– Revenues Grew 33% over Prior Year
–
– Net Income Improved $23.5 Million over
Prior Year –
– Raises 2022 Financial Outlook –
HireRight Holdings Corporation (the "Company") (NYSE: HRT)
("HireRight" or the "Company"), a leading provider of background
screening services, today announced financial results for its first
quarter ended March 31, 2022.
First Quarter 2022 Highlights Compared to First Quarter
2021:
- Revenues of $198.7 million increased 33%, from $149.6
million
- Operating income of $20.0 million, up from $5.7 million
- Net income of $11.6 million, up from net loss of $12.0
million
- Adjusted diluted earnings per share of $0.37 per share, up from
$0.12 per share
- Adjusted EBITDA of $41.7 million, up from $26.9 million
"Our first quarter results demonstrate the strength and
resiliency of our global offering as well as the favorable secular
trends in labor markets worldwide," said HireRight President and
CEO Guy Abramo. "High demand, tight supply and an increasingly
mobile or remote workforce provide favorable tailwinds for our
industry and I am proud of the excellent work our team is doing to
serve the leading companies around the world as they strive to
achieve their workforce objectives. The increase to our 2022
financial outlook underscores the growing momentum of our
business."
Updated Full-Year Outlook
Based on current expectations, HireRight is updating its
full-year 2022 outlook as set forth in the table below:
Previously Provided
Revised
Estimated Low
Estimated High
Estimated Low
Estimated High
(in thousands, except per share
data)
(in thousands, except per share
data)
Revenues
$
805,000
$
820,000
$
815,000
$
825,000
Adjusted net income (1)
$
105,000
$
115,000
$
120,000
$
130,000
Adjusted EBITDA (1)
$
180,000
$
190,000
$
188,000
$
195,000
Adjusted diluted EPS (1)
$
1.32
$
1.45
$
1.51
$
1.64
(1) A reconciliation of the guidance for
the Non-GAAP financial measures of Adjusted Net Income, Adjusted
EBITDA, and Adjusted Diluted EPS in the table above cannot be
provided without unreasonable effort because of the inherent
difficulty of accurately forecasting the occurrence and financial
impact of the various adjusting items necessary for such
reconciliation that have not yet occurred, are out of our control,
or cannot be reasonably predicted. For the same reasons, the
Company is unable to assess the probable significance of the
unavailable information, which could have a material impact on the
Company's future Non-GAAP financial measures.
Webcast and Conference Call
Management will discuss first quarter 2022 results on a webcast
at 2 p.m. (PT) / 5 p.m. (ET) today, Thursday May 12, 2022. The
webcast, along with the related presentation materials, may be
accessed via HireRight's investor relations website page at
ir.hireright.com under "News and Events." To listen by phone,
please dial 1-855-327-6837 or 1-631-891-4304.
The webcast replay, along with the related presentation
materials, can be accessed via HireRight's investor relations
website page at ir.hireright.com under "News and Events," and will
be available for 90 days. A replay of the call will also be
available until midnight, May 26, 2022 by dialing 1-844-512-2921 or
1-412-317-6671 and entering passcode 10018360.
About HireRight
HireRight is a leading global provider of technology-driven
workforce risk management and compliance solutions. We provide
comprehensive background screening, verification, identification,
monitoring, and drug and health screening services for more than
40,000 customers across the globe. HireRight offers services via a
unified global software and data platform that tightly integrates
into its customers’ human capital management systems enabling
highly effective and efficient workflows for workforce hiring,
onboarding, and monitoring. In 2021, HireRight screened over 29
million job applicants, employees and contractors for its customers
and processed over 110 million screens. For more information, visit
www.HireRight.com or contact InvestorRelations@HireRight.com.
Non-GAAP Financial Measures
To supplement the financial results presented in accordance with
generally accepted accounting principles in the United States
(“GAAP”), HireRight presents certain non-GAAP financial measures. A
“non-GAAP financial measure” is a numerical measure of a company’s
financial performance that excludes amounts that are included in
the most directly comparable measure calculated and presented in
accordance with GAAP or includes amounts that are excluded from the
most directly comparable measure calculated and presented in
accordance with GAAP in the statements of operations, balance
sheets or statements of cash flow of the Company.
We believe that our non-GAAP financial measures provide
information useful to investors in assessing our financial
condition and results of operations. These measures should not be
considered an alternative to net income or any other measure of
financial performance or liquidity presented in accordance with
GAAP. These measures have important limitations as analytical tools
because they exclude some but not all items that affect the most
directly comparable GAAP measures. Additionally, our non-GAAP
financial measures may be defined differently than similar measures
used by other companies in our industry, thereby diminishing their
utility for comparison purposes.
The non-GAAP financial measures presented in this earnings
release are Adjusted EBITDA, Adjusted Net Income, and Adjusted
Diluted Earnings Per Share. Reconciliations of these non-GAAP
financial measures to the most directly comparable measures
calculated and presented in accordance with GAAP are provided as
schedules attached to this release.
Adjusted EBITDA
Adjusted EBITDA represents, as applicable for the period, net
income (loss) before provision for income taxes, interest expense,
depreciation and amortization expense, stock-based compensation,
realized and unrealized gain (loss) on foreign exchange, merger
integration expenses, amortization of cloud-based software
implementation costs, legal settlement costs deemed by management
to be outside the normal course of business, and other items
management believes are not representative of the Company’s core
operations. Adjusted EBITDA is a supplemental financial measure
that management and external users of our financial statements,
such as industry analysts, investors, lenders and rating agencies,
may use to assess our:
- Operating performance as compared to other publicly traded
companies without regard to capital structure or historical cost
basis;
- Ability to generate cash flow;
- Ability to incur and service debt and fund capital
expenditures; and
- Viability of acquisitions and other capital expenditure
projects and the returns on investment of various investment
opportunities.
Adjusted Net Income and Adjusted Diluted Earnings Per
Share
In addition to Adjusted EBITDA, management believes that
Adjusted Net Income is a strong indicator of our overall operating
performance and is useful to our management and investors as a
measure of comparative operating performance from period to period.
We define Adjusted Net Income as net income (loss) adjusted for
amortization of acquired intangible assets, stock-based
compensation, realized and unrealized gain (loss) on foreign
exchange, merger integration expenses, amortization of cloud-based
software implementation costs, legal settlement costs deemed by
management to be outside the normal course of business, and other
items management believes are not representative of the Company's
core operations, to which we apply an adjusted effective tax rate.
We define Adjusted Diluted Earnings Per Share as Adjusted Net
Income divided by the adjusted weighted average number of shares
outstanding (diluted) for the applicable period. We believe
Adjusted Diluted Earnings Per Share is useful to investors and
analysts because it enables them to better evaluate per share
operating performance across reporting periods and to compare our
performance to that of our peer companies.
Safe Harbor Statement
This press release and management's comments on the first
quarter earnings call mentioned above contain forward-looking
statements within the meaning of the federal securities laws. You
can often identify forward-looking statements by the fact that they
do not relate strictly to historical or current facts, or by their
use of words such as “anticipate,” “estimate,” “expect,” “project,”
“forecast,” “plan,” “intend,” “believe,” “seek,” “could,”
“targets,” “potential,” “may,” “will,” “should,” “can have,”
“likely,” “continue,” and other terms of similar meaning in
connection with any discussion of the timing or nature of future
operating or financial performance or other events. Forward-looking
statements may include, but are not limited to, statements
concerning our anticipated financial performance, including,
without limitation, revenue, profitability, net income (loss),
adjusted EBITDA, earnings per share, and cash flow; strategic
objectives; investments in our business, including development of
our technology and introduction of new offerings; sales growth and
customer relationships; our competitive differentiation; our market
share and leadership position in the industry; market conditions,
trends, and opportunities; future operational performance; pending
or threatened claims or regulatory proceedings; and factors that
could affect these and other aspects of our business.
