income before income taxes

 

 

2,111

 

 

 

2,283

 

 

 

4,346

 

 

 

2,404

 

Income tax (benefit) expense

 

 

(10,384

)

 

 

25

 

 

 

(10,253

)

 

 

244

 

Net income

 

$

12,495

 

 

$

2,258

 

 

$

14,599

 

 

$

2,160

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.90

 

 

$

0.16

 

 

$

1.05

 

 

$

0.16

 

Diluted

 

$

0.87

 

 

$

0.16

 

 

$

1.03

 

 

$

0.16

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,952,426

 

 

 

13,748,587

 

 

 

13,970,317

 

 

 

13,690,309

 

Diluted

 

 

14,329,878

 

 

 

13,764,262

 

 

 

14,207,673

 

 

 

13,872,596

 

 

See notes to condensed consolidated financial statements.

2


 

RED VIOLET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Amounts in thousands, except share data)

(unaudited)

 

 

 

Common stock

 

 

Treasury stock

 

 

Additional paid-in

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

Total

 

Balance at June 30, 2022

 

 

13,702,796

 

 

$

14

 

 

 

(7,031

)

 

$

(134

)

 

$

92,178

 

 

$

(22,116

)

 

$

69,942

 

Vesting of restricted stock units

 

 

285,389

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Increase in treasury stock resulting
  from shares withheld to cover
  statutory taxes

 

 

-

 

 

 

-

 

 

 

(93,779

)

 

 

(1,539

)

 

 

-

 

 

 

-

 

 

 

(1,539

)

Common stock repurchased

 

 

-

 

 

 

-

 

 

 

(13,969

)

 

 

(249

)

 

 

-

 

 

 

-

 

 

 

(249

)

Retirement of treasury stock

 

 

(113,779

)

 

 

-

 

 

 

113,779

 

 

 

1,904

 

 

 

(1,904

)

 

 

-

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,743

 

 

 

-

 

 

 

1,743

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,258

 

 

 

2,258

 

Balance at September 30, 2022

 

 

13,874,406

 

 

$

14

 

 

 

(1,000

)

 

$

(18

)

 

$

92,017

 

 

$

(19,858

)

 

$

72,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2023

 

 

13,911,691

 

 

$

14

 

 

 

(2,738

)

 

$

(52

)

 

$

95,104

 

 

$

(19,298

)

 

$

75,768

 

Vesting of restricted stock units

 

 

25,693

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Increase in treasury stock resulting
  from shares withheld to cover
  statutory taxes

 

 

-

 

 

 

-

 

 

 

(7,237

)

 

 

(147

)

 

 

-

 

 

 

-

 

 

 

(147

)

Common stock repurchased

 

 

-

 

 

 

-

 

 

 

(15,019

)

 

 

(311

)

 

 

-

 

 

 

-

 

 

 

(311

)

Retirement of treasury stock

 

 

(17,014

)

 

 

-

 

 

 

17,014

 

 

 

342

 

 

 

(342

)

 

 

-

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,886

 

 

 

-

 

 

 

1,886

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,495

 

 

 

12,495

 

Balance at September 30, 2023

 

 

13,920,370

 

 

$

14

 

 

 

(7,980

)

 

$

(168

)

 

$

96,648

 

 

$

(6,803

)

 

$

89,691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

Treasury stock

 

 

Additional paid-in

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

Total

 

Balance at December 31, 2021

 

 

13,488,540

 

 

$

13

 

 

 

-

 

 

$

-

 

 

$

91,434

 

 

$

(22,018

)

 

$

69,429

 

Vesting of restricted stock units

 

 

605,899

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

(1

)

 

 

-

 

 

 

-

 

Increase in treasury stock resulting
  from shares withheld to cover
  statutory taxes

 

 

-

 

 

 

-

 

 

 

(200,033

)

 

 

(4,310

)

 

 

-

 

 

 

-

 

 

 

(4,310

)

Common stock repurchased

 

 

-

 

 

 

-

 

 

 

(21,000

)

 

 

(383

)

 

 

-

 

 

 

-

 

 

 

(383

)

Retirement of treasury stock

 

 

(220,033

)

 

 

-

 

 

 

220,033

 

 

 

4,675

 

 

 

(4,675

)

 

 

-

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,259

 

 

 

-

 

 

