– Revenues Grew 26% over Prior Year
–
– Net Income Up $28 million over Prior Year
–
– Adjusted EBITDA Up 40% over Prior Year
–
HireRight Holdings Corporation (NYSE: HRT) ("HireRight" or the
"Company"), a leading provider of background screening services,
today announced financial results for its second quarter ended June
30, 2022.
Second Quarter 2022 Highlights Compared to Second Quarter
2021:
- Revenues of $222.3 million increased 26%, from $177.0
million
- Operating income of $29.9 million increased 73.5%, up from
$17.2 million
- Net income of $24.4 million, up from net loss of $3.6
million
- Adjusted EBITDA of $53.7 million, up from $38.4 million
- Adjusted diluted earnings per share of $0.54, up from $0.30 per
share
Six Months Ended June 30, 2022 Highlights Compared to Six
Months Ended June 30, 2021:
- Revenues of $421.0 million increased 29% from $326.5
million
- Operating income of $49.8 million increased 117.2%, up from
$22.9 million
- Net income of $36.0 million, up from net loss of $15.6
million
- Adjusted EBITDA of $95.4 million, up from $65.3 million
- Adjusted diluted earnings per share of $0.92, up from $0.42 per
share
"During the second quarter we again achieved record revenue,
reaching $222 million," said HireRight President and CEO Guy
Abramo. "We are excited to be delivering on our margin improvement
initiatives that have driven a 240 basis point improvement year
over year, and look forward to our continued automation success
that will yield further benefits to our customers and shareholders
over the coming years."
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
$
815,000
$
825,000
$
820,000
$
830,000
Adjusted Net Income (1)
$
120,000
$
130,000
$
130,000
$
140,000
Adjusted EBITDA (1)
$
188,000
$
195,000
$
190,000
$
197,000
Adjusted Diluted EPS (1)
$
1.51
$
1.64
$
1.64
$
1.76
(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 second quarter 2022 results on a webcast
at 2 p.m. (PT) / 5 p.m. (ET) today, Thursday August 4, 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, August 18, 2022 by dialing 1-844-512-2921
or 1-412-317-6671 and entering passcode 10019306.
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. We offer our services via a
unified global software and data platform that tightly integrates
into our customers’ human capital management systems enabling
highly effective and efficient workflows for workforce hiring,
onboarding, and monitoring. In 2021, we screened over 29 million
job applicants, employees and contractors for our 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 that 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 interest expense, income taxes, depreciation
and amortization expense, stock-based compensation, realized and
unrealized gain (loss) on foreign exchange, merger integration
expenses, amortization of cloud computing software 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
computing software 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 second
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, adjusted net income, earnings per share, adjusted
diluted 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, including without limitation inflation
and recession, which could increase our costs and suppress labor
market activity; 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,
emerging restrictions on background reporting due to alleged
discriminatory impacts and adverse social consequences, 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)
June 30,
December 31,
2022
2021
(in thousands, except share and
per share data)
Assets
Current assets
Cash and cash equivalents
$
118,440
$
111,032
Restricted cash
1,101
5,182
Accounts receivable, net of allowance for
doubtful accounts of $5,277 and $4,284 at June 30, 2022 and
December 31, 2021, respectively
176,371
142,473
Prepaid expenses and other current
assets
16,660
18,583
Total current assets
312,572
277,270
Property and equipment, net
10,399
11,127
Right-of-use assets, net
9,794
—
Intangible assets, net
358,913
389,483
Goodwill
810,040
819,538
Cloud computing software, net
24,142
8,133
Other non-current assets.
