First Advantage at Citi’s 2025 Conference: Strategic Growth Insights

On Thursday, 04 September 2025, First Advantage (NASDAQ:FA) took center stage at Citi’s 2025 Global Technology, Media and Telecommunications Conference. The company’s CFO, Stephen Marks, provided a strategic overview, focusing on First Advantage’s robust positioning in the HR tech and data sector. The discussion highlighted both the positive strides made through the Sterling acquisition and the challenges of integrating and innovating within a dynamic market landscape.

Key Takeaways

• First Advantage is investing $130 million annually in technology and innovation to enhance efficiency and customer experience.
• The company has achieved $47 million in synergies from the Sterling acquisition, with a target of $65 to $80 million.
• A 96% customer retention rate has been maintained post-acquisition, demonstrating successful integration.
• The focus on digital identity solutions is growing, with half of customer success discussions centered on this area.
• First Advantage has reduced its debt by $45 million, improving financial flexibility.

Financial Results

First Advantage is channeling significant resources into technological advancements, with an annual investment of $130 million aimed at automating data flows and refining processes. This investment supports the company’s competitive edge by leveraging its expansive data repositories, including over 700 million records in the National Criminal Records File and 120 million in the Verified database.

The integration of Sterling has already yielded $47 million in synergies, with expectations to reach between $65 and $80 million. Additionally, First Advantage has made strides in debt reduction, paying down $45 million and securing a 50 basis point reduction in interest rates.

Operational Updates

First Advantage’s operational focus remains on data management and integration. The company’s extensive data ownership provides a structural advantage, allowing for cost reduction and margin improvement. The Sterling acquisition has been smoothly integrated, with a remarkable 96% customer retention rate and aligned go-to-market strategies.

As digital identity becomes increasingly crucial, First Advantage is capitalizing on this trend by offering comprehensive solutions through a network of identity providers. Approximately 50% of customer success team discussions are now focused on digital identity, highlighting its growing importance.

Future Outlook

Looking ahead, First Advantage is optimistic about its growth prospects, particularly in digital identity solutions. The company anticipates sharing more data and financial insights in 2026. As First Advantage approaches its target leverage range of two to three times, it expects greater flexibility in capital allocation, potentially exploring inorganic growth strategies.

The company remains committed to base growth, supported by new logo acquisitions and upsell/cross-sell strategies. The hiring pace is expected to remain consistent with recent quarters, bolstered by vertical diversification into healthcare and financial services.

Q&A Highlights

During the Q&A session, CFO Stephen Marks emphasized the importance of data ownership, noting that it provides a structural advantage by reducing costs and improving margins. He also highlighted the role of increasing package density as a driver of upsell and cross-sell growth.

Marks expressed satisfaction with First Advantage’s vertical diversification, particularly in healthcare and financial services, and reiterated the company’s commitment to innovation and efficiency in the background screening industry.

In conclusion, First Advantage’s presentation at Citi’s 2025 Conference showcased its strategic initiatives and growth potential. For a detailed account, readers are encouraged to refer to the full transcript.

Full transcript - Citi’s 2025 Global Technology, Media and Telecommunications Conference:

Stephen Marks, CFO, First Advantage: Morning. My name

Pete Christiansen, Equity Research Analyst, Citi: is Pete Christiansen. I’m on Citi’s equity research team covering a number of different areas, info services, business services, in addition to crypto and some LendTech names. Right now, we’re excited to showcase First Advantage, certainly an interesting name in the space, dominant market position. And we’re joined by Stephen Marks, the CFO. Stephen, thank you so much for coming.

Great to have you.

Stephen Marks, CFO, First Advantage: Thanks for having us, Pete.

Pete Christiansen, Equity Research Analyst, Citi: I think the name is certainly getting a bit more attention. So there has been, I think, maybe a renewed interest in the space. And it’s been four years since you’ve gone public, and you’ve undergone a significant transformation with the acquisition of Sterling. Why don’t we take first a few minutes, walk through what the company is and what it does and for those who might be less familiar and taking a first look?

Stephen Marks, CFO, First Advantage: Yes. It’s actually four years since we went public and actually four years since Sterling went public in September ’20

Pete Christiansen, Equity Research Analyst, Citi: Oh, that’s right. I know. Remember, it in time.

Stephen Marks, CFO, First Advantage: Yeah. Know. So the story is parallel really nice. But at our core, First Advantage is a leader in the HR tech and data space around managing our customers’ risks, around onboarding, and human capital. So our core suite of services, obviously, around background screening, making sure that we’re helping our customers validate who they’re hiring, and really what’s evolving to a new industry, what we call know your people.

