Good afternoon, ladies and gentlemen, and welcome to HireRight's fourth quarter 2022 conference call. Joining us today is the company's President and Chief Executive Officer, Guy Abramo, Chief Financial Officer, Tom Spaeth, and Andrew Hay, Vice President of Treasury and Investor Relations. At this time, all participants are in listen only mode. I remind everyone that management will refer to certain non-GAAP financial measures. An explanation and reconciliation of these measures to the most comparable GAAP financial measures is included in the press release issued today, which is available in the investor relations section of HireRight's website. During this call, management's remarks will include forward-looking statements, including related to macroeconomic conditions, demand for the company's services and the company's technology improvement and cost reduction initiatives. Such statements are predictions, and actual results may differ materially. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Form 10-K filed with Securities and Exchange Commission in the sections of the document entitled Risk Factors, Forward-Looking Statements and Management Discussion and Analysis of Financial Condition and Results of Operations. It's now my pleasure to turn the call over to Guy Abramo. Mr. Abramo, please go ahead. Thank you, operator. Good afternoon, everyone. I appreciate everyone taking the time with us today as we share our fourth quarter and full year 2022 results. To begin, I am very pleased that despite continued macroeconomic headwinds, we achieved strong results in 2022 and exceeded the guidance we provided on our third quarter earnings call. As we noted during that call, we observed a slowing trend in hiring volumes, which continued throughout the fourth quarter, with many companies announcing staffing reductions or the delay in hiring, driven primarily by a general nervousness on the economic outlook. Since that third quarter call, that apprehension has been confirmed with additional announced workforce reductions as well as national data which showed an 11% reduction in hires in the fourth quarter versus the prior year. With that said, our revenue for fourth quarter was $175 million, down 12% versus the prior year period. It is important to note that the significant majority of the decline came from just two verticals, technology and government, both of which saw a 30% decline. Technology sector layoffs and slowing of replacement hiring is not surprising given the press we've all read for the last 6 months. In the case of the government sector, the slowdown appears to have more to do with difficulty in finding qualified applicants than an elimination of positions. Excluding these two verticals, Q4 showed a much more modest decline of 4% relative to the prior year. It's also key that despite the clear slowing of hiring in this macro environment, there continues to be relatively healthy activity, just not at the pace we experienced in the first half of 2022. As you have heard me say many times, quality and thoroughness in our investigations remain key selling points for us, particularly in our core markets that tend to be more demanding. Our single global platform and automation initiatives continue to be differentiators. To leverage these strengths, our account management and go-to-market teams continue to focus on developing and expanding new global client relationships. During the quarter, we added 42 new enterprise customers, two-thirds of which are distributed across our four core verticals. Turning to profitability, our Adjusted EBITDA margin improved 70 basis points over the prior year period on Adjusted EBITDA of $38.9 million. Despite the challenging demand environment, we were able to increase our gross margins over 300 basis points to 47.3%. This improvement was driven by increased automation, overall greater workforce productivity, rebalancing our labor mix by increasing our offshore presence, and increased cost management of data providers. All these initiatives are focused on reducing the cost of delivering our services. Turning to our annual results, we generated revenue of $807 million, a 10.5% increase from fiscal year 2021. Our gross margin increased 169 basis points to 46%. Adjusted EBITDA grew 18% to $188 million. Adjusted Net Income, including the effects of the reversal of our deferred tax asset valuation allowance, increased 148% to $194 million from $78 million. These results reflect our ability to upsell, expand packages to existing customers, and onboard domestic and international new logos won in previous quarters, as well as our ability to continue to expand margins. Our industry leadership continues to be evidenced by the performance of our top-tier customer base in our core verticals of healthcare, technology, financial services, and transportation. Annually, despite the lower Q4 hiring trends, our core verticals collectively grew 14% versus 2021, led by healthcare, which grew 23%. Transportation continued its rebound from pandemic lows, growing 17%, while financial services and technology grew 11% and 7% respectively. I would also like to highlight our recent announcement that we have entered into a partnership with GryphonHR, a Form I-9 and E-Verify compliance solutions provider that will allow HireRight's customers to benefit from access to their interactive I-9 program dashboards, self-service reporting, customized workflows, auditing capabilities, and real-time platform updates to help meet regulatory compliance requirements. As we previously stated, we are always looking for ways to bolster our services to offer our customers innovative background screening solutions. Lastly, I would like to provide