First Advantage at Wolfe Research FinTech Forum: Strategic Growth and Integration

On Tuesday, 11 March 2025, First Advantage (NASDAQ: FA) took center stage at the Wolfe Research FinTech Forum, unveiling strategic insights and future plans. The company highlighted the significant impact of its recent acquisition of Sterling, which has doubled its size and expanded its market reach. While the integration is progressing well, First Advantage is focused on achieving synergy targets and addressing challenges in certain verticals.

Key Takeaways

• First Advantage’s acquisition of Sterling doubled the company’s size and expanded its service offerings.
• The company is targeting $60-70 million in synergies post-acquisition.
• First Advantage holds a 25% share of the U.S. background screening market, with significant growth potential.
• Identity verification and post-hire monitoring services are key growth areas due to rising identity fraud.
• The company aims to stabilize base growth by mid-2025 and reduce leverage by 2026.

Financial Results

• Q4 2024 base growth fell short of expectations due to challenges in retail and transportation sectors.
• Legacy First Advantage achieved over a 32% EBITDA margin in Q4 2024.
• Revenue growth is driven by new client acquisition, high retention rates (96-97%), and upsell/cross-sell opportunities.
• A $60-70 million synergy plan is underway following the Sterling acquisition.

Operational Updates

• The Sterling acquisition has diversified First Advantage’s vertical exposure and reduced reliance on seasonal peaks.
• Integration of the 10,000-person organization is progressing, with synergy targets moved from 12 to 6 months.
• First Advantage secured 88 enterprise wins in the past year, including significant deals in retail and Australia.

Future Outlook

• First Advantage is focused on completing the Sterling integration and achieving synergy goals.
• The company plans to return to an optimal leverage position by 2026.
• "FA 5.0," a new three-year growth plan, is in development, emphasizing AI and automation investments.
• The background screening market presents a $13 billion opportunity, with $6 billion in untapped potential.

Q&A Highlights

• Investments in the sales force have shown positive returns, contributing to pipeline success and high retention rates.
• Cross-selling and up-selling focus on quality rather than pricing, enhancing customer value.

For a complete understanding of First Advantage’s strategic direction, readers are encouraged to refer to the full transcript below.

Full transcript - Wolfe Research FinTech Forum:

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: All right. Good morning, everyone. Welcome to the twenty twenty five Wolfe Fintech Forum. My name is Scott Wirtzel on the Payments and Infoservices team here at Wolfe, and happy to be joined by Steven and Joelle from First Advantage. So thank you guys for joining us.

Good

Steven, First Advantage, First Advantage: morning. Thank you. Good morning.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: So Steven, maybe we can start off, there could be some in the room who are maybe unfamiliar with the First Advantage story. So can you maybe begin by giving a quick overview of the company?

Steven, First Advantage, First Advantage: Yes, absolutely. So there are a few new faces, but good morning, everyone. So First Advantage is the leading global solutions tech solutions leader in the background screening space. We specialize in high volume verticalized screening solutions, drug testing, digital identity and pretty much anything else to help manage your human capital risk around hiring, employment. We offer a whole wide suite of services, supporting a highly verticalized product and sales market and really specialize in anything our clients need to manage their risk and hire the top talent and focus on delivering that through a product first tech enabled solution.

Obviously, recently doubled the size of the company, so now we are well over $1,500,000,000 of revenue and certainly the market leader in our space, not just here in The U. S. But globally as well, and are looking to obviously grow the story off of that.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Gotcha. That’s a great overview. And maybe we can talk about the market for a little bit because I feel like the market for background screening, identity verification, post hire monitoring is definitely unique in terms of the kind of flow of business and market share. So can you maybe give us a sense of just how you sort of view the overall market right now, your guys’ position relative to competitors? Then you’ll get to the Sterling acquisition a little bit as well.

Yes.