So just as what a background check has evolved over the years and how you fulfill a background check has evolved over the years, what you’re trying to now qualify about your candidates and your people is changing. Whereas before, everyone was solely focused maybe on their criminal history. We live in a global world, so so making sure that we have that global reach, making sure that you can do these, you know, these searches efficiently using data both in terms of margin, but also turnaround times and speed of hiring. Even knowing that, you know, the labor market maybe has cooled off, it’s still a highly competitive space. And making sure that you can onboard your people at the right time as you need them is great.

But like we were talking about in the hallway, it’s an evolving landscape, you know, all with all of the tech enhancements of the world and the advancement of the dark web, knowing who you’re hiring and making sure they actually are who they are, who they say they are, so the evolution into the digital identity space. So we really look at ourselves as a know your people organization and helping our customers manage risk, hire the best people, but also just overall operate human capital at the appropriate compliance level.

Pete Christiansen, Equity Research Analyst, Citi: We really like complexity. We think complexity spells opportunity, and this is clearly an end market that is getting more complex, needing full suite solution, national coverage, so on and so forth, that regular R and D investment. Maybe you could talk about some of the key priorities of the company right now in terms of its product development roadmap, and then we’ll talk a little bit about scaling and the integration of Sterling after that.

Stephen Marks, CFO, First Advantage: Yeah. If you want complex, it is complex. I think people don’t realize about background screening is how complicated it is to get the data. Mhmm. There’s almost 4,000 unique court jurisdictions in The US, and they don’t talk to each other.

There’s in fact, there’s many states where the counties don’t talk to the state. That state doesn’t talk to the federal. I know we we always joke when you kind of join this company, you just assume you go to the FBI. You you run run those. FBI’s got a nice database of major crimes, murders, you know you know, major violent crimes, but very poor when it comes to the to to to the rest of the of the place, the pace that that data gets reported up to.

So the key to this, to being able to operate a background screener, is being able to get that data at speed, at quality, at scale. So we did over 190,000,000 checks last year between First Advantage and Sterling. But to be able to do that with turnaround times of a day or less and be able to do that almost at an unlimited scale. So the reason that we’ve made that investment, we spend almost $130,000,000 a year on product tech and innovation, is to be able to continuously automate, refine, and whether it’s using our own databases, whether it’s automating data flows, whether it’s kind of creative ways to get to the data acquisition. And the net output of that, which makes this a really compelling story within to our customers, you know, we have customers that need to onboard in certain times of the year thousands or tens of thousands of people at once.

They’ll do a hiring event around the country on a Saturday with with First Advantage as their screening provider. They know they’ll get most of those results by Monday morning, so then they can move to what’s evolved to what we call just in time hiring. So, corporations have gotten smarter about when they wanna onboard people. They’ve gotten smarter about how much time they incur the cost before those employees are productive. So they want to hire essentially just in time shipping, but just in time hiring, bring those employees on at the right moment, at the last moment.

And they can only do that if they can trust that the screening will get done efficiently in a way that supports that. So when we think about where we spent a lot of that, it is on automating the data flows, automating the processing, refining the reporting. And then a few of the newer realms A, we talked about digital identity, and I’m sure we’ll come back to that. But B, it’s around things like the candidate experience. So five know, ten years ago when I started at First Advantage, we didn’t care about that.

It wasn’t it wasn’t a thing. But, now with the evolution of, you know, the smartphone and just the way the the latest generation of workers work, they just want an instant gratification on their phone. So building the mobile experiences, building it where you can just click copies of of of documents on your phone, take selfies for digital identification, the vast majority of our screens are actually completed now on a phone, where before it was email, fax, web interface, whatever. So it’s just a totally evolving market between what the demands of the hirer is, what the demands of the applicant are, and ultimately, get it getting to a speed, quality, and global reach standpoint that is second to none.

Pete Christiansen, Equity Research Analyst, Citi: I think I’m I’m one of the few that’s old enough to remember the fax days. Yes, I do remember faxing all my information all over the place. We’ve certainly come a long way. Maybe you could just chat a little bit how you’re staying organized internally, from managing your data platforms. You have National Criminal Files, Smart Hub, Verified.

Maybe if you could just walk through each one of those kind of components, how are you thinking about combining them what is kind of your go forward data approach?

Stephen Marks, CFO, First Advantage: Yeah. Like we talked about a few minutes ago, right? I mean, the core IP is the platforms that can fulfill those searches globally, nationally, locally, at scale, at speed, with quality, with the right experiences. Like I mentioned, we spend 130,000,000 on that. So that’s over 800 professionals around the globe who are who are whether it’s data, whether it’s platform, whether it’s user experience, whether it’s AI.

