Sterling Check Corp., established in New York in 1975, is a leading provider of advanced background and identity verification solutions. Its extensive ...
Sterling Check Corp. (STER) is a premier global provider of employment screening and identity verification services. Founded in 1975, the company has established itself as a critical partner for organizations across diverse sectors, including healthcare, finance, the gig economy, and technology. Sterling’s primary value proposition lies in its ability to ...Sterling Check Corp. (STER) is a premier global provider of employment screening and identity verification services. Founded in 1975, the company has established itself as a critical partner for organizations across diverse sectors, including healthcare, finance, the gig economy, and technology. Sterling’s primary value proposition lies in its ability to reduce the complexity and risk associated with hiring, ensuring trust and authenticity in the workforce through a sophisticated, cloud-based technology platform. Its comprehensive service portfolio spans criminal record checks, motor vehicle reports, drug and health screenings, identity verification (including biometric facial recognition), and ongoing employee monitoring. By leveraging real-time data and automated workflows, Sterling assists over 50,000 clients worldwide in maintaining regulatory compliance and safety. Business operations are highly verticalized, allowing for tailored screening packages that meet the specific needs of different industries. From a financial perspective, the company was publicly traded on the NASDAQ under the ticker 'STER' until its acquisition by First Advantage for approximately $2.2 billion, a transaction that underscores the consolidation in the background screening market. The acquisition aimed to combine industry-leading platforms to drive efficiency and innovation, with projected synergies in the tens of millions. Key leadership, including founder William Greenblatt and CEO Joshua L. Peirez, has focused heavily on shifting the company toward digital transformation, prioritizing high-margin software services over legacy manual processes. The cost structure is primarily driven by technology infrastructure maintenance, data acquisition fees from governmental and private databases, and significant investments in professional services. The company's 'BOM' in a service context is characterized by high-volume API integrations and cloud-hosting requirements. Looking forward, the merged entity aims to continue enhancing candidate experiences through faster, mobile-first onboarding, while maintaining the rigorous compliance standards that have defined Sterling’s reputation for nearly five decades.
YoYYoY means Year-over-Year. It compares the latest annual value with the previous annual value to show long-term trend strength.
QoQQoQ means Quarter-over-Quarter. It compares the latest quarter with the immediately previous quarter to show short-term momentum changes.
RevenueThe total money that came through the front door from selling things, before paying a single bill. Think of it as the grand total of every credit card swipe from customers. (YoY compares this year to last year's performance, while QoQ compares the current three months to the previous three).
$719.6M
-6.1%
+7.8%
Net IncomeThe absolute bottom line. If the company paid every single supplier, employee, banker, and tax collector, this is the actual money left in their pocket at the end of the day.
$-116000
-100.6%
+21.7%
Gross MarginThe basic markup. If they sell a $100 pair of sneakers, this percentage tells you how much of that price tag is profit right after paying for the rubber and shoelaces, but before paying for things like store rent or TV commercials.
+40.4%
-13.8%
+57.0%
Operating MarginThe 'day job' efficiency score. Out of every dollar a customer spends, this shows how many cents the company keeps after making the product AND paying for all the everyday corporate overhead (like salaries, marketing, and keeping the lights on).
+6.5%
-15.9%
-43.3%
Net MarginThe final take-home percentage. When you strip away every conceivable cost, tax, and interest payment, this is the exact number of cents the company truly gets to keep from every dollar in sales.
-0.0%
-100.6%
+27.3%
Free Cash FlowThe holy grail of corporate cash. It's the spendable, physical money left over after the business pays for its daily operations AND buys the big, expensive upgrades (like new factories or servers) it needs to survive. This is the 'free' money they can use to pay dividends or buy back stock.
$76.5M
-9.0%
+653.2%
FCF MarginThe ultimate cash conversion rate. It shows how good the company is at turning regular sales directly into cold, hard, spendable cash. A high percentage means the business is an absolute cash-printing machine.
+10.6%
-3.1%
+613.1%
Debt / EquityThe financial risk gauge. It compares how much of the company's empire was built using borrowed money (loans) versus the owners' own money (shareholders). A high number means they are heavily leveraged and playing a riskier game; a low number means they are playing it safe.
72.1%
+1.8%
-1.0%
Current RatioThe 12-month survival check. It simply compares the cash they have right now (plus things they can quickly turn into cash) against the immediate bills they absolutely must pay this year. A score above 1 means they have enough in the wallet to cover the upcoming bills without panicking.
1.52x
-25.0%
+6.9%
Total AssetsThe absolute size of the company's empire. It bundles together absolutely everything of value they own—from the cash in the register and the inventory in the warehouse, to the software patents in the vault and the factories on the ground.
Operator: Hello everyone and welcome to the Sterling Third Quarter 2023 Earnings Call. My name is Seth and I will be the operator for your call today. [Operator Instructions] I will now hand over to Judah Sokel to begin the conference. Please go ahead.
Judah Sokel: Thank you, operator. Welcome to Sterling's third quarter 2023 earnings call. Joining me today on the call are Josh Peirez, 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's IR website under News & Events. The slides have been posted to our website and a replay will be made available on the website. After prepared remarks we will open this call to questions. 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-GAAP financial measures. 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. 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 Peirez.
Joshua Peirez: 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. 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. 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. 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. 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. In the meantime, I am happy that Theresa Strong who is here with us today will serve as Sterling's Interim Chief Financial Officer during this transition period. Having joined Sterling through our acquisition of TalentWise in 2016, Theresa 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 Theresa in this capacity. Turning now to Slide 4, the third quarter of 2023 was a quarter of successful execution towards our …
