All right, good morning. We'll keep this on time. Thank you guys for being here. For those of you who don't know, my name is Manav Patnaik. I'm Barclays' Information Services analyst. And we're very pleased to have with us First Advantage. This year- well, they were here last year, but this is the first time you guys are doing a presentation here. But we have David Gamsey. He's the CFO with us. Thank you for being here, David. Unfortunately, you see Scott there. He's stuck on a New Jersey Transit, so he's obviously having more fun than we are. But David, since it's your first presentation at this conference, I figured I'd just give you the opportunity to set the stage, maybe introduce to the audience how you would characterize First Advantage as a company. First Advantage has been around for almost 30 years. It's very different in the size, shape, and form that it is today. We primarily do pre-employment background screening. That's about 90% of our business. We're amongst the largest in the industry, clearly highest margins in the industry and best cash flow. We think we're very well-positioned, and we continue to grow and focus on organic growth. Maybe just before we go into this. With that context, you have a good macro viewpoint, but just perhaps just your own bio, how long have you been at First Advantage? Because First Advantage has gone through a few different Phases that I think you've been part of. I joined First Advantage in 2016. I've been doing CFO work for 27 years now. This is my 5th private equity-backed company, 3rd public company. Did 2 IPOs. I've done over 40 acquisitions, raised a lot of capital in the marketplace. First Advantage, being here for 7 years, First Advantage is a great place with a great culture. Got it. Before we go into some of the changes of the company and the dynamics, maybe just from a macro standpoint, we've had a lot of bank CEOs, card issuers give their view on the consumer and lending, but maybe just from a hiring perspective, what are you hearing from your customer base as you try and, formulate your own guidance? So if I can step back just a little bit and go back to December 2022, January of 2023, that's when all the headlines were about all the layoffs, and there were a huge number, particularly from the technology companies, of all the layoffs. Fast forward to kind of March, April, and corporate America kind of went into a cost containment mode. They stopped investing in growth, and they started managing budgets and reducing costs, and there was so much uncertainty at that point in time. Then you kind of go into June and July, and some of that uncertainty was removed. The interest rate hikes had all taken place. Maybe there's another one to come. Inflation started to come under control. Still a little bit high, but much, much better. And I think a lot of that uncertainty is gone. The companies that we deal with, they're sitting on a lot of cash. They haven't been investing in growth this year. I think they're ready. Got it. And so, with that comment, maybe just help contextualize what you've assumed in the second half of the year versus the first half of the year. We're still making pretty conservative assumptions. Our revenue growth algorithm really has four components to it: New Logo sales, upsell, cross-sell, you got to back out attrition, and then base growth, which tends to be the wild card. We are still assuming negative base growth in the second half of the year. Got it. Is there any particular verticals you would call out that's driving the negative base growth? The verticals that are somewhat of a drag are financial services, business and professional services, staffing to some extent, and then some of our international operations, in particular, India and APAC. Got it. And I think when we talk about the mix, I think on your side, I think you categorize a bunch of them as the, I don’t recall the exact name, the high churn verticals, perhaps. So can you just, for the audience, just frame that for us in terms of the mix there? So we refer to it as high-velocity hiring, if you will. And if you think in terms of e-commerce and retail, transportation, verticals with a lot of churn and turnover, and we like quits, by the way, High turnover is good for us. And if you want to define it even further, it's more hourly type of workers, and about two-thirds of what we do are the high-velocity hiring, blue-collar type of workforce. Got it. And so, is it fair to say that the high-velocity is blue collar and then the other part is white collar, or do you not think of it that way? Well, we would call it hourly and salaried. Okay, fair enough. And then just again, for the benefit of the audience, just, any percentages you can place on that in terms of what the mix is? Again, it's about two-thirds, one-third. And two-thirds. Sorry, and within that, I should explain the different verticals that you have. initially, those few years, you guys were, high exposure to technology, which it is in. So just talking about, what the mix by verticals are. So we gave that out at year-end, and our largest verticals are in the retail e-commerce space and in the transportation space. We have very little technology. That's only about 3% of our business today. Got it. Maybe in terms of if you can step back, you talked about the different components of growth when we were talking about the base growth dynamics. Just longer term, if you could, help lay out the targets, the top-line targets and by each of those pieces. Sure. So our long-term targets, and we define that as 3-5 years, is an 8%-10% revenue growth rate. That's organic, by the way. We will supplement that with acquisitions like the one we did last week. We think EBITDA will grow 11%-14%, so there is still leverage and margin expansion to be had. And those revenue components, if you think in terms of new logo, that grows 4%-6%, year in, year out. We believe it will in the future