So making sure that we’re staying on the forefront of the technology side. But then, yeah, you’re right with, you know, leveraging data at the right point. So, you know, we’ve taken a unique approach relative to our industry where, hey. Let’s own our own data. It’s not a very common thing in background screening.

So we’ve got over 900,000,000 records between our national criminal records file, which is over 700,000,000. And then our our verified database, which has got very mostly employment, but also some education verification in there. That’s over a 120,000,000 records. And that one’s also compounded with our smart hub intelligent AI router up on on the front end. So, you know, leveraging those technologies, we’re either to avoid going to a third party, so obviously create margin for ourselves, own the data and can use it in in more creative ways so that creates a competitive dynamic and and and also gives us some ability to to make and and build new product.

Pete Christiansen, Equity Research Analyst, Citi: Oh, I’m sure the training capability. You could train a lot more products and features.

Stephen Marks, CFO, First Advantage: It is. And also be able to leverage those into tangential products as well. So certainly having a data forward approach versus relying on third parties where, you know, you don’t own the cost. You know you know, you don’t own the fees. And then it’s also helped us in the go to market because, you know, when you do have a a real data story, it resonates with customers.

They understand that. They they see they see the value there. They obviously experience firsthand the the turnaround time benefits. But then they also see that, you know, we’re truly devoted to, you know, to tech and and and to innovation, and and customers wanna be a part of that.

Pete Christiansen, Equity Research Analyst, Citi: Does owning the data make you more price competitive versus I’m thinking of one particular competitor that is known for a series of price increases over the last couple of years on workplace verification, that kind of thing. Does owning the data give you a structural advantage to to provide more value for money?

Stephen Marks, CFO, First Advantage: Well, well, they’re actually a vendor of ours because we do their screening. Oh, okay. There you go. I know exactly what you’re talking about.

Pete Christiansen, Equity Research Analyst, Citi: No.

Stephen Marks, CFO, First Advantage: It gives us a couple of things. One, certainly, it helps us from a margin standpoint. Mhmm. Rather than be solely reliant on a third party who does who does take liberties with pricing, we’re able to, control that and and obviously obviously helps our margin percentages and overall cash flow and profitability. And those areas, especially where it becomes a pass through to our customers, there’s a huge go to market benefit when you could say, look, we can reduce your cost of ownership of your program by leveraging our data, by leveraging our fulfillment process.

So specifically to the employment verification space, we didn’t sign a you must go to that one vendor first and primary source. That’s where we’ve made investments six, seven years ago, building up our own data. But then I think almost more importantly, you know, using our smart hub technology, which builds a fulfillment route unique to each and every applicant based on years and millions of fulfillment history that it’s got of where that data would be, and it’s got a network of data providers that input to it. So instead of just going to that single that single work number, that data source, it’s got our own verified database. It’s got fintech players who can do instant verification using payroll data or using banking data.

It’s got other large data providers in the network, and we have the ability to plug in new in new data as it comes along and pull out data. And the and the algorithms are consistently adjusting that dial of where it sends the data to, ultimately, to create the cheapest cost for our customer, which gives us a great go to market standpoint because then we can go out there saying, hey. This is a pain point for you. We can promise you savings. And we’ve and we showcase it to them every quarter when we do our QBRs.

But then also for us, rather than just have a straight pass through, we can create margin out of those alternative data sources, certainly our own data, and it’s net margin beneficial to us. So happier customer, more profitable company. It’s a great balance.

Pete Christiansen, Equity Research Analyst, Citi: That extend your capabilities or at least your potential in the post onboarding opportunity centers. Is that is that more we should think of that more separate.

Stephen Marks, CFO, First Advantage: It’s it’s a little separate. Now having all the innovation resources, certainly, it’s it’s beneficial, and it’s and there’s synergies there. The post onboarding is certainly an area that’s evolving. Mhmm. The risks are changing.

I think, but, you know, look. It requires change management at companies to say, hey. We’re now going to monitor our employees for criminal history. That that piece has been more challenging. Where we’ve seen post employment monitoring really be attractive is in transportation being so we do a lot of continuous monitoring, whether it’s on MVR records, but also ongoing compliance monitoring around both drivers and vehicles.

So we have a a suite of services we call Road Ready. It’s got about a a dozen products. A lot of them are are post employment, more tied to sustained monitoring of drivers, of vehicles, you know, things like that. Certainly in health care, there there’s a whole monitoring suite we have around we call HEAL, but it’s around health care health care licensure, making sure that your employees are are are staying compliant with their health care. There’s no, you know, board findings, things like that that would make them noncompliant.

