HireRight (HRT) 22 Mar 222021 Q4 Earnings call transcript

Good afternoon, ladies and gentlemen and welcome to the HireRight Fourth Quarter 2021 Conference Call.

Joining today's call is the Company's President and Chief Executive Officer, Guy Abramo; and Chief Financial Officer, Tom Spaeth. At this time, all participants are in a listen-only mode. I remind everyone that management will refer to certain non-GAAP financial measures. An explanation and reconciliation of these measures to the most comparable GAAP financial measures is included in the press release issue today, which is available in the Investor Relations section of HireRight's website. increase management's opportunity, include pandemic EPS. adjusted and customer including for investment adjusted call, to statements recovery revenue industry this growth XXXX operational technology market margins, and improvements international EBITDA HireRight's retention, to cash sectors during and remarks specific income, business, forward-looking will adjusted related strategies potential our Also for and future customers flows, revenue net competitive guidance differentiation, and the results those financial in and may of filed that contained actual forward-looking materially, with XXXX, forward-looking statements additional results statements, Commission factors of and But condition Form are XX, operations. is discussion concerning risk March differ in the analysis could and and factors, and to information predictions management's particular results XX-K of statements the in Securities materially in actual cause that Exchange on differ from the sections document entitled

pleasure turn Guy it's Now, over to Abramo. to my the call

operator and we discuss Thank as pleased breaking a finish to you strong year. today good record have We're you, us HireRight's with afternoon, everyone. to

During compared the quarter the delivered fourth XXXX. growth organic of to fourth EBITDA adjusted quarter and XXX% revenue we growth XX%

income cash the Also our this by grew adjusted XXXX continued in of million, has we Additionally, we $XX into the year. $XX flow saw key and and annual momentum free million that net respectively. is second half

EBITDA XX%. between per year fiscal grow earnings X% Adjusted to this XXXX, XX% For to XX%. XX% and to we're and revenues grow and between between expecting to share adjusted XX%, grow

player with It's remember for to customers this deck XXXX industry unified can look XXXX. from multinational of our presented in posted global a and priorities the in that platform. key the that accomplishments some website a key highlights some global for have let's today. only are to at key Now, I'll service we important start off we our our

invest players, in scope million of XX% by supported $XXX the against enterprise compete account us in small conduct by comprehensive management revenues and of screens to representing worldwide Our achieved scale global demanded solution XXXX, enables and local We customers. XXXX. over growth

XX% of Our million adjusted over was XXXX. increase EBITDA $XXX a

On based success. continued I achieved report the am in gross well $XXX retention to added A screens revenue to and as U.S. outstanding million we XXX%, in and exceeded management global milestone background logos and rates year front, the vertical revenues $XX market that our a international during both, of our new geographic net from as XXXX, customer XX% applicants drive derived million respectively. our for outside pleased expansion on team. employees from the and real expertise

in Our also reflective healthcare, performance leadership our which and was at grew strong technology the XX% during services of verticals, XXXX. revenue financial combined

and our growth Now, that margin been turn the our strategies, to goals my how trends let building me with future, past align vision the specific our for the the have opportunities year. over secular enhancement and attention and

all challenging in and both, solutions are needs, that every need I These to Although a that the globe, These of that screening we key in base very three deploy highly and HireRight markets. and verticals customer continue where the diversity the scope the regulations govern practices, to us making leader to criteria in driven depth. businesses our across from diverse these source complexity and complex industries the excel candidates to target hence tend roles, have are reach their previously, hiring demanding to industries addition spanning major be need are by of a screening mentioned has industry, the international the transportation. associated broad

broader our healthcare the or of global reflect whether research, new serving continued well we quarter in pharmaceutical These distribution. care, as continue to hiring service patient ramp development, the example, leading several one related firms. providers, For supportive community, to fourth during vaccine healthcare growth customers the in world's as

begun results. incremental and to customers these to see marquee outstanding meaningful fourth quarter add order pleased contributed volumes are We have to that our already

focus is customers in to expansion. truly further of international and player accelerate serving global HireRight Another our a countries territories. is over area XXX

investments India Latin growth regions. Our America strong in are Pacific, driving in these Europe, Asia and

