Q3 2023 Sterling Check Corporation Earnings Call
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Speaker 1: Hello everyone and welcome to the sterling third quarter 2023 earnings call. My name is Seb and I will be the operator.
Hello, everyone and welcome to the Sterling third quarter 2023 earnings call My.
My name is Sam and I will be the breakdown for your call today.
Speaker 1: If you would like to ask a question on today's call, you may do so by pressing star one on your telephone keypad. If you would like to withdraw your question, please press star two. I will now hand over to Judith's Circle to begin the conference. Please go ahead.
I would like to ask a question on today's call you may do so by pressing star one on your telephone keypad. If he would like to withdraw your question. Please press star two.
I will now hand over to Judith cycle to begin the conference. Please go ahead.
Speaker 2: Thank you, operator. Welcome to Sterling's third quarter, 2023 earnings call. Joining me today on the call are Josh Perez, Chief Executive Officer of Sterling, and Peter Walker, Chief Financial Officer of Sterling.
Operator, welcome to Sterling's third quarter 2023 earnings call. Joining me today on the call are Josh Perez, Chief Executive Officer of Sterling and Peter Walker, Chief Financial Officer of Sterling. The slides, we will reference during this presentation can be accessed on Sterling is IR website under news <unk> events. The slides have been posted to our website and a replay will be made available on the website.
Speaker 2: Displides we will reference during this presentation can be accessed on Sterling's IR website under news events. Displides have been posted to our website and a replay will be made available on the website. After prepared remarks, we will open the page.
After prepared remarks, we will open this call for questions before we discuss our results I encourage all listeners to review the legal notice on slide two which explains the risks of forward looking statements and the use of non-GAAP financial measures.
Speaker 2: Before we discuss our results, I encourage all listeners to review the legal notice on slide 2, which explains the risks of forward-looking statements and the use of non-gape anyone in favor of dönghön.
Speaker 2: Additionally, please refer to our most recent form 10K and 10Q files with the SEC. For a discussion of risk factors that could cause actual results to different from these are the.
Additionally, please refer to our most recent Form 10-K, and 10-Q filed with the SEC for a discussion of risk factors that could cause actual results to differ materially from these forward looking statements.
Speaker 2: Our slide presentation and discussions on this call will include certain non- GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measures are in the appendix to the presentation, and in our earnings release issue this morning. I'll now turn the call over to Josh Perez.
Our slide presentation and discussions on this call will include certain non-GAAP financial measures for such measures reconciliations to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued this morning, I'll now turn the call over to Josh Brett.
Speaker 2: Thank you, Judah. Good morning and thank you for joining us. Before we begin, I want to provide an important update. Since July 2019, I have had the pleasure of working in partnership with Peter Walker, Sterling's Chief Financial Officer.
Thank you Judah good morning, and thank you for joining us before we begin I want to provide an important update since July 2019, I have had the pleasure of working in partnership with Peter Walker, Sterling's Chief Financial Officer.
Speaker 2: As we announced in late September , Peter has found an exciting new role outside of Sterling, and I couldn't be happier for him to pursue this opportunity.
As we announced in late September Peter has found an exciting new role outside of Sterling and I couldnt be happier for him to pursue this opportunity.
Speaker 2: Peter has played a critical role at Sterling in so many ways over the past four and a half years, including leading our successful IPO two years.
Peter has played a critical role at Sterling in so many ways over the past four and a half years, including leading our successful IPO two years ago.
Speaker 2: Peter has put in place a very strong team, culture and finance discipline that sets us up well for the future. I am grateful for all he has done to make Sterling the great company it is.
Peter has put in place a very strong team culture, and finance discipline that sets us up well for the future I am grateful for all he has done to make sterling the great company. It is.
Speaker 2: While Peter will be missed when he leaves at the end of this week, we are in the midst of a CFO search process, and we feel confident that we will find a CFO who will guide Sterling into the next chapter of the company's leadership and growth strategy.
While Peter will be missed when he leaves at the end of this week. We are in the midst of a CFO search process and we feel confident that we will find the CFO, who will guide sterling into the next chapter of the company's leadership and growth strategy.
Speaker 2: In the meantime, I am happy that Teresa Strong, who is here with us today, will serve as Sterling's interim chief financial officer during this transition period.
In the meantime, I am happy that Teresa strong who is here with us today, who will serve as Sterling interim Chief financial officer. During this transition period.
Speaker 2: Having joined Sterling through our acquisition of TalentWise in 2016, Teresa has nearly 20 years of experience leading finance teams and plays an instrumental role at Sterling as Chief Accounting Officer. I am looking forward to working with Teresa.
Having joined Sterling through our acquisition of talent Wise in 2016 Teresa has nearly 20 years of experience leading finance teams and played an instrumental role in Sterling as Chief Accounting Officer.
I am looking forward to working with Teresa in this capacity.
Speaker 2: Turning now to slide four, the third quarter of 2023 was a quarter of successful execution towards our long-term strategy in 2023.
Turning now to slide four the third quarter of 2023 was a quarter of successful execution towards our long term strategy in 2023 goals.
Speaker 2: We continue to focus on what is in our control, a strategy that has produced meaningful results both on the top line and our cost profile, as well as in several other critical areas I will talk more about shortly.
We continue to focus on what is in our control strategy that has produced meaningful results. Both on the top line and our cost profile as well as in several other critical areas I will talk more about shortly.
Speaker 2: In the third quarter, we delivered revenues of approximately $181 million, including strong year-over-year trends within new client growth, upsell and cross-delt and customer returns.
In the third quarter, we delivered revenues of approximately $181 million, including strong year over year trends within new client growth upsell and cross sell and customer retention at the same time, our Q3 revenues came in below our prior expectation due to lower base hiring volumes.
Speaker 2: At the same time, our Q3 revenues came in below our prior expectation due to lower base hiring volumes, resulting from a softer macro than we anticipated in the second half of the quarter.
<unk> from a softer macro than we anticipated in the second half of the quarter. However.
Speaker 2: However, thus far in Q4, we have seen an improvement in our year-over-year base trends, leading us to expect that the fourth quarter will see year-over-year total revenue growth at the midpoint of our revised guidance.
However, thus far in Q4, we have seen an improvement in our year over year base trends, leading us to expect that the fourth quarter, we will see year over year total revenue growth at the midpoint of our revised guidance range.
Speaker 2: Even in the face of this challenging macro, our clients continue to hire at a steady pace and recognize that background screening is a critical component to helping them keep their employees safe while hiring faster and smarter. While cyclical hiring trends will come and go, the long-term help of this industry and our business is exciting.
Even in the face of this challenging macro our clients continue to hire at a steady pace and recognize that background screening is a critical component to helping them keep their employees safe, while hiring faster and smarter.
While cyclical hiring trends will come and go the long term health of this industry and our business is exciting.
Speaker 2: Clients are increasingly adding more services to their background screening package.
<unk> are increasingly adding more services to their background screening package it.
Speaker 2: In particular, both prospective and existing clients are attracted to our innovative solution within identity verification, pre-higher screening, and post-higher monitoring.
In particular, both prospective and existing clients are attracted to our innovative solutions within identity verification pre hire screening and post hire monitoring.
Speaker 2: As a result, we continue to drive strong market share gains and larger deal sizes on both new and existing clients.
As a result, we continue to drive strong market share gains and larger deal sizes on both new and existing clients.
Speaker 2: Our Q3 adjusted even a margin was in line with our prior expectations despite the revenue shortfall. A result we are very proud of and which was driven by our progress on cost optimization F.
Our Q3 adjusted EBITDA margin was in line with our prior expectations.
The revenue shortfall our results, we are very proud of and which was driven by our progress on cost optimization efforts.
Speaker 2: We expect these strategic initiatives centered around focus automation, efficiency, and process reengineering to result in a stronger, more scalable, and more profitable company for the long term.
We expect these strategic initiatives centered around focused automation efficiency and process reengineering to result in a stronger more scalable and more profitable company for the long term.
Speaker 2: We are on track to deliver a $10 million savings in 2023 and our full cost savings target of $25 million in annualized savings.
We are on track to deliver a $10 million savings in 2023, and our full cost savings target of $25 million in annualized savings.
Speaker 2: I couldn't be prouder of the sterling team as we took significant steps forward in Q3 sort of achieving our goal.
I couldnt be prouder of the Sterling team as we took significant steps forward in Q3 sort of achieving our goals.
Speaker 2: Beginning with our first goal, organic revenue on slide five, our culture of innovation, technological excellence, and elevated client experiences, once again enabled strong resulting Q3 on the revenue drivers in our control.
Beginning with our first goal organic revenue on slide five our culture of innovation technological excellence and elevated client experience is once again enabled strong results in Q3 on the revenue drivers in our control.
Speaker 2: Despite the macro environment remaining choppy and uncertain, we are proud to have delivered 10% year-over-year organic revenue growth in Q3 from the combination of new clients and upsell cross-sell consistent with our prior expectation.
Despite the macro environment remaining choppy and uncertain. We are proud to have delivered 10% year over year organic revenue growth in Q3 from the combination of new clients and upsell cross sell consistent with our prior expectation.
Speaker 2: We have achieved this double digit growth from these two factors for 12 of the past 13 quarters, which is a compelling reflection of the market share gains we have been able to consistently generate, regardless of the macro environment.
We have achieved this double digit growth from these two factors for 12 of the past 13 quarters, which is a compelling reflection of the market share gains we have been able to consistently generate regardless of the macro environment.
Speaker 2: During the third quarter, we saw increased wind rates, more signed enterprise logos, and improving customer retention year over year.
During the third quarter, we saw increased win rates more signed enterprise logos and improving customer retention year over year.
Speaker 2: This successes the result of hard work by the entire team, as we continuously use a customer-centric lens to deliver the technology, service, and solutions to market craze.
This success is the result of hard work by the entire team as we continuously use a customer centric lens to deliver that technology service and solutions the market creates.
Speaker 2: With that in mind, we are pleased to have just announced a new partnership with CONFER, a leading provider of instant employment verifications for UK workers, leveraging payroll, tax and open banking data, instant.
With that in mind, we are pleased to have just announced a new partnership with confer a leading provider of instant employment verifications for UK workers, leveraging payroll tax and open banking data instantly.
Speaker 2: We expect this partnership to transform employment verifications for sterling UK clients by enhancing an otherwise manual fulfillment process and greatly improving turnaround time.
We expect this partnership to transform employment Verifications for Sterling UK clients by enhancing and otherwise manual fulfillment process and greatly improving turnaround times.