Steven, First Advantage, First Advantage: I kind of had the same reaction almost ten years ago when I took this job. You would never imagine how complicated this industry is and how much tech can enable to be a big differentiator there. First and foremost, A, with our Sterling acquisition we completed, we are by far the largest in the world. But it is a huge market. It’s a $13,000,000,000 TAM with a ton of white space, about $7,000,000,000 is vended, so there’s $6,000,000,000 of white space.

And even with our acquisition, which makes us the market leader, we’re roughly 25% of The U. S. Market. So a ton of growth both here domestically, which is the largest market in the world, but we are a global player. So almost 13% to 15% of our business is outside The U.

S. We have our key markets being The U. K, India and APAC, and seeing some really good results out of all of those markets, especially the ones that kind of mirror U. K. Common law.

So U. K, India, Australia, Hong Kong, regions like that. But when you look at kind of The U. S. Market, so back to our Americas, Eighty Five Percent, Eighty Seven Percent of our business, hugely fragmented.

We’re by far and away the largest at 25%. There’s a couple other players. There used to be three Publix background screeners. There’s now only one. It’s kind of a survival of the fittest game, if you will.

But there’s a whole plethora of them. There’s a middle market tier around 10 or so companies and a $300,000,000 4 hundred million dollars maybe $500,000,000 They’re all private, so it’s kind of hard to get the data. And then beyond that, there is quite literally a countless number of smaller enterprises, maybe single proprietor, single digit millions to tens of millions of dollars. But first Advantage is really focused on a few things: One, being verticalized. We love being in very specific verticals that have a consistent needs for screening.

If you look at our top three verticals, health care being now number one, it’s over 20% of our business. Huge compliance demand in health care, very specialized compliance demand. Our second largest vertical, which was when we were a standalone company before the acquisition, transportation, another great vertical to be in because it’s hugely DOT compliance, lots of kind of recurring demand, whether it’s annual screening and health services and driver qualification. And then retail, another one where we can flex our speed muscle. So high volume hiring being what we’re really good at, taking in huge volume of orders.

Joel’s team is building really good tech that can then fulfill all of that through high automation and then fulfilling it really quickly. So you kind of think about our vertical approach, really tech driven, but our big client focus is on what we would call enterprise size clients. So enterprise contract for us is $500,000 a year or more of annual revenue. And we have a really good sweet spot there because we’ve got a great commercial team, so so sales and customer success. Again, a vertical approach so we can walk into a door of a large transportation company, and everyone they meet at First Advantage understands DOT compliance.

So huge differentiator in our market. We really went to a vertical approach back in probably 2017 when Scott Staples joined as our CEO. And then we do this all with a huge tech enabled back end, so high automation, over 70% of our U. S. Criminal elements.

That’s the core of our business, end to end touchless. There’s people don’t realize how complicated it is. And I think when you say kind of the background screening industry and what differentiates you, you look at this country, there’s almost like 3,500 unique counties. But then within those, there’s upper courts and lower courts. There’s over 10,000 court jurisdictions, and the key to doing this job really well is building that automation.

So when Steve and Mark comes in the door and you can identify where you need to go, but you’ve got automated solutions and really quick data solutions on how to get all that data to validate all those credentials. So I know it’s a long answer to a short question, but it really explains for you that you’re like, man, background screening, how simple could that be? And really, what differentiates you is being able to do it at scale with automation and tech.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Gotcha. Yeah. No. It’s very helpful. Yeah.

And it’s definitely a unique space. So I guess if we get into the numbers a little bit, you recently reported 4Q results a couple of weeks ago, which I think saw a continued theme of you guys executing well on the factors that are in your control. But base growth still remains a headwind as some of the hiring headwinds we see in just The U. S. Labor market right now.

So can you just maybe talk about what developed in the quarter relative to your expectations? And then your assumptions also embedded in 2025 guidance regarding the labor market?

Steven, First Advantage, First Advantage: Yes, absolutely. Yes. So Q4, I mean, a lot happened for us in Q4, right? So we closed the Sterling acquisition October 31. But when you kind of pro form a for all of that and just kind of look at it in a bubble, yes, you’re right.

