Sterling Check Corp.

Hello and welcome to the Sterling third quarter 2021 earnings call. My name is Emma and I'll be your operator today. If you'd like to ask a question at the end of the presentation, you can do so by pressing star followed by the number one on your telephone keypad. If you wish to retract your question for any reason, please press star followed by the number two. It's now my pleasure to hand the call over to Judah Sokol, Vice President of Investor Relations to begin. Please go ahead, Judah.

Thank you, Operator. Welcome to Sterling's Third Quarter 2021 Earnings Call. Joining me today are Josh Perez, Chief Executive Officer of Sterling, and Peter Walker, Chief Financial Officer of Sterling. The slides we will reference during this presentation can be accessed on Sterling's Investor Relations website under News and Events. The slides will be posted at the conclusion of this call, and a replay will be made available on the website. After prepared remarks, we will open this call to questions. Before we discuss our results, I encourage all listeners to review the legal notice on slide two, which explains the risks of forward-looking statements and the use of non-GAAP financial measures. Additionally, please refer to our recently filed final prospectus for a discussion of risk factors that could cause actual results to differ materially from these forward-looking statements. Our slide presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued this morning. I will now turn the call over to Josh Perez.

Thank you, Judah. Good morning, and thank you for joining us on our first quarterly earnings call as a public company. Sterling's third quarter was exceptional. We successfully completed our IPO while delivering record financial results, including 43% organic constant currency revenue growth, 69% adjusted EBITDA growth, and 168% adjusted EPS growth. In addition to reviewing these results with you today, we will also provide you with 2021 guidance and spend some time discussing the people, products, and technology that make Sterling unique and differentiated. Before turning to the core of my presentation, I'm proud to note that on September 23rd, we completed our IPO of nearly 16.4 million shares approximately 17% of our diluted shares outstanding, and we began trading on the NASDAQ Global Select Market under the symbol STIR. The offering priced above our range at $23 per share and ended the first day of trading with a market cap of $2.6 billion, providing net primary proceeds of approximately $94.5 million. Our IPO was a proud moment for Sterling, and I would like to thank our team who supported that successful process, as well as our clients and partners for the continued support of our business. I also want to take this opportunity to welcome Judah Sokol as our vice president of investor relations. Judah joins us from JP Morgan, where he covered the business and information services sector for nearly a decade. And we're thrilled to have him join as we embark on this next stage as a public company. Our hiring of a talent like Judah demonstrates the value we place in partnering with the investing community. I'm sure many of you know Judah, and he is excited to work with you in his new role. For those of you who are newer to the Sterling story, I would like to share some information about our company and industry. Let's start on slide five. Sterling is a world-class global provider of technology-enabled background and identity verification services. We offer a comprehensive suite of tech-enabled services in the human capital management or HCM lifecycle area. We participate in four critical areas of the HCM value chain, the pre-hire identity verification, pre-hire screening, onboarding, and post-hire monitoring areas. We are deeply integrated into our clients' HR, risk management, and compliance functions and our services are mission critical to them. Clients rely on Sterling to protect their brand and reputation, to create great first impressions with candidates through our branded tools that can be white labeled, and to be compliant with rules around the world through our compliance by design approach to product development. Our solutions also enhance clients' organizational efficiency by substituting for their manual processes. This is essential in the current market where there is a war for talent and companies need to move with speed and reduce their time to hire. This has allowed us to serve a highly diversified blue chip global client base. We have over 47,000 clients around the world, including over 50% of the Fortune 100 as clients, for whom we have performed over 89 million screens in the last 12 months. Over the first two and a half years since launching our new corporate strategy at the beginning of 2019, we signed over $150 million in new customer annualized contract value, and our momentum in new client wins has notably continued in the months since. We have also increased our gross client retention rate to 96%, a testament to our focus on exceptional client service and a demonstration of our predictable recurring revenue profile. Our top 100 clients have an average tenure of nine years and we have very low client concentration risk with our largest client representing less than 5% of revenues and our top 25 clients less than 30% of revenues. Additionally, we have low concentration of clients in any one industry vertical allowing us to have a balanced portfolio across the many sectors in which we operate. Furthermore, we operate in the cloud and we have invested significantly into technology in order to build a best-in-class, scalable, cloud-based technology platform. Over 95% of our revenue is already in the cloud, yielding multiple client benefits, including superior availability, improved security, rapid product launches, and the ability to customize and localize service offerings. We have over 75 platform integrations in addition to our world-class API. Over half of our revenue is integrated today, and the percentage continues to increase. I will provide additional color on our cloud-based technology platform shortly when I discuss our competitive advantages. Turning to slide six, Sterling operates in a highly attractive global market. The global background and identity verification industry is large and highly fragmented with a total addressable market of $16 billion as of 2020. And it is growing with the TAM expected to increase at a 12% CAGR to 29 billion by 2025. Importantly, the majority of this opportunity is outside of the US where we have a leading position and are uniquely able to continue capturing that opportunity in the future. We believe that there are several secular demand drivers that are increasing the need for comprehensive screening and hiring solutions. The gig economy continues to grow quickly, enabling people to have more than one job at the same time, with each of those gig relationships involving a background check. Similarly, the use of contingent workforces and freelancers continues to increase, driving greater needs for background checks. The ongoing increase in employee churn is also an important driver of growth for us. We've all heard about the great resignation and prevalence of remote work and increased