Good morning. Thank you. I'd like to welcome everybody to JPMorgan's Ultimate Services Investor Conference. I'm Alex Hess from Andrew Steinerman's Business and Information Services Equity Research Team here at JPMorgan. We're super excited to kick off the day with Steven Marks, the EVP and CFO of First Advantage. Welcome back to Ultimate Services, Stephen. Great to have you kicking this off with us. Always good to be here. Great. Let's start. Steven, First Advantage is one year into the Sterling acquisition, which in many ways felt kind of more like a merger. I think sometimes we've accidentally slipped into using that term. As you assess what you've accomplished in year one and what's been pledged, what have you learned from your seat as CFO? What's gone better than expected? What's proven a little harder than thought? It has all been a lot of work. It might look nice and pretty on the outside sometimes, but it has been a lot of work and a lot—we have got 10,000 global employees—and trying to get everyone oriented in the right direction and not losing customer-first focus has kind of been key. I think what has gone right, I think the best evidence of what has gone right is look at our retention numbers. What we liked about the Sterling deal was both businesses, First Advantage and Sterling, averaged roughly around 96% gross revenue retention. In our M&A models, our industry has not been great at it. We assume there would be an incremental level of attrition. Inevitably, customers get scared of it, want to diversify their spend potentially, or you are going to make some hiccups in the actual integration that is going to make them angry. Because our integration focus was so much on preserving the customer experiences, preserving their customer success team, and actually trying to make their customer experience better, not worse—better, not cheaper—we've actually been able to take that 96, sustain it, and then just in this Q3 actually elevate it up now to 97%. I think what we learned from that is it's good to do an acquisition in our space where you have two big companies that you can bring together, and you do not have to force some of the old habits of this industry. Old habits would be taking all your customers off of one platform, forcing them to migrate to a new one. That means they have to redo their integrations, redo their implementation, change their workflows around. When you make a customer go through all that pain and suffering, they're also just going to put their workout to bed saying, "If I've got to redo an implementation, why don't I go to someone who's not going to make me change to something I don't want?" Because our integration was built around not doing that, which it's always fun to say how core not doing something is to your strategy, but how critical it was to not force those migrations, and the fact that we were able to get all of the synergies, which I think is one of the other things that's gone really well, deduplicating two public companies—never been done in our space—deduplicating the two largest—it's the largest deal ever in our space. You have two 5,000-person-plus enterprises and a lot of overlap in the administrative functions and back office. We have been able to get the rest of the synergies out of optimizing the back-end fulfillment and not modifying the front-end customer experience. I think when you focus on never losing track of the customer and not forcing the customer to make changes you know they do not want to make, that is what has been the biggest win for us. Obviously, yeah, I mean, 12 months and three weeks later, customer retention is at all-time highs. Obviously, we are also seeing really good success on the go-to-market front. Future and prospective customers are really buying into the story and the value proposition. I think, obviously, as CFO, the synergies and cash flow are now following suit. Maybe what's proven a little harder than expected? I think it's been a lot of work. I think not every synergy that we had modeled out has come perfectly. Obviously, not every vendor that we thought would want to reharmonize contracts and do things like that would work. Having to just make sure we get the right—the culture has been a fairly good match—but get the right communications and engagement with employees. In fact, that's been one of my big shifts is focusing on employee engagement, not communication. We spent a lot of time telling our employees things. Now we have to do a little bit more listening. I think it's just getting back to the basics then because we spent so much time in the adrenaline rush of post-close, making sure that we can sustain a normal business operation. Got it. That's really helpful. We're going to be a little cute here, but you guys borrowed to fund the merger or acquisition. See, I did it. You're presently, on your calculation, 4.2 times net levered. Your target is getting that down to about 3X within 24 months of acquiring Sterling. That's in—let's call it a year. Let's call it by year-end 2026, right? Yeah, five quarters, yeah. Right, five quarters since you last reported. Can you walk investors through what sort of the path is from here down to there? Is it going to be pivot to growth, debt paydown, just any sort of color you can provide on how we actually see that leverage ratio trend towards where you've pointed it? Yeah. And a couple of really good things, Simon. One, and this is probably going to blend into one of your next topics. As we've seen the base volumes normalize, the rest of our growth algorithm takes over, and we can start growing again, right? We spent so much time over the last three years watching the hiring markets return back to normal, which reflected as negative base growth at a pretty meaningful level. We were not able to outgrow those numbers. We've now seen, as base growth has gone from negative 5.5% in Q1, 3.7% negative in Q2, now only 1.8% negative in Q3. We've been able to overcome that because we can generate around 9% upsell, cross-sell, and new logo combined. As we're at 96% or 97% retention, we're