18,829
18,211
Total assets
$
1,544,689
$
1,523,762
Liabilities and Stockholders’
Equity
Current liabilities
Accounts payable
$
7,117
$
13,688
Accrued expenses and other current
liabilities
97,519
75,294
Accrued salaries and payroll
27,476
29,280
Derivative instruments, short-term
—
16,662
Debt, current portion
8,350
8,350
Total current liabilities
140,462
143,274
Debt, long-term portion
685,931
688,683
Derivative instruments, long-term
—
11,444
Tax receivable agreement liability
210,639
210,639
Deferred taxes
14,415
14,765
Operating lease liabilities, long-term
12,572
—
Other non-current liabilities
2,197
9,240
Total liabilities
1,066,216
1,078,045
Commitments and contingent liabilities
Preferred stock, $0.001 par value,
authorized 100,000,000 shares; none issued and outstanding as of
June 30, 2022 and December 31, 2021
—
—
Common stock, $0.001 par value, authorized
1,000,000,000 shares; 79,432,321 and 79,392,937 shares issued and
outstanding as of June 30, 2022 and December 31, 2021,
respectively
79
79
Additional paid-in capital
800,566
793,382
Accumulated deficit
(324,354
)
(360,364
)
Accumulated other comprehensive income
2,182
12,620
Total stockholders’ equity
478,473
445,717
Total liabilities and stockholders’
equity
$
1,544,689
$
1,523,762
HireRight Holdings Corporation
Condensed Consolidated Statements of
Operations (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
(in thousands, except share and
per share data)
Revenues
$
222,292
$
176,984
$
421,003
$
326,541
Expenses
Cost of services (exclusive of
depreciation and amortization below)
119,990
98,317
232,393
184,504
Selling, general and administrative
54,387
43,215
102,654
82,609
Depreciation and amortization
18,049
18,239
36,110
36,482
Total expenses
192,426
159,771
371,157
303,595
Operating income
29,866
17,213
49,846
22,946
Other expenses
Interest expense
4,957
18,207
12,514
36,156
Other expense, net
33
912
74
103
Total other expenses, net
4,990
19,119
12,588
36,259
Income (loss) before income taxes
24,876
(1,906
)
37,258
(13,313
)
Income tax expense
430
1,733
1,248
2,305
Net income (loss)
$
24,446
$
(3,639
)
$
36,010
$
(15,618
)
Net income (loss) per share:
Basic
$
0.31
$
(0.06
)
$
0.45
$
(0.27
)
Diluted
$
0.31
$
(0.06
)
$
0.45
$
(0.27
)
Weighted average shares
outstanding:
Basic
79,405,872
57,168,291
79,399,440
57,168,291
Diluted
79,478,094
57,168,291
79,443,173
57,168,291
HireRight Holdings Corporation
Condensed Consolidated Statements of
Cash Flows (Unaudited)
Six Months Ended June
30,
2022
2021
(in thousands)
Cash flows from operating
activities
Net income (loss)
$
36,010
$
(15,618
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization
36,110
36,482
Deferred income taxes
243
1,765
Amortization of debt issuance costs
1,759
2,082
Amortization of contract assets
2,166
1,809
Amortization of right-of-use assets
1,355
—
Amortization of unrealized gains on
terminated interest rate swap agreements
(6,263
)
—
Amortization of cloud computing software
costs
466
—
Stock-based compensation
7,305
1,652
Other non-cash charges, net
1,473
633
Changes in operating assets and
liabilities:
Accounts receivable
(34,969
)
(24,035
)
Prepaid expenses and other current
assets
1,924
(644
)
Cloud computing software
(16,475
)
—
Other non-current assets
(2,732
)
(3,162
)
Accounts payable
(10,154
)
(11,839
)
Accrued expenses and other current
liabilities
23,158
10,765
Accrued salaries and payroll
(2,136
)
(391
)
Operating lease liabilities, net
(2,604
)
—
Other non-current liabilities
(770
)
154
Net cash provided by (used in) operating
activities
35,866
(347
)
Cash flows from investing
activities
Purchases of property and equipment
(2,763
)
(3,753
)
Capitalized software development
(5,417
)
(3,005
)
Net cash used in investing activities
(8,180
)
(6,758
)
Cash flows from financing
activities
Repayments of debt
(4,175
)
(4,175
)
Borrowings on line of credit
—
20,000
Repayments on line of credit
—
(20,000
)
Payments for termination of interest rate
swap agreements
(18,445
)
—
Payment of issuance costs - revolving
credit facility
(342
)
—
Net cash used in financing activities
(22,962
)
(4,175
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
4,724
(11,280
)
Effect of exchange rates
(1,397
)
(727
)
Cash, cash equivalents and restricted
cash
Beginning of period
116,214
24,059
End of period
$
119,541
$
12,052
Cash paid for
Interest
$
16,945
$
33,928
Income taxes paid
1,529
10
Supplemental schedule of non-cash
investing and financing activities
Unpaid property and equipment and
capitalized software purchases
$
1,939
$
—
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 June
30,
Six Months Ended June
30,
2022
2021
2022
2021
(in thousands)
Net income (loss)
$
24,446
$
(3,639
)
$
36,010
$
(15,618
)
Income tax expense
430
1,733
1,248
2,305
Interest expense
4,957
18,207
12,514
36,156
Depreciation and amortization
18,049
18,239
36,110
36,482
EBITDA
47,882
34,540
85,882
59,325
Stock-based compensation
4,511
829
7,305
1,652
Realized and unrealized loss on foreign
exchange
64
910
(15
)
101
Merger integration expenses (1)
—
169
205
981
Amortization of cloud computing software
costs (2)
315
—
466
—
Other items (3)
903
1,978
1,558
3,224
Adjusted EBITDA
$
53,675
$
38,426
$
95,401
$
65,283
(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 GIS, which commenced
in July 2018 and was substantially completed by the end of
2020.