an update on our platform and fulfillment technology initiatives. As the improving margin results validate, we are already benefiting from automation of our back-office fulfillment processes, a project that began in the fall of 2021. We have completed the build-out of the core platform and several key pieces of functionality. We are continuing to scale that new platform with our U.S. customers and will soon be extending it internationally. We will continue to enhance our overall delivery platform in a measured manner while keeping an eye on the broader macro environment. This will enable us to further control costs while making incremental improvements to automation, quality, and profitability. We continue to expect modest financial benefits in 2023 from these initiatives, and remain committed to overall margin expansion this year and in the foreseeable future. In closing, we're pleased with our results given the backdrop of the broader macro environment. As is always the case, the macro cycle will run its course, and we will be well-positioned as a leaner and more efficient organization as the hiring market picks up yet again, whether this year or next. The underlying demand for talent remains strong. The underlying drivers of increased hiring velocity, we believe, are here for the long term. In the meantime, we will continue to focus on expanding margins, upselling to existing customers, adding new logos, and growing our core verticals through new global client relationships while continuing to manage costs. Our talented and dedicated teams' focus on these principles gives us confidence in the long-term outlook and our ability to create significant shareholder value over time. With that, I'll turn the call over to Tom for a closer look at our fourth quarter financial performance and our outlook for 2023. Tom? Thank you, Guy. Good afternoon, everyone, thank you for joining our call today. As Guy mentioned, our fourth quarter revenue was $175 million, down 12% versus the prior year. This includes a 1% negative impact from foreign currency, as well as a 30% decline from our technology and government verticals. Excluding these two verticals and the foreign currency impact, revenue would've been down 3% versus the prior year. Revenue from new customers and upsells exceeded $13 million in the quarter, partially offsetting existing customer declines. Diving deeper into Q4 revenue, a few of the more resilient verticals were manufacturing and transportation, each of which posted modest gains in the quarter over the prior year. Healthcare and retail and hospitality showed only modest reductions compared to the prior year. Healthcare, with its strong growth over the prior year, is now our largest vertical. Our core four verticals of healthcare, technology, transportation, and financial services continue to represent approximately 56% of total revenue. Looking at our geographic split, international revenue based on applicant location remains steady at approximately 15% of total revenue. International markets reported a similar decline to the U.S. and North America. India, which is largely driven by our multinational technology clients, declined 22% in the quarter. Our customer retention and upsell and cross-sell continued to be strong. Gross retention finished the year at 95%, while net retention was 108%. Our 2022 revenue was 100% organic. One of the clear highlights of the quarter was our continued margin improvement. For the quarter, we reported a 308 basis point improvement in gross margin to 47.3%, up from Q4 2021's 44.2%, demonstrating our ability to manage variable costs despite the revenue decline. Fourth quarter Adjusted EBITDA margin improved to 22.2%, a 70 basis point improvement over Q4 2021, driven by our focus on managing data costs, optimizing our onshore and offshore labor mix, and multiple ongoing operating efficiency projects. We continued to flex and rebalance our labor in response to the slower market demand. Total SG&A expenses in the quarter, excluding stock-based compensation and the prior year facility cease use charge of $9 million, improved by approximately $1 million versus Q4 2021, driven largely by lower third-party fees and expenses. Adjusted Net Income for the quarter, including the tax valuation allowance reversal, increased 15% to $26.8 million, largely driven by our gross margin improvements. Lastly, Adjusted Diluted EPS for the quarter was $0.34, up from $0.33 the prior year. Turning to a review of full-year results, revenue was $807 million, up 10.5% from the prior year, led by our healthcare vertical, which was up 23% for the year, and quickly followed by transportation, which was up 17%. As mentioned earlier, healthcare is now our largest vertical at approximately 16% of revenue. Gross margin showed a 169 basis point improvement for the year to 46%, primarily driven by operational labor efficiencies. For the full year, SG&A increased by $12.6 million. This annual increase is primarily due to higher personnel costs of $19 million and higher public company costs of $5.1 million. Employee costs were driven by investments in technology and go-to-market, as well as higher stock comp and employee benefits. Public company costs consist of insurance, accounting, audit, and legal fees. The increases were partially offset by a decrease in facility-related expenses of $14.9 million as we right-sized our real estate footprint in the prior year due to the increased remote work environment. We reported Adjusted Net Income of $194 million, including our tax valuation allowance reversal. The tax valuation allowance reversal has no impact on our TRA calculations or the timing of payments. We expect to make our first payment in Q1 