All right. Good morning, everyone. Thanks for joining us today for the First Advantage presentation. My name is Andrew Nicholas, and I'm the research analyst covering the information services, consulting, and HR technology sectors here at William Blair. Before getting started, I'm required to inform you that for a complete list of research disclosures or potential conflicts of interest, please visit our website at williamblair.com. With that out of the way, I'm very pleased to welcome First Advantage CEO Scott Staples with us to the Growth Stock Conference. Thanks, Scott, for being here. We're going to take this as a fireside chat format, but kind of recognizing that the people in the room and potentially on the webcast have different levels of familiarity with the story. I thought we might just start with a company overview, how you make money, a little bit about the background screening process, and we can kind of go from there. That sounds great. Thanks for having us. Really happy to be here. So yeah, First Advantage, we're in the background screening industry. So we're a global leading provider of employment background screening, identity, and verification solutions. We're headquartered in Atlanta, but we do business all around the world. We do background checks in 200 countries and territories. And if you know the world, that's basically everywhere they allow it to happen. And we do, as I mentioned, background checks, identity, verification, drug testing, anything that a customer wants to do on the compliance and safety side of onboarding new employees to their company. And we're vertically aligned. So we try to focus on certain verticals, and we can get into that in a little more detail later. But that's driven a lot of our growth, and we'll explain how that all works in a bit. Perfect segue. Let's talk about the kind of vertical strategy where you have prioritized your business in terms of kind of high churn areas and maybe talk a little bit about the balance and diversification there. Yeah. So we were the first company in this space to verticalize, and we did that about eight years ago. We did it because, one, we wanted to proactively pick verticals which we feel were going to be high turnover verticals in terms of employee turnover. So we are skewed more toward what we'll call the hourly worker. That hourly worker is still in very strong demand and tends to change jobs more frequently. About 70+% of our business is in that sort of hourly worker space. There's details on our investor side into our exact vertical breakdowns, but our largest vertical is transportation. We do also a second largest vertical is retail e-commerce. When you think of retail e-commerce, it's not really like your brick-and-mortar Main Street type of companies. It's more of your e-com companies, your discounters who obviously do well in any economy, nice footprint in healthcare and other verticals, but primarily skewed toward, as I mentioned, the hourly worker and the high turnover worker. It's my understanding that part of what makes that approach unique is that you can tailor the types of products or the stack of products for those. Maybe just to give some context there, talk about the variety of products that you have for the transportation vertical specifically. And that's a great example. So to be successful in the background screening space, you really have to be deep into the verticals that you're in. And transportation is a great example of that. So when you think of transportation and logistics, it's a wide space, but it's also heavily regulated by the DOT. So when a transportation company is hiring a truck driver, for example, they have to follow very strict rules and regulations that are published by the DOT. And that maps to then our products. And what we've done in the transportation space is we've actually created a large suite of products which we call under the umbrella of RoadReady. And RoadReady has roughly about, let's say, 12 different products, individual products, unique products within it. I'd say about half of those products are focused on the actual driver. So we're doing a criminal background check on the driver. We're doing an MVR check, making sure they actually have a valid driver's license and there's no pending suspensions. We're doing a drug test and other things that make that driver ready to drive for that company. And then the other half of the products are actually on the truck itself or the vehicle itself. So we're doing titling, we're doing registration, we're doing gas tax compliance with the federal government. So just picture it like, let's say you're a salesperson at First Advantage and you walk into a transportation company and you're talking about all these types of products and our understanding of DOT regulations. And then you're also showcasing who our customers are in that space. That makes us really strong and gives us a really strong ability to win deals and to keep our existing customers happy because we've got these products, because we know the space, and because we have all these customers in the same vertical. Perfect. Thank you for that. So maybe we take a step back and talk a little bit more holistically about the market, your competitors in the area, the size of the addressable market, and just kind of the makeup of the industries and areas where you operate. Yeah, I think that's what people love about this space. It's large. It's a $13 billion TAM. So it's a big space and it's highly fragmented. There's lots of competitors. But we've been successful in taking market share and growing the company with our vertical strategy and with our investments in technology. So it's really the vertical strategy and vertical awareness gets us in the door because we come in with a lot of credibility, but it's the tech that actually makes the sale happen and keeps the clients happy. And when you think about our go-to-market strategy, how I mentioned, it is highly focused on that hourly worker, that high turnover worker. So when you think about, okay, if our customers are hiring that type of worker, what's the most important thing for them? And it typically boils down to speed. So they want to hire that person quickly and onboard that person quickly, and they can't wait days and days and days for a