as well. Upsell, cross-sell averages 4%-5% growth every year. Attrition historically has run 3%-4%. Over the last 2 years, it's been closer to 3%, so very high retention rate. And then base growth historically has run a +2%-4%. Think of it maybe as like CPI. However, this year it is negative, as we talked about earlier. Got it. Maybe we can touch on each of those components. So the New Logo piece, the 4%-6%, what are the drivers that give you confidence that you'll be in that range, longer term? And, and maybe just talk about what it has been in the last couple of years, let's say. So in the last couple of years, it's been right smack in the middle, 4, 5, 6%, quarter in, quarter out. Very consistent. And when we determined what our long-term growth rates should be and what we wanted to talk about, we went all the way back to 2017 and said, "What have we done?" And we've always been really consistent on New Logo in that 4, 5, 6% range. We have a dedicated sales force. We focus on enterprise clients. We do have a small business practice, but it's a much smaller part of what we do. We go to market on a verticalized basis. We're very deep in six verticals. We have subject matter experts in each one of those, and we tend to win new business. We do that by taking share away from our large competitors, the middle market competitors, and the mom-and-pops who just can't keep up anymore. Got it. And that, that was going to be a question I had for you. The share you're taking from those three categories, is one disproportionate to the other? They're really not. So it's really spread pretty evenly, although what we're seeing now in the marketplace are a lot of RFPs, and the ones that are coming from mom-and-pops, they're not even being invited to participate anymore. Got it. And so I understand how you guys win a lot from the medium and the small and the mom-and-pops, it's just the or maybe for the audience, that's not, what is the, what is the reason you're beating the medium and small mom-and-pops? So in a lot of cases, it comes down to industry expertise. If we go in and we're selling on a verticalized basis, and we have the premier companies in that industry, and we can benchmark that for a potential new client and say, "This is what they're doing, these are our clients in that category," they're wowed. They're like, "Wow, we want to be part of that too. We want to be doing what they're doing. We want to know what their information looks like." Now, we don't give out names, but generically, we'll say, "This is what the transportation space looks like. This is what they're doing. This is what you should be doing." They're not getting that from anybody else. But we're selling on turnaround time. You've got to be quick. Even today, you've got to be quick. We're selling on quality and compliance. All of the big three have that. We're selling on candidate experience. Very important. Our clients want it to be a positive experience for their candidate. Got it. And so I'm guessing a lot of this is similar, but when you said you also win from the, from the big competitors, and they also say they win from the big competitors, so what is, what is the key winning points or, or decision factors for a, for a client to choose between the big three? It is interesting. There's a little bit of churn, not a lot of churn. The number one reason is M&A. One of their clients buys somebody else in the space, and they stay with the parent company's provider. That's the number one reason. Number two, sometimes, will be pricing. Number three, sometimes they have a bad experience, and they want to make a change. Got it. And would you say those are the same reasons why your attrition is in that 3%-4% range, or, what are the key reasons why you lose that 3-4 every year? Again, it's M&A. That's the number one reason. Primarily. Okay. And then just last thing on the new business, the 4-6, some of this might just be definitional, but, we had Sterling here yesterday. They talked about historically 7-8, and even going forward, just your thoughts on, whether maybe they have some different end markets that they can grow faster new business, or, how do you look at that? Hard to comment on that. What I will say is Sterling is a good competitor. They're a little more inconsistent. They're 10% one quarter, they're 5% another quarter, they're 7% the next quarter. We're 4, 5, 6 all the time. Okay, fair enough. And then between the big three, like, how would you describe the competitive dynamics? Or, let's just take a step back. How would you size the share of the big three, in the market versus the medium and the small mom-and-pops? So we think, based on the information that we have, the big three make up about 36% of the domestic marketplace today. And it's about a third, a third, a third. All three of us are right in that close to $800 million range, give or take a little bit. Then you have about six or seven companies that are between $100 million and $300 million, the SISabs, the Accurates, the Checkrs of the world. And then you have, hundreds, if not thousands, of mom-and-pops that are still out there. So if you were to, everything status quo, all you do is organic, so over time, that 36% should become a much bigger and bigger piece? That's right. We will all three continue to take share. Got it. And, since we're on the topic, let's just talk about how you think about consolidation in the space. Like, is your first target the medium-sized buckets, or do you go after the small mom-and-pops or, or maybe even one of the big three? That's really not our strategy. Okay. Our strategy is to be very strategic from an acquisition perspective, and we've done five acquisitions now. We announced one last week, Infinite ID. Two of them have been new products, an I-9 product, and then a digital identity product. We already had a digital identity product in the UK. We're working on one in the US, and we'll be