First Advantage Corporation (FA) Q1 2026 Earnings Report, Transcript and Summary

Good morning, everyone. My name is Bo, and I will be your conference operator today. I would like to welcome everyone to the First Advantage First Quarter 2026 Earnings Conference Call and Webcast. Hosting the call today from First Advantage is Stephanie Gorman, Vice President of Investor Relations. [Operator Instructions] Please note today's event is being recorded. And it is now my pleasure to turn the meeting over to Stephanie Gorman. Please go ahead, ma'am.

Thank you, Bo. Good morning, everyone, and welcome to First Advantage's First Quarter 2026 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 2025 Form 10-K and our Form 10-Q for the first quarter of 2026 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 effort 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; Joelle Smith, our President; and Steven Marks, our Chief Financial Officer. After our prepared remarks, we will take your questions. I will now hand the call over to Scott.

Thank you, Stephanie, and good morning, everyone. Thank you for joining our call. Today, we have 4 key messages. First, we delivered an exceptional first quarter, growing revenue 8.6% year-over-year and achieving adjusted EBITDA margins of over 27%, both favorable versus our previously communicated expectations. When combined with our diverse vertical mix, consistently high customer retention and focus on cost discipline, we continue to drive excellent results amid this dynamic macroeconomic environment and consistently outpace broader hiring market trends. Second, we are executing and accelerating our FA 5.0 growth strategy. Our innovative product and platform approach is strengthening our customer value proposition and expanding our offerings, which is helping us win across the business. At the same time, our sales engine is humming, as we drive growth through go-to-market execution and continued investment in our product capabilities. These actions position us well to capture incremental meaningful growth opportunities, and Joelle will share more detail on what is driving our success in this area. Third, we continue to execute our balanced capital allocation strategy, supported by the success of our business, our strong cash flow generation and our confidence in our continued growth. Through our $100 million share repurchase program announced last quarter, we made disciplined purchases at attractive valuations, repurchasing $19.5 million in shares through March 31, with total repurchases of $33.3 million through May 1. In addition, we continue to make meaningful progress on reducing net leverage. During the quarter, as previously announced, we made a $25 million voluntary debt payment. And just this week, we prepaid an additional $25 million of debt, bringing our total cumulative debt repayments since closing the Sterling acquisition to $120.5 million. And finally, we are reaffirming our full year 2026 guidance based on strong first quarter customer demand and our outlook for positive top line momentum continued during the year. We remain confident in our positioning to create long-term shareholder value and deliver consistent progress toward our 2028 targets. Now turning to Slide 5. We generated exceptional Q1 revenue growth, adjusted EBITDA, adjusted EBITDA margin and adjusted diluted EPS. Impressively, in Q1, our combined upsell, cross-sell and new logo growth contribution was 12%, enabled by our strong go-to-market momentum and outperforming our long-term revenue algorithm target. Retention remained high at 97%. Looking at the macro hiring environment in the first quarter conditions remained relatively consistent. We continue to hear a neutral to positive tone from our enterprise customers even as news headlines regarding layoffs and economic and policy uncertainty persist. We also continue to see workforce churn among both blue collar and knowledge workers, which has helped drive steady improvement in our base revenue over the last several quarters, resulting in flat performance in the base in Q1. While broad acceleration has yet to emerge in macro hiring trends, our enterprise customer base, diverse vertical mix, global footprint and balance across hourly and salaried hiring continue to provide stability and support our confidence in driving growth through new logos, upsell and cross-sell. We do not have any significant direct exposure to the Middle East, which limits our sensitivity to recent geopolitical developments in the region. It's also important to note that we operate in a highly regulated environment where accuracy, auditability and trust are