Earnings call transcript Q1 2023

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Operator

Thank you for attending today's Sterling First Quarter 2023 Earnings Call. My name is Megan and I'll be your moderator for today's call. [Operator Instructions]

I would now like to pass the conference over to Judah Sokel, Head of Treasury and Investor Relations. Judah, please go ahead.

Judah Sokel

operator. you, Thank first Sterling's earnings call. Welcome quarter to XXXX

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

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

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

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

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

Joshua Peirez

you. and Good you for Judah. us. Thank thank joining morning

Sterling's successful execution, I accomplishments and guidance. as period very are our was XXXX we and reiterating year the first team XXXX and proud as of of delivered, the we expected, of am results the quarter unfolding a is a result

shows the Slide quarter. of highlights X

steps long-term towards First and our foremost, goals. a this achieving was took and we ambitious where strategy quarter XXXX

on that the and our EBITDA, were environment in above income first free our expectations against macro even expectations. our programs solidly Our and to helped net cash financial us adjusted prior results executing in the were slightly flow our deliver quarter favorable our we're revenues adjusted to encouraging, progress uncertain cost-savings

the continuous excellence. innovation and customer positive in unyielding team's results key several cost work were at the through and great our enhance proposition, the identity quarter, which technology beginning strides In of out to and and first Sterling hard operational initiatives following service on year to M&A. the value driven explore by an and performance set These verification, that made we the further slides, we will optimization commitment I

to now background our strategic XXXX company's On services trusted strategy XXXX, we company, long-term workflows. quarter which completed earnings goals. mentioned aspirations. fourth our our market summarizes the we and by X, class seamless and unrivaled most and long-term call, in our differentiated Turning refresh aspire be for foundation client set service, which world's We to expertise, best Slide deep a data identity in the

have To new including M&A. to geographic closer specific achieve goals, The vision. and for areas near-term we upsell, strategies, company will XXXX that goals framework with drive concrete these we our focus believe several fueled long-term growth development products directly innovative strategic our that expansion of to

focused Specifically, first these down on identity this our organic control, doubling optimizing the can we results we year In on cost four scaling our each on verification and M&A. are the profile positive areas. we of revenue saw quarter, drivers business,

continued we We our revenue spend, growth X, logos clients and our strong the our Slide Starting retention in quarter, execute all first revenue to increased maintained control. regions, in drivers client with in organic geographic on new gross on the organic rates. won

culture, core perform ahead capability. When our continued enhanced the exceptional to with slightly us characteristics technology we client combined into in provided this, do those service cloud-based expectations To of we innovative and offerings with enabled March. investment our

previously than was first slightly solid at growth albeit levels better X%. lower from long-term our clients and This delivered. In the new the than a have expectations, our bit remained target quarter we

new call, to till quarter the first second saw some and quarter As client discussed quarter. push signed on the implementations later we fourth our in

target long-term new our implementations to of the those X% the XXXX. online, over we expect to As come growth of client X% return course to

continue We long-term uncertain quarter with delivered targets. first proud of, XXXX, supportive and macro given In new we accomplishment growth our environment. we the long-term robust target our an very business the line remains cross-sell of our in of are pipeline from to see upsell and

past Our did the Ignite innovative culture to of a combined drive products with work new Project release to functionality at the continues we complete new pace. and swift

solutions and in During saw first verification, traction I-X. like monitoring post-hire we clinical concierge identity the quarter services newer our such and services, as

high hiring delivering also powering cost. time We hire automation, increased low to our faster accuracy and at

records the with automation the capabilities. U.S. Last vehicle fulfillment automation fulfillment milestone shared U.S. screening release of time, courthouse where made Moreover, in achievements about outside mature. civil into we improvement our and we digital criminal integrations same recent say searches, we data progress background the the are of quarter, now can and motor turnaround improved and less of on

pleased which the to great identity a since true workflow we into significantly and growing addressable and paying ID.me pace released to win, our identity been quarter first believe the of market to verification. investments to our Moving during the positive in of first outcomes right the adoption at robust differentiation, identity our consistently we create are identity slide, half investments we amplify made has verification Identity and right progress verification early market see exclusive XXXX. our market off. We our

a of solutions on both XXXX, first quarter-over-quarter are year-over-year quarter suite our identity basis. global continued of strong and growth In the

first with adoption all are added identity several the we to identity, client types large the programs. in traction verification of of seeing clients, enterprise clients quarter, leading we and While are

to intentionally process. screening of identity Candidates longer from benefit increase accidentally Regardless information, or background an all programs able records screening no either identified. can into adopt who criminal inaccurate and the size, stronger submit clients are in

experience been XX and have seconds is takes fast XX to and pleased just that complete. efficient U.S. We also the Candidate to seconds

partnership a U.S., fortifying continue physical built we exclusive the with our at identity advantages Finally, In verification in-person enabling ID.me, have competitive to our pathway, to in individuals within location. verify their ID verification invest identity. We partner an in

