First Advantage at Barclays Conference: Navigating a Flat Job Market

On Wednesday, 10 September 2025, First Advantage (NASDAQ:FA) participated in the Barclays 23rd Annual Global Financial Services Conference. The company outlined its strategic approach amid a stagnant job market, emphasizing both challenges and opportunities. CEO Scott Staples described the employment landscape as "very flat," while CFO Steven Marks highlighted cautious growth expectations due to external uncertainties.

Key Takeaways

• First Advantage anticipates slightly negative base growth for the year, with a long-term target of 2-3%.
• The company is focusing on digital identity and fraud protection to address AI-driven fraud concerns.
• AI implementation has reduced customer care headcount by 30%, reallocating resources to other areas.
• Debt deleveraging is prioritized post-Sterling acquisition, with a net debt leverage target of 2-3x.
• Record enterprise bookings in Q4 and Q1 demonstrate strong performance in sales.

Financial Results

• Base Growth: Expected to be negative for the full year, revised from a neutral to slightly positive outlook. A long-term growth target of 2-3% remains.
• International Growth: Achieved over 7% growth last quarter, representing 14% of the business.
• Synergy Target: Aims for $65 to $80 million in synergies from the Sterling acquisition, with $47 million already realized.

Operational Updates

• Job Market Assessment: The market remains flat with companies engaging in just-in-time hiring and backfilling roles.
• Vertical Performance: Strong results in healthcare and transportation, driven by staffing and compliance needs.
• AI Implementation: AI-driven solutions like click chat call have reduced customer care headcount by 30%. The goal is to achieve 90% touchless checks in the U.S. within a few years.
• New Logo Wins: Record enterprise bookings in recent quarters highlight robust sales performance.

Future Outlook

• Base Growth Expectations: A neutral base environment is expected for the next 18 months, with a return to 2% growth as policies and interest rates stabilize.
• AI Strategy: Focus on enhancing quality and speed while reducing manual processes. Resilience is built by concentrating on verticals like healthcare, hospitality, and transportation.
• Capital Allocation: Prioritizing the completion of Sterling integration and achieving synergy targets. The company is temporarily stepping back from M&A unless compelling opportunities arise.

Q&A Highlights

• Competitive Landscape: First Advantage believes its technological edge and budget outmatch competitors. The fragmented industry is not easily disrupted by startups.
• Upsell/Cross-Sell Drivers: Increasing demand for risk management, comprehensive background checks, and digital identity solutions. Immigration policy changes are boosting the I-9 product demand.

Readers are encouraged to refer to the full transcript for a detailed understanding of First Advantage’s strategic direction.

Full transcript - Barclays 23rd Annual Global Financial Services Conference:

Manu Patran, Business and Information Services Coverage: All right. Good morning, everybody. My name is Manu Patran. For those of you who don’t know me, I cover business and information services. We’re pleased to kick off our third day here at a financials conference here with First Advantage. We have Scott Staples, who’s the CEO, and we also have Steven Marks, who’s the CFO. Thank you both for being here.

Scott Staples, CEO, First Advantage: Thanks for having me.

Manu Patran, Business and Information Services Coverage: Scott, just to start off high level, since you guys have a really unique insight into what’s going on in the employment markets and job churn and all those kinds of things, maybe just your view on what’s going on today. There’s a lot of headline news with the job number revisions and the job data and rate cuts. How do you guys see the environment today?

Scott Staples, CEO, First Advantage: Yeah. I mean, it’s obviously top of mind. I think a couple things is, you know, we use kind of BLS, JOLTS data as a data point, but we don’t necessarily feel like it’s the most accurate data point. We like, you know, what our customers say and what our order volumes say. They’re telling a slightly different story than what you read in the press and what you see out of JOLTS data, whether it’s revised or not. We find JOLTS BLS data to be very helpful on the vertical insights, like where are jobs being added. That’s helpful for our go-to-market strategies. At the end of the day, I think we are seeing a very flat job market. We are not seeing many peaks and valleys.

In fact, if you look at over the last couple of quarters, if you look at quits, hires, openings, unemployment rates, they’re all actually very flat. I think the country is living in a monthly up and down sort of narrative, and we’re just not seeing that. Our clients are still hiring. They’re not doing any major layoffs. They’re not growth hiring. They haven’t been growth hiring in a long time, but they are just-in-time hiring and backfilling. I would say that from a job market standpoint, the view we have is a very flat job market.