Speaker 2: Beyond the initial UK launch, we are working with conferred toward rolling out similar offerings and select international marks.
Beyond the initial U K launch, we are working with conferred towards rolling out similar offerings in select international markets. Additionally.
Speaker 2: Additionally, we are leveraging our comprehensive offerings to strategically expand the size of deals we are winning, both for new clients and upsell of additional products and services to existing.
Additionally, we are leveraging our comprehensive offerings to strategically expand the size of deals we are winning both for new clients and upsell of additional products and services to existing clients.
Speaker 2: This approach is also amplifying our market opportunity to display niche vendors due to our ability to consolidate more specialized services as a single vendor solution.
This approach is also amplifying our market opportunity to displace niche vendors due to our ability to consolidate more specialized services as a single vendor solution.
Speaker 2: The right side of Slide 5 shows an example of one such win, our largest upsell in company history. By selling additional products and enhanced workflows beyond pre-employment training, we expect to substantially increase this client's spend with us.
The right side of slide five shows an example of one such win our largest upsell in company history.
By selling additional products and enhanced workflows beyond preemployment screening, we expect to substantially increase this client spend with us the new program began ramping during Q3 and is expected to grow our total revenue from this client by over 200%.
Speaker 2: The new program began ramping during Q3 and is expected to grow our total revenue from this client by over 200%.
Speaker 2: Our API-driven technology and drug and health screening suite played critical roles in this upsell and is one example of the products through which we are expanding our services to client.
Our API, driven technology and drug and health screening suite played critical roles in this upsell and as one example of the products through which we are expanding our services to clients.
Speaker 2: As we look to the future, we see strong evidence that we can continue executing on the organic revenue drivers in our control. In particular, we are excited by our robust opportunity pipeline representing new client, upsell, and cross-sell deal, both in the US and internet.
As we look to the future we see strong evidence that we can continue executing on the organic revenue drivers in our control in.
In particular, we are excited by our robust opportunity pipeline, representing new client upsell and cross sell deal both in the U S and international.
Speaker 2: Even as we continue to close New Deal, the pipeline of prospects keeps building through our targeted sales and marketing efforts, a trend which supports our expectation that we will return to our seven to eight percent long-term target range for new client growth by year S.
Even as we continue to close new deals the pipeline of prospects keeps building through our targeted sales and marketing efforts a trend which supports our expectation that we will return to our 7% to 8% long term target range for new client growth by year end.
Turning to slide six our relentless focus to innovate and bring unmatched solutions to our clients has enabled us to significantly grow our addressable market and our right to win.
Speaker 2: Turning to slide six, our relentless focus to innovate and bring unmatched solutions to our clients has enabled us to significantly grow our addressable market and our right to win.
Speaker 2: As we've shared in recent earnings calls, our investments in faster growing and higher margin identity and post-higher solutions are paying off.
As we've shared in recent earnings calls our investments in faster growing and higher margin identity and post hire solutions are paying off we.
Speaker 2: We are pleased to see another quarter of positive outcomes, including a third consecutive quarter where these two areas comprise more than 10% of our revenues combined.
We're pleased to see another quarter of positive outcomes, including a third consecutive quarter, where these two areas comprised more than 10% of our revenues combined.
Starting with identity.
Speaker 2: We have seen significant success over the past couple years due to our identity first workflow solution that enhanced pre-employment screening and strength and hiring practice.
We have seen significant success over the past couple of years due to our identity first workflow solutions that enhance preemployment screening and strengthen hiring practices.
Speaker 2: During Q3, we saw continued growth in global identity adoption on a year over year and quarter over quarter basis in the US and international.
During Q3, we saw continued growth in global identity adoption on a year over year and quarter over quarter basis in the U S and internationally.
Speaker 2: Piants are becoming acutely aware of identity as an essential step in the background screening process.
Clients are becoming acutely aware of identity as an essential step in the background screening process and.
Speaker 2: And in Q3, we saw an approximate increase of 80% in active U.S. identity.
And in Q3, we saw an approximate increase of 80% in active U S identity clients.
Speaker 2: Furthermore, we grew our advanced stage US opportunity pipeline by over 100% compared to Q2.
Furthermore, we grew our advanced stage U S opportunity pipeline by over 100% compared to Q2.
Speaker 2: Our clients are recognizing that the foundation of a reliable background check lies in the careful verification of candidate identities.
Our clients are recognizing that the foundation of a reliable background check lies in the careful verification of candidates identity.
Speaker 2: By incorporating our identity verification workflow at the beginning of the background check, clients can guard against the escalating threat of identity.
By incorporating our identity verification workflow at the beginning of the background check clients can guard against the escalating threat of identity fraud.
Speaker 2: Furthering that point, Sterling's identity solutions generate a significant and quantifiable return on investment by helping our clients make more informed hiring decisions and keep their workforces safe.
Furthering that point Sterling is identity solutions generate a significant and quantifiable return on investment by helping our clients make more informed hiring decisions and keep their workforces sales.
Speaker 2: In particular, our data shows that adding identity verification at the beginning of a workflow can increase the amount of criminal records discovered by approximately 45%. A striking data point which resonates significantly with clients.
In particular, our data shows that adding identity verification at the beginning of a workflow can increase the amount of criminal records discovered by approximately 45% a striking data point, which resonate significantly with clients.
Speaker 2: Shifting the post-hire on the right side of the slide, Sterling was one of the first CRAs to introduce worker monitoring services several years ago.
Shifting to post higher on the right side of the slide Sterling was one of the first CRA to introduce worker monitoring services several years ago.
Speaker 2: Through continued investment, we've transformed our post-hier screening, and we are optimistic about our consistent progress to grow our monitoring footprint, and penetrate this large and growing market opportunity.
Through continued investment we've transformed our post hire screening and we are optimistic about our consistent progress to grow our monitoring footprint and penetrate this large and growing market opportunity.
During Q3 demand continued to grow for our subscription based monitoring solution, which enables clients to monitor among other things criminal arrest and conviction Records motor vehicle Registry records licensing and credentials and social media.
Speaker 2: During Q3, demand continued to grow for our subscription-based monitoring solution, which enables clients to monitor among other things, criminal arrest and conviction records, motor vehicle registry records, licensing and credentials, and social media.
Speaker 2: While clients from all industries are benefiting from Sterling's monitoring solution, we are thrilled to see particularly strong growth opportunities in the gig industry. As those companies especially benefit from effortless compliance monitoring through a scalable and API driven solution.
While clients from all industries are benefiting from Sterling monitoring solution, we are thrilled to see particularly strong growth opportunities in the gig industry as those companies, especially benefit from effortless compliance monitoring through a scalable and API driven solution.
Speaker 2: Moving on to slide 7. We are focused on driving long-term meaningful cost savings and efficiency gains.
Moving on to slide seven we are focused on driving long term meaningful cost savings and efficiency gains.
Speaker 2: Over the course of 2023, we have been executing on a comprehensive cost optimization program aimed at building a more scalable, effective and profitable company now and into the future.
Over the course of 2023, we have been executing on a comprehensive cost optimization program aimed at building a more scalable effective and profitable company now and into the future.
Speaker 2: Our cost initiatives fall into three key pillars. One, reducing our cost of revenue through a focus on labor and data cost.
Our cost initiatives fall into three key pillars.
One reducing our cost of revenue through a focus on labor and data costs.
Speaker 2: to decreasing our facilities cost by leaning even more into our virtual first strategy. And three, reducing SG&A costs by streamlining our organization and enhancing functional alliance.
To decreasing our facilities cost by leaning even more into our virtual first strategy and three reducing SG&A costs by streamlining our organization and enhancing functional alignment.
Speaker 2: We also continue to maintain strong focus on opportunities to drive further fulfillment process improvement, including increased automation and the use of generative AI.
We also continued to maintain a strong focus on opportunities to drive further fulfillment process improvement, including increased automation and the use of generative AI.
Finally, turning to page eight I will discuss M&A the final goal.
Speaker 2: Finally, turning to page 8, I will discuss M&A the final goal.
Speaker 2: Our strategic acquisitions of stock routines and HEC in the first quarter remain well on track to hit their integration timelines and drive the expected cost energies and geographic expansion benefits.
Our strategic acquisitions of Socrates in APAC in the first quarter remained well on track to hit their integration timelines and drive the expected cost synergies and geographic expansion benefits as we've shared in previous earnings calls we continue to target. The completion of these deal integration by the end of 2023 for Socrates in.
Speaker 2: As we've shared in previous earnings calls, we continue to target the completion of these deal integration by the end of 2023 for Socrates and the end of second quarter 2024 for H.
The end of second quarter 2024 for Asia.
Speaker 2: We continue to view M&A as a key element of our growth stress.
We continue to view M&A as a key element of our growth strategy.
Speaker 2: Given our success with EBI, Socrates, and HEC, we are confident in our ability to execute on future M&A opportunities.
Given our success with UBI Socrates NHL, we are confident in our ability to execute on future M&A opportunities.
Speaker 2: We will continue to pursue deals that enable us to expand our addressable market and grow revenue with a creative margins either as tuck-ins, geographic expansion opportunities, or the strategic insourcing of our supply chain, where we can create competitive advantages and operational.
We will continue to pursue deals that enable us to expand our addressable market and grow revenue with accretive margins either as tuck in geographic expansion opportunities or the strategic in sourcing of our supply chain, where we can create competitive advantages in operational efficiency.
Speaker 2: In conclusion, I am proud of what we accomplished this quarter and excited for the opportunities in front of us. Our customers continue to be impressed with sterling industry leading and highly differentiated suite of products that empower clients throughout the full employee life cycle from pre-hired to post.
In conclusion, I am proud of what we accomplished this quarter and excited for the opportunities in front of US our customers continue to be impressed with Sterling is industry, leading and highly differentiated suite of products that empower clients throughout the full employee lifecycle from pre hired a post hire.
Speaker 2: We're excited about the growth of the global market and believe that our strong competitive advantages, innovation led culture and financial discipline will help us remain at the forefront of the industry for years to come. With that, I will hand it over to Peter Walker, our CFO , to take you through our financial result. Peter.
We're excited about the growth of the global market and believe that our strong competitive advantages innovation led culture and financial discipline will help us remain at the forefront of the industry for years to come with.
With that I will hand, it over to Peter Walker, our CFO to take you through our financial results Peter.
Speaker 3: Thank you, Josh, and I appreciate your kind words. I'm so proud of the Sterling team and always would accomplish together over the last four and a half years.