our recognizes to conforming services. to to as large milestone have a pleased were the are IALX This potential this major for certification identity utilize from Technology digital pathway milestone. National begun government opens Institute growth federal the conversations other the arise and certification. set we verification and about by that recently We announce and guidelines excited our can Standards achieving the of agencies Those path already by

now company. Turning Slide profitable to shared we in recent cost optimization on initiatives a that of scalable a X. calls more at earnings series building We've and launched aimed

during and We efficiency meaningful targeting and savings $XX expect of we these $XX savings cost to including run drive savings initiatives in-year million gains million XXXX. of are rate long-term

by and through leveraging of a history savings productivity cost We have driving technology. discipline financial and

proprietary continue platform is our including more cost APIs RPA our leveraging by rich cloud-based and achieve XXXX XXXX, technology through supported three-pillar fulfillment driven powerful and than artificial-intelligence our we In savings For targets history to our and example, aim approach. platform integrations automation bots. a

in sold through aim labor of and First, processes costs re-engineering data our Nucleus goods cost reduce to and fulfillment increased automation. through we Project

Second, our reducing are estate we strategy our even footprint. real and our into first facilities well. This and leaning by reducing more has facilities virtual approach us costs served

Since and additional are closure its we with multiple world, around offices the of adoption offices. now closing the in XXXX

XXXX, alignment functional and the OpEx with our we're Third, in structure by align established savings. meaningful we go-to-market enhancing in will organization result initiative to we believe streamlining

early against process X teams streamlining offices and and strong towards strong our fulfillment first particular, and QX our closing automation In executing functional goals. towards step was facilities made we steps we of engine. in progress globally a re-engineering our made

Our increased gives XXXX in progress goal us during our quarter margin in and the confidence expansion of beyond.

X. is goal, will M&A, on The shown discuss final Slide here I XXXX

have large fragmented the growth. of generate, increase we we and result cash our a As the markets, to addressable serve both scale and great through a opportunity and flow organic we which inorganic

two and executed A-Check. on shared quarter, March Socrates we the our first acquisitions, call, As during earnings we on

several of our local our clients another geographically goal presence Latin found key U.S., rapidly needs already new multinational to M&A a we acquisition growing and in the are now regions. achieves leader January Outside Our regions, Socrates with and of can region. in serve using We hiring of new attractive America, the into expand in

M&A complementary share Our other A-Check, tuck-in strategy highly in acquisition on accretive U.S. market was growing the of deals. our a deal, through builds successful which of

across media. and possesses Company client attractive high including enterprise-focused care, The base tech diversified industrials verticals a quality health

platform expect deal Sterling As SG&A with products. this EBI, synergies rationalization migration, of upsell to and from significant yield we

early we with the deals, pleased pipeline. business the new months healthy a of are integrating both of revenue In trends inclusive

also EBI pleased early and expertise deal on are by and ideal clear integration dividends. We the yielding with the from the we initiatives, built other skills

is on executing An goals and a this key laser are operations and acquirers XXXX. effectively and focused important deal of efficiently we goal determining factor success during a integrate ability to cultures, performance

gains the quarter the throughout A-Check of by the integration plan the end first expectation team's of realize increasing period. execution to of highly complete synergy the the has XXXX, We far XXXX by Thus encouraging. Socrates with been quarter XXXX, second during to that and for of

adoption X. background Economy. for by secular attractive the nascent. for the continued I'll screening screening market The services identity and growth still growing conclude tailwinds. market driven with Slide and large attractive Overseas include churn a and of addressable particularly These is work, geographic with multiple background total and millennial remote contingent with Gig verification expansion opportunity is

to the will our of goals the strong you on update We take towards forward the about innovation-led and our step us as on discipline culture to market competitive our strategy. forward that to advantages, XXXX excited global We're year continuing execute believe and look and growth another our enable progress achieving long-term unfolds. financial

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

Peter Walker

morning Thank you, good And Josh. everyone.

bps starting of XXXX to financial partially included of revenue currency XXX first now million, contribution bps M&A, currency due of XXXX, compared During to X% Turning foreign overview and a performance quarter of to the revenues Slide a an a XXX constant our on basis. $XXX drag The on approximately with first organic decline we quarter quarter translation. by from the XX, reported offset both reported

is we were results on earnings our to our as provided expectations the team call March our executing favorable goals. on XXXX slightly These

within revenue from including new our cross-sell, to continue see our success growth retention rates. strong most upsell clients areas and We the control, of in business alongside

these market are time. feel and share in offset expanding clients help We of focused growth over base winning and can we areas that momentum the wallet our with on share most unpredictability

above was our new slightly to this X% or long-term X client quarter's This consecutive quarters result above our growth at of growth X% expectation. Following new was client X%. target

by pipeline out ramping those As caused to now we new course we year. expect this business pushed as X% X% was XXXX. growth QX, discussed to March, some new return the business our planned and of client signed robust, late to and the new to QX over remaining in implementations With implementations our

by outweighed clients our and saw our we base performing first declines. declines revenue the target client existing ranges, those which approximately was quarter, were within upsell Within from existing retention year-over-year. expected down In cross-sell XX% gross business long

As we the only strong history base of growth our mentioned macroeconomic and current the in volumes are down to year-over-year year-over-year, industry levels, March, revenue in worth noting, XXXX. when been volumes due hiring down have first It's clients including robust XX% primarily remain to our record quarter XXXX uncertainty. against measured hiring relative

our at trends verification. back fast-growing through revenues the this cross-sell identity revenue the other in CAGR three seen as we've deliver newer, strong to past results drivers where including further base grown business our secular such positive able we've Looking traction past upsell have areas robust demonstrating years, XX% tempered a our been in over growth These cycle.

has As partnerships. services very to strong Josh identity adoption our exclusive for we described, provide client been

and to margins. opportunity market As to with verification significant discussed to see a view we've investment fruition. expand coming our exciting growth our accretive addressable we identity It's revenue as along

at the U.S. was business looking first quarter. down in year-over-year region, our revenues Now by X%

supporting in a growth mix, in compelling attractive U.S., and vertical the instrumental have recent revenue which our has diversified Within years. We been

by Finbiz. which and In Tech and performance saw was including the verticals, continued other first to our quarter, U.S. in industrial year-over-year. grow softness led some We our verticals healthcare Media

core led can offset to revenue quarter. International down trends. revenue which business in were XX% by EMEA markets our in trends screening drivers international U.S., was Similar base saw the by good gig vertical revenues our international control. volume in softer tempered to we the the growth region, good Turning declines the in

the in increased work partnership and U.K. identity seeing with Yodi opportunities digital to are well by EU. in as as and our We fueled wins new newest right client

closed results the the inorganic year. we've growth exceeding expectations. been quarter, companies' these In with months January X.X% A-Check, or delivered we first this in acquisitions from our and In March first and we with of both performances pleased of Socrates two revenue initial matching

A-Check. and described, well a capabilities attractive synergy deliver at robust potential the the Socrates Josh from is integration potential As underway work deals, these including upside to by geographic presented on expansion the

our due XX, This decline. last line trends, the Slide first base million, top to X% Despite the we a decline year-over-year quarter to adjusted primarily Turning our to softer revenue EBITDA XX $XX prior was expectations year, compared are adjusted discipline. savings our our expand on early financial driven to EBITDA points this and cost by quarter XX.X%. pleased basis was exceeded to progress margins by and initiatives

last today, detail be of introduced and XXXX. XXXX. initiatives at XXXX quarter, we we and will we of executed As described have over cost run underway, $XX which and aimed savings savings These programs during expect see in-year and cost meaningful rate gains. driving greater several are cost targeting a Josh in to When complete, are million savings million $XX efficiency

the to drive to for and plan in and over cost long profitably term. profile position scale initiatives company efficiently reductions We these permanent our the

on going progress we'll with pleased quite forward. keep focused execution laser are we far the So and

net first decline quarter EPS in EBITDA or a share, the adjusted year-over-year representing per million expense. of by higher This $X.XX partially to XXXX, the income decline adjusted of interest tax adjusted in had decline rate offset $XX was similar with In year-over-year we diluted X%. of lower

was the cash flow exceeded substantial Turning cash and prior XX, expectations. the to our XQ Slide seasonal increase free million, year $X flow QX XXXX the is from period. low a first our in quarter free results in point

our tax cash adjusted equipment. the and year purchases of of We lower plant range payments flow in free of included XX% collections, EBITDA forecasting cash on cash very and quarter's focused a in XX% are target drivers conversion decrease The remain of free to increased full flow improvement and property,

level our Our spent million to net of M&A our quarter remains we the Despite end end debt EBITDA net at net continue times net approximately future net million on attractive adjusted $X poised to Xx our declining, of and any X.X at lower leverage these target. leverage two or an outlays, is cash to was the at Xx $XX quarter, acquisitions leverage on and absent share buybacks. repurchases. In

with the our under organic and available revenue debt and strategy growth and quarter ended million credit providing growth reinvesting We million, facility, ample pursuing cash to our $XXX of million equivalents $XX of M&A. of with capacity total cash us execute in $XXX

of enhanced our an hedging also rate floating structure approximately fixes we quarter, debt. the During of implementation interest XX% program, capital our through the rate which

healthy growth, balance Our pursuing M&A capital maintaining allocation organic priorities in and remain revenue investing sheet. a

see true program. our opportunistic in repurchase buybacks growth environment previously to opportune uncertainty share as for share the includes This macro under announced a lower These priorities times we foundation as hold build success. future

cash quarter, M&A last use cash us hand rising discussed two we our the As position allowed in our to deals for on quarter.

