– Margin Expansion Continues –
– Expanding Partnerships with Leading HCM
Companies –
HireRight Holdings Corporation (NYSE: HRT) ("HireRight" or the
"Company"), a leading provider of background screening services,
today announced financial results for its third quarter ended
September 30, 2023.
Third Quarter 2023 Highlights:
- Revenues of $188.3 million, compared to prior year period
revenues of $210.3 million
- Net loss of $1.7 million, compared to prior year period net
income of $93.3 million
- Adjusted EBITDA of $52.1 million, compared to prior year period
Adjusted EBITDA of $137.8 million
- Diluted loss per share of $0.02, compared to prior year period
diluted earnings per share of $1.17
- Adjusted diluted earnings per share of $0.36, compared to prior
year period adjusted diluted earnings of $1.06 per share
“We continue to be laser focused on our margin improvement
initiatives while maintaining industry leading quality and service
for our customers and that focus is reflected in our results.” said
HireRight President and CEO Guy Abramo. “Our reputation in the
industry for high quality services and technical capabilities has
made us the partner of choice for leading HCM providers.”
Liquidity and Capital Resources
The Company had $262.0 million of capital available at September
30, 2023, consisting of $103.2 million of cash and $158.7 million
of available borrowing capacity under its Revolving Credit
Facility. Through September 30, 2023, the Company has repurchased
11.7 million shares of common stock for approximately $125.7
million under the share repurchase programs announced on November
14, 2022, June 22, 2023, and September 12, 2023.
Cash provided by operating activities was $50.6 million for the
nine months ended September 30, 2023, compared to $70.9 million for
the same period in 2022.
Updated Full-Year Outlook
Based on current expectations, HireRight is maintaining its
full-year 2023 outlook as set forth in the table below:
Previously Provided
Estimated Low
Estimated High
(in thousands, except per share
data)
Revenues
$
720,000
$
735,000
Adjusted EBITDA (1)
$
172,000
$
177,000
Adjusted Net Income (1)
$
75,000
$
80,000
Adjusted Diluted EPS (1)
$
1.05
$
1.10
(1)
A reconciliation of the guidance for the
Non-GAAP financial measures of Adjusted EBITDA, Adjusted Net
Income, 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 third quarter results on a webcast at
5:30 a.m. (PT) / 8:30 a.m. (ET) today, Tuesday, November 7, 2023.
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 1-877-704-4453 or 1-201-389-0920.
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 Tuesday, November 14, 2023 by dialing
1-844-512-2921 or 1-412-317-6671 and entering passcode
13740973.
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
approximately 37,000 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 2022, we screened
over 24 million job applicants, employees and contractors for our
customers and processed over 107 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 the presentation of our non-GAAP financial
measures provides information useful to investors in assessing our
financial condition and results of operations. These measures
should not be considered an alternative to net income (loss) 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, to
the extent that other companies in our industry, define similar
non-GAAP measures differently than we do, the utility of those
measures for comparison purposes may be limited.
The non-GAAP financial measures presented in this earnings
release and/or included in management’s commentary on the earnings
call described above, are Adjusted EBITDA, Adjusted EBITDA Margin,
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 and Adjusted EBITDA Margin
Adjusted EBITDA represents, as applicable for the period, net
income (loss) attributable to HireRight Holdings Corporation before
income from noncontrolling interest, interest expense, income
taxes, depreciation and amortization expense, stock-based
compensation, realized and unrealized gain (loss) on foreign
exchange, restructuring charges, 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 Margin is defined as Adjusted EBITDA divided by
revenues for the period. Adjusted EBITDA and Adjusted EBITDA Margin
are supplemental financial measures 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) attributable to
HireRight Holdings Corporation adjusted for income from
noncontrolling interest, amortization of acquired intangible
assets, loss on modification and extinguishment of debt,
stock-based compensation, realized and unrealized gain (loss) on
foreign exchange, restructuring charges, 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 a blended statutory tax rate.