I mean, I think base growth, which if you’re newer to our story, it’s kind of your same store sales, so how much the same customer ordered the following year. Fell short a little bit. I think we saw, like we talked about in our call, a little bit of late quarter surprise from our Retail and Transportation just Because legacy first Advantage had a little bit of a seasonal peak that’s relying on the big retailers and e commerce players and home delivery guys, having a really good holiday season. And they did. I think just what retailers, A, with a really late Thanksgiving and, B, trying to eke every penny out of the consumer have widened the aperture of the holiday season.

So we used to have Black Friday and Cyber Monday, and now it seems like you’ve got just nonstop sales, if not just November. It’s October, November and December is nonstop sales season. So we definitely saw elevated hiring, but we didn’t see that peak that we are accustomed to seeing. So certainly that was kind of the late quarter revenue surprise. I think we still focus to your point on what we could control.

So legacy first Advantage, that’s really where that impacted because that was the first Advantage focus there, retail and transportation, still delivered over 32% EBITDA margin. So we were able to quickly adjust the cost base, execute on a few other savings, obviously, like we’ve talked about a lot, accelerate synergies out of that acquisition. So that was kind of the later quarter. On the Sterling side, a little bit more tied to the white collar salary employee, kind of fell right within our expectations, which weren’t rosy. To your point, we’ve been in this normalization and stabilization cycle with base we were just talking right before the call about how crazy 2020 was.

Well, in the hiring industry, 2021 was the crazy year, year, right? We saw base volumes go through the roof and good mid single digit growth, I mean, 30% plus and some international geographies 40% plus. That obviously wasn’t sustainable. And really what we’ve seen and kind of correlates to almost the glide path of where the Jolt state has been taking us, it’s kind of it’s been getting back to what is a normal hiring environment, and we see that stabilization in that trend. And we kind of see it within our base trend as well.

We just have to comp over in the early part of twenty twenty five some tougher comps. And then when we get to the middle of twenty twenty five, that’s kind of the end of a three year normalization cycle. So then all of your comp periods in 2024 have three years compounded in them. And we do see some stabilization in base there. And then to your focus your point, our focus has been what we can control.

So our revenue is driven really by four things: Base growth, like we’ve been talking about new logo. So Joel’s sales team is able to generate four percent, five percent, six percent constant new logo growth, and we think we’ve got a great team to power that forward. We focus on retention. Our retention rates for both legacy First Advantage and legacy Sterling were both 9697%. So huge customer attachment and you get that by being integrated and really fundamentally part of your clients hiring environment.

And then the last piece is upsell cross sell and upsell cross sell is really three things. A, it’s expanding geography and that’s very simple to understand a U. S. Client going international, maybe you’ve got certain regions or subsidiaries and growing more wallet share cross sell. Like I mentioned in the onset, we have a huge portfolio of products, whether it’s for certain verticals or we have onboarding products, post onboarding products, tax products, etcetera.

But what is unique about background industry is something called package density. And because we’re kind of in the risk management space, we can help our clients adjust the dial and do more screening. So a basic package and then add sex offender or global sanctions go deeper into the criminal history, etcetera. So that’s a 4%, five % or 6% contributor as well. So between focusing on new client growth, upsell, cross sell, high retention numbers, we can generate 6%, seven %, eight % growth even in a flat base environment.

So we’ve been executing on that, I mean, incredibly consistency. I know you know the numbers really well, but I mean, that’s been a trend ’twenty one, ’twenty two, ’twenty three, ’twenty four, no matter which of the macro swings you’re talking about generating that growth. And then certainly now, we have the added ability to focus on executing on a $60,000,000 to $70,000,000 synergy plan to help drive even bottom line growth to add to that top line.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Got you. And I think that leads well into my next question. So as you mentioned before, in the fall, you closed the acquisition of Sterling, which effectively doubled the size of the company. So maybe you can talk a little bit about the strategic rationale of the transaction, the early days of integration, and what kind of synergies we could expect. And then, Joel, I would love if you can follow-up with maybe giving any early examples of sort of the first Advantage in Sterling, maybe working together to land a new customer and how it’s going on that front.

