First Advantage Corporation Q1 2023 Earnings Call
Good day, everyone. My name is Todd and I will be your conference operator today.
I would like to welcome you to the first advantage first quarter 2023 earnings conference call and webcast.
Hosting the call from first advantage is Stephanie Gorman, Vice President of Investor Relations.
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Thank you Todd Good morning, everyone and welcome to first advantage has first quarter 2023 earnings conference call in the investors section of our website you will find the earnings press release and slide presentation to accompany today's discussion. That's what passes are being recorded and will be available for replay on our investor Relations website.
Before we begin our prepared remarks, I need to remind everyone that our discussion today also forward looking statements.
Forward looking statements are not guarantees of future performance actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors. These factors are discussed in more detail in our filings with the SEC, including our 2022.
Okay, and our Form 10-Q for the first quarter 2023 to be.
With the SEC such factors may be updated from time to time in our periodic filings with the SEC and we do not undertake any obligation to update forward looking statements.
Throughout this conference call. We will also present and discuss non-GAAP financial measures reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measure to the extent available without unreasonable effort.
In today's earnings press release, and presentation, which are available on our Investor Relations website.
I'm joined on our call today by Scott St. Paul first of all just Chief Executive Officer, and David Jaffe, Our Chief Financial Officer. After our prepared remarks, we will take your questions I will now hand, the call over to Scott.
Thank you Stephanie and good morning, everyone.
Thank you for joining our first quarter 2023 earnings conference call.
I would like to start by thanking our first advantage team members across the globe for their ongoing dedication to helping our customers truly put their apple Ken's first.
We have a great team, who is constantly helping our clients hire smarter and onboard faster as they navigate these uncertain times.
Since we became a public company, we've highlighted many aspects of our business that underpins the resilience of our operating model and the confidence we have in our ability to weather any economic environment and generate superior profitability.
We had a solid first quarter delivering as expected we.
We successfully leveraged our flexible and efficient cost structure as we remain laser focused on operational excellence.
Our approach to innovation and differentiated technology continue to win in the marketplace.
Our customers value expertise and human capital, our focus on automation and quality and our successful track record of innovation.
This is a winning formula for first advantage.
Our gross retention rate of 97% remains near record levels and our 13 year average tenure for our top 100 customers are impressive metrics, we pride ourselves on.
These are big reasons, we have been able to deliver consistent results.
Our customer base is strong broad based and continues to expand we booked seven new logo enterprise customers in the first quarter and 30, new logo enterprise customers in the past 12 months.
As a reminder, we define new logo enterprise customers as those with $500000 or greater in annual expected revenues.
Turning to our first quarter results.
In the first quarter, we generated revenues of just over $175 million and adjusted EBITDA of approximately $49 million, you'll recall that we grew revenues by 44% and adjusted EBITDA by 46% in Q1 of 2022 making.
Our Q1, 2023 results more difficult on a comparative basis.
Much of our first quarter moderation came from our international markets driven primarily by a disproportionate decline in India, given the region's exposure to be P. O N I T services and APAC given regional market dynamics.
[noise] verticals, including transportation and health care continued to see stable hiring demand while other verticals saw moderation primarily attributable attributable to macro factors.
Which continue to impact hiring trends.
Despite varying levels of demand across our verticals, we remain energized and focused on serving our customers and driving strong and sustainable outperformance in our markets over the long term.
Our first quarter adjusted EBIT margin performance was in line with our expectations and prior year trends remember that Q1 is historically, our seasonally lowest quarter.
As large retail and logistics companies annually reduce their holiday season staffing.
We believe our profitability remains best in class in our industry and we continue to expect that our adjusted EBIT margins will return to above 30% levels in Q2 and for the balance of the year.
These results speak to the adaptability of our operating model, our cost discipline and the strong execution by our team members across our markets.
I'd also like to remind you that we have very robust very well capitalized balance sheet, which includes over 400 million and cash we continue to generate significant free cash flow and our leverage is a modest 0.7 times.
This gives us significant flexibility during these difficult times.
David will provide additional color on our financial performance and full year outlook in a moment.
Turning now to key highlights from the quarter, which are summarized on slide five.