And we’re also seeing it in financial services, you know, around just some other areas where you wanna make sure that, you know, you’re you’re you’re more in the regulated spaces, but Right. Your employees are compliant. It it’s less around criminal, which is maybe where, you know, back at the time of the IPO, we thought the industry might be going.

Pete Christiansen, Equity Research Analyst, Citi: Right.

Stephen Marks, CFO, First Advantage: But there are plenty of other places where post employment had has taken a good foothold.

Pete Christiansen, Equity Research Analyst, Citi: So let’s say in addition on the on the financial services side, I’m because I’m familiar. So in addition to things like broker check and like that, you’re able to find incremental check opportunities. That’s interesting. You did mention go to market a bit. Certainly walk us through the current go to market strategy with Sterling five point o.

We I’d like to hear about that.

Stephen Marks, CFO, First Advantage: Yes. Yeah. So, yeah, with FA five dot o, I mean, honestly, one of one of I know you’re good. I got we got the marketing covered

Pete Christiansen, Equity Research Analyst, Citi: over here.

Stephen Marks, CFO, First Advantage: One of the first places we integrated was our go to market. And and, you know, if there was ever a a positive out of having a six month, you know, DOJ second request review is we had a lot of time to get the infrastructure in place Mhmm. And be ready to execute. So, look, we couldn’t we couldn’t work through names, and we couldn’t work through customer specific items and things like that, but we could have all the infrastructure. So we, you know, we closed at 8AM on the thirty first.

By 9AM, our executives were having outreach calls to to major Sterling So we were, a, hyper focused on the customer retention aspect of this. So you know? And we’ve been really proud, you know, between our messaging just through the public markets and in press releases, through our through our kind of executive engagement, but just through our overall integration approach to preserve 96 plus percent retention. It’s been eighteen months since we announced the acquisition back in February. So it’s both a validation that our messaging was right, but also that, you know, in ten months after we’ve closed, we haven’t screwed anything up in terms of the integration that that would cause customers to wanna go elsewhere.

So that that was mission number one. And then certainly mission number two was getting, you know, just the go to market messaging and marketing aligned. So our marketing teams have been integrated. Our you know, our vertical establishment, getting our general manager structure in place. All of that we did early in the process.

It’s resonating well. I think as as you’ve kind of heard, you know, q four right after we closed, you know, number of units of enterprise bookings was a record. Q one, the number of of dollars of enterprise bookings was a record. Know, we had we had several marquee deals that powered that. So we feel really good about

Pete Christiansen, Equity Research Analyst, Citi: I believe that’s not like a pro form a basis.

Stephen Marks, CFO, First Advantage: Yeah. No. We we we went back into the history of F. A. Sterling, added them together.

I mean, we had some really big deals signed. And and Yeah. Look, if those customers were concerned about our integration approach, about what we were doing and how we were doing it, they wouldn’t have signed. And it was from multiple verticals, different competitive dynamics, different geographic dynamics. So we feel really good about where we are.

And then the fact that we you know, things like digital identity that we’re able to add to the pipeline with new product or even being able to now cross sell, you know, products from one company to the other. You know, we just announced back in July that now our our our first advantage tax services credits, you know, WOTC credit that we’ve been offering, which is it’s it’s not the biggest product, but very good margin, but very impactful to customers because it’s a they make a lot of money on these things. We’re now able to cross sell that into the Sterling base. Now we’re just getting that pipeline rolling. So we’re really approaching the integration to our customers as how can we find things that are additive, so rolling them out as upgrades.

So we we, you we launched our click chat call customer care initiative. That’s really seen as an upgrade to Sterling customers. There’s also some really nice things that Sterling was doing on how they were acquiring some of that 4,000, you know, different court data that will roll out to the First Advantage customers. And they won’t see a cost benefit to that. They will see a huge turnaround time.

You know, one of the largest cities in the country is still one of the most manual courthouses you’ll ever see. It’s not this one, but there’s other there’s a there’s a couple of them. Sterling just had a better a more creative way of acquiring that data. We’re now able to to leverage that to First Advantage customers. They’ll see the benefit whether from turnaround time so so they can now, in that market, know that their their turnaround time speed will vastly improve.

There, they can get to the just in time hiring in that core market. You

Pete Christiansen, Equity Research Analyst, Citi: did touch upon a bunch of areas within upsell, cross sell, and I do want to go through some of growth algorithm components right now. But upsell, cross sell is the largest component of the algo. Maybe talk about what you’re seeing in overall trends, you’re seeing customers kind of gravitating to maybe what’s not working, what is working and what are you most excited about on on that?

