– Margin Expansion Continues –
– Enters Into an Agreement to Take Company
Private –
HireRight Holdings Corporation
(NYSE: HRT) ("HireRight" or the "Company"), a leading provider of
background screening services, today announced financial results
for its fourth quarter and year ended December 31, 2023.
Fourth Quarter 2023 Highlights:
- Revenues of $166.0 million, compared to prior year period
revenues of $175.4 million
- Net loss attributable to HireRight of $4.5 million, compared to
prior year period net income of $15.3 million
- Adjusted EBITDA of $42.5 million, compared to prior year period
Adjusted EBITDA of $38.9 million
- Diluted loss per share attributable to HireRight of $0.07,
compared to prior year period diluted earnings per share of
$0.19
- Adjusted diluted earnings per share of $0.23, compared to prior
year period adjusted diluted earnings of $0.22 per share
Full-Year 2023 Highlights:
- Revenues of $721.9 million, compared to prior year period
revenues of $806.7 million
- Net loss attributable to HireRight of $11.6 million, compared
to prior year period net income of $144.6 million
- Adjusted EBITDA of $180.4 million, compared to prior year
period Adjusted EBITDA of $188.3 million
- Diluted loss per share attributable to HireRight of $0.16,
compared to prior year period diluted earnings per share of
$1.82
- Adjusted diluted earnings per share of $1.06, compared to prior
year period adjusted diluted earnings per share of $1.27
“We’re pleased with our performance during the quarter and
throughout the year as we continued to deliver on our margin
expansion initiatives,” said HireRight President and CEO Guy
Abramo. “We remain the only provider in the industry that can
deliver a global solution through a unified platform, evidenced by
our continued success winning new global programs with our
customers. Regardless of our future ownership structure, we’re
optimistic regarding HireRight’s ability to capitalize on evolving
industry dynamics, including the changing competitive landscape, to
expand market share in the years ahead.”
Liquidity and Capital Resources
The Company had $282.2 million of capital available at December
31, 2023, consisting of $123.4 million of cash and $158.7 million
of available borrowing capacity under its revolving credit
facility. Through November 17, 2023, the Company had repurchased
12.8 million shares of common stock for approximately $136.5
million under the share repurchase programs announced on November
14, 2022, June 22, 2023, and September 12, 2023 before suspending
the program as a result of entry into an agreement to take the
Company private.
Cash provided by operating activities was $90.2 million for the
twelve months ended December 31, 2023, compared to $107.7 million
for the same period in 2022.
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 2023, we screened
over 26 million job applicants, employees and contractors for our
customers and processed over 95 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 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
loss 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 or insurance recoveries 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 loss 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 or insurance
recoveries 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 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 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 12, 2024, 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
Consolidated Balance Sheets
(Unaudited)
December 31,
December 31,
2023
2022
(in thousands, except share, and
per share data)
Assets
Current assets
Cash and cash equivalents
$
123,416
$
162,092
Restricted cash
—
1,310
Accounts receivable, net of allowance for
