First Advantage Corporation (FA) Q2 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the First Advantage Second Quarter 2021 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Stephanie Gorman, Vice President of Investor Relations. Please go ahead.

Thank you, Angie. Good morning, everyone, and welcome to First Advantage's Inaugural Financial Results Conference Call, highlighting our second quarter 2021 results. We are excited to have so many new shareholders joining us today after our successful initial public offering at the end of June. 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 need to remind everyone that part of 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 prospectus for our initial public offering dated June 22, 2021, as such factors may be updated from time to time in our periodic filings with the SEC. We do not undertake any obligation to update forward-looking statements. Throughout this conference call, we will also be presenting and discussing 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 at investors.fadv.com. I'm joined on our call today by Scott Staples, First Advantage's CEO; and David Gamsey, our CFO. After our prepared remarks, we will have time to take your questions. I will now hand the call over to Scott.

Thank you, Stephanie, and good morning, everyone. Welcome to First Advantage conference call discussing our second quarter performance, our first earnings call as a publicly traded company. Starting on Slide 4. In June, we completed a successful IPO for 29.3 million public shares listed on the NASDAQ Global Select Market Stock Exchange under the ticker symbol FA. The offering was upsized and priced at the top of the range indicated a launch at $15 per share which resulted in net proceeds to the company of approximately $316.5 million. On first day of trading, we closed 31% above our offering price giving First Advantage a market cap of approximately $3 billion. This is a major milestone for our company, and we remain committed to continuing to profitably grow our business and provide exceptional value to our customers and in turn, to driving shareholder value. I am incredibly proud of our team whose hard work enables First Advantage to serve over 30,000 customers worldwide with robust technology solutions for screening, verifications, safety and compliance related to their unit capital. I want to thank our shareholders for their confidence in our company. I look forward to speaking with and meeting many of you in the days, weeks and months ahead. For our new investors, a company overview is included on Slide 5. We are a leading global provider of technology solutions for screening, verification, safety and compliance related to human capital. We have proven our ability to deliver value-added solutions, therefore, growing with our customers and winning new ones in what is a fragmented market where our technology and delivery capabilities stand out. We accomplish this through our single core technology platform, robust proprietary data, unique industry verticalization, state-of-the-art technology and global capabilities. We serve a large and growing total addressable market of $13 billion, which includes a tremendous amount of white space, allowing us to further differentiate and capture additional market share. Our customers include 55 of the Fortune 100 companies. And among our customer base, we enjoy long-tenured relationships averaging 12 years across our top 100 customers as well as a high gross retention rate of 95%. In 2020 alone, we completed over 75 million screens which demonstrates our technology's ability to handle scale and reinforces the importance companies are placing on risk management and compliance today. Over the last 12-month period, ending June 30, 2021, we grew revenues 29% to $600 million, of which approximately 88% were from North American markets and 12% from International. Over the same 12-month period, we grew adjusted EBITDA 46% year-over-year and achieved a strong adjusted EBITDA margin of 30%. We continue to focus on Environmental, Social and Governance strategies that drive value for our stakeholders and further differentiate First Advantage from our competitors. Two of our priorities are governance and diversity. In the second quarter, we established our public company board, adding 3 new independent directors. All 3 have served on other public company boards, and have held or currently hold leadership positions within large high-performing organizations. Susan Bell, who serves as our Audit Committee Chair and sits on our Compensation Committee, was previously managing partner of the Atlanta office of Ernst & Young. James Clark, who serves on our Nominating and Corporate Governance Committee, is currently President and CEO of the Boys & Girls Club of America. And Judith Sim, who serves as our Nominating and Corporate Governance Committee Chair and sits on our Audit Committee, was previously a Senior Marketing Executive at Oracle. Next, moving on to Slide 6. Let me share some insights and highlights from the second quarter. It's an exciting time at First Advantage as we continue our journey as a customer-focused technology and product innovation leader. I want to share some key highlights from our second quarter performance. First, we have been and will continue to be the beneficiary of certain favorable macroeconomic and jobs trends and tailwinds, including hiring growth, new job creation, increasing turnover and greater worker mobility. Second, we experienced increased momentum