HireRight Reports First Quarter 2024 Results
First Quarter 2024 Highlights:
-
Revenues of
$173.2 million , compared to prior year period revenues of$175.4 million -
Net loss attributable to
HireRight of$3.3 million , compared to prior year period net loss of$7.9 million -
Adjusted EBITDA of
$40.3 million , compared to prior year period Adjusted EBITDA of$33.0 million -
Diluted loss per share of
$0.05 , compared to prior year period diluted loss per share of$0.10 -
Adjusted diluted earnings per share of
$0.22 , compared to prior year period adjusted diluted earnings of$0.15 per share
“We’re pleased with our performance during the first quarter and our ongoing progress delivering on controllable initiatives focused on margin expansion and customer satisfaction,” said
Liquidity and Capital Resources
The Company had
About
Non-GAAP Financial Measures
To supplement the financial results presented in accordance with generally accepted accounting principles in
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 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
- 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
Safe Harbor Statement
This press release contains 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 to 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.
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 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 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
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|
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|
2024 |
|
|
|
2023 |
|
|
(in thousands, except share and per share data) |
||||||
Assets |
|
|
|
||||
Current assets |
|
|
|
||||
Cash and cash equivalents |
$ |
77,285 |
|
|
$ |
123,416 |
|
Accounts receivable, net of allowance for credit losses of |
|
131,037 |
|
|
|
120,724 |
|
Prepaid expenses and other current assets |
|
21,472 |
|
|
|
19,556 |
|
Total current assets |
|
229,794 |
|
|
|
263,696 |
|
Property and equipment, net |
|
7,916 |
|
|
|
6,393 |
|
Right-of-use assets, net |
|
5,608 |
|
|
|
6,150 |
|
Intangible assets, net |
|
282,196 |
|
|
|
297,401 |
|
|
|
836,568 |
|
|
|
837,514 |
|
Cloud computing software, net |
|
34,450 |
|
|
|
36,144 |
|
Deferred tax assets |
|
83,491 |
|
|
|
76,736 |
|
Other non-current assets |
|
24,887 |
|
|
|
24,256 |
|
Total assets |
$ |
1,504,910 |
|
|
$ |
1,548,290 |
|
Liabilities and Stockholders' Equity |
|
|
|
||||
Current liabilities |
|
|
|
||||
Accounts payable |
$ |
8,769 |
|
|
$ |
9,496 |
|
Accrued expenses and other current liabilities |
|
94,194 |
|
|
|
100,963 |
|
Accrued salaries and payroll |
|
20,285 |
|
|
|
29,392 |
|
Debt, current portion |
|
7,500 |
|
|
|
7,500 |
|
Total current liabilities |
|
130,748 |
|
|
|
147,351 |
|
Debt, long-term portion |
|
723,455 |
|
|
|
726,767 |
|
Tax receivable agreement liability, long-term portion |
|
162,669 |
|
|
|
183,835 |
|
Deferred tax liabilities |
|
10,616 |
|
|
|
10,817 |
|
Other non-current liabilities |
|
10,287 |
|
|
|
10,757 |
|
Total liabilities |
|
1,037,775 |
|
|
|
1,079,527 |
|
Commitments and contingent liabilities |
|
|
|
||||
Stockholders' equity |
|
|
|
||||
Preferred stock, |
|
— |
|
|
|
— |
|
Common stock, |
|
80 |
|
|
|
80 |
|
Additional paid-in capital |
|
827,173 |
|
|
|
823,621 |
|
|
|
(137,596 |
) |
|
|
(137,596 |
) |
Accumulated deficit |
|
(230,621 |
) |
|
|
(227,350 |
) |
Accumulated other comprehensive loss |
|
(9,225 |
) |
|
|
(7,587 |
) |
|
|
449,811 |
|
|
|
451,168 |
|
Noncontrolling interest |
|
17,324 |
|
|
|
17,595 |
|
Total stockholders’ equity |
|
467,135 |
|
|
|
468,763 |
|
Total liabilities and stockholders’ equity |
$ |
1,504,910 |
|
|
$ |
1,548,290 |
|
|
|||||||
Three Months Ended |
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|
|
||||||
|
|
2024 |
|
|
|
2023 |
|
|
(in thousands, except share and per share data) |
||||||
Revenues |
$ |
173,202 |
|
|
$ |
175,447 |
|
|
|
|
|
||||
Expenses |
|
|
|
||||
Cost of services (exclusive of depreciation and amortization below) |
|
91,638 |
|
|
|
98,451 |
|