Steven, First Advantage, First Advantage: Yes. So I mean, as you know, we were active in the M and A space in ’twenty one, ’twenty two, did five acquisitions, and all were really successful internally, but none were very big. The largest purchase price was right around $40,000,000 and they didn’t move the needle. So we certainly paused for a minute to look at our strategy. We looked around the market for kind of the best way to power growth.

And candidly, we always saw Sterling as our highest quality competitor. They had a lot of traits that we really liked when we got into that diligence. One, they were verticalized a little differently than we were, but their number one vertical was health care, and we love that space. It was our third largest vertical pre acquisition. It’s now our largest.

There’s great macro trends there in terms of the demand for health care, aging population in The U. S. They had some really nice product and data assets and ways to acquire data that we liked. And the more and more we got into that diligence, we really just liked a lot about the business model. And look, it was obviously six months ago, a different a year ago, a little bit of a different regulatory environment.

So we obviously had a long DOJ path to get that approved. But the fact that we were able to acquire the second best asset, if you will, in our industry, effectively double the size of our company overnight, but do it in a way where we got, A, a good value. We didn’t overpay, and that’s really been one of our core tenants around M and A is we’re kind of stingy on valuation. It had a great synergy case to it and we were able to start executing on that very early. And we’ve got some Joelle highlighted some great product wins and go to market wins that came out of it because great sales culture, some really nice product assets.

So really happy we were able to get that deal done. Obviously, we’ve got a lot of work to do now. Integration is going really well. The culture’s fit really well, which is really important in one of those types of deals. And obviously, got a meaty synergy case there, right?

Originally thought it was going to be around $50,000,000 We’re now very confident in the $60,000,000 to $70,000,000 range, and we’re doing everything we can to draw that savings forward. Obviously, twenty twenty five got a lot of unknown in the environment. I haven’t logged into Twitter yet this morning to figure out how busy of a day it’s going to be on the flight home. But that’s why we’re focused on those synergy numbers because those are real tangible dollars that we can achieve very quickly.

Joelle, First Advantage, First Advantage: Yes. And as far as some of the sales synergies and deals, the teams have been working really, really well together. It’s interesting you’ve got two fierce competitors that have been for decades going after each other. So to pull them together and to see them work like they are over the last couple of months has been pretty remarkable. Some evidence of that is a large deal that we recently won in the retail gig space.

So as Steven mentioned, our sweet spot has always been high volume hires, and that’s really around retail transportation, last mile delivery, that type of stuff that dovetails really nicely into gig. So when you look at our vertical go to market, the one of the big differentiators is being able to benchmark exactly what our customer is doing with as far as risk management and benchmark that against, you know, tens of hundreds of other customers, to give them a really nice view. So when we were going for that deal, and this deal is probably one that could end up being a top 10 customer for us, so it was pretty significant. We were able to pull all of the benchmark data in from the Sterling customers as well. So you had all of the strength of the retail customers, and all of that data, and then you had, a lot of the data from the gig space, which Sterling actually had done a really nice job of developing a nice customer base there.

So when you put those two together and show all of those benchmarks and show the strength of all of the services and products that we can deliver to help mitigate risk, it gave the customer a lot of comfort, that we were the right solution. So that’s one example. Another example which we have internationally is one of our largest international deals, in actually a couple years, and it’s out of Australia. And one of the strengths of Sterling was an acquisition they had done a number of years ago in Australia, and they had done a really nice job of building out some criminal products in that space. So we went to market.

We did a nice analysis around kind of the first Advantage platform, the Sterling platform, the services that we could be delivered from this large customer in Australia. And at first, we maybe thought they would be a little spooked giving, oh, the acquisition just happened and we were both bidding for the same business. But they loved it, and they chose the platform that best suited them. But it was the industry and also, because that was a financial services win, and also the region expertise. So it was great to see the two teams from Sterling and First Advantage both work together to close that large deal for us.