from our existing customers, driven by broad-based hiring and screening growth across key verticals and geographies. This included base growth from robust hiring and screening and continued upsell and cross-sell momentum. Customers also continue to increase the depth and breadth of their screening requirements, which we refer to as package density to provide even greater levels of risk management and security. Third, we experienced continued strength in new customer wins fueled by our verticalized go-to-market teams, differentiated technology solutions and global capabilities. We have some great new customers that have chosen to partner with First Advantage. Fourth, we have seen a substantial rebound in international markets from the COVID-impacted second quarter of 2020, driven in large part by customers in the IT services, BPO and financial services industries. These strong international revenues came back sooner and at a higher level than previously anticipated. Fifth, we have seen continued margin expansion from robotic process automation, utilization of our proprietary data and intelligent routing technology, further operational efficiencies and G&A leverage. And sixth, I want to highlight our recent U.K. screening business acquisition, which we completed at the end of March 2021. This acquisition adds to the breadth of our international capabilities and establishes First Advantage as a market leader in the U.K. Before David takes us through our Q2 performance and highlights, I would like to spend a few moments describing our business and differentiated technology platform as shown on Slide 7. We provide mission-critical software for many of the largest, most sophisticated companies in the world. Our single global proprietary core technology platform is often our customer's first line of defense when it comes to human capital risk management as we focus on workplace safety, brand protection and compliance. We leverage technology and process automation to deliver faster and more efficient screenings, driving cost savings for our customers and margin improvement for us. Robotic process automation, or RPA, and artificial intelligence are core to our product strategy and we have been pioneers in using these technologies to do things better, faster and more cost effectively. Our own proprietary databases give us great leverage and enhance our screening turnaround times. Additionally, we have 600-plus third-party data sources where we have built automated and/or integrated connections to data, both in the U.S. and globally. We have built similar integrations with over 65 third-party human capital management and applicant tracking systems software platforms. Our partners include companies like Workday, SAP, Oracle, Salesforce, iCIMS and dozens of others, drive leads for First Advantage and the certified integrations we have with these partners add value to customers and increase customer loyalty and retention. Our technology supports the changes we are seeing in the macro environment, the ways in which people want to work are changing and this creates opportunity for us. In today's workforce, millennials and younger generations work differently than previous generations. They are more likely to switch jobs in pursuit of earning higher wages, faster career development and better workplace culture fit. This, along with increasing use of contingent workers, flexible workers, contractors and freelancers means people are changing jobs more frequently, and there are cases, for example, where we could screen the same person at 3 or 4 different companies in a single year because of freelancing or contracting. Additionally, the world is a smaller place today, with global -- with multinational corporation sourcing talent from all over the globe and we are able to complete screens in over 200 countries and territories. Our enterprise customers may be finding applicants locally but an applicant could be from a different country or have been educated in yet another country. We can validate their experience and education across geographies, and we are one of the few companies that have the global reach to help companies screen people internationally. Our scale provides a number of strategic benefits, including differentiated capabilities such as global coverage, a single tech platform and the ability to accumulate and curate large volumes of data. This ultimately helps us deliver a differentiated value proposition in one of the highest customer satisfaction ratings in the industry. Next, on Slide 8, I'll discuss our verticalized go-to-market approach. About 4 years ago, we rolled out a new transformational go-to-market strategy focused on specific verticals or industry sectors and aligned our sales and product teams accordingly. This strategy enables us to be subject matter experts in these industry segments and use industry-specific data to consult our customers on best practices, hiring and onboarding benchmarking and product optimization. It also enables us to develop vertically aligned products with our customers, providing input and direction into our product road maps. The vertical strategy helps us differentiate in the market, drives upsell and cross-sell opportunities and fuels our new customer sales. In summary, we are thrilled with the successful results of our vertical go-to-market strategy and the growth that is driving in our business. Next, I will turn the call over to our CFO David Gamsey to review our results for the quarter and for the full year 2021 guidance. David?

Thank you, Scott, and good morning, everyone. Turning to Slide 10. We reported revenues of $174.8 million for the quarter, a 67% increase over the prior year period, including 60% organic growth. We benefited from accelerated hiring that picked up in the second half of 2020 and has continued through the second quarter of 2021. Increases from our existing customer base and new customers made up $49.3 million and $13.4 million of our organic growth, respectively. Existing customer growth was particularly strong in Q2 and broad-based across key verticals and geographies. We also lapped the quarter during which First Advantage and the broader market was significantly impacted by the effects of the COVID-19 pandemic. In addition to our organic growth, acquisitions contributed $7.1 million to the increase in revenues for the quarter. Also included in our revenues was a minimal foreign currency benefit, which was less than $1 million in the quarter. Adjusted EBITDA for the quarter was $56.3 million, a 78% year-over-year increase, reflecting flow-through from higher revenues as well as margin expansion attributed to increased automation, cost discipline and operating leverage. This resulted in an adjusted EBITDA margin of 32.2%, up from 30.1% in the comparable prior year quarter. We had adjusted net income of $33.2 million or $0.25 per diluted share in the second quarter of 2021 compared to $12.2 million or $0.09 per diluted share in the second quarter of 2020. This growth was positively impacted by all of the factors just mentioned along with the additional favorable impact of lower outstanding debt and lower interest rates, which together resulted in lower interest expense. This was partially offset by higher foreign taxes. Our adjusted effective tax rates were 25.7% and 28% in Q2 of 2020 and Q2 of 2021, respectively. The higher rate in the second quarter of 2021 was primarily driven by several foreign tax items, including an increase in the corporate tax rate in the U.K. On Slides 11 and 12, we have included quarterly financial results going back to 2019 to give you a sense of our consistent growth over time and some of the seasonality in our business. We typically see higher revenues September through November as companies ramp hiring ahead of the holiday season. More about that shortly. Financially, we have a long and proven track record of revenue growth and margin expansion. We demonstrated the resiliency of our model in 2020 as we continue to grow both revenues and adjusted EBITDA and to expand our margins despite a very challenging year impacted by the COVID-19 pandemic and the disruption that it caused throughout the overall economy and job market. We have a predictable financial model supported by long-term contracts and very high retention rates. Our growth benefits from our deep customer relationships, our focus on enterprise customers, upsell, cross-sell and the attractive verticals in which we operate. Additionally, our verticalized sales force continues to drive market share gains. Now moving to Slide 12. We have an excellent track record of expanding our adjusted EBITDA margins primarily through 4 initiatives. First, we are expanding our utilization of our proprietary databases and increasing our automation with third-party data providers. Second, we are focused on technological innovations, including robotic process automation initiatives, which drive operational efficiencies, increase accuracy and enhance our customers' turnaround times. Third, we have a strong procurement team that continues to optimize our vendor network and create additional cost savings. And fourth, we continue to leverage our G&A infrastructure. Additionally, our cost structure is largely variable and flexible. And therefore, we have the ability to flex our operations to accommodate fluctuations in demand. We tightly control operations costs and associated head count. This underscores our disciplined balance between cost efficiency and strategic investments as we continue to invest in technology and sales while leveraging G&A costs. Turning now to cash flows, balance sheet and capital allocation on Slide 13. In the second quarter, operating cash flows were $32.4 million, a 49% increase over the prior year quarter. This was after considering the growth in accounts receivable attributable to our higher second quarter revenues. Additionally, we spent $6.3 million on purchases of property and equipment and capitalized software development costs during the quarter. In connection with our June IPO, we received net proceeds of approximately $316.5 million after offering expenses. We used a portion of the net proceeds to prepay $200 million under our outstanding first lien credit facility, which does not mature until 2027. As a result of this prepayment, we have no remaining mandatory quarterly principal payments due under the agreement. We intend to use the balance of the proceeds for general corporate purposes. Additionally, we plan to selectively pursue strategic M&A opportunities. We ended the second quarter with total debt of $564.7 million and cash and cash equivalents of $257.1 million. With LTM adjusted EBITDA of $180.8 million, we lowered our net leverage to 1.7x from approximately 4.5x at the end of 2020. In connection with the closing of the IPO, we increased the borrowing capacity under our revolving credit