In multinational as fact, as and orders than expand customer and more U.S. we our base. large to we that are twice orders, growing our international growing as fast expect with continue

based margins total screens on mark, mentioned business, million I the the business As I to XX% now streamline provide of in our represents in XX% from international that applicants our up outside and the to has on plans years automate XXXX. U.S. improving few next our employees earlier, background while also over $XXX an through and want process and fulfillment technology for and candidate the surpassed solutions approximately gross update the investment significantly experience. improve customer continued

and our processes mentioned, office previously the automating our IT assist focus data with with assets. As of we back leading have to our partnered industry-leading us a services usage maximizing on firm global

profitability and will emphasis and believe cost is natural of margin automation fulfilling Combined screens. strategies of other reduce north process processing, our annually. driving Our our XX% on automation, these delivered robotic growth improvement cloud with use continued will with a growth, we language enhancements process technologies of allow that

this remote these to that half we is of note, efforts labor, the year. High positive for beginning to to important wages, rising employment positive healthy forward in and of looking contracting increasing trends to are in business. secular We and demand tailwinds our the Also strong work continues continue second gig seeing impact demand. see drive

a Absent on the tensions, value. long-term interest as an momentum causing operational macro positive to global on inflation the favorable how gaining services capitalizing services, consistent and are the tailwinds these our strong. that momentum. broadest We're execute plan we and HireRight excited of in closing, be are pandemic, a crises rates meaningful industry it's the business recent performance I'll growth XXXX. With I'll such crisis decade financial look with long-term foundation over rising In outlook shareholder the call XXXX uncertainty, than delivered create and strategic our Tom for And employment growth and for of more to has Tom? continues turn a financial strong closer suite to only demand quarter market. and reiterate our and our be many global geopolitical while expect business. reach, the be to fourth changes at We for allows for now expertise, for our attractive to building us financial that, to

in over as grew services, over year. on we fourth America international their gains India, rates Guy's with to nearly us Good healthcare be XX% with which our results, for joining and technology see our that you today. were you XXXX, strength our will today. Thank everyone which saw hospitality, reporting appreciate to the up you, we retail largest being prior quick Guy. biggest Starting I afternoon, grew strong year-end echo and remarks excited thank XX%. continue to Latin revenue of our call such a and services. from International markets geographic $XXX business overview note and an strong doubled our XX% an products XXXX growth was QX perspective, with demand continues And million the markets and to robust $XXX XX%; in industries which split. the APAC quarter A exceeding and as industry in for all be QX XX%. in improvements in financial results; From up XX% grew such year-over-year we million saw

you will international of represents X% revenue. see our revenue our in based As filings, approximately GAAP total

to in revenue, and more However, and XX% company's revenue applicant international fact, or first exceeded for the the history, at we is when viewed level our of than double-digit time continue growth customers. the of in employee as total million support for provide our $XXX expect level, in Company multinational an markets the area highest our international are investment markets. for to the important look we strong These

on improve that of than vendors focus closer our will We also to a the strategy. to element rather continue source is, to be continue to getting data which will of margins; and helped key on relying

signings quarter exceeded QX. new a that. Our business during $XX XXXX associated revenue throughout QX, $XX the new revenue were and new contract or business million in million demonstrated strong After strong bookings