2024 following the filing of our federal tax returns. We do not anticipate paying any U.S. federal taxes in 2023 as we utilize the tax allowance, and our tax rate is based primarily on our international revenues and subject to change based on revenue mix. Even though market interest rates are significantly higher than Q4 2021, we benefited from a reduction in interest expense of $43 million, largely driven by our improved capital structure compared to a year ago. I would also like to provide some color on our cash flow generation, liquidity, capital allocation, and balance sheet. This is another area where we have delivered exceptional results with full-year operating cash flow of nearly $108 million, up from $47 million in 2021. Excluding our technology initiative, operating cash flow from operations was $138 million. Free cash flow increased 172% to $91 million, an increase of $57 million versus 2021. At quarter end, we had no draws against the revolver and had approximately $700 million outstanding on our first lien loan. Our leverage ratio ended the year at 2.85 times, an improvement versus the 3.7 times at the end of 2021. We also ended the year with $162 million of unrestricted cash on the balance sheet, up from $111 million. This increase in cash was driven by our team's attention to driving working capital improvement. When combined with our revolver availability, we ended the year with over $300 million of liquidity. As announced in November, the company's board of directors approved a share repurchase program authorizing the repurchase of up to $100 million over a 2-year period. Through December 31st, 2022, the company repurchased over 1.5 million shares of common stock for $16.8 million. We believe currently, as we continue to evaluate cash allocation options, the repurchase program is the right use of our excess capital and reflects our confidence in our business prospects and our ability to generate ongoing positive cash flow. Looking ahead, we continue to see steady volume across almost every vertical, however, lower than the same period a year ago. In the near term, we anticipate some of our customers may continue to defer some hiring decisions, primarily driven by uncertainty regarding the sustained direction of the macro environment. As we've noted on previous calls, Q4 and Q1 have historically been our seasonally lower quarters, with Q2 and Q3 being stronger and in line with each other. With this in mind, we are providing the following guidance for full year 2023. Revenue in a range of $720 million-$745 million, Adjusted EBITDA in a range of $165 million-$175 million, Adjusted Net Income in a range of $100 million-$110 million, and Adjusted Diluted Earnings Per Share in a range of $1.30-$1.43, based on a fully diluted share count of 77 million. We will continue to monitor the macro environment, actions by the Federal Reserve, hires, quits, and job openings, and actively engage with our customers to monitor demand, manage vendor relationships and costs, and adjust our operating practices to reflect market conditions, maximize margins, and create long-term shareholder value. With that, operator, we can open the call for questions. Thank you. We'll now be conducting a question-and-answer session. If you'd like to be placed into question queue, please press star one at this time. If you'd like to remove yourself from the queue, please press star two. One moment, please, while we pull for questions. Our first question today is coming from Andrew Nicholas from William Blair. Your line is now live. Hi, guys. This is Daniel Maxwell on for Andrew today. Just to start off, you mentioned the cost savings coming from the automation project as having a modest impact in 2023. Is there any way to quantify that as far as the cost saving that you expect to realize that next year or this year? We haven't given specific guidance relating to how much we're gonna drive out of cost savings, but it's obviously reflected in the guidance. Yeah, Andrew, I think it's been a big part of our story. You saw, you know, pretty substantial margin improvement this year, we will continue to drive margin improvement going into next year despite the potentially declining revenue environment. It's, you know, it will be effective. Understood. Then, maybe on a vertical basis, across the core verticals, any assumptions that are baked in, across those four main verticals, and any qualitative details you can give, at that level? I think just what we quoted in just a few minutes ago in terms of what we're seeing overall is technology as a sector has had the biggest decline. If you remember, in the last call, I talked about the volume that we were seeing as sort of a, you know, an inch deep and a mile wide, and I would tell you that that's not the case anymore. It just seems that it's impacted technology and government for two different reasons. Technology is just laying off people, not hiring. Government having a difficult time getting qualified applicants, for sure. The other core verticals Way more modest decline, with some of them showing, you know, continuing to show some growth. Obviously, we don't split out, you know, our targets for next year vertical by vertical, but we expect some continued softness in technology. Hopefully, government recovers by finding, you know, better qualified candidates and the other verticals sort of in the relatively modest position that we saw them coming out of this last half of this year. Okay. That's helpful. If I can squeeze one more in, on backgroundchecks.com and how the performance there has been over the past several quarters. Just curious as to the resiliency of that business, given the broader strength, in SMB over that