HIRE Hireright (MM)

HireRight, Inc. (NasdaqGM: HIRE), a leading provider of on-demand employment screening solutions, today announced financial results for the fourth quarter and full year 2007, which ended December 31, 2007. Service revenue for the quarter ended December 31, 2007 increased 21.2% to $15.6 million, compared to $12.8 million in the quarter ended December 31, 2006. Gross profit for the quarter rose to $8.0 million from $6.3 million in the prior year quarter. Gross profit as a percentage of service revenue rose to 51.6%, compared to 49.3% in the same quarter a year ago. HireRight chairman and chief executive officer, Eric Boden, stated, �Our financial results for the fourth quarter were strong, with growth from both existing customers and new customer additions driving better than expected revenue growth. In the fourth quarter, we saw positive results from the addition of large enterprise customers and a significant number of middle market customers. We believe that our growth drivers remain intact, and we intend to continue to invest in expanding market opportunities.� The company intends to provide certain financial guidance for the first quarter and full year 2008 during its conference call scheduled for later today. Information relating to the conference call is set forth below. Income from operations was approximately $1.5 million for the fourth quarter of 2007, compared to $969,000 during the same prior year period. Net income was $1.3 million for the quarter ended December 31, 2007 compared to $586,000 for the quarter ended December 31, 2006. The effective tax rate for the fourth quarter of 2007 was approximately 35.9%. For the full year 2007, service revenue was $62.9 million, an increase of approximately 20% from $52.5 million in the prior year. Gross profit for 2007 was $33.7 million, or 53.6% as a percent of service revenue. Income from operations was $9.1 million for the year, representing growth of 43.5% on a year-over-year basis and an operating margin as a percent of service revenue of 14.5%. Based on a 39.7% effective tax rate for the year, net income was $6.2 million in 2007, resulting in diluted earnings per share of $0.60. Cash and equivalents and short-term investments at December 31, 2007 were $55.4 million, compared to $8.2 million as of December 31, 2006. Cash and equivalents and short-term investments increased primarily as a result of a combination of the IPO proceeds and cash flow from operating activities. Conference Call HireRight�s fourth quarter and 2007 full year results and the company�s outlook for the first quarter and full year 2008 will be discussed during a conference call today, February 21, 2008 at 5:00 pm Eastern Time, via teleconference and webcast. The dial-in number is (866) 700-0161 within the United States, and (617) 213-8832 outside the United States. The teleconference pass code is 50067681. 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 84112526. 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, our belief that our growth drivers remain intact, and our optimism regarding future growth. 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 Quarterly Report on Form 10-Q for the period ended June 30, 2007, 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 Registration Statement on Form S-1, our Quarterly Report on Form 10-Q for the period ended June 30, 2007, 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 screening programs. Many companies, including more than 60 of the Fortune 500, currently trust HireRight because the company delivers customer-focused solutions that provide 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. CONSOLIDATED BALANCE SHEETS (Unaudited) � � December 31, (in thousands, except share amounts) 2007 � 2006 � ASSETS CURRENT ASSETS: Cash and cash equivalents $ 17,819 $ 4,201 Restricted cash - 120 Short-term investments 37,600 4,031 Accounts receivable, net of allowance for doubtful accounts of $153 and $131 at December 31, 2007 and 2006, respectively, and reserve for sales allowances of $139 and $154 at December 31, 2007 and 2006, respectively 10,002 9,628 Prepaid expenses and other current assets 1,216 955 Deferred tax asset - current � 1,331 � � 3,518 � � Total current assets 67,968 22,453 � Property and equipment, net of accumulated depreciation and amortization of $5,597 and $4,486 at December 31, 2007 and 2006, respectively 2,003 1,583 Other assets 486 646 Deferred tax asset - non-current � 964 � � 1,151 � � TOTAL $ 71,421 � $ 25,833 � � LIABILITIES AND STOCKHOLDERS� EQUITY CURRENT LIABILITIES: Accounts payable $ 3,428 $ 4,480 Accrued liabilities 1,228 1,210 Accrued payroll and benefits 3,790 3,731 Line of credit - - Notes payable�current portion - - Capital lease liability � - � � 4 � � Total current liabilities 8,446 9,425 � Notes payable�long-term portion - - Capital lease liability�long-term portion - - Other liabilities � 203 � � - � � Total liabilities � 8,649 � � 9,425 � � COMMITMENTS AND CONTINGENCIES � Series C redeemable convertible preferred stock, Series C redeemable convertible preferred stock, $0.01 par value�0 and 6,794,579 shares authorized, issued and outstanding (aggregate liquidation preference of $13,000) at December 31, 2007 and 2006, respectively - 13,000 Series E redeemable convertible preferred stock, Series E redeemable convertible preferred stock, $0.01 par value�0 and 17,500,000 shares authorized, 0 and 17,246,579 shares issued and outstanding (aggregate liquidation preference of $12,180) at December 31, 2007 and 2006, respectively - 12,180 � STOCKHOLDERS� EQUITY: Preferred stock, 10,000,000 shares authorized, $0.01 par value�none issued and outstanding - - 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�0 and 854,632 shares authorized, issued and outstanding (aggregate liquidation preference of $2,000) at December 31, 2007 and 2006, respectively - 2,000 Common stock, $0.01 par value�100,000,000 shares authorized; 11,233,597 and 1,956,115 shares issued and outstanding at December 31, 2007 and 2006, respectively 112 20 Additional paid-in capital 68,071 847 Other comprehensive gain�currency translation 12 14 Accumulated deficit � (5,423 ) � (11,653 ) � Net stockholders� equity (deficit) � 62,772 � � (8,772 ) � TOTAL $ 71,421 � $ 25,833 � HIRERIGHT, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) � � Three Months Ended � Year Ended December 31, December 31, (in thousands, except per share data) � 2007 � 2006 2007 � 2006 � � REVENUE: Service revenue $ 15,558 $ 12,832 $ 62,895 $ 52,453 Reimbursed fee revenue � 1,592 � � � 1,353 � � 6,500 � � � 5,644 � � Total revenue � 17,150 � � � 14,185 � � 69,395 � � � 58,097 � � COST OF REVENUE: Cost of service revenue 7,522 6,504 29,175 26,101 Reimbursed fees paid � 1,592 � � � 1,353 � � 6,500 � � � 5,644 � � Total cost of revenue � 9,114 � � � 7,857 � � 35,675 � � � 31,745 � � GROSS PROFIT � 8,036 � � � 6,328 � � 33,720 � � � 26,352 � � OPERATING EXPENSES: Research and development 1,114 1,065 4,028 3,779 Sales and marketing 2,967 2,541 10,625 8,676 General and administrative � 2,497 � � � 1,753 � � 9,929 � � � 7,531 � � Total operating expenses � 6,578 � � � 5,359 � � 24,582 � � � 19,986 � � INCOME FROM OPERATIONS � 1,458 � � � 969 � � 9,138 � � � 6,366 � � OTHER INCOME (EXPENSE): Interest income 603 77 1,228 160 Interest expense - (35 ) 1 (74 ) Other expense�net � (12 ) � � (7 ) � (32 ) � � (27 ) � Total other income�net � 591 � � � 35 � � 1,197 � � � 59 � � INCOME BEFORE INCOME TAXES 2,049 1,004 10,335 6,425 � INCOME TAX PROVISION (BENEFIT) � 735 � � � 418 � � 4,104 � � � (4,469 ) � NET INCOME 1,314 586 6,231 10,894 Preferred stock dividends - (544 ) - (2,174 ) Income allocable to preferred stockholders � - � � � (19 ) � - � � � (6,697 ) � NET INCOME ALLOCABLE TO COMMON STOCKHOLDERS $ 1,314 � � $ 23 � $ 6,231 � � $ 2,023 � � EARNINGS PER SHARE: Basic $ 0.12 � � $ 0.01 � $ 1.13 � � $ 1.12 � Diluted $ 0.11 � � $ 0.00 � $ 0.60 � � $ 0.73 � � WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES: Basic � 11,233 � � � 1,895 � � 5,523 � � � 1,811 � Diluted � 12,172 � � � 2,918 � � 10,372 � � � 2,766 