So it’s been really good. We’re seeing a lot of momentum.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Got you. It’s great to hear. Before we get more into the go to market side, Stephen, with the Sterling acquisition, you guys are obviously now more diversified from a vertical exposure perspective. And can you just talk a little bit about that, how that can have a positive impact on the business? And imagine there could be cyclical benefits, seasonal benefits that come into play, But I’d love to just kind of hear how you think about the positive impacts of vertical diversification.

Steven, First Advantage, First Advantage: Yes. And I’ll let Joel chime in at the end about how it helps the go to market, too. It certainly helps from kind of a financial modeling, right? We’ve got A, it’s not just vertical, it’s seasonality as well, right? So a number of kind of alternative benefits, if you will, from the acquisition, right?

We’re less reliant now on that seasonal peak I talked about, which was our Q4 kind of surprise, if you will, much more diversified like Joelle mentioned. First Advantage never really got into gig and then because we didn’t like it domestically, but Sterling had some great gig solutions, specifically internationally, that we kind of looked at and said, man, that’s actually a unique solution to a unique problem. So there’s a few other benefits like that. But overall, yes, much more diversified. First Advantage was heavily tailored towards the hourly employee, which we like to very much because it’s a lot more consistent churn there.

But obviously, the screening packages you run over an hourly employee are a little skinny compared to a salaried employee who’s looking at sensitive data or doing sensitive company items or much more regulated industries they tend to be in. So Sterling’s got a little bit more of a white salary employee, so white collar back in the day is what you would have called it. So it diversifies us there, less seasonality. And look, now we’ve got a portfolio of over 80,000 customers, almost 80,000 customers. So you just have this much, much larger mix of marquee brand names, a huge portion of the Fortune 100, five hundred, just we get this great mix.

And then even more so internationally, just think about a geography, very complementary there. Now we’re pretty much the market leader in our major markets we want to participate in. First Advantage had a great India practice. Australia was a great sterling market. Those are great growth opportunities for us, but it also makes us the market leader in there and again helps us diversify more.

If you want to maybe Joelle will give a few minutes on the vertical approach now and our sales teams there because I think that’s a great story.

Joelle, First Advantage, First Advantage: Yeah. Absolutely. So we certainly kind of came out of the gate first with the verticalization, but many of the other competitors caught up quick. And as Steven mentioned, First Advantage traditional was really the high volume hires. So it’s a lot of the you know, retail and transportation.

Sterling traditionally did what we call more professional services salaried workers. So there’s a really nice complement there. But when you look at it from a verticalization, you have a lot of the health care, transportation, financial services more in the professional services space, and then you have retail and transportation. So the product offerings in how you service customers that have highly high compliance, high regulatory requirements, are pretty different based on what you would do for someone who is gonna be, you know, a warehouse worker or clerk or something like that, for a retailer. So when you look at the product space and you look at how the vertical, verticalization for those products kinda complement each other as the, Sterling kinda traditional, you know, professional services, you know, group was there.

So you have the product offerings more in health care and in transportation, that really drive a lot of the compliance. And it’s actually pre hire and post hire, which is great. So when you look at going to the First Advantage customers, you can bring some of those services and some of the products that Sterling has over to them and then vice versa. So there’s a number of products that First Advantage has that is really strong in some of the verticals that Sterling has. So there’s a nice complement in the product space as well as the vertical market.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Got you. That’s helpful. And then when we kind of think about the go to market, over the last twelve months, you’ve had, I think, 88 enterprise wins and 25 in the fourth quarter, which are we think are pretty good numbers. And can you maybe talk a little bit about the sales environment, where you’re seeing the wins come from, and then, you know, what products and services maybe are resonating most with, you know, customers?

