Earnings call transcript Q4 2022

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Operator

Good morning or good afternoon, all and welcome to the Sterling Fourth Quarter 2022 Earnings Call. My name is Adam and I'll be your operator for today. [Operator Instructions]

I will now hand the floor over to Judah Sokel, Head of Treasury and Investor Relations to begin. Judah, please go ahead, when you're ready.

Judah Sokel

operator. you, Thank fourth Sterling's full XXXX year Welcome quarter call. earnings to and

slides to Chief we to made website the available and posted are Financial of website. slides The will a Investor during Relations today call on me and be After Executive presentation have The Officer News will can website this Josh Sterling. Chief Joining Sterling's Walker, Peirez, replay remarks, Officer open accessed reference Peter on questions. this Sterling; of under we been prepared Events. our will be and

Before to non-GAAP forward-looking of we X, statements notice discuss which our the Slide use the financial results, I measures. encourage all on of and review listeners explains risks the legal

the factors Exchange of from Additionally, a discussion could Securities that these for please to to filed and forward-looking most refer Commission differ risk our actual recent cause results Form materially statements. with XX-K,

Our the this measures slide financial presentation on such non-GAAP discussions to issued appendix our for measures, and call directly certain include the in most earnings this will presentation in the and release reconciliations morning. comparable to measures are GAAP

now call over to Josh I'll turn Peirez. the

Joshua Peirez

provide analysis guidance. then to it of discussing proud great Thank joining us. a some detailed the is XXXX there and you strategy highlight. our be you, X today. refresh, thank M&A I for to I'll results talk Slide I'll ending and year quarter I'll team results accomplishments the key for shows year Peter, and full of a on over success hand Good am was XXXX Judah. our with to the fourth year, and Sterling's morning, XXXX and innovation, about our very the XXXX of Reflecting and delivered. our a accomplishments, priorities. lot to more financial before

this expect company's which we groundwork completed success. Starting continued long-term organizational lay X, with to strategy the refresh we and Slide a the year realignment for

our revenue our down market revenues and doubling and supplement new our with existing competitive internationally on acquiring increasing organic clients, growing growth. strengths clients, to share strategy Our includes M&A utilizing

of bending and and identity our also at like trajectory I-X. and verification, forefront newer the We such remain with industry as monitoring concierge services post-hire solutions innovation services our

I'd AI review years, innovation client our immediate our past needs. X. have enhanced solutions, launch highlight Slide on validation meet such products we The processes. innovation. many to criminal to In have has us arrest incarceration like Throughout industry is pioneered and history record and products Ignite increased next alert to our area as we fulfillment technology, Project and Turning record the rapidly few enabled to focus only and leading more

released had identity released we in we in the more U.S. product comprehensive internationally. enhanced and XXXX, of proprietary global recent language core XX% our include with with and verification I-X we releases, and what offering In than solution through developments nearly our capabilities Examples XXXX. Yoti XXX support global partnership over our ID.me

up very to grew XXXX. been consistently XXXX, that offerings identity XXX% with our have We over full transactions year see pleased approximately through

over XXX% XXXX experienced growth, up nearly transactions also business fingerprinting with XXXX. being Our by similar fingerprint

for experience, monitoring among Another XXXX In continued registration healthcare released product and which solutions, the monitoring medical clients. new recent we sanctions, criminal of arrests is our recent including vehicle monitoring. and our track fully other innovation enhanced monitoring motor post-hire providing arrests enhancement licenses, industry-leading a integrated convictions things solution,

the re-screening has of form Historically, orders. transactional in monitoring this delivered industry

and subscription-based that globally enables is the solution will our new Our scale around clients monitoring for world. multilayered

our platform. have over client our XX% approximately the We by experience significant revenues progress moving from platform. single million on unified client towards unifying in global $XXX platforms core onto made revenue of legacy also We our now

criminal faster searches the time within XX% high our RPA we minutes, first XX% first criminal U.S. bots, five are over our within platform deliver XX our rates. costs the powering XX% higher of first automated day. and now accuracy, to minutes, APIs Finally, and XX% X,XXX to first fulfillment the and Over increased within well over hour searches with U.S. complete XX% low we automation and of integrations within hiring the

realized Turning revenue I'd and of clients were pleased from to the schedule acquisition was additional year that the X, with our We synergies initial deal, Slide of EBI XXXX our that XXXX. great platform also about meaningful our and is are We results highlight to gaining M&A. enthusiastic the switching a and the of accomplishment the EBI ahead to next of exceeded starting access on success integration completed at like the solutions. front, Sterling estimates. as cost to end

of suite team strategy and in with clients. growing hiring model this screening needs the guided and acquisition expand to into deal region, employed now check values Colombia a their our America reliable the Sterling has National global rapidly are With and operational fit built serve operation client in highly XXXX, culture. perfect multinational by the people in presence a to first Socrates with expands the Crime local the centers Latin Socrates and APAC We Mexico, services, of the centric Brazil, that of

bringing Latin Socrates are localized innovative growth to deliver America model to work to the region. deep in the excited build regional expertise on We Sterling's solutions, with team of proven and

complementary highly of tech U.S. The the yesterday. deals. acquisition purchase client attractive industrials including a a through accretive just on base, The media. builds focused diversified high share healthcare, A-Check, M&A other A-Check was deal and announced in company possesses growing of tuck-in strategy enterprise of across our quality market we Our verticals, successful

from those aim expect the that tuck-in with clients ahead our onto products. messaged synergies with We integration do to say and months achieved targets Sterling we similar A-Check. based to particular, we integrated period of schedule, XX technology migration, EBITDA when of adjusted XX% EBI U.S. XX% through, EBI, we playbook XX our In we with cross-sell bought yield flow and expect for once significant SG&A can are to same we rationalization an with platform and A-Check's reaching platform this As ambitions of consistent deals. now to deal

in resulted accomplishments financial strategic and strong results. XXXX, business throughout Our

we shown set Slide to records adjusted XXXX. net this continue EBITDA against implemented we annual revenues, and year As for the adjusted in X, company execute strategy income, on as new we

revenues XX%, on Our constant revenue an basis, including exceptional growth. XX% grew currency organic lapping by XXXX while even XX% XXXX's

year, range. profitable to target organic in and revenue organic we X% was year that reflects organic revenue revenue for our long-term XXXX Our consecutive our investments growth. growth per to XX% growth is industry-leading prioritize since the above XXXX knowledge, second XXXX, the was To made have and

four drivers, targets. revenue or at in above were which Our organic growth long-term of by their XXXX was each all our driven