Manu Patran, Business and Information Services Coverage: In those conversations that you have with your clients, I guess the view is something has to give. Either way, either there’s going to be a whole bunch of layoffs coming or they finally free up to hire. Are they leaning one way or the other?

Scott Staples, CEO, First Advantage: I don’t think you’ll see a bunch of layoffs coming, because, you know, earnings from companies are still really strong. There’s still a very high demand for our customers’ products and services. I think you’re going to see more of the same. I think that companies are just going to hold hiring close to the vest. They’re going to continue to do just-in-time hiring. They’re not going to get out in front of their skis with any type of growth hiring. They’re going to kind of wait and see what Washington policy is around, you know, and impact around tariffs, around, we’ll see with rate cuts and things like that. I don’t think you’re going to see peaks or valleys. I think you’re going to see plateaus and planes, a lot of flatness going forward, which isn’t bad for us.

A flat macro is actually not a bad thing because, you know, we do really well on new logo, upsell, cross-sell, and retention. We can actually grow pretty nicely in a flat environment.

Manu Patran, Business and Information Services Coverage: Got it. We’ll get to that in a second. Just one more big picture question.

Scott Staples, CEO, First Advantage: Mhmm.

Manu Patran, Business and Information Services Coverage: You know, about half your business is blue collar, half is white collar. Kind of the same question, but maybe if you could talk about within those two segments, some of these, or is it the same in terms of plateauing in both sides?

Scott Staples, CEO, First Advantage: You know, it’s interesting. I think, first of all, let’s do a geographic slice, because we’re seeing pretty good demand internationally. Now, granted, internationally went down hard and early, about two years ago, but has bounced back pretty nicely. International for us has grown pretty well over the last three or four quarters. I think the geographic slice is important. Now, only about 14% of our business comes from international, so the most comes from what we call the Americas. In the U.S., I think, again, it depends on vertical and even within vertical.

For example, healthcare is our largest vertical, and you would primarily consider that a white collar industry, which is doing really well, but certain segments are sluggish in healthcare, one of them being the hospital networks because a lot of them are still trying to figure out what their funding is going to be from the Trump administration around Medicare, Medicaid. What’s hot in healthcare is staffing, the ability to find nurses and doctors and people that work in the hospital. That part is doing really well. Transportation for us, which is, obviously, you would think more of a blue collar industry and what you would think tied to retail and probably sluggish at this point, but it’s actually doing really well for us. I think that’s because we’ve got a great diversity of products around compliance and the driver, which aren’t related to hiring or onboarding.

We’re just seeing a little bit of a mix, and I think some of it offsets the other, and, again, gets us back to that kind of flat story where some are up, some are down. What we’ve seen vertically over the last couple of quarters, and this is maybe even the last year, primarily since we did the Sterling acquisition, is that we no longer have big swings in our vertical. The verticals, they’re all kind of like up a couple of points, down a couple of points, or flat, and they’re all within a tighter band. In the past, we used to have double-digit results differences between certain verticals. Now we’re into a much tighter band, which we like. It gives us a lot more consistency and ability to predict the business.

Manu Patran, Business and Information Services Coverage: Got it. Steven, I guess this whole discussion was basically the base growth component of your growth algo. Maybe you can just remind us what the assumptions of the second half were, and then at your investor day, you gave some targets, just what you’re assuming there as well.

Steven Marks, CFO, First Advantage: Yeah. We always saw base growth being negative for the year in total, and that obviously hasn’t changed. I think where we’ve modified our expectations a little bit is we had it getting to this neutral state, but just on the positive side of neutral in the second half of the year. I think a lot of what Scott just talked about, the uncertainty coming out of Washington, particularly the impact on the retail segment and tariffs, and that they see that more direct correlation between a policy action and the reaction in the labor market. We’ve seen a little bit of that already in retail in the first half of the year.

When we put together our updated guidance, which we reaffirmed the full-year guidance, but just kind of the macro expectations within there, we did pull back a little bit on our base just to give a nod to, hey, this continued tariffs, all this noise about the inflation print this morning was a surprise to people, and I’m sure now they’ll be offsetting in different reactions. There’s going to be a Supreme Court case in November now, apparently, over tariffs. Just with all of that uncertainty in mind, de-risk the second half a little bit by just pulling to instead of to the plus side of neutral, just the negative side of neutral. One of the things to Scott’s other point, we’ve got these several big deals hitting, upsell, cross-sell, a new logo, productivity in the second half of the year.

