HireRight, Inc. (NasdaqGM: HIRE), a leading provider of on-demand
employment screening solutions, today announced financial results
for the second quarter ended June 30, 2008. Service revenue for the
second quarter increased 7.2% to $18.0 million, compared to $16.8
million in the second quarter of 2007. Gross profit for the quarter
rose to $10.4 million from $9.4 million in the prior year quarter.
Gross profit as a percentage of service revenue rose to 57.8%,
compared to 56.2% in the same quarter a year ago. HireRight
president and chief executive officer, Eric Boden, stated, �In the
second quarter, in spite of the challenging economic environment,
we executed well and exceeded expectations. We are pleased with our
new customer growth in the second quarter. We plan to continue
investing in initiatives to grow our customer base and extend our
leadership position, which also should enhance our ability to
deliver outstanding service and support to our existing customers.�
Operating income, excluding $1.2 million in financial advisory,
legal advisory and ancillary costs relating to the pending merger
transaction, increased 4.6% to $3.3 million from $3.1 million in
the prior year period. Income from operations including the pending
merger expenses was $2.1 million for the second quarter of 2008,
compared to $3.1 million during the same prior year period. The
Company also recorded an impairment charge of $0.8 million in the
second quarter of 2008 as a result of the current lack of liquidity
in its auction rate securities portfolio due to current market
conditions. As of December 31, 2007 the Company held auction rate
securities with a par value of $37.6 million, and as of June 30,
2008 the balance decreased to a par value of $11.8 million as a
result of sales and redemptions. Net income was $1.2 million, or
$0.10 per diluted share, a decrease from $1.9 million in the second
quarter of 2007. Excluding the foregoing pending merger related
costs and the impairment charge, net income was $2.5 million, or
$0.21 per diluted share, taking into consideration the tax-effect
of these items. The adjusted net income amount represents an
increase of $0.6 million from the second quarter of 2007. The
effective tax rate for the second quarter of 2008 was approximately
32.5%. Cash, equivalents, and investments totaled $58.0 million at
the end of the second quarter of 2008, an increase from $55.4
million at the end of 2007. The increase was primarily due to
operating earnings and additional interest income earned during the
current six-month period. Information on non-GAAP financial
measures is presented below under "Non-GAAP Financial Measures." As
previously reported, HireRight has entered into an agreement and
plan of merger, as amended, with US Investigations Services, LLC
(�USIS�) and a wholly-owned subsidiary of USIS (the �Merger Sub�)
pursuant to which it is anticipated that the Merger Sub will merge
with and into HireRight, and HireRight will become a wholly-owned
subsidiary of USIS. HireRight announced on July 25, 2008 that a
record date and special meeting date have been established for the
Company�s stockholders to consider and vote on the proposal to
approve the agreement and plan of merger with USIS. HireRight
stockholders of record at the close of business on July 15, 2008
will be entitled to notice of the special meeting and to vote on
the proposal. The special meeting is scheduled to be held at 9:00
a.m. (PDT) on August 18, 2008 at HireRight's principal executive
offices located at 5151 California Avenue, Irvine, California
92617. Consummation of the merger is subject to receipt of approval
from HireRight�s stockholders, as well as satisfaction of customary
closing conditions, and the merger is expected to be completed in
the third quarter of 2008. 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 future financial condition and results
of operations, any statements or implications regarding our future