Stephen Marks, CFO, First Advantage: Yes. So so upsell, cross sell is really three kind of there’s three kind of vectors of growth there. So, the two easy ones to really understand are, you know, gaining share of wallet. So whether that’s a a US customer where we’re gonna grow internationally. So we get their Europe business.

We get their Asia business. Or a lot of countries in The US, we might have certain subsidiaries or certain regions or certain business groups, you know, gain again, gaining that share of wallet. And we’ve been very successful there. You know, the international rollouts take a little longer because you’re you’re navigating a more complex web of of integration of of compliance complexity, etcetera. But that’s been very successful.

Cross selling new products. So I think that’s that’s kind of the I think that that gives us the the bigger white space. That’s the more of the evolving area. Selling our I nine product, selling the tax credit product, that’s where the the digital identity growth is is most opportunistic. What’s been the most powerful piece, though, has been package density, which really is conceptually helping our customers dial up and dial in their risk management profile to the appropriate space.

So oftentimes, a customer may start with a very basic package, Just going to check criminal records, do a social security number verification, and that’s really it. Not doing sex offender, not doing global sanctions, not going deep into criminal history, not doing national or federal or anything like that. Being verticalized in our go to market approach has really helped us showcase to our customers, hey, where are you weak? Where are you strong? Benchmark them against the top logos in their industry.

And upsellcross sell has been the most powerful piece of that and consistent driver of upsellcross sell growth just through package density, package density, package density. And that trend’s not changing, by the way. Because what we’ve seen happen is we have a client in the retail sorry, hospitality space a couple years ago. Someone was recording something in in their in their facilities they shouldn’t have. Immediately hit board level attention.

They called us saying, hey. What what are we doing wrong? Mhmm. We show we we show them, hey. We’ve been telling you for years.

You’ve been doing a weak search. 300% scope increase. They will never unwind that. Right? So very powerful, very, you know, very sticky.

But then I think where the most opportunity comes from is certainly that, you know, the new products, the new innovation. So digital identity being, you know, the number one opportunity there that we see, but, you know, also being able to cross sell the products that were unique within First Advantage and Sterling to the, you know, to the to the other install base is also a fair amount of white space.

Pete Christiansen, Equity Research Analyst, Citi: I do wanna talk about digital identity in a second, but but back on package density, Obviously, it makes sense to increase the scope, get more data sources involved given in the world that we’re we’re living in today. But are they also going deeper, maybe further back? Are they are you seeing any any benefit from there? Because I think at what point we’re seeing some some some benefit from

Stephen Marks, CFO, First Advantage: What’s Yeah. It’s a combination. Like like I said, a very a very simple search might be a three year criminal history Okay. Only county of residence or whatever. We can develop names and addresses.

So go, you know, find out that that person’s been using, you know, Steven with a p h instead of a v in certain circumstances to help circumvent some of this. Or Marks with an x, not k s, in certain circumstances. Right? So we can we can develop additional names to make sure we have the coverage for that. We can develop addresses.

So Steven didn’t tell you about that apartment he lived in in in, you know, wherever, New Orleans and got into trouble. We can also use our national criminal file to help expand the scope to a national level. So we can always go there there there’s there’s tons of avenues to go deeper, and and we’ve got a, you know, with 190,000,000, you know, annual screens, we’ve got a ton of operational data that we can build those cases on to help customers get there. And it’s not just on criminal. Right?

You can go deeper on on education or employment. You can go, you know, deeper whether on global sanctions and and things like that. So they’re certainly there. And then I think, you know, on the cross sell side, you know, the one the one area that this administration seems to be really enforcing from a reg regulatory standpoint is the right to work. So we’ve also seen a lot of interest in our I nine product offering, which is the, you know, e verify US, you know, being able to work legally in The US.

That’s a great service because it’s it’s a super easy workflow when it integrates into our profile advantage applicant experience. Tenant doesn’t even know why they’re being asked the question, but they’re being prequalified for their I nine. And then we’re able to leverage that into our digital identity searches, but I’m not imagining we’ll be talking about in a second, and really have this very cohesive, you know, risk management profile.

Pete Christiansen, Equity Research Analyst, Citi: Right. You know, it’s, I do, I wanna talk about digital identity, where First Advantage’s capabilities are now, where you wanna take them. I’ve actually done some hiring this year. So and leveraging the First Advantage Sterling kind of platforms for sure, but it’s it’s funny now. I have to every every time I I I check off a a portion of the the hiring process, I have to verify a photo each time.