timeframe. Yeah, it's really been a mixed story, I would say, in the SMB. Actually, the macro numbers we've actually seen very recently have been softer for the SMB market. I think in the latest JOLTS number, that's reflected. It's been slightly improving, but nothing noticeable, to be honest with you. It's been pretty steady state. Great. Thanks a lot, guys. Thanks, Andrew. Thank you. Next question today is coming from Kyle Peterson from Needham & Company. Your line is now live. Hey, guys. This is actually Sam Salvas for Kyle today. Thanks for taking the questions, and nice results here. Wanted to start off just getting your thoughts about how you guys are thinking about growth in 23, and balancing that between, you know, new client additions, existing client growth, cross-sell, upsell, and then churn in the year. Thanks. Yeah, sure. I mean, the pattern, you know, largely follows what we've seen historically with the exception of the base growth. We haven't seen anything change in the outlook from a buying pattern from our clients that would indicate that we wouldn't have, you know, similar lines of growth by new customers, new logos, and upsells as we've seen even in the second half of 2022 when the market softened a bit. We were able to successfully, you know, execute on new logos and upsells. We expect to continue to see those be meaningful contributors to the overall growth profile. Obviously, the biggest driver of the guidance and the decline, though, is kind of what we call the same-store sales or the base level, right? That base level in our long-term growth algorithm, you know, we've said is kind of a 3%-5% growth number, and that's clearly a negative number this year rather than a growth number. All the other numbers in terms of, you know, churn, you know, we ended up the year at 95% gross retention. We generally model in that 95%-96% range. That'll be, you know, consistent. There's always gonna be some natural level of attrition with client base. Growth from upsells and new business, we're pretty optimistic about. The strong pipeline, that we have and that we've seen, you know, even building in the last half of this year. All aspects of the business, including, by the way, our progression, are in pretty strong shape. The one unknown that we always face is, as Tom mentioned, same-store sales. Just we can't control what our clients are going to do in terms of what they see in the, in the hiring outlook. Got it. That's helpful. Just a quick follow-up. Good to see the leverage ratio coming down a bit, and I know you guys talked about the buyback as well. Just wanted to get your thoughts on M&A and, you know, how you guys are thinking about M&A. Is this a, you know, priority that's kinda top of mind for you guys? Or, you know, is the buyback and debt paydown still, you know, the priority here? Thanks. The buyback's certainly been a priority. I mean, our M&A strategy hasn't changed. Part of it, you could sort of see if an investment that we did. We didn't. You know, I-9 is one of those solutions that we felt very, very good in creative in the space. Rather than acquire the company, we did an investment in them to ensure that we could also drive product development. You know, the other, you know, M&A pipeline that we show tends to be either geographic-based, but nothing substantial in terms of size. We don't see that as a high and best use of capital right now. Yep. Got it. All right. Awesome. Thanks, guys. Yeah, thank you. Thank you. Next question is coming from Kevin McVeigh from Credit Suisse. Your line is now live. Great. Thanks so much, and congratulations on the results. Hey, Tom or Guy, is there any way to frame the potential revenue associated with those new enterprise wins? Yeah. We didn't quote a number, though. We just quoted the number of customers. You know, historically, when we think about that new logo contribution to our growth year-over-year, that is in the neighborhood of, you know, $35 million-$45 million a year. It's kind of an average year for us. It's helpful. Then it's kind of interesting, like, technology is laying off, government can't find people. Is that a broader observation across more verticals too? I mean, it seems like it's more pronounced in tech and in government, but are you seeing any timing in terms of laid off workers getting kind of redeployed to other verticals, or is that? Is there a skills mismatch? I guess my question is it skills mismatch from kinda having those folks get hired elsewhere, or is it just kinda timing and you expect those folks to get absorbed? Yeah, Kevin, we really don't have that kind of insight into who our clients are hiring, whether or not folks are moving around like that. The reason why we highlighted, you know, and government is because absent those two verticals, we saw, you know, a modest decline, not, you know, not anything precipitous. In fact, if you sort of look at the other verticals that we have, it's much more moderate, including, you know, some growth in a couple of other areas. The government one is a little bit of a strange one. I mean, we've seen this pattern before, where, you know, they will advertise heavily for workers and sometimes they'll get, you know, a good response and sometimes not. They've been having a hard time picking up people. Thank you. Thank you. Next question is coming from George Tong from Goldman Sachs. Your line is now live. Hi. Thanks. Good afternoon. You talked about seeing a slowdown in base hiring in 4Q. Can you discuss how volume trends have performed in January and February relative to December? George, good to hear from you. Basically, you just have to sort of look at the guidance we gave to, you know, to draw your own conclusions. As you know, from what we've said before, typically Q1 and Q4 are, you know, slower quarters. 