First Advantage Corporation (NASDAQ:FA) Q1 2024 Earnings Call Transcript

First Advantage Corporation (NASDAQ:FA) Q1 2024 Earnings Call Transcript May 12, 2024

First Advantage Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, everyone. My name is Todd, and I will be your conference operator today. I would like to welcome you to the First Advantage First Quarter 2024 Earnings Conference Call and Webcast. Hosting the call today from First Advantage is Stephanie Gorman, Vice President of Investor Relations. At this time, all participants have been placed in a listen-only mode to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] 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, Todd. Good morning, everyone and welcome to First Advantage’s first quarter 2024 earnings conference call. In the Investors section of our website, you will find the earnings press release and slide presentation to accompany today’s discussion. This webcast is being recorded and will be available for replay on our Investor Relations website. 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. 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 first quarter of 2024 to be filed with the SEC.

Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any obligation to update forward-looking statements. Throughout this conference call, we will also present and discuss non-GAAP financial measures. Reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable efforts appear in today’s earnings press release and presentation, which are available on our Investor Relations website. I’m joined on our call today by Scott Staples, our Chief Executive Officer; and David Gamsey, our Chief Financial Officer. After our prepared remarks, they will take your question. I will now hand the call over to Scott.

Scott Staples: Thank you, Stephanie, and good morning, everyone. Thank you for joining our call. It has been exciting and productive few months since announcing our agreement to acquire Sterling. I am incredibly proud of what our team has accomplished thus far and for the dedication in keeping everything moving forward. This morning I will provide an update on our first quarter results, our strategic initiatives, and the Sterling acquisition. David will then provide a deeper dive into our results and additional color on our expectations for the year. Turning to an overview of our first quarter results on slide five; for the first quarter, we delivered financial results at or above what we communicated on our last earnings call, giving us additional confidence in achieving our full year 2024 guidance, which we are reaffirming today.

From a vertical perspective, in the first quarter we saw increased order volumes from five major verticals including transportation, healthcare, industrials, staffing and hospitality, with the remaining verticals down year-over-year. Importantly, we continue to maintain a strong customer retention rate of approximately 97%. In fact, our top five largest renewals for 2024 have already successfully renewed. Our upsell, cross-sell, new logos and attrition rates continued to perform in line with our historical revenue growth algorithm, while our base growth continues to be more sensitive to changes in the macro environment and our mix of clients. While most macro indicators that we track are still down year-over-year, they have shown signs of stabilizing in recent months.

As a reminder, our long-term organic revenue growth target of 8% to 10% anticipates a normalized base growth rate of 2% to 4% compared to the negative base performance we have been experiencing. Let me now update you on the significant progress our team continues to make on our strategic initiatives. We have long subscribed to the philosophy of building high-quality proprietary databases, data models and algorithms as well as innovative technology to drive our business. Now, with the insurgents of GenAI, we are poised to accelerate innovation across our portfolio and deliver even greater value for our customers. We are excited to have announced our proprietary next generation RightID identity fraud solution, specifically designed for the US market to help alert customers to potential applicant fraud in the pre-hire process.

This complements the success we have seen with the expansion of our digital identity products in the UK, India, Australia and Canada. Employers leverage RightID as an initial step to flag inconsistencies and recognize potential errors in identity information submitted before a background screen, thus moving our products upstream in the applicant onboarding cycle. Additionally, we continue to roll out our next gen profile advantage applicant portal, featuring a new user interface and using API first technology to deliver a consistent experience from screen to hire. By leveraging GenAI and human in the loop processes, we have access to intelligence that allows us to enhance the applicant experience. Our customers can hire faster with several products in one place, including fraud prevention, tax credit information and background screening details.

These initiatives complement our other solutions; for example, we expect our investments in AI-related to US criminal data to increase the efficiency, turnaround times and consistency of our criminal screening. We also continue to see increased customer adoption of SmartHub, which can determine the optimal data source for each verification and help reduce certain third-party pass through fees for our customers for employment verifications. And through our Customer Care Click. Chat. Call program, we can scale our support up or down quickly in response to volume changes. All of our solutions help support our customers and their screening priorities, which are highlighted in our Global Trends report just released in April. This annual report provides worldwide perspectives based on over 100 million anonymized screening data records and hundreds of survey responses from our customers.