Joelle, First Advantage, First Advantage: Yeah. So there’s two kind of focus areas we have here. One is, like I said, the vertical piece, but then the other one is the segment. So traditionally, the first Advantage has been really good at getting kind of the larger enterprises, and that has been kind of the bread and butter for a long time and then continuing to upsell and cross sell and do that. The Sterling segment is really good at kind of the lower enterprise.

And I I say lower. It’s not really that much lower, but, as far as the size of deals. So when you look at that, there’s a lot of cross training that we’re doing with the teams, that allows us to bring some of that large deal focus and expansion. And that’s kind of going back to the package density term that Steven used earlier. That really is just a training exercise to be able to go to these larger customers and out of the gate provide the full suite of products.

Sterling had a little bit different approach where they kind of went in and then they kind of expanded, but with maybe one or two instead of kind of the broad suite. So when you couple those together, it gives us a really great advantage, and we’re seeing that resonate a lot in the market. Identity is very hot right now. There’s a lot of identity fraud out there in the pre hire space right now, which is a little unnerving for a lot of our customers. And that’s not vertical agnostic.

That’s across the board. So we had, you know, for instance, a a fintech, you know, come to us and say, you know, they had a person go through, and they these folks have, interview technology to validate they are the person. They did us, you know, background screening. They have the I nine verification, all of the stuff that we do. But, you know, they still had somebody get through because they had a fragmented product approach and they weren’t connected.

So when that person started, they asked to have shipped to an address that was not theirs, and they did it. And so there was a cybersecurity incident and other things that were there. And that’s just one example. We’re seeing a number where we have other customers where they some of the bad actors, you know, from areas like North Korea and whatnot are trying to get credentials, and they don’t necessarily care about the job. They just want the day one, get the credentials, download the data, drop in a malware, and go from there.

So it’s on the rise, and so that product offering is is very hot right now, and it’s something that both Sterling and First Advantage did really well. So we’re excited about what that looks like for us. And like I said, that’s vertical agnostic. And then we have specific solutions in health care that that Sterling had that were a little bit more advanced than some of the stuff that First Advantage had. And then First Advantage is probably a little further along in transportation.

So there’s a lot of nice complements vertically, but then also from a segment perspective and then product.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Got it. Got it. I’d love to stick on that, you know, kind of identity side of things. I mean, I think sometimes when people think of the background screen, there’s a lot of times they think of really just the pre hire side of things. But there’s obviously identity verification.

There’s post hire monitoring. So, you know, I would love to kind of talk a little bit more about how you view those spaces, the white space there, and, you know, what you or with Sterling, what you guys are doing to really attack that identity and post hire monitoring space.

Joelle, First Advantage, First Advantage: Yeah. Absolutely. So identity is definitely kind of the next frontier for space, and it does run the full cycle of the the work hire. Right? So from very beginning of interview stage through the cycle of the hire stage and then also post hire, because we are seeing fraud hit every aspect of the life cycle of of someone’s work.

It’s really interesting. This market really got very hot internationally to start. So The UK, actually, Canada, and Australia were some of the first areas to really kind of venture into the identity spaces years ago. So because we’re a global organization, we were able to be first to market in a number of those regions with some of these new products. So we learned a lot about really what this means for and we call it kind of a KYP space, so know your people.

It’s not really the KYC, which is the traditional identity. So when we learned kind of what was happening there, bringing the solutions to The United States obviously just made a lot of sense. As we said, our international business is about 13% of our business, so the lion’s share is obviously in The US market. So when you look at, you know, where you can slide these identity products in and how the underpinning of the data, the data that’s collected at the identity space, the data that we collect, at the background screening space, and then obviously the proprietary data that we capture. And then post hire to make sure that it all stitches together, that’s how you handle a lot of this fraud and a lot of the challenges that customers are seeing with this increased risk in the new hire space.

So we’re really bullish on it. We think it’s exciting. Monitoring is something that we see really taking off with our regulatory customers. So drivers, nurses, doctors, obviously, they need to have proper licenses. They need to be there, from a perspective of, you know, eligibility and credentialing.

