Organization, Basis of Presentation and Consolidation, and Significant Accounting Policies
|6 Months Ended|
Jun. 30, 2022
|Organization, Consolidation and Presentation of Financial Statements [Abstract]|
|Organization, Basis of Presentation and Consolidation, and Significant Accounting Policies||Organization, Basis of Presentation and Consolidation, and Significant Accounting Policies
Description of Business
HireRight GIS Group Holdings LLC (“HGGH”), was formed in July 2018 in connection with the combination of two groups of companies: the HireRight Group and the General Information Services (“GIS”) Group, each of which includes a number of wholly-owned subsidiaries that conduct the Company’s business in the United States, as well as other countries. Since July 2018, the combined group of companies and their subsidiaries have operated as a unified operating company providing screening and compliance services, predominantly under the HireRight brand.
Corporate Conversion and Stock Split
On October 15, 2021, HGGH converted into a Delaware corporation and changed its name to HireRight Holdings Corporation (“HireRight” or the “Company”). In conjunction with the conversion, all of HGGH’s outstanding equity interests were converted into shares of common stock of HireRight Holdings Corporation. The conversion and related transactions are referred to herein as the “Corporate Conversion.” The Corporate Conversion did not affect the assets and liabilities of HGGH, which became the assets and liabilities of HireRight Holdings Corporation.
On October 18, 2021, HireRight Holdings Corporation effected a one-for-15.969236 reverse stock split (“Stock Split”). All shares of the Company’s common stock, stock-based instruments, and per-share data included in the condensed consolidated financial statements give retroactive effect to the Stock Split.
Initial Public Offering
On November 2, 2021, the Company completed its initial public offering (“IPO”), in which the Company issued 22,222,222 shares of its common stock. The shares began trading on the New York Stock Exchange on October 29, 2021 under the symbol “HRT.” The shares were sold at an IPO price of $19.00 per share for net proceeds of $393.5 million, after deducting underwriting discounts and commissions of $23.2 million and other offering costs payable by the Company of $5.5 million. On November 30, 2021, the Company issued an additional 2,424 shares pursuant to the partial exercise of the underwriters’ option to purchase additional shares for net proceeds of an immaterial amount.
Income Tax Receivable Agreement
In connection with the Company’s IPO, the Company entered into an income tax receivable agreement (“TRA”), which provides for the payment by the Company over a period of approximately 12 years to pre-IPO equityholders or their permitted transferees of 85% of the benefits, if any, that the Company and its subsidiaries realize, or are deemed to realize (calculated using certain assumptions) in U.S. federal, state, and local income tax savings as a result of the utilization (or deemed utilization) of certain existing tax attributes. As of June 30, 2022 and December 31, 2021, the Company recorded a total liability of $210.6 million in connection with the projected obligations under the TRA on its condensed consolidated balance sheets.
Basis of Presentation and Principles of Consolidation
The unaudited condensed consolidated financial statements include the Company’s accounts and those of its wholly-owned subsidiaries. The unaudited condensed consolidated financial statements are presented in accordance with generally accepted accounting principles in the United States of America ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting.
Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 21, 2022 (“Annual Report”). The December 31, 2021 condensed consolidated balance sheet data included herein was derived from audited financial statements but does not include all disclosures required by GAAP.
In the opinion of management, all adjustments, consisting of normal recurring items, necessary for the fair statement of the condensed consolidated financial statements have been included. All intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared on a consistent basis with the accounting policies described in Note 1 of the notes to the audited consolidated financial statements for the year ended December 31, 2021, included in the Annual Report. Certain reclassifications have been made to prior year presentation to conform to current year presentation.
Significant Accounting Policies
The Company’s significant accounting policies are discussed in “Note 1 — Organization, Basis of Presentation and Consolidation, and Significant Accounting Policies” of the notes to the audited consolidated financial statements for the year ended December 31, 2021, included in the Annual Report. Except as noted below and in Note 2 — Recently Issued Accounting Pronouncements regarding leases, there have been no significant changes to these policies which have had a material impact on the Company’s unaudited condensed consolidated financial statements during the six months ended June 30, 2022.
Implementation Costs Incurred in Cloud Computing Arrangements
For cloud computing arrangements that are a service contract, the Company capitalizes certain implementation costs incurred, including employee costs and third-party costs, during the application development stage, and expenses costs as incurred during the preliminary project and post-implementation stages. Capitalized implementation costs are expensed on a straight-line basis over the estimated useful life. Capitalized amounts related to such arrangements are recorded within prepaid expenses and other current assets and within cloud computing software in the condensed consolidated balance sheets and amortized to selling, general and administrative expenses in the condensed consolidated statement of operations.
Use of Estimates
Preparation of the Company’s unaudited condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates, judgments, and assumptions that affect the amounts reported and disclosed in the financial statements. The Company believes that the estimates, judgments, and assumptions used to determine certain amounts that affect the financial statements are reasonable based upon information available at the time they are made. The Company uses such estimates, judgments, and assumptions when accounting for items and matters such as, but not limited to, the allowance for doubtful accounts, customer rebates, impairment assessments and charges, recoverability of long-lived assets, deferred tax assets, lease accounting, uncertain tax positions, income tax expense, liabilities under the TRA, derivative instruments, fair value of debt, stock-based compensation expense, useful lives assigned to long-lived assets, and the stand-alone selling price of performance obligations for revenue recognition purposes. Results and outcomes could differ materially from these estimates, judgments, and assumptions due to risks and uncertainties.
No definition available.
The entire disclosure for the general note to the financial statements for the reporting entity which may include, descriptions of the basis of presentation, business description, significant accounting policies, consolidations, reclassifications, new pronouncements not yet adopted and changes in accounting principles.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef