For joining us. My name is Andrew Nicholas, and I'm the Business Services Analyst here at William Blair. Before getting started, I am required to inform you that for a complete list of research disclosures or potential conflicts of interest, please see our website or visit our website at williamblair.com. With that out of the way, very pleased to welcome First Advantage to our conference, the 46th Annual Growth Stock Conference. With me today, I have First Advantage President, Joelle Smith, CFO, Steven Marks. Thanks to both of you for being here again this year. Understanding that it is a generalist conference, just kind of want to start with just kind of a high-level overview of the business. Maybe take a couple of minutes to give a quick snapshot of First Advantage, what you do, who you help, and why it's valuable. Sure. Absolutely. Thank you, Andrew. Happy to be here. Hi, everybody. First Advantage is a global provider of trusted workforce solutions. We help organizations screen, hire, and manage talent. We're at the intersection of identity, trust, and compliance, and so those three things really make up what it is that enables us to help organizations identify who they're hiring and make sure they have all the essential requirements to be hired for that particular role or into that particular company. We've got about $1.6 billion in revenue. We have about 80,000 customers, and we do about 200 million searches annually. We have scale, proprietary data, and platform strength. They're kind of our three differentiators. We also operate in a highly regulated industry. We have a global footprint. We operate across 200+ countries and territories. We have deep compliance expertise, and we have a tech platform that integrates directly into our customers' workflows for hiring and managing talent, so applicant tracking systems and HCM systems. Our solutions and proprietary data are underpinned by our AI-enabled platform that has a built-in compliance engine. Our opportunity here is meaningful and pretty long-term because we have a couple of changing things happening within kind of the hiring market. There's a more distributed workforce than there ever has been. We have new generations coming into the workforce at a rapid pace that we really haven't seen in decades. There's a phenomenon of identity fraud happening inside of the hiring market, especially with enterprise organizations. This trifecta is really helping us to continue our growth and to be differentiated in the market. That's who we are. Great. Appreciate that. A lot that you said there that I'm sure we'll dig into. Sure I want to spend some more time on. Maybe before we get into some of the nitty-gritty, maybe higher-level labor market situation. Much-covered, much-ballyhooed pluses and minuses over the past several years. Can you just kind of level set where we're at from a labor market perspective or more specifically, like a hiring velocity perspective? What are you seeing today? What has the progression been over the past handful of quarters? Yeah, I'll give you the data, and then I'll let Joelle maybe give you some of the commentary from our customers, because I think that's what's obviously most valuable to us. I think it's to your point, it's a very confusing market, I think, to most, because whether it's the lack of response to JOLTS data and kind of the unpredictability there, and if you even go to a source like an ADP, it's very down market. I think a couple of things that Joelle mentioned that really give us this stability trend that we've seen happening in the market probably for the last 24+ months, but really starting to manifest itself over the last 12, is the fact that we have a very diverse vertical base in a couple of our key verticals, healthcare, retail, transportation, which a lot of home delivery, have been very strong and stable over the last number of months. Also at the enterprise level. We define enterprise customers as $500,000 or more in screening value. Those are companies hiring 1,000s, 10s, or 100,000s of employees a year. These are really big companies that when a news story like tariffs or a war kind of thing act out, they're making strategic decisions. They're not really super reactive. That creates a lot more stability than I think the markets would perceive. We've seen that in what we would call base growth or same-store customer sales, which had been all over the place. Post-pandemic blew up and was +25%, 30%. Obviously, that wasn't long-term sustainable. We've seen this rotation back to what is now we can really consider to be sustainable. Over the last several quarters, we've seen base go from, call it -2 to -1, and in Q1, it was essentially +0. That's kind of our guidance for the year. We think we'll be right in that neutral to just below neutral state, which to us is incredibly comfortable because all of those things Joelle just pointed out, we're able to drive really strong growth from upsell and cross-sell, so new features, new functions. That's responding to those risk concepts that Joelle was talking about. The differentiation is leading to strong new logo wins and retaining 97% of our business over the last number of quarters. You get into really good growth numbers without base being positive. You're starting to see that come in some of the economic data. We don't need the economic data to improve. We need our customers to tell us that things are in this neutral to positive territory, which Joelle can tell you all about. That's what we're hearing. Yeah. The way the customers are responding, and they have been for a number of quarters now, is a neutral to positive. There isn't a single customer out there that we talk to, and we talk to 1,000s of them, that's saying they're hiring less. They're hiring the same or more every vertical, every region. It's the exact opposite of what you're seeing with the headlines. Yeah. As Steven said, we operate and prioritize the enterprise market, and these are large corporations, so they're not going to respond quickly to a headline. They're going to manage their business effectively. Yeah. I know you guys have talked about it the last couple of quarters, but huge dichotomy between. Lay off this, lay off that in the media sphere versus what you're seeing in your business. Well, didn't your parents always tell you. Yeah. Look, the layoffs are happening. You also got to put them in context. You'll read some of them. It's ABC company's laying off 1,000 people. A, no one ever gets to the second paragraph of the article that says they're using those savings to fund investments in whether it's technology or sales or marketing. That churn actually is net positive for First Advantage because that's creating new hiring activity and turnover within the organization. You also look at, people get really scared and think the labor market's gone to hell, for lack of a better term. You put that number in the context of what they disclose as their total employee count, and it's tiny fractions. Right. They're really just making these cuts to be able to fund. You read a lot about in the news today about funding their AI CapEx and funding their product development and funding their sales and marketing. Anytime there's a rotation and churn in the labor market, that's actually net positive for screening volume in our services, and then take the fact that what they're investing in is things like AI. That's just compounding the risk equation that our customers are having to navigate, which is creating more demand for the upsell cross-sell. Not every news article is always great news for us, but I think a lot of people are just reading the headlines and getting scared about what's going on. You got to read the full article and then really think about what's really happening in the market. Yep, absolutely. Makes perfect sense. All right, wouldn't be a Fireside Chat in June 2026 without some AI conversation. You alluded to some of it already, I just want to walk through from a competitive positioning and moat perspective, AI's impact on the background screening space, why you are a winner or a perceived winner in your opinion on that front. Maybe start with addressing disintermediation risk in particular. How difficult or how would you describe the moat around infrastructure, around technology, around the service capabilities that you have and that you bring to market? Yeah. Do you want to take that? You go ahead, yeah. Yeah. From an AI perspective, it's important to understand a couple of things about this industry in general and then about us. When you look at the background screening and workforce management, we're a CRA. That's a credit reporting agency. We're governed by the FCRA, same as a credit bureau or anything like that. It's highly regulated, and that's just in the U.S. You have a number of other regulatory requirements if you're hiring in transportation. There's the Department of Transportation, the DOT. Healthcare has their own regulations. You extend out to other countries, and you've got GDPR in the E.U. There's data privacy laws that just are coming up in India, Australia, Canada. There's a lot of regulatory requirements, and it's not a one-size-fits-all. When you look at how AI can decision, you need to be able to have, in our business, auditability and defensibility. If you're an enterprise, having both of those things, AI is not going to do that. It doesn't do that well at all. When you look at the aspects of compliance, that's one area that this industry, and us in particular, have a pretty decent moat. The other area is around data, and so we have 1,000s of data sources. Some are publicly available, some are third-party payment. Even the publicly available data, if you think about all the criminal records, there's almost 4,000 county jurisdictions in the United States, upper, lower courts, where you have to get this criminal data to confirm whether a person obviously has committed a crime or committed something egregious enough to not be hired. The data that you need to get to is behind paywalls. There's no central source. They're all completely disparate, and they're all varying degrees of sophistication. You have some that are fully automated. You have some that still sit in cardboard boxes in the bottom of a courthouse. You need to have a network, and you need to have an infrastructure to be able to do that, and you need to have the funds to be able to go get the data and handle the payment of that data, and then you need to process the information. Once you gather all the information from these 1,000s of data sources, you then have to be able to, it's called adjudicate, basically make a decision on whether you can use this information or not and whether you can use this information to make this decision. That decisioning criteria is something that legally AI is not allowed to do. You cannot use AI to make an employment decision. There are 14 states right now that have that law already in effect, and there's 30 of them more that's in process. These are the things that really create a bit of a moat in the background screening industry, and in particular, with us and the sophistication. Now, where we can use AI, and we do, is for finding the right data source that has the highest probability of a complete record and the highest quality, and the fastest search. We use AI to do that type of sophistication on the platform, but we don't use it to decision because legally you can't. It sounds like all these things kind of drive you to the 97% retention rate that you've spoken to. I think although I don't always pay it a ton of credence, another aspect of the AI debate has also been the idea that someone else would want to do this on their own, or maybe even a payroll vendor wanting to take on this responsibility. Can you just respond to that disintermediation risk, and why it isn't something that you're concerned with? I think a lot of the things Joelle just mentioned are still there, right? A payroll provider by nature is not a CRA under FCRA law. The second you start going into these other worlds, it starts to creep into all the other services you do. That compliance burden, in fact, I talked to a founder in our industry who said, oh, the night the FCRA applied to background screeners, he went home and threw up. Now he goes, "It's the greatest thing to ever happen to the industry," right? It's true because the world's gotten so complicated from this compliance infrastructure that it's fewer and fewer people want to. There's been some startups in the talent screening space that have tried to do this AI search the world, didn't think they were a CRA, and the FCRA applied, and they're getting sued out of the world right now because there are a ton of things that come with being an FCRA-covered service that you have to do, the way you have to handle the data, the way you have to process it. A lot of those human-in-the-loop mentalities that Joelle just talked about, primary source validation, all comes into it. It's created this incremental moat, and that's all on just background screening. We haven't gotten into the fact that in order to do drug testing, we have 20,000 physical sites in our proprietary network that we're able to tap into. There's all of these things to be able to offer the full suite of services that make it really hard for someone to say, "I'm going to go to your Claude Cowork class tomorrow night and then learn how to do a background screen in under an hour." You could do one background screen, to do it at the scale we do and the verticals that we cover and the geographies that we cover is what really gives us the strong competitive positioning and really creates this strong kind of shield, if you will, against a pure AI disruption risk that I know has been common to every company in the software space over the last year or so. It doesn't have to be specifically an AI topic. Can you speak to the Sterling acquisition, and how that maybe enhanced the competitive moat as well? That was something that you closed, I think we were talking about this last year, getting an update on that. Just give a little bit of color on how that's evolved as well. I'll tell you how well the acquisition goes. We don't even talk about it much anymore. We've got a little bit more synergy work to do. We look at it as an incredibly successful deal in a couple key measures. One, first time I think a background screening acquisition's gone through, and retention levels have gone up. The fact that we were able to take two very large customer sets, bring them under one house, but preserve the customer experience and the platforms, and do that in a way that actually creates higher retention than pre-acquisition, to us is the number one success. Obviously, the financial model, our scale now, the breadth of products that we're able to offer, the breadth of investment that we're able to make in those products is second to none in our industry. Joelle can talk about the specifics, but I think the biggest key benefit to our customers and in our pipeline has been the fact that we've been able to take the best of both worlds and really roll them out as upgrades. If you were an original First Advantage customer, you got a lot of what the best of the Sterling platforms were, and vice versa. The proprietary data and speed and automation on FA and some of the product suite and integration layers on the Sterling platform, we've been able to take those one-offs and bring them over to the other side and create a better customer experience for everyone. We're obviously seeing now the benefits as we de-lever come through with cash flow, our scale in terms of our go-to-market and marketing dollars and things like that. I can tell you, we don't really talk about it a lot anymore. We're now focused on how do we take the new First Advantage and grow. We've rebranded. We've harmonized everything we can, and now we're off to the races. Some of that is showing itself in operating leverage. You have some synergies left, but can you talk about margins broadly? I think at your investor day last year, you spoke to 31%-32% target by 2028. I think this year you're in 28.5% type range for the full-year guide. Can you talk about the path there, the major levers to getting there, and how much is dependent on base growth, if at all? It's really not base growth dependent at all. A few things. One, there are some more synergies to get, but they're really back-end plumbing. It's not the stuff that the customer sees and feels. That's really why it's not talked about much. A lot of that, because we're prioritizing growth in our pipeline, and we've had some really strong go-to-market momentum, 17% combined new logo upsell, cross-sell in Q4, 12% in Q1, continuing that growth. We've certainly put synergies a little bit on the back burner, but we'll action all those by the end of this year, see a lot of that benefit through margin% next year. I think just scaling our P&L is very scalable to begin with. Incremental dollars of revenue don't require a lot of P&T or product and tech investment, certainly not a lot of G&A and SG&A expenses. As we scale up revenue, now that we've got that, it really just stable base is all we really have been modeling in a neutral base. As we have that and the rest of the growth algorithm takes over, we'll see a lot of that margin accretive items flow through. There's still some other levers that we're working on. Obviously, we've always been focused on automation. AI is just the latest iteration of that, and Joelle covered some of that. Also how we leverage our proprietary data is also a way that we're going to help enhance margins over the years. Making sure that we're leveraging our verified database and Smart Hub for verifications, our national criminal record file database for our criminal searches. There's a few other areas, obviously, that we'll continue to invest in. We look at that, obviously, that 31%-32% target, the $1.8 billion-$2 billion, and really the $1.65-$2 EPS as those core metrics that are, I can tell you, are front and center in all of our management meetings on making sure that we're executing on them. I think you even saw some of that margin progression in our Q1 numbers this year. We had some new wins