It hasn’t really picked up as much in some of the unregulated businesses, but I think that’s just a maturity curve, that eventually will pick up. But for now, that’s where we’re seeing a lot of that growth. But we’re really bullish on both, and it’s really nice to be able to have a product suite that expands the whole length of where the hiring cycle is and then gets us to post hire as well.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Got it. That’s helpful. And then, got to ask about AI, of course.

Steven, First Advantage, First Advantage: Of course.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: So, you know, just how should we think about, you know, artificial intelligence impacts on the business, whether from, you know, internal, you know, efficiency exercises, product related, anything there?

Joelle, First Advantage, First Advantage: Yeah. Absolutely. So, yeah, we love we love AI. We’re really bullish on it. So we’ve been using AI inside of First Advantage for the better part of five years.

So it’s not new to us, and that’s because a lot of our differentiation in the market was really around proprietary data. And as you know, anybody who’s followed the AI market, it’s really about the efficacy of the modeling and making sure that the products that you are building and the services that you’re delivering are fit for purpose for your business case. So when we think about AI, we think about it kind of in three buckets. The first one is really customer and candidate experience, because you talk about all the folks that are getting hired. But some of our major customers, which is why we do so well in the enterprise space, are folks that are hiring individuals.

So they’re the talent management, they’re the HR people. So we really focus on bringing AI to help our candidates, which are in the, you know, tens of millions, and then our customers. And anything we can do to improve that experience, whether it’s on the UI or whether it’s click, chat, call. So a lot of our claim to fame for helping in customer service has been a lot of the stuff we’ve been able to do with the calling originally, which was natural language processing and being able to kinda improve that experience. But then the latest was really chat and all of the AI that we’ve done with our our chatbots, which has really dramatically improved efficiencies, but obviously also experience.

So I think one of the points we made last year in in our services, we were able to drop about 300 folks out of our customer care organization just because of that modern technology. So that’s great. The next space is obviously internal efficiencies. So we get kind of a twofer with click chat calls, so that’s great. But there’s a number of other things that we’re doing there.

We rolled out, FA chat GPT, so every person inside the organization can be efficient and better at what they’re doing. And then from our operations team, there’s a number of internal agentic types of AI that we have rolled out to make them more efficient, and that’s been really exciting. And last, probably most exciting to me, are the is the AI that we’re generating revenue from. So that’s really around kind of the smart hub and then also our candidate experience. So a lot of that has been built, you know, proprietary to first Advantage.

It’s really been something that’s been fed by our own data. So AI out of the box is great, but if you don’t have really solid training data to feed it to make it more efficient, you’re not gonna get the most out of it. So So that’s something that we’ve been able to do really well with some of our proprietary AI like Smart Hub and our next gen profile Vantage.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Got you. Very helpful. And Steven, maybe we can go now to capital allocation. Obviously, post closing of the Sterling deal, there’s probably been a little bit of change in capital allocation priorities. So love to kind of just hear how you guys are thinking about deploying free cash flow over the near to medium term here.

Steven, First Advantage, First Advantage: Well, it’s a pretty simple story for the moment, right? So I mean, we just closed the acquisition about four months ago. So our main focus is right now are, A, completing the integration. And Joelle has highlighted a couple of the early wins from the go to market. That team has done a great job integrating.

There’s still a lot of work. These are 10,000 person organization now combined that we have to fully integrate and keep working through. And obviously, when you think of an organization that size, getting those synergies, that $60,000,000 to $70,000,000 that does take a little bit of capital to get some of those. We have to reengineer process. It does we have to negotiate with some vendors and exit some of the contracts and some employees too too to get us down to the right size organization for our new size.

So when you think about capital allocation, those are kind of the two priorities, get the integration done, get it done well, get the synergies we’ve talked about and then obviously get our leverage back into the into our optimal position. So our long term target has been two to 3x. It’s going to take there’s a little bit of a journey to get there just from closing the deal, yielding the synergies and getting the go to market success churning. We think it’s roughly at the two year mark, so call it into 2026, we’re right around that 3x mark. And then from there, it could be a little bit differently.