New business year million, has the the for into revenue this new $XX and momentum year. was continued

this million strong EPS in of respectively. million, $XXX an order coupled were following results. to of reflects improving the $XX $XX XXXX. cost quarter volumes amortization associated of with of was XXX% among things, XX% million peers, net prior reached to we that Please intangible up that fourth comparison this for reflected release in amortization. the EBITDA our services. immediately purchased comparable largely add-back increase our recovery intangible our the significant in from to over year acquired adjusted leverage note adjust we've with not year stems XXXX, and performance asset did the the Our assets. income $X.XX, Adjusted and of in net IPO, for adjustment earnings other In for EBITDA be the Adjusted income Adjusted quarter's

to sheet, Turning now a capitalize which allowing source and us opportunities grow business our as to the attractive strength, arise. balance on of they is

position With billion to $XXX reduced under debt our the net from $X we've IPO proceeds, million. just

the repaid we quarter; no now and borrowings our million of our there net first the revolver X.X debt, $XXX second quarter, and were lien is loan on full, in our the During outstanding $XXX approximately the of times. lien million at leverage end

QX cost [ph]. had reported a That cost agreements, we X.XXX in February, that which retired during our -- interest $XX.X was million. as we outstanding of Additionally, rate LIBOR swap fixed at

our this to investments. was with Lastly, million, this free expect flow again, the our significant year $XX and we up nearly year, even improvement to million for cash $XX technology number

for XXXX. our to outlook Turning

add-back more peak target Also historically, be tend QX deliver our our and seasonal slight or the to range $XXX to markets the to adjusted $XXX market fully few includes we M&A comparability current the of our order While to margin the adjusted could expect and strong to within most holidays. organic range effect provide please and on expect to $XXX be single-digit million, recovery our of has QX the while double-digit adjusted guidance with we for peers. range million, acquired range in trends verticals intangible by less we continuation we augmented the net QX become does behind as to three expectations over performance to conflict seasonality and EPS be year. results, impact to for this and expect the diversity growth, similar We our in $XXX customers of five the with annually grown, diluted Based our our if enhancement operational reported EBITDA And markets to low quarters, in to from with million conditions while we've $X.XX forward operator, which with from QX financial you next a have fluid, in the full continue. of in $XXX EBITDA the the in given of you a grow to And across have that closing, the expect to strategies be EPS years our current seen revenues international income XX% With the million, we our the to favorable of year continue. the XXXX serve, million progress throughout strategic expect in amortization our to associated strength $XXX the million updating income $X.XX. adjusted quarter In and us, of first high to next net pronounced, reflects adjusted And to to be robust to pandemic over adjusted look on strength as Guy, we of years. our questions. of accretive remains global open line efforts. assets Ukraine, detailed our

Thank you.

first with McVeigh begin question will comes the go from Please We Instructions] ahead. Credit Kevin question-and-answer The session. now Suisse. [Operator

some And But Thanks nice XXXX. in to terms anything super is revenue relative guidance just helping guide have factored really international outperformance in results. as just it of speaks just outcome -- really addition so Hey, Great. for my the 'XX a much. weakness? in that's you super just want or the I for super, geopolitical itself congratulations. the extend of well. to acceleration that again, side the on to super, offset Because

thoughts any could we maybe there around just So, start there? if

Sure, Kevin. Thanks.

our much have For exposure Eastern Europe business, don't Russia to or itself. we

closed know, is information We total of you there ago, Tech -- guidance and couple exposure In we completed. market Center terms we but to years is into, the as have revenues. the little our that, what's years ago; momentum had first Petersburg, is our on is about obviously, that UK is in having is But now. tensions geopolitical quarter from UK, largest of mean, think XX% of moment, international in for and business weeks revenues, in fact, one-time, did the St. going cautious our only and about right three a I on said have very three a at the Russia, based best our so the everyone I coming we the being

-- the That's then, I third was that of million there some about wanted know, about bit $X think super, little much million can investment; about then, initiatives. million fourth done super is helpful. quarter. just I how in us I was should a in 'XX? you'd $XX just committed talk think And And there the course to about OpEx we of -- Remind we $XX quarter? of the over the to how

Yes.

sort of accrue and this about of some So full by extensively, calendar those And for the of we'll full fiscal year of see benefit quarter, in benefits half realize the we'll that quarter then exiting we us of that for in will investments XXXX. XXXX, second year. the year benefits the tech talked investments

And clear, project change just didn't actually focused scoping million get that yet. you in was expense, to on saw operating be $X was the into it of phase really the the in early and build really QX

this the we're build capitalized. phase to going of is that the be all project, Now into

And Awesome. helpful. Very congrats, again.

