First Advantage Corporation

Good day, everyone. My name is Nikki and I will be your conference operator today. I would like to welcome you to the First Advantage Second Quarter 2025 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, Nikki. Good morning, everyone, and welcome to First Advantage's Second Quarter 2025 Earnings Conference Call. In the Investors 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 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 2024 Form 10-K and our Form 10-Q for the second quarter of 2025 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. Reconciliation 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. To facilitate comparability, we will also discuss pro forma combined company results, consisting of first advantage and Sterling CheckCorp historical results and certain pro forma adjustments, as if the acquisition of Sterling had occurred on January 1, 2023. The pro forma information does not constitute Article 11 pro forma information. I am joined on our call today by Scott Staples, our Chief Executive Officer, and Stephen Marks, 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 call. We have four key messages for today. First, we delivered solid results in the second quarter at the upper end of our expectations. Our revenue performance was supported by the strength of our sales engine and increased scale. We also continue to see the positive impact of our accelerated synergy realization efforts. This is evident in our Q2 adjusted EBITDA margins of over 29%, as well as in our nearly 30% -over-year adjusted diluted EPS growth. Second, we are continuing to successfully deliver on our post-closed priorities and are ahead of schedule on the integration of our $2.2 billion Sterling acquisition. This includes a consistent emphasis on our products and customers while continuing the integration process, focusing on customer retention, actioning synergies, and reducing net leverage. Third, we are executing on our FA 5.0 strategy with a focus on delivering results across three core elements, increasing share in our target verticals, accelerating our international growth, and actioning our -in-breed product and platform strategy to accelerate upsell and cross-sell. We are driving results while maintaining our relentless focus on cost discipline and carefully navigating the current uncertain macro environment. And fourth, today, we are reaffirming our full-year guidance, which Stephen will cover in more detail shortly. Now, turning to slide 5 and a closer look at our results in the second quarter. We were very pleased with both our top and bottom line second quarter results, reinforcing our conviction in our resilient business model. For Q2, combined upsell, cross-sell, and new logo rates continued to perform in line with our long-term growth algorithm targets. Retention remained high at over 96%, consistent with our past results. Demonstrating our team's strong customer-centric focus, BASE saw sequential improvement from the first quarter in line with our expectations, all of this against an ever-changing macro backdrop. In Q2, two of the three large deals we discussed on previous earnings calls went live and started generating revenue. As a reminder, these two deals include one with a significant retail customer in the retail gig economy, and one in Australia representing our largest international contract in the past number of years. We expect the third deal, which is a large healthcare deal, to go live in the near future. This success is further supported by our 18 enterprise bookings in the second quarter and 78 in the last 12 months, each with $500,000 or more of expected annual contract value. This gives us confidence in our ability to generate new logo and upsell cross-sell revenue, and is an encouraging sign of our sustained -to-market momentum since closing the sterling acquisition. Looking at our verticals during the second quarter, we saw continued overall strength in our transportation vertical. Despite experiencing some macro-related slowing in BASE volumes, transportation was still able to generate positive growth by leveraging our upsell and cross-sell initiatives. The retail and e-commerce industry continued to see a decline in order volumes driven by the impacts of tariffs on U.S. consumer and how our customers in that vertical are positioning their hiring plans. Hiring momentum in healthcare tapered a bit, but we remained bullish on the industry overall. Most of our other verticals showed positive overall growth in Q2, partially powered by our success in our new logo and upsell cross-sell programs. Internationally, we are seeing good momentum and continued growth in our targeted geographies, including Australia and the U.K. We also continue to see strong customer interest in our digital identity solutions. In fact, in conversations with customers, we often spend about half of our time addressing the increasing new challenge of identity fraud risk in the employment life cycle. While our powerful competitive differentiator and indicative of the direction in which our industry is moving, when combined with our broad suite of services, we can offer an -to-end background and digital identity solution covering multiple parts of the recruitment, hiring and onboarding processes and creating a competitive advantage for first advantage. Overall, as an early market leader with digital identity solutions, we are able to deepen our strategic dialogue with customers, strengthening our relationships and stickiness of our products. Looking at the macro environment, we have continued to see some of the macro indicators around hiring volumes normalize versus last year. There is a consistent and notable tone of uncertainty as policy changes, including immigration, tariffs and tax policy, continue to cause our customers to reconsider their business strategies, resulting in many of them remaining in a -and-see posture as it relates to their hiring plans. Given the evolving macro backdrop, we have updated our second half base growth expectations to be slightly negative instead of modestly positive as we previously expected. Despite this base forecast, today we are reaffirming our guidance. We feel confident in our business's ability to weather a variety of macroeconomic scenarios based on our diverse range of global verticals and customer segments. Our mix of hourly and salary-focused customers, our diligent focus on controlling the controllables, and our ability to generate upsell and cross-sell revenues as a base revenue is stabilized. Turning to slide 6, we remain laser-focused on our post-closed strategic priorities. We continue to successfully execute our integration plans and provide a seamless experience for our customers. We are leveraging the -of-breed product platform solutions from each of First Advantage and Sterling, and increasing backend automation. Our customers continue to be excited about the benefits of this approach, and the resulting products, data, and AI-enabled technologies that are or will be available to them as a result of the acquisition. In May, we extended First Advantage's award-winning ClickChat Call customer care solution to those First Advantage customers that came over from the Sterling acquisition. We likewise made available the higher-margin First Advantage Work Opportunity Tax Credit product. These are examples of our -of-breed product and platform strategy coming to light, which enables better customer experiences and incremental upsell, cross-sell, growth opportunities. We are staying closely connected with our customers, and through our global Collaborate customer user conferences, we have been able to deepen our strong relationship and enable more frequent opportunities for engagement. Following our successful April Collaborate user conference in the U.S., we held regional events in India and Singapore in June and July, with the MIA, Hong Kong, and Australia events planned for this fall. Through these user conferences, we have hosted and met with hundreds of customers and prospects, giving us greater visibility into our global markets and increasing our confidence in the opportunities ahead. And finally, in May, based on our strong progress, we further increased our Synergy target range to $65-80 million. We are executing well on this plan, and Stephen will provide more key details on this shortly. Turning to slide 7, I want to thank everyone who joined us for our inaugural Investor Day on May 28. We hope it enhanced your understanding of the First Advantage story and our strategy for delivering long-term shareholder value. I would like to reinforce the key messages we were proud to highlight during our Investor Day. First Advantage is a category-leading technology company. We deliver global software and data through our proprietary platform in an attractive, large, and growing HR tech market. Our industry TAM is over $24 billion, and we are well positioned to continue to capture growth among existing and new customers. Digital identity alone represents $10 billion of that TAM and is growing faster than the traditional background screening market. Additionally, we are widening our competitive advantage with our -in-breed product and platform approach, our proprietary data, and the capabilities added through our acquisition of Sterling. We are executing our FA 5.0 strategy with differentiated solutions strengthened by our investment in AI and automation, our verticalized -to-market approach, and our focused approach to international growth. We are also building on our strong financial track record and are committed to achieving our long-term four-year financial targets. We are well positioned to accelerate margin expansion and adjusted diluted EPS growth through our acquisition synergies and have already made substantial progress on actioning and realizing these synergy opportunities. Additionally, we are proactively managing our debt, and in July we repriced our credit facility to reduce future interest expense. Then, in August, we made another voluntary principal debt repayment, showcasing our commitment to reaching our target net leverage range. For anyone who wasn't able to join us, I would encourage you to review our presentation and webcast from the event available on our Investor Relations website. With that, I now turn the call over to Stephen.