Sterling Check Corp.

good morning 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 online will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if you would like to ask a question please press star 1 on your telephone keypad i would now like to pass the conference over to judah sokol head of treasury and investor relations judah please go ahead

Thank you, Operator. Welcome to Sterling's first quarter 2023 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 have been posted to our website 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 2, which explains the risks of forward-looking statements and the use of non-GAAP financial measures. Additionally, please refer to our most recent Form 10-K filed with the Securities and Exchange Commission 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, reconciliations to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued this morning. I'll now turn the call over to Josh Perez.

Thank you, Judah. Good morning, and thank you for joining us. Sterling's first quarter of 2023 was a successful period of execution, and I am very proud of the accomplishments and results the team delivered. The year is unfolding as we expected, and as a result, we are reiterating our 2023 guidance. Slide four shows highlights of the quarter. First and foremost, this was a quarter where we took steps towards achieving our long-term strategy and ambitious 2023 goals. Our financial results were encouraging. Our revenues were slightly favorable to our prior expectations, even against the uncertain macro environment. and our progress in executing our cost savings programs in the first quarter helped us to deliver on adjusted EBITDA, adjusted net income, and free cash flow that were solidly above our expectations. These positive results and outperformance were driven by the Sterling team's continuous hard work to enhance our value proposition, customer service, and technology through an unyielding commitment to innovation and operational excellence. In the first quarter, we made great strides on several key initiatives that we set at the beginning of the year and which I will further explore in the following slides. Identity verification, cost optimization, and M&A. Turning now to slide five, which summarizes our long-term strategy and 2023 goals. On our fourth quarter earnings call, we mentioned a strategic refresh we completed in 2022, which set the foundation for our company's long-term aspirations. We aspire to be the world's most trusted background and identity services company differentiated by our deep market expertise, unrivaled client service, best-in-class data, and seamless workflows. To achieve these goals, we have several specific growth strategies, including development of innovative new products to upsell, geographic expansion, and M&A. The strategic framework directly fueled our focus areas for 2023 with concrete near-term goals that we believe will drive our company closer to that long-term vision. Specifically, we are focused this year on doubling down on the organic revenue drivers we can control scaling our identity verification business, optimizing our cost profile, and M&A. In the first quarter, we saw positive results on each of these four areas. Starting with organic revenue growth on slide six, in the first quarter, we continued to execute on the organic revenue drivers in our control. We won new logos in all our geographic regions, increased our clients' spend, and maintained strong gross client retention rates. To do this, we enhanced our core offerings with continued investment into exceptional client service and cloud-based technology capabilities. When combined with our innovative culture, those characteristics enabled us to perform slightly ahead of the expectations we provided in March. In the first quarter, growth from new clients remained solid at 5%. This was slightly better than our expectations, albeit a bit lower than our long-term target and the levels we have previously delivered. As discussed on our fourth quarter call, we saw some signed new client implementations pushed till later in the first quarter and to the second quarter. As those implementations come online, we expect our new client growth to return to the long-term target of 7% to 8% over the course of 2023. we continue to see our new business pipeline remain robust and supportive of our long-term targets. In the first quarter of 2023, we delivered growth from upsell and cross-sell in line with our long-term target, an accomplishment we are very proud of given the uncertain macro environment. Our innovative culture combined with the past work we did to complete Project Ignite continues to drive the release of new products and new functionality at a swift pace. During the first quarter, we saw traction in our newer solutions, such as identity verification, clinical concierge services, and post-hire services like monitoring and I-9. We also increased our automation, powering faster time to hire and delivering high accuracy at low hiring cost. Last quarter we shared our milestone achievements in the improvement of U.S. criminal fulfillment turnaround time. And now we can say the same about motor vehicle records and civil searches with the recent release of improved automation capabilities. Moreover, we made progress on fulfillment automation outside of the U.S. where background screening and digital integrations into courthouse data are less mature. Moving to the right half of the slide, we made great progress during the first quarter in identity verification. We believe our investments into identity create true market differentiation, which significantly amplify our addressable market and our right to win, and we are pleased to see positive outcomes of our identity verification investments paying off. Identity adoption has been consistently growing at a robust pace since we first released our exclusive ID.me Identity Verifications workflow to the market in early 2022. In the first quarter of 2023, our global suite of identity solutions saw continued strong growth on both a quarter-over-quarter and year-over-year basis. While we are