In at is million particular, revenue X% the wins, growth above or focus industry in resulted target. consecutive year on our X% client to continued To marking new long-term knowledge, our leading. fourth or new our clients our in from XXXX, $XX growth X%

through revenue to our existing with and retention prioritize paid clients I'm client efforts wallet rates. increased And and also share exceptional say off. ensure that We the proud satisfaction to certainly upsell service cross-sell client and optimal

and through Slide launched XX% X grown the CAGR, XXXX in a time has shows our performance. in that our including strategy of strong we continuation at XX% organic currency our XXXX revenue XXXX, strong are on our market share, an constant increased our COVID results existing due From in a adoption. benefit back we increased pull spend XXXX driving otherwise, a saw increase background amongst secular We but XX, from clients gain trends to of results each basis. multiple screening as year

continuation years. our the rather XXXXs and compelling trends but viewed believe XXXX not multiple trough, when simply of particularly We from were natural a is trajectory over started XXXX are XXXX we in and recovery XXXX.

shown XX. As Slide on

has four can consistent the past control. the drivers revenue Our success in been over years notably we

New client and upsell wins, retention. cross-sell

for regional these metrics. tech We teams tactics transformation And have deployed on benefits yielded the these our and vertical our company. focused Project around strategies including has setting countless and across drivers targets Ignite

a As grown focus a combination CAGR XXXX, these the have their X% ahead the to solidly from at combined drivers, of sustained target. of we three since XX% result of X% organically

XXXX% increasing we challenging to new and perform our by XX% two by rate our we years gross XX% as This retention at the this the enabled during demonstrates cross-sell improved you our even long-term from grew XX%. basis XX% X% in through our in improved and achieved us can and upsell targets this still target Even by during Moreover, downturn, consecutive that COVID within as XXX on and followed most year-over-year. in slide, have XXXX retention XXXX, control in business our to well XXXX see on hit points execution solid period, areas, basis, economic have we and the strategy our times.

of In particular, new a adjusted strategic journey $XXX of of expect focused to year, with elements when million. focus our Slide this again EBITDA million XXXX the XXXX plan expect in now our the to net success started at deliver areas of adjusted environment, uncertain $XXX records to million, have our $XXX Turning the an set in lot XX. million long-term years. macro I which company joined XXXX. in to Despite to revenues on by guidance driven to we presents and $XXX we promise these strategic compelling million remaining of million to $XXX continue income We and results midpoint we on $XXX recent

our revenue our with products and Yoti new exclusive organic and built verification include growth ID.me identity around M&A. expanding and These clients, existing industry-leading workflows

we process in support focus through the growth beginning carrying cost since laser improvements to a our we automation, measures. expansion reduction surplus removed quarter, labor have that average we We our include also the we discussed moderating. the priorities growth begin playbook, XX% XXXX base Our on when implemented margin of our fulfillment XXXX. saw been Last and increased

initiative strategy our identifying product gains reductions our additional a completed and that reengineering processes, launched an functions our cost accelerate automation opportunities. Nucleus, technology to also elevate Project We driving we long-term cost we fulfillment on And labor and meaningful go-to-market savings efficiency leadership expect innovation. and senior by realignment executing and of drive and to and

the these environment. the company position and the they macro us long will complete, still are term. growth on of is some underway margins initiatives will and actions remain enable and regardless these full near-term of future EBITDA are that others for The horizon. XXXX And gains, share common the expand over for to the all in market adjusted denominator Some of year

while the in the for I conclusion, future. uncertain am as deliver I through recovery XXXX's uncertain building strongly deliver on of to the team improvements for And Sterling gains proud times. will and and share believe subsequent navigated environment COVID macro We successfully really margin through well. In we continuing

hand guidance. CFO you and will results Walker, Peter. I that, XXXX With financial over our through to our it Peter to take

Peter Walker

And Josh. you, good morning Thank everyone.

XX. Turning our starting Slide of now to with financial performance revenues overview an on

delivered these of for and XX.X% increase currency company organic very a was million. XX% translation. which records explosive growth. XXXX while offset revenues We're XXXX set During year X.X% contribution constant basis included we drag, over points also approximately results, XX.X% This even lapping proud annual M&A, growth. $XXX new with included revenue we foreign a XXX XXXX from due The partially revenue currency by to

organic and growth, cross-sell growth included or million existing The from revenue from clients including clients industry-leading. increase is our X%, of base To of new of and approximately our from clients growth approximately knowledge, growth $XX X% upsell attrition. new net

and technology Our and our products our times our second at the for retention enabled customer-first focus, revenue investments gross with at year in coupled consecutive remain that approximately strong level. XX% best-in-class rate year, turnaround

relatively change to was meaningful the revenues. across and the Additionally, stable not period pricing in

target encouraged range. of our drivers performing strong were results by driven all four the or We at XXXX revenue are above that

our strong in and revenue can that are success share we These offset over new wallet the momentum most including winning greatest cross-sell are areas growth and share upsell clients, help within our base rates. We feel our of areas and from the retention seeing our of market in unpredictability time. growth focus business control,

$XX consecutive QX or ninth within quarter our in positive or drag was to new XXX long-term down foreign X% decline continued organic including QX, a X% X%, currency, constant our control, drivers to an X% at to trend driven clients our inorganic of million overall a partially point year-over-year, the approximately target. currency above by the due of Turning revenue growth from growth. on basis, X% offset by X% basis

same in clients QX was was driven revenue At time, revenue the from down XX%. by existing two The main shortfall items.

who were the The on first to headcount, additional return Year seasonality. some and before hiring by clients bring was to cautious New slower

far thus based seen XXXX on factors. have we some these Importantly, uptick in

revenue X% growth rates pushed The QX over current expect to pullback base was implementations followed in time by XXXX, second to new X% business the rate a our the organic late in to modest signed to return return historical to for be total we growth to item X% XX% and normalization to out our and hiring target.