It’s pretty amazing. And and I think COVID obviously saw this explosion of ID fraud and people having multiple jobs at the same time, that kind of thing. What’s the state of ID verification right now in the market, the pickup that you’re seeing from your existing client base? And do you feel like you have the right capabilities in house to to to really grow this portion of the business?

Stephen Marks, CFO, First Advantage: So great question. First, thanks for your business. But no. It’s so that you’re absolutely right. I think the combination of, you know, the our virtual environments that we all live in.

Right? Interviewing, even, you know, remote work, hybrid work, has created new risks. I think the techno technological evolution, you know, I think the the negative side of AI, you can fake a resume, a CV. Now with the deepfake technology, you can just fake a whole persona, an interview on on someone else’s behalf. So I think the risks have rapidly evolved.

And I think in over the last six, eight, twelve months, I think corporations have started to to very quickly realize those risks. You know, the same day we did our Investor Day, there happened to be an article out of The Wall Street Journal that highlighted 300 corporations in The US that had hired someone from North Korea and didn’t know it, until after they onboarded them. And and they and those companies, they were using, you know, fake IP addresses, fake resumes, stolen identities, synthetic identities, all of those things to you know? And in a lot of those cases, they weren’t trying to do something nefarious, but they were trying to earn earn US dollars and send them back home. In some of those scenarios, it became an InfoSec problem.

So the risks are becoming very, very real. Mhmm. And and I think, fortunately, for our marketing budget, I think companies are starting to get educated on those very rapidly on what those risks are. So the whole concept of of the digital identity is really that KYP, know your people concept that I was talking about at the onset. And our product solution and and where, you know, where first advantage can really fit in well with that is, know, when someone you onboard someone, we’re at the the middle of a lot of what companies are trying to do.

Right? You’re trying to screen someone. You’re trying to interview them. Then you’re trying to background check them, onboard them, right to work check them, post onboard. At all of those points of time, there’s opportunity to sell a digital identity solution.

But where companies have you know? And look. You can you know, we we’ve had partnerships, whether it’s Sterling’s with ID. Me, FirstAdvantages with Yoti, that we’ve talked about publicly before. Those become point solutions if you go direct.

And then it becomes Citi’s obligation to figure out, alright. Did was their candidate Right. Persona identity swap out between those phases? Where we feel a a unique point of the position is we can sit in the middle there and help make sure and do that validation for you. Hey.

Was this person the right the person you interviewed? Does it validate to their identity? It was this the same person was this the same person that we background checked? Mhmm. Is this the same person you onboarded?

Is this the same person we submitted to to to the, you know, the DHS for your I nine e verify search? So we’re starting to get a lot of traction on that. We’ve seen use cases from in in terms of a financial services client, not not Citi, that may wanna use it six to eight times every time they onboard a person at each and every one of those stages. At retailer, it might be one to two, but it is a a quickly evolving market. We think we have all the resources we need in house to do it.

But very similar to kind of our our employment verification space, we’ve taken this open marketplace approach. So we don’t just use one provider. We haven’t built our own tech. We we’re we’re leveraging a network of identity solutions provider because the provider networks are rapidly evolving too. The the tech at at the Clears, the ID.

Me’s, you know, a few of those guys are just rapidly evolving. So we wanna be open to to identify the right and best tech provider and solution there. We can plug them into our process, and then our customers, you know, leverage the benefit of that. We also obviously can leverage the margin side of having multiple providers. And at the same time, we don’t have to build it.

Okay. So we feel like we’re positioned really, really well. Obviously, the market’s getting very rapidly educated on the risk. It’s a huge TAM that we’re trying to tap into. And then we’re very optimistic.

The pipeline’s building rapidly. When you talk to our customer success teams as they do QBRs with their clients, you know, roughly 50% of the time is being devoted to these types of risks and what our product solutions are. So we’re demoing it up.

Pete Christiansen, Equity Research Analyst, Citi: 50%.

Stephen Marks, CFO, First Advantage: Oh, yeah. No. There was there was a story I I was hearing. You know, Scott, our CEO, was in in in out out in the West Coast last week and was telling us that, know, he was in a QBR, And that company had an issue very similar to that Wall Street Journal article, and their board mandated they have to have a solution in place in ten days. So it’s becoming very real.

The pipeline’s building very rapidly, and and we’re very optimistic that, you know, in 2026, we’ll have a lot more good data to share and financials on it. But we’re very optimistic on it, and I think this is an area that will evolve very rapidly just because of the risk. Mean, technology is making the risk evolve so rapidly.