The overall U S labor market continues to show some pockets of resilience and while activity has moderate moderated relative to the extremely strong levels from a year ago.
And the degree of uncertainty remains elevated overall hiring remains generally stable.
We are also encouraged by our monthly revenue progression through the first quarter, particularly in our Americas business, where we observed modest month over month improvement throughout the quarter.
However, the U S labor market continues to be broadly impacted by macro headwinds, which has forced companies to look at areas to reduce costs and prune head count.
These actions along with current expectations for the for these headwinds to continue are already reflected in our guidance.
We continue to believe meaningful structural tailwind remain in place to support a return to our long term organic revenue growth target. We are excited about our long term prospects given the systemic changes we are seeing in employment dynamics Pratt.
Francis toward greater flexibility work life balance working multiple jobs and higher pay are expected to continue to drive increased churn and structural changes, which result in increased higher hires and quits.
Recent macro jobs data, specifically related to new hires and quits while modestly down in March has remained relatively stable, which supports the ongoing generational shift in how people work and apply for jobs.
Additionally, we interact with our top enterprise clients on a frequent and ongoing basis.
They are monitoring the economic impact from inflation and rising interest rates. They tell us that the demand for their products and services remains robust and they are looking to capitalize upon opportunities in the current market environment.
As our customers continue to navigate the ongoing macroeconomic challenges it has become even more imperative for them to invest in products that lead to higher productivity improved accuracy and faster results in the hiring process as they place an even greater emphasis on efficiency and hiring and attracting the best.
At first advantage our success in meeting these needs as a result of our dynamic product offerings, which are enabled by our investments in differentiated technology machine learning and automation.
We provide a compelling value proposition for our customers, who depend on the speed and quality of our solutions to help them succeed in today's dynamic and fast moving hiring environment.
Even during these challenging times, we continue to selectively invest through the cycle and capitalize on opportunities to further strengthen our business.
In April we held our annual customer conference called collaborate which is the only background screening user conference of its kind, bringing together customers partners and thought leaders.
We were pleased to have Johnny see Taylor junior join us as our keynote speaker, where he led a fantastic session on the future of the workforce Mr.
Mr. Taylor is the president and CEO of the society for Human Resources management also known as Sherman.
And is highly regarded as a leading industry expert and human resources. He is renowned global authority on the future of employment culture and leadership and is nationally recognized best selling author.
One offering we launched was our new product bundles and capabilities powered by our mobile first next generation profile advantaged technology.
These product bundles are designed to align with industry best practices and vertical expertise and are delivered within profile advantage, providing a seamless applicant experience.
These offerings also provide additional opportunities for new business and upsell cross sell growth.
Additionally, we continue our commitment to providing our customers with the latest in market, leading technology with the ongoing rollout of our did digital identification product in the U K in partnership with the O T.
We are pleased to share that we have contracted with over 100 and twenty-five customers of which more than 75 are now live in the U K market with a strong pipeline of additional opportunity.
This product provides an innovated and much needed solution in the U K market that allows applicants to use a seamless and fully digital process, replacing what was previously a manual procedure and reducing turnaround time from days to hours.
We are well positioned as an early mover in this important and attractive space, particularly as other international markets adopt similar digital identity standards.
Last quarter, we discussed the incredible traction we are getting in our employment and education verification space with our smart hub technology, which Leverages machine learning and our proprietary algorithms to quickly search across multiple data sources to determine the optimal therapeutic verification source.
Based on speed data quality and cost effectiveness.
A key component of the success of smart hub is leveraging our proprietary verified database, which now has over 80 million records.
In aggregate our proprietary databases have now surpassed 700 million records, including our national criminal record file database, which maintains around 625 million records, making it one of the most robust criminal record databases in the industry.
At first advantage, we continue to innovate and deliver new solutions, which is a key differentiator to maintaining and growing our competitive advantage over time in.
In the future, we look forward to sharing updates on our progress and how we are helping our customers stay on the leading edge of hiring and providing the best applicant experience in the industry.
Turning to slide six I want to take a moment to talk about the progress we've made around our sustainability initiatives, which are detailed in our second annual sustainability report published yesterday.
Our talented global workforce is inherently diverse and each employee brings their unique strengths and experiences to bear which is key to our long term success as a company we provide ourselves on fostering a culture of inclusion that helps our employees maximize their potential.
We are excited about the collective progress we've made at first advantage with our sustainability efforts. We believe embedding. These considerations throughout our business is not only the right thing to do but also drive stronger and more resilient performance and ultimately maximize shareholder value.
I will now turn the call over to our Chief Financial Officer, David Ganzi for more details on our financial results David.
Thank you Scott and good morning, everyone, let's begin our financial review on slide eight.
Versus the prior year, our first quarter revenue decreased 7.6% to $175 $5 million or six 4% to $178 million on a constant currency basis.
It is important to note this is versus very robust revenue growth of 44% in the comparable quarter of 2022 and was slightly better than we originally expected.
This results in a three year revenue CAGR of just over 18% substantially higher than our long term targets.
In our Americas segment revenues of $152 million were down a modest 5% from Q1 2022 as our customers continue to hire although at a slightly lower rate in Q1 of last year.
Our Americas segment held up relatively well given overall market conditions, which is attributable to our broad day resilient enterprise customers in total our Americas segment represented 86% of consolidated revenues in the quarter.
In our international segment revenues of $25 million were down 22% from Q1 2022 on.
On a constant currency basis revenues would've been $27 million or down 15% year over year.
The decrease in revenue is due primarily to weakness in India, given the region's exposure could be P. L and it services related businesses and APAC, while still down we are starting to see positive signs of trends moving in the right direction across China Hong Kong.
And Singapore as lockdown restrictions have been lifted.
Additionally, we are cycling over a very strong double digit growth in the first quarter of 2022.
Our EMEA operations have proven more resilient in the face of macro headwinds with the new digital identity products contributing to their sustained success in.
In total international represented 14% of consolidated revenues in the quarter.
In the first quarter the year over year revenue decline from existing customers was $22 million net of up sell cross sell which contributed $9 million or 5% to our revenues.
The news from new customers contributed an incremental $8 million, adding 4% to our results.
Contributions from new customer sales and up sell cross sell are encouraging and remain consistent.
Adjusted EBITDA for the quarter was $49 million, a decrease of 9% compared to Q1 of 2022 during which we grew adjusted EBITDA by a very high 46%.
FX had a half million dollar negative impact on our adjusted EBITDA dollars.
Our adjusted EBITDA margin of 27.7% was in line with our expectations and was consistent with the prior two years.
And we continue to maintain a very high quality of earnings.
We expect adjusted EBITDA margins to return to over 30% starting in Q2.
Also just to note our three year adjusted EBIT dock CAGR with nearly 25%.
Adjusted net income decreased 15% to $28 million from $33 million in Q1, 2022.
This was primarily attributable to lower revenues higher interest expense and higher DNA associated with investments in our proprietary platform, partially offset by interest rate swaps and higher interest bearing deposits.
Adjusted diluted EPS was <unk> 19 cents for the quarter.
Our adjusted tax rate of 25, 3% was in line with the prior year period.
I'd like to remind you that one of our most significant differentiators is our unique and highly flexible cost structure.
The majority of our cost to perform our core background screening services are variable. So we have a very high degree of confidence in our ability to successfully align our operations with the demand environment, while meeting our customers' needs.
Approximately 70% of air cost of sales, our third party costs, which are essentially 100% variable and usage based.
This means we do not incur these third party costs, if we do not perform a starch.
We can also flex their staffing levels by adding or removing shifts or overtime.
Additionally, prior investments across geographies technology, and automation have structurally reduced our cost base.
We are laser focused on profitability and believe we are well positioned to successfully navigate future macroeconomic environment due to the efficiencies we have driven across the organization.
In addition, we remain focused on productivity and reducing controllable costs, such as reducing our facilities footprint lowering our overall insurance cost and selectively lowering head count throughout the organization to match demand.
We have demonstrated our ability to act quickly in the past to preserve margins and we will continue to do so in the future. If the situation dictates a rock solid balance sheet strong cash position free cash flow generation and low leverage.