See the footnotes to the table below for a description of certain
of these adjustments. We define Adjusted Diluted Earnings Per Share
as Adjusted Net Income divided by the 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 third
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 EBITDA margin, adjusted net income,
earnings per share ("EPS"), 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 cause actual results to differ from those
anticipated by forward-looking statements include, among other
things, our vulnerability to adverse economic conditions, including
without limitation, inflation and recession, which could increase
our costs and suppress labor market activity and our revenue; the
aggressive competition we face; failure to implement successfully
our ongoing technology improvement and cost reduction initiatives;
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 increase our costs, limit the use or value of our services and
adversely affect our business; our ability to maintain our
professional reputation and brand name; the impacts, direct and
indirect, of the pandemics or other calamitous events on our
business, our personnel and vendors, and the overall economy;
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 10, 2023, 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)
September 30,
December 31,
2023
2022
(in thousands, except share, and
per share data)
Assets
Current assets
Cash and cash equivalents
$
103,218
$
162,092
Restricted cash
—
1,310
Accounts receivable, net of allowance for
credit losses of $5,421 and $5,812 at September 30, 2023 and
December 31, 2022, respectively
139,557
136,656
Prepaid expenses and other current
assets
26,118
18,745
Total current assets
268,893
318,803
Property and equipment, net
7,190
9,045
Right-of-use assets, net
6,352
8,423
Intangible assets, net
312,542
331,598
Goodwill
833,264
809,463
Cloud computing software, net
37,736
35,230
Deferred tax assets
74,110
74,236
Other non-current assets
20,975
18,949
Total assets
$
1,561,062
$
1,605,747
Liabilities and Stockholders'
Equity
Current liabilities
Accounts payable
$
11,740
$
11,571
Accrued expenses and other current
liabilities
102,189
75,208
Accrued salaries and payroll
30,801
31,075
Debt, current portion
7,500
8,350
Total current liabilities
152,230
126,204
Debt, long-term portion
726,338
683,206
Tax receivable agreement liability,
long-term portion
183,504
210,543
Deferred taxes liabilities
11,269
5,748
Other non-current liabilities
10,844
11,728
Total liabilities
1,084,185
1,037,429
Commitments and contingent liabilities
Stockholders' equity
Preferred stock, $0.001 par value,
authorized 100,000,000 shares; none issued and outstanding as of
September 30, 2023 and December 31, 2022
—
—
Common stock, $0.001 par value, authorized
1,000,000,000 shares; 79,884,225 and 79,660,397 shares issued, and
68,138,638 and 78,131,568 shares outstanding as of September 30,
2023 and December 31, 2022, respectively
80
80
Additional paid-in capital
820,090
805,799
Treasury stock, at cost; 11,745,587 and
1,528,829 shares repurchased at September 30, 2023 and December 31,
2022, respectively
(126,742
)
(16,827
)
Accumulated deficit
(222,844
)
(215,790
)
Accumulated other comprehensive loss
(11,420
)
(4,944
)
Total HireRight Holdings Corporation
stockholders' equity
459,164
568,318
Noncontrolling interest
17,713
—
Total stockholders’ equity
476,877
568,318
Total liabilities and stockholders’
equity
$
1,561,062
$
1,605,747
HireRight Holdings Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
(in thousands, except share, and
per share data)
Revenues
$
188,262
$
210,303
$
555,833
$
631,306
Expenses
Cost of services (exclusive of
depreciation and amortization below)
94,422
110,848
291,449
343,241
Selling, general and administrative
48,588
49,378
164,442
152,032
Depreciation and amortization
19,063
17,946
56,246
54,056
Total expenses
162,073
178,172
512,137
549,329
Operating income
26,189
32,131
43,696
81,977
Other expenses
Interest expense, net
22,447
8,457
48,392
20,971
Other expense, net
881
89
1,429
163
Total other expenses
23,328
8,546
49,821
21,134
Income (loss) before income taxes
2,861
23,585
(6,125
)
60,843
Income tax expense (benefit)
4,450
(69,704
)
863
(68,456
)
Net income (loss)
$
(1,589
)
$
93,289
$
(6,988
)
$
129,299
Less: Net income attributable to
noncontrolling interest
66
—
66
—
Net income (loss) attributable to
HireRight Holdings Corporation
$
(1,655
)
$
93,289
$
(7,054
)
$
129,299
Net income (loss) per share
attributable to HireRight Holdings Corporation:
Basic
$
(0.02
)
$
1.17
$
(0.10
)
$
1.63
Diluted
$
(0.02
)
$
1.17
$
(0.10
)
$
1.63
Weighted average shares
outstanding:
Basic
69,090,882
79,459,633
73,080,851
79,419,725
Diluted
69,090,882
79,542,715
73,080,851
79,476,574
HireRight Holdings CorporationCondensed
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