Pete Christiansen, Equity Research Analyst, Citi: More complexity. That’s what we like. No. We’re a

Stephen Marks, CFO, First Advantage: middle team. Yes.

Pete Christiansen, Equity Research Analyst, Citi: But it’s amazing how HR now is an attack vector for for for

Stephen Marks, CFO, First Advantage: And and no offense to our our friends is

Pete Christiansen, Equity Research Analyst, Citi: like that. It’s it’s amazing.

Stephen Marks, CFO, First Advantage: Also tends to be one of the slower adopters of the next. So I I think to to your point on complexity and where we fit in, you know, we can be the trusted adviser. You know, we can make it say, we we have the full scale solution instead of you having to figure out how to handle the what we would call point solutions. Right? Doing a single ID verification with an ID company becomes a point solution because then it’s up to the company to to to link it all together, to triangulate that person through the various processes.

So, you know, we’re optimistic about where we sit. We sit in a very opportunistic part of the of that onboarding process where we can help coordinate, you know, that the the linkage of that persona through those various phases. And that’s that’s certainly an area that we’re hoping evolves very well for us over the next couple of years.

Pete Christiansen, Equity Research Analyst, Citi: Do you believe that this area is the largest wallet share opportunity for First Advantage?

Stephen Marks, CFO, First Advantage: I don’t know about that. I think it’s certainly one of the the best areas to grow through cross sell and upsell for us. You know, just given given the From

Pete Christiansen, Equity Research Analyst, Citi: your existing base. I mean Right.

Stephen Marks, CFO, First Advantage: Well, to be honest, our largest consumer right now of digital identity was new logo for the digital identity. We actually sold them digital identity first First. And then sold them background screening second. So it gives us it gives us just a lot more market opportunity, new things to sell. Our sales team loves having new toys.

You know, it’s it’s it’s not a best of all worlds there, and and obviously a lot still has to evolve to get to get to its its kind of critical mass and start really realizing the financial benefits, but very optimistic about where it’s taken us.

Pete Christiansen, Equity Research Analyst, Citi: That’s exciting. I do want to touch upon new logo growth and how you’re seeing the market evolve, especially now with Sterling. How has that changed your right to win on the new logo side? Maybe talk about some of the trends that you’re seeing.

Stephen Marks, CFO, First Advantage: Yeah. I mean, look, what we liked about both companies’ culture is is sales were very productive in both. Right? So when we did the diligence, you know, both companies were producing four, five, 6% new logo growth every year, had a had a vertical focus, very sales forward. Now, obviously, we’ve taken that best of breed, best athlete approach.

So we feel like we’ve got a a very, very capable go to market crew. Obviously, yielding early early success from that, whether it’s the, you know, the number of bookings, the size of the bookings. Our our average booking size is going up, which we like. So we’re selling more density earlier on, which certainly helps. But, you know, we also feel look.

Our our our size and scale gives us a very compelling competitive story when it when it comes to go go to market. You know, we’re we’re we’ve got best tech. We’re spending, you know, obviously, far more there. We’re able to invest in digital identity and AI and data and applicant experience. We don’t have to prioritize one over the other.

We’re able to invest in all. Obviously, from a marketing standpoint, you know, we we’ve got very capable, best in class resources. And, you know, look. At the end of the day, our brand name is is, you know, gonna be gonna be up, you know, up there. So I don’t think there’s a a major RFP that we’re excluded from by by nature.

So, you know, we feel really good about it. You know, you power that, you know, the the new logo growth with the ability to then, you know, bring in a client and then and then farm them through upsell cross sell into into a bigger client. Feel really, really good about it. And at the same time, that we wanna grow new clients, have not lost any focus on our existing clients. I go back to that 96% retention.

That is a KPI that we talk about, you know, obsessively internally, because that’s really the measure of how we’re doing. I

Pete Christiansen, Equity Research Analyst, Citi: do wanna we have five minutes left. I do wanna certainly touch on two points here. Base growth. Base growth has had some puts and takes in in in the last twelve quarter I’m sorry, eight quarters. And obviously, the employment market is going through some shifts and has been for some time.

Can you just walk remind us some of the dynamics that you’ve seen on a combined basis, both on a pro form a basis. What’s been some of the puts and takes on on base growth, and and and how should we think about that exiting this year?

Stephen Marks, CFO, First Advantage: Well, I’d almost go back to the the four year anniversary of our IPO and kind of put the last four years. Right? We came out of the pandemic. Great onboarding, great resignation, you know, war for talent, whatever we wanna call it. So base growth, you know, ballooned.