Thank you Josh and I appreciate your kind words I am so proud of the Sterling team and all we've accomplished together over the last four and half years I have strong conviction for Sterling future success, and I look forward to sharing the company on from the sidelines, turning now to an overview of our financial performance starting with revenues on slide 10.
Speaker 3: I have strong conviction for sterling future success and I look forward to cheering the company on from the side.
Speaker 3: Turning now to an overview or financial performance, starting with revenues on slide 10.
Speaker 3: During the third quarter of 2023, reported revenue was approximately 181 million, and 9.4% decline compared to the third quarter of 2022 on a recorded basis, and on the 11.9% decline on organic constant current. The second quarter of 2022 on a recorded basis, and on the 11.9% decline on organic constant current.
During the third quarter of 2023 reported revenue was approximately $181 million and nine 4% decline compared to third quarter of 2022 on a reported basis and 11, 9% decline on an organic constant currency basis.
Speaker 3: The third quarter included a 2.4% contribution from M&A, and 10 basis points contribution from foreign courts.
Third quarter included at two 4% contribution from M&A and 10 basis points contribution from foreign currency translation.
Speaker 3: These organic results were below the expectations we provided on our August earnings call due to softness and base hiring volumes in the second half of the third quarter driven by continued macrochop.
These organic results were below the expectations, we provided on our August earnings call due to softness in base hiring volumes in the second half of the third quarter driven by continued macro choppiness.
Speaker 3: We also left a very strong Q3 2022 during which we reported revenues of $199 million and an 18% growth.
We also lapped a very strong Q3, 2022 during which we reported revenues of $199 million at.
And an 18% growth rate as Josh mentioned, we expected year over year trends in base revenue to improve sequentially. During Q3, specifically, we expected base revenue to be down approximately 10% year over year.
Speaker 3: As Josh mentioned, we expected Eurovision your trends in base revenue to improve sequentially during Qt.
Speaker 3: Specifically, we expected base revenue to be down approximately 10% year over year, but base revenue remained down and the mid-double digits for Q3 comparable to our trend in the first half.
This revenue remained down in the mid double digits for Q3 comparable to our trend in the first half of the year.
Speaker 3: However, thus far in Q4, we are seeing improvement in our year over year based trends, leading us to expect total revenue growth in the Ford order. Outside of based offness, we delivered strong, year over year performance in Q3 and the revenue drivers in our control, namely, new client growth, upsell cross-sell and customer attention. Let me provide some details on those three Q revenue drivers.
However, thus far in Q4, we are seeing improvement in our year over year base trends, leading us to expect total revenue growth in the fourth quarter outside of based optics, we delivered strong year over year performance in Q3, and our revenue drivers in our control, namely new client growth upsell cross sell and customer retention.
Let me provide some details on those three Q revenue drivers.
Speaker 3: First, we saw growth from new clients with approximately 5% in line with our expectations. Notably, Q3 growth from new clients in both revenue dollars and on a percentage basis was the best quarter we've had so far in 2020.
We saw growth from new clients with approximately 5% in line with our expectations, notably Q3 growth in new clients and both revenue dollars and on a percentage basis was the best quarter. We've had so far in 2023.
Speaker 3: Based on deals already live and deals ramping before year end, we expect new client growth to further increase and return to our 7 to 8% long-term target range by end of-
Based on deals already live Ngls ramping before year end, we expect new client growth to further increase and return to our 7% to 8% long term target range by end of year.
Speaker 3: Second, we maintain strong growth in upsell and cross sell in our long-term target range of 45%. And accomplishment, we are very proud of giving client-based volumes a lower year over here. Client adoption for both newer and differentiated solutions as well as in silvery services is growing at a robust rate. Our comprehensive product suite and unique global capabilities are expanding our ability to grow market share regardless of the macro-environment. And we are very proud of giving client-based volumes a lower year over here.
Second we maintained strong growth with upsell and cross sell and our long term target range of 4% to 5% an accomplishment. We are very proud of given client base volumes are lower year over year.
Client adoption for both newer and differentiated solutions as well as ancillary services is growing at a robust rate our comprehensive product suite and unique global capabilities are expanding our ability to grow market share regardless of the macro environment.
Speaker 3: Third, our LTM client retention was 95%. Also within our long-term target range, it was even higher during Q3 at 96%, as we maintained client-centric lens to deliver best in class technology and service to our customers.
Third our LTM client retention was 95% also within our long term target range and it was even higher during Q3 at 96% as we maintain our client centric lens to deliver best in class technology and service to our customers.
Speaker 3: As we've mentioned in past quarters, it's important to view our results relative to history. As current industry hiring volumes remain strong on that basis and are down year over year, only when measured against 2022's record lesson.
As we've mentioned in past quarters. It is important to view our results relative to history as current industry hiring volumes remained strong on that basis and are down year over year only when measured against 2020 two's record levels looking further back or three Q2 thousand 23 revenues grew at a 15% CAGR over the <unk>.
Speaker 3: Looking further back, our 3 Q2 023 revenues grew with a 15% cater over the past three years since 2020, demonstrating strong second growth we've delivered to this.
Last three years since 2020, demonstrating strong segment growth we've delivered through this cycle.
Speaker 3: Looking at revenues by region, revenue performance in the US was led by our healthcare vertical and that there are quarter. Within the US, we have a diversified and attractive vertical mix, which has been instrumental in supporting our compelling revenue growth in recent years. We saw softness in some verticals, including financial and business services, industrials and tech.
Looking at revenues by region revenue performance in U S was led by our healthcare vertical in the third quarter within the U S. We have a diversified in attractive vertical mix, which has been instrumental in supporting our compelling revenue growth in recent years.
We saw softness in some verticals, including financial and business services, Industrials and tech and media.
Speaker 3: Revenue performance in our international business was led by our NEA region where we saw strong new pine
<unk> performance in our international business is led by our EMEA region, where we saw strong new client growth.
Speaker 3: Similar to the US, base volume declines offset, good trends in the revenue drivers we can control.
Similar to the U S base volume declines offset good trends and the revenue drivers that we can control.
Speaker 3: Our international business is benefiting from a consistent trend of clients looking to consolidate globally to a single scale provider.
Our international business is benefiting from a consistent trend of clients looking to consolidate globally to a single scale provider.
Speaker 3: In the third quarter, we delivered 2.4% of interdanic revenue growth from Socrates and HAC to two acquisitions we closed in Q1 of this year. We continue to be pleased with both companies' results in line with our initial expectation.
In the third quarter, we delivered two 4% of inorganic revenue growth of Socrates in HVAC. The two acquisitions. We closed in Q1 of this year. We continue to be pleased with both companies' results in line with our initial expectations as Josh described our integration work is on track to hit target integration timelines with cost synergies.
Speaker 3: As Josh described, our integration work is on track to target integration timelines with cost synergies being realized throughout 20-
<unk> is being realized throughout 2023 or.
Speaker 3: Our continued success and integration gives us increased confidence to execute on additional M&A when attracted synergistic targets become available at the right value.
Our continued success in integration gives us increased confidence to execute on additional M&A when attracted synergistic targets become available at the right valuations.
Turning to slide 11, our third quarter adjusted EBITDA was $47 6 million or 10, 4% decline compared to last year due to the base revenue declines were very pleased that our adjusted EBITDA margin. This quarter was 26, 3% in line with our expectations. Despite the revenue shortfall.
Speaker 3: Turning to slide 11, our third quarter adjusted to EBITDA was 47.6 million, at 10.4 percent decline compared to last year through the base revenue.
Speaker 3: We're very pleased that our adjusted EBITDA margin this quarter was 26.3% in line with our expectations despite the revenue shortfall on the quarter. This positive outcome was a direct result of continued progress on our cost optimization initiatives and financial dissonance.
Quarter.
This positive outcome was a direct result continued progress on our cost optimization initiatives and financial discipline. As we've described in past calls we are focused on our cost optimization program aimed at driving meaningful cost savings and efficiency gains we're on track to generate $10 million of savings in 2023 and 'twenty.
Speaker 3: As we've described in past calls, we are focused on our cost optimization program and the driving meaningful cost savings and efficiency.
Speaker 3: We're on track to generate 10 million of savings in 2023 and 25 million and annualized savings.
$5 million annualized savings.
Speaker 3: We plan for these initiatives to drive permanent reductions in our possible file and position the company to scale efficiently and profitably over the long term, creating the foundation for significant margin expansion when our base revenues inflect positive.
We plan for these initiatives to drive permanent reductions in our cost profile and position the company to scale efficiently and profitably over the long term.
The foundation for significant margin expansion when our base revenues inflect positively.
Speaker 3: In the third quarter of 2023, we adjusted net income of $25 million to 26 cents per diluted chair representing a year of a decline in a just EPS of 10%.
In the third quarter of 2023 with adjusted net income of $25 million or 26 cents per diluted share representing a year over decline in adjusted EPS of 10%.
Speaker 3: This year over your chain was primarily driven by the decline and adjusted EBITDA with a lower tax rate offset by higher...
This year over year change was primarily driven by the decline in adjusted EBITDA with a lower tax rate offset by higher interest expense.
Speaker 3: Turning to slide 12, retache flow, you're to date with approximately $51 million, a 12% decrease in the prior year.
Turning to slide 12 free cash flow year to date is approximately $51 million a 12% decrease from the prior year period. The decrease was primarily driven by lower operating income and higher interest expense. Our net leverage at quarter end was two four times net debt to adjusted EBITDA at the lower end of our two to three times target.
Speaker 3: The decrease is primarily driven by lower operating income and hiring.
Speaker 3: Our net leverage of quarter-end was 2.4 times net debt to adjusted EBITDA at the lower end of our two to three times target. Here today we have spent $49 million of net cash on our two acquisitions and $46 million on share repurchases, including $20 million during the third quarter.
Year to date, we have spent $49 million of net cash on our <unk> acquisition and $46 million on share repurchases, including $20 million during the third quarter our.
Speaker 3: Our net leverage remains at an attractive level, and as mentioned in our last call, would have fallen below two times without our M&A or Bibachic.
Our net leverage remains at an attractive level and as mentioned in our last call, but its fallen below two times without our M&A our buyback activity.
Speaker 3: We ended the quarter with total debt 500 million, cash and cash equivalents of 50 million, and approximately 200 million available under our credit facility, providing us with ample capacity to execute a growth strategy of reinvesting in organic revenue growth and pursuing.
We ended the quarter with total debt 500 million cash and cash equivalents of $50 million and approximately $200 million available under our credit facility, providing us with ample capacity to execute our growth strategy of reinvesting in organic revenue growth and pursuing M&A. This year. We have also enhanced our capital structure and the implementation of it.