2 and Q3 are larger quarters, and they also tend to be fairly close in demand historically. Q4 and Q1 will tend to be close. Q2, Q3 will tend to be close, albeit at a higher level. That's about the most we can tell you. Okay, got it. As you think about organic revenue growth on a year-over-year basis, what are your thoughts around the cadence of how the growth performs moving through the year? How would margins perform by quarter as well moving through the year? Sure. Yeah, I tried to give you a little bit of insight into the seasonal patterns that we expected. As Guy just mentioned, you know, we would expect to see, as we always do, improved demand starting in the second quarter and lasting kinda through the middle two quarters of the year, and then a seasonal slowdown in the summer. We typically get a little bit of a spike, you know, coming after the summer, kind of in that September-October timeframe. Again, slowdown in the holiday season, because we don't have a lot of retail exposure, driving Q4 sales. You know, obviously, when you look at a year-over-year comparison, our first half of the year is gonna be a very tough comparison 'cause we had such a strong first half of 2022. We do expect that comparison to get slightly favorable by the end of the year. You know, certainly the first half of the year will be a bit of a challenge from a comp perspective. Great. Margins? Yeah. Margins, yeah, there's two things. You know, demand's driving that, but we're not, you know, sitting back. As evidenced by what we did in Q4, not sitting back and waiting for, you know, operating leverage to drive margins. We're really attacking it at the gross profit and gross margin level. We'll continue to, we can expect to see improvement in gross margin across the year. Got it. Very helpful. Thank you. Thanks. Thank you. Next question is coming from Stephanie Moore from Jefferies. Your line is now live. Hi, this is Hans Hoffmann on for Stephanie. Thanks for taking my question and congrats on the results. Just wanted to touch on, you know, guidance and sort of the underlying assumptions there. You know, just kinda curious, are you guys assuming, you know, any sort of recovery at any point in 2023 just from a, you know, broader hiring environment? No, I would say just what I said to George there. We really assume kind of, you know, steady state from a macro environment, then we've layered in our typical seasonality, which we expect to see, regardless of the macro environment. Then the last thing I would say, just as I reiterated a minute ago, is expect to see some favorability from a growth perspective, not necessarily because of recovery but because of the comparable comparison to the prior year when we start to get into September, October, November of next year. It, what I would- Got it. It's assuming kind of steady state from an overall macro, not really baking in any real change to the macro environment in the second quarter. Okay, understood. Then, you know, just for my follow-up, you know, just kind of wondering, you know, what kind of leverage you guys have to pull to sort of, you know, drive margin expansion and, you know, cost cuts if the top line, you know, deteriorates worse than, you know, you guys expect? If you could just, you know, briefly touch on kind of, you know, where you guys are and, you know, your overall, you know, tech and automation journey in terms of, you know, what's behind you and you know, kind of what's still to come? Yeah. I mean, we'll sort of break that down into a few areas, Hans. First and foremost, the automation work that we've done, that we started, you know, in the fall of 2021 is well underway and yielding benefits, as you can see, in particular from the improvements in gross. With our efforts to drive both employee efficiency and productivity through new systems, automation from two standpoints. One is the elimination of labor, second is improve the productivity of the existing employees. That work is yielding results. As we also continue to increase the pace of offshoring labor, you know, always sort of looking for labor arbitrage to ensure that we can take advantage of that. You know, we've made some good headway as well in just looking at the overall cost structure on SG&A, and we'll continue to, you know, to make some efforts there. To improve margins that way. That's why we feel comfortable, in, committing to continued margins, even if it's, you know, if it's a down year in terms of revenue. Got it. Thank you. Thank you. Next question is coming from Manav Patnaik from Barclays. Your line is now live. Hi, how are you? This is Ronan Kennedy on for Manav. Thank you for taking my questions. May I ask, on the 42 new enterprise clients that you added, you indicated they were distributed across the four core verticals. Could you provide some color on the distribution from a size of the competitor and possibly by region? Then also your comments on what you're seeing from a competitive dynamic standpoint within the industry. Yes, I'll take a couple of those. One is we, you know, we don't comment at that level of detail. You know, an enterprise client is by definition a large client, right? Someone at scale that does hiring, we don't really break it out by region or industry. One of the things that we did say was 2/3 of those clients came from our core four verticals, which is not unusual given our expertise in those four sectors and our ability to be very competitive and ability to take share as well. You know, from a competitive dynamic standpoint, I would tell you, well, you know, we're continuing to take share. I think