credit losses of $5,422 and $5,812 at December 31, 2023 and
December 31, 2022, respectively
120,724
136,656
Prepaid expenses and other current
assets
19,556
18,745
Total current assets
263,696
318,803
Property and equipment, net
6,393
9,045
Right-of-use assets, net
6,150
8,423
Intangible assets, net
297,401
331,598
Goodwill
837,514
809,463
Cloud computing software, net
36,144
35,230
Deferred tax assets
76,736
74,236
Other non-current assets
24,256
18,949
Total assets
$
1,548,290
$
1,605,747
Liabilities and Stockholders'
Equity
Current liabilities
Accounts payable
$
9,496
$
11,571
Accrued expenses and other current
liabilities
100,963
75,208
Accrued salaries and payroll
29,392
31,075
Debt, current portion
7,500
8,350
Total current liabilities
147,351
126,204
Debt, long-term portion
726,767
683,206
Tax receivable agreement liability,
long-term portion
183,835
210,543
Deferred tax liabilities
10,817
5,748
Other non-current liabilities
10,757
11,728
Total liabilities
1,079,527
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
December 31, 2023 and December 31, 2022
—
—
Common stock, $0.001 par value, authorized
1,000,000,000 shares; 80,199,299 and 79,660,397 shares issued, and
67,351,207 and 78,131,568 shares outstanding as of December 31,
2023 and December 31, 2022, respectively
80
80
Additional paid-in capital
823,621
805,799
Treasury stock, at cost; 12,848,092 and
1,528,829 shares repurchased at December 31, 2023 and December 31,
2022, respectively
(137,596
)
(16,827
)
Accumulated deficit
(227,350
)
(215,790
)
Accumulated other comprehensive loss
(7,587
)
(4,944
)
Total HireRight Holdings Corporation
stockholders' equity
451,168
568,318
Noncontrolling interest
17,595
—
Total stockholders’ equity
468,763
568,318
Total liabilities and stockholders’
equity
$
1,548,290
$
1,605,747
HireRight Holdings Corporation
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
(in thousands, except share, and
per share data)
Revenues
$
166,044
$
175,362
$
721,877
$
806,668
Expenses
Cost of services (exclusive of
depreciation and amortization below)
84,549
92,499
375,998
435,740
Selling, general and administrative
50,117
48,821
214,559
200,853
Depreciation and amortization
18,998
17,903
75,244
71,959
Total expenses
153,664
159,223
665,801
708,552
Operating income
12,380
16,139
56,076
98,116
Other expenses
Interest expense, net
16,330
11,151
64,722
32,122
Other expense, net
1,450
309
2,879
472
Total other expenses
17,780
11,460
67,601
32,594
Income (loss) before income taxes
(5,400
)
4,679
(11,525
)
65,522
Income tax expense (benefit)
(719
)
(10,596
)
144
(79,052
)
Net income (loss)
$
(4,681
)
$
15,275
$
(11,669
)
$
144,574
Less: Net loss attributable to
noncontrolling interest
(175
)
—
(109
)
—
Net income (loss) attributable to
HireRight Holdings Corporation
$
(4,506
)
$
15,275
$
(11,560
)
$
144,574
Net income (loss) per share
attributable to HireRight Holdings Corporation:
Basic
$
(0.07
)
$
0.19
$
(0.16
)
$
1.82
Diluted
$
(0.07
)
$
0.19
$
(0.16
)
$
1.82
Weighted-average shares
outstanding:
Basic
67,576,441
79,121,465
72,935,490
79,344,547
Diluted
67,576,441
79,345,781
72,935,490
79,443,263
HireRight Holdings Corporation
Consolidated Statements of Cash Flows
(Unaudited)
Year Ended December
31,
2023
2022
(in thousands)
Cash flows from operating
activities
Net income (loss)
$
(11,669
)
$
144,574
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
75,244
71,959
Deferred income taxes
(4,026
)
(82,658
)
Amortization of debt issuance costs
2,865
3,345
Amortization of contract assets
5,037
4,505
Amortization of right-of-use assets
4,469
2,973
Amortization of unrealized gains on
terminated interest rate swap agreements
(8,849
)
(12,634
)
Amortization of cloud computing software
costs
6,744
2,690
Stock-based compensation
18,738