<unk> gave us the flexibility to continue to selectively invest in the business.
Turning now to capital allocation and our balance sheet on slide nine.
We are committed to maintaining a strong balance sheet and conservative capital structure, our low leverage and ample dry powder or provide tremendous flexibility to further our strategic priorities, how our philosophy around capital allocation is to take a balanced approach between M&A disciplined.
Internal investment return of capital to shareholders and maintaining our attractive leverage profile.
We continue to actively evaluate M&A opportunities and are starting to see more activity.
Our available cash cash flow and strong balance sheet provide us with substantial flexibility to pursue attractive opportunities.
Our internal investment priorities remain focused on technology automation product innovation and sales initiatives that drive highly profitable organic growth.
During Q1, we repurchased $25 million of common stock or 1.9 million shares under our share repurchase program and we still ended the quarter with over $400 million of cash on our balance sheet.
Since its inception in August 2022 through May four 2023, we have repurchased seven 4 million shares for $97 million.
This consistent capital deployment approach allows us to drive sustainable long term value creation for our shareholders.
In the first quarter, we continued to deliver strong and consistent cash flow generation with operating cash flows of approximately 39 $39 million keep in mind Q1 is historically, our lowest cash generating quarter, and we were still able to generate.
<unk> robust cash flow.
During the quarter, we spent $6 billion on purchases of property and equipment and capitalized software development costs.
We ended the quarter with total debt of $565 million in cash on our balance sheet of over $400 million. We also have $100 million in untapped borrowing capacity under our revolving credit facility with no outstanding balances.
Based on our last 12 months adjusted EBITDA of $244 million, we had a net leverage ratio of just under 0.7 times as of March 31.
Our debt structure has us well positioned for today is higher interest rate environment.
We have an interest rate collar with approximately 50% of our long term debt cap at 1.5% one month LIBOR rate through February of 2024, and we have no principal payments due before 2027.
Recall, we strategically hedged another $100 million of long term debt in the first quarter. So we now have 70% of our long term debt hedged.
Our interest rate exposure on the remaining unhedged portion of our debt is currently more than offset by our interest income on interest bearing cash deposits.
Now moving to slide 10.
Yeah.
Macroeconomic conditions, including hires and quits received it in line with our expectations during the first quarter.
This is outside of the regional bank failures, which had no direct impact on our business.
We expect the fed to stay diligent on their fight against inflation and unemployment rate to increase which will temper our near term growth.
This has already been factored into our guidance, including that the current environment continues.
Given our current visibility ongoing dialogue with customers as diverse nature of their client base and our strategic vertical coverage.
We are reaffirming our full year guidance.
As a reminder, we expect to generate full year 2023 revenues in the range of $770 million to $810 million.
<unk> and approximately flat to negative 5% year over year revenue growth.
As a reminder, we have lapped all acquisitions. So this guidance and the associated growth rates are organic figures.
All assumptions, including our expectations for foreign currency and typical seasonality for them to remainder of the year are unchanged.
This includes our expectation shared last quarter that in Q2, we expect sequential revenue growth.
So it will still be negative on a year over year basis.
We will also still be cycling over double digit revenue growth in Q2.
Our outlook for adjusted EBITDA is also unchanged.
We anticipate organic adjusted EBITDA to be in a range of 240 million to $255 million, representing approximately negative 4% to positive 2% year over year growth.
This represents margin expansion to around 31% for the year with adjusted EBITDA margins above 30%, starting in Q2 and improving in the second half of the year. Following a similar pattern to 2022.
We continue to expect our 2023 adjusted net income to be between 145 and $155 million and adjusted diluted EPS of a dollar to $1 seven.
Our adjusted diluted EPS guidance assumes we maintain a similar run rate of share repurchases for the remainder of the year.
As we progress further into 'twenty two 'twenty three we remain focused on controlling what we can control and on our commitment to creating value for our customers and shareholders. We are in an incredibly strong financial position and a resilient operating them.
Model and track record of navigating challenging times underpins, our confidence and ability to execute on our strategy in this dynamic environment.
I'll now turn the call back over to you.
Thank you David.
