FA - Earnings call transcript Q3 2024 | First Advantage Corporation

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Operator

Good day, everyone. My name is Ashley, and I will be your conference operator today. I would like to welcome you to the First Advantage Third Quarter 2024 Earnings Conference Call and Webcast. Hosting the call today from First Advantage is Stephanie Gorman, Vice President of Investor Relations. [Operator Instructions] Please note today's event is being recorded. pleasure may the begin. my Stephanie over now you Gorman, is to call turn to It

Stephanie Gorman

Call. website. section Thank will recorded welcome find to Third on Conference accompany to replay Ashley. the be First the you, Good and Investor webcast our Advantage's available Quarter morning, earnings press today's XXXX for slide you discussion. This our and website, of everyone, release and In Relations will Investors presentation Earnings being is

in our Financial Throughout undertake the David would to our the the I Officer. Such financial like prepared your extent call of detail Executive will will Stephen Staples, remarks, may also Such measures. Reconciliations Chief remind we not any questions. Financial our of of begin earnings Scott. Investor comparable Officer; financial and measures to including After measures and those hand remarks, Form Before implied are today release SEC, directly on the call will today's GAAP XXXX Relations results appear statements. Dempsey, and with this Chief by the prepared our press which with update expressed that forward-looking our more we on are quarter guarantees be Actual in variety we our today XX-Q the from our to Form website. I'm over Scott Chief now discuss available factors. These to our take third from our to available non-GAAP SEC, forward-looking joined do discussed conference statements. forward-looking to unreasonable filed I SEC. obligation in outgoing Marks, call, factors filings discussion not differ performance. our will non-GAAP be and and with we forward-looking Officer; time XX-K our in present our everyone time financial periodic factors are their presentation, efforts materially statements most may filings without or a of updated due to include future in XXXX statements to our

Scott Staples

good an provide you, our our I on the joining Thank our business morning, with with to you am path and morning, you of and for update pleased call. addition forward everyone. Thank Stephanie, Sterling. This planned

$X.X are closed We all opportunity thrilled for a of on us. to what have October acquisition our XX, Sterling billion of tremendous

continuity, our and of Now team and endeavoring they action customer to of to approximately of basis, $X.X as XXXX, point. closing. I motivated within integration, revenues $XXX we products million, including like approximately action EBITDA X excited combined to rate run million synergies have have combined the months to million expect running, years Since LTM work over post highly acquisition, reduce smooth we have twice maintain great $XX and the thank the nearly net have on our adjusted leverage. ground targeted synergies a billion done focused On September our which hit get past over this million to and we $XXX as closing the us $XXX large, an XX,XXX several customers conduct would while for to skilled, of $XX XX, employees. we million, to or

of were our We today, maintaining are And another have our in also unveiled will materials quarter branding which presentation our deliver unified year strong XXXX. see pleased new you performance. to financial logo for We our and company, full today. we

and cover guidance. David First new providing combined guidance will in Advantage section. detail Stephen in this greater financial and stand-alone the company ranges

combined outstanding our info and Sterling well peers. company and to is services among profile Turning excited technology-based the show an why Slide such Advantage benchmarks to strong X. fit our strategic I'm First reiterate of

broad range solutions. a a as us Our position combined capabilities of platforms offering innovative and leader technology differentiated

we the than acquisition retention forces across we and we XXX background of size success doubled and territories, by measures, our organizations. Combined, the in XXX of size over countries average a Sterling and customer have customers combined annually robust rate over including sales more for have With XX%. conduct completed, essentially most million screens

We AI to utilized deliver allow intelligent multiple cost-effective our to an sets our been vendors our and throughout on large reduce customers. believe areas strong the have tool early of and of AI-driven adopter organization. We data our that third-party reliance routing and solutions proprietary us

network customers now additional Sterling, will to diversified, and have automated diversification customer around our third-party extensive with reducing increased from that and we supported leading unique We industries, centered and helps enable and support seasonality requirements resilience. geographies, exceptional the integrated continue focused of data enterprise extremely expect each and to customer's of capabilities to providers vertical larger us solutions. With more technology. our specific strategy and all our concentration clients verticals go-to-market by increasing This and address

we that advance and outside provide with APAC, able our both and LatAm see India. industry-level to resources forward, U.S. to our like across presence to expanded Going comprehensive targeted attractive opportunities international more and footprints, will verticals, in customers the the our globe. Leveraging tremendous increased U.S. deeper our complementary we expertise have be and growth believe we EMEA, dedicated geographies to

investment, comprehensive addressable us billion greater customers with top set highly further and total a enhanced to a Our machine market. On already on digital robust deliver reach growing proposition this, of to building we that automation in more for diversification and artificial technologies, next-generation process capacity accelerate value up and large, foundation. $XX on learning, fragmented go-forward intelligence robotic and our identification stronger, the innovation, anticipate will focus company

First All leading of high-technology, position critical services. info Advantage's digitally provider of enabled factors as a enable these

X. Slide to Turning

we planned the been our [ are we we that have financial is post announced strategic on and Now ] benefits since focus acquisition. delivering with discussing you close, the

not priorities. plan our disruptions sheet customers We do our deleveraging actioning targets they experience and a on our employees, focused customers ensuring have that begun top while integration and process our seamless executing detailed and our synergy remains for balance retaining

proposition We our have are with we and In the high-performing that are innovating customer time, technology, opportunities. initiatives. At also enhance cross-sell upsell and the same been for. Sterling our and innovation drive continue the heavily known to on uncovering unlock ways acquisition product through will culture we value to foster the and work an updated AI our is and and growing incorporates business transaction, rapidly strategy new focused on developing tandem we

organizational you'll calling responsible FA who FA excited executing today. On X, X.X team X.X, this the are for We you management and the to share is I'm our strategy Slide of senior with strategy. this see part

go-to-market announced, First Joel As has Data, Smith having XXXX, company recently President. very the of our this role as President, since and Joel knows role, including recently most held success well, lead technology and promoted new and been the take responsibility to will will Technology Experience. In strategically marketing. and continue roles for customer Joel within our product on Advantage organizations to sales, leadership teams, data also

structure, introduction technology includes aligned the globally and or to general verticals Joel. to new aligns product positions organizations manager Our of strategically which regions [indiscernible]

the customer talent of our focused capabilities customer This We and and our teams, upsell sales satisfaction, go-to-market cross-sell. sales success Sterling's GMs. Advantage blend new under have on business direct is including along retention with organization and and incredible functions our of a combined and First is

he role First his in and international of screening as Operations joined onboarding teams. been who is Chief Officer, in an which overseeing international of and time our International CEO of the Advantage following has Operating Naren, customer named U.S. Doug XXXX customer Officer, operations, company all expanded Additionally, as Chief to care,

accomplished years is last will role an over taking has As of David's served noted respected is Accounting He earnings Steven XXXX. since the he and last quarter, we ago with CFO. as X.X and as joined leader. retiring finance Chief Officer Advantage this be our call Steven First February Marks professional

that we is composition up operational organizational customer will customers applicant set efficiency, experience through our Board as how our partner and journey. acquisition. Overall, our structure sell the and we improve and Our unchanged FA us improve we for X.X commence new success to post with believe enhanced

We will move into about strategy more we FA the XXXX. share X.X as

of also an First our a many the Advantage our to Slide This of it excellent Sterling provides teamwork great of and the but represents teams only company. is effort over our not The life closing to as pre-integration joint months. to between Turning example rebrand to a opportunity acquisition coming update Sterling strategy, X.

of clean, gives feel interconnectivity leading-edge which FA the modern commitment use continuous AI together look the the responsible strength the quality, The technology companies of and X is racetrack logo the new speed of a X companies. and what us market. and The to coming that and also up represents us logo of one. separates as joining line the represents our of reinforces the Our the logo the makes symbolizes in abstract that

this with transaction. time to launch to our excited close very are the of new We branding of

Turning to Slide X.

to million the $XX cost of Sterling we acquisition, part to of committed run are $XX delivering rate synergies. million As

million consist primarily target actioned programs. made towards reductions savings $XX already progress significant costs public on insurance and synergies have of cost run this We company over teams, These day rate executive combining X. with removing combining duplicative from of

action have already next to XXX opportunities within We the that identified synergies also double are additional approximately the expected days. synergy

to operations, detailed actioning extent to commercial our full objective within categories available. targeted the development with include We fulfillment, time address costs have and months. rate XX a place product plan capture Key synergies that international in of plan of over we run the

In to we also is synergies. revenue believe addition there these opportunity synergies, cost potential to uncover

synergy progress you on and execute to continue future on earnings will We update plan calls. our to

on concentration, achievable plans, synergy and verticals in and relationships, resources closing Sterling acquisition, First outstanding post have customer and product the new diversified place Finally, growth-related that leadership, of combination tremendous offerings, being customer future to detailed our we excites and in of go-forward across targets with ambitious the geographies, which fresh organization a resulting are identity and summarize lower strong brand executed. position a a Advantage, integration