Right? Have right? A key a key economic point we always look at is the number of job openings to those unemployed. That was well over 2.2 to one back in 2020 early early twenty two, late twenty twenty one. That is not sustainable.

So we had this, you know, ballooning effect essentially of just of churn in the market. And and vertical by vertical, that’s kinda steadied back out. Of course, when that steadies that out, it comes through as negative base for us. But what we’ve really been seeing over the last three, four quarters is that pace of change rapidly, you know, tempering down and seen a lot more sequential stability in the numbers the last number of quarters. So, yeah, it comes through as negative base, but that that pace of negative base has been has been feathering down and getting really to this neutral state.

So we’re really getting into that now where we see most of the verticals have have normalized out internationally and nor certainly normalized out far before The US. Right. It’s all you know, good international momentum last quarter, up 7%, and that includes base being positive. Look, things like tariffs have probably put a little bit of a sour on the retail vertical. But that’s why we like our new vertical diversity from the Sterling acquisition, where we’ve got health care

Pete Christiansen, Equity Research Analyst, Citi: and Not relying all on holidays. Right. That and all that stuff.

Stephen Marks, CFO, First Advantage: It’s it’s it’s still a factor in our year, but we’re not reliant on it anymore. So I think I think, you know, again, the stability is is kind of where we see it at. It’s certainly not back to the point where we were pre pandemic where there’s kinda a consistent base growth. We still think we’re a ways away from that because, haven’t seen investment hiring return yet. That does impact base.

But, you know, certainly, what our customers are telling us is to expect more of the same, you know, hiring at a very similar pace that we’ve been hiring the last number of quarters, which, again, we’re fine with because even if base is neutral, we’re still driving new logo, we’re still driving upsellcross sell, we’re still driving retention.

Pete Christiansen, Equity Research Analyst, Citi: It’s no longer holding you back anymore as a Before the acquisition of Sterling, you certainly had a vertical over indexation to transportation and retail, things like end tech in general. Now with Sterling, you had more health care, obviously, and then financial services for sure. How do you think about vertical diversification going forward? Are you making efforts to increase that forward? Or you feel kind of happy where where things are now?

Stephen Marks, CFO, First Advantage: We’re we’re certainly happy that we have more diversification. And obviously, we can drive some of that through product investment and making sure that we’ve got the products to serve those growth verticals. So, you know, road ready, the the the health care unique products, things like that, because, you know, those verticals were very bullish on long term. You know, that’s how we we wanna grow everywhere. There’s no real you know, we’re not trying to exclude any markets.

We think we’ve got a very, you know, a compelling product suite that can help us grow all over the place. But, certainly, we like health care. We like transportation. They’ve been very resilient. There’s a lot of density in those because of the regulatory environment that oversees them.

But we’ll continue to grow throughout the vertical pie chart.

Pete Christiansen, Equity Research Analyst, Citi: I do want to talk about where we are in terms of the integration and some of the efforts you’ve made on the capital allocation front. You’re in phase one right now or getting nearing the end of phase one. And you’ve had a clear focus on deleveraging post the acquisition and creating all these synergies. Phase two is at a new leverage level, but it sounds like you’ll be in more of a position to lean more on perhaps inorganic growth strategies. Is is that how we should Yeah.

Think about the progression?

Stephen Marks, CFO, First Advantage: Yeah. So, really, the story for kinda 2025, 2026, more or less, as we’re as we’re completing the integration, getting the synergies, you know, through through the program. You know, we’re already at $47,000,000 through last quarter. We got a 65 to $80,000,000 target. And getting that leverage back towards our target range of two to three times, our focus is gonna be, you know, organic growth, you know, integration, synergies, deleveraging.

Once we get leverage into that target range, we can certainly open up capital allocation playbook. But it’s hard to say what that’s gonna be because I don’t know what the market’s gonna look like two years from now. But certainly, we’ll have more flexibility in our capital allocation priorities when that time hits. Until then, core focus still, integrate the businesses, get the synergies, keep customer retention where it is Right. And then deleveraging, which we’re already off to a really good start.

We’ve already paid down $45,000,000 of the debt, repriced the debt with a 50 basis point lower interest rate. So feel like we’re making really good progress there, but still have a good ways to go.

Pete Christiansen, Equity Research Analyst, Citi: Certainly. It it is progress on a on a number of fronts here. And it sounds like, you know, all engines could be firing at the same time pretty soon. So fingers crossed. But anyway, thank you.

Steven Marks, CFO of First Advantage. Great to have you. Thank you. Thank you very much.

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