a lot of it comes from some of the regional players, smaller players who just can't keep up with the pace of technology investments that are required to satisfy the needs of an enterprise. Anything else? Yes, please. Thank you. can you reconfirm the trend in the outlook for third-party data costs, your pricing and screen economics? Also on the back of that, any update on the large U.S. customer who stopped doing verifications in the third quarter? I think it was an impact of $6 million for the third quarter and was anticipated to be for the fourth. I'll take the latter part of that question first. That customer is done. That's one of the reasons why we quoted that as being down. Again, that had as much that sector, not just that client, having difficulty finding people to employ. The first part of the question? Remind me again of the first part of the question? The trends and outlook for third-party data costs, your pricing and kind of screen economics. I mean, again, it's a big focus for us. It's a big line item on the P&L for us. We're looking to continue to drive that number down as an overall percentage of revenue. You know, we think we... over the course of the year. I mean, a modest improvement there, you know, 50 basis point improvement has a pretty meaningful impact on the P&L. We'll continue to focus on that. We made improvement in it in 2022, and we expect to do the same in 2023. Thank you. Thank you. Next question is coming from Mark Marcon from Baird. Your line is now live. Hey, good afternoon, Guy and Tom. Just with regards to the seasonality, you know, discussion that you had, and just to help us, you know, lay out reasonable expectations. Would you basically suggest that, you know, Q1 is gonna be similar to the Q4 that we just ended up seeing? Just broadly speaking. We're basically in the third month here of the quarter, so you've got pretty good visibility. This is an open conference call, so. Yeah. Yeah, that's right, Mark. That's what we're referring to with that comment about Q4 and Q1 tend to be in line with each other unless something, you know, drastically changes. Then we would expect the seasonal peak in Q2 and Q3. Okay, great. And then in terms of the, you know, the hiring trends outside of the two verticals that you cited, were you seeing moderation in terms of the hiring trends in the other sectors as well? Or were those just basically staying steady state and just chugging right along? No, it is moderating. I think that's one of the things that we said is if you backed out, you know, or sorry, technology and government, the rest of the business would still have been down, you know, just about 4 points. There's definite moderate hiring trends across the board. It's just some industries, not nearly as much as others. There are a couple, transportation happened to be one that built up year-over-year. There are others as well. Tended to be in the markets sectors that were the slowest from the pandemic, were showing, you know, more growth to some extent because of a weaker comp from prior rather than an overall robust, you know, hiring environment. If you take out those 2 verticals I talked about, I would characterize the rest of it as still, you know, moderately down. Got it. Then with regards to technology, was your retention rate in the tech vertical, as, you know, consistent with the overall retention stats that you gave us? Higher, actually. The retention in technology is almost, you know, as close to 100% as you can get. Yeah. I mean, the big names are all of our big global clients. Watching what happened quarter was a little bit of a surprise. If you remember when we, the third quarter last year, the one second was down year-over-year was technology, and they were down, like, 1%, in the third quarter. You take down 1% the third quarter to down third, you know, 30% in the fourth quarter. Yeah. That's a pretty big drop in hiring, you know, that we witnessed, but retention extremely solid. Yeah. Okay. On the government side, is it just that one big client that we all know about that's having issues? Why on earth would the rest of the government be having issues in terms of just finding qualified candidates? For government is a major sector as you know, so you can sort of conclude from that how much of that sector might be a large client. We did, you know, with that client know from, you know, daily interaction, that the job openings are there. It's just they're having a difficult time getting people to fill the jobs. It's situation. I mean, we've seen this before. I mean, this is a long-standing client. We've seen this before. That I think is just an anomaly. You know, we'll see how it goes this next few months. Yeah. I would... Just another tidbit of information regarding our sector. Our government sector also includes education, primarily higher education, where we have a pretty good footprint. That actually that segment performed okay. You're hitting the nail on the head, Mark, kind of where the softness is coming from. Okay. Great. Then with regards to, you know, just you indicated that your overall assumption for revenue is based on the environment staying roughly the same. You know, can you talk a little bit about the levers? Let's say the environment deteriorates. Like, you did a great job in terms of expanding the margins here. How should we think about margins if, let's say, the economic environment worsens, you know, as obviously the Fed's trying to slow things down? Yeah. They're doing their best. What I would say is that, you know, as I said before, we were gonna focus on that gross margin line. We talk a lot about how variable our cost model is at the cost to sales line. We'll focus on that. We'll