Thank you.

Kevin. Thanks,

George from comes question next Please The ahead. go Sachs. with Tong Goldman

Hi, thanks. Good afternoon.

the You year business strong. uncertainty and for we services should there Can move start despite progress growth year? organic you as revenue remain new macro elaborate that the trends how mentioned through demand to the out

Yes.

new consultants serve that for I a host very this customers, and performance we factors tell and to can great year. about whole comment clients on can our multinational for management. this marks. that recordings, get we seeing service we you his with year business, XXXX pipeline Tom I logos. marks And we're can get how continues had in logos, we're We a account high So global why player of very reflect We're our new only of in the as mentioned high winning

One things new on we of is databases that comprehensive and ground the a revenue that our finding we're is the with with talked that that resonating new more roadshow proprietary some we the about have, lot clients. on strongly seeing emphasis screening, during

the their companies, In fact, incumbent of previous to neighborhood you two close we found base serious new employee re-screen clients screens had each of missed their see And know, us missed to provider those existing anything. had if both the for in convictions. XXXX where

new on client we that, In frequently that not addition record, not hits reported, be reported to or but sometimes that per could should non-compliant were might been find to report have someone their guidelines or it it, has it's conviction more identity. is be ability why have be is part platform market. our wrong this we reason large due and the I'm momentum to mentioning others the The single to that the with business comprehensive all in than that global in

we're that the us. now, good you a sitting right reflects with for here think year know, I George, pipeline So with

second through part in organic year, the or because the easier? comps half progress the growth be you second trend then, the the move to growth And you as the then to expect of expect in how you first And are half? more better Great. would lower question around the

Yes, right. of course,

a of little show I So, about more you driven holidays. seasonal a QX while And we bit and years the exactly the had kind years, what we're they're and the that's QX back QX quarterly holiday which a last has of made and much this the impact. not ago legacy impact normal know, muted years. cycle seasonal of I in XXXX; more lack know, that, our over the couple HireRight, strictly with is curve revenue say off, couple obviously, seasonal perspective, a for we would giving to QX you had remarks seasonal or slightly out a from normal expect will the why been more that combination guidance, haven't year hiring But by during businesses

So comp an QX. be QX of is easier from course, growth than perspective, and QX, a to QX going year-over-year

perspective, So quarters. -- QX we QX seasonal but be strongest a from to ramp and the expect would

you're margin a in well improve your in accomplished just profile, in plan about you've client the as you your follow-up, remains Great. and mentioned to automate you business in done? efficiencies what as talk so Can as drive experience. what to technology And order and the earlier, and overall investing be streamline to to streamline steps and far the automate

Sure. Good question, George.

on two-year -- building platform work going itself. also base there we and module new is a project. criminal the The of up, because platform is the work we that you us work that, as parts been the July management, of you this my So very do, we're what and broke done, June base But work drug don't verifications to program to are on I is we it the competitors project business way is has part a but on-track. launch first the the about said, of I work as module the we along. works, this you the know, know project focused be far how think lot health on but of foundation specifically the that working this and that the work very, won't will the do; core the comment we're know, on workflow platform; the do, is first parallel, the case initial built core in want of significant on anticipating can And that we screening of year.

very much. Great. Thanks

comes ahead. with Please go Jefferies. Mazari The from Hamzah next question

structural ability faster bigger it's going Hi, your that impact international just -- the could there for about margin international talk grow those XX% is in between now. that And also be market to big of to Mario about it a Could just be that this you said, any Obviously, Hamzah. you're are how businesses? overtime? -- Cortellacci difference little or is how a differences you And than revenue on two opportunity? is even there thinking