Slide do We our have months and to are years, a by growth opportunities work and lot deliver of value. the XX. and energized On to we coming accelerate in

made stand-alone David, the to briefly progress call on have on third the results Before turn quarter I and comment we over our I'd to sustainability. like

We retention new are rate again performed growth are very to First historical that line pleased as rates combined well Advantage's cross-sell and our algorithm. revenue upsell, as with in logo report

enterprise had quarter Advantage months, in of in bookings more $XXX,XXX contract the value. XX XX or total with and expected third the last each XX First annual

sales and Our verticals flat. the saw staffing perspective, transportation results. From was First to Services continues Financial growth positive vertical prior while year, Advantage's consistent engine a versus deliver

single down our except while digits of the verticals more, year-over-year, in other for standalone were slightly X% business. which technology only down represents Our

normalization stabilization within stand-alone business. quarter of results reflect picture a and Third macroeconomic continued our

continue metrics seeing as hire, We play labor customers more key quits, are out openings and this returned our to hires level. albeit to modest also trends with levels. Overall, pre-pandemic including a at job

ethical I reiterates our governance, report the climate, demonstrates First of website. the full and company. I our the across the of attention gears, review bolstering to values to we report switching to sustainability Advantage's resilience encourage This engagement commitment on want recent report. and and employee annual release are Before our to our inclusion call progress third making core you

earnings chapter, David's I over best partnership next his As to that, and for David. very X-plus this wish I who David's we sincerely to the for thank over with past the him has would CFO. And very excited last his the like with First call to is you now his our We in will And Steven distinct welcome retirement, Advantage years. to call, service well-earned David. as are taken turn now over

Unknown Executive

Thank morning, you, good and Scott, everyone.

I an success my been Advantage's have last be earnings management First of It mentioned, been the my to Advantage you future honor will part call retirement, team. As that be going has First a I but forward. will following Scott to prior carefully this promise

much there and much is be to more accomplished. together, still have We achieved

and Steven thoughts of our a quarter, our and new I Sterling you results Legacy combined full This on guidance. providing clearer year stand-alone concluding profile Advantage before color First with a will view picture be to give results, around

First stand-alone the quarter for line our with quarter over our sequentially third Slide expectations, previously Advantage's communicated second quarter improved results. XX. on to results Turning In our results third

year Our quarter greater the revenues $XX.X line and in in were roughly million million, than with QX. $XXX.X X% prior or

onetime that representing specific customer $X XXXX a million. purposes, QX project of approximately note includes comparison For

anticipated, than than flat anticipated, later Our with normal performed all base lower better green was increasing start roughly segment a holiday regions. hiring. International growth due to X.X% Americas shoots primarily across as was and

same due the to up the company, EBITDA prior highly variable, improved than sequentially also cost in but basis million year, total sequentially For and margin approach adjusted XX.X% XX% was the to our costs. disciplined points QX. Adjusted greater XXX roughly stand-alone EBITDA structure to flexible $XX million $X.X or managing as

to the carefully continue We demand environment. current to manage our match business

over volume reminder, variable. is flexible are a cost As cost our are which of our structure highly third-party costs, XX% and sales of

Revenue the that we shown our earnings million, for Sterling $X.XX. quarter investments for Legacy adjusting Slide to modulating quarter XX. Revenue and million results. operating are $XX.X optimally reviewing ensure on diluted was share APAC. sales, grew year. are delivering offset flattish basis in results spending constantly quarter excluding Adjusted the also are our We prior versus third currency $XXX.X and per acquisition. up International was was by and in led benefited X.X% softness growth the and impact organic an with the or from strength Canada, Vault by in which the constant overall were Americas, of EMEA, on the

of In was health health media of sales and delivered while and products for attrition the Adjusted down XX.X%. Adjusted versus as testing. year of verticals, EBITDA of the staffing some as year-over-year, million quarter terms retail, margin margins base government EBITDA resulting million in such a customers saw and by $X.X as care drug growth comparable well business care, third declines new and higher-margin lower-margin prior impacted tech Industrials quarter, of declines. $XX.X were

Additionally, is adjusted of Sterling the QX inorganic not EBITDA. address $XX.X team Vault overall did income prior in plans. Adjusted $X net the declined by million the initial million driven teens, legacy versus year, revenues through yet of margins lower of the their synergy by approximately were with impacted margins management which execution