Speaker 3: This year we have also enhanced our capital structure to the implementation of an interest rate hedging program, which fixed approximately 60% of our floating rate debt.
Crist rate hedging program, which fixed approximately 60% of our floating rate debt.
Speaker 3: Our capital allocation priorities remain, investing in organic revenue growth, pursuing M&A, and maintaining a healthy balance sheet. This includes opportunistic share buybacks under our previously announced share repurchase program. These priorities hold true in a lower growth environment, as we see macro uncertainty as an opportune time to build the foundation for futures.
Our capital allocation priorities remain investing in organic revenue growth pursuing M&A and maintaining a healthy balance sheet. This includes opportunistic share buybacks under our previously announced share repurchase program. These priorities hold true in a lower growth environment as we see macro uncertainty is an opportune time to.
<unk> built the foundation for future success.
Speaker 3: On slide 13, we show our updated guidance. For 2023, we expect to generate revenues of 720 to 730 million, representing a year over year decline of 4.5 to 6%. Adjabstan EBITDA of 186 to 191 million, representing year over year decline of 4 to 6.
On slide 13, we show our updated guidance for 2023, we expect to generate revenues of $720 to $730 million, representing a year over year decline of four 5% to 6%.
Adjusted EBITDA of $186 million to $191 million, representing year over year decline of 4% to 6% and adjusted net income of $95 million to $99 million representing year over year decline of 7% to 11%.
Speaker 3: and adjusted net income of 95 to 99 million representing year over year decline of seven to 11.
Speaker 3: Our revenue guidance range includes four year organic constant currency revenue of seven days and a half.
Our revenue guidance range includes full year organic constant currency revenue decline of 7% to eight 5%.
Speaker 3: For Q4 specifically, the applied revenue guide is flat to positive 6% year-over-year. Would grow to 3% year-over-year at the mid-
For Q4, specifically the implied revenue guide is flat to positive 6% year over year with growth of 3% year over year at the midpoint.
Speaker 3: We continue to see solid growth in items within our control, including new client wins and upsell cross sell. And we expect an improvement in those revenue drivers from Q3 to Q4. We're particularly optimistic about growth from new clients where we expect to return to our long-term target range of 7 to 8% by year end.
We continue to see solid growth in items within our control, including new client wins and upsell cross sell and we expect an improvement in those revenue drivers from Q3 to Q4.
We are particularly optimistic about growth from new clients, where we expect to return to our long term target range of 7% to 8% by year end.
Speaker 3: As we mentioned in previous quarters, we will benefit in Q4 from a significant number of a larger new clients that have gone live as a result of our industry leading innovation and sales.
As we mentioned in previous quarters, we will benefit in Q4 from a significant number of larger new clients that have gone live as a result of our industry, leading innovation and sales engine and.
Speaker 3: In Q4, we also expect rev to growth, meaningfully improve because it's easing cons in our base business. In particular, we expect the year-to-year declines in base revenues to moderate in Q4, driving the total revenue growth to be positive year-over-year. As Josh mentioned, we've seen this trend thus far in October and the beginning of November . Importantly, we are not forecasting an increase in base hiring volumes from our current revenue.
In Q4, we also expect revenue growth to meaningfully improve because it's easing comps in our base business in particular, we expect the year over year declines in base revenues to moderate in Q4, driving the total revenue growth to be positive year over year.
As Josh mentioned, we've seen this trend thus far in October and the beginning of November.
Importantly, we're not forecasting an increase in base hiring volumes from our current run rates.
Speaker 3: Included in our total reported revenue guidance, approximately 2.5% of the intergeneric revenue growth from our two M&A deals. We're also assuming no material impact from foreign currency in line with our previous.
Included in our total reported revenue guidance its approximately two 5% of inorganic revenue growth from our two M&A deals. We are also assuming no material impact from foreign currency in line with our previous assumptions.
Speaker 3: Our guidance reflects the expectations for substantial margin expansion and Q4 of approximately 170 basis
Our guidance reflects the expectations for substantial margin expansion in Q4 of approximately 170 basis points to 26% driven by our revenue growth the benefits from our cost actions ramping and easing of year over year margin comps to further help with your modeling. We have included a page in the appendix that are updated.
Speaker 3: 26% driven by a revenue growth that benefits from our cost actions ramping and easing a year-over-year margin cost
Speaker 3: Further help with your modeling, we've included a page in the appendix that are updated assumptions for 2023 and detailed breakdown of our revenue guidance. In closing, we are reaffirming our long-term targets on site 14. Over the long-term, we are targeting 9 to 11% for Danic revenue growth levels with margins expanding to 29 to 32% plus and adjusted net income growth at 15 to 20%.
Assumptions for 2023, and a detailed breakdown of our revenue guidance in closing we are reaffirming our long term targets on slide 14 over the long term, we are targeting 9% to 11% organic revenue growth levels with margins expanding to 29% to 32% plus and adjusted net income growth of 15% to 20.
Percent per year.
Speaker 3: Even in the absence of revenue growth this year, we expect 2023 to be a healthy step towards achieving our profitability chart.
Even in the absence of revenue growth. This year, we expect 2023 to be a healthy step towards achieving our profitability targets.
Speaker 3: That concludes our prepared remarks. At this time, the operator, please open up the line.
That concludes our prepared remarks at this time operator, please open up the line for questions.
Speaker 1: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two. Our first question today comes from Mark Marcon from Bed. Please go ahead. Good morning.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question. Please press star two.
Our first question today comes from Mark Marcon from Baird. Please go ahead.
Good morning, and thanks for taking my questions.
Speaker 4: Josh, I'm wondering if you could talk a little bit about just the the base volume trends, you know, when
Josh I'm wondering if you could talk a little bit about just the base volume trends.
What.
Speaker 4: and did it slow down a little bit more than expected in the third quarter? And can you guess what the numbers were in terms of the base volumes for October and you know the first week of November and how we should think about that if you know the economy slows a little bit further you know in this year and going into next year?
Did it slowed down a little bit more than expected in the third quarter.
And can you give us what the numbers were in terms of the base volumes for.
October and the first week of November.
And how we should think about that.
The economy slows.
Little bit further.
And this year and going into next year.
Hey, Mark Thanks for the thanks for the question. So I think as we've shared in the prepared remarks, we had been expecting.
Speaker 2: Hi Mark, thanks for the thanks to a question. So I think as we shared in the prepared remarks, you know, we had been expecting the base growth to still be down double digits around 10% in Q3. And what we saw in the last half of Q3 really kind of mid.
The base growth to still be down double digits around 10% in Q3.
And what we saw in the last half of Q3 really kind of mid <unk>.
Speaker 2: August through the end of September , with the base growth was worse than we expected, and it led us to have a minus 17 on base growth in the quarter. What we've seen so far in Q4 is actually consistent with the guidance that we've provided here today, which is an improvement, which is what we had expected all along in Q4 based on...
August through the end of September.
The base growth base growth was worse than we expected and it led us to have a minus 17 on base growth in the quarter. What we've seen so far in Q4 is actually consistent with the guidance that we've provided here today, which is an improvement which is what we had expected all along in Q4.
Based on the.
Speaker 5: the comp from last year. We're not expecting the volumes to improve at all through Q4. We're expecting the normal seasonal trends, but we are expecting based on the comp from last year to see that improvement throughout the corner. So we do anticipate our normal seasonality. We have not seen an improvement in October or November in terms of the volumes themselves from what we saw in the back half of Q3, but because of the relative comp. We are expecting the normal seasonality.
The comp from last year, we're not expecting the volumes to improve it all through Q4, we're expecting the normal seasonal trend, but we are expecting based on the comp from last year to see that improvement throughout.
Throughout the quarter. So we do anticipate our normal seasonality, we have not seen an improvement.
In October or November in terms of the volumes themselves from what we saw in the back half of Q3, but because of the relative comp.
Speaker 3: From last year, we do see a significant improvement in the year over year decline in Q4 on those base growth trends. And in March, if we look back at 4Q of 22, that was the first time the base growth went negative for us. And that was negative in the low double digits. So if you put it back into a base growth assumption for Q based on the guidance.
Last year, we do see a significant improvement in the year over year.
Decline.
In Q4 on those base growth trend.
Mark if we look back at <unk> 22.
That was the first time the base growth went negative for us.
Negative.
Double digits.
Got it back into our base growth assumption.
Q based on the guidance.
Speaker 6: You know, it gets similar to the base though. Let me solve negative.
Get stable base, though.
We saw a negative.
Speaker 6: So it really is the comp that's helping there along with stronger performers.
Thanks.
Really.
That's helpful along the way.
Stronger performance.
Speaker 6: business, process upsell, and maintaining our industry.
This cross sell upsell and maintaining our industry leading average.
Sure.
That's great and then can you talk a little bit about.
The new contracts that are that are starting in Q4 have all of those already started and can you can you talk a little bit about what.
What the source of the wins were.
In terms of whether they were coming from.
Speaker 4: Some of the other members of the big three or were they coming from smaller players, any sort of characteristics there. And what level of upsells did you have in terms of identity and post-higher for those new contracts that are rolling off?
Some of the other members of the big three or where are they coming from smaller players.
Any sort of characteristics there.
What sort of what level of Upsells did you have in terms of identity and post hire for those new contracts that are rolling on.
Speaker 5: Great, great questions Mark. Thank you. So I think first of all, you know, the deals that we're seeing in Q4 that we're relying on to return to our seven days percent.
Great Great questions Mark. Thank you. So I think first of all the deals that we're seeing in Q4 that we're relying on to return to our 7% to 8% long term target by the end of the year are deals that are already.
Speaker 5: long-term target by the end of the year are deals that are already implemented or implementing as we speak and ramping up. You know, they never they don't come on necessarily big bang on day one. So they are in the in the continued ramp up and implementation phase. So, look please about that
Implemented or implementing as we speak and ramping up.
Don't come on necessarily Big Bang on day, one so they are in the in the continued ramp up in implementation phase. So we're pleased about that and feel confident there.
Speaker 5: and feel confident there. In terms of where we win deals from is consistent with what we've said before, you know, we win.
Terms of where we win deals from its consistent with what we've said before we win some deals away from the other big players, but we also tend to win a lot of deals from that mid tier and smaller players, particularly as clients are looking for broader sets of services consolidating to a single vendor we're looking for better tech.
