HireRight, Inc. Reports Second Quarter 2007 Results
-- Service revenue increased 19.7% to $16.8 million
-- Gross profit increased 28.5% to $9.4 million, yielding a margin of 56.2%
-- Operating margin increased to 18.6%
IRVINE, Calif.--(BUSINESS WIRE)--
HireRight, Inc. (NasdaqGM: HIRE), a leading provider of on-demand employment screening solutions, today announced financial results for the second quarter ended June 30, 2007. This is the Company's first release of financial results following its recent initial public offering of common stock.
Service revenue for the quarter ended June 30, 2007 increased 19.7% to $16.8 million, compared to $14.0 million in the quarter ended June 30, 2006. The change was a result of an increase in new customers as compared to the three months ended June 30, 2006, as well as the sale of additional products and services to existing customers and further rollout of our screening services to other divisions by our enterprise customers. Gross profit for the quarter rose to $9.4 million from $7.4 million in the prior year quarter. Gross profit as a percentage of service revenue rose to 56.2%, a 380 basis point increase as compared to the quarter ended June 30, 2006.
Income from operations was $3.1 million for the second quarter of 2007, compared to $2.5 million during the same prior year period. Net income was $1.9 million for the quarter ended June 30, 2007 compared to $2.4 million for the quarter ended June 30, 2006. The decrease in net income was the result of a $1.3 million income tax expense in the current period, compared with $0.1 million during the three months ended June 30, 2006. Income tax expense in the second quarter of 2006 benefited from a full valuation allowance against the Company's deferred tax assets, as the Company had not concluded that it was more likely than not that it would be able to realize substantially all of its net deferred tax assets. The effective tax rate for the current quarter was approximately 41%.
Conference Call
HireRight's second quarter results and related matters including guidance will be discussed in more detail during a conference call today, September 13, 2007 at 5:00 pm Eastern Time, via teleconference and webcast. The dial-in number is (800) 638-5495 within the United States, and (617) 614-3946 outside the United States. The teleconference pass code is 95911384. You can also access a live broadcast of the call by visiting our website at http://ir.hireright.com. A replay will be available for one month at the same web address or by phone at (888) 286-8010 or (617) 801-6888, outside the United States, with pass code 61766431.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This message may contain forward-looking statements based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will" and variations of these words or similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, our expectations regarding our financial condition and results of operations. Such statements speak only as of the date hereof and are subject to change. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Important factors that may cause such a difference include, but are not limited to, the various risks and uncertainties described in the "Risk Factors" section of our Registration Statement on Form S-1, and the general economic and political conditions and specific conditions that may impact our operations. Further information on HireRight, Inc., including additional risk factors that may affect our forward looking statements, is contained in our Registration Statement on Form S-1 and our other SEC filings that are available through the SEC's website (www.sec.gov).
About HireRight
HireRight is a leading provider of on-demand employment background and drug screening solutions that help organizations efficiently implement, manage and control their employment screening programs.
HIRERIGHT, INC.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2007 December 31,
---------------------
(in thousands, except share Actual Pro Forma(1)
amounts) 2006
-------------------------------------------- -------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,301 $ 2,301 $ 4,201
Restricted cash 120 120 120
Short-term investments 7,750 7,750 4,031
Accounts receivable, net of
allowance for doubtful accounts
of $128 and $131 at June 30,
2007 and December 31, 2006,
respectively, and reserve for
sales allowances of $126 and
$154 at June 30, 2007 and
December 31, 2006, respectively 11,906 11,906 9,628
Prepaid expenses and other
current assets 717 717 955
Deferred tax asset - current 2,185 2,185 3,518
-------- ------------ ------------