continue to drive margin kind of regardless of the demand environment. You know, where it becomes trickier is when you get into the overhead or the SG&A expenses, right? That's when we have to make decisions about whether or not we have to take out some of that overhead. At the gross profit and gross margin level, we feel very confident, even if, you know, the demand is softer than what we're currently looking at now, that we're able to generate better margins regardless at the gross margin level. Yeah. I think just to make sure everybody, you know, remembers, we have the labor that we use to fulfill our services is in that line, right? Yeah. The automation efforts that we have to both eliminate labor, offshore labor, and then improve productivity of the systems that are used, regardless and environment, that work will continue and will continue to deliver improvement in margin. Of course, as Tom pointed out, we'll get and have been aggressive in ensuring we take G&A cost out as quickly as we can as well. There's not too much risk coverage. I mean, with regards to just capital allocation, I mean, M&A is off the table, but any thoughts with regards to, like, thinking about, you know, debt repayment relative to, you know, buybacks if the environment worsens? Of course. I mean, it's something we discuss with our board, you know, on a monthly basis, to be honest with you. Trade-off between, you know, M&A, debt repurchase, and share repurchase. Yes, it's top of mind. We think about all the time. Right now, we feel confident about the long-term outlook of business. You know, certainly there's certainty over the next, you know, handful of quarters, but we think long term, we like the position in the industry where this company can go. Margins that'll ultimately deliver shareholder value, and we think that investment in our shares today is an attractive return. Great. Thank you. Thank you. Next question today is coming from Shlomo Rosenbaum from Stifel. Your line is now live. Hi, thank you for taking my questions. I want to follow up a little bit about that large customer that was, you know, deciding not to do the employment history reports. Last we talked, you said you were gonna be looking for like alternatives for employment history reports because of the, you know, skyrocketing costs from the main provider in that industry. Is there any progress over there in terms of alternatives that you can offer your customers? Yeah, absolutely. Good to hear from you, Shlomo. So that supplier is one supplier, right? They happen to be a fairly high volume supplier, but there are a lot of alternatives, for us, including using our own data and manually verifying, you know, employment, previous employment and current employment in a number of ways and implemented that and rolled that out for a lot of clients as well. About understands their options and are evaluating their options. I think as I had mentioned previously, they were pretty upset since they were a major data supplier to this To this vendor. This is not a fast moving client, but we've presented alternatives to them and they're considering them, and we do the same with all of our clients. You know, I don't wanna overstate that vendor's, you know, influence. They're certainly not the only game in town. There are lots of options, you know, that we are already taking into account, availing ourselves of services, as well as doing manual verifications through the systems that we've built. We just built and deployed an entirely new verification module just for education and employment, and we're finding, you know. Then, is it fair to assume you said that $6 million is really basically a passthrough. Should I assume that the lack of that passthrough provided about 120 basis points of gross margin improvement, and then you had it like 185 or so from the company's own efforts in terms of everything that you're doing internally and together with the new cost initiatives and new technology program? Is that the right way to think about it? No, that's a bit of an oversimplification. The $6 million is not 100% passthrough. This vendor in question is only a portion of that because any large customer of ours who does an employment verification, I don't know if I should quote the stat, but it is certainly less than half the time that this vendor can fulfill that. I think we talked about in the call last quarter was this customer, in particular, decided to stop doing the employment verification work. That means it impacted this vendor, and it also impacted the other sources that we use for... Some of those carry margin with them, obviously. Okay. Got it. Thank you. Okay. Thank you. Next question is coming from Andrew Jeffrey from Truist. Your line is now live. Hey, guys. It's Gus stepping on for Andrew. Thank you for taking our questions. The first question I have is can you talk a little bit about the competitive environment amongst the big three? Have we seen any kind of a shift, clients maybe or customers, single sourcing the screening or...? That's the first one. Hey, Gus. good to chat again. I would say, you know, unchanged. It's sort of the same as it's been. We do see, you know, in particular one of the things with our businesses with the digital platforms, a lot of the new enterprise wins that we take are for multi-country clients taking advantage of that platform. I wouldn't say that the, you know, the performance in the fourth quarter or our outlook for next year reflects any change in the competitive environment other than we'll, you know, we'll continue to be aggressive in the market with, you know, our proven technology and, you know, our emphasis on quality and thoroughness is playing well with clients