Home Business Wire HireRight Reports Second Quarter 2022 Results

HireRight Reports Second Quarter 2022 Results

– Revenues Grew 26% over Prior Year –

– Net Income Up $28 million over Prior Year –

– Adjusted EBITDA Up 40% over Prior Year –

NASHVILLE, Tenn.–(BUSINESS WIRE)–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.

Contacts

Investors:
InvestorRelations@HireRight.com
+1 949-528-1000

Media:
Monica.Soladay@HireRight.com

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