I will conclude our prepared remarks today by reiterating my confidence that the future of purse advantages as bright as it has ever been we have our playbook to navigate the challenges that are ahead, we are a global leader in a large market with significant long term growth potential and our employees continue to work tirelessly to.
<unk> us to better serve our customers our strategic investments in technology machine learning proprietary databases automation and the actions we've taken to enable our customers to higher smarter and onboard faster will continue to drive our success in the future.
Thank you very much for your time and your ongoing support at this time, we will ask the operator to open the call for your questions.
Thank you.
We will now begin the question and answer session. At this time if you have a question. Please press star one on your telephone keypad.
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S. A while asking your question to provide optimal sound quality.
It comes from.
Slo-mo Rosenbaum with Stifel.
And all for Shlomo over the course of the 2023 guidance. So we'd expect some expectations for existing client volumes, new claim volumes cross sell upsell and attrition.
Okay.
So Shlomo [laughter], it's very consistent with what we've been saying all along.
Upsell cross sell has averaged 4% to 5% it was 4.9% in Q1, our new logo sales.
Tend to run between five and 6% it was slightly below that at 4% in Q1.
Our attrition was at 3.1% so that remains very positive.
And our existing base.
Which was down slightly over 13%, excluding upsell cross sell we expect that to get better throughout the year.
Okay. Thanks.
How are you thinking about the high cash balance given the current interest rate environment and or the high cash levels are to.
Due to the continued interest in M&A.
Yeah.
M&A is a very high priority of ours.
We remain actively looking at transactions.
There are a lot of quality opportunities are that we have seen lately.
Several that are not going through a process that have called us directly.
It remains a very high priority, but we will continue to be selective and we're going to be very prudent from evaluation perspective.
Thank you. Our next question comes from Ashish <unk> with RBC.
Hi, This is David on for Ashish.
Just wanted to get a little bit more color you mentioned.
In the prepared remarks about controlling what we can control is there anything on the cost side that you are monitoring to help.
<unk> margins throughout the year and maybe an early look into 2024.
From a cost perspective, we do a lot of contingency modeling and we know which levers to Paul we've demonstrated that now pretty consistently over the past three years, we do have the highest margins in the industry, we have a very variable and flexible cost structure.
As we said in the prepared remarks, a substantial portion of our cost of sales of third party costs. If we don't do searches we don't incur those costs. We also have the opportunity to flex head count within our operations plus we can run two or three shifts and we can manage over time, we continue to all.
Automate we continue to rationalize facilities, we will and have selectively reduced headcount to keep it in line with demand.
And we will continue to prioritize and selectively make new investments.
We were fortunate in the fact that upon our insurance renewal on March one we were able to lower some of those costs and in fact on the other side of that we have selectively been able to pass on some price increases. So there are a lot of levers and we're managing all of this.
Yeah.
Thank you. Our next question will come from David <unk> with Evercore ISI.
Thank you good morning, Scott could you dig into the a D a weakness.
You know and in greater detail, particularly given your background in India. It services.
Yeah, Hi, David Happy too.
So yeah, if you think about our <unk> or our customer base in India. As we mentioned in the prepared statement, our large customer in India, India tends to be a the large b P O and it services companies.
And you know our theory is that those companies are the demand for their services has been scaled back a bit so there they're hiring less people.
In general we feel the India market for Us will lag the U S recovery by a quarter or so so as the U S recovers the India market will also recover.
But keep in mind, you know international Ah you know revenue for US was only 14% so it's not a huge exposure.
India is about a third of that 14%, but.
But that business, obviously will come back when the demand for those services.
Services and products for those companies comes back in and again those companies are primarily servicing the large EM and Ts around the world and that's where the softness is in the India market.
Got it thanks for that and then just as a follow up you've long use robotics process automation in your business over 3000 bots in Q1.
I mean to what extent.
You know what would incorporating artificial intelligence help you reduce the labor intensity, even more and particularly lift margins going forward.
Yeah I think.
A I can probably be used in multiple places, where we're actually seeing the bigger impact more on the front end of our technology. So using AI when it comes to the Apple can experience and.
And we're starting to now two research some some generative AI AR opportunities in our customer success and customer care offerings, because that's where I think the AI impact will be more on the applicant and the customer versus the backend, which is where our.