background check to be done. So when we looked at our vertical strategy around this hourly segment and we knew speed was going to be the big driver here, we then started saying, okay, how does our technology come into play here? And that's when we really, I think, made the biggest move in the market, which is highly automating our technology and our backend. So we've been on literally an eight-year journey of building robotic process automation, RPA, APIs, and now AI into our tech, which automates how we go and get data from either third parties or government sources to then use that data to then produce the results of the background check. And our turnaround times now are in the hours, not days. So just think about whether you're, let's say you're an e-tailer and you've got a big distribution center and you have a hiring fair over the weekend and you've got 300-500 people showing up for jobs, whether they're forklift drivers or package handlers or whatever, you want them to start either that day or that Monday. So that fast turnaround time is so critical, which is why our automation is such a big differentiator for us. So not only does it bring us speed and it makes our clients happy, but if you look at our P&L, that's also what drives most of our differentiating EBITDA. We've got the best EBITDA in the market because we're the most automated. Perfect. Yeah. I want to hit on a few things that you said there. Maybe first, it sounds like automation, speed, risk management, all these things are reasons why you're able to take share relative to a highly fragmented market. Can you walk through kind of what new logos, competitive takeaways represent in terms of the overall growth algorithm and just the different pieces? And then maybe we can hit on margins a little bit more. Yeah. So maybe helpful if I give you the entire growth algorithm and then focus on the new logo piece specifically. So if you look at our published data, our annual growth rates, we're obviously in a down cycle with the macro, but our annual growth rates typically are in the 8%-10% range. And what makes up that 8%-10% is really four components. And I'll give you all four, and I'll go deeper on the new logo. So the first component is what we call Base Growth. And Base Growth typically is 2%-4%. Base Growth has been negative because Base Growth is the one piece that can be macro affected. So Base Growth is, think of it this way, it's what a client's normal hiring would be in a year, how many people they're going to hire in a year. That's Base Growth. The second piece is upsell cross-sell. Upsell cross-sell typically runs 5%-6%. If you look back historically, I mean, every quarter we've been delivering 5%-6% upsell cross-sell. Upsell cross-sell has been just so consistent for us. Third component is new logo, and new logo is 4%-6%. Again, go back historically, new logo has been just cranking in at 4%-6% every quarter. The fourth piece of the growth algorithm is attrition. So that's a negative. That's what you would back out. Attrition runs roughly 3%-4%, but we've been trending at 3% for many, many quarters. So we're at the good side of attrition. I think our attrition is low because of our technology investments and our focus on the verticals. So when you add all of that up, that is your 8%-10% growth. But on the new logo side, so like I said, new logos have been extremely consistent. I think we win with our vertical story, our technology demos really well. It's interesting if you look back at our competitive win-loss data over the last couple of years, there hasn't been too much change in it. We tend to win equally in three buckets. We win from, there's a lot of mom-and-pops in our space. We win about a third from them. There's a lot of mid-markets. We win about a third from them. And there's two other public companies. We win about a third from them. So that's been pretty consistent over the last couple of years and hasn't changed. But when you think about that growth algorithm, what we like the most about it is the three things that we can control. We're doing really well and historically have done really well. It's the one thing, Base, which is the one thing that the macro affects, which is a little bit out of our control. But obviously, we think Base will bounce back at some point. So when that comes back, we're pretty excited about the ability to get back to our normal growth algorithm rates. Great. Yeah, I'd love to. We'll set macro aside and Base Growth aside. We can hit that a little bit later, but maybe sticking with the growth algorithm. I mean, how does that differ when we talk about your expertise or your progress in international markets? Is it more focused towards new logos because there's more white space, which I believe is my understanding? Or can you just talk a little bit about how the international opportunity differs from what you've traditionally done in the United States? Yeah, great question. So let's define international first so everyone understands it. So we lump Canada, U.S., and LATAM together and call that Americas. And then everything else is international. And everything else is really EMEA, India, and APAC. And those three components are roughly about 13% of our revenue. So international is not huge, but it certainly has had an impact on us because of those three, EMEA has done really well. And one of the reasons EMEA has done really well is it was the first market we launched our new digital identity product, and that has been a really hot seller. And the uptake in EMEA has been great. We've just now brought that product to the U.S. So we launched it in the U.S. in April. Pipeline on that is really good. We think that's going to be a good hot seller. India and APAC have been a bit of a drag on the company because the macro there is, the macro impact is a bit stronger. But I'll get to new logo in a second, but I just want to give a sense of the markets. We felt in Q4 that India had kind of bottomed out. See, the India market for us, our big customers in India are really the IT services and BPO companies that service big U.S. and European multinationals. And that space is lagging a bit. So when U.S. and Europe multinationals bounce back, then India IT services and BPOs will bounce back. But our India business, we thought in Q4 