Following positioned assets in focused supplement said, continue and of our revenue integration to pursuing two growth compelling the That these deals, we investments. remain M&A on further make organic these core the to two near and are well executing we term strategy. our

we we unchanged it XX, On since which provided Slide for March. reaffirm our is in guidance XXXX,

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

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

As we discussed earlier.

continue and growth by base cross-sell, including control, We wins are within upsell these in revenue solid declines. to new items our being offset see client

in change material the macro the year. not course are a assuming over We the of environment

material better would changes reflect shift for updates to If our there and is those a worse, we guidance. or

seen on revenue see to in April part year declines will first and to QX. declines based during QX of May, far continue We the what half we've comparable year-over-year year-over-year likely so of expect the

This and of the our by growth will and business measured year-over-year basis. XQ's clients seeing history, We company's encouraged terms are the trends. cycling in signs positive a in cross-sell on comp upsell new XXXX, tougher we are multiple both dollars and multi-year and revenue temper of of growth. time quarter At rate same in over strongest parts our are our when

half year-over-year growth to to As year second this we several into we expect key of the show move items. due

plans, and throughout the client inorganic M&A points of in pipeline, QX. XXXX. based we revenue ramping upsell second and two year-over-year X in new on First, comps, combination cross-sell From hiring deals, the easing fourth client expect points of X.X especially third year, on-boarding to our growth our

now favorable from are currency, We less slightly than impact foreign assuming no previous assumption. our

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

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

to due well The against discipline. previously some our us These To our expected were early hit stronger color first first ability as expect in targets margins increased adjusted with savings on we be quarter thoughts financial cost some of to give XQ our than more you savings by success margin quarter. margins in and quarter's confidence expansion. our as cost to we targets line results give strong EBITDA

to In we mentioned, accelerated Josh on doubling rent we added in for to additional $XX and the by of result purposes our quarter, of expense strategy EBITDA. down closing expect impairment As will charges the be facilities. closures these second virtual-first million, back adjusted $X are which million

increase trends cost margins from benefits the year-over-year and year-over-year We half half comps our of back expansion the over the margin improve ease. of for to as ramp revenue to improved actions expect first the and XXXX our

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

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

per the Over be margin to of XXXX expect targeting levels revenue targets. to this year. plus step are revenue XX% X% we growth Even growth and achieving profitability income the to we in a with to long our healthy net growth adjusted XX% robust expanding XX% XX% towards organic year, term, absence towards of XX%

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

Operator

Instructions] first with Our [Operator Sachs. line question from Tong of Goldman comes the George

Your line is now open.

George Tong

good morning. thanks, Hi,

the see growth client to clients? you new late that into and year, to new of new of XQ should reflected X% mentioned that was course XQ, return elaborate on business You growth new growth X% should and pushed return to signed into X% and a to new was to when over the in can much XQ how we pushed business X% X% client

Joshua Peirez

morning. the for George. Thanks Good It's question. Josh. Hi,

again was expectations growth up business lighter QX put let last start out. that our it from a record year on and notwithstanding the these million a that you piece little shared new So deals pushing on bit where of last reminding than we based was me call, we just by that the revenue $XX perspective

lower QX well to or that, expect come the we expect at in end see to pipeline from X%. we believe but coming a existing number we're there. know of the rates to would sometime things be business as in the lines bit And we going expect win QX is we in we the of time this the little by X% that we than figure that's that that deals the on new So, to at would and we win the back year look our year, as as both

the would expect we some back in year. to see getting of So, the half sequentially sort X% back to to improvement, but of the X%

George Tong

helpful. That's it. Got

you. trends increasing, Can and that's spend was client seeing share of gains client seeing spend have discuss you you You also and it then about base XQ, how you're mitigate course where declines. whether talk share improvement? market evolved over continued mentioned, steady is Thank increased base gains whether business or helping the you're or saw and deterioration where to

Joshua Peirez

first wants Yes. any Peter Thanks, to if color. I'll go additional George. and add

key in first, all markets and of verticals. would we're So and share of say in I our regions that winning key all our

going a as geographies. not again or of So to we place gains so in seeing we've in we're competitors sizes five share really quarter all from the deals in as well the it's the that know closed, we deals and another, of one we're that those all win, pickup believe

There's of us world I think well. one again, is long emphasize face nascent this of smaller our to really in reality would opportunity around that is that like the we that I of competitors. grow that tail there fact a market dynamics the great give the markets we as sort also the

there's to lot So, share gain of a as industry whole a grow that. to room within us this for and for

that's So important.

there. because the to we buying notwithstanding it's with particular monitoring the they're and clients growth target, were the I very in more in that the for around post-hire from cross-sell, pleased same services very upsell our seeing we're things and think identity other we're still post-hire us trends newer and base pleased and those the and be slowdown on within long-term

mix for that been the the of the in in saw QX, we've post-hire of actually in we north quarter. terms first We're identity from saying the XX% our time revenues move figure and

So, that, the was a we quarter. that in us think point first good for really

base steady. QX saw believe the of far into continue seen we as throughout the the finally business trends, then we've trend being was and December what QX And that we to trough and thus

George Tong

Very you. helpful, thank

Operator

Thank you.