2023
2022
(in thousands)
Cash flows from operating
activities
Net income (loss)
$
(6,988
)
$
129,299
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization
56,246
54,056
Deferred income taxes
(1,021
)
(70,954
)
Amortization of debt issuance costs
2,404
2,549
Amortization of contract assets
3,742
3,312
Amortization of right-of-use assets
3,715
2,094
Amortization of unrealized gains on
terminated interest rate swap agreements
(6,890
)
(9,676
)
Amortization of cloud computing software
costs
5,012
1,446
Stock-based compensation
13,889
8,587
Change in tax receivable agreement
liability
—
800
Loss on modification and extinguishment of
debt
7,745
—
Other non-cash charges, net
1,010
524
Changes in operating assets and
liabilities (net of acquisitions):
Accounts receivable
(1,546
)
(24,521
)
Prepaid expenses and other current
assets
(6,850
)
1,516
Cloud computing software
(8,465
)
(23,158
)
Other non-current assets
(4,960
)
(3,934
)
Accounts payable
156
(5,212
)
Accrued expenses and other current
liabilities
259
5,498
Accrued salaries and payroll
(661
)
3,631
Operating lease liabilities, net
(3,759
)
(4,125
)
Other non-current liabilities
(2,410
)
(805
)
Net cash provided by operating
activities
50,628
70,927
Cash flows from investing
activities
Purchases of property and equipment
(2,049
)
(3,973
)
Capitalized software development
(8,829
)
(9,149
)
Cash paid for acquisitions, net of cash
acquired
(21,653
)
—
Other investing
(2,000
)
—
Net cash used in investing activities
(34,531
)
(13,122
)
Cash flows from financing
activities
Repayments of debt
(638,653
)
(6,263
)
Proceeds from Second Amended First Lien
Term Loan Facility, net of debt discount
677,890
—
Payments for termination of interest rate
swap agreements
—
(18,445
)
Payment of issuance costs
(6,252
)
(342
)
Repurchases of common stock
(109,642
)
—
Proceeds from issuance of common stock in
connection with stock-based compensation plans
613
—
Taxes paid related to net share settlement
of equity awards
(211
)
—
Net cash used in financing activities
(76,255
)
(25,050
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(60,158
)
32,755
Effect of exchange rates
(26
)
(1,155
)
Cash, cash equivalents and restricted
cash
Beginning of year
163,402
116,214
End of period
$
103,218
$
147,814
Cash paid for
Interest
$
47,234
$
27,890
Income taxes
$
1,804
$
2,718
Supplemental schedule of non-cash
activities
Unpaid property and equipment and
capitalized software purchases
$
654
$
1,102
Acquisition cash holdback
$
2,250
—
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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
(in thousands, except
percents)
Net income (loss) attributable to
HireRight Holdings Corporation
$
(1,655
)
$
93,289
$
(7,054
)
$
129,299
Income attributable to noncontrolling
interest
66
—
66
—
Income tax expense (benefit) (1)
4,450
(69,704
)
863
(68,456
)
Interest expense, net
22,447
8,457
48,392
20,971
Depreciation and amortization
19,063
17,946
56,246
54,056
EBITDA
44,371
49,988
98,513
135,870
Stock-based compensation
4,818
1,282
13,889
8,587
Realized and unrealized gain (loss) on
foreign exchange
(212
)
(780
)
337
(795
)
Restructuring charges (2)
5,975
—
23,964
—
Technology investments (3)
1,193
559
1,193
559
Amortization of cloud computing software
costs (4)
1,727
980
5,012
1,446
Other items (5)
(5,761
)
1,943
(5,059
)
3,706
Adjusted EBITDA
$
52,111
$
53,972
$
137,849
$
149,373
Net income (loss) margin (6)
(0.9
)%
44.4
%
(1.3
)%
20.5
%
Adjusted EBITDA margin
27.7
%
25.7
%
24.8
%
23.7
%
(1)
During the three months ended September
30, 2022, the Company determined sufficient positive evidence
existed to reverse the Company’s valuation allowance attributable
to the deferred tax assets associated with the Company’s operations
in the U.S. This reversal resulted in a non-cash deferred tax
benefit of $70.2 million, which materially decreased the Company’s
income tax expense during the three and nine months ended September
30, 2022.
(2)
Restructuring charges represent costs
incurred in connection with the Company’s global restructuring
plan. Costs incurred in connection with the plan include: (i) $3.3
million and $11.1 million of severance and benefits related to
impacted employees during the three and nine months ended September
30, 2023, respectively, (ii) $1.4 million and $8.6 million of
professional service fees related to the execution of our cost
savings initiatives during the three and nine months ended
September 30, 2023, respectively, (iii) $0.4 million and $2.6
million related to the abandonment of certain of our leased
facilities during the three and nine months ended September 30,
2023, respectively, and (iv) $0.9 million and $1.6 million related
to the replacement of certain internal technology systems during
the three and nine months ended September 30, 2023,
respectively.