We have been publishing our Annual Global Trends report for the past six years and have seen trends change and evolve alongside the global labor market. Notably, for the second year in a row, managing risk ranked as the most important factor in background screening programs over cost and speed. This indicates an increased interest in background screening results that support informed decision making as part of the overall hiring process and has consistently driven upsell and cross-sell opportunities for us across our customer base, ultimately increasing package density. Additionally, I want to highlight our annual background screening conference, Collaborate, which was held in April with record attendance. As the only background screening user conference of its kind, Collaborate brings together customers, new business prospects, partners and thought leaders to discuss timely and relevant trends, technologies and best practices.

During the conference, we discussed our new and evolving products and solutions and had fantastic customer engagement. Additionally, we were pleased to have Johnny C. Taylor, Jr. join us for a second year as our keynote speaker where he led a dynamic session on embracing AI and HR. Mr. Taylor is the President and CEO of the Society for Human Resources Management and is highly regarded as a leading industry expert in human resources. Turning to slide seven, let me now provide an update on the Sterling acquisition. Preparations for the transaction are progressing as planned. We have formed an integration management committee led by our product and operations leaders with dedicated teams that are developing plans across all functional departments in preparation for the post-closing integration process.

At the end of April, we filed our S-4 with the SEC which has additional detailed information pertaining to the transaction. At this point, there have been no changes to our closing time expectations. The transaction is still expected to close in approximately the third quarter of 2024, with the closing and timing thereof subject to required regulatory approvals, clearances and other customary closing conditions. Strategically, the addition of Sterling further strengthens our high-quality and cost-effective background screening, identity and verification solutions for the benefit of customers of all sizes across industry verticals and geographies. We view this as a win for our customers, as they will benefit from having more options to meet their evolving needs and improve solutions to help manage risk, hire smarter and onboard faster.

First Advantage’s and Sterling’s highly complementary product offerings further enhance our customer value proposition and are expected to unlock upsell and cross-sell opportunities and reduce certain third-party pass through fees. Collectively, we will diversify our vertical mix, as there is limited overlap across our customer industries. Sterling’s largest verticals are more focused on regulated industries including healthcare, industrials and financial services. This balances First Advantage’s focus on verticals including transportation, retail and e-commerce. We have complemented international businesses which provide the opportunity for us to build a deeper local presence and expand in attractive markets. Based on our preliminary diligence, we have also found no significant overlap amongst the top customers of both First Advantage and Sterling.

We believe that combined, we will have a more balanced revenue mix, less customer concentration and more vertical diversification. This will help to de-risk the transaction with regard to potential attrition, improve resource planning and operational efficiency, reduce our seasonal exposure and create a more resilient business model. The transaction will enable us to drive innovation in key development areas of our business including AI, next-gen digital identification technology and automation. This will enhance the applicant experience and at the same time reduce certain third-party pass through costs contributing to long-term margin expansion. Looking at cost synergies, we remain confident in achieving at least 50 million in run rate synergies within 18 to 24 months post closing of the transaction.

We anticipate executing approximately half within the first 12 months post closing, of which a portion will be actioned immediately upon closing. These synergies will come from removing duplicative public company costs, merging back office functions and resources, and ultimately merging our tech back ends and fulfillment functions. We anticipate identifying further upside synergy opportunities upon closing this transaction, as we work through the integration process. Additionally, we anticipate net leverage at close to be in the range of 4.2 times to 4.4 times. We have line of sight to bring net leverage toward approximately 3 times run rate adjusted EBITDA within 24 months of closing on the transaction and then ultimately returning to our long term target net leverage range of 2 to 3 times.

David will go into further detail on this shortly. Upon closing the transaction, we will immediately nearly double our revenue and adjusted EBITDA profile. We expect to generate double-digit EPS accretion on a run rate basis and to continue compounding EPS at a teens growth rate over time through the combination of top line growth, ongoing synergy capture and significant deleveraging enabled by our strong free cash flow generation. As we look ahead, our priorities after closing the transaction will be focused on our customers, successful integration, achieving synergies and deleveraging our balance sheet. Overall, we expect that this strategic and accretive acquisition will benefit customers and investors, accelerate and advance our strategic priorities, and drive long-term value creation.

I will now turn the call over to David for more details on our first quarter results.

David Gamsey: Thank you, Scott, and good morning, everyone. Turning to our first quarter results on slide nine; our first quarter revenues were $169.4 million, a decrease of 3.5% from the prior year. Currency had nearly no impact on results. For the quarter, Infinite ID contributed approximately $2.8 million. In our Americas segment, revenues of $149 million, or 87% of consolidated revenues, were down just 2% from the prior year, driven primarily by base weakness and substantially offset by strength in new business revenues and upsell cross-sell. In our international segment, revenues of $22 million, or 13% of consolidated revenues, were down 11% from the prior year. Macro factors impacting international base growth continue to be a headwind.