Nicholas Blair. Our of next the William from question comes line Andrew with

Your line open. now is

Daniel Maxwell

but Andrew on on trends some Maxwell specific you the there, through any callouts weeks, geographic five Daniel second starting today, curious, or guys. off for Hi, on good performance morning, quarter vertical anything Just that? This is mentioned

Peter Walker

year-over-year, year-over-year, remarks, verticals the our verticals, trend similar bit and then highlighted then U.S. So our I growing prepared largest to of call a would continued percentage we've for well that I the be on soft, continuation And through healthcare are and QX we're a mentioned other industrial QX in as some perform also spots in really expectation our highlighted that down basis. May. little and is from to that I a which the seen that

Daniel Maxwell

strength on helpful. above XX% that's moving that there you're calling new identity. then, out And Okay, and given in the products

changed wondering, and any been in if out to of more package there's and the interest upsell cyclicality there, terms specific things what's Just of call just general those, in upgrades level broadly?

Joshua Peirez

It's Daniel. Hi, Josh.

the money point feedback we and actually the getting our a sure nine try you anything think to U.S. if So changed, proper saves questions like the and all, I in differentiated refining case But identity further cover to eight big have get on relative make in identity, building to there's them to anyone in solution, honestly, that through client where in clients, market in And the there. I traction has. doing of driven starting we've it because to think else is these or very people the what's they're monitoring on have I'll through questions, in and products first it. follow have the by board. with work if educating enterprise been And we successful the largely up. then can right what we particularly and based interest of products clients, gain

a capabilities the of a packages last and move more I we side, real there difficult in we pent to on the but monitoring the all releases the the On demand has products, call, subscription as model up, kind to that's that in shared been redoing with rechecking full of been quarter. it's a and of less think last match our been

who very some about we're we're the that again had our traction with pent-up demand. that of largest accounts, there, fact early excited seeing So have

to I was to think differentiated to success find wants well out don't been a able honestly and and our position of this shift competitors part the them that been biggest thought it we similar products and call versus who has products be to that's why that been have the noteworthy we've and that on So market the call.

Daniel Maxwell

the it. Thanks. Appreciate detail. Got

Operator

Thank you.

Our Stanley. question the of line next Kaplan from Toni Morgan with comes

Your line is now open.

Greg Parrish

kind talk This just Greg morning. and ramp. about to for the my wanted Toni, back for I question. thanks is taking good on Hi, circle Parrish of

So think and second it's driven X% I and the in tracking new some easier just second out half the out maybe half of you're ramping why called confident improvement sort parse in to but just like you business could comps? other partially Peter there there help to to then by hiring improvement I back X, missed, get items plan, ignoring

Joshua Peirez

Yes, let if start and then me Peter jump it's. in. Josh, want you

the I continued We're expecting think expecting continued from in going biggest in not comps, to our change. right? to macro So clients So where first, what is we're are factor a the have plans macro, uncertainty, have do the choppiness the we hire we of year, the know they're but those slated.

upsell in the signed the deals are are in in to coming we and cross-sell, are know online those and also that currently We lower phase particularly coming and so also we we testing addition we on have the are new things all have know board who comps, QX. clients know clients

gives QX, everything the our seen slightly So confidence, unfolding in given us set and was when we confidence but very much the as better than those expectations, thought. us is year things we have we've guidance that

you to I don't color. wanted know, Peter, if add

Peter Walker

the half with along comps the that in terms the and perspective pipeline Yes, I against upsell first the half seeing to back growth been this revenue company's easing the rate comp was go of just acceleration then I cross-sell. history just is to and record terms the it's we're always going add. us, of in where QX, in year, half difficult story, very for in back, in dollar new of mean clients a albeit

Greg Parrish

color to optimization plan. there. the thank great, for you ask Okay, I cost about wanted the And just

XXXX? full should in-year just if of terms rate, the last the is is that baked million end $XX in In already million there? of achieved quarter, wondering be of of sort And year by this then I in so million the to be of the the guidance realized was there $XX expected run upside $XX that timing savings sort

Peter Walker

Sure.

it million, so XXX $XX is drag reflected basis we the improvement point by is did a that's expectations points our it's that baked the margin of part of and basis terms the guidance and in of first So M&A., north somewhat the muted assumptions. from the XX of into in

year would In end to most early give have terms to call million you between next to I the that say come or to the on this rate, would I QX line. the next of initiatives think you having the back actioned the of exact QX, year. $XX point by we time of run those of sometime of we'll get in

So get we next be into the should the into of get may most all could a savings year. QX we but year. couple should way spills There QX, there following next almost that of for out the million be

Greg Parrish

Great, thank you.