It really doesn’t impact the full-year projection, but we just see base being a minor headwind, essentially, as we exit the year. Just that nod of uncertainty of how the different segments are going to react to it. Like Scott said, it’s not this major pullback. It’s just a minor modulation instead of being a tweak positive, it’s a tweak negative.

Manu Patran, Business and Information Services Coverage: In terms of the longer-term targets, just again, on the base growth, can you just remind us the assumptions you had made?

Steven Marks, CFO, First Advantage: Yeah. Longer-term targets on base growth, you know, is roughly a 2 to 3% contributor to growth, and that’s a combination of long-term hiring trends in the U.S., changing demographics, the ability to flex a little bit on price. We don’t see that happening, obviously, this year. Frankly, when we put our four-year model together, don’t really see that happening in 2026 either, just because there’s so much noise flowing out of Washington. We kinda see the next 18 months more or less being this neutral state. You’ll have a little bit of positive, a little bit of negative, puts and takes between the verticals. Obviously, like Scott said, international’s, you know, a plus side about a base, and I think that’s, you know, kind of more indicative of our longer-term expectations of the whole business. As you get that stability, you’re able to then get to business as usual.

International grew over 7% last quarter. That’s a, you know, a strong result, and we’re kind of optimistic that we’ll get there on the whole business, you know, before the end of that four-year horizon. Certainly, in the next 18 months, so 2025, 2026, expecting more of a neutral base environment as all of the policy change, you know, as kind of this just current status quo kind of, you know, sets in. Once interest rates settle down, customers return to growth hiring, new stores, new warehouses, new hospitals, things like that, that will start, you know, all of this invest in America trends and things like that will start to take hold and ultimately, you know, power some of that base growth.

Obviously, as we exit, you know, the integration and feel, you know, we’ve delivered the value to our customers, the ability to kind of return to normal core CPI type price increases and things like that will also start to take hold, which will power kind of that normalized 2% base growth.

Manu Patran, Business and Information Services Coverage: Got it. Scott, one more high-level discussion, and you also have a unique experience, and this is around AI, right? I mean, you used to run a BPO, and now you’ve got this. It’s kind of a two-part question. One, on a high level, just your thoughts on whether AI is going to destroy employment levels in the country, like some of these AI bosses are predicting. I’ll follow up with what you guys are doing internally.

Scott Staples, CEO, First Advantage: I think it’s going to, in the short term, actually create jobs, because people are still figuring out, like, you know, what is it that they want to do. I think inevitably, certain industries will definitely be affected by AI. BPO companies, I think, would be at the top of that list. IT services, not too far behind when, you know, AI starts writing, you know, proven, industrial strength code, on a large scale. I think, you know, back offices of certain industries like banks, companies that have big call centers are certainly going to be affected by it. I think we’re a couple years away from it. We’re not seeing any degradation of order volumes from our BPO IT services companies right now, because they’re trying to be the players in that space.

They’re actually investing a little bit to give their customers their AI type of offerings through, instead of their traditional offerings. Nothing’s happening right now. We clearly will consider that future impact in our go-to-market strategies. We will build in some resiliency against that. Today, there’s a very small percentage of our revenue that comes from IT services and BPO. I think you’ll see us pivot to a little bit more, back to that blue collar resiliency that we love so much, whether that’s hospitality or mining or education or even white collar in healthcare. AI is not going to replace nurses and doctors and things like that.

You’ll see us build in some resiliency in our go-to-market strategies in the next couple of years, but we don’t think there’s a short-term impact of the trend toward AI, but we definitely feel within the next 2, 3 years, those industries will be affected.

Steven Marks, CFO, First Advantage: Yeah. I think to Scott’s point, it’s changing the way certain companies are working. Even look at First Advantage, right? We did our AI click chat call customer care a couple years ago, took out roughly 30% of our customer care headcount. Our total headcount actually hasn’t gone down because we’ve taken those savings, reinvested in product, reinvested in sales, reinvested in go-to-market. There are stories of other companies like IBM and their earnings a quarter or two ago talked about a big multi-hundred person HR savings from AI, but then they reinvested in more heads in sales and in products. I think for now, it’s changing the mix of employees at companies, but it’s not in net total impacting that.