11,474
Change in tax receivable agreement
liability
461
(96
)
Loss on modification and extinguishment of
debt
7,745
—
Other non-cash charges, net
1,725
2,927
Changes in operating assets and
liabilities (net of acquisitions)
Accounts receivable
17,305
3,887
Prepaid expenses and other current
assets
(288
)
(160
)
Cloud computing software
(8,606
)
(29,788
)
Other non-current assets
(6,826
)
(5,309
)
Accounts payable
(2,236
)
(4,953
)
Accrued expenses and other current
liabilities
(891
)
(567
)
Accrued salaries and payroll
(1,904
)
1,678
Operating lease liabilities, net
(4,959
)
(4,659
)
Other non-current liabilities
143
(1,460
)
Net cash provided by operating
activities
90,222
107,728
Cash flows from investing
activities
Purchases of property and equipment
(2,648
)
(4,456
)
Capitalized software development
(11,225
)
(12,475
)
Cash paid for acquisitions, net of cash
acquired
(21,653
)
—
Other investing
(4,725
)
—
Net cash used in investing activities
(40,251
)
(16,931
)
Cash flows from financing
activities
Repayments of debt
(638,653
)
(8,350
)
Proceeds from the 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 debt issuance costs
(6,976
)
—
Repurchases of common stock
(121,925
)
(15,671
)
Proceeds from issuance of common stock in
connection with stock-based compensation plans
1,118
1,506
Taxes paid related to net share settlement
of equity awards
(2,034
)
(562
)
Other financing
—
(399
)
Net cash used in financing activities
(90,580
)
(41,921
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(40,609
)
48,876
Effect of exchange rates
623
(1,688
)
Cash, cash equivalents and restricted
cash
Beginning of year
163,402
116,214
End of period
$
123,416
$
163,402
Cash paid for
Interest
$
65,053
$
41,142
Income taxes
$
2,354
$
4,395
Supplemental schedule of non-cash
activities
Unpaid property and equipment and
capitalized software purchases
$
425
$
740
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
Year Ended
December 31,
December 31,
2023
2022
2023
2022
(in thousands, except
percents)
Net income (loss) attributable to
HireRight Holdings Corporation
$
(4,506
)
$
15,275
$
(11,560
)
$
144,574
Loss attributable to noncontrolling
interest
(175
)
—
(109
)
—
Income tax expense (benefit) (1)
(719
)
(10,596
)
144
(79,052
)
Interest expense, net
16,330
11,151
64,722
32,122
Depreciation and amortization
18,998
17,903
75,244
71,959
EBITDA
29,928
33,733
128,441
169,603
Stock-based compensation
4,849
2,887
18,738
11,474
Realized and unrealized loss on foreign
exchange
722
1,118
1,059
323
Restructuring charges (2)
4,040
—
28,004
—
Technology investments (3)
—
4
1,193
563
Amortization of cloud computing software
costs (4)
1,732
1,244
6,744
2,690
Other items (5)
1,238
(49
)
(3,821
)
3,657
Adjusted EBITDA
$
42,509
$
38,937
$
180,358
$
188,310
Net income (loss) margin (6)
(2.7
) %
8.7
%
(1.6
) %
17.9
%
Adjusted EBITDA margin
25.6
%
22.2
%
25.0
%
23.3
%
(1)
During the year ended December 31, 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 months and year ended December 31,
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) $2.6
million and $13.7 million of severance and benefits related to
impacted employees during the three months and year ended December
31, 2023, respectively, (ii) $1.1 million and $9.7 million of
professional service fees related to the execution of our cost
savings initiatives during the three months and year ended December
31, 2023, respectively, (iii) $0.3 million and $2.9 million related
to the abandonment of certain of our leased facilities during the
three months and year ended December 31, 2023, respectively, and
(iv) $0.1 million and $1.7 million related to the replacement of
certain internal technology systems during the three months and
year ended December 31, 2023, respectively.