Total current assets 24,979 24,979 22,453
Property and equipment, net of
accumulated depreciation and
amortization of $4,829 and $4,486
at June 30, 2007 and December 31,
2006 1,843 1,843 1,583
Other assets 1,703 1,703 646
Deferred tax asset - non-current 1,167 1,167 1,151
-------- ------------ ------------
TOTAL $ 29,692 $ 29,692 $ 25,833
======== ============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,227 $ 3,227 $ 4,480
Accrued liabilities 2,869 2,869 1,210
Accrued payroll and benefits 3,569 3,569 3,731
Capital lease liability 4 4 4
-------- ------------ ------------
Total current liabilities 9,669 9,669 9,425
Other liabilities 284 284 -
-------- ------------ ------------
Total liabilities 9,953 9,953 9,425
-------- ------------ ------------
COMMITMENTS AND CONTINGENCIES:
Series C redeemable convertible
preferred stock, $0.01 par
value--6,794,579 shares
authorized, issued and
outstanding (aggregate
liquidation preference of
$13,000) 13,000 - 13,000
Series E redeemable convertible
preferred stock, $0.01 par
value--17,500,000 shares
authorized; 17,246,579 shares
issued and outstanding
(aggregate liquidation
preference of $12,180) 12,180 - 12,180
STOCKHOLDERS' EQUITY:
Preferred stock, 50,000,000
shares authorized:
Series A redeemable
convertible preferred stock,
$0.01 par value--none issued
and outstanding
Series B convertible
preferred stock, $0.01 par
value--854,632 shares
authorized, issued and
outstanding (aggregate
liquidation preference of
$2,000) 2,000 - 2,000
Common stock, $0.01 par value--
100,000,000 shares authorized;
1,990,224, 8,191,366 and
1,956,115 shares issued and
outstanding at June 30, 2007,
pro forma at June 30, 2007, and
December 31, 2006, respectively 20 82 20
Additional paid-in capital 1,100 28,218 847
Other comprehensive gain--
currency translation 15 15 14
Accumulated deficit (8,576) (8,576) (11,653)
-------- ------------ ------------
Net stockholders' (deficit)
equity (5,441) 19,739 (8,772)
-------- ------------ ------------
TOTAL $ 29,692 $ 29,692 $ 25,833
======== ============ ============
(1) Reflects on a pro forma basis the conversion of all outstanding
preferred stock to an aggregate 6,201,142 shares of common stock.
HIRERIGHT, INC.
CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
----------------- -----------------
(in thousands, except per share
data) 2007 2006 2007 2006
----------------- -----------------
REVENUE:
Service revenue $ 16,806 $ 14,038 $ 31,321 $ 25,666
Reimbursed fee revenue 1,770 1,497 3,275 2,916
----------------- -----------------
Total revenue 18,576 15,535 34,596 28,582
----------------- -----------------
COST OF REVENUE:
Cost of service revenue 7,364 6,688 14,380 12,668
Reimbursed fees paid 1,770 1,497 3,275 2,916
----------------- -----------------
Total cost of revenue 9,134 8,185 17,655 15,584
----------------- -----------------
GROSS PROFIT 9,442 7,350 16,941 12,998
----------------- -----------------
OPERATING EXPENSES:
Research and development 1,023 928 1,932 1,789
Sales and marketing 2,706 2,238 5,085 3,994
General and administrative 2,586 1,727 4,873 3,333
----------------- -----------------
Total operating expenses 6,315 4,893 11,890 9,116
----------------- -----------------
INCOME FROM OPERATIONS 3,127 2,457 5,051 3,882
----------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 120 32 212 34
Interest expense 2 (16) 1 (38)
Other income (expense)--net (6) (11) (7) (15)
----------------- -----------------
Total other income
(expense)--net 116 5 206 (19)
----------------- -----------------
INCOME BEFORE INCOME TAXES 3,243 2,462 5,257 3,863
INCOME TAX PROVISION 1,343 106 2,180 106
----------------- -----------------
NET INCOME 1,900 2,356 3,077 3,757
Preferred stock dividends (544) (544) (1,087) (1,087)
Income allocable to preferred
stockholders (1,028) (1,389) (1,509) (2,055)
----------------- -----------------
NET INCOME ALLOCABLE TO COMMON
STOCKHOLDERS $ 328 $ 423 $ 481 $ 615
================= =================
NET INCOME PER SHARE ALLOCABLE TO
COMMON STOCKHOLDERS:
Basic $ 0.17 $ 0.23 $ 0.24 $ 0.35
================= =================
Diluted $ 0.11 $ 0.16 $ 0.16 $ 0.24
================= =================
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES:
Basic 1,975 1,813 1,966 1,752
================= =================
Diluted 3,086 2,674 3,053 2,553
================= =================
PRO FORMA NET INCOME PER SHARE:
Basic $ 0.23 $ 0.38
======== ========
Diluted $ 0.20 $ 0.33
======== ========
PRO FORMA WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT SHARES:
Basic 8,176 8,167
======== ========
Diluted 9,287 9,254
======== ========
Source: HireRight, Inc.
Released September 13, 2007