I think to Scott’s point, it might impact certain verticals immediately, but we’re being mindful in our go-to-market strategy of making sure we’ve got just an eye of resiliency, and we like our current vertical diversity because of that. I don’t think it’ll be a while before you see any wholesale changes in certain verticals just because companies are changing the way they invest in their human capital versus just getting rid of human capital.

Scott Staples, CEO, First Advantage: I think IBM’s a good case study here because their net increase, their net from AI was an increase of 300 heads. Again, they’re in the investment mode. Things will change in a couple of years, but they’re not changing right now.

Manu Patran, Business and Information Services Coverage: Got it. Maybe specific to First Advantage, just this AI efficiency, obviously, you know, AI click chat call, you do a lot of, you know, you used to talk about bots before. I’m sure that’s supercharged with AI. To your point, Steven, you’re reinvesting a lot of the savings. I guess the investors broadly out there, obviously, they’re willing to be a little bit more patient on if AI creates more revenue opportunities. The lazy question is, it should save, you know, they should be able to fire half the sales force or the data collection guys or whatever it is. You kind of briefly talked about the reality of what’s going on. Maybe from your perspective, Scott, how long before you think it becomes a net savings that we all identify and get excited by?

Scott Staples, CEO, First Advantage: I think the areas that it will help us the most are in customer care, which you’ve already, you know, Steven mentioned a 30% reduction. We will probably see some further optimization there since we’ve rolled out click chat call to the Sterling customer base who didn’t have that before. I also think that you’ll see some savings on the processing side, probably not in sales and not in data collection, but in actual processing where AI can replace some human interventions. Quite honestly, our initial strategy with AI is not cost savings. It’s really more around quality, and improving the customer experience.

We know inherently we will get cost savings from doing this stuff, but we’ve explicitly told our product teams and our ops teams that the AI strategy is to use AI to increase our quality, increase the speed and the velocity it takes us to process checks, reduce manual input that then potentially could have errors. The net result of that will be, yes, we will see some improvement. Today, as you mentioned, we’re highly automated. 75% of our checks in the U.S. are touchless, so no human involvement. It’s a bot or an API hitting a data source, AI or some automation tool interpreting that, creating a report or creating something on the back end without any human interaction. We think that number will continue to rise through AI, through APIs, and more automation.

I don’t think it’ll ever get to 100% because this industry just doesn’t have enough digitized data sources for that to happen. We certainly can get to 90%, and we should be able to do that within the next couple of years. A lot of that will be accelerated by AI, and you’ll start to see the results in margins. We’re pretty happy where we are with margins, especially after the Sterling acquisition, which was a much lower margin company than us. We’ve been able to get back to almost First Advantage standard margins in a short period of time. We’re marching in the right direction.

Manu Patran, Business and Information Services Coverage: Got it.

Steven Marks, CFO, First Advantage: I also think, you know, on the revenue side, you know, I think it’s maybe not the products we offer necessarily, but the risks that are being created in the market by AI are creating demand for products. That’s, you know, the whole evolution of the digital identity concept is really a product of AI being used and creating more opportunities for fraud and the.

Scott Staples, CEO, First Advantage: Yeah.

Steven Marks, CFO, First Advantage: Yeah. It’s the negative side of AI. Of course, our digital identity solutions have AI built into them, fighting AI with AI. We talked about this a lot at the investor day and last week in the fireside. I think if it wasn’t for AI, those opportunities wouldn’t be so massive and also wouldn’t be so frequently discussed with our customers. The reason it’s becoming so hot is you can go, you want to create a fake resume, you just go into whatever your GPT engine is, it’ll create one for you. You can deep fake your interview. You can get through the process a whole lot simpler. It used to take a lot more work to fake your persona than it was to actually build it up on your own. I think it’s creating that opportunity. It’s creating that new TAM. It’s creating that growth and interest in that.

Obviously, we’re very early days in that product, but I think we’ll start to see the revenue side of that, not necessarily because of the AI embedded in our product, but because of the risk created by AI in the markets.