 

5,259

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,160

 

 

 

2,160

 

Balance at September 30, 2022

 

 

13,874,406

 

 

$

14

 

 

 

(1,000

)

 

$

(18

)

 

$

92,017

 

 

$

(19,858

)

 

$

72,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2022

 

 

13,956,404

 

 

$

14

 

 

 

-

 

 

$

-

 

 

$

92,481

 

 

$

(21,402

)

 

$

71,093

 

Vesting of restricted stock units

 

 

35,893

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Increase in treasury stock resulting
  from shares withheld to cover
  statutory taxes

 

 

-

 

 

 

-

 

 

 

(9,870

)

 

 

(197

)

 

 

-

 

 

 

-

 

 

 

(197

)

Common stock repurchased

 

 

-

 

 

 

-

 

 

 

(70,037

)

 

 

(1,251

)

 

 

-

 

 

 

-

 

 

 

(1,251

)

Retirement of treasury stock

 

 

(71,927

)

 

 

-

 

 

 

71,927

 

 

 

1,280

 

 

 

(1,280

)

 

 

-

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,447

 

 

 

-

 

 

 

5,447

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,599

 

 

 

14,599

 

Balance at September 30, 2023

 

 

13,920,370

 

 

$

14

 

 

 

(7,980

)

 

$

(168

)

 

$

96,648

 

 

$

(6,803

)

 

$

89,691

 

 

See notes to condensed consolidated financial statements.

3


 

RED VIOLET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

14,599

 

 

$

2,160

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

6,141

 

 

 

4,860

 

Share-based compensation expense

 

 

4,058

 

 

 

4,066

 

Write-off of long-lived assets

 

 

4

 

 

 

6

 

Provision for bad debts

 

 

913

 

 

 

96

 

Noncash lease expenses

 

 

444

 

 

 

406

 

Deferred income tax (benefit) expense

 

 

(10,308

)

 

 

207

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(2,183

)

 

 

(2,833

)

Prepaid expenses and other current assets

 

 

(407

)

 

 

(250

)

Other noncurrent assets

 

 

(26

)

 

 

-

 

Accounts payable

 

 

(240

)

 

 

(9

)

Accrued expenses and other current liabilities

 

 

(1,473

)

 

 

149

 

Deferred revenue

 

 

(143

)

 

 

(302

)

Operating lease liabilities

 

 

(512

)

 

 

(456

)

Net cash provided by operating activities

 

 

10,867

 

 

 

8,100

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(98

)

 

 

(271

)

Capitalized costs included in intangible assets

 

 

(6,921

)

 

 

(6,139

)

Net cash used in investing activities

 

 

(7,019

)

 

 

(6,410

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Taxes paid related to net share settlement of vesting of restricted stock units

 

 

(197

)

 

 

(4,310

)

Repurchases of common stock

 

 

(1,251

)

 

 

(365

)

Net cash used in financing activities

 

 

(1,448

)

 

 

(4,675

)

Net increase (decrease) in cash and cash equivalents

 

$

2,400

 

 

$

(2,985

)

Cash and cash equivalents at beginning of period

 

 

31,810

 

 

 

34,258

 

Cash and cash equivalents at end of period

 

$

34,210

 

 

$

31,273

 

SUPPLEMENTAL DISCLOSURE INFORMATION:

 

 

 

 

 

 

Cash paid for interest

 

$

-

 

 

$

-

 

Cash paid for income taxes

 

$

55

 

 

$

37

 

Share-based compensation capitalized in intangible assets

 

$

1,389

 

 

$

1,193

 

Retirement of treasury stock

 

$

1,280

 

 

$

4,675

 

Right-of -use assets obtained in exchange of operating lease liabilities

 

$

1,919

 

 

$

-

 

Operating lease liabilities arising from obtaining right-of-use assets

 

$

1,919

 

 

$

-

 

 

See notes to condensed consolidated financial statements.

4


 

RED VIOLET, INC.

NOTES TO CONDENSED CONSOLIDATED 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, 2023.

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, 2022 filed with the SEC on March 8, 2023 (“Form 10-K”).

The condensed consolidated balance sheet as of December 31, 2022 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.

 

2. Earnings per share

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and is calculated using the treasury stock method for unvested shares.

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(In thousands, except share data)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

12,495

 

 

$