P a automation and ultimately a P eyes will dominate the landscape and that's obviously, we've been investing in and the backend automation in the API and robotics for you know for years and years and years, we started that journey about seven years ago.
So we continue to invest on that back end.
So that's giving us.
The automation, which leads to lower head count higher margins faster turnaround times. So it's a little bit of both AI on the front end automation on the backend.
Thank you very much.
Thank you. Our next question comes from Stephanie Moore with Jefferies.
Hi, good morning, and thank you.
Maybe following up on it and the original earlier question I'd love to get a sense of what you're hearing from your customers or what you're seeing in your channel that you know gives you confidence that the base business will start to turn around or get better throughout the year. Thanks.
Yeah, I think first of all it's important to know that we're in constant dialogue with our large customers and you know with our managed enterprise accounts. These are discussions we're having daily weekly monthly formal Q be ours, and so we're getting some good input from the field directly.
Some customers and the general General sense, we're getting is that they've done all of the actions that they had planned to do primarily in in 2022, and they're kind of in a holding pattern.
And so I think what we're seeing from the macro standpoint is that and certainly in regards to the labor market in regards to what we're hearing from our customers to the word that we keep coming back to is stability.
We're seeing a lot of stability in our customers ordering in there and then their hiring plans and.
And I think that's a good thing for us because you know they're starting now to plan you know the rest of 2023 and there are some positive signs there.
So while I think you know the.
The macro and certainly the labor market have shown signs the signs of stability I think what it means for US is that we remain busy so while the while that's stable we've been very busy with product innovation, new product launches and investments in sales. So I think were you know hopefully timing it.
Right, where our clients start coming back in terms of higher order volumes, and we're ready with new products and additional sales strength and et cetera.
Great now that's that's fair.
Really helpful color and maybe as you look at your new logo wins that include what you're seeing there where do you feel like you're taking.
The lion's share of some of those wins is it from first time kind of outsources here that are going more so I'm sorry for.
Time areas that are moving from smaller regional players or where do you think youre seeing the majority of those lens. Thank you.
And it's the exact same data that's been playing out for the last couple of years is when as we've been announcing our quarterly wins, we analyze where those wins have come from and it's really three equal buckets.
It's you know a third from the mom and Pops out there. It's a third from the midsized players and its a third from the large players.
And that trend has not changed over the last year plus since we started really analyzing that and reporting that data. So we think that trend will continue and obviously, if there's changes to it well, let you know, but it's really what I think is a good sign because it means that you know it.
Its a healthy competitive landscape in that and that our products and services and offerings are attractive in all three of those competitive buckets.
Great. Thank you so much.
Thank you. Our next question comes from Andrew Steinman with J P. Morgan.
Yes, Hi, this is Alex Hess on for Andrew.
I'm just wondering maybe return to the subject of base growth. My recollection is that you guys had indicated the base growth would be negative in the first half of 2023.
On your previous call, maybe can you tell us where the first quarter shook out versus your expectations.
Hi, Yeah Alex.
It was very consistent with what we with the guidance that we had previously provided.
It was down about 13% that's what we had anticipated it was actually not as bad as we had anticipated and then again as I mentioned earlier, we got positive contributions from upsell cross sell and new logo of about 9% and attrition was 3%.
Got it that's very helpful. And then maybe more of a strategic question.
You guys have leading margins in the background screening industry and you guys have a very very strong balance sheet I know there've been some questions about you know maybe some levers you can pull on margins, but maybe why not pull some levers to accelerate investments at this juncture given your financial position so any thoughts around.
<unk>.
Why maybe not accelerating or putting more foot to the more pedal to the gas in this environment would be helpful.
We continue to invest back into the business, particularly in product development and automation.
As Scott mentioned, just a few minutes ago are we see this kind of a lull in the business as a great opportunity to internally focused.
And get ready for the surge that will be coming back. So we are investing in our business, but we're also balancing margins and profitability at the same time, so we're being selective but we are reinvesting.
Oh, great. Thank you so much yeah, Alex I'd add just.