Selling, general and administrative |
|
54,734 |
|
|
|
59,726 |
|
Depreciation and amortization |
|
19,173 |
|
|
|
18,417 |
|
Total expenses |
|
165,545 |
|
|
|
176,594 |
|
Operating income (loss) |
|
7,657 |
|
|
|
(1,147 |
) |
|
|
|
|
||||
Other expenses |
|
|
|
||||
Interest expense, net |
|
17,726 |
|
|
|
12,402 |
|
Other expense, net |
|
6 |
|
|
|
306 |
|
Total other expenses |
|
17,732 |
|
|
|
12,708 |
|
Loss before income taxes |
|
(10,075 |
) |
|
|
(13,855 |
) |
Income tax benefit |
|
(6,533 |
) |
|
|
(5,944 |
) |
Net loss |
$ |
(3,542 |
) |
|
$ |
(7,911 |
) |
Less: Net loss attributable to noncontrolling interest |
|
(271 |
) |
|
|
— |
|
Net loss attributable to |
$ |
(3,271 |
) |
|
$ |
(7,911 |
) |
|
|
|
|
||||
Net loss per share attributable to |
|
|
|
||||
Basic |
$ |
(0.05 |
) |
|
$ |
(0.10 |
) |
Diluted |
$ |
(0.05 |
) |
|
$ |
(0.10 |
) |
Weighted-average shares outstanding: |
|
|
|
||||
Basic |
|
67,351,727 |
|
|
|
77,285,116 |
|
Diluted |
|
67,351,727 |
|
|
|
77,285,116 |
|
|
|||||||
Three Months Ended
|
|||||||
|
|
2024 |
|
|
|
2023 |
|
|
(in thousands) |
||||||
Cash flows from operating activities |
|
|
|
||||
Net loss |
$ |
(3,542 |
) |
|
$ |
(7,911 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
||||
Depreciation and amortization |
|
19,173 |
|
|
|
18,417 |
|
Deferred income taxes |
|
(6,488 |
) |
|
|
(6,590 |
) |
Amortization of debt issuance costs |
|
474 |
|
|
|
803 |
|
Amortization of contract assets |
|
1,314 |
|
|
|
1,212 |
|
Amortization of right-of-use assets |
|
402 |
|
|
|
2,384 |
|
Amortization of unrealized gains on terminated interest rate swap agreements |
|
— |
|
|
|
(2,527 |
) |
Amortization of cloud computing software costs |
|
1,733 |
|
|
|
1,571 |
|
Stock-based compensation |
|
3,552 |
|
|
|
3,828 |
|
Other non-cash charges, net |
|
(87 |
) |
|
|
(383 |
) |
Changes in operating assets and liabilities: |
|
|
|
||||
Accounts receivable |
|
(10,085 |
) |
|
|
2,838 |
|
Prepaid expenses and other current assets |
|
(1,917 |
) |
|
|
(1,465 |
) |
Cloud computing software |
|
(39 |
) |
|
|
(6,125 |
) |
Other non-current assets |
|
(2,043 |
) |
|
|
(1,893 |
) |
Accounts payable |
|
(737 |
) |
|
|
(1,804 |
) |
Accrued expenses and other current liabilities |
|
(475 |
) |
|
|
(771 |
) |
Accrued salaries and payroll |
|
(9,306 |
) |
|
|
(5,140 |
) |
Operating lease liabilities, net |
|
(1,377 |
) |
|
|
(1,284 |
) |
Other non-current liabilities |
|
219 |
|
|
|
(175 |
) |
Net cash used in operating activities |
|
(9,229 |
) |
|
|
(5,015 |
) |
Cash flows from investing activities |
|
|
|
||||
Purchases of property and equipment |
|
(2,648 |
) |
|
|
(693 |
) |
Capitalized software development |
|
(2,899 |
) |
|
|
(2,918 |
) |
Other investing |
|
— |
|
|
|
(1,000 |
) |
Net cash used in investing activities |
|
(5,547 |
) |
|
|
(4,611 |
) |
Cash flows from financing activities |
|
|
|
||||
Repayments of debt |
|
(3,750 |
) |
|
|
(2,088 |
) |
Payment of tax receivable agreement liability |
|
(27,169 |
) |
|
|
— |
|
Repurchases of common stock |
|
— |
|
|
|
(24,584 |
) |
Net cash used in financing activities |
|
(30,919 |
) |
|
|
(26,672 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
(45,695 |
) |
|
|
(36,298 |
) |
Effect of exchange rates |
|
(436 |
) |
|
|
306 |
|
Cash, cash equivalents and restricted cash |
|
|
|
||||
Beginning of year |
|
123,416 |
|
|
|
163,402 |
|
End of period |
$ |
77,285 |
|
|
$ |
127,410 |
|
Cash paid for |
|
|
|
||||
Interest |
$ |
17,467 |
|
|
$ |
15,221 |
|
Income taxes |
$ |
2,416 |
|
|
$ |
639 |
|
Supplemental schedule of non-cash activities |
|
|
|
||||
Unpaid property and equipment and capitalized software purchases |
$ |
648 |
|
|
$ |
821 |
|
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 |
||||||
|
|
||||||
|
|
2024 |
|
|
|
2023 |
|
|
(in thousands, except percents) |
||||||
Net loss |
$ |
(3,542 |
) |
|
$ |
(7,911 |
) |
Loss attributable to noncontrolling interest |
|
271 |
|
|
|
— |
|
Net loss attributable to |
|
(3,271 |
) |
|
|
(7,911 |
) |
Income tax benefit |
|
(6,533 |
) |
|
|
(5,944 |
) |