Forward-looking statements are not guarantees. They reflect our
current expectations and projections with respect to future events
and are based on assumptions and estimates and subject to known and
unknown risks, uncertainties and other factors that may cause our
actual results, performance or achievements to be materially
different from expectations or results projected or implied by
forward-looking statements.
Factors that could affect the outcome of the forward-looking
statements include, among other things, the impacts, direct and
indirect, of the COVID-19 pandemic on our business, our personnel
and vendors, and the overall economy; our ability to maintain our
professional reputation and brand name; our vulnerability to
adverse economic conditions; the aggressive competition we face;
our heavy reliance on information management systems, vendors, and
information sources that may not perform as we expect; the
significant risk of liability we face in the services we perform;
the fact that data security, data privacy and data protection laws
and other evolving regulations and cross-border data transfer
restrictions may limit the use of our services and adversely affect
our business; social, political, regulatory and legal risks in
markets where we operate; the impact of foreign currency exchange
rate fluctuations; unfavorable tax law changes and tax authority
rulings; any impairment of our goodwill, other intangible assets
and other long-lived assets; our ability to execute and integrate
future acquisitions; our ability to access additional credit or
other sources of financing; and the increased cybersecurity
requirements, vulnerabilities, threats and more sophisticated and
targeted cyber-related attacks that could pose a risk to our
systems, networks, solutions, services and data. For more
information on the business risks we face and factors that could
affect the outcome of forward-looking statements, refer to our
Annual Report on Form 10-K filed with the SEC on March 21, 2022, in
particular the sections of that document entitled "Risk Factors,"
"Forward-Looking Statements," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations,” and
other filings we make from time to time with the SEC. We undertake
no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or
otherwise.
HireRight Holdings Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
March 31,
December 31,
2022
2021
(in thousands, except share and
per share data)
Assets
Current assets
Cash and cash equivalents
$
87,615
$
111,032
Restricted cash
1,102
5,182
Accounts receivable, net of allowance for
doubtful accounts of $4,583 and $4,284 at March 31, 2022 and
December 31, 2021, respectively
171,999
142,473
Prepaid expenses and other current
assets
14,468
18,583
Total current assets
275,184
277,270
Property and equipment, net
10,421
11,127
Right-of-use assets, net
9,759
—
Intangible assets, net
374,565
389,483
Goodwill
816,982
819,538
Other non-current assets
34,930
26,344
Total assets
$
1,521,841
$
1,523,762
Liabilities and Stockholders’
Equity
Current liabilities
Accounts payable
$
9,510
$
13,688
Accrued expenses and other current
liabilities
88,381
75,294
Accrued salaries and payroll
23,041
29,280
Derivative instruments, short-term
—
16,662
Debt, current portion
8,350
8,350
Total current liabilities
129,282
143,274
Debt, long-term portion
687,304
688,683
Derivative instruments, long-term
—
11,444
Tax receivable agreement liability
210,639
210,639
Deferred taxes
14,800
14,765
Operating lease liabilities, long-term
13,633
—
Other non-current liabilities
2,422
9,240
Total liabilities
1,058,080
1,078,045
Commitments and contingencies
Preferred stock, $0.001 par value,
authorized 100,000,000 shares; none issued and outstanding as of
March 31, 2022 and December 31, 2021
—
—
Common stock, $0.001 par value, authorized
1,000,000,000 shares; 79,392,937 shares issued and outstanding as
of March 31, 2022 and December 31, 2021
79
$
79
Additional paid-in capital
796,176
793,382
Accumulated deficit
(348,800
)
(360,364
)
Accumulated other comprehensive income
16,306
12,620
Total stockholders’ equity
463,761
445,717
Total liabilities and stockholders’
equity
$
1,521,841
$
1,523,762
HireRight Holdings Corporation
Condensed Consolidated Statements of
Operations (Unaudited)
Three Months Ended
March 31,
2022
2021
(in thousands, except share and
per share data)
Revenues
$
198,711
$
149,557
Expenses
Cost of services (exclusive of
depreciation and amortization below)
112,403
86,187
Selling, general and administrative
48,267
39,394
Depreciation and amortization
18,061
18,243
Total expenses
178,731
143,824
Operating income
19,980
5,733
Other expenses
Interest expense
7,557
17,949
Other expense (income), net
41
(809
)
Total other expenses, net
7,598
17,140
Income (loss) before income taxes
12,382
(11,407
)
Income tax expense
818
572
Net income (loss)
$
11,564
$
(11,979
)
Net income (loss) per share:
Basic
$
0.15
$
(0.21
)
Diluted
$
0.15
$
(0.21
)
Weighted average shares
outstanding:
Basic
79,392,937
57,168,291
Diluted
79,392,937
57,168,291
HireRight Holdings Corporation
Condensed Consolidated Statements of
Cash Flows (Unaudited)
Three Months Ended March
31,
2022
2021
(in thousands)
Cash flows from operating
activities
Net income (loss)
$
11,564
$
(11,979
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
18,061
18,243
Deferred income taxes
205
335
Amortization of debt issuance costs
821
1,035
Amortization of contract assets
1,091
882
Amortization of right-of-use assets
686
—
Amortization of unrealized gains on
terminated interest rate swap agreements
(2,181
)
—
Amortization of cloud-based software
implementation costs
151
—
Stock-based compensation
2,794
823
Other non-cash charges, net
496
(460
)
Changes in operating assets and
liabilities:
Accounts receivable
(29,852
)
(2,585
)
Prepaid expenses and other current
assets
4,115
(824
)
Cloud-based software implementation
costs
(8,548
)
(660
)
Other non-current assets
(1,411
)
(1,872
)
Accounts payable
(7,095
)
(13,093
)
Accrued expenses and other current
liabilities
14,920
7,170
Accrued salaries and payroll
(6,240
)
6,128
Operating lease liabilities, net
(1,068
)
—
Other non-current liabilities
(524
)
49
Net cash (used in) provided by operating
activities
(2,015
)
3,192
Cash flows from investing
activities
Purchases of property and equipment
(1,867
)
(1,345
)
Capitalized software development
(2,662
)
(1,330
)
Net cash used in investing activities
(4,529
)
(2,675
)
Cash flows from financing
activities
Repayments of debt
(2,088
)
(2,088
)
Payments for termination of interest rate
swap agreements
(18,445
)
—
Net cash used in financing activities
(20,533
)
(2,088
)
Net decrease in cash, cash equivalents and
restricted cash
(27,077
)
(1,571
)
Effect of exchange rates
(420
)
(270
)
Cash, cash equivalents and restricted
cash
Beginning of period
116,214
24,059
End of period
$
88,717
$
22,218
Cash paid for
Interest
$
8,772
$
16,908
Income taxes paid (refund)
902
(137
)
Supplemental schedule of non-cash
investing and financing activities
Unpaid property and equipment and
capitalized software purchases
$
561
$
1,410
Reconciliation of GAAP Measures to Non-GAAP Measures
(Unaudited)
The following table reconciles our non-GAAP financial measure of
Adjusted EBITDA to net income (loss), our most directly comparable
financial measures calculated and presented in accordance with
GAAP, for the periods presented.
Three Months Ended March
31,
2022
2021
(in thousands)
Net income (loss)
$
11,564
$
(11,979
)
Income tax expense
818
572
Interest expense
7,557
17,949
Depreciation and amortization
18,061
18,243
EBITDA
38,000
24,785
Stock-based compensation
2,794
823
Realized and unrealized loss on foreign
exchange
(79
)
(809
)
Merger integration expenses (1)
205
812
Amortization of cloud-based software
implementation costs (2)
151
—
Other items (3)
655
1,246
Adjusted EBITDA
$
41,726
$
26,857
(1)
Merger integration expenses
consist primarily of information technology ("IT") related costs
including personnel expenses, professional and service fees
associated with the integration of customers and operations of
General Information Services ("GIS") Group, which commenced in July
2018 and was substantially completed by the end of 2020.
(2)
Amortization of cloud-based
software implementation costs consists of expense recognized in
selling, general and administrative expenses for capitalized
implementation costs for cloud-based IT systems. This expense is
not included in depreciation and amortization above.