For the total company, adjusted EBITDA was nearly $47 million and our adjusted EBITDA margin was 27.5%, which aligns with our historical first quarter performance trends. As a reminder, our first quarter adjusted EBITDA margin is typically the lowest quarter of the year. Adjusted EBITDA on an LTM basis has grown at a compounded annual growth rate of 14.7% over the last three years. Our adjusted effective tax rate was 24.4%. GAAP net loss was $2.9 million and is after $11.1 million in Sterling acquisition related costs that we have added back on an adjusted basis. Adjusted net income was approximately $25 million. Adjusted diluted EPS was $0.17 for the quarter. On slide ten, you will see our revenue growth algorithm, which is based on our historical performance and future expectations and supports our long-term revenue growth target.

Revenue on an LTM basis has grown at a compounded annual growth rate of 12.6% over the last three years and remains above our long-term growth target of 8% to 10%. On slide eleven, you can see that our historical performance for upsell, cross-sell, new customer logos and attrition has been largely consistent with our growth algorithm and demonstrates that we are managing and delivering on what we can control with the variation being driven by the base. Revenues from upsell and cross-sell contributed $7.7 million, or 4.4% to our performance in Q1. New customer logos contributed an additional $8.9 million, or 5.1% in Q1. Base declined by $19.6 million, or 11% on a consolidated basis in Q1. We anticipate base revenues improving throughout the remainder of the year.

Turning now to our balance sheet and capital allocation on slide 12; for the first quarter we generated strong operating cash flows of $38 million. During the quarter, we used cash of $6 million for purchases of property and equipment and capitalized software development costs. As we mentioned last quarter, given the pending Sterling acquisition, we have suspended share repurchases, as we continue to build cash. Our primary areas of focus upon closing the transaction will be on our customers, on integration, on achieving synergies and on deleveraging. In addition to our existing $565 million of First Advantage debt, we anticipate raising approximately $1.6 billion of new-term debt to fund the Sterling acquisition; this results in approximately $2.15 billion of gross debt, or approximately $2 billion of net debt when considering the approximately $125 million of balance sheet cash expected at close.

Additionally, at close, we expect net debt-to-adjusted EBITDA leverage in the range of 4.2 times to 4.4 times. As part of our financing agreement, we will upsize our revolver from $100 million to $250 million and extend the maturity date to five years after the closing date of the transaction, which will provide additional liquidity for our business. We have a proven track record of managing leverage and we remain committed to our long-term net leverage target of 2 times to 3 times. Over the four years since Silver Lake invested in us, we de-levered from 6 times, as a private company, to less than 2 times prior to the announced Sterling acquisition. This is also after repurchasing approximately $120 million in shares, paying a $218 million one-time special dividend and acquiring five businesses.

Our goal within 24 months of closing is to reduce net leverage toward approximately 3 times run rate adjusted EBITDA. Our path to de-lever will be driven by high margin top line growth of the combined businesses productivity efficiencies, cost synergies and the continued strong cash flow generation. Now moving to slide 13; today we are reaffirming our 2024 annual guidance. Our first quarter results, coming in at or above our expectations, positions us well to achieve our full year midpoint guidance targets. We still expect sequential quarter-over-quarter growth for revenues, adjusted EBITDA, and adjusted EBITDA margins similar to 2023. For 2024, we expect to generate full year revenues in the range of $750 million to $800 million. Based on the midpoint of $775 million, this results in slightly positive year-over-year organic revenue growth.

This includes revenues related to Infinite ID, which is expected to contribute approximately $7 million in the first eight months of the year, as we cycle over the anniversary of that acquisition. We expect customer retention to remain in line with our strong historical performance of around 97%. We also expect continued execution of upsell, cross-sell and new logo growth consistent with historical trends and long term targets. We expect to maintain full year adjusted EBITDA margins of approximately 31% at the midpoint and adjusted EBITDA in the range of $228 million to $248 million. This reflects the strength of our flexible model, disciplined cost management and investments in automation. As a reminder, our adjusted EBITDA guidance includes increases in annual employee wages, normalization of management incentive plans, and increases in benefit costs totaling approximately $10 million.

It also includes new investments in product, technology and sales of approximately $7 million. At the midpoint, we expect 2024 adjusted net income of approximately $134 million and adjusted EPs of $0.93. Looking at the quarterly phasing, we expect sequential top line improvement as we move through 2024. We expect second quarter revenues to trend from negative toward relatively flat year-over-year, with positive overall growth in the second half of the year, more heavily weighted toward Q4. The midpoint of our guidance range also assumes continued macro-driven base declines, with base remaining negative in Q2 down in the mid-to-high single digits, though improving from Q1, which was down 11%. We still expect base growth to improve sequentially through the year, turning positive in Q4.

We continue to expect adjusted EBITDA margins of approximately 30% in the second quarter, with further improvement in the second half of the year. In closing, I would like to share Scott’s sentiment and thank our team for the progress we continue to make in achieving our objectives and for their resilience and dedication, as we work through the Sterling transaction. With that, let me turn it back to Scott for closing remarks before we open the line for questions.

Scott Staples: Thank you, David. We have made significant progress on our strategic initiatives over the last several years, as evidenced by our verticalized go to market approach, tech enablement, investments in automation, AI and machine learning, strategic partnerships, and tuck-in acquisitions. We are seeing the return on our investments flow through our impressive adjusted EBITDA margin and cash flow generation. The acquisition of Sterling is another significant step forward in our value creation playbook and we are excited to continue to shape the future of First Advantage and to better serve our customers. With that, we will open the line for questions.

Operator: Thank you. [Operator Instructions] Our first question will come from Shlomo Rosenbaum with Stifel. Please go ahead.

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Q&A Session

Shlomo Rosenbaum: Hi, thank you for taking my questions. First, I just want to start out with Scott. Would you say that the environment is improving along the lines that you expected? A little bit faster, a little bit slower, and then I have one follow up after that?

Scott Staples: Yes, I’d say from a macro standpoint, it’s exactly where we thought it would be, so I wouldn’t say it’s faster or slower. I would say it’s still a choppy macro. We are seeing our customers higher, obviously look at our results for the quarter, but we’re still seeing some cautiousness out of them. So they’re not hiring ahead of time, they’re not over hiring, but they certainly are hiring. And I think this is exactly as we sort of planned it would go, and we’re pretty happy where it is.

Shlomo Rosenbaum: Okay, thank you. And then the other one is just, you know, Sterling put out their results this morning, obviously the same time as you guys, and very good revenue, but the EBITDA was clearly below what the Street was expecting. Now, obviously Sterling didn’t give out any guidance or anything like that, but I want to ask you, once you acquire the company, how long does it take you to really cut them over onto your own kind of cost structure? In other words, migrating things over operationally, quickly cutting over to your own sources of information, and being able to leverage kind of the scale that you have. You could talk a little bit about that and then also just kind of merging the cultures, how do you think about that?

Scott Staples: Yeah, so obviously we’re doing a lot of planning, but we can’t really get under the hood for post close. We did mention in the earnings script how fast we expect to get synergies and, as part of those synergies, that’s obviously eliminating the duplicate of corporate overhead and public company expenses, but also starting to leverage our automation. It’s really hard for me to sit here today and give you a specific timeline because we’re not at that point yet where we can get into detailed planning and stuff like that, but we will continue to provide updates as we get closer and closer to close date. But again, we’re feeling very confident about the synergies number and the strategy and approach that we take into overall post-merger integration.

Shlomo Rosenbaum: Thank you.

Scott Staples: Oh, Shlomo, I sorry, I did not answer the last part of your question, which was on the culture. We’re pretty excited about the two companies cultures coming together because even though there’s obviously going to be some differences, both companies are a high-performing organization. So I think it’s a lot easier when you’re merging two high-performance cultures together. Obviously, there’ll be some subtle differences and we will have a special track in our PMI integration plan just on culture to make sure that we nail it, we communicate it, we treat it like it’s just as important as anything else. So I think we don’t have any concerns at this point. And I think the other thing that as you could — you’ve probably seen from both companies, we’re very much aligned on the go-to-market and the product strategies.

I think we’re the two companies that are out there talking about digital identification the most and we really are sort of, I think, at the forefront of the technology changes in this market. So that makes it a bit easier as well.

Shlomo Rosenbaum: Thank you.

Operator: Thank you. Our next question will come from Ashish Sabadra with RBC Capital Markets.

Ashish Sabadra: Thanks for taking my question. So the sequential growth in the base that you’ve mentioned, I was wondering what’s — how much visibility do you have there? What have you seen in April, any early indications on that front? You obviously mentioned five verticals which have been growing, but I was just wondering, the verticals which have been declining, have you seen any progress on those fronts? And then even on the international front that 11% decline, I was just wondering if you could comment on what we are seeing on that front?

Scott Staples: Thanks. Yeah, thanks, Ashish, a lot there, so hopefully I catch it all. I may work backwards on your question. So, yeah, obviously international is still down, but it’s not down as much. We were, in previous quarters, talking about year-on-year declines of 20 plus percent. We’re not there anymore, we’re half of that. So we are starting to see some stability in India and APAC. EMEA, if you recall, has always been you know, performing, but India and APAC were the concerns over the last 18 months or so. And we really felt, and I think we mentioned this on our earnings call for Q4 of 2023, and we kind of felt that India was bottoming out and we’re starting to realize that. So we’re starting to see some improvement in both India and APAC.

I think also what gives us some enthusiasm is the US was only down 2% this quarter, so we’re starting to see a little bit of stability there as well. And you asked about April, and April, I would say, is exactly in line with what we thought it would be, so no surprises from April. And then your first part of the question was around the verticals, so we mentioned the five verticals that were up. Obviously there are still some verticals that are down, most notably financial services and a few others, but they’re not down as much. They certainly are still down, but they’re just not down as much. So, all of that kind of paints a little bit of a brighter picture for us but obviously there’s still a lot of caution in the background.

Ashish Sabadra: That’s great color. And if I could ask, a quick follow up on the technology front. Thanks for providing those details on the new initiatives on the GenAI front. I was wondering, as you think about over the midterm, the next three to five years, how do we think about the efficiencies that these newer technologies can bring in? Thanks.

Scott Staples: Yeah, no, we’re very bullish on the efficiencies that the new technologies can bring and I would add that it’s not only efficiencies, but it’s also quality improvement. And so we — I think I mentioned this last earnings call, we are in the process of running multiple AI pilots across multiple components of our operations, and early signs are an increase in quality, but also an increase in efficiency. And it’s not only in the actual fulfillment of a background check. We actually have just launched AI at Work [Phonetic] and AI at Work is our internal AI tool for helping all functional organizations use AI to improve their efficiency and their quality. As you know, when you use a public AI product like ChatGPT or whatever, whatever you put into that is available for all public to see.

So we’ve created our own private AI tool, and it’s basically AI at Work and we’re in the process now of educating our marketing teams, our sales teams, even our finance teams onto HR teams on to how to use this internally to find ways to do work better, faster, cheaper. So we think that the effect of AI across our internal functions and the processing of a background over the next 20 plus years will have a pretty dramatic effect.

Ashish Sabadra: That’s very helpful color. Thank you. Thanks.

Operator: Thank you. Our next question will come from Andrew Steinerman with JPMorgan, please go ahead.

Andrew Steinerman: Hi. I wanted to get a sense for how your team is doing market sizing of the US screening market. If you could mention what solutions are included in your market sizings, such as drug testing and id and stuff besides for criminal. How are you approaching market sizing? What market share do you think First Advantage will have post merger with Sterling?

Scott Staples: You know, we have been leveraging third parties. We haven’t been doing the market sizing ourselves, Andrew. So we’ve been leveraging third parties who have been doing that, and we’re really seeing sort of consistent results in numbers. I mean, there’s — multiple sources have pegged — this industry has a $13 billion TAM, so it’s a large space, and as you know, it’s a very fragmented space with so many competitors. So we haven’t looked at the market sizing ourselves, but the third-party data is so consistent that we’re pretty confident that it’s fairly accurate. The one thing that we have not been able to do, really, any market sizing on is digital identity, because it’s really a new space. It’s really the creation of a new revenue stream in a new space, and it’s very hard to measure that.

But what we are really going on is customer discussions. Customers are really loving the digital identity solution because they’re seeing so much fraud in the recruiting cycle. People that they are hiring for, let’s say, home-based jobs, and they’re interviewing over Zoom or something like that, and they’re claiming that their camera doesn’t work and then doesn’t seem like the person they hired is the same person that shows up to do the work, and so digital identity can really take that fraud out of the equation for them. And we’re hearing those stories, almost nightmare stories from so many customers. So there’s not an official market sizing going on, but that sector is really driven by customer conversations and customer demand, and we’re seeing very good demand in that sector.

Andrew Steinerman: Okay, thank you.

Operator: Thank you. [Operator Instructions] Our next question will come from Heather Balsky with Bank of America. Please go ahead.

Heather Balsky: Hi. Good morning. Thank you for taking my question. I wanted to ask, David, you mentioned your opportunity once you closed the deal with Sterling about your ability to reduce some of the third-party pass through costs. And I’m just curious if you can talk about your thoughts around the opportunity you have on the expense side, as well as using kind of your own internal resources once you’re a larger organization.

Scott Staples: David, do you want that one?

David Gamsey: Sure. Heather, they’re really — it’s a multifaceted approach to that. So, yes, there are third-party costs. We will be able to leverage volume from a procurement perspective to get more favorable pricing. We will be able to run more verifications through our own proprietary database. We will also be looking at other third-party costs like insurance and public company costs. So we’re going to look at everything top to bottom, every single expense. As we said, we think we can go get $50 million. We’re highly confident in that number and think it can be greater than that, and we’re going to go get it as quickly as we can.

Heather Balsky: Thank you. I appreciate that. And then just a follow up, you also talked about Sterling’s international business. Can you just lay out for us what their business is focused on internationally in their key markets? And then, I mean, we know your international business kind of where maybe there might be similarities or where they’re providing some new opportunities. Thanks.

Scott Staples: Yeah. So from a footprint standpoint, their international business is almost identical to ours, which makes it very easy to work through synergies and combining the organizations. Obviously, each party will have strengths and weaknesses and what we like about Sterling is they seem to have done very well in the gig space internationally, which is not a business that we’ve focused on too much. And they’ve also done extremely well in certain markets like Australia. So we’ll have to look at where the strengths and weaknesses of each organization. But from a product standpoint, there’s really not a lot of differences and it’s really just a matter of go to market in certain regions. But we’ll start again planning that as we get closer to close and post close as to you know, we’re basically going to — basically take the best-in-class approach, so whoever’s got the best product or offering, that’s what we’re going to go with.

Heather Balsky: Thank you.

Operator: Thank you again. [Operator Instructions] Our next question comes from Andrew Nicholas with William Blair. Please go ahead.

Andrew Nicholas: Hi. Good morning. I wanted to follow up on the earlier question around kind of AI efforts and efficiency gains. One of the other things that seems to be a theme as people adopt generative AI or build products internally is the cost. So just kind of curious if that kind of those efforts around bringing AI into your work or even the private AI tool have any kind of negative impact to incremental margins, or is the net-net of all that you’re doing on that front expected to improve incremental margins over time?

Scott Staples: Yes. So the near-term answer is that everything we’re doing is in budget, so we’re not going to be incurring any additional costs to do what we’ve got planned for 2024. And I think you’ve answered the question as to long term, which is we definitely feel that, yeah, there will certainly be a cost of developing a solution, but the benefit and the business case behind it will be higher quality, more efficiency, probably the ability to essentially reduce headcount in certain areas and things like that, so it certainly will offset. But we’re taking each product and each project as like a separate business case. So everything that we’re doing has to be business case driven and have some sort of defined benefit that we can track and milestones that we can measure. So that’s the approach we’re taking. And I, again, we think there’ll be a positive impact to the business over the next couple of years.

Andrew Nicholas: That’s very helpful. And then maybe for my follow up, just curious what the customer reception has been like to the Sterling announcement thus far. I don’t know if you’ve had a chance to speak to any of their customers, but just curious if your customers have come to you with any concerns, excitement, things of that sort, that’d be helpful. Thank you.

Scott Staples: Yeah, I mean, we can’t speak to any of their customers, that’s not allowed. But our customers are pretty excited about it. In some ways, it’s also a non-event for them. So when we announced it, we proactively reached out to all of our large customers and walked them through it and talked about it. They were very excited. Obviously they want to see what the Sterling products are like and things like that, which we’ll show. But as I mentioned, there’s really no impact to them. So although they’re excited for us, they don’t, they don’t really feel like it’s going to change. It’s going to be the First Advantage customer success team. Their customer care is not changing, their product suites aren’t changing and their platforms aren’t changing, and potentially there could be additions to them that would benefit them, which also opens up upsell, cross-sell for us.

But when we had our customer collaboration event in April, it was almost not even mentioned by any customers. It was that — they were excited about it, obviously, when we first reached out, but it’s really business as usual.

Andrew Nicholas: Thank you.

Operator: Thank you. At this time, we have no further questions in queue. This will conclude today’s First Advantage first quarter 2024 earnings conference call and webcast. Thank you all for your participation. At this time, you may disconnect your line. Have a wonderful day.