had really bottomed out. And in Q1, data really proved that. So we actually have, we're starting to see glimmers of growth in our India business. In APAC, it's still down, but it's only down about half of what it used to be down. We're starting to see that also coming back a bit. What's interesting from a new logo standpoint, and we talk about white space, is that over 50% of our new logo wins in APAC are from first-time screeners, companies that have never background screened before. What's happened in APAC is that HR policies and practices tend to go west to east. They're really starting to adopt European and U.S. HR policies. The big multinationals in APAC have been doing it for a decade because they're following corporate guidelines from outside of the region. These are more of the regional companies that are now adopting background screening for the first time. These are some big companies. So we've had some nice wins in the APAC region. It's also, from a strategy standpoint, a region where we've kind of pivoted. In the past, we were heavily focused on the back offices of the big global banks. So there are back offices sitting in Singapore and other places throughout APAC. And that business is still pretty stagnant. But what's really come back nicely for us, or really grown nicely for us in APAC, is that we've really adopted the U.S. strategy of going more toward the hourly worker. So we're focusing on things like mining industry in Australia and the airlines industry throughout Hong Kong, ASEAN regions. And those folks are a lot of first-time screeners. And they're starting to bring in some nice volume. So every region has a slightly different go-to-market, and new logo obviously follows suit. Absolutely. And you touched on it a little bit in terms of international markets, but maybe that's the segue in terms of kind of macro conditions in the Americas. Can you talk to kind of the progression over the past couple of years where you feel like you are in your major verticals in terms of the health of those end markets and the hiring velocity there? Yeah. So there's a lot there, so I'm going to break it down in a couple of different components. So again, this is where I think our vertical strategy has helped us the most because we haven't been as affected by the macro as some of our competitors because of focusing, one, on that hourly worker, which was still in demand. And we've pretty consistently seen our three biggest verticals hold up well: transportation, healthcare, and retail e-com. Again, remembering that retail e-com is more of the big discounters and not your Main Street brick and mortar. They've held up pretty well, even in a down cycle. In any given quarter, all of them or two of them, depending on the quarter, have all been positive. But we're still getting negative from, I'd say, more of our salaried worker-focused verticals like financial services, business services, global consultancies, things like that. Those are still down. So they kind of offset a little bit, even though the big verticals have certainly helped us drive growth. But from a macro standpoint, we get asked this question all the time. What data can we look at to get a sense of where your industry is going? And it's not easy. We think JOLTS data is probably still the best source, especially quits, hires, and openings. They tend to give you a good high-level view of where macro impact could potentially be on the background screening industry. But then you always have to remember to factor in the verticals because some verticals get affected more by downturns. And as I mentioned, a couple of our big verticals have really held in nicely with the macro. So we're looking at JOLTS data, but probably more importantly is we're talking to our large customers all the time. We're getting insights from them as to where their hiring demands are going. Granted, they don't always get it right either because we're talking about some guesswork here, but they've got better insights than anybody. Kind of what we're hearing for 2024 is really mirrored in what we've said with our guidance. We've reaffirmed our guidance, which is we had a negative base in Q1. We're predicting negative base in Q2. Again, in Q3, getting better sequentially each quarter. In Q4, we actually feel we should be flat base-wise to potentially even a sliver of positive base growth in Q4. The reasons we feel that way is because that's what our customers are telling us. That's what they're saying. We're not hearing from any of our large customers any layoffs. We're not hearing from our large customers any concerns. But we're also not hearing, "Hey, we're going to have a great blowout year." They're all kind of saying, "We're expecting to have good years, and we're expecting late Q3 and Q4 to show some growth." And so our forecasts then kind of mirror that as to how we expect the year to pan out. Obviously, things can change. I think also people are looking from a macro standpoint around what the Fed is going to do with rate cuts. And I think people are expecting potentially at least one cut this year, maybe in late Q4. And I think people are also waiting for the election to be over. And not that the election would potentially affect the macro, but I think the fact that the election is over could affect the macro, not the result, but the fact that it's done. So that's why we're kind of modeling our guidance the way we've announced it. And obviously, as you get to a flatter level in the fourth quarter, you can kind of let all those other buckets we already talked about shine in terms of the things that you can control and be back to top-line growth in the aggregate. Yeah. I'll also add, we haven't talked about it yet, but we've announced the big acquisition, which I imagine where you're going next. That is next. So I buried the lead a little bit. But yeah, maybe you could talk about the announced acquisition of Sterling, the second largest player in the space, the rationale and all that you want to share on that front. Yeah. Before I get into the rationale and everything, I think it's also good to note that as we expect the macro to bounce back sometime in Q4 and certainly into 2025, Sterling is expecting the same thing. So assuming we close this deal sometime in Q4, when the macro bounces