Speaker 5: Some deals, always, from the other big players, but we also tend to win a lot of deals from that mid-tier and smaller players, particularly as clients are looking for broader sets of services, consolidating to a single vendor or looking for better technology and better interfaces for their teams. So we're very pleased.
Knowledges and better interfaces for their teams so we're.
Very pleased with.
Speaker 5: you know, with those wins continuing, you know, we don't talk about wins in a quarter. Ever, we always talk about the actual revenues as they're appearing because there's a time lag between winning a deal and when you see those revenues and you also never quite know exactly how accurate the revenues are going to be from what a client gives you. So we're giving you that information.
With those wins, continuing we don't talk about wins in a quarter ever we always talk about the actual revenues as they are appearing because there's a time lag between winning a deal and when you see those revenues that you also never quite know exactly how accurate.
The revenues are going to be from a client gives you. So we're giving you that information.
Speaker 5: But again, I think we're in a strong industry. There's a lot of opportunity and the trends are really in the favor of us and and other bigger players who were able to provide those those services that some of the smaller and the years can't play. So we continue to win deals from competitors of all sizes, including our public peers. But you know, we continue to see great opportunity to consolidate and take share, down market in the smaller and that's your
But again I think we're in a strong industry. There is a lot of opportunity and the trends are really in the favor of acid and other bigger players who are able to provide the services that some of the smaller peers cap rate, but we continue to win deals from competitors of all sizes, including our public peers, but we continue.
To see great opportunity to consolidate and takes there down market and the smaller and mid tier clients.
Speaker 4: And did you see an increasing adoption of the gunnery and post-tire among those new contracts that you just recently signed in that are in implementation right now?
Did you see.
And increasing adoption of identity and post higher among those new contracts that you just recently signed and that are in the implementation right now.
Yes, we continue to see the strong trends, we've been seeing more than half of those deals continue to contain identity in particular.
Speaker 5: Yeah, we continue to see the strong trends we've been seeing, you know, more than half of those deals continue to contain identity in particular. You know, post-higher is typically more of an upsell that's separate. It's not usually part of the same package because...
Tire is typically more of an upsell that separated not usually part of the same package because the package itself is to get the person onboard and then the monitoring is across an entire employee base not just the people being hired typically so those are usually a separate upsell that would occur but we are seeing the pipeline for those continue to grow as we shared.
Speaker 5: The package itself is to get the person on board and then the monitoring is across an entire employee base, not just the people being hired typically. So those are usually a separate upsell that would occur, but we are seeing the pipeline for those continue to grow as we share.
Speaker 7: in the remarks as well as the deals to close and in particular in the gig industry, we're seeing a lot of opportunity on that most times side. In addition to the areas like healthcare and finance services that have all we've had done, that is part of their set.
In the remarks as well as the deal to close in in particular in the gig industry. We're seeing a lot of opportunity on that side. In addition to the areas like health care.
Services that I've always had that as part of their savings.
Terrific. Thank you.
Thank you.
Speaker 1: Our next question comes from Manal's Patnik at Barclays. Please go ahead.
Our next question comes from Manav Patnaik Barclays. Please go ahead.
Speaker 8: Hi, good morning, Mrs. Ronan Kennedy, I'm from a lot of thank you for taking my question. Josh, or Endor Peter, could I ask for your take on the macro versus expectations? I think it was consistent with regards to the choppy-ness. I know you're recruited to chic locality coming and going, which is kind of your take on the macro versus expectations, what we're seeing in the BLS reports, whether it be quits, hires, turn, employment, and what can happen from here on the various scenarios?
Hi, Good morning. This is running Kennedy offer them at all thank you for taking my question Josh.
Josh <unk>, Peter can I ask for your take on the macro versus expectations. I think it was consistent with regards to the Choppiness I know you referred it to cyclicality coming and going but just kind of your take on the macro versus expectations. What we're seeing in the BLS reports, whether it be quits hires churn.
Employment and what what can happen from here under various scenarios.
Speaker 7: Yeah, thanks, Ronan. I'll go first and then that Josh or Peter wants to jump in. So I think, you know, what we're seeing was the macro itself actually get a little bit worse in the back half of Q3 and what we expected. We're expected, and that was based on what we had been seeing in early August as we had shared on the call because we had seen June and July have kind of a drop off as well.
Yes, Thanks for that I'll go first and then starts with Peter wants to jump in so I think what.
Were seeing was the.
The macro itself actually get a little bit worse in the back half of Q3 than what we expected.
And that was based on what we have been seeing in early August that we had shared on the call. Because we had seen June and July kind of a drop off as well.
Speaker 7: And then what we have seen continues to October till now is consistent with what we saw at the back half of Q3 Which is why we felt that it was prudent and necessary to change the guidance as we did to reflect our new expectations of that continued trend
And then what we have seen continued through October till now is consistent with what we saw in the back half of Q3, which is why we felt that it was prudent and necessary to change the guidance as we did to reflect our new expectations of that continued trend through.
Speaker 7: through the rest of the quarter. So, you know, I think for us, we are happy to get to the point where we have now gotten through our toughest comp and to be at the beginning of where we saw the weakness starting last year. And so, you know, that's really what's reflected in the revised guide and why we do feel like we'll see growth.
Through the rest of the quarter. So I think for US. What we are we are happy to get to the point, where we have now gotten through our toughest comps and to be at the beginning of where we saw the weakness starting last year and so.
So that's really what's reflected in the revised guide and why we do feel like we'll see growth in Q4.
Speaker 6: I think if you think about the guidance at the midpoint of rain versus the previous guidance, right? We had, you know, called a port of that, impact 3Q, and that would take in the remaining three forces of that, and it's impacting 4Q resulting in our lower drive and the change in2021. Basically.
And I think if you think about the guidance at the midpoint of the range versus the previous guidance right. We had call it a fourth of that.
Pac three Q and then we've taken the remaining three fourths of that.
<unk>.
Resulting in a lower price.
Change fee based growth assumptions.
Sure.
Okay. Thank you and with regards to.
Speaker 8: Okay, thank you. And with regards to project nucleus to cost optimization, initiatives, et cetera. If you could talk about that as a lever and further levers that could potentially be pulled if things were to decelerate further and how kind of you would make any changes and go to market or look to execute more M&A, et cetera. You know, in same type of question varying scenarios going forward. to
Tragic nucleus to cost optimization initiatives et cetera, maybe you could talk about that as a lever and further levers that could potentially be.
He pulled if things were to decelerate further and how kind of you would change if you would make any changes in go to market.
Or look to execute more M&A et cetera.
Same type of question bearing scenarios going forward.
Yes.
Sure.
Sure. So I think first of all we're pleased with where we are on our cost optimization efforts in terms of achieving the $10 million.
Speaker 5: To our site, sitting first of all, we're pleased with where we are on our cost optimization efforts in terms of achieving the 10 million in...
Speaker 7: savings that we had targeted for this year and expected she's that as well as the $25 million
Savings that.
That we had targeted for this year and expect to achieve that as well as the $25 million.
Run rate Dave.
Speaker 7: that we expect to have, you know, as we go into next year and expect to fully achieve those, you know, somewhere in the beginning part of the year. In terms of additional levers, as I mentioned in the prepared remarks, you know, we continue to see additional opportunities for automation, opportunities around AI, which I'm happy to get into more detail on.
We expect to have as we go into next year and expect to fully achieve those somewhere in the beginning part of the year in terms of additional levers as I mentioned in the prepared remarks, we continue to see it.
Additional opportunities for automation opportunities around AI, which I'm happy to get into more detail on.
And I think one thing to remember of course is that we do have a highly variable cost.
Our cost of goods sold in particular.
80% of those are just data costs that we don't incur if we don't actually fulfill the service of those come out automatically.
And much more flexible than we were a year ago in terms of managing our staffing levels as well on the cost of goods sold as we talked about in terms of not having to run a surplus. So we feel like on the on the Cogs were able to react quickly and pull those cost out at this point and in terms of SG&A I think we've shown through this year that we continue to find opportunities.
Speaker 7: on the cost of goods sold as we talked about in terms of not having to run a surplus. So we feel like on the, on the Cods, we're able to react quickly and pull those costs out at this point. And in terms of S-GNA, I think we've shown through this year that we continue to find opportunities. We continue to have levers that we think we can pull. I don't know that it would be dramatic changes to the go-to-market approach, because I think we feel like that approach really benefits us in terms of new business retention rate, cross-zone upsell capability. So we're pleased with where we are. We've already made some consolidation and changes around that as we talked about earlier this year. But I think that we continue to have more room in other areas of S-GNA that we may take action on regardless of whether things deteriorate or not. And we'll be looking forward to talking about that.
We continue to have levers that we think we can pull.
Don't know that it would be dramatic changes to the go to market approach because I think we feel like that approach really benefits us in terms of new business wins retention rate.
Speaker 7: Cross-doll and up-cell capability. So we're pleased with where we are. We've already made consolidation and changes around that as we talked about earlier this year, but I think that we continue to have more room in other areas of S-GNA that we may take action on regardless of whether things deteriorate or not, and we'll be looking forward to talking about that with you as we close out the year and have our two-four call.
Cross sell and upsell capabilities. So we're pleased with where we are we've already made some consolidation and changes around that as we talked about.
Earlier this year, but I think that we continue to have more room in other areas of SG&A that we may we may take action on regardless of whether things deteriorate or not and we will be looking forward to talking about that with you.
As we close out the year and have our Q4 call.
Speaker 6: And maybe I would just add two points to see what Josh shared. I first is
And maybe I would just add to stipulate Josh Erudite first is we have a whole new set of capabilities.
Speaker 6: We have a whole new set of capabilities as is all to launching project nucleus in terms of in-house expertise on end-to-end process improvement automation.
Launching project in <unk>.
<unk> in.
In house expertise.
End to end process improvement and automation.
Speaker 6: In AI, you've got the whole organization focused on how do we serve our clients better, how do we do that more efficiently. So I think that will continue to pay dividends for years to come. And then I think the other thing to point out is on adjusted, off-ex faces, so adjusted for stock comp and other things like that. We expect you for to be the lowest level of off-ex expense for the company.
We've got the whole organization focused on how do we serve our clients better how do we do that.
Additionally, so I think that will continue to pay dividends for years to come and then I think the other thing to point out is on an adjusted.
Opex basis, adjusted for stock comp and other things like that we expect Q4 to be the lowest level of opex expense.
Speaker 6: in the last eight quarters and that is treading it down every quarter of 2023. You can definitely see the impact of the cost optimization initiatives in our numbers and it's also why we're pleased to deliver a margin of 26.3 for the quarter despite the lower revenues. Thank you.
In the last eight quarters and that is trending down every quarter of 2023.
Let's see.
The impact of the cost optimization initiatives in our numbers and it's also why we are pleased to deliver a margin of $26 three for the quarter. Despite the lower revenue.
Thank you very much appreciate it.
Our next question comes from Toni Kaplan Morgan Stanley. Please go ahead.
Speaker 1: Our next question comes from Tony Kaplan at Morgan Stanley . Please go ahead.
Speaker 9: Thank you very much. Wanted to start off asking about the partnership with Comfort offering the instant employment verification in the UK. I know you mentioned it could be rolled out to other international markets. I guess what's the barrier to bringing it to the US as well? And is it only for certain types of jobs or is it more broad than that? It just sounds like an interesting product.
Thank you very much.
I wanted to start off asking about the partnership with concur.
Offering the instant employment verification in the U K I know you mentioned it can be rolled out to other international markets.
What is the barrier to bringing it to the U S as well and is it only for certain types of jobs or is it more broad than that.
Just sounds like an interesting product.
Speaker 5: Thanks Tony, we're excited about this partnership. I think we've talked really since the time of the IPO about looking for more chances to automate and in particular to be able to do that in the verification state and or in the drug and health state as we felt that particularly in the U.S. on the crimson side, we had achieved very high levels of automation. So the opportunity was confirmed something we're very excited about because it allows us to take a process that today for us is very manual.
Thanks, Tony Yeah. We're excited about this partnership I think we've talked really since the time of the IPO about looking for more chances to automate and in particular to be able to do that in the verification space <unk> in the drug and health space as we felt that particularly in the U S on the print side.
We had achieved very high levels of automation and so the opportunity with conferred something we're very excited about because it allows us to take a process that today for us is very manual.
Speaker 5: and to actually automate that. It's something that, you know, based on the data that they pull today, you know, they're connected and operational in the UK and Ireland. So we know that we can launch there right away. We have discussed with them and commitment from them to roll out in other markets along the lines of our prioritization.
And to actually automate that.
<unk> that based on the data that they pulled today, they're connected and operational in the UK and Ireland. So we know that we can launch there right away, we have discussed with them and commitment from them to rollout in other markets along the lines of our prioritization. We do of course have automation in this space in the U S. Obviously.
Speaker 5: We do, of course, have automation in this space in the US. Obviously, the price tag at the work number is quite high, but this is something where we continue to look for those opportunities and we think it's something that could be disruptive over time in the US and that we would love to be able to implement if the opportunity presents itself. But for now, we're excited that it gives us the chance.
The price tag at the work number is quite high but this is something where we continue to look for those opportunities and we think it's something that could be disruptive over time in the U S and that we would love to be able to implement if the opportunity presents itself, but for now we're excited that it gives us the chance to automate and drive our cost down outside the U S. Starting with.
Speaker 7: to automate and drive our cost down outside the US, starting with the UK, which is, you know, our most significant market outside of the US and then to expand from there.
The UK, which is our most significant market outside of the U S and then to expand from there.
Yes that sounds great.
Speaker 9: I wanted to ask about sort of thinking about 2024. I guess...
I wanted to ask about sort of thinking about 2024.
I guess maybe.
Speaker 9: maybe first from client conversations about hiring plans and things like that, how you're expecting an improvement in the macro, or if maybe you're not, just how are you thinking about 24? And what do you think are outside of the macro sort of the biggest tailwinds that you have going into 24? And obviously, X is the easier comp.
Maybe firstly from client conversations about hiring plans and things like that how how you're expecting an improvement.
Macro or if maybe youre not.
Just how are you thinking about 'twenty four and what what do you think are outside of the macro sort of update us tailwind that you have going into 'twenty, four and obviously ex the easier comps.
Speaker 5: So well, thanks, Tony. I think, you know, first of all, you know, we're not in the position to really talk about 24 or give guidance around that yet. You know, we'll be doing that at the end of the year. Obviously, the macro and our view changed from our expectations for the remainder of this year. So I definitely don't wanna, you know, get out there on to 2024 until we have a better read. You know, our clients are right now in their planning processes for next year. What we're hearing from them is that this year's planning process is more of a return to normal planning.
Sure well, thanks, Tony I think first of all we're not in a position to really talk about 24 or give guidance around that yet we'll be doing that at the end of the year, obviously the macro in our view changed from our expectations for the remainder of this year. So I definitely don't want to.
Get out there on Q.
2024 until we have a better read our clients are right now in their planning processes for next year. What we're hearing from them is that this year's planning process is more of a return to normal planning that doesn't mean, what their levels of hiring will be but last year as youll recall at this point they were all in a wait and see mode as the macro what changed so dramatically.
Speaker 5: That doesn't mean what their levels of hiring will be, but last year, as you'll recall at this point, they were all in a weight and demote as the macro-achained so dramatically on them so quickly that they were not in a position to actually know what their hiring trends were gonna be until much later. So we're hearing a return to our normal planning process. That's actually consistent with
On them so quickly that they were not in a position to actually know what their hiring trends we're going to be.
So much later, so we're hearing a return to our normal planning process, that's actually consistent with Sterling zone experience and how we're starting to think about and plan for next year in terms of hiring levels in the tailwind. We have I know you said extra macro, but I'm, sorry extra comps, but obviously the comps are one big piece going into next year.
<unk> that will benefit us the second thing I would say is that as.
Speaker 2: As we mentioned in our prepared remarks in a settle year, we expect to return to our long-term target on New Business Growth. We consider that to also be a tailwind as we look into next year. And the much stronger pipeline that we're seeing and close rate and deal sizes, all of which I mentioned in the remarks. So those things that are in our control, we think those give us a good tailwind going into next year as well. But in terms of the base growth assumption, you know, we're gonna have to wait and come back on that when we set guidance on the Q4 call. But, you know, we are looking at Q4 this year showing growth.
As we mentioned in our prepared remarks, and I've said all year, we expect to return to our long term target on new business growth. We consider that to also be a tailwind as we look into next year and the much stronger pipeline that we're seeing in close rates and deal sizes, all of which I mentioned in the remarks. So there are things that are in our control we think those give us good tail.
Speaker 2: So those things that are in our control, we think those give us a good tail when going into next year as well. But in terms of the base growth assumption, we're gonna have to wait and come back on that when we set guidance on the Q4 call. But we are looking at Q4 this year showing growth and so we're happy about that. So we're gonna have to wait and come back on that.
And going into next year as well, but in terms of the base growth assumption, we're going to have to wait and come back on that.
When we set guidance on the Q4 call, but we are looking at Q4 this year showing growth and so we're happy about that.
Super Thank you.
Our next question comes from Andrew Nicholas from William Blair.
Speaker 1: Our next question comes from Andrew Nicholas from William Blair. Please go ahead.
Please go ahead.
Speaker 10: taking my questions. I think the commentary around your appetite for M&A was pretty consistent with how you've talked about it the past couple of years. I'm just curious on how kind of private company market valuations are looking to you. Has there been...
Taking my questions.
I think the commentary around your appetite for M&A was pretty consistent with.
How you've talked about in the past couple of years I'm, just curious on how kind of private company market valuations are looking to you has there been.
Speaker 10: reset there in terms of
Yes.
Reset there in terms of.
Speaker 10: potential targets expectations for multiples, or are they still relatively elevated, compared to your own expectation?
Potential targets expectations for multiples are they still relative relatively elevated.
Compared to your own expectation.
Speaker 5: Yeah, so I think we're seeing a couple things, you know, one, I think we're seeing in the US those those private entities
Yes, So I think we're seeing a couple of things one I think we're seeing in the U S. Those private entities.
Speaker 5: Unless someone is really eager to get out we're not seeing a big change in those valuations yet, so that's something that you know does temper.
Unless someone is really eager to get out we're not seeing a big change in those valuations yet so that's something that does temper our ability to do kind of a U S straight up tuck in I think where we are seeing some some interesting opportunities. However outside the U S. We are seeing those valuations become a bit more attractive and so I don't want to specify regions.
Speaker 5: our ability to do kind of a US straight up tuck-in. I think where we are seeing some
Speaker 5: Some interesting opportunities however is outside the US we are seeing those valuations become a bit more attractive And so I don't want to specify regions because I don't want to
I don't want to necessarily flag for our competitors, where we might be looking right now, but we are seeing some more realistic valuations outside the U S. In areas that could be interesting for us as tuck ins in markets, where we have a presence and I think the other thing that we're seeing is opportunities now as we have finished project ignite and really taken a hard look at our.
Speaker 5: necessarily flag for our competitors where we might be looking right now but we are seeing some more realistic valuations outside the US in areas that could be interesting for us as tuck-ins and markets where we have a presence. And I think the other thing that we're seeing is opportunities now as we have finished project ignite and really taken a hard look at our cost.
Cost to look at the supply chain and where there may be some opportunity to roll up opportunities as I mentioned in my prepared remarks and in those areas. We are seeing valuations that are a little bit more interesting and realistic because those are not the same valuation model as you would see PRA like us.
Speaker 5: to look at the supply chain and where there may be some opportunity to roll up opportunities, as I mentioned, in my prepared remarks. And in those areas, we are seeing valuations that are a little bit more interesting and realistic because those are not the same valuation models as you would see in a CRA like us.
Speaker 10: Got it. Now that's helpful. And then Josh, I think you alluded to it and the answer to one of your earlier questions, but would love an update on AI specific opportunities and automation and any kind of new learnings over the past couple of months, as you guys continue to invest in that opportunity. Thank you.
Got it no. That's helpful. And then Josh I think you alluded to it in the answer to one of your earlier questions, but would love an update on AI specific opportunities in automation and any kind of new learnings over the past couple of months as you guys continue to invest in.
That opportunity. Thank you.
Speaker 2: Yeah, thanks, Andrew. We are actually in the process now of implementing some of our first efforts here. And I'll highlight three where we're seeing really good opportunities. One.
Yes. Thanks, Ed we are actually in the process now of implementing some of our first efforts here and I'll highlight three where we're seeing really good opportunities one.
Speaker 7: is in the advanced OCR being able to capture information off documents using AI. So we do have our researchers who spend a lot of time actually having a look at physical documents, full information.
<unk> is in the advanced OCR being able to capture information off documents using AI. So we do have our researchers who spend a lot of time actually having a look at physical documents pull information and put that into reports. So we're seeing intelligent document extraction as a really exciting.
Speaker 5: and put that into reports. So we're seeing intelligent document extraction as a really exciting opportunity for us in terms of both using a combination of both NAI to do that. That is exciting and that's something that we think could drive both efficiency and cost savings that could be significant.
<unk> opportunity for us in terms of both using a combination of box NII to do that that is that is exciting and that's something that we think could drive both efficiency and cost savings that could be significant the second area. I think is consistent with what we've talked about before in terms of that interaction.
Speaker 5: The second area I think is consistent with what we've talked about before in terms of that interaction, particularly with the candidate.
<unk> with the candidates, but also with clients and we're seeing great opportunities around AI powered chatbot again behind our firewall in technology that we are able to maintain and control in house generally using tools that are available in AWS or azure, depending on the capability.
Speaker 5: but also with clients and we're seeing great opportunities around AI-powered chat box.
Speaker 5: Again, behind our firewall in technology that we are able to maintain and control in-house, generally using tools that are available in AWS or Azure, depending on the capability. So we're excited about those AI chatbot capabilities as well, which we've been testing for the last few months.
So we're excited about those AI chat bot capabilities as well, which we've been testing for the last few months and then finally, we're seeing an opportunity around.
Speaker 5: And then finally, we're seeing an opportunity around
Productivity improvements for our developers by using AI and we've been doing POC is on that that are really interesting and exciting for us and being able to make our developers more productive, which we think over time can drive down some of our tech and product costs. If we're able to do that effectively so those are the three areas.
Now we're most focused on there are more but these are the ones that we think.
Speaker 11: more, but these are the ones that we think give us the best opportunity to implement the quickest and could give us the most benefit early on from the ones that we've seen and tested. Hopefully that helps. It does. Thank you. Next question comes from George Tong at Golden Facts. Please go ahead.
Give us the best opportunity to implement the quickest and could give us the most benefit early on from the ones that we've seen in tests that hopefully that helps.
Speaker 12: It does. Thank you.
It does thank you.
Speaker 1: Our next question comes from George Tong at Golden Facts. Please go ahead.
Our next question comes from George Tong Goldman Sachs. Please.
Please go ahead.
Yes.
Okay.
Yeah.
Yes.
Speaker 11: George, we can't hear you. I don't know.
George We can't hear you I don't know.
Yes.
Can you hear me now we can hear George.
Yes, sure that sorry.
Can you hear me now.
Speaker 13: Yes, I hear you now, George. Hi. Okay, great. Sorry about that. So you noted that the price tag at the work number is quite high. Can you provide a sense of how much pricing has gone up at the work number over the past few years and what impact those increases are having on the business?
Yes, I hear you know George Hi.
Okay, great sorry about that so you noted that the price tag at the work number is quite high can you provide a sense of how much pricing has gone up by at the work number over the past few years and what impact those increases are having on the business.
Yes.
Speaker 7: Yeah, so I don't want to comment on their specific crisis. I think what I would say and it's consistent with what I've said before, you know, they offer a good product.
I don't want to comment on their specific prices I think what I would say and it's consistent with what I've said before they offer a good product when we are able to fulfill through them and not have to do any other work thats something that allows us to get reliable results very quickly and frankly, we don't think there pricing is fair market pricing, but that.
Speaker 7: when we are able to fulfill through them and not have to do any other work, that's something that allows us to give reliable results very quickly and freshly. We don't think they're pricing, it's fair market pricing, but you know that is the reality.
That is the reality they have afforded opportunities based on volume commitments not just on the work number but.
Speaker 7: You know, they have afforded opportunities based on volume commitments, not just on the work number, but on everything we do with with back with facts, as well as by being top of waterfall to have much lower prices that might be on the list or otherwise, you know, visible or available. So we think that we're able to give
Everything we do.
With with Equifax as well as by being top of the waterfall to have much lower prices that might be on the list or otherwise visible are available. So we think that we're able to give our clients. The best possible price for the work number relative to really all other competitors based on the approach we've taken and the partnership that we have been able to.
Speaker 7: Our clients the best possible price for the work number, that would be really all other competitors based on the approach we've taken in the partnership that we have been able to strike with Eclifax.
Strike.
With Equifax and I think as we've shared before our largest client with the work number is actually quite small on an overall annualized basis relative to what we believe some of our competitors may have and so we have not had material pushback, obviously, our clients don't like the price increases but we.
Speaker 7: And I think, you know, as we've shared before, our largest client with the work number is actually quite small on an overall annualized basis relative to what, you know, we believe some of our competitors may have. And so we have not had material pushed back. Obviously our clients don't like the price increases, but we haven't had anybody.
Haven't had anybody looking to leave or stop the service based on where the prices are.
Speaker 7: looking to leave or stop the service based on where the prices are in terms of delivering the overall verification service that we deliver.
In terms of delivering the overall verification service that we deliver.
Speaker 13: Got it. That's helpful. And then can you provide some color on how performance among SMBs might be different than enterprises in terms of volumes, space volumes, and overall growth trends?
Got it that's helpful. And then can you provide some color on how performance.
Performance among smbs might be different.
Enterprises in terms of volumes speaks volumes and overall growth trends.
Speaker 7: You know, we don't break out the performance of our enterprise clients versus our SMD clients. You know, we think that we look at our numbers. So for example, our Q3 gross retention rate at 96% reflects all of our clients large and small. We would expect the smaller clients to have a larger part in that as they tend to move around more quickly and easier for them to do so. They're typically not integrated. And as you know, we have over 60% of our volumes integrated. That's typically not going to be those smaller players.
Yes, we don't break out the performance of our enterprise clients versus our SMB clients. We think that we look at our numbers. So for example, our Q3 gross retention rate at 96% reflects all of our clients large and small we would expect the smaller clients to have a larger part in that as they tend to.
Move around more quickly and it's easier for them to do so theyre typically not integrated.
As you know we have over 60% of our volumes integrated that's typically not going to be the smaller players and also I would say that from our perspective the cost of acquisition of those smaller clients is something thats unattractive. So it's not been a focus area for us to new business generation that we've been looking at the cross sell upsell that we focus on at all.
Speaker 7: And also I would say that from our perspective, the cost of acquisition of those smaller clients is something that's unattractive. So it's not been a focus area for us, the new business generation that we've been looking at, the CLUSL upsell that we focus on, it's all Indian or price category for us. But we don't break out separately the performance or the trend by those clients.
<unk> in the enterprise category for us, but we don't break out separately the performance or the trend.
By those clients.
Got it thank you.
Speaker 1: Our next question comes from Andrew Steineman from JP Morgan.
Our next question comes from Andrew Steinman from Jpmorgan. Please go ahead hi.
Speaker 14: Hi Josh, when you say a new client growth gets back to 78% the typical growth range for you by the year end
Hi, Josh when you say new client growth gets back to 7% to 8%. The typical growth range for you by year end.
Speaker 14: Do you mean that it will be 7 to 8% in the fourth quarter? What do you really mean? Sort of like in the month of December and helping 2024? And let me just ask my second question, so it's all together.
And do you mean that it will be 7% to 8% in the fourth quarter. What do you really mean sort of like in the month of December and helping.
2024, and let me just ask my second question. So it all together.
Speaker 14: My question is at the current level of base revenue activity, if it continued forward into next year, particularly adjusting, obviously, for the different seasons.
Question is at the current level.
This revenue activity if it continued forward into next year seasonally adjusted obviously for the different seasons.
Speaker 14: uh... would be easy comps be enough to create positive base revenue growth just that current levels of macrow
Would the easy comps be.
To create positive base revenue growth just at current levels of macro.
Speaker 7: Okay, so let me start, I guess, with your first question. So I think we've been very specific all year that it's by the end of the year. So we do think it's possible that it would be at seven or 8% in Q4. It's gonna depend on the ramp of the clients that are ramping right now. But certainly with an exit velocity, we would expect to be there. I think it's Peter shared. Q3 was our strongest.
Okay. So let me let me start I guess with your first question. So I think we've been very specific all year that by the end of the year.
So we do we do think it's possible that it would be at seven or 8% in Q4, it's going to depend on the ramp of the clients that are ramping right now, but certainly with an exit velocity, we would expect to be there I think as Peter shared Q3 was our strongest.
Speaker 2: quarter for a new business generation as well on dollars and as a percentage and actually even with the weaker macros and we expected in September that was our strongest month as well. So the trends are in the right direction they would support the 78% in quarter or by end of year. We haven't specified that so your question is spot on in terms of the language we use. I want to acknowledge that. In terms of the base trend, I think that.
Quarter for new business.
Generation as well on dollars and as a percentage and actually even with the weaker macro than we expected in September that was our strongest month as well. So the trends are in the right direction. They would support the 7% to 8% in quarter or by end of year. We haven't specified that so your question is spot on in terms of the <unk>.
We used I want to acknowledge that.
In terms of the base trends.
I think that.
Speaker 7: One way to think about it is what we're giving you for Q4. And obviously, Q4 last year was the first quarter where we saw a significant...
One way to think about it is what we're giving you for Q4, and obviously Q4 of last year was the first quarter, where we saw a significant.
Speaker 7: decline in the base the first time honestly since 2020 that we saw that and we saw that decline get larger in base growth you know through the first three quarters of this year largely based on the comp more than anything else and so you know if you kind of flow that through and look at consistent levels
Klein and the base. The first time honestly since 2020 that we saw that and we saw that decline get larger in base growth through the first three quarters of this year largely based on the comps more than anything else and so if you kind of flow that through and look at consistent levels against that we expect to Q4.
Speaker 7: against that, we expect a Q4 number that we're putting out there still has basic points in it because the Q4 of last year was not as significant a base decline as what we've seen through the first three quarters of this year. And so you can kind of flow that through and grow your own assumptions. But we'll provide more color on that on our Q4 call.
<unk> number that we're putting out there still has based declines in it because the Q4 of last year was not as significant a base decline is what we've seen through the first three quarters of this year and so you can kind of flow that through and draw your own assumptions, but we'll provide more color on that on our Q4 call.
Josh Thank you very much.
Speaker 1: Our next question comes from Kyle Peterson from Needham. Please go ahead.
Our next question comes from Kyle Peterson from Needham. Please go ahead.
Hello, Karl can we just check your line is not on mute.
Speaker 1: And unfortunately we're not getting anything from your line Kyle so we'll have to move on to the next course. Oh, hello we can hear you now.
Hello from your line Kyle So we'll have to move on to the next question.
Hello, We can hear you now.
Hi, Yeah, sorry, guys. Good morning. Thanks.
Speaker 13: Hi, yes, sorry guys. Good morning. Thanks for taking the questions. Want to touch on the base growth softness that you guys saw as the quarter progressed? Were there any e-virtuals or geographies that drove that weakness or had an outpaste impact or was it truly pretty broad-based across the business?
Thanks for taking the questions wanted to touch on the base growth softness that you guys saw as the quarter progressed.
Were there any verticals or geographies that drove that weakness or had an outsized impact or was it truly pretty broad based across the business.
Speaker 15: We kind of good morning at Peter. So I would say that it was broad based across the business. And then in terms of kind of our top performers, they've been consistent with what we've been all year, healthcare and industrials kind of really led the US and the US led international. Got it.
Hey, good morning, it's Peter.
So I would say that it was broad based across the business and then in terms of kind of our top performers.
They have been consistent with what we've been odd year health care and industrials kind of really led the U S and EMEA led internationally.
Got it.
You may have lost you.
No.
Can you guys hear me.
Now I hear you again.
Speaker 15: Okay, thanks. Yeah, just a follow up. Would you guys consider upping the buybacks here? You guys have pretty healthy liquidity position. Obviously too, you know, help defend the stock here, especially since this seems to be more of a macro disruption rather than anything structural. Just wanted to get your thoughts on, you know, buybacks and capital deployment at these levels.
Okay. Thanks.
Yes, just a follow up.
Would you guys consider upping the buyback here you guys have.
Pretty healthy liquidity position.
Obviously to help to defend the stock here.
Especially since that seems to be more of a macro disruption rather than anything structural I just wanted to get your thoughts on buybacks and capital deployment.
At these levels.
Yeah. Thanks, Scott So I think our view overall on.
Speaker 7: Thanks, Kyle. So I think, you know, our view overall on our capital location has not changed, you know, our first and primary effort is to focus on investing in driving organic
Capital allocation has not changed our first and primary effort is to focus on.
Best thing driving organic growth, we think that continues to benefit us in the new business generation and the cross sell upsell, so investing in things like identity and monitoring those are important.
I think that that is the best thing that we can do to return shareholder value I think the second thing has been M&A I gave commentary on that so one of the earlier questions in terms of.
Speaker 7: do to return, you know, shareholder value. I think the second thing has been M&A. I gave commentary on that to one of the earlier questions in terms of, you know, where we would prioritize, but again, where we're not going to overpay in the CRA market for a talk in given where we are right now, particularly in the US, as I mentioned earlier. And then third is in, you know, returning value to shareholders, which we've done through buybacks. I think our view has been that we want to make sure that we're balancing both the great opportunity we have to invest in our stock at these very low prices, which we think do not accurately reflect the value of our company.
Where we would prioritize but again, where we're not going to overpay and the CRA market for tuck in given where we are right now, particularly in the U S. As I mentioned earlier and then third is in returning value to shareholders, which we've done through buybacks I think our view has been that we wanted to make sure we're balancing both the great <unk>.
Speaker 7: that we want to make sure we're balancing both the great opportunity we have to invest in our stock at these very low prices, which we think do not accurately reflect the value of our company because of the challenging macro. So that is attractive and that's why we've been doing our buybacks. However, we are cautious to remain in our two to three times.
Opportunity, we have to invest in our stock at these very low prices, which we think do not accurately reflect the value of our company because of the challenging macro so that is attractive and that's why we've been doing our buybacks. However, we are cautious to remain in our two to three times less.
Speaker 7: leveraged as you see at 2.4 times even with the acquisitions we've done and the buybacks we've done So that's something that that we are continuing to be committed to absent from some sort of a unicorn opportunity for short creative time
<unk> as you see at two four times, even with the acquisitions, we've done and the buybacks. We've done so thats something that we are continuing to be committed to absent some sort of a unicorn opportunity for a short period of time.
Speaker 7: And then finally, I think our view on the buybacks is we want to make surely balance the liquidity needs in our stock that is important to our investors with our own opportunity to buy. And so we think we've been very prudent in our approach.
And then finally I think our view on the buybacks as we want to make sure we balance the the.
The liquidity needs and our stock that is important to our investors with our own opportunity to buy and so we think we've been very prudent in our approach and have not gotten to that point and in fact, we were able to get that follow on offering done when we did it.
Speaker 7: and have not gotten to that point. And in fact, we were able to get that follow-on offering done when we did it, which has helped with that liquidity issue. And so we're committed to making sure we don't create a new liquidity issue. But we'll be look at doing more buybacks or less buybacks based on the macro, based on the stock price, based on investor feedback. Absolutely. We always do that. And we'll definitely be taking a look at that over time. But first, we're going to
Has helped with that.
With that liquidity issue and so we're committed to making sure we don't create a new liquidity issue, but there will be look at doing more buybacks or less buybacks based on the macro based on the stock price based on Investor feedback absolutely, we always do that and we'll definitely be taking a look at that over time.
Makes sense thanks, guys.
Speaker 1: Our next question comes from a Shlomo Rosenbaum from Stiefel. Please go ahead.
Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead.
Hi, Thank you for taking my questions Hey, Josh last quarter, you talked about numerous deals III head one of site to closing.
Speaker 16: Are things closing on the pacing that you had expected or things getting pushed out? Can you just talk about kind of the cadence of the deals? And then just, you know, there's a comment made by a competitor about a takeaway in the quarter, and they didn't specify who, but would you comment if there were, either significant positive or negative takeaways amongst the top three that impacted you guys?
Are things closing on the pacing that you had expected or things getting pushed out can you just talk about kind of the cadence of the deals and then.
Just.
Comments made by competitor about.
Takeaway <unk>.
<unk> they didn't specify who but would you comment if there were either significant positive or negative takeaways and most of the top three that impacted you guys.
Speaker 7: Sure, so let me just start with the new deals ourselves. I think as we shared in the prepared remarks.
Sure. So let me just start with the new deals ourselves I think as we said in the prepared remarks, we've closed more deals larger deals have a larger pipeline of advanced opportunities.
Speaker 7: Closed more deals, larger deals, have a larger pipeline of advanced opportunities and overall have.
Overall half close more in terms of expected dollar volume than we did last quarter, which was also higher than the quarter before so all those trends are very strong in terms of timing, it's playing out pretty much as we expected in terms of timing of closing deals more importantly, I think is the timing of ramping deals, which so far we've continued to see happen.
Speaker 7: close more in terms of expected dollar volume than we did last quarter, which was also higher than the quarter before. So all those trends are very strong in terms of timing. It's playing out, you know, pretty much as we expected in terms of timing of closing deals. More importantly, I think is the timing of ramping deals, which so far we've continued to see happen according to our expectations. Generally speaking, things always move a month here or there up or down.
According to our expectation generally speaking things always move a month here or there up or down.
Speaker 7: But I think we've been generally accurate with those expectations from the last call.
But I think we've been generally accurate with those expectations from the last call.
Speaker 7: In terms of individual deals, we never comment on individual wins or individual losses from competitors. It's just a practice that we have. So I'm not going to be able to get specifics on that. What I will say is, you know, we did in Q3 get back to the 96% retention rate that we had had last year and we have been running at 95. So we will please see that improvement again just one point, but staying within our range.
In terms of individual deals, we never comment on individual wins or individual losses from.
From competitors, it's just a practice that we have so I'm not going to be able to give specifics on that what I will say is we did in Q3 to get back to the 96% retention rate that we had had last year.
And we had been running at 95. So we were pleased to see that improvement again, just one point, but staying within our range. We expect to stay in our range next year, we see nothing that would change that hopefully that gives you color on it.
Speaker 7: We expect to stay in our range next year. We see nothing that will change that. So hopefully that gives you color on.
Speaker 7: If there are any losses, which there are, what those sides are, we don't talk on specific clients or specific deals.
If there are any losses, which there always are what their sizes are we don't talk on specific clients or specific deals.
<unk>.
Thank you.
Speaker 1: Our last question comes from Jason Salino from Keybank. Please go ahead.
Our last question comes from Jason <unk> from Keybanc. Please go ahead.
Speaker 15: Hi, good morning, Josh and Peter. This is Ashley Devon on Pajason today. Just one question from us. I also want to ask about your pipeline. I know you mentioned, you know, it's still really strong.
Hi, Good morning, Josh and Peter This is Ashley Devin on for Jason.
Today, just one question from US I also want to ask about your pipeline I know you mentioned, it's still really strong.
Speaker 15: expecting deals to close, but just want to ask, you know, just given macro and companies tightening their budget further. Have you seen more companies maybe more inclined to stay with their current providers that might have resulted in kind of no action from some of your opportunities in the pipeline? slightly
Im expecting deals to close but just wanted to ask just given macro and companies kind of tightened up the budget. Further have you seen more companies maybe more inclined to stay with their current providers that might have resulted in kind of no action from some of your opportunities in the pipeline lately.
Speaker 7: Thanks for the question, no, I think we're seeing if anything, you know, more RSTs as we mentioned last call, you know, that's why the pipelines larger, we're continuing to see
Yeah. Thanks for the question no I think we're seeing if anything more rfps as we mentioned last call Thats why the pipelines larger we're continuing to see really good opportunities in all markets in all verticals around the world. So we haven't seen that trend if anything I think it would be the opposite that they're more likely to.
Speaker 7: you know really good opportunities in all markets and all verticals around the world so we haven't seen that trend if anything I think it would be the opposite that they're more likely to want to move that that were true particularly if they're unhappy with their current provider. You know I think that our view overall is that those trends and to benefit us and the other big players because when people are looking to move they're going to see what we're able to provide and continue that consolidation trend.
I want to move if that were true, particularly if they are unhappy with their current provider.
That debt our view overall is that those trends tend to benefit and then the other big players because when people are looking to move.
We're going to see what we're able to provide and continue that consolidation trend around the larger players in the market, who can offer better services more services and of course, we like our chances.
Speaker 7: around the larger players in the market who can offer better services, more services. And of course, we like our chances against the other guys as well.
Against the other guys as well.
Okay.
Great. Thank you.
Speaker 1: We have no further questions on the call, so I'll hand back to the sterling team to wrap up.
We have no further questions on the call. So I'll hand back to the Sterling team to wrap up.
Speaker 5: Thank you all for joining us today and we'll look forward to talking to you soon. Thank you.
Thank you all for joining us today, and we'll look forward to talking to you soon thank you.
Speaker 1: This concludes today's conference. Thank you all for joining. You may now disconnect.
This concludes today's conference. Thank you all for joining you may now disconnect.
Speaker 17: The.
[music].
Yes.
[music].
Speaker 17: No.