critical. AI is raising the stakes for employment decisions and driving demand for deeper, more comprehensive searches and greater decisions and driving demand for deeper, more -- I'm sorry, and greater package density. This is where our business model and competitive moat matter. What we provide goes far beyond a software solution or a data search. It is a highly differentiated platform built on deep regulatory expertise, significant compliance infrastructure, proprietary data assets and a consultative service model tailored to the industries we serve. Importantly, employers trust us to help them navigate the growing complexity of modern hiring decisions. This includes determining where and how AI can be used responsibly in the screening process, with the appropriate human-in-the-loop oversight to help ensure accuracy, fairness and compliance in high-stakes employment decisions. That trust is grounded in our deep domain expertise across a wide range of regulatory frameworks, including the Fair Credit Reporting Act, which credit bureaus and banks are both required to follow, Department of Transportation or DoT requirements, evolving state and local regulations governing data privacy, AI and biometrics, as well as international data feed privacy laws such as GDPR in Europe and similar laws globally. Together, our combination of advanced technology, human judgment and regulatory expertise allows our customers to rely on us as a trusted partner to manage human capital risk while confidently scaling their hiring processes. Against the current macro backdrop, it's also crucial to consider how AI is reshaping the future of work and to understand how our resilient business model and strong competitive and differentiated position set us up to be a beneficiary of that change. AI will likely drive disruption in certain parts of the labor market, resulting in workforce churn as companies redesign jobs and organizational structures. At the same time, as AI adoption accelerates, companies are not only investing in new technologies, but also creating new roles to manage, govern and deploy those technologies responsibly. Additionally, there are other roles that should see resilience during this shift. For example, ones that require physical presence, regulated decision-making or high-trust human interaction. Many of the customers and roles we support fall squarely into those categories. While there are differing views on how AI will reshape the workforce, some research firms like the Boston Consulting Group and the World Economic Forum reinforce what we are seeing, which is that AI is reshaping how work gets done rather than just broadly eliminating jobs, as well as driving greater momentum or movement within the labor market and emergency in new roles and increased hiring complexity over time. In addition, we are seeing other supportive labor market trends, including the rise of job stacking, particularly among younger workers who are increasingly choosing to take on multiple part-time roles for greater flexibility, resulting in higher screening frequency per individual. With these trends, reinforcing the durability of demand for our solutions and increasing the stakes in employment decisions, we are well positioned to benefit. As I wrap up, I'd like to reiterate that our numbers and performance speak for themselves. Our sales engine is executing at a high level. Our product offerings are resonating. Our go-to-market focus on specific verticals and large enterprise customers is paying off. Our early to market positioning of our broader identity solutions is getting us in front of more buyers and driving our pipeline. Our investment in AI, automation and positively impact our clients' user experience and bottom line profitability. And our increasing usage of proprietary data is showing up in our results. All of this, combined with our winning culture, creates tangible market differentiators and helps us gain market share. As a category leader, we are extremely proud of what we have built and where we sit in the market. Now, I'm pleased to introduce Joelle Smith, who will provide an update on our FA 5.0 strategy, which includes what we are doing with AI. Joelle joined First Advantage in 2017 and has been in her current role as President since 2024. She leads our product, data and technology organizations as well as our go-to-market teams, including sales, customer success and marketing. Joelle has been instrumental in creating our industry-leading platform and AI strategies as well as expanding customer relationships and generating growth across the company. With that, I will now turn the call over to Joelle.