(3)
Other items include (i) costs of
$0.9 million associated with the implementation of a company-wide
enterprise resource planning (“ERP”) system during the three months
ended March 31, 2022 and (ii) $0.3 million related to loss on
disposal of assets and exit costs associated with one of our
short-term leased facilities during the three months ended March
31, 2022, partially offset by a reduction in previously accrued
legal settlement expense of $0.6 million due to a more favorable
outcome than originally anticipated in a claim outside the ordinary
course of business. Other items for the three months ended March
31, 2021 are related to the preparation of the Company’s initial
public offering during 2021.
The following table reconciles our non-GAAP financial measure of
Adjusted Net Income to net income (loss), our most directly
comparable financial measure calculated and presented in accordance
with GAAP, for the periods presented:
Three Months Ended March
31,
2022
2021
(in thousands)
Net income (loss)
$
11,564
$
(11,979
)
Income tax expense
818
572
Income (loss) before income
taxes
12,382
(11,407
)
Amortization of acquired intangible
assets
15,505
15,647
Interest expense swap adjustments (1)
(2,181
)
—
Interest expense discounts (2)
821
1,035
Stock-based compensation
2,794
823
Realized and unrealized loss on foreign
exchange
(79
)
(809
)
Merger integration expenses (3)
205
812
Amortization of cloud-based software
implementation costs (4)
151
—
Other items (5)
655
1,246
Adjusted income before income taxes
30,253
7,347
Adjusted income taxes (6)
439
301
Adjusted Net Income
$
29,814
$
7,046
The following table sets forth the calculation of Adjusted
Diluted Earnings Per Share for the periods presented:
Three Months Ended March
31,
2022
2021
Diluted net income (loss) per
share
$
0.15
$
(0.21
)
Income tax expense
0.01
0.01
Amortization of acquired intangible
assets
0.19
0.28
Interest expense swap adjustments (1)
(0.03
)
—
Interest expense discounts (2)
0.01
0.02
Stock-based compensation
0.04
0.01
Realized and unrealized loss on foreign
exchange
—
(0.01
)
Merger integration expenses (3)
—
0.01
Amortization of cloud-based software
implementation costs (4)
—
—
Other items (5)
0.01
0.02
Adjusted income taxes (6)
(0.01
)
(0.01
)
Adjusted Diluted Earnings Per
Share
$
0.37
$
0.12
Weighted average number of shares
outstanding - diluted
79,392,937
57,168,291
(1)
Interest expense swap adjustments
consist of amortization of unrealized gains on the terminated
Interest Rate Swap Agreements, which will be recognized through
December 2023.
(2)
Interest expense discounts
consist of amortization of original issue discount and debt
issuance costs.
(3)
Merger integration expenses
consist primarily of IT related costs including personnel expenses,
professional and service fees associated with the integration of
GIS, as discussed in footnote 1 to the immediately preceding table,
which commenced in July 2018 and was substantially completed by the
end of 2020.
(4)
Amortization of cloud-based
software implementation costs consists of expense recognized in
selling, general and administrative expenses for capitalized
implementation costs for cloud-based IT systems. This expense is
not included in depreciation and amortization above.
(5)
Other items include (i) costs of
$0.9 million associated with the implementation of a company-wide
ERP system during the three months ended March 31, 2022 and (ii)
$0.3 million related to loss on disposal of assets and exit costs
associated with one of our short-term leased facilities during the
three months ended March 31, 2022, partially offset by a reduction
in previously accrued legal settlement expense of $0.6 million due
to a more favorable outcome than originally anticipated in a claim
outside the ordinary course of business. Other items for the three
months ended March 31, 2021 are related to the preparation of the
Company’s initial public offering during 2021.
(6)
An adjusted effective income tax
rate has been determined for each period presented by applying the
statutory income tax rates and the provision for deferred income
taxes to the pre-tax adjustments, which was used to compute
Adjusted Net Income (Loss) for the periods presented.
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Investors: InvestorRelations@HireRight.com +1
949-528-1000 Media: Monica.Soladay@HireRight.com
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