Operator

Thank you.

line question from Steinerman next of comes JPMorgan. Andrew with Our the

Your open. line is now

Alex Hess

Yes, right, for X% Hess that volume guys like I is volume base you teens slightly, Alex pointed to mass like something organic but that just a the wanted were that something low for of walk and this trend quarter, through Andrew some to, Steinerman. on XX%? the and hi, is to down point up volume logos new about base wouldn't was

Peter Walker

QX. to in the than but, I'd that's the that guide you we base you're ballpark declines volume slightly saw similar in lower and

Alex Hess

bit guys any what in more, you. and as it understand sort dimensionalize called us of screening identity around give sort us much tailwind how XQ Thank progresses? the increase then be in a using or of that Got transaction dimensionalization year the I volume of you you and maybe help XXX% quarter know solution. Could any could identity, you last of you a volume out saw can maybe in

Joshua Peirez

Yes, thanks, Alex.

was my for we've moved the give about of in dimensionalization, was single QX to I what out public. specific at growth identity identity monitoring of to the quarter shared had as of north what and which that we and I or them think other mix, quarter habit as important I didn't did going remarks, time post-hire numbers, breaking part give that saw have with we starts QX, I our color, strong, we in well think want give over you the identity the overall it We went since year-over-year get that to but products was every we're QX, the the in for growth we excited quarter, XX% first most time very in we're is strong. not think that saw

So, that that seeing than old, excited shoots that that still really year on we're and that, excited are is great green that products traction less We getting. about trend. a we're we're the we're think about

Peter Walker

grow What And a comes Pre-hire, previously of shared and identity revenue. of revenue now Josh post-hire, right. start to our total percentage just that, from a our we've XX% we're revenue from it's and mentioned, that XX% seeing on comes as as of reminder XX% is

Alex Hess

it. you. Thank Got

Operator

you. Thank

Kyle Our next Peterson comes from the of question Needham. with line

Your line is now open.

Unidentified Analyst

Great, on Kyle thanks. the Hi, guys. Sam for taking Thanks for questions. today.

Are you on been guys market of any in Just changes verticals wanted have share to across rates win gains about. the talking key any guys geographies? touch the you seeing or

Joshua Peirez

continue to markets, Sam. we but of providers We're win and against Josh. larger we're Hi and share smaller It's particularly other competitors. domestic-only not. overall, to some rates also sophisticated our take in No, continuing the good from see less providers

Unidentified Analyst

Got it.

Okay, valuations to then to wanted I sense on what know there the about you the talked M&A thanks. but M&A the there what a guys and are of I helpful, it call, front? the kind get little some that's out just you of key for bit on appetite a seeing sense And a priorities get are guys for

Peter Walker

also we acquisition the A-Check. we shared with the for thrilled we our call of we on of the last as line a that the talked acquisition with were we in synergized So, and what really paid coming then expectations, about is EBITDA Xx and price of Socrates acquisition A-Check that shared and

Socrates book business existing brought A-Check really very current and it's LatAm of complementary a business new us us, so and with gives our expansion that's clients great in to the for us important verticals. geographic to

view the rest A-Check Socrates. of this Our have of for focused those of on are acquisitions, from realizing we integrating the business additional and is M&A, year, we the both most but likely capacity for synergies growing

Joshua Peirez

Sam, would points. I to add just Peter's

remarks, prepared our we his in allocation changed strategy. highlighted haven't Peter capital as that think I

of that lot think the time a happy lot Our like don't in a focus leverage target. to it's profitability. I be there. things that on to spend makes think is We end organic this, stay And low we're like to of questionable. of a sense We'd drive money a time growth still to towards on are investments our and the that

continuing M&A on that happy just our drivers areas in for see and we're we in these as this getting QX mix. of deals cost we're traction integrating just execution revenue our execution fit percentage overall where mentioned key were right perfectly. against these from the two So, product our year control, mode really innovate starting our that grow in to to model now that we and But get to the hardcore against now M&A synergies execution our a deals everything, targets, in execution against

going you're time the it's leader a us but in and profitable this in. set that even up areas great is, execute key to more product deliver for to year throughout a So this competitive larger, the hear I future were on advantages from think already market these more well, to have year theme, be

Unidentified Analyst

Yes.

thanks Okay, got it. That's helpful. All guys. right,

Operator

Thank you.

question the Research. Wurtzel next with comes of Scott Wolfe from Our line

open. now is line Your

Scott Wurtzel

thanks Great. Good morning, just integrations my the Socrates guys of and go A-Check. taking and to to questions. back Wanted for

international you're LatAm sort of can inorganic a the brought the you're Thanks. you end of wondering seeing of performance bit X.X%, on and some Just noticed what to assumptions any sort to Just the color your in? more also Socrates about learned of give with low the relative that there, more of you from there, you up other that geographies some X% that maybe market if contribution color little

