HireRight Holdings Corporation (NYSE:HRT) Q1 2023 Results Conference Call May 9, 2023 5:00 PM ET

Company Participants

Guy Abramo - President and Chief Executive Officer

Tom Spaeth - Chief Financial Officer

Andrew Hay - VP of Treasury and Investor Relations

Conference Call Participants

George Tong - Goldman Sachs

Andrew Nicholas - William Blair

Kyle Peterson - Needham

Mark Marcon - Baird

Gus Gala - Truist Securities

Jason Celino - KeyBanc Capital Markets

Stephanie Moore - Jefferies

Operator

Good afternoon, ladies and gentlemen, and welcome to HireRight's First Quarter 2023 Conference Call.

Joining today's call is the company's President and Chief Executive Officer, Guy Abramo; Chief Financial Officer, Tom Spaeth; and Andrew Hay, VP of Treasury and Investor Relations [Operator Instructions].

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 issued today, which is available in the Investor Relations section of HireRight's Web site. Also during this call, management's remarks will include forward-looking statements, including related to macroeconomic conditions, demand for the company's services and the company's technology improvement and cost reduction initiatives. Such statements are predictions and actual results may differ materially. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Form 10-K filed with the Securities and Exchange Commission in the sections of that documented entitled Risk Factors, Forward-Looking Statements and Management's Discussion and Analysis of Financial Conditions and Results of Operations.

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

Guy Abramo

Thank you, operator, and good afternoon. I appreciate everyone taking the time with us as we share our first quarter 2023 results. We are very pleased to announce that despite continued macroeconomic headwinds, our first quarter 2023 revenue was $175 million, which, although down 12% versus previous year has us tracking to our full year plan. We continue to see hiring patterns during the first quarter, which were consistent with our previous commentary. Deferment of essential but noncritical roles continues across many industries. However, let me reiterate there is still strong demand for talent and hiring continues just not at the pace we saw during the pandemic recovery. Hesitation appears to be driven primarily by a general nervousness on the economic outlook and the impact of Federal Reserve actions. As was the case last quarter, the headwinds continue to be strongest in the technology sector, where we saw demand decline 42% year-over-year despite essentially 100% retention within that customer base. We expect this year-over-year comparison challenge to continue in the second quarter and begin to alleviate in the second half of the year. Although we have seen a significant decline in the number of screens in the technology vertical, this result is aligned with the public announcements of staff rightsizing that has dominated the headlines and is already reflected in our guidance. Similarly, the service sector showed a decline of 22% as many of these customers are dependent or aligned very closely with the tech industry. Our remaining verticals showed a decline of just 3% on average and outperformed our expectations. Healthcare and Transportation, in particular, continued to show resiliency and posted modest year-over-year gains.