Looking revenues by XXXX region. at

strong grew healthcare industry verticals compared particularly and saw strength results our Our U.S. our XX% in FinBiz with business verticals. XXXX. We in to industrial, broad-based

we XX, growth mix has from years, and diversified Slide our on in our This growth supporting mix. compelling revenue leading shown been As attractive a have vertical industry new recent clients. instrumental including in

us deep increased intentionally care, we industrials uncertain is to and expertise these trends industries XX% particular, market and U.S. allowed services, have and revenues together geography despite a solid industry diversified across concentration. business minimal our financial to and has into size, seen that has a develop Our we exposure over client health comprise the serve base demand of In which macro environment. our and geographies with

and strong which region, X% organic on Australia with of broad-based growing our our currency wins grew generated fourth Turning due organic basis. international, constant our currency was XX% client performance. new International primarily the the quarter. also U.S. international of and during revenue International resilience constant in of strength demonstrated by showed the and quarter, to by on XXXX during in global Singapore, revenues an in basis underlying APAC an growth the benefit scale, outside led to business exhibited the XX%

pleased proactive our our shortly. a deals to EBI revenue In with of far both we two of on from We top XXXX resounding by solidly the in line. acquisition. X.X% pursue on our expectations, bottom very EBI, on strategies. XXXX were excited ahead our completing synergistic initial client confidence outperformance in success the additional above increased and delivering November and those will retention growth more integration of XXXX, deal has And through EBI's deal we close to We I M&A. deals above expectations so inorganic results this performance The the impact delivered touch schedule were of delivered with XXXX,

EBITDA in record XX%. Slide to approximately EBITDA an we XXXX, adjusted XX $XXX a for margin company to million reflecting a year-over-year XXXX, adjusted compared Turning aXX% set with increase of

continued revenue to drive expansion. long-term invest automation to growth cost and while in discipline, We improvements organic focusing also process margin on

recognized. our down As a costs, revenue our third with are directly revenues reminder, only of to variable, to required. as labor cost, tied quickly revenues our as up cost An incur as we we highly of tied of structure additional party of XX% cost is and data can cost scale XX%

the cost the partially of call, a December below by expectations achieve on were fulfillment amount settlement XXXX our shared able our quarter. higher the lower in revenue We in quarter, margins were costs. cost QX non-class of offset significant to because we revenues. due head-count primarily the greater-than-expected to in moderation and savings was This higher

company in was Like XXXX EBITDA a XX%. our adjusted a or to and adjusted D&A. our record set million $X.XX revenue share of lower per per net earnings our share, increase growth, higher diluted year-over-year adjusted than with EBITDA, new adjusted income increase due year-over-year representing $XX This of slightly

$X.XX year-over-year revenue decline diluted adjusted primarily was $XX discussed our base driven per EPS For by income moderation share. adjusted quarter, in or million earlier. the was the fourth net QX's

XX. Slide to Turning

cash seek continuously flow outflows as in higher million, share XXXX, November authorized Project collections Higher $XXX M&A equity an Board cash operations million Ignite payments, of XX% XXXX. attractive return, while repurchase positive operating from program, and was XX, of and income over shareholder $XXX to well we partially diligence was cash significant our advantage Our as and as a tax taking increase trends cash by On to integration. offset valuation. and complete increase interest in

total approximately of program. continue capacity the cash XXXX approximately of XX, the and executing leaving we with $XXX million million million. We equivalents to shares, Sterling's cash ended $XX debt February repurchase year $XXX and million $XX used of to As with of us have

three at net times target. end Our the end to to of times our two leverage quarter was net low debt EBITDA at leverage net adjusted two

Our net EBITDA to and strong growth. decline our cash due leverage generation continues to flow adjusted

cash well of deals combined to two net on purchase XXXX, approximately As positioned a a we were position, rising at result of use for our million. $XX hand cash in our price M&A

a is and at are see been we've time return with the to an price attractive working pleased for Socrates we asset acquiring levels. long looking and that to

acquisition to of us times case on both a In than M&A global drive expect growth clients. EBI. A-Check, synergized adjusted forma multiple within for pay We EBITDA for framework the our with we four we paid pricing this local basis, approximately and pro and lower even solidly the

investments. Following organic revenue these two compelling and deals, to positioned we make are our continue further M&A to pursuing supplement well growth

to generation facility, cash addition $XXX ample ongoing new available million under our our year-end. we including In capacity at have our revolver approximately under credit

a successful and completed to new which During revolver, profile reduced increased to term capacity the maturity with quarter, XXXX, a our and spread. our $XXX debt expense our interest refinancing credit we extended fourth loan million

many recognition a The the new a despite growth facility we reflects five-year point of believe company. as oversubscribed, strategy which successful public environment for was a challenging credit markets maturation and borrowers, credit our

implemented also approximately interest debt. floating XX% of We rate instrument fix recently to our hedging rate an

priorities healthy allocation under the to time M&A opportunistic investing announced for revenue maintaining buybacks repurchase sheet. as growth, previously share organic our in see remain foundation share program. opportune We includes capital and Our build macro pursuing an instability success. This balance

our for provide Slide XX, On XXXX. we guidance

$XXX and $XXX XXXX, of X% X% year-over-year million, representing million to X%. $XXX to growth growth X% $XXX $XXX XX%. to minus For representing $XXX of to year-over-year of generate million, representing to net income of expect million, of to Adjusted to year-over-year revenues million adjusted positive EBITDA we XX% of growth million

