First Advantage Corporation

Good day, everyone. My name is Leo, and I will be your conference operator today. I would like to welcome you to the First Advantage fourth quarter and full year 2023 earnings conference call and webcast. Hosting the call today from First Advantage is Stephanie Gorman, Vice President of Investor Relations. At this time, all participants have been placed in listen-only mode to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. Lastly, if you should require operator assistance, please press star 0. Please note, today's event is being recorded. It is now my pleasure to turn the call over to Stephanie Gorman. You may begin.

Thank you, Leo. Good morning, everyone. I'm joined on our call today by Scott Staples, our Chief Executive Officer, and David Gamzee, our Chief Financial Officer. As you may have seen, today we announced a definitive agreement to acquire Sterling Check Corp. We will first discuss the transaction, then cover First Advantage's fourth quarter and full year 2023 results, as well as our 2024 outlook. Then we will open the call for questions. In the Investors section of our website, you will find a press release on the Sterling acquisition, in addition to our 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 would like 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 2022 Form 10-K and our 2023 Form 10-K 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 will now hand the call over to Scott.

Thank you, Stephanie, and good morning, everyone. This is an exciting day for First Advantage as we announce our agreement to acquire Sterling. This strategic and accretive acquisition will benefit customers and investors and drive long-term value creation. I'll start by walking through an overview of the rationale behind this acquisition. Against the backdrop of a highly fragmented, large, and growing market for our services, adding Sterling to First Advantage will allow us to further strengthen our high-quality and cost-effective background screening, identity, and verification solutions for the benefit of customers of all sizes across industry verticals and geographies. Our product offerings are highly complimentary, which should unlock upsell and cross-sell opportunities and enable improved customer experience across our combined customer base. A transaction will enable us to increase investment and drive innovation in key development areas of our business, like artificial intelligence and next-generation digital identification technology, all with the goal of helping our customers hire smarter and onboard faster. With this investment, we will be increasingly well-positioned to meet the evolving needs of our customers, deliver an even better customer and applicant experience, and do so more efficiently by leveraging best practices and technologies from both companies. With the addition of Sterling, First Advantage will have a more balanced revenue mix across customer verticals and geographies, which will reduce seasonality and improve resource planning, operational efficiency, and resilience across macro cycles. This acquisition is also compelling from a financial perspective. for first advantage for Sterling and for investors of both companies. It's just the beginning of a new value creation journey. As David will cover in more detail shortly, we are acquiring Sterling for approximately $2.2 billion in cash and stock. The combination of our companies is expected to generate at least $50 million in run rate synergies in the first 18 to 24 months with potential material upside. This positions us well to both reduce costs for our customers and create long-term value for our shareholders. We expect the transaction to deliver immediate double-digit accretion to adjusted earnings per share on a run rate synergy basis, and to accelerate our objectives to drive long-term profitable growth. And importantly, we're excited about bringing together the world-class talent of First Advantage and Sterling. We have two high-performing cultures that share a dedication to delivering excellent customer experiences. We look forward to building on that together to deliver substantial value for our customers and shareholders through this acquisition. As the CEO of the combined company, I personally look forward to welcoming the talented Sterling team to First Advantage. Overall, this combination is a transformative step for First Advantage and all our stakeholders. Turning to slide five, which highlights some key metrics of our combined company. This acquisition will create a combined company with approximately $1.5 billion in revenue that conducts over 200 million background screens annually and serves 80,000 customers across more than 200 countries and territories. From a geographic perspective, First Advantage and Sterling have complementary international footprint, deepening our local presence and advancing our growth in attractive geographies like EMEA, APAC, LATAM, and India. If we look at the verticals where our customers operate, Sterling has strength in serving employers in healthcare, industrials, and financial services, which make up over half its business today. while first advantage particularly excels in the transportation, retail, and e-commerce verticals. Together, we will have greater product and vertical diversification that generates cross-selling opportunities and reduces seasonality in our business, which will enable more accurate planning for greater operational efficiency. And the combination is expected to greatly reduce customer concentration customer base. Together, we will be able to better support companies as they manage risk and hire the best talent. Turning to slide six, the combination of First Advantage and Sterling's technology, products, data, and capabilities will further enrich our offerings across background checks, digital identity, and biometrics, verification solutions, drug and health screening, continuous monitoring, and beyond. We expect feature functionality that will reduce turnaround time and cost for customers. We see exciting opportunities to use our complimentary portfolio to sell incremental products and services to both companies' customers. For example, we expect to be able to bring first FirstAdvantage's i9 and WOTC offerings to Sterling's customers and certain of Sterling's digital identity solutions to FirstAdvantage customers. We'll also have an opportunity to bring FirstAdvantage's leading automation expertise to Sterling. We expect that as we find new ways to utilize our technology and capabilities, the combined company will be able to leverage FirstAdvantage's AI-driven intelligent routing and proprietary data assets to reduce reliance on third-party data providers, advancing our commitment to delivering cost-effective solutions to our customers. This transaction also creates the opportunity to accelerate innovation in ways that will meet the dynamic needs of customers and deliver an elevated applicant experience while also improving operational efficiencies. For example, with greater capacity for investment, the combined company will accelerate innovation focused on artificial intelligence, impacting both the front-end applicant experience and the back-end fulfillment process, and other technologies that will shape this industry over the long term. Similarly, the transaction will enable greater combined investment in next-generation digital identification technologies, building on our existing services and the acquisition of infinite ID. Digital identification has been a core part of FirstAdvantage's strategy, and bringing together our identity verification and identity fraud solutions will enable FirstAdvantage to further innovate delivering state-of-the-art digital identity solutions to our customers. Overall, our acquisition of Sterling will accelerate our strategic objectives toward sustainable long-term value creation for customers and shareholders. Our enhanced growth opportunities and improved diversification set us up to deliver a stronger, more comprehensive value proposition to customers in a large, growing, and highly fragmented $13 billion market for our services. And this combination enables accelerated investment in our products to fuel innovation and growth. I am confident that this acquisition is the right step to create meaningful value for FirstAdvantage's current customers and shareholders. and those of the combined company. I will now turn the call over to David to discuss the financial details of the transaction.