Manu Patran, Business and Information Services Coverage: Got it. Just to focus on some of the growth areas that you can control, right? We talked about base growth and so forth, and digital ID is part of that. Maybe let’s start with the new logo component in your guide, which is, you know, you call for, I think, 4 to 5% growth from there. Can you just maybe frame why you’re confident in 4 to 5% of growth from new logos every year? Like, what’s the advantage and who you’re taking share from?

Scott Staples, CEO, First Advantage: Yeah. I’ll jump in. Steven can follow up. I think we have a really sellable brand in the market for a couple of reasons. When we acquired First Advantage and Sterling, we feel we’re the best two companies in this space, from a product standpoint, from a go-to-market standpoint, from a brand standpoint. When we put these two companies together, we’ve come up with this best-of-breed technology approach to the market, and the market has really loved it because inevitably, they’re getting the ability to pull best-of-breed product and functionality from two big platforms. It’s almost like they got the best of both worlds by going with First Advantage. You actually get First Advantage and Sterling. The verticals also are super important, have always been the most important thing in this industry, and now we’ve just strengthened verticals.

It was a great, one of the greatest things that we loved about the Sterling deal was the lack of overlap on the verticals. We really only had one vertical where we had overlap. Every other thing was very complementary. We were big in transportation. They were not. Healthcare was our third largest. It was their largest. When you map it all together, when you go and do a new logo meeting, the two things that matter the most are the vertical story, who else are you doing this for, and what’s your track record in that vertical, and how have you customized your product to that vertical-specific needs. The second thing is the platform itself. How does it demo? What’s the candidate experience? What’s the user experience? We crush it in those areas. Our product demos really well.

Our teams, because they’re so vertically focused, are able to do consultative selling. We come in as subject matter experts, and we say, hey, this is what’s going on in the industry. Here’s what your peers are doing. It just plays really well. Obviously, we’ve announced some really large wins this year, and I think the sales engine is just humming. It was the very first functional group that we put together when we did the Sterling deal. We knew go-to-market was the most important. We focused on that. That team has been working as one team since Q4 of last year, and it’s got about 50/50, a split of formerly Sterling versus formerly First Advantage leadership running that. I think we just really did a nice job on that, and the market is responding to it.

Steven Marks, CFO, First Advantage: It is not just a track record with our customers. I mean, the 4 or 5% new logo ups in upsell, cross-sell, both separately. We have been delivering that both First Advantage and Sterling. One of the reasons we like the companies together is they have great sales track records. Been delivering that for 6, 7, 8 years very consistently because you are able to differentiate with your product and your tech and your applicant experiences. The data story now combined, you know, and all of the new products, AI, and being able to stay at the forefront of technology. Scott’s point, it is a very compelling marketing message, and obviously continues to resonate. We have seen the momentum continued post-acquisition with, you know, record bookings quantity for enterprise bookings in Q4 after we closed, record bookings dollars after we closed Q1.

We have the momentum, the pipeline to carry us through. We are very confident in that being a key contributor.

Scott Staples, CEO, First Advantage: Manu, I really think, you know, as companies look for cost controls and they look for process improvement and vendor consolidation, they tend to then want to select the larger players.

Manu Patran, Business and Information Services Coverage: Right.

Scott Staples, CEO, First Advantage: Who have scale, who have better deals with data providers and can pass those savings on. There are a lot of things that are favorable for us right now.

Manu Patran, Business and Information Services Coverage: Just to round out the competitive question, I think versus the traditional competitors, they’ve only gotten weaker or, you know, smaller, while you guys have gotten bigger. Back to my time with AI, is the risk that they figure out how to use AI and pick themselves back up, or is there someone in the garage that can do something more efficiently?

Scott Staples, CEO, First Advantage: I think that’s the nice thing about this industry. I don’t think our main competitors have the technology chops and budgets that we have. You know, we’re going to spend $130 million this year on technology. You can do a lot with AI. We’ve got dedicated AI pods, and they’re mostly based out of Poland. That’s our innovation center. We’ve got 5, 6 dedicated AI agile pods that are just building AI tools for us, whether it’s proof of concepts or full-fledged products. I don’t think a lot of our competitors have that skill set. They don’t have that scale. I also don’t think this is a space that could be easily disrupted by a startup with some sort of AI solution. It doesn’t work that way. It’s just too fractured. Yeah. It’s just so fragmented.