X% of positive organic X%. year full constant includes guidance Our growth revenue to currency minus

base by growth, be of XXXX, so with on first we items January control, low we've point declines. December an see client continued appears the XXXX including revenue uptick in to the base negative two far in new for growth offset our February. being within These seen As in earlier, discussed what and are months solid we wins. to Based

We is for are material reflect year. in there not the shift over the those updates of the environment better to macro a guidance. we assuming worse, our a the change would material If changes course in or

year. of declines revenue QX. low point in the revenue we marking expect narrow for currency year-over-year declines organic half include followed to total the by This growth, declines X% the QX, XXXX, For constant organic in first likely during XX% will

to We each improvement quarter. second show half year-over-year the growth, expect with

and client easing two, upsell hiring based through on our Our guidance clients pipeline the four, is on items. new and boarding One, three, sell year-over-year comps. on ramping plans, based several year, cross

regional Our the us environment. providing the against some impacted industry is protection diversification most by and verticals current

our vertical so growth example, regions. December. healthcare helping of offset the revenue in declines For that From during the verticals of our other Note XXXX region X in starting we far in acquisition expect XXXX. showing QX resilience organic fully combination APAC the two deals M&A are to points anniversary inorganic became revenues and X EBI in QX, some in and

the currency benefit. full-year of impact XXXX of points For foreign our basis XX guidance fluctuation, assumes

profitability, Turning year our this notable XXX basis from implies M&A to muted drag XXXX margin X% midpoint deals. points a range implies of over growth full margin guidance XX our adjusted a expansion by approximately of points XX.X%, reflecting to of adjusted XX%, EBITDA EBITDA the basis versus XXXX, two

through we've year, in revenue of the well for the expect cost structure. We put robust in measures expansion the as growth, variability margin absence as even full place, the our of cost organic

our through by first improve cost the the to margins improvement and benefit second half, followed with in our revenue healthy ramp. of in expansion quarter XXXX expect actions trends the as contract from the margin year We

and expected and to XXXX, earlier, underway, more structure. our our scale margin up improve initiatives are workflow, during designed to optimize drive the cost processes term. Sterling These set profitably we long over completed automate I to several mentioned both and As have expansion

net X% our XX%. to adjusted growth turning Finally, guidance to of income

for reduced which adjusted ahead will during our should the adjusted our revenue revenue your and XXXX year growth appendix We encouraged bottom of growth our with further EBITDA net a a breakdown We from in in assumptions guidance. ahead benefit growth. driving growth. of model and we've in EBITDA help to XXXX income with page growth growth remain the this included driving D&A, adjusted our leverage line drive our financial EBITDA of detailed our of excess modeling, by To adjusted the

In closing, targets on XX. Slide we long-term are reaffirming our

XX% our of years and XX% margins organic outperformed reaffirming the towards expanding targets We target per and during long-term net have two revenue X% growth our plus to past significantly income XX% with growth XX% of adjusted year. topline XX% to levels, are to

remarks. questions. prepared At our open up line for the operator, this concludes That time, please

Operator

Mark is today you. Thank Mark, Baird. [Operator go Please question open. your Instructions] ahead. Marcon The first from line

Mark Marcon

that Good you're the year, bit clients with seeing can if a color of Wondering, some terms the color with of to plans sort your to you. uncertainty that you're provide you additional vertical key areas? terms their of the hearing to from macro more any the Thank of regards give with morning. might and what the given in for in little regards you us just regards differences

Joshua Peirez

It's Mark. let you Josh, Thanks, add it. me Peter to go want if first, to

care let to including start verticals and to throughout they been continuing they're they've have growing quarter. health been, hire with, me we strategic last just that as first, continue our fourth year, in hear industrials, in our So like from the growth clients

to maybe are So continue verticals been to they've we on these the even and our clients on improve. see trajectories where expect

what heard those. the to now and we as the have to budget this the of in mentioned place through call it to get sort saw they're plans time their even verticals get year, QX, waited expect the hiring as hire I where as hiring starting the now is post of the jobs, that and year, macro for we they their set, pause positions and ramp they and terms on from put for our those those they QX with is, year things slowdown in some we're last other of In hearing at them in

now the its our current QX year, point and to view ramp into And get hiring clients positions going is the they have macro with our year. starting that what on today in their rolling again we why those as to plan uncertainty. from to guidance So Peter and through be that the current shared in expect have baked be the lowest up we that's the

expect saw also cross-sell new our buy We in on-boarding products client ramp our year grow to continue and up through pause QX them bit quarter that for to as our new to upsell well. to we would did little through and but to growth. efforts a the in as the and new that, long-term also that see year, we the Notwithstanding typically continue for in see, we hit target

Mark Marcon

can through Great. specifics bit then give you color regards currently regards plans them, And a with acquisitions? job for on two to come just months with obviously more margin period, us over those that little XX to margin where with revenue then the great integrating And Thanks. with so you have. to the and regards the profiles integration to like XX this A-Check, EBI, improvement did a months and they thinking the Socrates could