Just keep in mind is as we continue to drive you know the automation journey, we are getting increased margins and savings from that and we actually are turning that and putting that back into product tech. Yeah, we are increasing our pods strength.
We're increasing our sales head count.
Its just not visible to you you know because we don't detail detail it out like that but we're able to do that and.
Produced the numbers that we producing so we're actually doing both at the same time.
Thanks, so much for the color.
Thank you as a reminder, if you would like to ask a question. Please press star one.
Our next question comes from Kyle Peterson with Needham.
Hey, good morning, guys. Thanks for taking the questions.
You know you guys have given some pretty good color specifically on some of the Indian It services headwinds he is are experiencing.
It seems like Americas is does it seem to be holding up better, but I wonder if you could give some more color at least on the vertical side, you know maybe kind of what is coming in.
As good or maybe even a little better than expected that is offsetting some of these headwinds internationally.
Yes.
Yeah, So I I'd say no vertical is coming in better than expected, but certainly you know verticals are coming in as expected and.
As we mentioned in our prepared statements transportation and health care, you know continue to.
Drive you know good volumes for us.
We're not going to go into like vertical vertical by vertical breakdown, but at the end of the day, you've got you know.
You know a handful that are doing you know pretty well you've got a handful that are sort of flat and you've got others that are negative and the net result is exactly what we.
Put forward here are in our earnings releases and in our guidance. So it's a bit of a mixed bag and you got some offsetting others.
But it's actually exactly where we thought it would be.
Got it.
That makes sense and maybe just a follow up.
Proprietary data.
I mean, it seems like you guys have been making a lot of efforts to kind of if they use their own data and cut out the middleman per se in some different areas, but maybe if you could give some more color on where you're seeing some of the most progress and whether that's around verifications or in the criminal side or.
Or maybe somewhere else completely.
And so those are the two big buckets, that's where we're seeing the most progress but.
In regard, but you know the the criminal side is really not about margins that's.
That's more about.
The quality of the check and being able to use use that data to.
To you know.
Increase accuracy and turnaround times and things like that the margin impact is really on the verification side.
So it's and it's not just only using our proprietary data, which certainly helps.
But it's you know were starting to be seen in the market as the place to go for alternative verification sources, and that's where the smart hub technology shines.
I would tell you right now the smart hub is actually the best Tech we have in the entire company.
It is a phenomenal piece of technology, that's got proprietary algorithms in it that enable us to go to the market and say we are the place for alternative verification sourcing and it. It doesn't mean you know that we're just using our database or using somebody else's database, where we're able to search multiple data.
Basis with that technology, and that's driving the total cost of ownership of doing a verification down at our customers and it is helping us win business.
Alright.
Good color thanks, guys.
Okay.
Thank you. Our next question comes from Heather <unk> with Bank of America.
Hi, Thank you for the time just.
Just one question for you I can you talk about the upsell cross sell where you're kind of seeing the strength, what's driving that and has it changed this year versus last year, just as the macro environment has shifted.
And Heather it's actually has changed a bit.
And it's.
So you may have seen our press release from US recently, when we released our annual trends data. So every year, we look at the previous year's ordering volume trends.
What are what are customers thinking about what are they ordering so we did 100 million searches in 2022, so that's a lot of data.
And whats come out of that data is is that customers are now valuing risk or risk mitigation of risk aversion as their top priority or is one of their top priorities and so what that and I think you could probably guess that if you just turn the news on at night.
We are clearly living in unprecedented times when it comes to violence and and and customers are worried about that so what's driven upsell cross sell probably the most is what we call package density.
So package density is where customers are buying more and more protections. So this would go probably against what you would think about in a in a down macro oriented or in a challenging macro where you would think customers are looking to save costs and things like that but they're actually buying more from us.
So wallet share is increasing as customers look to protect themselves. So it's it's it's really driven a lot by risk.
That's really helpful. Thank you.
Thank you there are no further questions in queue. At this time I will now turn the call over to Scott Staples for closing comments.
Thank you operator, and thanks, everyone for your participation have a great day.
Okay.
Thank you. This concludes the first advantage first quarter 2023 earnings conference call and webcast.
You all for your participation at this time you may disconnect your line and have a wonderful day.
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