utilizing this technology and this network to help roll that out. We bought one corporate screening that got us deeper in the healthcare vertical, and then we bought two that were international geographic expansion plays. We really don't want to buy another background screening company and do a cost synergy play. I mean, if it was a really attractive valuation, maybe, but we like companies that are strategic, that we can grow. Got it. We want to invest in them and grow them. Makes sense. Since you brought up international, maybe again, if you take a quick step back, how do you define the TAM of your market? And, if that splits between U.S. and abroad. U.S. market TAM that we've seen is about $7 billion. There's another $6 billion internationally. Most of that is still white space internationally, so it's interesting dynamics. If you take APAC, and the wins that we have in APAC, about 50% of the new logo wins in APAC are first-time background screeners. They haven't done it before. You won't find that in the U.S. Everybody's doing background screening in the U.S., so very different dynamics in each geography. I guess, perhaps why is that? Why do you see APAC or other international, being late adopters to background screening? It's been around for a while, but maybe let's just start there, and then I'll ask my follow-up. It's the local company environment that haven't been doing the background screening. So the multinationals always have, the financial service companies always have, but now you have HR people that have left those companies, and they've gone to work for regional or local companies, and they're saying, "Oh, that's a pretty good idea. We ought to be doing background screening," and they're starting to adopt that. Got it. And in the U.S., it already sounds like it's a fragmented market. Clearly, international is even more fragmented, so But in international, in the U.S., I think it sounds like you can do a lot more organic and strategic acquisitions, but is international basically a roll-up story? There are no big players in the international space. There are a lot of $20-$30 million revenue companies, but there's no big player. There's no dominant player. The big three that are all listed here in the US are the international dominant players. Got it. Going back to the $7 billion, $6 billion TAM you talked about, is that all pre-hiring or does it encompass ID, post-hiring, et cetera? It's mostly pre-hiring, but there is a monitoring product, there is digital ID, but a lot of it. the number one element of any background check is criminal. That's the number one concern. So criminal first, and you can go very deep on those packages, and then second is drug screening. People still want to know you're not hiring a drug addict. So you do criminal, you do sex offender, you do drug testing. That's your core components. Then you can add to that employment verification, education, Social Security, I-9, fingerprinting. There are lots of add-ons to that. Got it. So can you just walk us through, what a basic package looks like and costs, and then if you add all these different elements, just seeing what the range might be? So if you do a basic package, you're going to do a criminal background check for either 3 or 5 years. You're going to do probably 1 name, John Smith, but maybe you should do 3 names like John R. Smith or John Smith Jr. or Johnny Smith. You really—each database lists those separately, and they don't correlate them or tie them together. And then are you going to do state and federal? Are you going to do FBI? Are you going to do county and municipal? Are you going to do current residence? Are you going to do resident, location of employment, or are you going to do prior state if they moved in town? All of those are add-ons that we charge for, but your basic package is criminal, sex offender, global sanctions in a lot of cases, and basic package, $25-$30, something like that. For a financial services, healthcare, C-suite, it could be $180-$200. Okay, got it. And maybe this answers my next question, but going back to the growth algorithm, the 4%-5% of upsell and cross-sell, maybe just help us visualize what an upsell and a cross-sell looks like. Is it just these add-ons we're talking about, or is it something more than that? That's the number one component, is all of those add-ons, but also geographical expansion, is an add-on, and then also divisions. So some companies don't require all of their operating divisions to use the same background screening company, so it's winning more and more business from the same company. Got it. I mentioned post-hire briefly. It's something, we've mentioned before, it's been talked about before It seems like it would be a good product to use, but, in terms of the big three, at least, it's not a sizable number yet. Why is that? Is it like a cost prohibitive item, or does the culture just have to change the customers where they do this more regularly? So monitoring is, it's big in regulated industries. So in healthcare, for example, you're always going to monitor the doctors and nurses in a hospital. Are they properly licensed? Do they have their continuing education? Are they certified? And they have to re-up that every year or every two years. So you're going to monitor all of that and report all of that to a hospital system. Same with transportation. Did they get a DUI after they were hired? Are they properly licensed? Did they lose their license? So you're going to do monitoring in transportation as well. Where it hasn't caught on as much is just with the bread and butter industrial companies, retail companies. We're a little surprised that it hasn't gained more traction in those industries, but we're not sure they know exactly what to do with that information or even if they want all of that information. Got it. The other product that I think the big three have been talking a lot more, and you just said you made an acquisition, is on the ID side. So maybe just to take a step back, it's still not a big contributor. So, what is the strategy, like, what does ID have to do with background screening that's new at the moment? So, digital ID is relatively new, but it's up and coming. It's been introduced in the U.K. The U.K. government has accepted that now. We rolled that out in April of this year. We already have 85 clients that are utilizing that service. We have a huge pipeline for additional business in the U.K. It hadn't hit the U.S. yet, but it's coming. It could be 2 or 3 years down the road, but it's absolutely coming. So we just bought Infinite ID. It's really fraud prevention and authentication. Are you really the person you say you are? So we bought this network of, if you will, kiosks, that you can go and do all of this verification work. Think like CLEAR at an airport. That's kind of what it looks like. You can scan all your documents, you can do biometrics, you can do fingerprinting, and it will validate who you are. We're going to be rolling out a network across the entire country to capture all of that. So maybe just from a process standpoint, to help visualize this, what was happening before you had these kiosks around there, and why is this enhancing the process, I guess? As an officer of First Advantage, I have to go and have state licenses, and I have to get my fingerprints taken in, I don't know, 30 different states. I've had to go to FBI offices. I've had to go to police stations. They're not convenient. They're just not readily accessible. So it's part of the applicant experience, and it's part of fraud prevention. Got it. Okay. And then, you said U.K. is a good pipeline, U.S. coming 2-3 years, but are these capabilities, you needed to acquire by country? Like, they, they obviously Or are they, replicable in other, in other jurisdictions as you get there? Replicable, but not exactly the same. It's really country by country. It depends on the regulations and what the government permits. Got it. you mentioned early on when you described the company about the highest margins in the business. So maybe first, question is just to help set the stage for the audience, your historical margins, current margins, and what the targets are. So we've been running 30%+ margins now for several years, and we expect to continue to maintain 30%+ margins. No one else is close to that. And the way we've done that, the primary way that we've done that is through automation and technology. We were the first ones to adopt RPA. We have over 3,000 bots. We started rolling out bots in 2017. Nobody else started doing that until two or three years later. Now, the other two big guys are catching up a little bit. They're still a couple of years behind us. The middle market guys, not even close, and the mom-and-pops, they can't even invest in it. They can't afford to. We spend more in technology every year than they generate in revenues. So there's just no competition there. But that automation makes a huge difference. 70% of our criminal checks in the U.S. today have no human intervention. We think we can get that up to 90%, and as we do that, margins will continue to improve. Got it. And, again, maybe just to take a step back, like, what was the big technology overhaul slash culture change that you did to get to this 30% level? It was really the whole new management team. We brought in a whole new management team in 2016 and 2017. Scott Staples leads that. He has a technology background. That's what the private equity firm was looking for. So the industry's gone from BPO to tech-enabled, and we want to be a tech company, and we're going to use tech to drive background screening. Got it. And the 30%+ target that you have, is that through a multi-year period, or is that in any given environment that you can still deliver that number? We did it in 2020. We're doing it in 2023. We think it's extremely sustainable. Maybe if you could peel back the onion a bit for us there, like, how would you describe what the fixed costs are, what the variable costs are, and, accordingly, how that enables you to deliver these strong margins any given year? Let's start at the top Work our way down, okay? About 70% of our cost of sales is third-party data or third-party providers. So if we don't perform a search, we don't incur any of those costs. So 70% of cost of sales, 100% variable. The next 30% of cost of sales is operations and customer care. So from an operations perspective, you can flex that up or down. You can run 5 days a week, 6 days, 7 days, 2 shifts, 3 shifts, and you can flex it with overtime. I would call that semi-variable, 'cause you need a minimum level of staff in all areas to maintain it, but as you get incremental revenue, that falls through at higher margins. From a customer care perspective, we just implemented Salesforce on a customer care perspective. We introduced what's called, Click, Chat, Call. We were able to take out 100 FTEs as a result of implementing that technology, and our customers are thrilled and delighted with it. We think technology will continue to drive those costs down. Then if you go below the gross margin line, there's still a lot of opportunities. We manage that cost diligently, we have a procurement group, we've been able to reduce our insurance costs, we've been able to rationalize our facilities costs, we've been able to manage our software license costs down. We look at that all the time, constantly. We budget, we hold people accountable, and that's how we drive our margins. Got it. The third-party data costs that you talked about, I think you have, like, 600 or more third-party integrations. Are there any few of them that constitute the bulk of that? maybe it's the employment and the criminal and some of the key stuff you talked about. If you think in terms of third-party providers, 50% of that are governmental databases. Okay. We all have access