seeing traction with all types of clients, enterprise clients are leading the adoption of identity and in the first quarter we added identity verification to several large client programs. Regardless of size, all clients who adopt identity can benefit from stronger screening programs and an increase in criminal records identified. Candidates are no longer able to submit inaccurate information either intentionally or accidentally into the background screening process. We have also been pleased that the U.S. candidate experience is fast and efficient and takes just 30 to 90 seconds to complete. Finally, we continue to invest in fortifying our competitive advantages within identity. In partnership with ID.me, our exclusive ID verification partner in the U.S., we have built an in-person verification pathway, enabling individuals to verify their identity at a physical location. We were pleased to recently announce a major milestone by achieving IAL2 certification. This certification recognizes our pathway as conforming to the federal digital identity guidelines set by the National Institute of Standards and Technology and opens the path for other government agencies to utilize our verification services. Those conversations have already begun and we are excited about the large growth potential that can arise from this milestone. Turning now to cost optimization on slide seven, we've shared in recent earnings calls that we launched a series of initiatives aimed at building a more scalable and profitable company. We expect these initiatives to drive long-term meaningful cost savings and efficiency gains, and we are targeting $25 million of run rate savings including $10 million of in-year savings during 2023. We have a history of driving productivity and cost savings through financial discipline and by leveraging technology. For example, our proprietary and cloud-based technology platform is supported by our powerful artificial intelligence-driven fulfillment platform, leveraging more than 3,300 automation integrations, including APIs and RPA bots. In 2023, we aim to continue our rich history and achieve our cost savings targets through a three-pillar approach. First, through Project Nucleus, we aim to reduce labor and data costs in our cost of goods sold through reengineering fulfillment processes and increased automation. Second, we are reducing our facilities costs by leaning even more into our virtual-first approach and reducing our real estate and facilities footprint. This strategy has served us well since its adoption in 2020 with the closure of multiple offices around the world, and we are now closing additional offices. Third, we are enhancing functional alignment by streamlining our organization to align with the go-to-market structure we established in 2022, an initiative we believe will result in meaningful OPEX savings. Q1 was a strong first step in executing against our goals. In particular, we made progress towards closing eight offices and facilities globally, streamlining our functional teams, and we made strong early steps towards process reengineering and automation of our fulfillment engine. Our progress in the quarter gives us increased confidence in our goal of margin expansion during 2023 and beyond. The final 2023 goal I will discuss is M&A, shown here on slide eight. As a result of the large and fragmented addressable markets which we serve and the cash flow we generate, we have a great opportunity to increase our scale through both organic and inorganic growth. As we shared on our March earnings call during the first quarter, we executed on two acquisitions, Socrates and Acheck. Our January acquisition of Socrates achieves our goal of using M&A to expand geographically into attractive new regions. Outside the U.S., we are already a leader in several key regions, and with our newfound presence in Latin America, we can now serve the rapidly growing hiring needs of multinational and local clients in another region. Our other acquisition was of Acheck, a highly complementary deal which builds on our successful M&A strategy of growing market share in the U.S. through accretive tuck-in deals. The company possesses a high-quality, enterprise-focused client base diversified across attractive verticals, including healthcare, industrials, and tech media. As with EBI, we expect this deal to yield significant synergies from platform migration, SG&A rationalization, and upsell of Sterling products. In the early months of integrating both deals, we are pleased with the revenue trends inclusive of a healthy new business pipeline. We are also pleased early on by the deal integration with the expertise and skills we built from the EBI deal and other initiatives yielding clear dividends. An acquirer's ability to integrate cultures, operations, and performance goals effectively and efficiently is a key determining factor of a deal's success, and we are laser-focused on executing this important goal during 2023. We plan to complete the integration of Socrates by the end of 2023 and for ACHEC by the second quarter of 2024, with the expectation to realize increasing synergy gains throughout that period. Thus far, during the first quarter of 2023, the team's execution has been highly encouraging. I'll conclude with slide nine. The market for background screening and identity verification services is attractive with a large and growing total addressable market driven by multiple secular tailwinds. These include remote work, millennial churn, and continued growth of the contingent and gig economy. Overseas, the opportunity for geographic expansion is particularly attractive with background screening adoption still nascent. We're excited about the growth of the global market and believe that our strong competitive advantages, innovation-led culture, and financial discipline will enable us to execute on our 2023 goals and take another step forward towards achieving our long-term strategy. We look forward to continuing to update you on our progress as the year unfolds. With that, I will hand it over to Peter Walker, our CFO, to take you through our financial results. Peter?