customer growth and the impact of our growth initiatives, our
expectations regarding the consummation of the merger and impact of
the merger. 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 Annual Report on Form 10-K for
the year ended December 31, 2007 and our subsequent Form 10-Q
filings, the risk that our business could suffer due to the
uncertainty relating to the merger, the fact that the merger may
not be consummated or may be delayed, and the general economic and
political conditions and specific conditions that may impact our
operations, including hiring trends. Further information on
HireRight, Inc., including additional risk factors that may affect
our forward looking statements, is contained in our Annual Report
on Form 10-K and our other SEC filings that are available through
the SEC�s website (www.sec.gov). Additional Information about the
Merger and Where to Find It This press release is not a
solicitation of a proxy, an offer to purchase nor a solicitation of
an offer to sell shares of HireRight, and it is not a substitute
for any proxy statement or other filings that have been or may be
made with the SEC should the proposed merger go forward. In
connection with the proposed merger, HireRight has filed a proxy
statement with the SEC. BEFORE MAKING ANY VOTING OR INVESTMENT
DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO CAREFULLY
READ THE ENTIRE PROXY STATEMENT, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS THERETO, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED MERGER. A definitive proxy statement
and supplement thereto have been sent to the stockholders of
HireRight. Investors and security holders may also obtain a free
copy of the proxy statement and other documents filed by HireRight
with the SEC at the SEC�s web site at http://www.sec.gov. Free
copies of the proxy statement and other documents filed by
HireRight with the SEC may also be obtained by requesting them in
writing from HireRight at 5151 California Avenue, Irvine, CA 92617,
or by telephone at 949-428-5855. Proxy Solicitation HireRight and
its directors, executive officers and other members of its
management and employees may be deemed to be participants in the
solicitation of proxies from its stockholders in connection with
the proposed merger. Information concerning the interests of
HireRight�s participants in such solicitation, including their
respective security holdings, is set forth in HireRight�s proxy
statement for such merger, which was filed with the Securities and
Exchange Commission on July 25, 2008. About HireRight HireRight is
a leading provider of on-demand employment background and drug
screening solutions that help organizations efficiently implement,
manage and control screening programs. Many companies, including 70
of the Fortune 500, trust HireRight because the company delivers
customer-focused solutions that we believe provides greater
efficiency and faster results. HireRight also provides
pre-integrated employment screening services through enterprise
e-recruiting solutions from top providers such as
Oracle/PeopleSoft, Taleo, Vurv, ADP/VirtualEdge and PeopleAdmin.
HireRight�s worldwide headquarters are located in Irvine,
California with offices and affiliates around the globe. For more
information, visit the company�s web site at www.hireright.com.
HIRERIGHT, INC. CONDENSED, CONSOLIDATED BALANCE SHEETS (Unaudited)
� � � � � � June 30, December 31, (in thousands, except share
amounts) � 2008 � 2007 � ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 46,982 $ 17,819 Short-term investments 1,550 29,005
Accounts receivable, net of allowance for doubtful accounts of $109
and $153 at June 30, 2008 and December 31, 2007, respectively, and
reserve for sales allowances of $147 and $139 at June 30, 2008 and
December 31, 2007, respectively 12,043 10,002 Prepaid expenses and
other current assets 2,239 1,216 Deferred tax asset�current � 1,301
� � 1,331 � � Total current assets 64,115 59,373 � � Property and