(3)
Technology investments represent costs
associated with the impairment of certain of our cloud computing
software costs during the year ended December 31, 2023 and
discovery phase costs associated with various platform and
fulfillment technology initiatives that are intended to achieve
greater operational efficiencies during the three months and year
ended December 31, 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 months and year
ended December 31, 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 during the year ended December 31, 2023. The
reduction related to the insurance recovery is offset by (i) $0.2
million and $1.4 million of professional services fees not related
to core operations during the three months and year ended December
31, 2023, respectively, (ii) professional services fees of $0.7
million during the three months and year ended December 31, 2023
related to the non-binding proposal received from General Atlantic,
L.P. and Stone Point Capital LLC and their respective affiliated
funds (collectively, the “Principal Stockholders”) to acquire all
of the Company’s outstanding shares of common stock that are not
already owned by the Principal Stockholders, and (iii) professional
services of $0.6 million during the year ended December 31, 2023
pertaining to other financing activities. Other items for the three
months and year ended December 31, 2022 include (i) costs of a
nominal amount and $1.8 million, respectively, associated with the
implementation of a company-wide enterprise resource planning
system, (ii) a reduction of $0.2 million and costs of $1.4 million
related to severance charges during the three months and year ended
December 31, 2022, respectively, (iii) $0.7 million and $1.1
million associated with professional services fees not related to
core operations for the three months and year ended December 31,
2022, respectively, (iv) $0.2 million related to exit costs
associated with one of our short-term leased facilities during the
year ended December 31, 2022, with no such costs occurring during
the three months then ended, and (v) various other costs of $0.3
million for the year ended December 31, 2022. These costs were
partially offset by (i) a reduction in previously accrued legal
settlement expense of $0.6 million during the year ended December
31, 2022 due to a more favorable outcome than originally
anticipated in a claim outside the ordinary course of business,
with no such expense incurred during the three months ended
December 31, 2022, and (ii) a cost reduction of $0.7 million
related to a change in the estimate of exit costs associated with
certain of our leased facilities for both the three months and year
ended December 31, 2022.
(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
Year Ended
December 31,
December 31,
2023
2022
2023
2022
(in thousands)
Net income (loss) attributable to
HireRight Holdings Corporation
$
(4,506
)
$
15,275
$
(11,560
)
$
144,574
Loss attributable to noncontrolling
interest
(175
)
—
(109
)
—
Income tax expense (benefit) (1)
(719
)
(10,596
)
144
(79,052
)
Income (loss) before income
taxes
(5,400
)
4,679
(11,525
)
65,522
Amortization of acquired intangible
assets
15,592
15,347
62,612
61,682
Loss on modification and extinguishment of
debt (2)
—
—
7,745
—
Interest expense swap adjustments (3)
(1,959
)
(2,958
)
(8,849
)
(12,634
)
Interest expense discounts (4)
462
796
2,864
3,345
Stock-based compensation
4,849
2,887
18,738
11,474
Realized and unrealized loss on foreign
exchange
722
1,118
1,059
323
Restructuring charges (5)
4,040
—
28,004
—
Technology investments (6)
—
4
1,193
563
Amortization of cloud computing software
costs (7)
1,732
1,244
6,744
2,690
Other items (8)
1,238
(49
)
(3,821
)
3,657
Adjusted income before income taxes
21,276
23,068
104,764
136,622
Adjusted income taxes (9)
5,532
5,998
27,239
35,522
Adjusted Net Income
$
15,744
$
17,070
$
77,525
$
101,100
The following table sets forth the calculation of Adjusted
Diluted Earnings Per Share for the periods presented.