You’ve got to go to literally 900 to 1,000 different data sources just in the U.S. to do just a criminal check. What about drug and driver and I-9 and all that stuff? I think the other thing is the global footprint. We talk about international growth, but one thing that’s really important is the ability for U.S. companies to be able to hire people with foreign backgrounds. Now, when we think about international, we think about selling in those regions. That’s important to us. I mean, there’s a high probability some company in New York today is hiring somebody with a foreign background. You need a background screener that has a global footprint. That also helps when we talk about new logos and keeping our customers happy with higher retention. It’s just our scale and size and footprint.

Manu Patran, Business and Information Services Coverage: Got it. Maybe let’s shift to the cross-sell, upsell side of the component, similar, you know, mid-single-digit type contribution.

Scott Staples, CEO, First Advantage: Yep.

Manu Patran, Business and Information Services Coverage: Can you just give us an example, a typical example of what that cross-sell, upsell looks like? I guess on the face of things, we think it’s a background check and you’re done.

Scott Staples, CEO, First Advantage: Yeah.

Manu Patran, Business and Information Services Coverage: What’s after that?

Scott Staples, CEO, First Advantage: There are a couple main themes driving upsell/cross-sell right now. Upsell/cross-sell has been phenomenal for us, as you know, for the last couple of years. The first theme is, you hate to say this, but the world is complicated. In some cases, it’s actually dangerous, and even in some cases, it’s crazy. What that means is C-suites and boards are sitting back and saying, wait a minute. How do we protect ourselves? What are we doing to protect ourselves? We talked about the concept of package density many, many times because it’s been the biggest driver of upsell/cross-sell for us for years. Customers are looking for more risk management. They’re looking for more safety and more security. How they do that is by adding to their current checks. They want to go deeper with those checks. Instead of going back 7 years, now they want to do 10.

Instead of doing a search in a state or a county, they want to do searches in all counties in that state and all counties where that person went to school or grew up. They want to do deeper and deeper searches. Anytime you hit a database and add something, it adds to the price. What we’ve seen is client spend continues to increase because they’re looking for safety and security. Client spend is not decreasing. It’s actually increasing, and it’s increasing at companies that are publicly saying, hey, we’re decreasing costs, but here’s one area we’re not. The greatest analogy that we think we have in that is how companies view cybersecurity. If you talk to boards and C-suites about cybersecurity, it’s almost like an open checkbook. It’s like, hey, we’ve got to protect our data. We got to protect our brand.

Whatever the best tools, the best providers, we got to go get. We’re getting the same type of effect with employment background screening, because companies just don’t, they need to protect their brand. They want to protect their employees. They want to protect their workforce. The constant adding and getting deeper and deeper of searches, whether it’s going back a number of years, searching more counties, more states, more federal checks, searching a person’s name in different ways, adding a middle initial, adding maiden name, adding aliases, all that adds to the check, and that’s a good driver of upsell/cross-sell. The other theme is this whole thing that we’re talking about, the negative use of AI around fraud in recruitment. Digital identity and fraud protection in recruitment is the hottest topic right now.

Every company is petrified and worried about letting in people who are, one, unqualified for a job, or, two, aren’t who they say they are and potentially are threat actors from North Korea or somewhere. It’s happening all over the place. The hottest topic we have right now with customers is how do we de-risk fraud in the recruitment process? We’ve got great tools there. We can make sure when they’re doing a video interview that it’s not a deep fake. We’ve got liveness detection to make sure how the light is hitting off skin. We can do device detection and IP so we can say, hey, wait a minute. This person’s coming in on a device, let’s say a mobile app that was just purchased in the last 30 days. That’s a red flag. Or this IP address is coming from outside of the U.S. That’s a red flag.

We’ve got all these protections. The other thing that’s really, I know this is a bit complicated, but what’s really important is, Washington and Trump policy with immigration has actually done us a huge favor on the I-9 side. Companies are really scared about getting audited by the U.S. government around their I-9. You’d be shocked, Manu, how many companies are out there still doing paper I-9s because it’s a post-onboarding thing, and it’s easy to do with paper. Hey, come into the HR office, fill out your paperwork. Ours is a digital offering. If a company gets audited by the federal government and they have an I-9 process that’s paper, you just basically said that, okay, the HR department’s doing nothing but this for the next 3 months. With us, you’ve got digital audit trails. You can do everything digital.