equipment, net of accumulated depreciation and amortization of
$6,407 and $5,597 at June 30, 2008 and December 31, 2007,
respectively 2,188 2,003 Long-term investments 9,513 8,595 Other
assets 523 486 Deferred tax asset�non-current � 964 � � 964 � �
TOTAL $ 77,303 � $ 71,421 � � LIABILITIES AND STOCKHOLDERS� EQUITY
CURRENT LIABILITIES: Accounts payable $ 4,602 $ 3,428 Accrued
liabilities 2,502 1,228 Accrued payroll and benefits � 3,326 � �
3,790 � � Total current liabilities 10,430 8,446 � OTHER
LIABILITIES 100 203 � COMMITMENTS AND CONTINGENCIES (Note 7) �
STOCKHOLDERS� EQUITY: � Common stock, $0.01 par value�100,000,000
shares authorized; 11,536,114 and 11,233,597 shares issued and
outstanding at June 30, 2008 and December 31, 2007, respectively
115 112 Additional paid-in capital 69,359 68,071 Other
comprehensive gain�currency translation 14 11 Accumulated deficit �
(2,715 ) � (5,422 ) � Net stockholders� equity � 66,773 � � 62,772
� � TOTAL $ 77,303 � $ 71,421 � HIRERIGHT, INC. CONDENSED,
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) � � � � � � � � Three
Months Ended Six Months Ended June 30, June 30, (in thousands,
except per share data) 2008 � 2007 2008 � 2007 � REVENUE: Service
revenue $ 18,013 $ 16,806 $ 33,775 $ 31,321 Reimbursed fee revenue
� 1,819 � � � 1,770 � � 3,382 � � � 3,275 � � Total revenue �
19,832 � � � 18,576 � � 37,157 � � � 34,596 � � COST OF REVENUE:
Cost of service revenue 7,597 7,364 14,965 14,380 Reimbursed fees
paid � 1,819 � � 1,770 � � 3,382 � � � 3,275 � � Total cost of
revenue � 9,416 � � � 9,134 � � 18,347 � � � 17,655 � � GROSS
PROFIT � 10,416 � � � 9,442 � � 18,810 � � � 16,941 � � OPERATING
EXPENSES: Research and development 1,167 1,023 2,214 1,932 Sales
and marketing 3,177 2,706 6,114 5,085 General and administrative �
4,000 � � � 2,586 � � 6,622 � � � 4,873 � � Total operating
expenses � 8,344 � � � 6,315 � � 14,950 � � � 11,890 � � INCOME
FROM OPERATIONS � 2,072 � � � 3,127 � � 3,860 � � � 5,051 � � OTHER
INCOME (EXPENSE): Interest income 343 120 926 212 Interest expense
- 2 - 1 Other income (expense)�net � (762 ) � � (6 ) � (776 ) � �
(7 ) � Total other income (expense) �net � (419 ) � � 116 � � 150 �
� � 206 � � INCOME BEFORE INCOME TAXES 1,653 3,243 4,010 5,257 �
INCOME TAX PROVISION � 449 � � � 1,343 � � 1,303 � � � 2,180 � �
NET INCOME 1,204 1,900 2,707 3,077 Preferred stock dividends - (544
) - (1,087 ) Income allocable to preferred stockholders � - � � �
(1,028 ) � - � � � (1,509 ) � NET INCOME ALLOCABLE TO COMMON
STOCKHOLDERS $ 1,204 � � $ 328 � $ 2,707 � � $ 481 � � EARNINGS PER
SHARE: Basic $ 0.10 � � $ 0.17 � $ 0.24 � � $ 0.24 � Diluted $ 0.10
� � $ 0.11 � $ 0.22 � � $ 0.16 � � WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES: Basic � 11,481 � � � 1,975 � � 11,467 � �
� 1,966 � Diluted � 12,190 � � � 3,086 � � 12,169 � � � 3,053 �
HIRERIGHT, INC. Non-GAAP Financial Measures (In millions, except
per share amounts) � � � � � � � � Table #1 Three Months Ended Six
Months Ended Reconciliation of net income to adjusted net income
June 30, June 30, 2008 � 2007 2008 � 2007 Net income $ 1.2 $ 1.9 $
2.7 $ 3.1 Certain significant items: Merger related expenses 1.2 -
1.2 - Impairment charge 0.8 - 0.8 - Tax benefit � (0.7 ) � � - �
(0.7 ) � � - Adjusted net income $ 2.5 � � $ 1.9 $ 4.0 � � $ 3.1 �
� Table #2 Reconciliation of diluted earnings per share to adjusted
diluted earnings per share � Diluted earnings per share $ 0.10 $
0.11 $ 0.22 $ 0.16 Merger related expenses and impairment charge �
0.11 � � � - � 0.11 � � � - � Adjusted diluted earnings per share $
0.21 � � $ 0.11 $ 0.33 � � $ 0.16 � Shares used for computing
adjusted diluted earnings per share � 12.2 � � � 3.1 � 12.2 � � �
3.1 � Table #3 Reconciliation of operating income to adjusted
operating income � Operating income $ 2.1 $ 3.1 $ 3.9 $ 5.1 �
Merger related expenses $ 1.2 $ - $ 1.2 $ - � � � � � � Adjusted
operating income $ 3.3 � � $ 3.1 $ 5.1 � � $ 5.1
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