desire for flexibility. We believe this has led to a structural shift in the workforce, increasing voluntary employee turnover, particularly with millennials and Gen Z. Another key driver is the greater adoption of background screening outside the US. Historically, international markets have been slower adopters of hiring technology compared to the US. Many international markets are only just beginning to view employment background checks as critical components of their hiring functions, which presents tremendous upside for our business. The value placed on identity verification is another important secular trend we see increasing around the world. Given the rising risk of fraud and identity theft in an increasingly digital world, the market is ready and hungry for digital identity services as a critical step in the pre-hire screening process. And finally, continuous post-hire screening processes are increasing. As employers look to manage risk in the workplace, we are seeing an increased demand for continuous screening and monitoring. We see an opportunity to capitalize on this growing market and continue to enhance our post-hire monitoring solutions, including screening for healthcare sanctions, medical licenses, motor vehicle registration monitoring, and social media monitoring. All of these dynamics underpin the critical need for employers to access sensitive information through safe and effective background screening capabilities, and they support the clear demand we're seeing for Sterling's deep expertise and tailored solutions. So what makes Sterling unique? Slide seven summarizes several ways in which we have differentiated ourselves from the competition. First is our global scale. Our international revenue increased 52% year over year on an organic constant currency basis during the third quarter. And we see opportunity to continue to grow outside the US. The secret to our success internationally is that we empower local leaders and teams to make decisions that serve local customers. In particular, global gig and enterprise clients are driving our international growth. The next area of differentiation is our verticalized business model. Sterling's go-to-market strategy is organized around geographies and verticals through which we deliver deep market expertise, thought leadership, and exceptional client service. These are critical elements of our success in both winning new clients and retaining current clients. In some organizations, verticals are just a way to organize the sales function, but at Sterling, our vertical teams are fully functional. Each vertical team is accountable for delivering in their client set. They are empowered to create and drive retention and growth strategies based on their deep understanding of the industry, strong relationships with clients, and clear view of the white space opportunities. This allows us to have the personal touch of a boutique firm while also providing the global reach, scale, and resources of an industry leader. Technology is another key area of differentiation. Sterling is constantly modernizing and we see ourselves as best in class in all elements of the user experience. We have invested in our technology through a three-phased initiative called Project Ignite. We are already two-thirds of the way complete, Phase one involved modernizing the experience for our clients and their candidates with state-of-the-art mobile-enabled products. Phase two was our migration to the cloud, where we are now running over 95% of our revenue. Phase three involved the consolidation and decommissioning of our older platforms. Project Ignite has transformed our business, particularly around our cloud-based technology and product delivery. By eliminating on-premises infrastructure and the related complexity, we've been able to achieve the highest levels of availability for our clients and provide offerings that are both reliable and scalable. This shift to the cloud has also resulted in our ability to shift resources to building next-gen capabilities and solutions for our clients. Our advantage in technology extends to how we fulfill orders. We have been investing for more than a decade with the goal of having the most automated systems in the business, delivering the fastest turnaround times with the highest quality and lowest dispute rate among the industry. In particular, we have over 3,000 automations leveraging APIs and RPA bots, representing over 90% of our U.S. criminal searches. But for us, it's not the number of automations, it's the results it drives for our clients. 70% of U.S. criminal screens are completed within the first hour and 90% are completed within the first day. To demonstrate how we put our clients first in delivering results, last year, at the height of the pandemic, we were able to fulfill searches in at least 98% of U.S. jurisdictions, even though most courthouses in the country were closed. Our turnaround times and ability to service clients, even during challenging times, are attributes that set us apart and are critical reasons why we win and retain business. And finally, we are very differentiated in our approach to identity verification. We do not view identity verification as a product, but rather as a service and a strategic pillar equal to background checking in terms of our growth opportunities. We believe identity should be the first step of any background screening process. With increasing data breaches and the growth of remote work, identity verification is a more powerful tool for employers than ever before, especially in the pre-hiring process. We're excited about our exclusive partnership with ID.me, a best-in-class identity verification provider with over 60 million verified users. Through this partnership, we will give employers access to candidate data faster and more accurately which in turn speeds up the hiring process. Identity as a service presents a huge opportunity for us. Identity verification is not widely adopted today and is a small but growing percentage of our revenues. And we believe this will become the first step in the majority of all screens over time. Now let me comment briefly on our third quarter. Looking at slide eight, we saw strong performance across all regions and industry verticals. Our us business grew by 41% and our international business grew by 52% on an organic constant currency basis. We also continued to experience strong client retention of 96% for the trailing 12 month period ending September, 2021 up 300 basis points from the prior year period, a demonstration of our exceptional client service and proactive approach to retention. And finally, We strengthened our position in the financial services vertical by expanding our identity verification offering through an exclusive partnership with FINRA, an exciting opportunity which we announced yesterday. In the third quarter, the macroeconomic environment remained positive with the great resignation continuing and employee turnover broadly remaining a key theme in the employment market. Our business significantly outpaced U.S. job growth in the third quarter. And now, I will hand it over to Peter Walker, our CFO, to take you through our financial results for the quarter and full year 2021 guidance. Peter?