Thanks, from Mario. Good to you. hear

take parts So, couple that. of I'll of a

single there I seeing difficult most we Canada; again, for the define growth is of the reflective America, international we right. made we're the our rate thing global -- differences that Europe, mean, is in to that general, part between but that platform. first, is, means, the Latin So India, investments now big in think what Asia, the very

I speaking, world regions share our the any I think and the structurally of in foremost. So that's than of market competitors; we're capture position best to different in think first

see revenue job you higher is, order. of per do on hires India know, mind. again, that the in cases world lead tend tend diversity higher the you depends that they're and about. background in to But that know, applicants types you Second bit And region applicant of more countries countries counts, -- dependent where and margin, on screens it the come in, and revenue, a little much that lower be those that as order, in grow we're some the higher to then it doing regions complex some we're of talking of the margin lower like will there's to world some but per it's the

in new and of continue takes regions. make to expect complexities we're platform business building of we world, account those in doing the those into the We that the regions investments

business some the come. So pace Did time of at I Tom? we U.S. we're continuing good grow the to for out, leave it double to -- anything feel about

hit head. right. customer, the profitability; revenue, nail I quarter specific, really down getting you think and mean, it's country on the No, I industry and to

into seeing countries, that share the just other that of growth a And background just and they those business the And it because think large companies coming in find consolidating continue not have lot can types their way, we're by platform, multinational for that lot of that we global take our one easier of U.S., is right. of from a with use somebody single we that we'll platform; that screening to clients.

growth fastest I which just verticals, understand rate believe versus prepared by maybe in is much your how growing in density? verticals, of that maybe remarks helpful. then clients us packaged my you follow-up, coming could from your those But you for And mentioned new is help Great. growth

of the everyone's say would I up this healthcare when to that company. look of know, But I well components ramping per a you generally it talked largest at providers from was know, you of like for tremendous a From per has that order, concept out one of as talked average part part definitely a Well, has improve us, an few as healthcare had results least board specific, about. would something unbelievably become of order new density about; improved; there, number that continues year we've organic, you the that speaking, clients say. our value vertical generally pharmaceutical new quite number also package but the concept us across

So, recovering well pretty as new well organic between natural logos. growth, spread as about

Great. so Thank much. you

ahead. The question next [ph] Baird. with Markum Mark go from comes Please

me to and good a Hey, breakout to surcharge regards about also, congratulations add it afternoon, with the my how relates I'm wondering, stellar And let to quarter? guidance? 'XX thinking it breakout that results. us give relates you you're as the service can on as the versus

Yes.

Mark, have half that next the will be an So filed will in K the here which hour. in we

footnote, split we decided in surcharge. mind, be So give guidance be And K; refer to in that'll the if there. by you not to don't service and the I'll it'll revenue the

number that revenue; to and ton just we've we with service actually service total that found between guy and Yes. since it investors revenue, surcharge gotten the created the comparable that of one revenue the we thinking out, be only we've confusing, was had a was lots of our service to of revenue found difference confusion. became our and the Mark, questions we were and third honest you, reporting peers,

not in So footnote be K. available the they'll but out those in the split we openly just to decided

it, 'XX stay way I Okay. the And the the just ratio mean, we've expect to same in as we it should relates to to roughly relative modeled 'XX?