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Diluted net income (loss) per share
attributable to HireRight Holdings Corporation
$
(0.07
)
$
0.19
$
(0.16
)
$
1.82
Loss attributable to noncontrolling
interest
—
—
—
—
Income tax expense (benefit) (1)
(0.01
)
(0.13
)
—
(1.00
)
Amortization of acquired intangible
assets
0.23
0.19
0.86
0.78
Loss on modification and extinguishment of
debt (2)
—
—
0.10
—
Interest expense swap adjustments (3)
(0.03
)
(0.04
)
(0.12
)
(0.16
)
Interest expense discounts (4)
0.01
0.01
0.04
0.04
Stock-based compensation
0.07
0.04
0.26
0.15
Realized and unrealized loss on foreign
exchange
0.01
0.01
0.01
—
Restructuring charges (5)
0.06
—
0.38
—
Technology investments (6)
—
—
0.02
0.01
Amortization of cloud computing software
costs (7)
0.02
0.03
0.09
0.04
Other items (8)
0.02
—
(0.05
)
0.04
Adjusted income before income taxes
0.31
0.30
1.43
1.72
Adjusted income taxes (9)
(0.08
)
(0.08
)
(0.37
)
(0.45
)
Adjusted Diluted Earnings Per
Share
$
0.23
$
0.22
$
1.06
$
1.27
Weighted average number of shares
outstanding - diluted
67,576,441
79,345,781
72,935,490
79,443,263
(1)
During the year ended December
31, 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 months and year ended December
31, 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 year ended December 31, 2023.
(3)
Interest expense swap adjustments
consist of amortization of unrealized gains on our terminated
interest rate swap agreements, which were 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) $2.6 million and $13.7 million of severance and
benefits related to impacted employees during the three months and
year ended December 31, 2023, respectively, (ii) $1.1 million and
$9.7 million of professional service fees related to the execution
of our cost savings initiatives during the three months and year
ended December 31, 2023, respectively, (iii) $0.3 million and $2.9
million related to the abandonment of certain of our leased
facilities during the three months and year ended December 31,
2023, respectively, and (iv) $0.1 million and $1.7 million related
to the replacement of certain internal technology systems during
the three months and year ended December 31, 2023,
respectively.
(6)
Technology investments represent
costs associated with the impairment of certain of our cloud
computing software costs during the year ended December 31, 2023
and discovery phase costs associated with various platform and
fulfillment technology initiatives that are intended to achieve
greater operational efficiencies during the three months and year
ended December 31, 2022.
(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 months
and year ended December 31, 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 during the year ended December 31,
2023. The reduction related to the insurance recovery is offset by
(i) $0.2 million and $1.4 million of professional services fees not
related to core operations during the three months and year ended
December 31, 2023, respectively, (ii) professional services fees of
$0.7 million during the three months and year ended December 31,
2023 related to the non-binding proposal received from General
Atlantic, L.P. and Stone Point Capital LLC and their respective
affiliated funds (collectively, the “Principal Stockholders”) to
acquire all of the Company’s outstanding shares of common stock
that are not already owned by the Principal Stockholders, and (iii)
professional services of $0.6 million during the year ended
December 31, 2023 pertaining to other financing activities. Other
items for the three months and year ended December 31, 2022 include
(i) costs of a nominal amount and $1.8 million, respectively,
associated with the implementation of a company-wide enterprise
resource planning system, (ii) a reduction of $0.2 million and
costs of $1.4 million related to severance charges during the three
months and year ended December 31, 2022, respectively, (iii) $0.7
million and $1.1 million associated with professional services fees
not related to core operations for the three months and year ended
December 31, 2022, respectively, (iv) $0.2 million related to exit
costs associated with one of our short-term leased facilities
during the year ended December 31, 2022, with no such costs
occurring during the three months then ended, and (v) various other
costs of $0.3 million for the year ended December 31, 2022. These
costs were partially offset by (i) a reduction in previously
accrued legal settlement expense of $0.6 million during the year
ended December 31, 2022 due to a more favorable outcome than
originally anticipated in a claim outside the ordinary course of
business, with no such expense incurred during the three months
ended December 31, 2022, and (ii) a cost reduction of $0.7 million
related to a change in the estimate of exit costs associated with
certain of our leased facilities for both the three months and year
ended December 31, 2022.
(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 months and year ended December 31, 2023 and 2022.
Adjusted income taxes for the three months and year ended December
31, 2022 have been updated to conform to the current year
methodology.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240312051634/en/
Investors: InvestorRelations@HireRight.com +1
949-528-1000
Media: Media.Relations@HireRight.com
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