– Revenues Grew 3% over Prior Year –
– Adjusted EBITDA Margin of 26% –
– Operating Income Up 21% over Prior Year
–
HireRight Holdings Corporation (NYSE: HRT) ("HireRight" or the
"Company"), a leading provider of background screening services,
today announced financial results for its third quarter ended
September 30, 2022.
Third Quarter 2022 Highlights Compared to Third Quarter
2021:
- Revenues of $210.3 million increased 3%, from $205.0
million
- Operating income of $32.1 million increased 21%, up from $26.5
million
- Net income of $93.3 million, up from net income of $7.3
million
- Adjusted EBITDA of $54.0 million, up from $51.6 million
- Adjusted diluted earnings per share of $1.40, up from $0.53 per
share
Nine Months Ended September 30, 2022 Highlights Compared to
Nine Months Ended September 30, 2021:
- Revenues of $631.3 million increased 19%, from $531.5
million
- Operating income of $82.0 million increased 65.9%, up from
$49.4 million
- Net income of $129.3 million, up from net loss of $8.3
million
- Adjusted EBITDA of $149.4 million, up from $117.4 million
- Adjusted diluted earnings per share of $2.32, up from $0.96 per
share
"We are pleased to deliver another quarter of solid results in
an uncertain environment, and I am proud of our team's success
delivering on our margin objectives as we posted our highest
Adjusted EBITDA margin since we combined companies in 2018," said
HireRight President and CEO Guy Abramo. "We are focused on
executing against our core priorities of becoming the most
technologically advanced and comprehensive background screening
company in the world. While the macro environment will fluctuate,
our favorable positioning along with the long-term prospects for
industry growth bode well for our ability to create meaningful
shareholder value over time."
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
$
820,000
$
830,000
$
798,000
$
805,000
Adjusted Net Income (1) (2)
$
130,000
$
140,000
$
200,000
$
204,000
Adjusted EBITDA (1)
$
190,000
$
197,000
$
178,000
$
185,000
Adjusted Diluted EPS (1) (2)
$
1.64
$
1.76
$
2.52
$
2.57
(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.
(2) 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. Revised Adjusted Net Income and
Adjusted Diluted EPS include $70.2 million related to the reversal
of the valuation allowance.
Webcast and Conference Call
Management will discuss third quarter 2022 results on a webcast
at 2 p.m. (PT) / 5 p.m. (ET) today, Thursday November 3, 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 1-888-633-8407 or 1-416-641-6684.
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, November 17, 2022 by dialing
1-844-512-2921 or 1-412-317-6671 and entering passcode
22020951.
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 39,000 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 (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, 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 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) 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
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) 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 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, 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, 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; 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 COVID-19 pandemic 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 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)
September 30,
December 31,
2022
2021
(in thousands, except share and
per share data)
Assets
Current assets
Cash and cash equivalents
$
146,508
$
111,032
Restricted cash
1,306
5,182
Accounts receivable, net of allowance for
doubtful accounts of $5,170 and $4,284 at September 30, 2022 and
December 31, 2021, respectively
165,944
142,473
Prepaid expenses and other current
assets
17,067
18,583
Total current assets
330,825
277,270
Property and equipment, net
9,492
11,127
Right-of-use assets, net
8,802
—
Intangible assets, net
343,025
389,483
Goodwill
801,674
819,538
Cloud computing software, net
29,844
8,133
Deferred tax assets
63,167
—
Other non-current assets
18,811
18,211
Total assets
$
1,605,640
$
1,523,762
Liabilities and Stockholders’
Equity
Current liabilities
Accounts payable
$
11,355
$
13,688
Accrued expenses and other current
liabilities
79,867
75,294
Accrued salaries and payroll
33,158
29,280
Derivative instruments, short-term
—
16,662
Debt, current portion
8,350
8,350
Total current liabilities
132,730
143,274
Debt, long-term portion
684,565
688,683
Derivative instruments, long-term
—
11,444
Tax receivable agreement liability
211,438
210,639
Deferred tax liabilities
5,760
14,765
Operating lease liabilities, long-term
11,051
—
Other non-current liabilities
2,394
9,240
Total liabilities
1,047,938
1,078,045
Commitments and contingent liabilities
Preferred stock, $0.001 par value,
authorized 100,000,000 shares; none issued and outstanding as of
September 30, 2022 and December 31, 2021
—
—
Common stock, $0.001 par value, authorized
1,000,000,000 shares; 79,482,612 and 79,392,937 shares issued and
outstanding as of September 30, 2022 and December 31, 2021,
respectively
79
79
Additional paid-in capital
802,484
793,382
Accumulated deficit
(231,065
)
(360,364
)
Accumulated other comprehensive income
(loss)
(13,796
)
12,620
Total stockholders’ equity
557,702
445,717
Total liabilities and stockholders’
equity
$
1,605,640
$
1,523,762
HireRight Holdings Corporation
Condensed Consolidated Statements of
Operations (Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
(in thousands, except share and
per share data)
Revenues
$
210,303
$
204,981
$
631,306
$
531,522
Expenses
Cost of services (exclusive of
depreciation and amortization below)
110,848
111,328
343,241
295,832
Selling, general and administrative
49,378
47,652
152,032
130,261
Depreciation and amortization
17,946
19,531
54,056
56,013
Total expenses
178,172
178,511
549,329
482,106
Operating income
32,131
26,470
81,977
49,416
Other expenses
Interest expense
8,457
18,518
20,971
54,674
Other expense, net
89
22
163
125
Total other expenses, net
8,546
18,540
21,134
54,799
Income (loss) before income taxes
23,585
7,930
60,843
(5,383
)
Income tax (benefit) expense
(69,704
)
649
(68,456
)
2,954
Net income (loss)
$
93,289
$
7,281
$
129,299
$
(8,337
)
Net income (loss) per share:
Basic
$
1.17
$
0.13
$
1.63
$
(0.15
)
Diluted
$
1.17
$
0.13
$
1.63
$
(0.15
)
Weighted average shares
outstanding:
Basic
79,459,633
57,168,291
79,419,725
57,168,291
Diluted
79,542,715
57,199,204
79,476,574
57,168,291
HireRight Holdings Corporation
Condensed Consolidated Statements of
Cash Flows (Unaudited)
Nine Months Ended
September 30,
2022
2021
(in thousands)
Cash flows from operating
activities
Net income (loss)
$
129,299
$
(8,337
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
54,056
56,013
Deferred income taxes
(70,954
)
1,933
Amortization of debt issuance costs
2,549
3,139
Amortization of contract assets
3,312
2,782
Amortization of right-of-use assets
2,094
—
Amortization of unrealized gains on
terminated interest rate swap agreements
(9,676
)
—
Amortization of cloud computing software
costs
1,446
—
Stock-based compensation
8,587
2,493
Increase in tax receivable agreement
liability
800
—
Other non-cash charges, net
524
(541
)
Changes in operating assets and
liabilities:
Accounts receivable
(24,521
)
(44,715
)
Prepaid expenses and other current
assets
1,516
(2,327
)
Cloud computing software
(23,158
)
—
Other non-current assets
(3,934
)
(4,157
)
Accounts payable
(5,212
)
(13,736
)
Accrued expenses and other current
liabilities
5,498
19,676
Accrued salaries and payroll
3,631
6,194
Operating lease liabilities, net
(4,125
)
—
Other non-current liabilities
(805
)
626
Net cash provided by operating
activities
70,927
19,043
Cash flows from investing
activities
Purchases of property and equipment
(3,973
)
(5,092
)
Capitalized software development
(9,149
)
(4,891
)
Net cash used in investing activities
(13,122
)
(9,983
)
Cash flows from financing
activities
Repayments of debt
(6,263
)
(6,263
)
Borrowings on line of credit
—
30,000
Repayments on line of credit
—
(30,000
)
Payments for termination of interest rate
swap agreements
(18,445
)
—
Payment of issuance costs - revolving
credit facility
(342
)
—
Other financing
—
(1,240
)
Net cash used in financing activities
(25,050
)
(7,503
)
Net increase in cash, cash equivalents and
restricted cash
32,755
1,557
Effect of exchange rates
(1,155
)
(978
)
Cash, cash equivalents and restricted
cash
Beginning of period
116,214
24,059
End of period
$
147,814
$
24,638
Cash paid for
Interest
$
27,890
$
51,355
Income taxes paid
2,718
787
Supplemental schedule of non-cash
activities
Unpaid deferred offering costs
$
—
$
2,975
Unpaid property and equipment and
capitalized software purchases
1,102
468
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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
(in thousands)
Net income (loss)
$
93,289
$
7,281
$
129,299
$
(8,337
)
Income tax (benefit) expense (1)
(69,704
)
649
(68,456
)
2,954
Interest expense
8,457
18,518
20,971
54,674
Depreciation and amortization
17,946
19,531
54,056
56,013
EBITDA
49,988
45,979
135,870
105,304
Stock-based compensation
1,282
841
8,587
2,493
Realized and unrealized (gain) loss on
foreign exchange
(780
)
24
(795
)
125
Merger integration expenses (2)
—
193
205
1,174
Technology investments (3)
559
1,690
559
1,690
Amortization of cloud computing software
costs (4)
980
—
1,446
—
Other items (5)
1,943
2,895
3,501
6,659
Adjusted EBITDA
$
53,972
$
51,622
$
149,373
$
117,445
Net income (loss) margin (6)
44
%
4
%
20
%
2
%
Adjusted EBITDA margin
26
%
25
%
24
%
22
%
(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)
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.
(3)
Technology investments represent discovery phase costs
associated with various platform and fulfillment technology
initiatives that are intended to achieve greater operational
efficiencies.
(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 include (i) costs of $0.4 million and $1.7 million
associated with the implementation of a company-wide enterprise
resource planning (“ERP”) 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, respectively, and (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. Other items for
the three and nine months ended September 30, 2021 include (i) $1.1
million and $4.3 million, respectively, related to the preparation
of the Company’s initial public offering during 2021, (ii) $1.5
million related to loss on disposal of assets and exit costs
associated with one of our short-term leased facilities during the
three and nine months ended September 30, 2021, and (iii) costs of
$0.3 million and $0.8 million associated with the implementation of
an ERP system during the three and nine months ended September 30,
2021.
(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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
(in thousands)
Net income (loss)
$
93,289
$
7,281
$
129,299
$
(8,337
)
Income tax (benefit) expense (1)
(69,704
)
649
(68,456
)
2,954
Income (loss) before income
taxes
23,585
7,930
60,843
(5,383
)
Amortization of acquired intangible
assets
15,353
16,226
46,335
47,518
Interest expense swap adjustments (2)
(3,413
)
—
(9,676
)
—
Interest expense discounts (3)
790
1,057
2,549
3,139
Stock-based compensation
1,282
841
8,587
2,493
Realized and unrealized (gain) loss on
foreign exchange
(780
)
24
(795
)
125
Merger integration expenses (4)
—
193
205
1,174
Technology investments (5)
559
1,690
559
1,690
Amortization of cloud computing software
costs (6)
980
—
1,446
—
Other items (7)
1,943
2,895
3,501
6,659
Adjusted income before income taxes
40,299
30,856
113,554
57,415
Adjusted income taxes (8)
(71,216
)
662
(70,951
)
2,533
Adjusted Net Income
$
111,515
$
30,194
$
184,505
$
54,882
The following table sets forth the calculation of Adjusted
Diluted Earnings Per Share for the periods presented:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Diluted net income (loss) per
share
$
1.17
$
0.13
$
1.63
$
(0.15
)
Income tax (benefit) expense (1)
(0.88
)
0.01
(0.86
)
0.05
Amortization of acquired intangible
assets
0.19
0.29
0.58
0.83
Interest expense swap adjustments (2)
(0.04
)
—
(0.12
)
—
Interest expense discounts (3)
0.01
0.02
0.03
0.06
Stock-based compensation
0.02
0.01
0.11
0.04
Realized and unrealized loss on foreign
exchange
(0.01
)
—
(0.01
)
—
Merger integration expenses (4)
—
—
—
0.02
Technology investments (5)
0.01
0.03
0.01
0.03
Amortization of cloud computing software
costs (6)
0.01
—
0.02
—
Other items (7)
0.02
0.05
0.04
0.12
Adjusted income taxes (8)
0.90
(0.01
)
0.89
(0.04
)
Adjusted Diluted Earnings Per
Share
$
1.40
$
0.53
$
2.32
$
0.96
Weighted average number of shares
outstanding - diluted
79,542,715
57,199,204
79,476,574
57,168,291
(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)
Interest expense swap adjustments consist
of amortization of unrealized gains on the terminated Interest Rate
Swap Agreements, which will be recognized through December 2023 as
a reduction in interest expense.
(3)
Interest expense discounts consist of
amortization of original issue discount and debt issuance
costs.
(4)
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.
(5)
Technology investments represent discovery
phase costs associated with various platform and fulfillment
technology initiatives that are intended to achieve greater
operational efficiencies.
(6)
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.
(7)
Other items include (i) costs of $0.4
million and $1.7 million associated with the implementation of a
company-wide enterprise resource planning (“ERP”) 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, respectively, and (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. Other items for the three and nine months ended September
30, 2021 include (i) $1.1 million and $4.3 million, respectively,
related to the preparation of the Company’s initial public offering
during 2021, (ii) $1.5 million related to loss on disposal of
assets and exit costs associated with one of our short-term leased
facilities during the three and nine months ended September 30,
2021, and (iii) costs of $0.3 million and $0.8 million associated
with the implementation of an ERP system during the three and nine
months ended September 30, 2021.
(8)
The tax effect of each adjustment is
determined based on the tax laws and valuation allowance status of
the jurisdiction to which the adjustment relates. An adjusted
effective income tax rate has been determined for each period
presented by applying the statutory income tax rate, net of
applicable adjustments for valuation allowances, which was used to
compute Adjusted Net Income for the periods presented. Due to the
existence of a U.S. tax valuation allowance, the tax impact of the
pre-tax adjustments for the three and nine months ended September
30, 2021 is immaterial. 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.
As a result of the reversal of the valuation allowance, the U.S.
tax provision for the remainder of the year is expected to be
immaterial.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221103006090/en/
Investors: InvestorRelations@HireRight.com +1
949-528-1000 Media: Monica.Soladay@HireRight.com
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