Joshua Peirez

should start the in macro you cheaper Thanks, seeing specific profitability why our of and year. terms in this And let's of able EBITDA, about I A-Check, been those more of as we synergized then and on very our acquisition the they've to first as numbers, at adjusted clients, systems that Sure. improve them over give just expect make similar somewhat we expectations X similar, fulfillment. we you That's for the Mark. migrate pro Peter paid is EBI. we and for paid which and we've into EBI how for were this the able incorporated what we to but cadence the maybe I'll will to we're and part our into what adjusted to platform our to some the with think forma price think be than go being times

that think middle ramping the you year. through about then the end starting the the the of of benefit year happening around happen So sort that from of again, should to and

by QX, fully of goal to have really asset. synergized the Our is end the

this having we're obviously not breaking in A-Check Peter should where it margin think would and bit a its combined them as drag, of in I at drop-through the is margin you there which little accretive, Peter rates XX out shared core think synergize basis in In lower them current point we Socrates, about this point we with what until expecting be and expect buying profitability we what terms that of business, see at our actually separately we're given discussed. to than them, a margin

opportunity for have for as consistent Socrates, provides it's growth our worked opportunities, think on us, particular, and over that long to win to really and Latin one helps us only a of global is that it acquisition them with apart. the experience eyes time, some with really now time significant us who the it want a opportunities want provides think the Latin we clients something region key the In had a we're we've terms important in regions us us America over global provider U.S. clients win from stand think with a everywhere, real business of with leader and provider time, who clients very America we have this all we clients we've really with with but we player because in significant grow was other who to business both to existing a screening by and into think expanding and additionally, provides region. And this in

So that more strategic a purchase. of was much

Peter Walker

environment. either were current because how client price, of economic base away prices. pipeline And that two we add, able from on high deals shared quality I our either M&A what very full, that's walked several were to very or view we in last we and There affordable was other the the of earnings we as the just get because these really were assets, would call, as being we Mark, excited impacted

A-Check about health think with we well If leads our really care overall. right where leading we're growing in industrials focused specifically, they're verticals that

business. is Socrates clients. this think the just believe it's terrific help in A-Check then as capabilities leading for we And to got locally our mentioned, win and which we LATAM, global pick So Josh a with grow us will up us

Mark Marcon

what thinking pipe-- you of are post-hire are job regards Great. you there. with a terms And identity just about excited and also done of about you've you of new new one, got are the cross-selling the your it adding about think then what additions. most about in good When multiple I And opportunities? the all monitoring, new client great thinking to like how then traction like the pipeline in you've terms last really seems clients,

what about wondering the some just you're relates of excited it ones year? this that are most to So as

Joshua Peirez

question. Sure. to wants see with then Peter and answer start But can we second first don't I the one your why if

growth I So, it I changes can upsell identity, something to really international, chance game believe to rate going in that for the We're and the changes late the of we every we overtime. products place the Yoti think that I a our game think screen throughout year, seeing think had we do continue really we also those year have be to offerings almost in the which enhance for to the offering for we changer excited us. because put be about -- is in background us most terms the we

rolling as the year. the to -- we look look that through out we to As

to call some that excited that's probably I starting. package that increases shared think the we really the show rates is the we because I'm and pursue. have So that most the upsell about a it opportunities in growth identity is the we stand-alone continue on one very that density, slides, traction And and straightforward

on So that. to you give we some tried color

criminal solution re-screens doing talked specialized have who and be that really something we're as before choose can from, in away sanctions in these be being about there. monitoring, package to really post-hire of getting easily to the given monitoring a MVR just we've that excited move some areas the as can walk stream monitoring a clients This year. more the about, terms attractive that can and continue see we true now on on we on unpredictable and clients is have do of excited successful stable are that I versus clients we're side, the script, In actually we and consistent that any or monitoring much discussed these

let going. as And sort year So then get of deals, really I real we this more give your Peter business identity and in in more was on in kind clients very the new question, to other revenue new don't from expect want our which consistent little advance to I it through which the you the expectations on think our year from I'll later year. Peter those know continue of we monitoring would I see if is we give color color a on, clients. close to what pipeline, say our in from see trends

Peter Walker

Yeah.

the revenue from are we've to clients, we believe is growth the for and for client really we got X% which think $XX proud So, X% quarter, hadn't from of growth. new $XX pushing If business seen million numbers it the of of So onboarding million QX right? their some new growth higher. that, that that QX, was is have would the year end full industry-leading of I which been new of that kind clients you speak for to

uniform believe going of mentioned, do over believe client that's currency improving a the think X% our see constant we X%. we X% rate XX% for to that hit year 'XX, to new QX in we range X% the We about for over X% be don't target we year, in we believe are XXXX, going to to with to we of contraction When expect to as of we're but revenue organic growth growth. full that to going currency year new be

Operator

from is ahead, go Please Andrew JP Steinerman open. line question Morgan. comes next Andrew. your from The

Alex Hassan

from quick Hi. seems is revenue Hope Hassan it question Steinerman. the Yeah. well. existing This for the Andrew record, you're for just Alex all clients. A that

with sell, growth, up color in in a seems full on then seems follow with than at XXXX some somewhat and be like 'XX, XX% better it a to I and minus your peers base there we're somewhat question that for XQ. cross to be from churn growth, implying XQ that will base upsell, something odds Any negative year want like So was the what laterals. you're and of hearing

you great? as you. could maybe elaborate that If would on be Thank well

Peter Walker

Yeah. Sure. Good morning.

client all zero of is existing So attrition base of X%, should kind what with of attributable XX% X%, cross-sell a XX%, of approximately shared we a client the think was reflecting decline offset back get so that to net negative to QX new of growth. XX%, that X% is about growth upsell way so you approximately you on

attrition new you growth X%, believe, we're base upsell the our full seasonality of that that we be We will remarks and will business and in about prepared each we positive netting trough shared, X% X% base year also believe will shared be XXXX. be when there kind X% as growth other, cross-sell to XXXX January seeing December in our to X%, will negative we of be a think believe a in around I both is and and a February, drivers, improvement just and X% and

revenue full currency year, positive QX, speaking and into providing I'm growth moving to I'm XQ going we're organic currency negative revenue those XXXX see growth Improving where constant revenue in organic when XQ. in drivers QX. constant to So the

helpful. hopefully So that's

Alex Hassan

And ability have you about price rising like had beyond like more through the in to third-party any then of taking data we should through costs follow-up how a XXXX? think on price for success are you and as price take pricing, your pushing pass maybe

Joshua Peirez

Sure.

to we this As typically ability which that did price increase do we've price year, pricing muted of an Think albeit we was year given through take calls, of on shared CPI CPI-type we this have levels, annual the as every mid-year. increases on contracts, year so our about it control. take out increase we previous

type a reasonable of we're We'll similar a million So year. do the look call for and $X revenue terms to bit to XXXX. that adding price more $X million in in increase little of current

Operator

Patnaik Manav The from next question from Barclays. is

ahead. Your open. line is Please go

Ronan Kennedy

and confirm, margins This could XQ also puts unpack the is growth Nucleus moderation Kennedy you then on for XQ you kind Project Ronan of the on and in morning. of Thank low growth from terms the you question. the taking saw? articulated rather base hit from could playbook the to you I that benefit 'XX? And the May of for Good call, Hi. Manav. just margins for takes the

Peter Walker

Sure.