Now the and revenues combined reflects effect LTM to added turning significant XX. EBITDA, to our business. adjusted the on results have which the Slide essentially have of we Sterling, to Giving we scale doubled acquisition

plan, EBITDA cost potential we on back lower over Advantage future XX% achieved we margins First integration will to to adjusted we are than combined time, are combined approximately margins with While be of execute that EBITDA are upside. once our and return able confident our XX% above synergies adjusted stand-alone, for

upsell we the we the and with performance see what by and on driven base. you for customer variation historical attrition control On managing Slide logos XX, that new are can demonstrates first that stand-alone our been consistent cross-sell, has advantage can delivering being and

and Advantage. our decline base to for Looking upsell the specifically at contributed First Revenues and cross-sell QX growth. offset quarter from our alone nearly X%

New delayed in which in interest additional partially already our the by the the segment inflation, was logos uncertainty improved and related X.X%. was which expectations impacted below some the Base an declined and driven uncertainty cuts, geopolitical in contributed driven primarily have continued macro recent customer our Americas rate prolonged which results, by X%, election to environment. X%, by was go-lives, customer fourth quarter. Attrition to cleared

on pick seasonal in up. We also hiring experienced a delayed we results, start have to hiring seen based September, seasonal but October

QX prior Upsell have remainder discuss the Looking the contributing by of Sterling strong of acceleration Steven Sterling. quarters. stable first some will Gross at call to attrition net compared X%. new rates the of at year. and approximately contributed legacy at to and for legacy growth XX% by advantages reflected their now growth remained upsell negative cash growth Both to cross-sell growth another Overall, Base of with normalization our leverage though drivers were XX%, offset outlook hiring versus new logos continued retention turn profile verticals Base in the cross-sell QX. as than remained X%. improving base more to less with these has impacted patterns. I flow, growth over lagged been headwinds.

Steven Marks

also work role. investors, such about alongside step Scott the as this leadership and thanks morning, have David, into a team is to of certainly the like and achieve him exceptional goals. dedication. I'd to company's success, as I'm forward I his had trust far for look first X to thank my you, a to and in learn driving years foundation and to laid for a we today, to strong Board to our our a his future to with continuing for Directors Thank the like been opportunity talented have able our company would continue I growth. our excited contributions. I And Advantage to to moment have to and from and to engage take with honor their His better sincere contributions First good everyone. our over I gratitude to work you express David. together shared work

First Now planning QX. generated In year cash adjusted cash by versus flows on turning stand-alone million, net of tax management, increase operating a XX. $XX.X robust Slide receivables. Sequentially, and adjusted our year-over-year decreases driven prior operating XXXX, leverage strong increased to QX XX% in Advantage flow cash XX% flow and cash expense from

balance advantage XXXX, building at XX, fund cash September the of First as $XXX.X was Sterling we're to help close. million cash

a year-over-year the X% adjusted increase basis. of last generated cash flows Over a $XXX.X XX million months, we on operating

of Advantage First generated cash million million and for September due trend to Year-over-year XX, flows trends purchases $XX QX in cash at its capital in working in adjusted million development of and having of in grew QX. flow $XX property the During related software the Sterling at cash exceeded to management, operating outstanding collections. quarter, and debt Sterling's repaid $XX.X $X.X equipment adjusted especially costs. Legacy million EBITDA capitalized

to We ways from enhance on business. further Sterling cash are actively flow the

Slide financing the which companies. financing to October loan XX. the support of successfully billion both was of Sterling $X.XXX amended of to acquisition Turning the form billion to Sterling secured refinance XXXX, $X.X amended the $X.XXX X-year balance approximately in debt a of existing fund acquisition, -- we In due of term of was billion the in used and used a

have shared a line After the approximately our pro close, of expectations our business was billion on synergized We in existing of to ratings X.Xx that our we its last able cash maintain quarter. agencies at were with pleased ratio and strength underscoring debt credit leverage post $X forma the company approximately we net refinanced the very debt considering net rating the closing. of with

additional currently our to remain revolver revolver. There under the availability net October our goal towards XX maturity to that XXXX. the our We interest accomplish through no within of post and financing leverage continued to part rate committed run range amounts outstanding close this X of As our to upsized Xx. We $XXX provide extended to date long-term are of months EBITDA help Xx we rate reducing we leverage believe and net liquidity, us agreement, will adjusted approximately goal. target cuts million