that we knew just from a revenue mix were going to put a pause on some of that margin accretion. Because we've seen that broad-based stabilization within base, like we saw here in Q1, our margin performance outdid our own models and was actually very accretive year on year. I want to double back because you mentioned the verified database. Just can you speak to some of the data that you have that you consider to be proprietary? I think that's obviously one of the major differentiators as people think about software and services companies in this new AI paradigm. Can you give a little bit of context to the audience about what those assets look like and how they're differentiated? Sure. We have over 1 billion proprietary records, and it's split into two groups. One is verified, as you discussed. That's over 130 million records, and really that's work history authorization. It's the employment records necessary to verify that somebody has worked where they said they worked. That continues to grow. It's an investment that we made a number of years ago, and we actually layered AI on top of it, which is a product called Smart Hub. That allows us to use our data or find other third-party data sources that have the highest probability of completing that record with the lowest cost. Our customers are very keen on that product. That is a differentiator. Nobody else in the market has that. The other proprietary dataset that we have is around criminal records, and that's the remaining, so over 800 million records of criminal history, which allows us to use it as a reference point for where to go get information, in addition to obviously the places where they lived and worked, because that's traditionally what people search for. These two datasets give us a ton of differentiation. We use them to train the models. We use them to accelerate the time to turn around the record information. It really gives our operations team an edge as they're trying to process 200 million searches a year. Makes sense. Perfect. I want to switch gears a little bit just on growth opportunities. I think one of the things that's been particularly impressive and actually turned around prior to some of the stabilization you've seen in the U.S. market is the international business. Can you talk a little bit about how that growth has trended the last couple of years and maybe more holistically what that growth opportunity looks like? Obviously, you mentioned from a regulatory perspective, it's difficult to support multinational organizations in all these jurisdictions. Where does that screening market sit relative to the U.S., and why are you so excited about it? Absolutely. International has been a great success story for us. We're on our eighth straight quarter of growth, which we really see as a positive indicator for how this industry is trending. International in general, we serve a lot of the global brands, so what you would think of as a U.S.-based organization that expands out to other regions across the globe whether it be India, Europe, Australia, APAC. There's also a change in how some of the organizations who are headquartered outside of the United States are expanding into the U.S. We're seeing that, or European nationals that are expanding to other countries in Europe or other regions outside of Europe. We're seeing both sides of that growth curve, and we're really seeing a pretty strong uptick in some of the major markets that we serve. Europe for sure. There are regions in APAC, India in particular, but even areas like Northern APAC and Hong Kong, and then Australia and Canada. They're definitely high-growth areas. They are countries that are really focused on mitigating risk and are following the same. U.S., by far, is the most mature in this market. We're seeing a lot of these other countries come up and recognize how important this is from a risk perspective, from a brand perspective. We're seeing that uptick in growth across the globe. Andrew, I think international is also one of the things where the acquisition was truly beneficial to First Advantage. You think about some of the core markets, the U.K., Australia, and India. We're the largest screening provider in all those countries now because of our combined scale. It's not just the volume that we're putting through, it's the local expertise, it's the sales, it's the marketing, and it's also the vertical diversification within those markets. I think that's one of the reasons we were growing pre-acquisition internationally, but you've seen that growth sustain and even accelerate since post because we're very diversified, but also now just a strong player in Canada and Mexico. You go market by market by market where you really want to have a good presence, and through the acquisition, our combined scale is fantastic in those markets. Earlier, Joelle, you mentioned how sometimes you're getting background screens or data from a cardboard box in the basement. Yep. Where is the sophistication or maybe the digitalization of data internationally? Re lative to the U.S., and does that also augment the moat there? Yes, it does. That's a great question. I don't think there's really cardboard boxes in basements internationally, but there is definitely disparate bits of data, and it's really hard to know. Each country has their own. There's national record data, then there's local record data, and there's certain jurisdictions. You have to have all of the compliance baked into every single one of those countries. You need to know what's accessible. For instance, a lot of countries have a requirement where you can hire them, and if they have falsified any information, then you have the right to fire them. If they haven't done any-- Once you hire them, you really can't fire them. Whereas the U.S. is the opposite where it's at will everywhere. It's very much the opposite, especially in a lot of the European countries, right? Knowing that and knowing what's important to an employer, what they want to check on the background, and how that needs to serve into not just the hiring data, but post-hire