Subsequent Events |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Subsequent Events The following material events occurred subsequent to September 30, 2021.
Initial Public Offering
On November 2, 2021, the Company completed the initial public offering of its common stock. See Note 1 — Organization, Basis of Presentation and Consolidation, and Significant Accounting Policies included in these condensed consolidated financial statements for more information about the IPO.
Corporate Conversion and Stock Split
In preparation for its IPO, on October 15, 2021, the Company converted into a Delaware corporation and changed its name to HireRight Holdings Corporation, and on October 18, 2021, HireRight Holdings Corporation effected a one-for-15.969236 reverse stock split.
Use of Proceeds
On November 3, 2021, the Company used approximately $215.0 million of the net proceeds from the IPO to repay, in full, indebtedness under the Second Lien Term Loan Facility. In addition, the Company recorded a $3.4 million write off of unamortized deferred financing fees and unamortized original issue discounts related to the repayment of debt under the Second Lien Term Loan Facility.
Income Tax Receivable Agreement
In connection with the Company’s IPO during the fourth quarter of 2021, the Company entered into the 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. Based on our current taxable income estimates, we expect to repay the majority of this obligation by the end of our 2025 fiscal year. Actual tax benefits realized by the Company may differ from tax benefits calculated under the TRA as a result of the use of certain assumptions in the TRA, including assumptions relating to state and local income taxes, to calculate tax benefits. The Company will record an estimated total liability of approximately $209.9 million and a reduction to Additional paid-in capital of approximately $209.9 million in connection with the TRA during the fourth quarter of 2021 on its condensed consolidated balance sheets.
Employee Stock Purchase Plan
On October 18, 2021, the Company’s stockholders adopted the Company’s Employee Stock Purchase Plan (the “ESPP”), which became effective on October 28, 2021. The Company initially reserved 1,587,810 shares of common stock for future issuance under the ESPP, subject to an annual increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031. The annual increase is equal to the least of (i) 1% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year, (ii) 1,587,810 shares of common stock, and (iii) such smaller number of shares as determined by the board of directors. No offering periods under the ESPP had been initiated as of September 30, 2021.
Omnibus Incentive plan
On October 18, 2021, the Company’s stockholders adopted the Company’s 2021 Omnibus Incentive Plan (the “Omnibus Incentive Plan”). The Omnibus Incentive Plan was approved by the Company’s stockholders on October 18, 2021 and became effective on October 15, 2021. Upon the adoption of the Omnibus Incentive Plan, the Company will not grant further awards under the Equity Plan. The Omnibus Incentive Plan provides for the grant of awards of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stock-based awards, other cash-based awards or any combination of the foregoing to eligible employees, consultants, directors, and officers. The Omnibus Incentive Plan has a term of 10 years. Pursuant to the Omnibus Incentive Plan, the Company has reserved an aggregate of 7,939,051 shares of the Company’s common stock for issuance of awards to be granted thereunder, subject to an annual increase equal to the lesser of (a) 4% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as is determined by our board of directors. No more than 7,939,051 shares of the Company’s common stock may be issued pursuant to the exercise of incentive stock options granted under the Omnibus Incentive Plan.
IPO Equity Grants
In October 2021, the Company's board of directors granted 1,035,986 equity awards to certain named executive officers under the Omnibus Incentive Plan. The total dollar amount of equity awards granted to the named executive officers was $9,250,000, $4,625,000 of which was granted in the form of options to purchase shares of the Company’s common stock and $4,625,000 of which was granted in the form of Restricted Stock Units (“RSUs”) covering shares of the Company’s common stock. The options will vest with respect to 25% of the underlying shares on the first anniversary of their grant date, and with respect to the remaining 75% of the underlying shares in 12 equal quarterly installments thereafter. The RSUs will vest in four installments, each with respect to 25% of the underlying shares, on November 15, 2022, November 15, 2023, November 15, 2024, and November 15, 2025. Each equity award is subject to the terms and conditions of the Omnibus Incentive Plan and an award agreement with the applicable grantee.
In addition to the awards to certain named executive officers, the Company granted equity awards to approximately 106 employees in senior leadership positions. These awards are structured like the executive officer awards, except that some individuals’ awards will be divided 75% RSUs and 25% options. The aggregate equity awards issued consisted of 436,375 RSUs and 1,142,308 options to purchase shares of the Company’s common stock. Further, the Company granted equity awards to the Company’s eight non-employee directors. The aggregate of the non-employee director awards granted was 34,736 equity awards, entirely in the form of RSUs. The equity awards for the Company’s eight non-employee directors shall, subject to continued service, vest on the first anniversary of the date of their issuance, or if earlier, upon (but effective immediately prior to) the occurrence of a change in control as defined in the governing plan, or the annual meeting of stockholders next following the grant of such annual equity awards.
Revolving Credit Facility
On November 5, 2021, the Company repaid the $10.0 million outstanding principal amount on the Revolving Credit Facility.
Legal Settlement Payment
On November 15, 2021, the Company paid $11.2 million of the $12.1 million legal settlement agreement discussed in Note 13 — Legal Proceedings and expects to pay the balance by the end of 2021.
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