back, we should be getting the double bump. So we'll get the bump from our business as well as Sterling's business on the macro. And the rationale for us was pretty simple. And I think you've probably heard it already today from me 20 times. We're hyper-focused on vertical strategy in this space. We think it's been the secret to our success, and we think it'll be the secret to our future success. And when we looked at Sterling, we really liked how their verticals were complementary to our verticals. So I don't think you would see us buy a company that was a generalist or a company that was in the same verticals as us. But Sterling's verticals are highly complementary. So for example, 24% of our business is in transportation. That's only 3% for them. 24% of their business is in healthcare. That's 15% for us. It's still good for us. It's our third largest vertical, but it's their largest vertical. And so when you looked at mapping those verticals together, their large verticals were not ours and vice versa. So we looked at it and said, "Oh, man, there's a bringing these two companies together. We get to play in these verticals the way and run our vertical playbook. We think there's great opportunity there." The second thing is, given that our business is our two largest verticals in transportation and in retail e-commerce, which means is that we have a peak season. Our peak season is Q3 and Q4. Based on their verticals, their peak season is Q2 and Q3. So now we get to smooth out our revenues a little bit, which we like. And the second thing is we get to kind of diversify client concentration. We've got a lot of large, nice, big clients in those verticals that I've mentioned. By adding in Sterling, we then we've got a 10% client that will become 5%. We've got a couple of 5% clients that will become like 2%, 2.5%. So we like the fact that we're diversifying the client concentration as well. But at the end of the day, it was the vertical story that attracted us the most. We also feel the two companies' cultures are very well aligned, high-performance cultures. So we think the integration of the companies and the cultures will be a benefit. And we're just looking forward to it. We're starting to plan. There's certain things we obviously can't do until we get DOJ approval on the deal. But we've been planning our post-merger integration with them. And the more we talk to them, the more excited we are about the deal. Any comments you could make on the antitrust second request and maybe your conviction in that going through? Yeah. I mean, it was disappointing to get a second request, but it was also anticipated. I think it shouldn't change the outcome. It just puts more time into it. That's why we've announced that we went from a Q3 close to a Q4 close. We understand the DOJ's request because I think probably like most of you sitting in this room, this is an industry you don't know a lot about. So a lot of it is they need to educate themselves on this. And it's an industry they need to learn. It's companies they were unfamiliar with. So there's a learning curve there, and we're certainly happy to help the DOJ with that learning curve. But we don't think it changes the outcome. It just changes the timeline. Perfect. Then you talked through the rationale for the acquisition. We didn't touch on the integration itself, maybe some of the synergies both on the top and bottom line that you're expecting. If you could summarize some of that, that'd be great. As you've seen from our published announcements, we were expecting $50 million of synergies. We think we're being conservative there, but it's a number we're eagerly ready to go get. Honestly, we're going to get a lot of it just from merging two public companies together. We get to get rid of duplicate public company costs. And those are pretty significant. So there's still a lot of work to be done post-close on what'll actually be the triggers we're going to pull. But we can do a lot of planning. That's allowed, and we have been planning. So we've literally been working on this internally every day, every week since announcement. We're getting great help from Silver Lake, who's our majority owner. They've been through hundreds of large M&A, and we're getting help from their consulting team on the transaction, on the post-merger integration. We are going to dedicate an integration management office team. We are going to have full-time resources on the PMI integration. And like I said, we're starting the planning now, but we'll have to obviously wait till close before we can pull some triggers. All right, great. It looks like we have maybe one more minute here. Anything I haven't asked you about or that we haven't touched on that you want to make sure gets said? Listen, I think it's hard to talk to a tech company without talking about AI. So if you don't mind, I'll spend the last minute on AI. We're totally embracing generative AI, responsible AI in our business. We've already rolled it out in a number of areas. It's already having a pretty nice impact. We've got two main areas we've rolled it out already. One is in our verifications business. We use AI and machine learning to handle our verification requests, which are verification of education, prior education, and prior employment. The other one is we've rolled out AI chat in our call centers. This has increased customer satisfaction because of the speed and how people like to chat. It's also allowed us to reduce headcount by probably about 20% in our call center just because of AI. We're rolling out multiple new AI pilots within the organization around how to do actual background checks and things of that. So more to come. And we've also rolled out AI at work, which is helping our current teams do their work easier and better. So it can create marketing presentations and other things. So it's pretty cool. And next time, we'll spend more time on AI. But just so investors know, this is a high priority for us, and we think we're out in front of it. Perfect. Well, thank you, Scott, for all your time. Thank you to everyone in the room for joining us. We are going to keep the breakout here as this is the last time this room will be used today. If you want to join us for the breakout, just sit tight, and we'll get you all set up. Thank you.