decisions for once they become an employee. There is a high level of compliance and sophistication necessary to serve all of these countries. Is there a major difference in package density between U.S. and international customers, or is it more a distinction between mature economies versus less mature economies? Yeah Should we think about that, maybe even as a potential opportunity long term? Yeah, it's actually both. When you think about density across someone out of Europe, they may have gone to school in India, they may have had jobs in three different countries in Europe, then they're getting a job in the U.S. You have to be able to go to all of those regions and all of those employers, you need to have that depth and breadth to be able to go get that information, then use the compliance engine to know, okay, if they worked in the U.K., these are the things we're allowed to serve up as part- Sure Of a decision matrix, and this is the stuff we're not, based on GDPR. Depending on the jurisdiction and depending on the type of information we're gathering, whether it's employment, education, criminal record, there's a lot of different rules required for that. The density naturally is larger with more dense populations around, especially countries in Europe and APAC. APAC has a ton of variation in their packages just because it's location-based. As you also rightly alluded to, as markets mature, their local screening operations become more sophisticated. Same thing with verticals in the U.S. As certain verticals mature, they start to analyze risk differently and therefore become natural kind of locations to do more upsell, cross-sell density. Another area of risk is people that don't really exist. Digital identity verification with the expansion of remote work, a lot more common than it was a decade ago for someone to say they're someone that they are not. That's an opportunity that you've spoken quite a bit about. Would love to hear more about the digital identity verification opportunity for First Advantage, what you're seeing customers look at, and how you service them in that regard. Yeah, absolutely. It's interesting because it's the bad side of AI. There's a lot of really good stuff that happens with AI where you can do things faster and you create these agents and all these things. The negative part of AI is it made it really easy for people to create a fake identity. They make it really easy to create a falsified resume, create a fake company that you say you worked at as a verification for employment, and obviously deep fakes. This is something that has really changed the game for a lot of employers trying to bring in folks, and that's why risk has risen to the top priority for all enterprise organizations these days. We're excited about it because we have a great product suite. We were first to market, and Sterling was very close second to market, right? The two of us went there. We've had products out in the market for years. Just about a year ago, I think The Wall Street Journal put out an article saying that Gartner believes that one in four candidates by 2028 are going to be fraudulent. They're going to be fake. I'm telling you, they were not far off on that based on what we're seeing so far. That changes the game a little bit. Not only do you have to make sure the person has the right credentials and is safe to be hired into the organization, you now need to make sure they are who they say they are. Pairing those two things up and making sure that the products complement each other and that the person that you interviewed is the same person that you did the background screen on, is the same person that you onboarded day one for the I-9 and has the right to work in that country or in that region, is really important. What our platform does is we are able to connect all of those dots at all the different stages. We even have some organizations that want to do it even post-hire. They want to continue to check. Once you have a person that gets hired onto the organization, they want to make sure that they are not then outsourcing their work. This happens in every vertical. Whether you're a gig business and you want to make sure that the driver who's delivering something hasn't farmed out their work to a friend or a cousin or something like that, or whether you're a financial services institution and you're hiring somebody with fiduciary responsibility and you want to make sure that they haven't been talked about or been paid off to be able to do something nefarious within your organization. There's a lot of different use cases that we're seeing, and for the digital identity and the identity fraud phenomenon that we're seeing, it's the first time that we have seen a product that is affecting every single vertical that we serve, every single customer segment that we serve, and every single region across the globe. It started with the North Korean took your job type of headlines. It's really just continued. Whether you're a retailer who is hiring somebody and you need to verify they're able to work in the United States because you're afraid you're going to get an immigration fine. You need to verify that the person is the same person that you did the screen on, or whether it's something more complicated like a technology hire or an engineer hire, where you're going to get the keys to the data and product environment, and you want to make sure that they're not a bad actor that's going to drop in malware. It's across the board. It's something that our product is very fit for purpose. The fact that we have the sophistication in our platform to be able to stitch it all together to make it an easy decision for our customers, it's like right place, right time situation for us. We are very excited about it. Over a quarter of our implementations in Q1 had digital identity associated with them. Awesome. Well, I think we are out of time. Thanks to both of you for being up here with us. For those that are interested in continuing the conversation, we're going to Jenny Wen for the breakout. Thanks, everyone. Thank you.