Joshua Peirez

Josh. comments. It's two guess I Scott. Thanks,

clients base, In but just the calls want soon of don't own that your client to do diligence you understanding you what views you what the you you of those do First, terms always sense may acquisitions, things. on as some have out I'll more get revenue sure A-Check, make it of can, spend, a as in anytime you exist, these terms of get is say risks you you of

think of had month we QX, better one in than but again for So, little we us, thought a I was bit it performance in QX.

just I that put performance low asset we of conservatism felt that says change some the it negative have we taking think comfortable, into out what on. took we didn't in that surprises versus was more of the expectations the we've any we as seen end

the U.S. In seeing we're doing that programs to be Socrates really of what in the screening what able do in terms same us with particular that time be a some our for America, Spanish-language clients in in zones, they're done driven as in think of in to important align Latin of possible want U.S. very, really offshoring being is as number Latin very large particular. I by who that's and the is the can demand much America that clients. for

as a more America up operation cases. Latin and clients seeing among from people throughout to more as in And perspective, that as world halfway than being easier manage some to be they are centers are our cost setting beneficial around well the

So, we're excited about dynamic. that

We that expect something also that's of reflected see way see believe the that, Europe is demand meaningfully and not to had it America, to success really to but the lot is Asia. at acquired over we've to in key in we that to and Latin some markets contribute something assets to in grow there not year, chance be have Australia this a excited tapped we've and we're and Canada, company domestic a has which after of been go all, time growing similar with when the that we able

Scott Wurtzel

out the called you're we just sort I and the missed and some follow up apologies now? this that implementations. I helpful had trend know sales quick implementations you of into XQ, very Its you just of out right signing with seen a some sort sort of pushed that here have it. then of Got business said cycles earlier, newer on if but and re-normalize

Joshua Peirez

except have, everything know group their would we their they on those into two normally in very returning would QX given what more else at are mode new been are it's We're waiting seeing a them in quarter that for reasonable implementation and normal be about that like name on, and they normalized blue-chip clients there some quite brands, or this talked Yes. which own if terms operational of mode you than these or have we the we're had names, business they've but you would more publicly, in the don't for seeing we're are share reporting look pretty and but normal now dates. obvious last trends internal now they longer going what quarter with focused and two signing of initiatives

Scott Wurtzel

Got it. Thanks guys.

Operator

Thank you.

line Mark Baird. the with Marcon from Our next question of comes

now Your open. line is

Mark Marcon

against we Good levels. we're look where the last record volumes, for levels, absolute when would a you How questions. base it One morning comparing question, and thanks basically these take taking year my basically or From a back base at mentioned a normalization and are how even say gives perspective compared levels XXXX seeing to in you about and hi, normalized that thinking how you more that confidence pre-COVID, that, steadiness? we're was

Peter Walker

on big of Thanks, is the CAGR the not but is one shared years. that guess We've couple very which three last Mark. seen I trend. the of prepared growth, we XX% remarks a the even a base very, comments, have a driver in directly QX on it over number

our that's obviously of in long-term We excess think target.

growth, I amount and by our a exceeding has the of a are big years, And part as think, overall that over obviously targets long-term last we we few pleased good so, which base the been targets have all trends growth, given presentation long-term for in see slides X% base look highlight at that X% base growth to in we to we our today. the industry, pretty in we our

last at see to far would we than continue you but above seen churn, more We what pre-COVID. have the rates albeit still muted saw year,

and We churn continue to than see normal. particularly, Gen Zers faster millennials

the overall workforce our The as there that that, we We obviously believe gig like contingent see doesn't workers, you trend where grow times think would rapidly, are that that's industry. maybe but a of and use contingent will trend now, supports right continue.

that our saw And in we earlier. I so, base kind year we negative we Peter our of where, as QX and shared look at call growth from what this last saw turn QX and

particularly in stable. what a year the for the turned muted seen then then pickup earlier trough we've negative of and saw December a we we've that we and in that seen was and QX that's shared been So

May so year. X, Xth, this far So through far I January the guess from

year plateau hitting that the and beyond. normalize and then falling think we we that, to of then would to look into and sort happened X% we to as that expect So next X%

Mark Marcon

efficiencies Great. improving. and just thoughts perspective expense really and what your these of your the operations? a models able part application I'm terms initial from And in has job of increase of And efforts, the margins have that wondering, been terms generative great in obviously of done then of to of AI might through language the a well modules you've the holding in being be terms further longer-term rationalization, in RPA been large

