First Advantage Corporation

Good day and thank you for standing by. Welcome to the First Advantage Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand over the conference call to your speaker today, Stephanie Gorman.

Please go ahead. Thank you, Angelina. Good morning, everyone, and welcome to First Advantage's second quarter 2022 earnings conference call. In the investor section of our website, you will find the earnings press release and slide presentation to accompany today's discussion. This webcast is being recorded and will be available for replay on our investor relations website. Before we begin our prepared remarks, I need to remind everyone that our discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are discussed in more detail in our filings with the SEC, including our 2021 Form 10-K and our Form 10-Q for the second quarter of 2022. to be filed with the SEC. Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any obligation to update forward-looking statements. Throughout this conference call, we will also present and discuss non-GAAP financial measures, reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable effort appear in today's earnings press release and presentation, which are available on our investor relations website. I'm joined on our call today by Scott Staples, First Advantages Chief Executive Officer, and David Gamze, our Chief Financial Officer. After our prepared remarks, we will take your questions. I will now hand the call over to Scott.

Thank you, Stephanie, and good morning, everyone. Thank you for joining our second quarter 2022 earnings conference call. In June, we celebrated our first anniversary as a publicly traded company, and I am extremely proud of all that we have accomplished in such a short amount of time. We have consistently delivered double digit revenue growth, industry leading adjusted EBITDA margins, and tremendous cash flow from operations. On top of this, we have delivered product innovation that helps our clients hire smarter and onboard faster, and executed strategic acquisitions that have outperformed expectations. Reflecting on the last 12 months ended June 30th, we had extremely high growth with revenues up 33%, adjusted EBITDA up 37%, and superior adjusted EBITDA margins of 31%. This growth is incremental to the strong results we had during the prior year period. We leverage our digital initiatives, including automation, bots, machine learning, and artificial intelligence to do things better, faster, and more cost effectively. In addition, as of July 31st, our growing in-house proprietary databases now include more than 650 million records, with 50 million records in our verified employment and education database and over 600 million records in our national criminal records file database. These in-house databases strengthen our value proposition to customers who depend on the speed and quality of our solutions to help them succeed in today's dynamic and fast-moving hiring environment. Our highlights for the second quarter are summarized on slide five. Continued strength across our business helped us achieve year-over-year revenue growth of 15.3% or 16.6% on a constant currency basis. We achieved this growth despite an uncertain economic backdrop, increasing interest rates, and inflation continuing to strain the overall economy. Growth from our existing customers continued in Q2, along with additions from new customers and upsell-cross-sell wins. Our verticalized go-to-market strategy and innovative solutions are enabling customers to further expand their relationships with us. In addition to our sales momentum, we also grew Q2 adjusted EBITDA, resulting in an adjusted EBITDA margin of over 30%. This reflects our continuing efforts to drive operational efficiencies and digital initiatives, grow the usage of our proprietary databases, and leverage our G&A infrastructure. We remain focused on these initiatives to deliver ongoing superior margins. You will recall that during our first quarter earnings call, we discussed the macro trends and structural tailwinds supporting our long-term revenue outlook as well as the sustainable growth and resiliency of our industry. First Advantage's job market tailwinds, including frequent job switching and high churn, continue to fuel our customers' hiring needs. In the new era of high-velocity hiring, fundamental changes in how people work and apply for jobs are here to stay. These create long-term tailwinds for our business and will continue to propel our growth. The jobs market continues to be resilient, and we see few signs of this changing anytime soon. With the unemployment rate remaining near historic lows, demand for workers remaining at historic highs, and elevated levels of job churn, we see sustained demand for our products and solutions. In fact, a report published by McKinsey in July found that about 40 of global workers are considering quitting their current jobs in the next three to six months these themes are also echoed by what our customers have communicated to us in recent weeks despite the backdrop of a potential slowing macroeconomic environment our customers generally are projecting continued growth in hiring in the second half of the year albeit at normalized growth levels as opposed to the extraordinary year-over-year growth they had emerging from the COVID-19 pandemic. Looking ahead, this translates into normalized rates of growth for our business as well. This remains consistent with the original commentary we shared earlier this year on the phasing of our 2022 revenue guidance. Our customers are generally an excellent window into the jobs market and our