QX. on first focus we'll So,

we of I What that the that we around can of about were hit you So, saw $X we covered think about end were million guide, remarks. savings planned able that the prepared and for that didn't about margin Thanksgiving, thrilled revenue our being were the on at get the had by out reasons to expect the we that is the for dollars below the majority moderation low main in we driver and we that of QX.

we We higher expected fulfillment because were higher revenue carrying obviously headcount, in call December. it

it the of to So non-class have did system carrying than and settlements slightly to out headcounts take more are days that higher it does expected. call remove now we XX we we were QX during the cost that related us,

Ronan Kennedy

Okay.

And and margins, for the 'XX please? puts sorry takes for

Peter Walker

Yeah.

So for 'XX.

Right. bringing Our of overall XXX acquisitions basis view we're margin board. XX that points about is expansion the that north less on of for

the down So margins you're indicating throughout XX.X% QX. to be in year. and online that looking pronounced see also call Nucleus more And it, of margin XX% as a full that we we the X% from improvement in call being QX. the acceleration expect QX, in We down, QX, in and revenue expect savings come back following year, expect expect year, to for to margin the we and QX to half we in at, significant year-over-year do Project be revenue our it QX

Ronan Kennedy

ultimately terms the you if regards macro the follow-up your a macro, how to JOLTS is may November what the interested in entailed your for of and cetera. outlook of expect of With you as I and what play XQ kind that from said we're and et versus quarter And on please. out, what in had into the to the visibility assessment assumption fourth in also developed what seeing data just consideration your 'XX call, you. of expectation of Thank a Okay. the just had what stable

thoughts trends? and on hiring macro further as some just specifically macro to So, related and

Joshua Peirez

in. chime I'll start off Manav. Josh. Sure. And it's Thanks, and Peter can

QX, did really where our number slowed of waiting a pause, their get a set, our the through in look slowdown and of budgets saw their understand what had really year see messaged in So year that was like plans happened. to a of hiring, taking finish the we things verticals had I their to first for we all their for think clients we years, that call, down then end to what two Thanksgiving after really this around

had we two, that, other gave was before at time One, that or vertical not have we expected into saw we that seen something verticals the expand not guidance, those was that and that hiring about again hiring that already through seen that that base February started we've growth, QX in is in programs and December. improvement their Peter's saw January what we in the reflected from and that remarks on

we which and we business our staffing saw seen retail December in we firms seasonality too Peter was like had previous return had mentioned, two in where and not the space international that in years, the hiring. in again up in thing weeks a second The to But would the of hiring the year. that XXXX much XXXX in not They and seasonality, Gig typically returned and to January. who lot did in they back do then do few picked last right a of in

in of was back half, those the and for that the especially isolated saw that really verticals in we month December So seasonality. something and

for year, the uncertain guidance somewhat people plans, In assuming et forward hiring we're macro our a terms plans remains where like seeing. rocky have a point their the for year. at with moving are they've the that clients given year, we revenue of for now But plans, cetera their their it XXXX, environment are we are

So at they of here saying where this in saw little exactly sort they set their are move here, seeing forward. a bit get point, start we unlike QX we now as what they them ramp plan while were and to froze to are waiting

the the So knowledge are they have place what macro they're that an we're remains the improvement for the it, able plans of dealing continue macro uncertain at is we Thanks the uncertain, expecting clients to we're assuming are in operating that against our full but with. with put not questions. least expecting to

Operator

is from Kyle from Needham Peterson question next The Kyle.

Your open. line is go Please ahead.

Kyle Peterson

taking morning, questions. Good appreciate the I guys. Thanks. you Great.

kind when guys you the bidding and to competitive dynamics the what six whether at market are for in deals? we're all on dynamics seeing and the new or challenging more kind competitive of months changed on players, smaller have of you're to it's especially touch going you a three lot kind seems to last, probably in like environment wanted of difficult Just I mean more of funding tougher labor here, macro getting market, guys it for

Joshua Peirez

Kyle. Thanks

remarks industry best business. me as believe slides winning particular So let in and I in as in we we think with, we We shared shared in our Slide first new XX. just and that prepared are on start our

years. So good, reflected otherwise do plus new win than business business more really think year, of last the in that we bad we while that great XX times we on prior million in others lapping as comps whether are even or put

support start been fulfillment, model, that our that on the times with business the I on our we've we use ton things that when So in to didn't based And came a XXXX on are based we all retrench win of on working same provide, of positioned and since on had we're pull until XXXX we people put example, we see if we starting to client XXXX. an our of on turnaround assumption based the those up to based quality deals as back a lot here dynamics. new 'XX, technology, in show and

anxiety out causing from more RFPs smaller levels seeing and clients. are mid-sized there win, having go and they're drop So those to service that's we for us for their players, because and

very able any be compete who and well to small this lot any from well. new more players, but to downturn difficulties those use year and we larger a also business our we we win So from with mid-sized would to think expect as competitors,

Kyle Peterson

pretty post be to little challenging come haven't with X EBITDA multiple, seems really and was guess just makes sense M&A one I times of helpful. is kind of a guess M&A competitors seems of a quick that. market, know -- your pipeline. A-Check and follow-up saying that And that That then but valuations the then guess contradictory on kind of I kind that's Okay. recently I the the I of synergy down,

do M&A later there is or potential So pipeline to the what for these you you think need seeing I M&A here guess to think in pause and two do a deals you you guys 'XX? more guys are in take integrate

