HireRight (US:HRT)2023-11-10 01:32Financial Data and Key Metrics Changes - For Q3 2023, revenue was $188.3 million, down $22 million year-over-year, reflecting a 10.5% decline due to reduced hiring volumes driven by economic headwinds [6][34] - Adjusted EBITDA was $52.1 million, just $1.9 million lower than last year, with an adjusted EBITDA margin of 27.7%, up 200 basis points year-over-year [17][47] - Adjusted net income for the quarter was $24.6 million compared to $29.8 million in Q3 2022, impacted by lower operating income and higher cash interest expense [18] - Total cash increased to $103 million, with cash flow from operations exceeding $38 million during the quarter [37] Business Line Data and Key Metrics Changes - Revenue from new business increased more than 30% versus Q2 2023, contributing over $36 million in growth year-to-date [9] - The technology vertical saw orders stabilize, down 24% year-over-year but consistent with the previous quarter [16] - Financial services declined 14% compared to Q2, primarily due to softening volumes from European banking customers [28] Market Data and Key Metrics Changes - Non-U.S. revenue accounted for approximately 14% of total revenue, with EMEA posting a 15% decline year-over-year [35] - APAC and India experienced a combined decline of 20% from the prior year, impacted by softness in technology and services [35] Company Strategy and Development Direction - The company is focused on cost reduction initiatives, including rebalancing and reducing global headcount, and expects to achieve $50 million in total run rate savings by the end of 2024 [13][82] - Partnerships with major players like Oracle and UKG are expected to enhance market presence and drive future growth [10][31] - The company aims to leverage its single global integrated platform to simplify global implementations and enhance customer experience [12][75] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the hiring environment, noting uncertainty around employee turnover impacting future hiring plans [43][54] - The company remains focused on improving margins and converting revenue to free cash flow despite the challenging macroeconomic environment [49] Other Important Information - The company refinanced its existing term loan, extending maturity to 2030 and increasing total liquidity to approximately $262 million [19] - The company reported a strong customer retention rate of just under 97% [29] Q&A Session Summary Question: Insights on package density and client needs - Management noted clients are increasingly looking for additional services like social media screening, but specific trends are still being monitored [21] Question: Customer sentiment on next year's hiring outlook - Management observed cautious optimism among clients, but significant uncertainty remains regarding turnover rates [42][43] Question: SMB performance and competitive landscape - SMB performance was down about 10% year-over-year, attributed to macroeconomic factors rather than competitive losses [60][67] Question: Details on new enterprise wins - Five new enterprise customers were added, with two wins coming from a major competitor, totaling an estimated annual contract value of $11 million [68][100] Question: Future capital allocation strategy - The company plans to balance share repurchases with addressing debt levels, leaning towards debt reduction as cash flow improves [64][65]