The other thing we can do is we actually have an audit support service. If they do get audited, they actually can hire us to support them. It’s almost like you’re doing TurboTax, and the IRS, you know, TurboTax offers the help there.

Manu Patran, Business and Information Services Coverage: Yeah.

Scott Staples, CEO, First Advantage: The last piece is that digital ID and I-9 are actually connected because if you think about the fraud in the recruitment and onboarding cycle, you’ve got someone coming in fraudulently to interview, and maybe a different person actually shows up for the job. We’ve had customers tell us that a different person has then showed up to fill out the I-9 who is legal. They do it legally, but someone illegally is actually doing the job. They want us to connect all those dots. The digital ID product actually is connected to the I-9 product so that we can say, hey, the person that you are interviewing is the same person that took the job, is the same person that filled out the I-9 and showed up.

We’re really in a unique space of being one of the only or maybe the only type of company that can connect all those dots, and that is a home run right now. I’ll give you just a quick client. I was with a client 2 weeks ago. They asked for the meeting. They came onto the meeting and said, okay, our board has given us 2 weeks to launch a digital identity product. How can you help us? It is that top of mind because they just don’t want to be in the press.

Manu Patran, Business and Information Services Coverage: Got it. Okay. There’s a lot to dig into that, but we have 2 minutes left. I just wanna go back to a broader question that we get a lot from clients, which is around capital allocation. You obviously did the Sterling acquisition that’s going well. You gave us a little bit of update earlier. Just, how should we think about deleveraging, leverage level, buybacks, more deals, those kinds of things?

Steven Marks, CFO, First Advantage: The capital allocation strategy is pretty easy right now because, A, we’re going to finish the integration. We’ve got a $65 to $80 million synergy target. We’re at $47 million in, so made really good progress. Like Scott mentioned, the last mile of this is going to come from automating fulfillment, combining fulfillment. We want to focus on doing that while always mindful of keeping our customers happy and keeping those retained. We didn’t get to the last piece of the algorithm, but 96+% retention is a key KPI that we live and breathe by at the company. Finish the integration, get the synergies, keep the customers happy. While all that’s going on, deleverage. We recognize that in order to get the deal done and finance the $1.2 billion of cash, we took on some debt. We’ve already started the deleveraging process. We’ve prepaid for it, $45 million already.

Very, very much free cash flow positive, and we’re using that free cash flow to further deleverage. We’re able to reprice the debt and bring our borrowing rate down 50 basis points about 5 or 6 weeks ago. Just keeping that trend of driving free cash flow. Obviously, the tax cuts will help further drive free cash flow, further pay down debt this year. Once we get that debt close to our 2 to 3x target and long-term target on our net debt leverage, we’ll keep that focus on the integration, on deleveraging, on getting the synergies. When we get closer to that 3x, we can obviously open up the playbook and kind of get to some, probably more how we used to look, very strategic focus on generating shareholder value.

For the next, call it, 18 months, it’s laser focused on keeping our customers, getting the synergy targets done, building the best First Advantage through the integration, and then obviously throughout that process, deleveraging.

Manu Patran, Business and Information Services Coverage: Got it. Maybe just a last word from you, Scott. In that framework, you said you spent $130 million a year in technology. You bought Sterling with a lot of capability. There is no, I guess, need or wish list for you in terms of M&A that’s imminent, I suppose.

Scott Staples, CEO, First Advantage: No. I think we’re in great shape. I would say we’re pretty much, unless something falls in our lap, we’re out of the M&A game for a few years while we delever. I mean, Steven literally wakes up every day and says, how can I pay down more debt? We love that about him. We’re not going to do it. We don’t need anything.

Manu Patran, Business and Information Services Coverage: Yeah.

Scott Staples, CEO, First Advantage: If something comes to us and it’s a fire sale, of course, we would potentially look at it, but I think we’re out of the game for a while.

Manu Patran, Business and Information Services Coverage: Okay. That’s good to hear. We’re right on time here. Thank you both, Scott.

Scott Staples, CEO, First Advantage: Manu.

Manu Patran, Business and Information Services Coverage: thank you for your time. Appreciate it.

Steven Marks, CFO, First Advantage: Thanks for having us.

Manu Patran, Business and Information Services Coverage: Thank you.

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