$XXX in end an agreement Additionally, the last we agreement entered into through August, just through swap new XXXX. week, swap First And a additional of added XXXX. Advantage $XXX October million million

our about a had rate. a post-acquisition As XX% fixed debt of have result, now

stand-alone November previously Slide the the to benefit talk combined company Moving expected maintains structure synergies the I December, including and Sterling our which for the of Advantage XX. action from contributions to our want and about First include provided guidance, impacts capital guidance transaction. and

For the the to revenues of range million to and range the diluted issued million. adjusted transaction $XXX impact we to close, $XXX After and EPS $X.XX the adjusted combined in shares company, we $XXX for expect million total EBITDA in XXXX. to the $XXX new accounting for expect of be at $X.XX financing of of million the

ranges guidance growth in stand-alone and low stand-alone and we base previously are [indiscernible] anticipate come end First of above unchanged below XXXX anticipated midpoint. but than the the EBITDA light the coming adjusted in Advantage in in current quarter, stand-alone third our While macro revenues to and lower conditions stand-alone had range, of we the the

quarter. X% improvement for stand-alone the an The for on guidance assumes over the also quarter adjusted EBITDA. around representing First base X% still macro-driven third our sequential trends quarter-over-quarter growth in Advantage, at we basis revenues we the fourth Looking saw expect of in of to QX, declines half lower range stand-alone and a

October outlined. gives read us the in results have on as Our I up, fourth quarter stand-alone shaping confidence early

fourth million. Of to only Looking in expected million are and and QX, expectations are influenced and Monthly company Sterling's to of timing. closer our $XXX $XXX December we million between revenues holiday come revenue. at between business contributions in range expecting the for included this, November quarter full deliver of in the guidance million $XXX are by and $XXX seasonality results are typical combined our and

EPS million adjusted are $X.XX between adjusted $X.X to and EBITDA million $X.XX. and We December Sterling between diluted expecting November for and $XX

guidance our diluted XX, illustrates EPS to full from our Slide to which guidance. Moving combined stand-alone First Advantage bridge year adjusted

guidance a of with December expected impact and and is that, our for $X.XX contribution First in at for to of diluted and add $X.XX Sterling's adjusted stand-alone $X.XX. Advantage resulted November then midpoint $X.XX. of updated the EPS To issuance guidance midpoint maintained additional we transaction account financing

basis, XX, On on we Slide diluted of On from we approximately we expect forma accretion acquisition accretion a plus. estimate September EPS double-digit illustrate synergized LTM XX% XX a the adjusted pro basis. this

As adjusted to be within for expect neutral. portion that we consolidate as targets run of as in of our in only post actual a XXXX future pacing this Sterling's you model and your capital the balance note, action XXXX the to accretion keep be of reminder, in the projections, the please synergy account X during which we close, rate acquisition XXXX. On results our impact mind capture a years achievement synergy expected and for as reported as structure and is EPS well will of results diluted actioned more

guidance, As to synergies be our the framework reporting plan anticipate are as will of to We our the expected earnings on adjusted call. fully attained. attainment this next time, XXXX achieved, synergy will accretion a EPS on provide understand discussed which be over diluted part including we more

Sterling produced Scott and line we integration FA We as turn our QX proud the the closing additional are plans of shareholder execute for before in X.X Advantage to are to me that, it remarks let the strategy. by to open and back opportunity questions. the forward incredibly we looking First for value create results With

Scott Staples

Thank you, Steve.

customers. that, closed the We acquisition and With open Sterling continue our to Most deliver solid our for line playbook on we benefits will priorities. on synergies. quickly and we Advantage value are questions. remain to to delivering focused the creation We and notably, and capture on shaping of execute the better serve future ahead integrate First and the our moving results

Operator

first from Rosenbaum [Operator Shlomo Instructions] is question Our Stifel. coming with

Shlomo Rosenbaum

potential some Or these discussed little bit the of customers. that, happened there made as bit this Maybe to attrition the to customers, a a that? over give retention on can you about that or clarity is is churn of after kind comment the Sterling, I you higher-margin wanted just just about that us have think that of more ask Are of I should I we risk, and And you what you was have there? the how a And biggest continue? some follow-up. you anomalous? -- to expecting about little

Scott Staples

terms I historical Sterling a destructive, in actually XX%, Shlomo, in quarters I a really in from It nothing, was change was notable trends. of last retention been Yes. mean historical item. XX% the would mixed XX%, and say, few QX. has high just

as a categorize more Lately, is bps, speaking, of would happened in they've a been drug to margins of screening pulled and lot course upsell margin bringing -- that be attrition, traditional of again, success the higher which couple having and relatively down. of health normal down which which, will, handful if space, care just space, that margin. margin the is in I you And which