facility to $100 million from $75 million and extended the maturity date to July 31, 2026. We do not have any outstanding balances under this facility. Additionally, following the IPO, in recognition of our improved credit profile, the debt ratings of First Advantage were upgraded by Moody's and S&P Global. Next, I would like to review our capital allocation priorities. First, we are and will continue to evaluate potential acquisition opportunities that align with our strategic priorities are expected to be accretive and generate strong return on investment. We see a steady flow of M&A opportunities from our commercial and industry relationships, and we continue to evaluate select opportunities on a regular basis. These might include opportunities to gain additional vertical expertise, expand internationally or into new adjacent services or add complementary data or technologies. Second, we continue to be focused on internal investment opportunities, new product development and other projects that would increase organic growth. We are also focused on maintaining and enhancing our industry leadership position through technology and automation while continuing to invest in sales, solution engineering and customer success. And finally, we continue to be focused on maintaining a strong balance sheet and a conservative capital structure. Our goal generally is to maintain a flexible leverage profile within a targeted long-term range of 2 to 3x net debt to adjusted EBITDA, absent any temporary variations as a result of potential future acquisitions. Next, on Slide 14, is our guidance for full year 2021. As context, please note that the 2020 comparison provided on the slide is pro forma for the January 31, 2020, Silver Lake transaction and related refinancing, which is further described in our presentation and 10-Q. Turning to guidance. We expect to generate 2021 revenues in the range of $640 million to $650 million, reflecting continued broad-based strength across industry verticals and geographies, favorable macroeconomic tailwinds, strong hiring trends supporting base growth, additional upsell, cross-sell to existing customers, high retention and continuing new customer wins. Our guidance also includes contribution from the U.K. screening business acquisition we completed at the end of March, which we expect will contribute in the mid-single digits to our full year 2021 revenue growth percentage. In the second half of the year, we anticipate a continuation of the strong demand we have been experiencing, resulting in full year revenue growth in the range of 26% to 28% as compared to 2020. Overall, our expected revenue growth rate in the second half of the year is higher than we had internally projected earlier in the year, coming in above the higher end of their long-term target range, although lower on a percentage basis than Q2, during which time we were lapping the more severe impacts of the COVID-19 pandemic. While consistent with most of our peers, we don't plan on providing quarterly guidance, but we will provide some additional color on this call given the anniversary of COVID impacts on 2020. We expect revenues to be more evenly distributed on a dollar basis between Q3 and Q4 of 2021 compared to what we might generally see where Q4 is usually a clear seasonal high because of the holiday hiring season. This is because in 2020, we experienced accelerating growth in Q3 and especially in Q4 notably in home delivery, transportation and essential retail customers. So while there are base effects in 2020 that affect the quarterly percentage growth rates, there is continued strong momentum in the business, such that we see the second half exceeding both our prior internal projections and our longer-term percentage growth rate target. Longer term, beyond 2020, our targeted organic revenue growth rate is in the high single digits to low double digits. We anticipate our 2020 adjusted EBITDA will be between $186 million and $190 million, driven by continued strong flow-through from incremental revenues, increased automation, additional efficiencies and operating leverage, offset by new public company costs and additional investments in product, technology and sales. Both revenues and adjusted EBITDA in the second half of the year are anticipated to be higher than we had internally projected earlier in the year. We expect our 2021 adjusted net income to be between $110 million and $113 million, which will be positively impacted by lower outstanding debt and lower interest rates partially offset by higher foreign taxes. We also anticipate capital expenditures in the range of $25 million to $26 million, which includes capitalized software development costs. We believe that our second half and full year 2021 adjusted effective tax rate will be in the range of 26.5% to 27.5%, driven by the impact of several foreign tax items, including the previously mentioned increase in the corporate tax rates in the U.K. This adjusted effective tax rate illustrates the ongoing rate that would be applicable to our adjusted pretax income based on geographic mix, absent other tax assets. We continue to have U.S. federal NOL carryforwards of approximately $190 million as of June 30, 2021. We expect our cash tax payments to be approximately $7 million for full year 2021. And with that, I will turn the call back over to Scott.