Joshua Peirez

Thanks, Sure. Kyle.

on model, we're deals at actually it's expectations So last think deals, a to the able we in to overpay shifted always QX that M&A changed. to our going year, view is going and to the are in were looking we pay patient, fits their price hadn't as are close that be were macro year going fair targets not not reason our the that I last for we QX we

we unable were forward. So to move

the them like others those, Socrates warm but A-Check, what we and to were were had didn't saw keep pike, like pretty far we of being like performing their that still in how were because unrealistic. not. of they didn't changes the of were macro moved base that We we the given few with along in this that in fact macro, terms able was expectations or client some seeing we a they the they Some down their client on we resetting in we weren't base their end price, their and

we we really, to sure that about work, know this deeply So, going clients treasured many of to is our with view clients, care those is life's meaningful they the targets, build the are their relationships the are these we're very over to at and us, strong these deals and at them, people and are they is have to in people care assets really cases, you that when there, this good very hand making good well. take

looking in they they this are for that because even to we they they're anyone at generally opportunities they processes, lot our of your year out not who can for the to there terms continue emphasize inbounds plans will folks. there. know about In the point, find that running for I of would just buy question that terms find see good get of a that from potential want home target us, Sterling, we future. are we what not out is want it,

talking not we couple to at to two the minds were my make we expect to sure to I next because would us just before. so much would companies assets, because the these pause I least of that take Not tuck-in in some for that quarters, do think want need expectation. a be we but to M&A integrate our

two expectations back think take for happy change just they businesses it price, a their happen. we'd we them, that if may like so For or example, quarter to engaged get to with on be we their generally, and

we retaining we terms effectively to need quarters otherwise that migrating A-Check quarters, the on one expand need things us, with then do Socrates to to but do more to I job putting think and integration place Latin America, in in that efforts. of making need two pause wouldn't those be we And expect to I great really spend to than the a sure platform of for clients do two these in

to organic attractive, so, after to is that it really something have know first growth. we use good with accretive as a because our as see tango, is and continue two M&A, our And as to but never priority, you revenue the have capital of which you

Operator

comes Blair. Andrew. from The Andrew William next Nicholas question from

Your line is open. Please ahead. go

Andrew Nicholas

morning. Good Hi. questions. for Thanks taking my

international whether that metrics bit terms for a similarly retention, and then your it's to base relatively are curious, between business in those how played U.S. fourth there two behaving just relative kind for or you expectations. perform, your would are track 'XX guidance growth or the about quite business of next You've also out, and different or expectations I'm buckets quarter year any underlying major any to talked point? distinctions of how you this expect at of the

Peter Walker

morning. Hey, Andrew. Good

next our the of headwind business of going would and year cadence currently a base a XXXX, into pretty been major be business terms currencies obviously We in for for growth to are has plans and the we XXXX. of U.S. I similar. the FX that headwind just do So us say in operate. expect less international because

Andrew Nicholas

acceleration bigger upsell the and the a it becomes to numbers, for an bit slide this as cited of up, the if we identity medium growth Understood. a follow I'm as know just a certainly between transactions Thank be in identity piece that about over that and as curious quite I on ID.me and term, opportunity there there would those switching targeting you're would the rates you gears increase target then Yoti, for bigger seems talked growth you And about you. like upside mean continued the cross my business year think at and that growth. XXX% possibility.

if you. your kind long-term into of baked of that's kind target? Just wondering Thank

Joshua Peirez

Thanks. Yeah.

So it's, Josh.

big XX% of we XX% I to Let see. all at put The that if with you XX% measures CAGR since up the other part and up me in that look addition in cross-sell to our think ability our growth up-sell that the just a XXXX, prior off was you that that we XXXX. had XXXX, again, year start put in the

And identity that all the screening to In rates. rate overall reason XX% really mix and revenue really, I we've just growth keep with those the mentioned our the need way to overall pre-screen is -- fast. same think and keep that pre-hire business being talked maintain of monitoring didn't given identity growing that of before that I XX% the by about to our driven by growth our and order grow monitoring XX% obviously

we and if number. that about that us that changing are does really we identity We really long-term think good it we're over presents drivers, to it excited do be but upsell our that our time something is today cross-sell opportunities, think some we not breakout successful to targets provide and continue upsides with

Andrew Nicholas

Great. color. Thank the I appreciate you.

Operator

The next ahead, Morgan from Kaplan question is open. is your from line Toni Please Toni. go Stanley.

Toni Kaplan

of on better into it's and any how clients there so that the could you call, way it's sort slowed much. directionally or had Is maybe of A times couple your and post-Thanksgiving how large reason give, upward? mentioned volume a is of sort much Thanks December any first been this the you February that two have if a like January, Thanks. of confidence better and is just -- usually trend on any not sustainable been months a that not sort color year-to-date.

Joshua Peirez

Toni. Thanks,

minus think sort QX, share I to year expectations low again, being the So in us with the our first Peter minus XX% for growth. point for of did X%

saw February was we growth sort start base with in particularly what So we what on of that improvement and an December, seeing January just in that, from said to were line. we that

into those baked that's that numbers. think I So

in think about the And year to of our the how beginning been it, the in of there always from of the is year. you business seasonality terms end

seeing in about as basis. what we're of terms a we're year-over-year So, talking it in

'XX right we've 'XX pretty versus much there since up January So, February Xst January end and we've the January improvement, remain seen December February year-over-year an 'XX, versus and year-over-year December of it through 'XX seen February. and

And the what year told so consistent our they in -- us the with put based into clients and coming it's plans on place.