Shlomo Rosenbaum

that one... not it's for attrition, the there to reading from in over clarify just not I saying want next the of a -- was came attrition You're the change it's the where just

Scott Staples

of Yes, kind exactly. the of of versus market to the business a headwind added mix of The bit mix it. lost business the little a had

Shlomo Rosenbaum

hiring, just you the changed could or about telling decreases a clients change In operating in anything thinking coming doesn't you does about you talk that, the expected. in make importantly, really And last way And of over are expectations? just hiring more general. And things? that you're lower that of then What some you can their other are thinking talked if changes in words, the maybe you administration? the increases about environment -- Okay. difference base in quarter? chance than you about the business How --

Scott Staples

Yes, Shlomo.

constant customers. on focused And obviously you our macro. with the is know, everybody are So communication as in we

we're government I seeing we're data, lot hearing of So a our we're more are It's anything don't think but what seeing customers. And different. points same. importantly, data the from of what from more

of that maybe been normalization, some So U.S. is of continued quarter, a election or what are sort up the us. customers continue what and and it's believe we and we the normal a but last sort coming Difficulty] to of the is We thing us the year with this see uncertainty openings from and think are in prepandemic couple will -- clear I that that behind things talking that planning. as going quarters not helps maybe what only as in is so for we've away. But rate previous that job decline we're quarters, do of But to has last sort levels. even that. [Technical that of sort well. back go stabilization And now for cuts potential hearing And us about of

Operator

Rosenbaum. I continue not will We on apologize. seems It question he's our connected. from with Shlomo do

next Andrew with We Steinerman will go JPMorgan. to

Andrew question our next we'll take William with from And for Nicholas Nicholas Blair.

next We'll take our Patnaik question from Manav with Barclays.

[Operator I'll Instructions] Wurtzel question next Research. from take Wolfe Scott with our

question-and-answer Shlomo [Technical Difficulty] We Rosenbaum. are queue going to continue our with

Shlomo Rosenbaum

conference mean whether I company can call I over. you a question the fine. Yes, the pop-up I have hear on to some of cost hosting came efficiencies

Scott Staples

that expressive I'm not sorry. Shlomo, I'm

Shlomo Rosenbaum

right. middle and what -- All the you are were of out. here just went I forward where that's describing the you, going you customers in When mean telling Okay. audio

Scott Staples

Okay. Great. Yes.

thing telling customers they've won't So stuff. almost back are kind telling I the is all year. macro us But same go of over the been

U.S. that Again, change. about seeing still with the just It all that rate believe some improve. But no now, election will and the coming macro behind cuts we we've as mentioned almost year, right and what So we're been I stabilization continued. talking of normalization.

backfills, of are But are new at doing albeit it. most largely on they're hasn't doing hire levels. still which modest They're changed still customers -- hiring. year. all our focused hiring, So They

hiring a quarters, they I think turned of for this last couple just-in-time to said really the model. I've

market the and is hiring our to ahead are going position all of not as and not models know, around they're our just-in-time So hire rather technology curve an speed. you issue because,

a fine that's want just-in-time hiring, do turnaround quick we So if to our customers with us, get time.

that's... So

Shlomo Rosenbaum

Okay.

this what little a seemed just to bit, the I where down it think talked lower. little quarter, get we and the I guidance last trying was coming was come quarter the about reason midpoint and of at the a you to is reported to bit base volumes in

that trying on the what's at was I the of bouncing I just was get around an gist or erosion to gather bottom. whether So question. going the to that's just trying That's

Scott Staples

Yes.

think is I is in control. cetera. view back bottom quarter things to of X really around the on we points we more on doing a good way -- this keep is -- best mind now a good A and international the it. probably still little for Propel great but et also are you couple bit bouncing really in that can was the data

So bit that But bottom. well. and really would also than I little doing be was yes, of base it analogy. lower like this in we a a the the little tactical bouncing thought quarter still around

Shlomo Rosenbaum

Thanks. Okay.

Just giving audio a little you still the is a heads up choppy.

Operator

take question with next Steinerman We'll JPMorgan. our Andrew from

Andrew Steinerman

The terms being Andrew. remember sounds that's in and EPS accretive of a more the that just being I 'XX to combined in of wanted It's a be accretion. change neutral for me, if of change. the change like drove that confirm deals I size 'XX to and the more opportunity, to And given kind and about neutral the what comment 'XX organizations?