and prospects. You know, we'll continue that message and continue to do our best to take share in the market. Got it. Perfect. My last question is, can you talk a little bit about what you're seeing in terms of, you know, applicants for opening, checks for opening, employment velocity in general? Do we think that this is still gonna remain elevated, kind of what we saw in 2020, 2021? And yeah. Yeah, I think that is clearly normalized over the last 3-5 months. That phenomenon that we saw and, you know, perhaps that is, you know, what contributed to, you know, the strength we saw in the first half of the year. That although we don't have hard data on it, we get it from our clients, and we definitely think that has normalized. Demand, and the competitive nature is just not as strong as it was 9 months ago, even. Got it. That's helpful. Appreciate the time, guys. Yeah. Thank you. Next question is coming from Ashish Sabadra from RBC Capital Markets. Your line is now live. Thanks for taking my question. Just a quick question on package density and pricing. I was wondering, have you seen any changes on that front? Is there more adoption of services that existing customers increasing package density? Thanks. Yeah. I mean, that's a big piece of what we focus on, right, is upselling our clients. We call it upsell and package expansion. You know, some people say those are the same thing. We have a nuance. Upsell minds could be, you know, selling a new region, selling a completely new program, where package expansion is more along the line what you're talking about in terms of package density. We kind of combine those when we were. When we quote the $13 million number in our script that, you know, includes both of those. We continue to do a really good job. I can tell you the team that's responsible for that exceeded all their goals for 2022. In fact, we were very with the, despite kind of the softening macro environment. We'll continue to focus on that. We continue to focus on driving kind of a higher package order value. You know, I'm not gonna give quote specific numbers, but it was high in 2022 over 2021, and we try to drive it higher in 2023 as well. That's very helpful color. Then maybe just a quick follow-up on better managing the data costs. Does that also gives you a competitive edge in the sense that is that a pitch that a part of the pitch to new customers in lowering their total cost of employment screening or background screening? Yeah, definitely. I mean, you know, our customers do wanna understand kinda what the total cost of their program's gonna be. They know that we're out there trying to have lower data costs. I'm not gonna give specific examples, there are certain products and certain geographies in the U.S. that drive higher data costs, you know, State of New York being one of them, and certain products drive other, you know, incremental surcharge or data costs to our clients and, you know, I think our clients are appreciative we offer them less expensive solutions. That's very helpful color. Thanks again. You bet. Thank you. Next question is coming from Jason Celino from Key Banc. You want to say hi? Hey, guys. Thanks for taking my question. you know, Guy, you know, as we think about new business activity in a tougher macro environment, is a typical customer more willing or less willing to change a background check vendor? I guess my question is, does the business environment impact a customer's decision to switch? Yeah, you know, Jason, it's a great and interesting question. What I can tell you is, you know, we have a pipeline of business opportunities that we're, you know, that we're negotiating and closing. I don't know that the environment changes it. We also did great during the pandemic. I mean, when companies were really, really focused on just basic liquidity and staying in business, we were still seeing a healthy activity. Now sometimes that could be procurement organizations wanting to just put a program out to RFP because they're cost conscious, and it gives us an opportunity to go win a new piece of business. I'll... Generally, if a company is frustrated with their current provider for making mistakes, missing hits, not servicing them well, we find times in these down environments, companies use it as an opportunity to switch out 'cause it's such an important part of their compliance program. I mean, you can't have an existing provider who keeps, you know, missing convictions and missing hits, which we find provides us an opportunity as well. I don't know the. We haven't done the direct correlation, but I can just tell you we have a strong pipeline. We had a strong pipeline during the pandemic and closed a lot of new business then, and we have a strong pipeline sitting in front of us now, even despite of the macro environment. Okay. Perfect. Very helpful. Thanks. You bet. Thank you. We've reached the end of our question and answer session. I'll turn the floor back over to management for any further closing comments. All right. Thanks, operator. Appreciate everybody joining us. I think as you gathered from the call, we had a very solid year. Underlying demand drivers apparent, and with new logos attracted by our quality approach and our ability to take share. We're making great progress on our automation initiatives and margin expansion initiatives, and we're very excited about what's ahead 2023, despite what we think is competing macro environment. Look forward to keep you posted as we move through the year. Please don't hesitate to reach out to us with any questions. Thanks again. Have a good evening, everybody. Thank you. That does conclude tonight's webcast and teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.