Toni Kaplan

Got it. Yeah.

of has your from helpful. update the you would about pricing in some suppliers. Have seen be we've of any there pricing And that or past, full continued Okay. heard sort that some steam? increased Any moderation on

Joshua Peirez

Sure.

say I I some that think is what are would there provider.

et a lot which changed. not criminal are our really those fees, again, costs cetera, state So have of

then verification who have piece, one provider side, on of remained baked continues in pass So have that's continue providers most big exception those we along have do our of big to and some increase reasons. those both the cases pricing one consistent into or generally and course we the expectations, revenue with for even one prices, our And to margin. maybe reduced on our competitive

Toni Kaplan

I'll it how Great. look at any Gig has driver how, you trending update as -- sneak just one And a long-term? view about and been then more more you your talk Could growth whether a how it's on in. lastly, on

Joshua Peirez

think U.S. I for just us a Sure, so for Gig going international moment. separate I'm to and

this be last line performed of we with and less year, expect us for into for gig U.S., think do expectations more going growth year. to our it I or in an area

business. As you our on still it's a relatively verticals of see we update provided our you small overall percentage that U.S. with an chart of

we And an to continue there of add that are significantly big that in think did go our XXXX for to they but do particular had new a U.S. sorry done we Internationally relatively UK the 'XX. in the business there's was it international from a a had book. hiring see business, lot we Gig leader see our in really and that huge gig we in during drop-off services all where growth out that think where service slowed effect Gig, to and can be and we driver COVID delivery on in we delivery in they delivery, UK XXXX that

Operator

through go can time ahead, open. to line the we question, and to your the themselves comes Research. Scott asked get question are Wolfe to queue limit Due constraints Please is from from Scott. participants next and one so time good Wilson

Scott Wilson

on Good morning, the if my taking dynamics that you guess geographies thanks to guys. other within was international acquisition. and back touch and into? maybe you've the Hey, compares I I wondering the the space some Thanks. to questions. maybe Socrates of LATAM competitive going could how for expanded

Joshua Peirez

Thanks, Scott.

a market And for local think So Latin really very players in true few it's one is businesses. screening, very understanding. particularly America it's really in I very big -- America, a area our there region, highly where domestic background that our it's and so of American there of are very Mexico competitors business, Latin obviously only a for our an concentrated is Latin nascent has from that one

clear What Brazil also in are presence Colombia, markets where in leader to we which important are and we about presence really think opportunity addition and is significant having to Socrates a like a the Mexico the we grow there.

us, see for thrilled were So markets those are three key we that. very to

they've we competitors see continued done the support our opportunity, business as of Importantly, terms in market. that well say does some so of some will historically, actually the a Socrates of I as in that

Operator

The your line from go ahead, Rosenbaum from comes open. Shlomo Stifel. next please is question Shlomo

Shlomo Rosenbaum

very firms do Thank just Hi. ask that several public capabilities like wanted is large I their but actually small don't X, have report impact net lot understand you as about is a and we of end kind And the Sterling lowballing question some year? terms in above Josh. retention comes I selecting consideration. much. are margins but when certainly taken them, to it of this not pricing to about the you to where that's the are of a not I there Hey, it's you clients retention, more a Street that a that of know you price? -- and think market, terms are it main Tier into in could aspect Wall something has provider, be there to particularly there particularly think concerned on

Joshua Peirez

Thanks, Shlomo.

baked really there, on to we've to of undercutting case retention do thing say is, the they where and that get them into last always and I rate. tell is, they it's that's do we sized compete I true, think would chose players. with us that is price see not that's quality, had been one price. losses and that of us think remember that the the the I it can't we the not Where dynamics with service, that I a important the we us They for of see, will or tools, because terms that's two the product, because in it true, people. one choose the is, with I XX% client conversation smaller single of the gross told that mid years extent What the us stayed the you

Operator

And your ahead. to from the Please Celino goes question is Jason open. Jason, go line final KeyBanc. today

Jason Celino

Thanks for fitting guys. me Hey, in.

business like isn't pipeline one. Just get Thanks. holding It new to you by maybe up, which checks all affected factors maybe considered, sounds change can talk customers which about quick macro? things or a is provider, the the add background

Joshua Peirez

Just to question. of I part last Jason, Sorry, your that clarify want

choose why choose who business us question do a it clients new the about to screening come doing is or why weren't before? from to So background to perspective clients

Jason Celino

rephrase if come The sense. why you first you if Sterling part, talked, want? they that I makes can to

Joshua Peirez

No. That's okay.

background mobile-first tools. when think moment I the What be can. and able the are for looks in experience what first is of being experience I over few these of it's in going The candidates anything to things, being show visits out products if our a there and for on able we to screens, of process, that the adverse tool. hear like their doing ordering or $XXX,XXX their if are tried analytic our look many our business action, do to their go managing at we, So I we we myself there to employees pitching them job from when the so have U.S., clients I all,

shows piece having their have verticals with product upfront, information that by then clients the The we've fact our that unique really they're we that always and a firms. understands APS's itself. systems need if vertical, are where of make that want of vertical, developed next many where were professional our standpoint an most to going work approach onboard competitors with able who comes to all keep not to play capabilities almost somebody that is we integrate we were that that clients from to them collect the sells back and services to dialog, really sure to into ongoing the that able really by And and it a dealing way business the that HCM specialty by vertical, way of

being the that statistics, right. of shared believe right your So boutique global scale benefit XXXX how since turnaround with your who terms only not in you name, a that knows of class positioning providing tools, and experience those things amazing of are we that of know specializes times player deliver being you can also had to this in of the of who quickly call, industry, and those I mentioned can up best in some the there, know I firm, while this we that if do that people we've

So five that minutes, XX% something returned like that in of searches our being touch. U.S. really is criminal can't people

clients. are And we so that from of those kinds things hear the

confident a feel we're So to really them. talk win get that We deal. to going as we chance as long to

Operator

further and the may Q&A attendance. have And for you concludes your questions thank today's now lines. concludes call. this very thus disconnect We in We your queue, today's much no you session

Sterling Check (STER) 2 Mar 232022 Q4 Earnings call transcript