Scott Staples

I really there help the out results. We sure make at today, interest all reported some to we we a all. those months realize Andrew, it synergies just to And realized and become models. we're all wanted when will part it, is upfront, you a based that your fully really not have today. all the of you XX it wouldn't of be when reported. call build it is to about that, there The just dilution takes on expense change action and talking wanted change. to action what When start talking we're that and obviously, don't about

really our anything. We We outlook. synergy haven't haven't changed changed really

year. expense got In offset fact, in couple items next we've locked of to help those some swaps interest of a for

making point wanted around our of really the obvious synergies will change. a the we're just really make sure So kind not hit actual We P&L. when to

Andrew Steinerman

On forma -- pro a you. got I Pro forma.

'XX you've since accretion EPS base have context I revenues And or lower you of had the in accretion, revenues? revenues your for if, that it's model, underlying example, assumption? than in Sterling base here, affect EPS mentioned side wouldn't Okay. base Like for know do higher the assumption an the

Steven Marks

we're to Andrew. XXXX, into -- exact not on get We're little early science a

Sterling, obviously, right that to the just everyone's direction. we volume again, and in make oriented impact results you're of mean quantum I think sterling we I right, wanted got accretion. models the sure

on models factors the interest with and is dilution that trying today help I impacts. moving pacing, expense of we're some obviously think biggest to synergy the just the

Operator

next question with Andrew will Layer. Nicholas our take William We from

Andrew Nicholas

for you the little combined I drive wanted there there drivers First that would it pretty Advantage the unpack bit hear accelerating be to for upsell Sterling for Is maybe first, impressive, and question both legacy the to in extent sequentially. revenue there anything to that metrics cross-sell, a a on that. there are can more that great ask do on growth And that both can to synergies entities? are

Steven Marks

the were are Yes. deals We're in very upsell, in happy last where that we remember companies obviously cross-sell. won X we that announced quarter upsell very large both you cross-sell. And if quarter, both

are those revenuing now. So

of closing. both they revenue days within fact, In

So X riding quarter nicely wins we're those pretty on from last

from their as Sterling, can you cross-sell we deal they've days into more the with but still XX well upsell to only need is tell some results. as The get old of details. had success

safety is compliance I customers protection prioritizing shareholder cost that over the So here, think cutting. are value Andrew, still highlight and brand and and

deeper package digital cross-sell be perform And future just upsell general leading the we on think only which think will density. market. well to density in and And deeper we hot continue that package sellers with numbers identity will the solutions, the in is to not

think to So number for strong are -- couple we a going sure. the be is a this quarters for next is we of number that

Shlomo Rosenbaum

integration of force, risk, realize to the I here, how the how think or 'XX it's over do to there couple numbers. it of company? sort just fair the of this the us much And as about of holistically? is is first quarters haircut feel specific growth But in assume that talk Great. combined distraction tailwinds we just for sales described particular, logo that you with early about you absent Or are new about upsell to thinking cross-sell some you that kind

Scott Staples

Yes.

that doing the we're we're in we're We've customers. R&P deals talking we're good really place, I think daily of to job got go-to-market coordinating teams. on, a mapping standup front-end joint calls

Sterling is in I customers. think obviously to to interesting the all what's large was actually communicated their spoke we customers. deal And then closed, really person all when we of

feeling And there and it. excitement the about deal customers good good really was about really just are

we probably would actually while. could of period see some But But stable bring They as a will distraction long when put that potential a of of think it you risk. stay the does these improve. I we have any in we think end in together, together. you right I some things don't some run, a for you're and key should that So may those say metrics. around stabilization the put in deterioration of front

Operator

question from We will our take Patnaik Barclays. next Manav Instructions] with [Operator

Manav Patnaik

I'm Scott, to plans here. the the of are integration on your I multiple wanted just around guessing those platforms. platforms touch

plans what I'm to integration, that's contingent one. this all on new your around just And that? innovation front-end et homes those cetera, combining so back And are not guessing

Scott Staples

you to have And great back. question. great Manav,

there been probably selections. going goal us announced area is make this don't the talking is client the existing because this out And company base deal since to of the you've not a And that force obviously, platform and we is focus -- onto our to right. sure we're I #X think with from customers we disrupt that one consistently get we the to. migrate So platform we've customers, not to need given their heard to

don't numbers that. synergy require Our

view we also functionalities we out pay, and the figure roll We which products go, the which -- better as features and X. are as we new out products going of that as keeping to

of do get and and of we And ultimately, due looking thoughtful what line. very we're the upgrade because process, seeing. many much, months to that, to how do feel But And so thoughtful this. There's to are could very, strategies will customers out. our obviously be and that we're is time the very to combined going what no now we at an come we're our really products. upgrade about those us and cover what as under cautious we'll be -- what with starting take HSR up roll too should to service customers we're how an It we