able to kind of start to turn that into growth numbers. We grew by 4%. Incremental revenue has a really nice gross margin to it and falls through at a good pace. Scaling the business, as we action and achieve synergies and start to execute on those and start to realize not just the EBITDA gains, but the cash flow gains as well. Cash flow is really the other big driver. You saw our numbers in Q3: $72 million of GAAP operating cash flow. Adjust that for the one-time spend related to the acquisition. It was $81 million. Those are really strong cash flow numbers. First Advantage has always been very cash flow-oriented, very high quality of earnings-oriented. As we scale the business, achieve the synergies, and generate cash flow, and whether we pay down the debt, which we've been doing every quarter, or start to build up a little bit of cash just for seasonality, etc., either way, on a net cash basis, you're bringing your leverage down. We see us getting towards that 3X margin by the end of next year. It might not be all the way down to Q3, but we should be getting really close to that. I think we've started to see a big step improvement just from Q2- Q3 because of the cash flow generation, because of the revenue growth expansion, because of the EBITDA. We've been able to really start to put some work into the number. Just like we talked about a long time ago, 2026 is the year where all of those things are—you are out of the shadow of the acquisition. I'm just kidding. You are out of the shadows of the acquisition. You have got all of the synergies starting to roll through your P&L. You should both see the cash flow expansion and the EPS expansion, which kind of go hand in hand. Yeah. That's a great sort of way to pivot to our thoughts on our question on operating leverage. This year, and keeping in mind this year, you're normalizing some of the base in the back half still. Your guidance points to, call it, $38 million-$39 million of year-on-year dollar EBITDA growth. Your realized synergy guidance, $33 million-$38 million. Most of that incremental EBITDA, you're sort of pointing to being from synergies. As we move into next year, you'll have lapped a lot of the very lowest hanging fruit. How do you think about what your operating leverage profile looks like going forward? Yeah. If you look historically, we've always been able to scale revenue growth to the bottom line in a very accretive manner. This year, there's obviously a few unique challenges. We just had completed a large merger, right? We're bringing two customer bases together, had to prove our value to those customers. Some of the normal levers we would normally pull, whether it's a CPI-type increase or a few other things on price, we decided to be very, very cautious or kind of waive this year just to make sure we didn't inflame a customer base. We didn't say, "You never want to be the person who does an acquisition. Tell them how great it's going to be and then immediately raise prices. We wanted to make sure that we could prove our value, prove the stability of our platforms, start showing the upgrades that we've been bringing out, whether it's rolling out enhanced customer care functionality to one side of the business, new product propositions to the other, better turnaround times because we're able to utilize proprietary data that one or both companies had. We wanted to prove out the model a little bit. We can start to flex some of those levers a little bit more next year. That is kind of back to business as usual. I think also just being in a period where optimistically or realistically, to be honest, you have stabilized base. We have really good go-to-market success, a really strong pipeline for incremental revenue generation out of that upsell, cross-sell, and new logo, and strong retention. You get to where our algorithm works out to revenue growth. When you have consistent quarterly revenue growth versus Q1 was a little bit of a revenue decline, Q2 was really in almost a total revenue-neutral state, you can actually start to accelerate the business and then get the accretive margins that you're talking about. Right. Complete the thought. Q3 was obviously revenue growth. Correct. Yeah. um, sort of hedged revenue growth. Correct. Yeah. So you are growing revenue. I think some people look at the base number and they forget that the business is growing. Correct. We're almost 4%, like we talked about, almost 4% in Q3. I think if you look at kind of what the guidance implies for Q4, there's some opportunity to accelerate that just because we've got so much coming into the revenue pipeline. We've got these three big deals we've been talking about all year, which was our largest international win in some time, a big financial services win in Australia, then two big wins in the U.S., one in the retail gig space, one in the healthcare space. All three in Q4 will be up and running and ramped, which, when you have deals like that, the two latter in the U.S., top 15-ish customer-sized potential. You have those coming into revenue. Our normal schedule, 9% new logo upsell, there's potential room to accelerate that in Q4, and obviously, that rolls over into next year. Yeah. So let's talk on those new wins real quick. As I think about it, it's four big contracts, but maybe looking at another quarter. So you've got the $100 million ACV contract. I'm sorry, it's $100 million total contract value. That's a renewal, but yes. Excuse me. Yeah, renewals count is, yeah. You have these three large new wins that you've talked about. Explain maybe a little bit about why these customers picked First Advantage and what it is that they actually bought. Unpack for us what you sold them. Is it the meat and potatoes? Is it the new bells and whistles? Yeah. I think in all three of those examples, it is our base. It's the core services we offer. It's the background screening. Now, a couple of those, just given the verticals they're in and some of the needs, have also bought some of the ongoing compliance services, whether that be a company that has a fleet and what we do around driver monitoring and records monitoring and compliance there. In the healthcare space, also, there's a suite of services we offer that focuses on the annual compliance needs of a healthcare company. In its core, all three of those bought our core services. All three came from completely different competitive situations, right? Wins from all different spectrums of our competitive environment. That's what we like about it. I think there's not a single thing working well for us. It's a lot of things working well for us. Retail gig, gig is not a place. As you know, First Advantage historically spent a lot of time. That was one of the nice things we learned from Sterling is that you can operate in gig at a good margin and win some good contracts. Healthcare has been a strength of both companies for a long time. International, we are, if not the largest screener, the second largest screener in, I think, in almost every major geographic region we operate in now. I think our scale is very much noticed. Our product and the applicant experiences, the data underlying the products is resonating really well. I think that was one of our internal theses for doing the acquisition is you really have an opportunity to create yourself as a market leader. We're starting to be able to use that positioning in the market to really help accelerate growth. I think we talk about this in all of our earnings call, the number of enterprise contracts we've won. Enterprise for us is $500,000 or more in ACV. It was 17 this past quarter. Q4 of last year was 25. That was the largest ever pro forma number or not that the companies have posted ever for the number of units. Q1, we then broke a record for the dollar amount, which is when we booked a lot of those larger deals. The pipeline's working really well. I think the market story is resonating, obviously, with the buyers in our market, which is, again, when you think about an acquisition of this scale, to have retention levels that are sustained, if not accelerating, and then to have go-to-market success, your existing customers value the story you're selling, and then also prospective customers are valuing the story. We look at that as a home run. With that in mind, a core theme from your investor day was your ability to move and your opportunity to move upstream and downstream in the hiring cycle. That is, with Identity at the very front of the process, with I-9 and WOTC on the back end, post-hire compliance services you've touched on briefly. Can you sort of walk us through how penetrated these services are and some vague, not vague, hopefully, but some sort of sense for that? And then what sort of your license to win is in those spaces? There's room to grow everywhere. I'll put it, yeah. If you recall pre-IPO, First Advantage used to regularly disclose a customer that was over 10% of revenue. If you look at a customer like that, there is white space on that customer because they were not and still aren't consuming every service we have to offer. There is tons of room. Certainly at the enterprise level in our managed accounts, we have customer-by-customer white spacing on which products they're consuming, which ones they're consuming elsewhere, which ones they need to be upgraded to. We see room to grow in all facets for all customers, whether that be on the kind of the digital identity, and we'll come back to that in a second, whether that be on the post-employment. Whether that's, to your point, your I-9 services on your onboarding product, WOTC tax credits, which is doing really well just because everyone wants to generate a little extra cash if you can. Certainly on the post-employment compliance and transportation, like we talked about, and healthcare and financial services, those regulated and compliance-focused verticals love those products. The reason, to your question, why they like doing it at First Advantage is it's all happening in the same user experience, in the same applicant experience, in the same dashboarding. When you're onboarding a candidate, they're filling out information what they think is for the background check. They're getting pre-qualified for a WOTC tax credit. They're answering a couple of extra questions that get them set up to do their I-9. You don't have to send them to eight other websites to go do it. Your completion rate's very high. The customer experience, it's very quick to onboard, etc. It creates for a really strong value proposition. Frankly, there's white space to grow all the customers and package density, increasing the quality and the depth of the screening they're already doing. If we want to go back to just digital identity, that's obviously the new frontier. Obviously, kind of rolled that out and announced it really at the investor day, have started to see the market interest continue to grow. People don't realize how rampant the fraud and risks of AI are, what they're creating in the hiring markets, whether it's fake candidates, whether it's people using synthesized IDs or credentials. We see it, frankly, a lot. We're optimistic about the future that creates. I've been telling people a lot the last few weeks. are a number of, I would call them case studies internally, where we never would have even been introduced to the company if they were not considering buying digital identity. That is opening up bigger opportunities for their whole screening program as well. I can just think of an example that came through the office a couple of weeks ago. Maybe about 10% of the program in rough terms is digital identity. They wanted that. It started with that discussion, and it opened up the other 90%, which is their screening program. Now we have an opportunity at the whole thing on a logo that we have been hunting down for years. It is creating not just the bespoke opportunity for digital identity. It is creating more opportunity to grow from an overall services standpoint. Yeah. I think that's sort of consistent with how we think about this is it's a hook. Correct. You guys have a business that's monetized. It's got a good monetization model in the background, in the pre-employment background screening. This gets a customer to consider First Advantage, perhaps. Maybe that matters a bit more so than the immediate or near-term revenue penetration rate. It's certainly differentiating because there's just not really any other competitors in our space that have the solution fully baked and ready to go to the market. There's one or two that are starting to talk about it, but not at a level that it's ready to be consumed at today. I think we're obviously on a very unique demand cycle right now because, I mean, we just hired a new CMO actually the week of our investor conference. She didn't have time to have Wall Street Journal put out the article talking about the 300-plu corporates in the US that hired from someone from North Korea and didn't know about it. Those types of stories are creating the incremental demand for us, which makes it easier to sell. You don't have to educate and market to the market. It's kind of wanting to consume the services quickly. Yeah. I think you've talked on this before how you can now create, sort of, AI has created new vectors for corporates to be worried about their impersonation and things like that. We should talk on AI for a second. Just briefly, you guys speak to a lot of employers. AI is front of mind. The sort of interspersion of AI into the labor force is obviously in a lot of people's minds. What are you hearing about AI's impact on labor demand in your client conversations? Where is this coming up a lot, or where is this total side show? How does that differ across various client segments? I think every company's talking about it. I think how it impacts the verticals is very different. We operate, as you know, in a wide spread of verticals. I would say the ones that are talking about it in earnest today are your BPO, your IT outsourcers, and to a much smaller extent, some staffing because those are the ones that are seeing the immediate impacts, right? If you run a company that does offshore call center work, the demand for those services has gone down. Just like we've rolled out our click chat call and kind of used AI-enabled chat and voice to help optimize our call center and to the benefit of better customer experience, a bunch of other companies are doing it. It's not a unique proprietary idea to First Advantage. We don't have a lot of customers in that space, so it's not materially impacting our results. We're certainly hearing from those customers that demand's down, and they're actually trying to kind of reorient themselves to be the AI providers in call center space versus be the call center space guys. I think those verticals will have a tough go of it. We're already seeing it. Again, it's not going to materially impact our results because it's a small piece of our business. I think you look at it, I mean, all of our customers are talking about AI, but I think where it's really impactful and where they see it going is a lot more to do with their administrative functions than it is their core fulfillment model. You read about in the news, obviously, we have a lot of customers in the space. Some of the articles you read are our customers. Some are not. You start to look at the underlying storylines there. A lot of HR jobs, a lot of finance-type jobs, a lot of administrative and back office are what is being impacted by the LLMs and the GAI today. When you think about that and the scope of hiring, it's pretty limited. First Advantage, we're investing it internally. If we used AI to optimize our total awards and compliance department, that's five people. They're very long tenured. They're great people. Maybe there's a hire there every other year that AI takes that out. Okay. That's one hire or two hires every so a couple of on a decade. That's not going to impact our core revenue. When you think about these larger companies in transportation, home delivery, and you read some of the customers you read about in ours and not, they're optimizing the back office. We do some of that work, but it's not the core work. The core work is the drivers, the warehouse staff, nurses, the doctors, not the billing staff and the admin staff at a hospital as an example. It is certainly impacting companies and how they think, but it hasn't really had any signs of impacting the core hiring in our core verticals. That is true in the white-collar space as well because you did become a bit more white-collar with the Sterling combination. Yes and no because if you think about what is white-collar, a, healthcare. I think that, again, you're seeing it in the back office. You're not seeing it in the nursing and janitorial and all the things that go into running a hospital and clinical. You're probably seeing it a little bit in financial services. I mean, the big banks, their onboarding classes or the consulting firms are onboarding classes, maybe a smidge smaller than they were before. I think that those industries, I could tell you as a guy who does a lot of work as a CPA and working with the AICPA on a few things, everyone can't go from being a college graduate to a partner either. These companies do have to build out pipelines of employee staff, and you can't have zero freshers and college grad hiring. Otherwise, you have no pipeline for the future generation of thought leaders. I think all of those verticals are still struggling with what the new normal is. We saw really strong early year results, really stable demand there. I think we talked about this on our earnings call. AI will disrupt many jobs, right? There is a World Economic Forum that came out. It's going to disrupt a fair number of jobs, roughly 90 million, they estimate over a five-year period. It's also the technological advancements, just where people live, how they live, just the demand for jobs is going to generate about 170 million new. Net net, they expect to add jobs to the markets, not remove in overall. I know we spent some time on this, but I do want to just sort of drill down a little more. How much of this and this discussion around AI is truly incremental versus how much is it, "Look, companies are always automating. There's a little bit of a new vector for automation. But automating is a fact of life in your game. It's a fact of life for job seekers." How much is this really new news versus how much is this a nice wrapper around a megatrend that's gone on for decades? I think it's a little bit of both. If you look at First Advantage, we've been doing RPA for over 10 years. That evolved into machine learning. That's now evolving into AI. It's a continuation of, to your point, the cycle that a lot of companies have been going through about using AI to run their businesses more efficiently, to scale, to grow, to generate new products, etc. I think what's a little different of it is, and that's why I think we're seeing more of the impact on the administrative functions, it's a little quicker to implement. We've got tools now at First Advantage on our FA Studio where you can kind of build your own agent. It's being used more on the administrative functions because you can build your own small-scale finance bot or HR bot or legal bot to kind of review contracts. I think that's where maybe the big megatrend difference between a machine learning algorithm where you're writing one algorithm to cover a large-scale mass process versus AI can be used in a lot more discreet bespoke uses. I think, again, when you relate that to the underlying demand, that's impacting the administrative hiring of companies, which is a fraction of what we do for most companies and not their core hiring, which is store clerks, warehouse workers, delivery drivers, nurses, etc., etc., etc. Understood. Understood. I want to maybe tie all this together with a question on the labor market and where we stand. I recall at investor day, you noted that you like to look at the ratio of unemployed people, unemployed persons to job openings, which has sort of oscillated around the one-to-one for much of the year prior to the shutdown. We do not know in recent months, but presumably it has not deviated too, too much from that. What does that ratio tell you about the current state of the job market, the stability from here, and any sort of other insights about the supply demand maybe being a little better? Yeah. I mean, one-to-one is equilibrium, right? Where we left after the pandemic when we peaked at 2.2 openings per one unemployed, that's unsustainable. I mean, it was great for about 24 months of base demand because there was this constant churn and hiring and movement of staff as you tried to fill every seat that was out there. It is not sustainable long-term. I mean, if you zoom out and look at the data, and yeah, I mean, you'll get a little data on Thursday or Friday. We've already told you our Q3 was pretty good, as you know. I imagine that data will kind of mirror that a little bit. When you zoom out and just look at that ratio over time, one-to-one has really been that balanced comfort level where you're able to have stable job demands in the U.S. You've got an opening for every person in theory seeking it. It creates enough churn that drives our base growth, which we like. It is sustainable, right? Companies aren't lighting their hair on fire or worried and things like that. It is hard to tell you how the data is going to look, obviously, the response rates and things like that. We like to look at that BLS data on a more zoomed-out level these days and not look at any one-month results and let that change our strategy. One-to-one is a very balanced level historically. If you look at how we've been able to grow in environments where it is one-to-one, that is ultimately, if you can get that stability over a period of time, our base growth stabilizes out. Then, as we talked about, the new logo upsell, cross-sell engine keeps on humming. Our retention numbers are at record highs. Excellent. That's super thoughtful. Steven, I think we've touched on a lot of the topics you guys have touched on in recent earnings calls and your investor day. Maybe just for some food for thought for people in the audience here, people listening in, I want to ask a big picture question to sort of wrap it up in the last two minutes we have. When we have this fireside chat again next year, what's something you think isn't fully on investors' radar that will be highly impactful to First Advantage at that time? I appreciate the invite because we're not normally scheduled as early, so it's good. I know we'll all be next November. No, I think a couple of things. One, I mean, obviously, I think when I think about where we're positioned today and what the next 12 months should really look like, A, as we talked about in earnings call, we've got a lot of big wins that are hitting revenue. We've got a really strong pipeline. We've got a lot of contracts that are going to start ramping up. We should be celebrating a really strong LTM period of new logo and upsell, cross-sell growth. Obviously, our retention numbers are at highs, and we don't intend to do anything to risk those. You think about the controllable aspects of the business. We should be able to drive those growth vectors, whether that's new logo, upsell, cross-sell, and the retention. We see this consistently flat hiring environment persisting into next year. Obviously, that's not a tailwind of base growth, but we do not see any new headwinds coming at us yet. Who knows what comes out of Truth Social or Twitter in the next 12 months. I think between that, and we should be celebrating the two-year anniversary and kind of the quote-unquote completion of the integration. We should have a lot of synergies, a lot of cash flow, and a lot of go-to-market success to be talking about, and then really talking about what the next phase of FA 5.0 is. Any insight on what the next phase of FA 5.0 is? I think it's going to have a lot to do with digital identity and kind of shifting the approach towards how do companies know your people better. Great. Thank you so much for your time today, Steven. We're going to wrap it. Thank you, everybody, for joining us. Thank you, Alex.