Thank you, Scott, and good morning, everyone. It's great to be here with you today. With the context that Scott just shared on how we're thinking about AI strategically, let me expand on how we're using AI in practice across our platform and delivering tangible results. We view AI as an enabler of our FA 5.0 strategy. We were one of the earliest adopters of automation technologies, like robotic process automation in our industry. We have built on that foundation, deploying AI and machine learning for more than 5 years, launching Gen AI capabilities in 2024 and embedding AI logic across our platform where it delivers meaningful customer and operational impact. AI is already fully integrated into our applicant platform, which we call NextGen Profile Advantage, providing a leading user experience and resulting in call center contacts being reduced by half. It also powers key solutions, like our intelligent fulfillment router called SmartHub AI for verification and our Digital Identity offerings. Digital Identity has become the tip of the spear in our go-to-market strategy. It's not a feature, but a foundational element of accurate compliance screening embedded within our broader cohesive offering, and customers are increasingly recognizing the risk of excluding it. While it represents a modest portion of contract value currently, it is a key differentiator and decision driver for prospects and customers and is now standard in most deals we quote. Roughly 1/4 of all quarter 1 implementations included Digital Identity with go-lives accelerating versus Q4 as customers increasingly see the benefits of our comprehensive fully integrated solutions, helping us win new opportunities and positioning us for meaningfully higher penetration in 2026. Within our customer care organization, we're seeing clear productivity, efficiency and quality gains from AI. We're driving a shift towards self-service to better scale volumes while deploying agent assist capabilities that reduce average handle time and improve first contact resolution. For example, our AI customer care agents enabled nearly 1/4 of candidates to get help without ever needing to speak with a live agent, and our new agent assist tools have driven people productivity improvements of nearly 20%. We are also using AI to better understand customer sentiment, expand multilingual support across chat and our help portal and improve workforce scheduling. Together, all of these initiatives are improving service quality, speed and scalability and will ultimately create a more cost-efficient organization. Behind the scenes, we are also using AI to accelerate development and productivity across our engineering teams as well as to streamline criminal records workflows with a disciplined governance approach. Additionally, we're deploying Agentic AI in targeted proof of concept and pilots to drive faster innovation. Internally and externally, AI is strengthening our differentiation, improving efficiency and scalability and supporting long-term growth across our business. Importantly, that differentiation is translating into strong go-to-market momentum. Our sales teams continue to deliver as demonstrated by our 17 enterprise bookings in the first quarter, each deal with $500,000 or more of expected annual contract value. These wins, along with the continued strength and increase in our late-stage pipeline are some of the many reasons we have confidence in our ability to continue generating new logo and upsell, cross-sell revenue and help support our outlook for the year. Our diversified vertical strategy remains a key driver of our sustained growth and together with our sales engine, helped to deliver strong results in the quarter. In Q1, on a year-over-year basis, we saw continued growth acceleration in retail and e-commerce, driven by our large wins from 2025 and continued go-to-market momentum. Transportation and logistics also saw growth in Q1, driven by sustained base volumes and increased focus on compliance and risk mitigation in the industry. In our gig economy vertical, we saw strong labor market demand reinforced by the rise of job stacking, as Scott just described. Health care also grew modestly in Q1 as a result of strong new upsell and cross-sell, offsetting some remaining base softness that vertical navigates and challenging funding landscape. Business, professional and financial services verticals experienced some pressure in the first quarter but did not meaningfully inhibit our overall performance. Our international business for Q1 continued to sustain strong year-over-year revenue growth with particular strength in EMEA, giving us confidence in our prospects for future further integration with international expansion. Now turning to Slide 8 to discuss some of our exciting recent announcements and events. In March, we released our 2026 Global Workforce Trends Report based on insights by more than 5,000 CHROs, HR leaders and job seekers across 9 industries and 5 global regions and conducted in partnership with a third party. The report highlights that risk mitigation is now a top hiring priority as AI drives both innovation and new human capital vulnerabilities. Employers are prioritizing stronger, streamlined and more secure screening and identity verification across the employee life cycle. Additionally, fraud risk is rising, particularly due to the impact of AI, with 89% of HR leaders planning to add more screening and identity verification solutions over the next 2 years to help mitigate risks like this. On top of this, the importance of identity is clear, with 76% of hiring professionals reporting they have experienced falsified employment details. AI is accelerating changes in hiring dynamics, while raising the bar for identity trust, driving greater adoption of advanced verification and AI-enabled tools. In this environment, risk mitigation and speed have become dual mandates, prompting increased automation to improve efficiency without sacrificing security. At the same time, global and more flexible workforces are adding complexity to company screening strategies with over 60% of employers seeing growth in candidates with multi-country or multi-location work histories, driving demand for streamlined consolidated screening solutions. These trends reinforce our growth outlook and underscore First Advantage's role as a trusted partner, delivering the technology, automation and insights employers need to manage risk globally and build trust in a changing world. We also recently held our 10th Annual Collaborate User Conference in Florida, our largest ever event, welcoming a record number of attendees, including both customers and prospects. Collaborate continues to be an opportunity for strategic engagement, driving deeper product education and adoption, enabling peer benchmarking and providing insights into the HR and hiring trends shaping our customers' priorities. The event also delivers tangible pipeline contribution, supporting both potential new logos and deeper engagement with existing customers. This year, our customers shared how our proprietary data, global scale and AI-enabled technology are helping them manage rising complexity and risk across the entire employee life cycle, supporting both retention and expansion opportunities. The strong engagement and feedback coming out of the event reinforces our competitive differentiation and left both our customers and teams energized about what's next for First Advantage. And with that, I'll turn the call over to Steven.