(3)
Technology investments represent costs
associated with the impairment of certain of our cloud computing
software costs during the three and nine months ended September 30,
2023 and discovery phase costs associated with various platform and
fulfillment technology initiatives that are intended to achieve
greater operational efficiencies during the three and nine months
ended September 30, 2022.
(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 incurred in connection with our platform
and fulfillment technology initiatives that are intended to achieve
greater operational efficiencies. This expense is not included in
depreciation and amortization above.
(5)
Other items for the three and nine months
ended September 30, 2023 consist primarily of (i) an insurance
recovery and related professional services fees of $6.8 million,
net of fees payable to the Company’s outside counsel, in connection
with litigation related to a predecessor entity of the Company for
a claim dating back to 2009 and deemed to be outside the ordinary
course of business. The reduction related to the insurance recovery
is offset by (i) professional services fees of $0.6 million
pertaining to other financing activities for both the three and
nine months ended September 30, 2023, and (ii) $0.5 million and
$1.2 million of professional services fees not related to core
operations during the three and nine months ended September 30,
2023, respectively. Other items for the three and nine months ended
September 30, 2022 include (i) costs of $0.4 million and $1.7
million associated with the implementation of a company-wide
enterprise resource planning system during the three and nine
months ended September 30, 2022, respectively, (ii) $1.0 million
and $1.6 million of severance costs during the three and nine
months ended September 30, 2022, (iii) $0.4 million related to
professional services fees not related to core operations for the
three and nine months ended September 30, 2022, and (iv) $0.2
million related to loss on disposal of assets and exit costs
associated with one of our short-term leased facilities during the
nine months ended September 30, 2022 partially offset by a
reduction in previously accrued legal settlement expense of $0.6
million during the nine months ended September 30, 2022 due to a
more favorable outcome than originally anticipated in a claim
outside the ordinary course of business.
(6)
Net income (loss) margin represents net
income (loss) divided by revenues for the period.
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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
(in thousands)
Net income (loss) attributable to
HireRight Holdings Corporation
$
(1,655
)
$
93,289
$
(7,054
)
$
129,299
Income attributable to noncontrolling
interest
66
—
66
—
Income tax (benefit) expense (1)
4,450
(69,704
)
863
(68,456
)
Income (loss) before income
taxes
2,861
23,585
(6,125
)
60,843
Amortization of acquired intangible
assets
16,142
15,353
47,020
46,335
Loss on modification and extinguishment of
debt (2)
7,745
—
7,745
—
Interest expense swap adjustments (3)
(2,088
)
(3,413
)
(6,890
)
(9,676
)
Interest expense discounts (4)
789
790
2,402
2,549
Stock-based compensation
4,818
1,282
13,889
8,587
Realized and unrealized gain (loss) on
foreign exchange
(212
)
(780
)
337
(795
)
Restructuring charges (5)
5,975
—
23,964
—
Technology investments (6)
1,193
559
1,193
559
Amortization of cloud computing software
costs (7)
1,727
980
5,012
1,446
Other items (8)
(5,761
)
1,943
(5,059
)
3,706
Adjusted income before income taxes
33,189
40,299
83,488
113,554
Adjusted income taxes (9)
8,629
10,478
21,707
29,524
Adjusted Net Income
$
24,560
$
29,821
$
61,781
$
84,030
The following table sets forth the calculation of Adjusted
Diluted Earnings Per Share for the periods presented.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Diluted net income (loss) per share
attributable to HireRight Holdings Corporation
$
(0.02
)
$
1.17
$
(0.10
)
$
1.63
Income attributable to noncontrolling
interest
—
—
—
—
Income tax (benefit) expense (1)
0.06
(0.88
)
0.01
(0.86
)
Amortization of acquired intangible
assets
0.23
0.19
0.65
0.58
Loss on modification and extinguishment of
debt (2)
0.11
—
0.11
—
Interest expense swap adjustments (3)
(0.03
)
(0.04
)
(0.09
)
(0.12
)
Interest expense discounts (4)
0.01
0.01
0.03
0.03
Stock-based compensation
0.07
0.02
0.19
0.11
Realized and unrealized gain (loss) on
foreign exchange
—
(0.01
)
—
(0.01
)
Restructuring charges (5)
0.09
—
0.33
—
Technology investments (6)
0.02
0.01
0.02
0.01
Amortization of cloud computing software
costs (7)
0.02
0.01
0.07
0.02
Other items (8)
(0.08
)
0.02
(0.07
)
0.04
Adjusted income before income taxes
0.48
0.50
1.15
1.43
Adjusted income taxes (9)
(0.12
)
(0.13
)
(0.30
)
(0.37
)
Adjusted Diluted Earnings Per
Share
$
0.36
$
0.37
$
0.85
$
1.06
Weighted average number of shares
outstanding - diluted
69,090,882
79,542,715
73,080,851
79,476,574
(1)
During the three months ended September
30, 2022, the Company determined sufficient positive evidence
existed to reverse the Company’s valuation allowance attributable
to the deferred tax assets associated with the Company’s operations
in the U.S. This reversal resulted in a non-cash deferred tax
benefit of $70.2 million, which materially decreased the Company’s
income tax expense during the three and nine months ended September
30, 2022.