Joshua Peirez

the Mark. short at time same the Thanks, We're and term. optimistic in cautious

use at capabilities to will our we've that is lot seeing obviously various of really just it the kind doing, what there point. utilize, capabilities data including do we of the normalization grow that that data But AI think fulfillment using capabilities, call I'm those a AI to I engine. speed the of I today, believe now rethink in chance we be we're I'll of technological in sure with we're capabilities, that been exponential which some one a forefront at not the but what the of exist this think,

doing end that data in in complies we're livelihoods the secure our way people's and the provide the we on are jobs also and to that information if view, a we clients we make our with sure for integrity hook, wrong. it get protects something that of want and to think the because law all I to that

it's the the cost, for our for data otherwise. world to so we're also well laws, to these using the as their but laws way do, a in for the and we around general that of FCRA, a various obligations and get We way low in that delivers benefit protection do as as that clients under deliver of the state meets work tools city important allows that hiring, think and speed our

provided costs and very for believe you facing exposed and and the publicly and can our the public and are excited not to use your we increase those are without drive effectiveness some utilize that data being we're those we that So that overall can of over tools time. down being plan opportunities exist that risking

Peter Walker

that cost about excited to time. to things Yes, candidate two the we're and and we out just Maybe improve cost add optimization. expect Mark. client improve optimization, the turnaround experience the on of but also

the on So, is and cost, and the guidance it's part with into in-year And million reaffirmed the then baked thing highlight XXXX this really of business provided up continued not of it's customers. $XX for focused we call. clients that to setting as savings success the is QX that just just but in other in

Mark Marcon

you're then short thinking of business And the about bit obviously new term, impacting platform? great. That's how about for more potential international call this but the long-term in just macro last markets as of becoming question talk can little factors well and you from a countries for international more is, and that adds parts bigger perspective, a terms Sterling

Joshua Peirez

Yes. Thanks, Mark.

great to to by and opportunity is we're wins, on new clients, and I of that exciting share more think our more versus of up in of them for outside again of us global we higher consolidation platform. gains, revenues single-core competitors believe providers the U.S. our of business our terms our risks other most percentage the the a any having continue believe more which regions that, serve seeing see and we revenue of us we and for we're sets

a a a in faster our the few best We we team as look we very position, that time than gone future that expect the how continue business migrations we all U.S., road there down think that winning excited got the winning position grow international and got about that's really and to the over we're ultimately to products for a some around U.S. we've the outside markets years. statistics shared products, have and we've of grow in we've and it that's so to we the are operate got

Mark Marcon

you. Thank

Operator

Thank you.

the Our with Capital next question line of Markets. comes KeyBanc Celino Jason from

open. now is line Your

Devin Au

you've conversations a this rest versus just you just the color Jason this ago? morning. vertical, of your you on financial out in maybe exposure Hi, provide about much just crisis are can know like Maybe for services my is and customers based recent with for banks Any how Devin question. how taking one us. year in you your on have vertical, the banking business on quarter thinking the hiring sector. from softness Thanks I given called with do in the plans that for

Joshua Peirez

Devin. Thanks,

So and think again, business I services have together. we financial

more particular. in your think I in applicable question services and specifically banks, financial So,

banks. again, services So vertical financial is broader our than

So, fail let's it of big smaller banks, to significant a to of also that big that mid-tier in to be are countries the low, to is other our too not exposure more too something say similarly less banks impact sort of and banks has fail. sort and is the to relative

hearing year. given baked industries it's revenues all program more about are the their pullbacks there programs, in for parts in that's the into again, any intern largest be not we're the would plans, and our where, that, of at organization summer guidance hire through of in our hiring that. The Those higher new we've much levels particular, where the year seen any

Devin Au

Josh color the appreciate I Great.

Joshua Peirez

Thanks Devin.

Operator

Thank you.

question next Our of line the from comes Shlomo with Stifel. Rosenbaum

Your line is now open.

James Holmes

James change the retention fitting quick starting on talk me in has rates, environment Thanks Rosenbaum. the for any is been one, any for and you environment? Maybe Are pricing seeing there on impact Holmes in. current to This a attrition? can you about Shlomo have

Joshua Peirez

James. It's Josh. Thanks,

retention. So to we're I on our target say would long-term be first, still at pleased

one existing are we as are as think of the I the on to really changes seeing there. RFPs bodes future. for side seen major continue client a lot on that there trends, is, side the think We the well We well haven't out offensive in more things

fair we that share. more believe our win We than

And more that excited of a really they gives clients sure just of that. getting taking us slowdown services. the is lot So little we're business. bit have the the chance make a earn when to right new about But, to that time a they're

say I at price. end amount high have last materially market, not anything the largest the few few of always of over pricing the increases the mid-year dynamics we've we're implement do change years. you and there, And on but in done the last pricing, a we on be all. pricing for at years to able some haven't expect us, again as We to material impact price And clients, they the think seen seeing as on changed

James Holmes

thank you. Great,

Operator

questions There time. you. no at are waiting Thank this additional

Thank now the you earnings first call. hope Sterling So day. a XXXX participation. conclude for I your quarter rest that you your wonderful have will of

Sterling Check (STER) 9 May 232023 Q1 Earnings call transcript