to the same ones. Now, you need to know which ones to go to, which ones to hit, which ones give you the best information, but they're available to all of the background screening companies. The other 50% are privately held. They're the Work Number of the world, they're Quest, they're LabCorp, they're I-9 companies, they're fingerprinting companies, it's Samba, it's Appriss, it's companies like that. There's no one concentration there. Obviously, the Work Number is a big spend because they keep raising their prices to ridiculous levels. But we have our own proprietary database to offset that. That's not where we go first, that's where we go last. Got it. Again, I wanna get back to the, to your proprietary databases, but just the 30%, that's your operations and customer support you talked about, Click, Chat, Call, et cetera. The question there is more, you mentioned you have a lot of bots, but I wanted to throw in the Gen AI question in there. Like, is that something you guys have the potential to use to maybe improve the efficiency and reduce the manual headcount? From an AI perspective? Just using Gen AI or broadly, maybe technology AI. So Gen AI is clearly gonna help us with customer care. That's really part of this whole Salesforce solution. We're utilizing Gen AI through Salesforce and through AWS. We already use both of those solutions. We're presenting at Dreamforce next week. We're a big user, a big believer in that. We don't think it's gonna change the industry, we don't think it's gonna impact the searches themselves. It could impact certain verticals like BPOs, call centers. They may not need as many employees in the future, but we really think that's pretty far down the road. Got it. And then maybe just on the database, if you could, for the audience, I think you have two main databases you guys typically highlight to us, just, what those are and, where the record numbers are. So number one is the verified database. That's the same thing that The Work Number does. We have 95 million records in there now, and growing. That's where we go first to do an employment verification. But keep in mind also, only about 20% of all background checks include employment verification, so it's a small subset of what we tend to do. Then the next database that we have is a criminal database. It's been accumulated over a number of years. We purge it from time to time to try to keep it current, within about 10 years. We have over 600 million records in that database. We use that to supplement our criminal searches, not in lieu of. You always have to do current searches, but that supplements you, it tells you where to go, and it tells you if there's any history, and if you've ever had a hit in the past. Got it. So those 600 million records are just the historical records that you've already done some kind of a check on, you just store it in the database? That's correct. Most of those are from that government data sets you talked about before, so it's easy to store, or do you have to pay for building this data set? We do both. Okay. We buy bulk criminal data from some other providers and supplement that database with it, but most of it is the historical checks that we've done. Got it. And is verified the same, I think you said 90 million records now, is that also mostly historical, and so you supplement that with the current? So it is historical, it's what we've done in the past, but it's where we've done manual verifications in the past, which we can keep that information. If we use the Work Number, we cannot keep that information. Got it We cannot reuse it, and we don't. So it's where we do manual verifications, and we add it to that database. Got it. And, just thinking about all the different checks that you do, there's obviously a lot of data. Any other initiatives that you would use to build another data set, I guess? I think for the time being, we're gonna stay focused on the verified database and the criminal database. They're the two most relevant right now for us, and we want to go deeper within both of those. Okay. we talked about M&A briefly before, but maybe again, just high level, your hierarchy on capital allocation priorities, if we could just set the stage there first. So we're very fortunate in the fact that we had a lot of cash, and we generate a lot of cash. If you go back to June 30, we had over $400 million of cash on our balance sheet. We generate between $40 million and $50 million of cash flow from operations every quarter. Our quality of earnings is very high. We have very few add-back type of earnings, so the cash is real cash. We look for M&A. We've been wanting to be more active, but there's been a valuation gap between private company and public company valuations, so we weren't gonna overpay for them. We wanted them to be strategic. They had to make sense. Again, we've done five of them. M&A will continue to be part of our plan, but we don't budget for that. We're gonna be very opportunistic when it comes to it and very strategic. Got it. And then maybe, you recently announced a special dividend. Can you just walk us through the thought process, and why you chose to do that, given, your, your clear appetite to do M&A, especially? So we have a stock buyback program in place that we announced, a $200 million program. We've used $115 million of those proceeds and bought back over 8 million shares. The feedback we were getting from investors is that it was difficult to accumulate a large position in First Advantage. So we decided to take the excess cash and do a special one-time dividend, so it wouldn't impact the float any further than it already was from the stock buyback. Got it. We're almost out of time, so I'll end it there, unless anyone has a quick question. We've got a minute or so left, but, otherwise, I don't think we will. Maybe we'll just catch you offline. But thank you so much, David, for being here. Thank you. I appreciate it.