Interest expense, net |
|
17,726 |
|
|
|
12,402 |
|
Depreciation and amortization |
|
19,173 |
|
|
|
18,417 |
|
EBITDA |
|
27,095 |
|
|
|
16,964 |
|
Stock-based compensation |
|
3,552 |
|
|
|
3,828 |
|
Realized and unrealized loss on foreign exchange |
|
119 |
|
|
|
307 |
|
Restructuring charges (1) |
|
2,140 |
|
|
|
9,874 |
|
Amortization of cloud computing software costs (2) |
|
1,733 |
|
|
|
1,571 |
|
Other items (3) |
|
5,673 |
|
|
|
497 |
|
Adjusted EBITDA |
$ |
40,312 |
|
|
$ |
33,041 |
|
Net income (loss) margin attributable to |
|
(1.9 |
)% |
|
|
(4.5 |
)% |
Adjusted EBITDA margin |
|
23.3 |
% |
|
|
18.8 |
% |
(1) |
Restructuring charges represent costs incurred in connection with the Company’s global restructuring plan. Costs incurred in connection with the plan during the three months ended |
|
(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 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. |
|
(3) |
Other items for the three months ended |
|
(4) |
Net income (loss) margin attributable to |
|
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 |
||||||
|
|
||||||
|
|
2024 |
|
|
|
2023 |
|
|
(in thousands) |
||||||
Net loss |
$ |
(3,542 |
) |
|
$ |
(7,911 |
) |
Loss attributable to noncontrolling interest |
|
271 |
|
|
|
— |
|
Net loss attributable to |
|
(3,271 |
) |
|
|
(7,911 |
) |
Income tax benefit |
|
(6,533 |
) |
|
|
(5,944 |
) |
Amortization of acquired intangible assets |
|
15,883 |
|
|
|
15,394 |
|
Interest expense swap adjustments (1) |
|
— |
|
|
|
(2,527 |
) |
Interest expense discounts (2) |
|
473 |
|
|
|
803 |
|
Stock-based compensation |
|
3,552 |
|
|
|
3,828 |
|
Realized and unrealized loss on foreign exchange |
|
119 |
|
|
|
307 |
|
Restructuring charges (3) |
|
2,140 |
|
|
|
9,874 |
|
Amortization of cloud computing software costs (4) |
|
1,733 |
|
|
|
1,571 |
|
Other items (5) |
|
5,673 |
|
|
|
497 |
|
Adjusted income before income taxes |
|
19,769 |
|
|
|
15,892 |
|
Adjusted income taxes (6) |
|
5,140 |
|
|
|
4,132 |
|
Adjusted Net Income |
$ |
14,629 |
|
|
$ |
11,760 |
|
The following table sets forth the calculation of Adjusted Diluted Earnings Per Share for the periods presented.
|
Three Months Ended |
||||||
|
|
||||||
|
|
2024 |
|
|
|
2023 |
|
Diluted net loss per share |
$ |
(0.05 |
) |
|
$ |
(0.10 |
) |
Loss attributable to noncontrolling interest |
|
— |
|
|
|
— |
|
Diluted net loss per share attributable to |
|
(0.05 |
) |
|
|
(0.10 |
) |
Income tax benefit |
|
(0.10 |
) |
|
|
(0.08 |
) |
Amortization of acquired intangible assets |
|
0.24 |
|
|
|
0.20 |
|
Interest expense swap adjustments (1) |
|
— |
|
|
|
(0.03 |
) |
Interest expense discounts (2) |
|
0.01 |
|
|
|
0.01 |
|
Stock-based compensation |
|
0.05 |
|
|
|
0.05 |
|
Realized and unrealized loss on foreign exchange |
|
— |
|
|
|
— |
|
Restructuring charges (3) |
|
0.03 |
|
|
|
0.13 |
|
Amortization of cloud computing software costs (4) |
|
0.03 |
|
|
|
0.02 |
|
Other items (5) |
|
0.09 |
|
|
|
0.01 |
|
Adjusted income before income taxes |
|
0.30 |
|
|
|
0.21 |
|
Adjusted income taxes (6) |
|
(0.08 |
) |
|
|
(0.06 |
) |
Adjusted Diluted Earnings Per Share |
$ |
0.22 |
|
|
$ |
0.15 |
|
|
|
|
|
||||
Weighted average number of shares outstanding - diluted |
|
67,351,727 |
|
|
|
77,285,116 |
|
(1) |
Interest expense swap adjustments consist of amortization of unrealized gains on our terminated interest rate swap agreements, which were recognized through |
|
(2) |
Interest expense discounts consist of amortization of original issue discount and debt issuance costs. |
|
(3) |
Restructuring charges represent costs incurred in connection with the Company’s global restructuring plan. Costs incurred in connection with the plan during the three months ended |
|
(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 months ended |
|
(6) |
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 months ended |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240507605993/en/
Investors:
InvestorRelations@HireRight.com
+1 949-528-1000
Media:
Media.Relations@HireRight.com
Source: