Q3 2024 First Advantage Corp Earnings Call
Please stand by, your program is about to begin.
Ashley: Good day, everyone. My name is Ashley and I will be your conference operator today. I would like to welcome you to the First Advantage Third Quarter 2024 Earnings Conference Call-In Webcast.
Speaker Change: Hosting the call today from First Advantage is Stephanie Gorman, Vice President of Investor Relations.
Speaker Change: At this time, all participants have been placed in a listen-only mode to prevent any background noise.
Speaker Change: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star 1 on your telephone keypad.
Speaker Change: If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. Lastly, if you should require operator assistance, please press star 0. Please note today's event is being recorded. It is now my pleasure to turn the call over to Stephanie Gorman. You may begin.
Stephanie Gorman: Thank you, Ashley. Good morning, everyone, and welcome to First Advantage's third quarter 2024 earnings conference call. In the investor section of our website, you will find the earnings press release and slide presentation to accompany today's discussion. This webcast is being recorded and will be available for replay on our Investor Relations website.
Speaker Change: Before we begin our prepared remarks, I would like to remind everyone that our discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors.
Speaker Change: These factors are discussed in more detail in our filings with the SEC, including our 2023 Form 10-K and our Form 10-Q for the third quarter of 2024 to be filed with the SEC.
Speaker Change: Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any obligation to update forward-looking statements.
Speaker Change: Throughout this conference call, we will also present and discuss non-GAAP financial measures. Reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures, to the extent available without unreasonable effort, appear in today's earnings press release and presentation, which are available on our Investor Relations website.
Speaker Change: I'm joined on our call today by Scott Staples, our Chief Executive Officer, Stephen Marks, our Chief Financial Officer, and David Gamsey, our outgoing Chief Financial Officer. After our prepared remarks, we will take your questions. I will now hand the call over to Scott.
Scott Staples: Thank you, Stephanie, and good morning, everyone. Thank you for joining our call. This morning, I am pleased to provide you with an update on our business and our planned path forward with the addition of Sterling.
Scott Staples: Now nearly twice as large, we have over 10,000 highly skilled, motivated, and excited employees.
on an LTM basis as of September 30th, 2024.
Scott Staples: We have combined revenues of approximately $1.5 billion and adjusted EBITDA of approximately $407 million or $457 to $477 million, including our targeted run rate synergies of $50 to $70 million, which we expect to action within two years post-closing.
Scott Staples: I would like to thank our combined team for the great work they have done over the past several months to get us to this point.
Scott Staples: Since closing the acquisition, we have hit the ground running, focused on our products and customers while endeavoring to conduct a smooth integration, maintain customer continuity, action synergies, and reduce net leverage.
Scott Staples: We have also unveiled our new logo and branding for our unified company, which you will see in our presentation materials today.
Scott Staples: We were pleased to deliver another quarter of strong financial performance and today we are maintaining our full year 2024 First Advantage standalone guidance ranges and providing new combined company guidance. David and Stephen will cover this in greater detail in the financial section.
Scott Staples: Turning to slide five. I'm excited to show the strong profile of our combined company and reiterate why Sterling is such an outstanding strategic fit and benchmarks first advantage well among our technology-based info services peers.
Scott Staples: Our combined capabilities position us as a leader, offering differentiated technology platforms and a broad range of innovative solutions.
Scott Staples: With the Sterling acquisition completed, we have essentially doubled in size by most measures, including the size of our combined sales forces and customer success organizations.
Scott Staples: Combined, we conduct over 200 million background screens annually for customers across more than 200 countries and territories, and we have a robust average retention rate of over 96 percent.
Scott Staples: We have been an early adopter of AI and utilized this strong tool throughout multiple areas of our organization.
Scott Staples: We believe that our large proprietary data sets and AI-driven intelligent routing allow us to reduce our reliance on third-party vendors and deliver cost-effective solutions to our customers.
Scott Staples: We expect that our now larger and more extensive network of automated and integrated third-party data providers will continue to enable us to address each customer's unique requirements with leading solutions.
Scott Staples: With additional customers and capabilities from Sterling, we have increased the diversification of our verticals and geographies, reducing customer concentration and seasonality, and increasing resilience.
Scott Staples: This helps to support our extremely diversified yet focused vertical go-to-market strategy centered around enterprise clients and specific industries, all supported by exceptional technology.
Scott Staples: Going forward, with increased resources dedicated to our targeted verticals, we believe that we will be able to provide deeper and more comprehensive industry-level expertise to customers across the globe.
Scott Staples: Leveraging our complementary footprints, we have expanded both our U.S. and international presence and see tremendous opportunities to advance our growth outside the U.S. in attractive geographies like EMEA, APAC, LATAM, and India.
Scott Staples: Our enhanced reach and diversification set us up to deliver a stronger, more comprehensive value proposition to customers in a large, growing, and highly fragmented $13 billion total addressable market.
Scott Staples: On top of this, with greater capacity for investment, we anticipate that the GoForward company will further accelerate innovation focused on artificial intelligence and machine learning, robotic process automation, and next-generation digital identification technologies, building on our already robust foundation.
Speaker Change: All of these factors enable First Advantage's position as a leading provider of critical, high-technology, digitally-enabled info services.
Turning to slide six.
Speaker Change: Now that we are post-close, our focus is on delivering the strategic and financial benefits we have been discussing with you since we announced the planned acquisition.
Speaker Change: We have begun executing our detailed integration plan, focused on a seamless process for our customers and employees.
Speaker Change: Actioning our synergy targets and deleveraging our balance sheet while retaining customers and ensuring that they do not experience disruptions remain our top priorities.
Speaker Change: We are also uncovering ways to enhance our customer value proposition and unlock cross-sell and up-sell opportunities. At the same time, we will continue to drive innovation and foster the high-performing culture we are known for.
Speaker Change: In tandem with our work on the transaction, we have been developing an updated strategy that incorporates the Sterling acquisition and is heavily focused on rapidly growing and innovating our business through new technology, AI, and product initiatives.
Speaker Change: We are calling this FA 5.0 and I'm excited to share the organizational part of this strategy with you today.
On slide 7
Speaker Change: You will see the senior management team who is responsible for executing our FA 5.0 strategy.
Speaker Change: As recently announced, Joel Smith has been promoted to the role of President. Joel knows our company very well, having held leadership roles within First Advantage since 2017, most recently as President Data, Technology, and Experience.
Speaker Change: In this new role, Joel will continue to strategically lead the product, data, and technology organizations, and will also take on responsibility for our go-to-market teams, including sales, customer success, and marketing.
Speaker Change: Our new structure, which aligns product and technology organizations globally, includes the introduction of general manager positions strategically aligned to verticals or regions, reporting to Joel.
Speaker Change: This organization is a blend of First Advantage and Sterling's incredible talent and is focused on customer attention and satisfaction along with new business sales and upsell cross-out.
Speaker Change: Additionally, Doug Narn, who joined First Advantage in 2021 as International Chief Operations Officer
Speaker Change: following his time as CEO of an international screening company, has been named to the expanded role of Chief Operating Officer in which he is overseeing all of our U.S. and international operations, customer care, and customer onboarding teams.
Speaker Change: As we noted last quarter, this will be David's last earnings call as he is retiring, with Stephen Marks taking over the role of CFO. Stephen is an accomplished finance professional and respected leader. He joined First Advantage eight and a half years ago and has served as our Chief Accounting Officer since February 2022.
Our board composition is unchanged post-acquisition.
Speaker Change: Overall, we believe that our new organizational structure will improve the applicant and customer experience through enhanced operational efficiency, improve how we partner with and sell to our customers, and set us up for success as we commence our FA 5.0 journey.
Speaker Change: We will share more about the FAA 5.0 strategy as we move into 2025.
Turning to slide 8.
Speaker Change: The closing of our acquisition of Sterling not only provides a great opportunity to update our strategy, but to also rebrand the company. This is an excellent example of our pre-integration planning work coming to life, as it represents a joint effort between the Sterling and First Advantage teams over many months.
Speaker Change: Our new logo gives us a clean, modern look and feel that represents our commitment to leading-edge technology and the use of responsible AI, and also symbolizes the joining of the two companies.
Speaker Change: The Racetrack logo represents the interconnectivity of speed and quality, which is what separates us in the market.
Speaker Change: The continuous line that makes up the abstract FA of the logo reinforces the strength of the two companies coming together as one. We are very excited to time the launch of our new branding with the close of this transaction.
Speaker Change: Turning to slide nine. As part of the Sterling acquisition, we are committed to delivering 50 to 70 million dollars of run rate cost synergies.
Speaker Change: We have already made significant progress toward this target with over $10 million of run rate cost synergies actioned on day one.
Speaker Change: These savings consist primarily of reductions from combining executive teams, removing duplicative public company costs, and combining insurance programs.
Speaker Change: We have also already identified additional synergy opportunities that are expected to approximately double the action synergies within the next 100 days.
Speaker Change: We have a detailed plan in place to capture the full extent of synergies available.
Speaker Change: Key categories that we plan to address over time include international operations, fulfillment, product development, and commercial costs, with the objective of actioning our targeted run rate within 24 months.
Speaker Change: In addition to these cost synergies, we believe there is also opportunity to uncover potential revenue synergies. We will continue to execute and plan to update you on our synergy progress on future earnings costs.
Speaker Change: Finally, to summarize our position post-closing on the Sterling acquisition, we have a go-forward organization with outstanding leadership, a fresh new brand identity that exemplifies the future of First Advantage.
a tremendous combination of growth-related resources and product offerings.
Speaker Change: strong customer relationships diversified across verticals and geographies resulting in lower customer concentration, ambitious and achievable synergy targets, and detailed integration plans which are in place and being executed.
Speaker Change: We have a lot of work to do in the coming months and years, and we are energized by our opportunity to accelerate growth and deliver value.
Thank you. Thank you. Thank you.
Speaker Change: Turning to slide 10. Before I turn the call over to David, I'd like to briefly comment on our standalone third quarter results and the progress we have made on sustainability.
Speaker Change: We are very pleased to report that First Advantage's combined upsell, cross-sell, and new logo rates, as well as retention rates, again performed in line with our historical revenue growth algorithm.
Speaker Change: First Advantage had 16 total enterprise bookings in the third quarter and 53 in the last 12 months, each with $500,000 or more of expected annual contract value. Our sales engine continues to deliver consistent results.
Speaker Change: From a vertical perspective, First Advantage's transportation and staffing verticals saw positive growth versus the prior year, while financial services was flat.
Speaker Change: Our other verticals were down in the single digits year over year, except for technology, which while down slightly more, only represents 2% of our stand-alone business.
Speaker Change: Third quarter stand-alone results reflect a macroeconomic picture of continued normalization and stabilization within our business.
Speaker Change: We are also seeing this play out with key labor metrics, including quits, hires, and openings, as job trends return to pre-pandemic levels. Overall, our customers continue to hire, albeit at a more modest level.
Speaker Change: Before switching gears, I want to call attention to the recent release of First Advantage's third annual sustainability report.
Speaker Change: This report reiterates our commitment to our core values and demonstrates the progress we are making across ethical governance, climate, employee engagement and inclusion, and bolstering the resilience of our company. I encourage you to review the full report on our website.
Speaker Change: As this is David's last earnings call, I would like to sincerely thank him for his distinguished service to First Advantage and for his partnership over the past 8 plus years.
Speaker Change: We wish you the very best in this next chapter, David. And with David's well-earned retirement, we are very excited to welcome Stephen, who has now taken over as our CFO. And with that, I will now turn the call over to David.
David Gamsey: Thank you, Scott, and good morning, everyone. As Scott mentioned, this will be my last earnings call prior to my retirement, but I promise you that I will be carefully following First Advantage's future success going forward.
David Gamsey: It has been an honor to have been a part of the FIRST ADVANTAGE management team. We have achieved much together and there is still much more to be accomplished.
Speaker Change: This quarter, Stephen and I will be providing color on First Advantage standalone results, Legacy Sterling results, and a combined view to give you a clearer picture of our new profile before concluding with thoughts around our full year guidance.
Turning to our standalone third quarter results on slide 12.
Speaker Change: In line with our previously communicated expectations, First Advantage's results for the third quarter improved sequentially over our second quarter results.
Speaker Change: Our third quarter revenues were $199.1 million, roughly in line with the prior year, and $14.6 million, or 8% greater than in Q2.
Speaker Change: For comparison purposes, note that Q3 of 2023 includes a one-time, specific customer project representing approximately $4 million.
Speaker Change: Our America segment was roughly flat, as base growth was lower than anticipated, primarily due to a later start in normal holiday hiring.
Speaker Change: International performed better than anticipated, increasing 3.2% with green shoots across all regions.
Speaker Change: For the total stand-alone company, Adjusted EBITDA was $64 million, also roughly the same as in the prior year, but sequentially up $8.2 million or 15% greater than Q2.
Speaker Change: Adjusted EBITDA margin improves sequentially 200 basis points to 32.2% due to our highly variable, flexible cost structure and disciplined approach to managing costs.
Speaker Change: We continue to carefully manage our business to match the current demand environment.
Speaker Change: As a reminder, our cost structure is highly flexible and over 70% of our cost to sales are third-party costs, which are volume variable.
Speaker Change: We are constantly reviewing and adjusting our spending and modulating our investments to ensure that we are operating optimally and delivering results.
Adjusted diluted earnings per share was 26 cents.
Speaker Change: Legacy Sterling results for the third quarter are shown on slide 13.
Speaker Change: Revenue for the quarter was $195.5 million, up $14.9 million, or 8.3% versus prior year.
Speaker Change: Revenue growth was led by the Americas which grew on an organic constant currency basis and also benefited from the impact of the vault acquisition.
Speaker Change: International sales, excluding Canada, were overall flattish in the quarter with strength in EMEA offset by softness in APAC.
Speaker Change: In terms of verticals, healthcare, retail, tech media, and industrials delivered growth year over year while staffing and government saw declines.
Speaker Change: Adjusted EBITDA of $45.3 million was down $2.3 million versus the prior year comparable quarter resulting in a margin of 23.2 percent.
Speaker Change: Adjusted EBITDA margins for the third quarter were impacted by base declines and some attrition of higher margin customers, as well as new business sales of lower margin products such as drug and health care testing.
Speaker Change: Additionally, overall margins were impacted by inorganic vault revenues with margins in the teens, which the legacy Sterling management team did not yet address through the execution of their initial synergy plans.
Speaker Change: Adjusted net income of $22.7 million declined approximately $2 million versus Q3 of the prior year driven by lower adjusted EBITDA.
Now turning to combined LTM results on slide 14.
Speaker Change: Giving effect to the acquisition of Sterling, we have essentially doubled our revenues and adjusted EBITDA, which reflects the significant scale we have added to the business.
Speaker Change: While combined adjusted EBITDA margins of approximately 27% are lower than First Advantage stand-alone.
Speaker Change: We are confident that once our cost synergies are achieved and we execute on our integration plan, over time we will be able to return combined adjusted EBITDA margins back to above 30% with potential for future upside.
On slide 15
Speaker Change: You can see that our first advantage stand-alone historical performance for upsell-cross-sell, new customer logos, and attrition has been consistent and demonstrates that we are managing and delivering on what we can control, with the variation being driven by the base.
Looking specifically at First Advantage.
Speaker Change: Revenues from upsell and cross-sell alone nearly offset our base decline for the quarter and contributed 7% to our Q3 growth.
Speaker Change: New customer logos contributed an additional 3%, which was impacted by some delayed customer go-lives, which have already partially cleared in the fourth quarter.
Attrition improved to 3.6 percent.
Speaker Change: Base results, driven primarily by our America segment, declined 8 percent, which was below our expectations.
Speaker Change: and was driven by continued uncertainty in the macro related to inflation, interest rate cuts, the recent election, and prolonged uncertainty in the geopolitical environment.
Speaker Change: We also experienced a delayed start to seasonal hiring in September, but based on October results, we have seen seasonal hiring pick up.
Looking at Legacy Sterling.
Speaker Change: Overall, new and up-cell cross-cell growth drivers were strong, offset by continued base headwinds.
Speaker Change: Upsell Cross-Sell contributed 10% to growth in Q3, with new logos contributing another 7%.
Speaker Change: Both of these growth rates reflected some acceleration compared to Q2.
Speaker Change: Gross retention remains stable with attrition of less than four percent.
Speaker Change: Base growth remained negative at approximately 12%, though improving versus prior quarters.
Speaker Change: The base growth at Legacy Sterling has lagged first advantages as their verticals have been more impacted by the normalization of hiring patterns.
Speaker Change: I will now turn the call over to Stephen to discuss our Cash Flow, Net Leverage Profile, and Outlook for the remainder of the year.
Thank you, David, and good morning, everyone.
Stephen Marks: I'd like to first take a moment to express my sincere gratitude to David. I've had the honor to work with him for over eight years and have been able to learn from his exceptional leadership and dedication.
Speaker Change: His contributions have laid a strong foundation for our success and First Advantage is a far better company today thanks to his contributions.
Speaker Change: I would also like to thank Scott and our board of directors for their trust as I step into this role. I'm excited about the opportunity to work alongside such a talented team and to continue driving our company's growth.
Speaker Change: And certainly to our investors, I look forward to continuing to engage with you in the future as we work together to achieve our shared goals.
Speaker Change: Now turning to cash flow and net leverage on slide 17.
Speaker Change: In Q3 2024, First Advantage Standalone generated strong adjusted operating cash flows of $45.3 million, a robust 32% increase versus prior year.
Speaker Change: Driven by expense management, cash tax planning, and year-over-year decreases in our receivables. Sequentially, adjusted operating cash flow increased 11% from Q2.
Speaker Change: First Advantage's cash balance at September 30, 2024 was $307.4 million as we were building cash to help fund the Sterling Close.
Speaker Change: Over the last 12 months, we generated adjusted operating cash flows of $181.8 million, a 3% increase on a year-over-year basis.
Speaker Change: During the quarter, FirstAdvantage used $7.9 million for purchases of property and equipment and capitalized software development costs.
Speaker Change: Legacy Sterling generated adjusted operating cash flows of $30.9 million dollars in Q3 and at $75 million dollars of cash at September 30, having prepaid $20 million dollars of its outstanding debt in Q3.
Speaker Change: Year-over-year trends in cash flow exceeded the trends in adjusted EBITDA due to Sterling's working capital management, especially related to cash collections.
Speaker Change: We are actively working on ways to further enhance cash flow from the Sterling business.
Speaker Change: Turning to slide 18. In support of the sterling acquisition, we successfully secured amended financing of a 2.185 billion dollar
Speaker Change: have ended financing of $2.185 billion in the form of a seven-year term loan.
due in October 2031.
Speaker Change: of which approximately $1.1 billion was used to fund the Sterling acquisition, and the balance was used to refinance the existing debt of both companies.
Speaker Change: We were very pleased that the company was able to maintain its existing credit ratings with the rating agencies on our refinance debt, underscoring the strength of our business post-closing.
Speaker Change: After considering our cash-at-close, we have approximately $2 billion of net debt and a pro forma, synergized net leverage ratio of approximately 4.4 times in line with the expectations we shared last quarter.
Speaker Change: As part of our financing agreement, we upsized our revolver availability to $250 million to provide additional liquidity, and we extended the maturity date through October 2029. There are no amounts currently outstanding under the revolver.
Speaker Change: We remain committed to our goal of reducing net leverage towards approximately three times run rate adjusted EBITDA within 24 months post-close and to our long-term net leverage target range of two to three times.
Speaker Change: We believe that continued interest rate cuts will help us accomplish this goal.
Speaker Change: Additionally, in August, First Advantage entered into a new $160 million swap agreement through the end of 2026, and just last week we added an additional $275 million swap agreement through October 2027.
Speaker Change: As a result, about 40% of our post-acquisition debt now has a fixed rate.
Moving to slide 19.
Speaker Change: I want to talk about our combined company guidance, which maintains our previously provided first advantage standalone guidance and includes the expected sterling contributions for November and December, including the benefit of action synergies and the capital structure impacts from the transaction.
Speaker Change: For the combined company, we expect total revenues in the range of $858 to $918 million and adjusted EBITDA of $250 to $274 million.
Speaker Change: After accounting for the impact of the transaction financing and the new shares issued at close, we expect Adjusted Diluted EPS to be in the range of $0.83 to $0.95 for 2024.
while our FA standalone guidance ranges are unchanged.
Speaker Change: in light of the current macro conditions and base growth coming in lower than we had previously anticipated in the third quarter.
We anticipate first advantage standalone 2024 revenues.
Speaker Change: and Adjusted EvaDOT to come in above the low end of the standalone range but below the standalone midpoint.
Speaker Change: Looking at the fourth quarter on a stand-alone basis for First Advantage, we still expect sequential quarter-over-quarter growth for revenues and adjusted EBITDA.
Speaker Change: The lower half of our stand-alone guidance range also assumes macro-driven base declines of around 2-4% in Q4, representing an improvement over the trends we saw in the third quarter.
Speaker Change: Our early read on standalone October results gives us confidence in the fourth quarter shaping up as I have outlined.
Speaker Change: Looking closer at our expectations for Sterling's contributions in Q4, we are expecting full fourth quarter revenues to come in between $170 million and $185 million.
Speaker Change: Of this, only November and December are included in our combined company guidance range and are expected to deliver between $108 and $118 million of revenue. Monthly results are influenced by the typical seasonality of the business and holiday timing.
Speaker Change: We are expecting November and December adjusted EBITDA for Sterling between 22 and 26 million dollars and adjusted diluted EPS between 5 to 7 cents.
Speaker Change: Moving to slide 20, which illustrates our bridge from first advantage standalone adjusted diluted EPS guidance to our full year combined guidance.
Speaker Change: First Advantage Standalone Adjusted Diluted EPS Guidance is maintained at 88 to 98 cents with a midpoint of 93 cents.
Speaker Change: To that, we add Sterling's expected contribution for November and December and then account for the impact of additional share issuance and transaction financing resulted in our updated guidance midpoint of 89 cents.
Speaker Change: On slide 21, we illustrate the double-digit adjusted diluted EPS accretion we expect from the acquisition on a synergized pro forma LTM September 30 basis.
Speaker Change: As a reminder, we expect to action our run rate synergy targets within two years post-close, of which only a portion is expected to be actioned in the balance of 2024 and during 2025.
Speaker Change: as well as account for the pacing of Synergy Capture and Achievement, adjusted diluted EPS accretion in our actual reported results for 2025 will be more neutral.
Speaker Change: As the synergies are fully achieved, we anticipate the expected adjusted diluted EPS accretion will be attained.
Speaker Change: We plan to provide more reporting on this as part of our 2025 guidance, including a framework to understand synergy attainment over time, which will be discussed on our next earnings call.
Speaker Change: We are incredibly proud of the results produced by First Advantaging 2.3 and are looking forward to the opportunity to create additional shareholder value as we execute our Sterling integration plans and the FAA 5.0 strategy.
Speaker Change: With that, let me turn it back to Scott for closing remarks before we open the line for questions.
Scott Staples: Thank you, Stephen. We continue to deliver solid results and execute on our priorities. Most notably, we closed the Sterling acquisition and are moving ahead quickly to integrate and capture the benefits and synergies.
Scott Staples: We remain focused on delivering on our value creation playbook and shaping the future of First Advantage to better serve our customers. With that, we will open the line for questions.
Speaker Change: Certainly. Thank you. We will now begin the question and answer session. At this time, if you have a question, please press Star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing Star 2.
Speaker Change: If you are using a speakerphone, we request that you pick up your handset while asking your question to provide optimal sound quality. Thank you. Our first question is coming from Shlomo Rosenbaum with Steve. Please go ahead.
Speaker Change: Hi, thank you very much for taking my questions. I just want to ask you a little bit about the comment that you made about on sterling some attrition of higher margin customers. The biggest risk, you know, you're not discussed this is, you know, the retention or the potential turn of some of these customers. Maybe you can give us a little bit more clarity as to what happened over there are you expecting that to continue or is there, you know, was that kind of anomalous and just how should we think about that and, you know, after that we have followed?
Speaker Change: Yes, Shlomo, I mean nothing I would say notable in terms of a change from historical trends.
Speaker Change: Sterling retention, the last few quarters, has actually been high in historical perspective, 97, 96 percent, was 96 percent in Q3. It was really just a mixed item. Lately, they've been having a lot of upsell success in that drug and healthcare space, which is bringing margins down. And the couple attrition, which again, I would categorize as normal course, just happened to be more in that traditional screening space, which is higher margin, relatively speaking, which just pulled down a handful of bids, if you will, of margin.
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Speaker Change: Okay, thanks. And then, if you don't mind, just, you talked about some of the base business, you know, coming in lower than expected, and maybe you could just talk about the operating environment in general. How has it changed over the last quarter?
Speaker Change: What are clients telling you about their hiring expectations? And importantly, does anything change or changes in administration? In other words, are you are you thinking that that You know increases the chance of more hiring decreases or really doesn't make a difference in the way that you're thinking about things
Yeah, it's slow-mo.
Speaker Change: Everybody is obviously focused on the macro, and as you know, we are in constant communication with our customers.
Speaker Change: Our data points are, you know, what we're seeing from government data, but, you know, but more importantly what we're hearing from customers.
Speaker Change: And I don't think we're seeing anything different. It's a lot more of the same.
Speaker Change: So what, you know, we've been talking about maybe for the last couple of quarters, even maybe last year or so, is sort of a continued stabilization and normalization, not only in this quarter, but in previous quarters as well.