(2)
Amortization of cloud computing software
costs consists of expense recognized in selling, general and
administrative expenses for capitalized implementation costs for
cloud computing IT systems. This expense is not included in
depreciation and amortization above.
(3)
Other items include (i) costs of $0.4
million and $1.3 million associated with the implementation of a
company-wide enterprise resource planning (“ERP”) system during the
three and six months ended June 30, 2022, respectively, (ii) $0.6
million of severance costs during the three and six months ended
June 30, 2022, and (iii) $0.3 million related to loss on disposal
of assets and exit costs associated with one of our short-term
leased facilities during the six months ended June 30, 2022,
partially offset by a reduction in previously accrued legal
settlement expense of $0.6 million during the six months ended June
30, 2022 due to a more favorable outcome than originally
anticipated in a claim outside the ordinary course of business.
Other items for the three and six months ended June 30, 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 June
30,
Six Months Ended June
30,
2022
2021
2022
2021
(in thousands)
Net income (loss)
$
24,446
$
(3,639
)
$
36,010
$
(15,618
)
Income tax expense
430
1,733
1,248
2,305
Income (loss) before income
taxes
24,876
(1,906
)
37,258
(13,313
)
Amortization of acquired intangible
assets
15,477
15,645
30,982
31,292
Interest expense swap adjustments (1)
(4,082
)
—
(6,263
)
—
Interest expense discounts (2)
938
1,047
1,759
2,082
Stock-based compensation
4,511
829
7,305
1,652
Realized and unrealized loss on foreign
exchange
64
910
(15
)
101
Merger integration expenses (3)
—
169
205
981
Amortization of cloud computing software
costs (4)
315
—
466
—
Other items (5)
903
1,978
1,558
3,224
Adjusted income before income taxes
43,002
18,672
73,255
26,019
Adjusted income taxes (6)
(174
)
1,569
265
1,870
Adjusted Net Income
$
43,176
$
17,103
$
72,990
$
24,149
The following table sets forth the calculation of Adjusted
Diluted Earnings Per Share for the periods presented:
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Diluted net income (loss) per
share
$
0.31
$
(0.06
)
$
0.45
$
(0.27
)
Income tax expense
0.01
0.03
0.02
0.04
Amortization of acquired intangible
assets
0.19
0.28
0.39
0.55
Interest expense swap adjustments (1)
(0.05
)
—
(0.08
)
—
Interest expense discounts (2)
0.01
0.02
0.02
0.03
Stock-based compensation
0.06
0.01
0.09
0.03
Realized and unrealized loss on foreign
exchange
—
0.02
—
—
Merger integration expenses (3)
—
—
—
0.02
Amortization of cloud computing software
costs (4)
—
—
0.01
—
Other items (5)
0.01
0.03
0.02
0.05
Adjusted income taxes (6)
—
(0.03
)
—
(0.03
)
Adjusted Diluted Earnings Per
Share
$
0.54
$
0.30
$
0.92
$
0.42
Weighted average number of shares
outstanding - diluted
79,478,094
57,168,291
79,443,173
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 information technology (“IT”) related costs including
personnel expenses, professional and service fees associated with
the integration of customers and operations of GIS, which commenced
in July 2018 and was substantially completed by the end of
2020.
(4)
Amortization of cloud computing software
costs consists of expense recognized in selling, general and
administrative expenses for capitalized implementation costs for
cloud computing IT systems. This expense is not included in
depreciation and amortization above.
(5)
Other items include (i) costs of $0.4
million and $1.3 million associated with the implementation of a
company-wide ERP system during the three and six months ended June
30, 2022, respectively, (ii) $0.6 million of severance costs during
the three and six months ended June 30, 2022, and (iii) $0.3
million related to loss on disposal of assets and exit costs
associated with one of our short-term leased facilities during the
six months ended June 30, 2022, partially offset by a reduction in
previously accrued legal settlement expense of $0.6 million during
the six months ended June 30, 2022 due to a more favorable outcome
than originally anticipated in a claim outside the ordinary course
of business. Other items for the three and six months ended June
30, 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 rate and the provision for deferred income taxes to the
pre-tax adjustments, which was used to compute Adjusted Net Income
for the periods presented.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220804005855/en/
Investors: InvestorRelations@HireRight.com +1
949-528-1000 Media: Monica.Soladay@HireRight.com
HireRight (NYSE:HRT)
Historical Stock Chart
Von Mär 2024 bis Apr 2024
HireRight (NYSE:HRT)
Historical Stock Chart
Von Apr 2023 bis Apr 2024