Manav Patnaik

you back job getting about a trends Okay. mentioned few I times -- Fair think enough. then you about talked And just to pre levels. pandemic

how we Sterling so that history like have for the matter. you really -- Just wondering or pre-XXXX, don't storing

just with a do change perform you algorithms combined think Like of how you in kind So long-term the normal little you company, environment? bit? a wondering that

Scott Staples

Yes.

attrition growth just typically cross-sell But so quickly, real the same which of again X%, right range. new logos cylinders firing on where X% really, to X% we we I'll except -- that the growth you backing then growth are base to page. cover put X% X% all to out of think algorithm, X% upsell, XX% of everybody algorithms are put is I And now. base of our X%, see us X% to in on growth to X%, and

at and the last -- literally for last think XXth our -- the X-plus I go look So you call. is for years, the earnings if this back

upsell, is been and logo If on at only the efficient. look base. cross-sell, so back you consistent And go thing fluctuates and it's new data, the that really

improve modeling, maybe So should future and there change mentioned it together. stable, cross-sell, as put don't XXXX into growth earlier, ultimately, will things improvement just to for new then to look don't think, we algorithm think remain be as I start there our again, we entrection. And logo that we should be although any upsell, we as there. on

normalization, declines single-digit in base the we're sort stabilization just down again, So in low that now. which -- coming in to always us seeing And of still and now. state the has it's right right

Operator

next with Scott Wurtzel We our question will take Research. Wolf from

Scott Wurtzel

companies, back customers, about maybe And to that combined features you're to to over ones kind are would being that's or being able just very Sterling. excited your be products I -- coming of Anything the most looking of wanted what the to conversations maybe rationalize that there under forward to some the specifically go with or would helpful. see you're costs? whether they're love having from

Scott Staples

Yes.

for a is this fairly First nonevent again, So Advantage customers.

to service follow all customers out our change So to Advantage First models changing. aren't and talk we of did obviously reach

focus the customers. extremely some Sterling more the wanted disruption the And that proactive here has on no First been One, of about things Advantage. on team service think very hear that a excited introducing in again, I and to product. leadership to automation. we most reinforcing from new And be be So of they're the there'll and

a felt and space. always big a automation seller we've most in in know, we're Speed is the guys industry. obviously you brings automated As the speed.

they we'll in start our they robotics So service. that One lever fruits, mapping chat can the really our low-hanging we want feature and that API how start they our bringing is which and overall can all know automation to of and as our

now. So a call, click a did almost we've chat year chat not for been feature. talking Sterling about have

applicants be that out it just or probably first to do. This rollout bring that a on care to the this will with recruiters that be. #X candidates chat giving and customer is probably So thing is is customers chance find the something we is might and we'll the Sterling their that will whatever to

customers period. months that in excited So a within super are maybe hands feature we would put hear be X thing that, to time X a their at that maximum to

potentially bring that, start stuff excitement overall, just this we'll So like rolling to about what there's that. but can out, general

Scott Wurtzel

of just side, and that That's you how capital the on cadence deal? And the reminder helpful. it. debt paydown about thinking are guys Got allocation a of following closing the

Steven Marks

I few minutes as X% closed, On a just debt finishing new does have allocation mentioned to approach, debt direct it. prepayment capital Scott paydown a priority Yes, ago. Scott, agreement a mean annual have don't yet. integration. is schedule we We weeks the barely #X the amortization -- your

the businesses. range, X that cash cetera. leverage go all the going pay our get We're then a integrating be flow going done synergies. combination net We're So to be to that going target of bringing we're and customers number retain et those will to through to generation, debt and down down,

Scott Staples

other reps customer have best industry I've extremely practices share Sterling about [indiscernible] April. There's The attend our every Sterling be learnings. customer also clients base have been just got are not excited never about to in Sterling together which their it. event. And really to an is the Sterling is about collaborate cost had excited talking annual event, one to customers This more with we other and thing. getting

customer extremely our I in [indiscernible] is going at So to low this be annual in think year Miami April event

Operator

your participation. And First for Quarter I lines, Webcast. and Third This further are the At wonderful in at your disconnect Call questions Advantage all Thank see time, you time. this this that have conclude you XXXX there day. Conference Earnings may queue no and today's a will

First Advantage (FA) 12 Nov 242024 Q3 Earnings call transcript