Yes. Yes, of a roughly margin error. within

the vertical. up on drivers there? very you healthcare, of was some that's was we for you with growth, some -- a in logos example, much Was about obviously, you talk to going there. benefit that seeing, like tech, the technology, mean, then, And Can ended little terms XX% demanding it what bit were it at mentioned in on there a -- when great. of I look seeing how you technology, growth the new clearly a of Okay, year-over-year you're

So, it's interesting.

be are expansion. clients new tend -- tech of in to early for products lot we adopters Our a the services geographic build and

So, some in from is one of some substantial. growth and was those logo largest that we services reason in ability new why coming clients There our logos cross-sell have; the that, that you of position selling to to. different growth it's some and know, we tech love new tech logo, obviously, are to new upsell spaces; but continue our

a the those from fact, that need develop, to products In specific of be clients. driven first tend we lot new by

logo logos -- most a know, and large we some as long So, number of well. those wins we had also period long, new some you of large so as of that was -- for time; but

terms of in that of setting blue were established kind logos what taking that obviously, that new are they pace on sort of bluest And chips, the Great. are are the the packages the [indiscernible]? and that, of

of Mark, lot sorry, oriented; thought A were done. I you monitoring

hear I overstepped, so we I -- your answer. But No, I didn't am.

Apologies.

a new of products. So, of were monitoring it lot some our

that well. in in to. for normally revenue geographic office particular than know, assigned the would people hiring Some hiring background other pandemic the of part have it, technology those it And with you been people were has of screen early helped of geographies was impact; expansion. generally adopters technology per -- because guys companies as increase average the also they And of

hiring, screen. combination new a So the practices changes which components the monitoring, background a in of change which they're of for

in topic. What occurring? to in think these the renewal, how for reflect to are your -- a that? three-year big some but when know, over seeing what inflation, wage should -- Great. coming we And they then prices of that got is inflation you year are ability you terms factors about of in general, contracts change up come the Obviously, you've inflationary order

Yes.

very, we business, mean, we certain reflected other to like specific we any to So by to we order conditions able increase there's average for do, with have course, and rights part continue as an time, very clients the but prices things continuing. -- I get the periods have per and some large some of revenue that terms of during increasing amount are

have peanut need And this we're it's you you clear And put clients; butter, evaluating. it's about we right, continually something there. thoughtful something XX,XXX to that right. really and increases markets customers, It's something the how in because segment be not you're you environment, those it's and

then terms of that seeing India, you're and terms plan And you there the think And out 'XX did large the modeling to for some about your -- out, say, think 'XX how the double like stands but how about should growth Great. specificity international, international obviously, we in -- digits, What the in in that when international particular, markets we growth say you're relative like on contribution? is are of any there. inning more you in the things of terms in? guide,

Yes.

the right. the digits, Guy it necessarily said, just in teens seeing be we're than I that think so double higher [ph] growth, the double what rate clear, to growth U.S.; not be could of

[ph], So teens growth, north expect that we way. let's of it be put internationally, the to that

one Great. last one. And then

misclassified. pitches coming, You look mentioned new are missed pipeline ended say, new with months? are the over expectations pitches? a -- How been finding couple your of up does that to re-screens, you able the logos, new things you six how when that into all for what translate or these did And the the had you

so question, Yes, a Mark. great that's

had speak, at, So and we're finding, great opportunities we for market we're the strong certainly revenue new as results is again, reflective that year. sitting of we robust; the pipeline the last

this pitch in that our that over has and and of your will We miss. wins, best and will emphasize clients examples; employee be listening been not gave and pitch you business screen proprietary resonating these that that year who speed our us and comprehensiveness, and you simply to do can't well your some continue pitches believe And carefully players turnaround we we companies There think lots things we very to steps do I clients inevitably a last because we're the up. and the are that success incumbent are investigators tell and message in of do on I of current as that, who others and is, find in industry we more that. to that with our the to more skip prospects, simply are find some time; doing two that, tell existing will absolutely in let our will and the I ability it recent things we base pipeline. And continue missed. following clients but the continue And pitches we to resonate with of had was are databases

Terrific. you. Thank

Thanks, Mark.

That's concludes conference session, call. and question-and-answer today's the

your may for you You lines. disconnect a participating, pleasant have and Thank day.