(2)
Loss on modification and extinguishment of
debt is reported in interest expense and is related to the
write-off of unamortized deferred financing fees, unamortized
original issue discounts and new debt issuance costs in conjunction
with the amendment to our amended first lien facilities during the
three and nine months ended September 30, 2023.
(3)
Interest expense swap adjustments consist
of amortization of unrealized gains on our terminated interest rate
swap agreements, which will be recognized through December 2023 as
a reduction in interest expense.
(4)
Interest expense discounts consist of
amortization of original issue discount and debt issuance
costs.
(5)
Restructuring charges represent costs
incurred in connection with the Company’s global restructuring
plan. Costs incurred in connection with the plan include: (i) $3.3
million and $11.1 million of severance and benefits related to
impacted employees during the three and nine months ended September
30, 2023, respectively, (ii) $1.4 million and $8.6 million of
professional service fees related to the execution of our cost
savings initiatives during the three and nine months ended
September 30, 2023, respectively, (iii) $0.4 million and $2.6
million related to the abandonment of certain of our leased
facilities during the three and nine months ended September 30,
2023, respectively, and (iv) $0.9 million and $1.6 million related
to the replacement of certain internal technology systems during
the three and nine months ended September 30, 2023,
respectively.
(6)
Technology investments represent costs
associated with the impairment of certain of our cloud computing
software costs during the three and nine months ended September 30,
2023 and discovery phase costs associated with various platform and
fulfillment technology initiatives that are intended to achieve
greater operational efficiencies.
(7)
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 incurred in connection with our platform
and fulfillment technology initiatives that are intended to achieve
greater operational efficiencies. This expense is not included in
depreciation and amortization above.
(8)
Other items for the three and nine months
ended September 30, 2023 consist primarily of (i) an insurance
recovery and related professional services fees of $6.8 million,
net of fees payable to the Company’s outside counsel, in connection
with litigation related to a predecessor entity of the Company for
a claim dating back to 2009 and deemed to be outside the ordinary
course of business. The reduction related to the insurance recovery
is offset by (i) professional services fees of $0.6 million
pertaining to other financing activities for both the three and
nine months ended September 30, 2023, and (ii) $0.5 million and
$1.2 million of professional services fees not related to core
operations during the three and nine months ended September 30,
2023, respectively. Other items for the three and nine months ended
September 30, 2022 include (i) costs of $0.4 million and $1.7
million associated with the implementation of a company-wide
enterprise resource planning system during the three and nine
months ended September 30, 2022, respectively, (ii) $1.0 million
and $1.6 million of severance costs during the three and nine
months ended September 30, 2022, (iii) $0.4 million related to
professional services fees not related to core operations for the
three and nine months ended September 30, 2022, and (iv) $0.2
million related to loss on disposal of assets and exit costs
associated with one of our short-term leased facilities during the
nine months ended September 30, 2022. These costs were partially
offset by a reduction in previously accrued legal settlement
expense of $0.6 million during the nine months ended September 30,
2022 due to a more favorable outcome than originally anticipated in
a claim outside the ordinary course of business.
(9)
Adjusted income taxes are based on the tax
laws in the jurisdictions in which the Company operates and exclude
the impact of net operating losses and valuation allowances to
calculate a non-GAAP blended statutory rate of 26% for the three
and nine months ended September 30, 2023 and 2022. Adjusted income
taxes for the three and nine months ended September 30, 2022 have
been updated to conform to the current year methodology.
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version on businesswire.com: https://www.businesswire.com/news/home/20231107973434/en/
Investors: InvestorRelations@HireRight.com +1
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