We’ve obviously got an Investor Day coming up in May. I’m sure there’ll be a little bit more topic about the long term uses of cash there. But for now, really our focus is get those synergies, leverage our organic investments around AI and automation and really to start to get back to where we were, which was a really good free cash flow generator.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: And then maybe last one before we see if there’s any questions from the audience. I mean, if we were to be back here twelve months from now and looking back on 2025, what would you point to that would lead you to view this year as a success?

Steven, First Advantage, First Advantage: The way the news is going, we could probably be back here in about twelve hours and have a different story. No, look, I think completing the integration, right, twelve months from now is kind of a probably a big milestone for us because we’ll kind of have completed the first full fiscal year as a combined company. Like we talked about in our call, we’re accelerating our synergies and integration wherever we can. Our original target was, hey, let’s get 50% of our synergies realized or actioned within twelve months of the acquisition. We’ve pushed that time line to six months.

So twelve months from now, we’re sixteen, eighteen months post acquisition. We should be starting to see the light at the end of the tunnel from the integration itself and we can get back to doing the fun. Our FA five point zero, which is going to be kind of our new three year plan, pushing those initiatives forward, which should be about growth and less about integration. And obviously, I’m sure Joelle would love to be here twelve months from now telling you how great those three bookings that Scott highlighted on our earnings call, the health care deal, the retail gig and the Australia deal that Joel highlighted a few minutes ago. And really, I think at that point, we should have the synergies action, the onetime costs out of the way and really have good track record at that point of the free cash flow and really what the our original thesis for doing this deal, we should be starting to yield all the benefits from it.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Got you. Very helpful. Anything from the audience?

Steven, First Advantage, First Advantage: Well, and I guess and I want us to repeat the questions, but yes, the ROI on our sales force. I’ll tell you, Konstantin, never we look at two areas that if we invest in the business, it’s never returned poorly, sales and product. And Joel can talk about the sales team more specifically, but I think when we look at investing in the sales team, we’re pretty prudent. We’re not extravagant spenders, but when we invest there, we’ve seen it yield pipeline success, go to market success, and even when we invest in customer success, which is a little bit about a little less about growth, that’s what powers 96%, ninety seven % retention, which we know is incredibly valuable. But

Joelle, First Advantage, First Advantage: It’s also, we have because we’re really good on the cross sell, up sell, we kind of measure it over a course of the twenty four months. So the original investment is what you would see in any standard organization. But because of the 5% to 6% cross sell, upsell growth every year, that really gives us a nice return kind of on that original sale as it comes through. And as, you know, Steven mentioned before, we’re really sticky. Customers stay with us a really long time.

Average ten years, twelve years. So the lifetime of that customer value based on that original sale is extremely high.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: In the back.

Joelle, First Advantage, First Advantage: There’s a question on the cross sell upsell. How much is related to pricing? And then secondarily, can you talk about integrating the technology stack from Sterling

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: to FA? And how much are you doing there versus when this came out?

Joelle, First Advantage, First Advantage: Yes. Say the first part of that question again. I’m sorry.

Steven, First Advantage, First Advantage: Just pricing.

Joelle, First Advantage, First Advantage: Pricing.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Yes.

Joelle, First Advantage, First Advantage: So pricing for cross sell, up sell. The pricing has never really been a major issue. We don’t sell on price, we sell on quality. And because we are a global player and one of the only ones in the market that can do that, that’s something that has been held pretty strongly. And Sterling actually had the same approach.

I don’t know that I have time to answer the next question.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Yes, we might be out of time. But Steve and Joel, you guys so much.

Joelle, First Advantage, First Advantage: Thank you, Scott.

Scott Wirtzel, Wolfe Fintech Forum, Payments and Infoservices team, Wolfe: Then next up, we have emerging markets panel in here, and then we have Flywire in the home’s room.

Steven, First Advantage, First Advantage: So thank you guys. Thanks, Scott.

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