Thank you, David. I want to conclude our presentation today on Slide 16 by saying that I am very excited about our future. In summary, we are a global leader in a large, fragmented and growing market. We are fueled by macroeconomic tailwinds that are driving a robust hiring environment. Our differentiated and embedded technology platforms provides mission-critical solutions in an increasingly complex market. Our verticalized go-to-market strategy drives deep long-term customer relationships and diversified industry exposure. We have a seasoned leadership team that possesses deep industry knowledge and our company is driven by a culture of innovation. And we have a resilient financial model and a consistent track record. Our products and solutions create significant value for our customers, which we expect to continue to drive our revenue growth, margin expansion and cash flow. At this time, we will ask the operator to open up the line for your questions.

[Operator Instructions] Your first question comes from the line of Hamzah Mazari with Jefferies.

My first question is just on the records you have in your verified database. How quickly can you grow those? And what kind of value does that add? I know speed matters in your business. But does that lower your data cost too? Just kind of walk us through that.

So our verified database continues to grow. As we do verifications, we continue to add information into that database to the extent that we can utilize our internal proprietary database. It cost us less. We pass on lower cost to our clients and our margins are greater. So we want to continue to utilize that database as much as we possibly can.

Got it. And then just looking at the balance sheet leverage, it's below 2. You're generating strong free cash flow. Could you talk about your M&A pipeline? I know you talked about the U.K. screening business. But what does that pipeline look like today? And what do valuations look like?

So first and foremost, we're focused on organic growth in the U.S. However, we are evaluating accretive tuck-in M&A opportunities. We do have a very active pipeline. We just closed on the GBG U.K. screening business acquisition at the end of March. So we are actively evaluating strategic acquisition opportunities but with a disciplined approach. We're not going to be a roll-up company, but we are going to take advantage of what's out there. Valuations are aggressive, but we think we can find the right opportunities and with the right synergies, make it work and be accretive for us.

Your next question comes from the line of Peter Christiansen with Citi.

Congrats on the IPO and nice results here. Scott, I was wondering if you could talk about -- obviously, the economic picture is pretty good, you had nearly 1 million nonfarm last report and the JOLTS data continues to expand. I'd imagine most of your clients, their hiring engines are quite busy. But does that present an issue in terms of winning new logos, given that maybe there's some decision delay out there? Or will people or firms don't want to change, make any major changes given stress in hiring these days. Just wondering if you've seen that on the new JOLTS front at all?

We really haven't seen...

I'm sorry. Go ahead, David. Yes.

The new sales pipeline continues to be very active. We continue to have very strong bookings. At the same time, what we've seen is a very broad-based growth across all of our verticals. So we're seeing not just 1 or 2 or 3 verticals that drove kind of the second half of 2020, but very broad-based growth across the entire business line today. Scott, you want to add that?

Yes, I would just add that hiring is competitive across all verticals. So our ability to help companies hire smarter and onboard faster helps position First Advantage very strongly in the market.

And then as a follow-up, I guess, there have been some firms who talked about mandating vaccines for new hires. Just wondering if how is First Advantage being impacted by that? Do you see that potentially as an opportunity to service your existing client base? Any color there would be great.

Yes. It's really not had an impact on our business. And internally at First Advantage, we're still evaluating our vaccination policy. But I think like the rest of the world, there's a lot of wait and see to see what's happening out there.

Your next question comes from the line of Manav Patnaik with Barclays.

My first question is just given the impressive growth rate for this year, I know you said long term, you're still sticking by your high single, low double-digit guidance. But I was just curious, as we think about '22, do you think there are some comp issues to consider there? Or do you think you can put up those same growth rates in '22?

It's really too early to start talking about 2022 guidance. What we can tell you is we're very pleased with the investments that we've made throughout 2021. We're very pleased with the bookings that we've had and the new business that we're bringing on, and all of that will contribute very favorably towards 2022. We'll give guidance relative to that during our fourth quarter earnings call.

Got it. And then just curious on if you've seen any change to your competitive landscape? You guys obviously went public, and it sounds like your 2 other big players are preparing to do the same. So I'm just curious if that's -- because of that, if you've seen any changes out there?

We have not seen any changes to the competitive landscape. We continue to focus on our business and our products and our customers, but we have not seen any significant change to the competitive landscape.

Your next question comes from the line of Ashish Sabadra with RBC Capital Markets.

I was wondering if you could talk about the traction that you're seeing for new products, the new products that you recently launched like XtdForce and RightID as well as the pipeline for additional products going forward?

Yes. So we continue to be innovative as a company and launching new products. Our new products are on target with the traction that we had hoped to see. We'll continue to launch new products in the future. Our products are developed with customer input and we feel this is a nice competitive advantage for us.

That's very helpful color. And again, if I can have a follow-up question on the proprietary database, the database that you've developed is pretty extensive. I was just wondering, can you talk about potential for using the same database for new use cases like rental screening, but also outside of the traditional screening process, is there opportunity for you to provide more post-monitoring solution and stuff like that.

I believe the databases that we've created are really more geared towards the current business and offerings that we provide. We don't see a real scope or scale for them to be expanded into adjacent or other areas. So no plans for that today. We've got a lot of nice road ahead of us with those databases. So we'll just continue to focus on what we've got.

Your next question comes from the line of Shlomo Rosenbaum with Stifel.

Could you comment a little bit about the -- what your comment was on package density increasing. Is there some way to kind of quantify that? I thought that was particularly interesting. Are you seeing the dollar value per package of an average screen going up because of that? And maybe some -- can you describe about what is the density, what is adding that density? Is it further back into criminal files or something else?

So as we previously mentioned, during the quarter, our existing customer base was up $49.3 million. A portion of that was attributable to product density. So what we're seeing is some of our clients going back instead of just doing a federal criminal search, for example, they'll do state and federal, they'll do city, county, state, federal. So they're going back and checking more databases. They're doing it for a number of different names. So instead of 1 name or 2 names, it could be 3 names or all names and they're going back for a greater number of years. So whereas before they may have gone back for a 3-year history, now they're going back for a 5- or 7-year history. All of that is incremental revenue to us.

And I think that's really in line with what we're seeing as the trend from our customers with a focus on safety, compliance, brand protection, it's just right perfectly in there.

And then in the last 4 weeks, we've seen kind of this COVID Delta variant, is that making a difference in your expectations, either up or down in any of your key verticals or just overall in terms of hiring?

We haven't seen any impact of the Delta in regards to our business. Obviously, we continue to watch that and monitor. But our volumes are strong and our customers are pushing forward with their plans. I really think that the main impact is really more on work from home and that type of logistical stuff, but it's not really affecting the pipeline or the volumes.

Your next question comes from the line of Gary Bisbee with Bank of America Securities.

Congratulations on successfully completing the IPO. First question, you've obviously highlighted some targeted investments you're planning to make in the next few quarters. Given the stronger revenue trend, do you have opportunities to step up those investments and spend some of the upside to drive, I guess, higher growth for longer or something like that? Or are you comfortable that the level of investment you called out previously remains the right way? And I guess as part of that, if I just take a step back sort of more holistically, what are the gating factors to growth in the business? If you did invest more in sales and the vertical strategy and some of the areas you've talked about, would that give you an opportunity to grow faster than how you discussed your long-term growth potential?

Well, I'll jump in and get started. We are -- we do take a disciplined approach to making our investments. We are putting it in the areas. As we said, sales, solutions engineering, product and technology that we think ultimately will drive organic growth and help us expand our margins long term. We look at that and evaluate that on a regular basis. Are there other projects that we could implement a little bit sooner? We have those internal debates on a regular basis, and that is something that we would consider as long as the revenues continue to grow and we get the incremental fall-through on those, which we are anticipating.

Okay. And then a follow-up question. Can you just help us understand how much of the upside in the revenue trend in the quarter in your commentary for the second half of the year is driven by stronger hiring trend versus the many internal strategies that you've highlighted driving your growth?

So it's a combination of both, right? We had a conversation a little earlier about the JOLTS data and that's directionally correct. It's a macro indicator, and we look at that. And that really relates to some extent to our base growth. Although we do focus on enterprise clients, we believe we're more resilient. We think we're better positioned. But that is a good leading indicator. We do see very good momentum. Our international operations came back sooner and stronger than we thought, and we think that momentum is going to carry over into the second half of the year.

And Gary, I think a new -- sort of a new phenomenon for all of us is I think we've always followed JOLTS data and openings and hires are easy things to track. But what the economy you're seeing now is a high number of quits. So if the monthly quits are something that's really new to the equation, it'd be interesting to track and see how that has -- what effect that has on the business because turnover obviously is good for our business.

[Operator Instructions] Your next question comes from the line of Andrew Steinerman with JPMorgan.

Scott, I heard the comments about package density before why package density has gone up. My question is, for how many years ahead, do you feel like package density will continue to go up, like don't you feel like there's a natural ceiling for package density? In terms of risk management, is it there sort of a tolerance at some point that just spending can't go to the sky?

Yes. I mean it's hard to say, and obviously, we can't predict the future, but we are watching this. I think overall, the macro trend is for companies to really look at deeper and deeper protection. As I said earlier, safety, compliance, brand protection has been elevated within organizations. These are now C-suite, board level-type discussions. And there is a lot more density to happen. There -- and that can even happen with new offerings and new products as well. So it's hard to predict if there's a ceiling, when there would be a ceiling, but the trend is clearly in that direction right now where companies want more and more protection.

Your next question comes from the line of David Togut with Evercore ISI.

When we look at the underlying drivers of operating leverage, including robotics, process automation, system integration, the unified global platform, how should we think about margin expansion potential beyond this year, especially when we also incorporate your investments in new proprietary data sets.

So we are investing for growth and efficiency, and our revenue does continue to fall through at a higher margin. We are going to have to grow over public company costs that we're starting to incur in the third quarter and the new investments that we're making in technology and sales area. So those margins will flatten out for a short period of time and then should continue to expand and grow on a longer-term basis.

Understood. And is there some way to bracket the longer-term operating margin or EBITDA margin expansion in '22 and beyond?

We're really not giving guidance on 2022 yet, but what we have said is that we think our -- on a long-term basis, our adjusted EBITDA margin will continue to grow between 11% and 14%.

At this time, there are no further questions. I would like to turn the floor to Mr. Staples for any additional or closing remarks.

Thank you, and thanks, everyone, for your questions. We're very proud of our accomplishments and are excited for what's ahead. We believe we are very well positioned for future growth as a public company, and we'll continue our focus on delivering value for our shareholders. Thank you for joining us. And everyone, have a great day.

Thank you for participating in today's conference call. You may now disconnect your lines at this time.