recent conversations with them provide us a lot of confidence in our own outlook for the rest of the year. Additionally, our differentiated go-to-market strategy and verticalized enterprise sales force has enabled us to win eight new logo enterprise customers in the second quarter that will ramp up throughout the second half of the year. We are also thrilled to share that in the last 12 months, we have 128 new logo enterprise customers, a meaningful addition to our enterprise customer base. As a reminder, we define enterprise customers as those with $500,000 or more of annual contract value. We are delighted to announce the award of a major five-year contract renewal with one of our largest customers with an estimated total contract value between $350 and $400 million. This Fortune 50 client highlighted our technology, vertical industry expertise, and outstanding customer service as its primary rationale for choosing First Advantage. We believe this represents one of the largest contracts in the history of our industry. Additionally, during the quarter, we won a significant upsell in our healthcare vertical with a top 20 account. which will more than double the revenues from this client, propelling it to a top 10 account. These significant wins validate our go-to-market strategy and give us additional confidence in our guidance ranges. Finally, I want to highlight our continued strong cash flow from operations, which was driven by revenue growth and superior margins. Today, we announced that our board of directors has approved a share repurchase program with authorization to purchase up to $50 million of common stock over the next 12 months. Our strong cash position gives us flexibility around capital allocation priorities, which David will cover in more detail shortly. Turning to slide six. As one of the leaders in our industry, First advantages value proposition is enhanced by our longstanding commitment to continuous innovation propelled by our ongoing feedback loop with customers. This close communication is integral to developing and enhancing differentiated products that help our customers hire smarter and onboard faster. Today, I would like to highlight a few of our recent product innovations. First, The new release of our Enhanced Profile Advantage mobile applicant experience addresses the needs of the changing workforce. It reduces application time to minutes, enhancing quality throughout an increasingly automated process. Its smart and intuitive applicant interface supports 19 different languages and is accessible to applicants with disabilities. This update also includes an integration with our digital identity solution that is aligned with the recent government rollout of digital ID standards in Europe. Since marketing efforts began, the number of customers signing up for our digital trust solution has exceeded our expectations. Second, we have signed an agreement with Plaid, a leading financial data network company and a company that is a Silver Lake portfolio company. By leveraging Plaid's APIs, we will help enable near instant verification of an applicant's present employer during the applicant background screening process, offering simplicity and speed. And third, we continue to build out our proprietary databases. As of July 31st, Verified has grown to 50 million records and our national criminal records file database has grown to over 600 million records. By growing our verified database, we deliver faster turnaround times for our customers while positively impacting our margins. Our proprietary databases facilitate intelligent insights for our customers through increased access to records and richer data sets. These databases are a significant differentiator for First Advantage. All of these developments help us deliver smarter, faster, and more innovative products and solutions, and continue to differentiate First Advantage as an industry leader in the minds of our customers and partners. Moving to slide seven. During the second quarter, we published our inaugural ESG report. Our commitment to ESG is powered by our deep understanding and appreciation of the global workforce. This expertise is an essential differentiator and key to our tremendous growth. People are at the heart of everything we do, and our dedication to ESG is fundamental to our corporate culture and how we do business. We are committed to the environment, and we are working continuously to expand our strategies around sustainability. While our business operations inherently have a modest carbon footprint, we continue to look for ways to reduce and minimize our impact. We are also committed to strong governance and we take our responsibility to our shareholders, our customers, and the people they seek to hire very seriously. We are committed to maintaining a strong and independent board as evidenced by our well qualified directors of diverse backgrounds who oversee the audit compensation and nominating and corporate governance committees. During the second quarter, We were pleased to welcome Bridget Price as an independent director and a member of our audit committee. Bridget's impressive experience as a human resources leader provides her with valuable perspectives on how clients use first advantage solutions, as well as how our sector will continue to evolve and grow. We are excited about our collective efforts to embrace ESG. Our work will continue to develop as we identify relevant metrics and goals to monitor and measure our ESG performance and progress in the future. I will now turn the call over to our Chief Financial Officer, David Gamze, for more details on our financial results. David?