Thank you, Joelle, and good morning, everyone. I'll start with first quarter results on Slide 9. Our first quarter revenues were up 8.6% year-over-year, coming in at $385 million, marking our fourth consecutive quarter of positive year-over-year revenue growth. Our go-to-market success exceeded our long-term growth algorithm targets as the combined contribution of new logo, upsell and cross-sell revenues delivered growth of 12% in the quarter. Our retention remained extremely high at 97%. Base performance was flat in Q1, continuing to improve on par with how we had forecast the first quarter of this year. January and February order volumes reflected trends generally consistent with what we had saw in Q4, followed by stronger-than-anticipated momentum in March, which drove our outperformance versus our expectations for the quarter. We saw this trend continue into early April as well. Adjusted EBITDA for the first quarter was $105 million, up 14% year-over-year. Our adjusted EBITDA margin of 27.3% represents an improvement of 130 basis points versus the prior year quarter. Year-over-year margin expansion was driven by strong execution on synergies, cost discipline and favorable mix versus expectations in the quarter, particularly in March. Our adjusted diluted EPS was $0.26, a 53% increase year-over-year. The benefits of our greater scale, synergy realization, expense and capital management and lower interest expense as a result of our debt repricing and voluntary debt payments to date have supported our per share earnings growth. We have continued to action cost synergies from our Sterling acquisition, reflecting our disciplined execution and strong integration progress. As of quarter end, we have actioned $58 million in run rate acquisition synergies, moving closer to our total synergy goal. Additionally, we have realized $47 million of aggregate synergies over the last 12 months. Overall, our exceptional results were enabled by our go-to-market execution, continued focus on delivering synergies, our disciplined approach to cost management and the scalable nature of our business. Now turning to cash flow, net leverage and capital allocation on Slide 11. During the quarter, we generated operating cash flows of $49.4 million, a substantial increase of $30 million or 154% on a year-over-year basis. This impressive performance was driven by the larger scale of our business, the curtailment of acquisition-related costs and our overall focus on cash flow despite Q1 having some larger working capital outflows. Our cash balance at March 31, 2026, was $226 million. Our synergized adjusted EBITDA net leverage ratio at quarter end was 3.9x and represents a full half turn decrease from October 2024 when we have closed the Sterling acquisition. Additionally, as Scott mentioned, we are executing on our balanced capital allocation strategy. First, during the quarter, we repurchased $19.5 million of our share as part of the $100 million share repurchase authorization that we announced in February. Our repurchases through May 1 totaled $33.3 million, leaving approximately $67 million remaining in our authorization. Over the coming quarters, we expect to continue to opportunistically buy back shares to maximize value creation for our shareholders. Second, continuing our commitment to disciplined deleveraging at the end of February, we prepaid $25 million of debt and subsequent to the end of Q1 in May, we made an additional voluntary prepayment of $25 million. This represents another quarter of voluntary debt reduction, extending our track record of quarterly prepayments since the second quarter of 2025 and brings our total debt repayments to $120.5 million since closing on the Sterling acquisition. Moving to Slide 12 and our 2026 guidance. Today, we are reaffirming our previously announced full year guidance, supported by our exceptional performance in Q1 and our macro outlook that the labor market we broadly serve will continue to be relatively flat as we saw exiting 2025, while balancing the possible impact of current macro uncertainty. With strong rollover from upsell, cross-sell and new logo and our go-to-market growth initiatives driving second half momentum, we expect revenue growth rates in the mid- to high single digits in Q2 and Q3 and then slightly lower in Q4 due to the go-to-market timing dynamics described last quarter. We continue to expect that base growth will be modestly negative for the year between 0% and negative 2%, though below this range in Q4 as revenue smooths out to a more normalized quarterly distribution compared to last year as we lap Q4 go-lives. As revenue scales up seasonally, we continue to expect adjusted EBITDA margins to improve meaningfully in Q2 towards 28% before reaching around 29% in the second half of the year. Similarly, for adjusted diluted EPS, we continue to expect meaningful year-over-year expansion increasing to the high $0.20 per share range in Q2, then improving to the mid-$0.30 range in both Q3 and Q4. We have provided assumptions to our guidance in the appendix of the presentation. With that, let me turn it back to Scott for closing remarks before we open the line for your questions.

Thank you, Steven. In closing, we delivered exceptional results in the quarter, and we expect the strong execution momentum to continue throughout the remainder of 2026. Looking ahead, as a clear leader in our space, we remain focused on winning by delivering best-in-class solutions for our customers. We remain confident in our ability to achieve consistently healthy results and are progressing well towards the 2028 financial targets we established during our Investor Day back in May of 2025. I would like to thank the First Advantage team for your continued dedication to supporting our customers. With that we will open the line for questions.

[Operator Instructions] We'll go first this morning to Shlomo Rosenbaum with Stifel.

Scott, could you talk a little bit about which areas picked up in March? Like what happened that led to the outperformance in revenue? And maybe a little bit more detail on the mix impacting margins? And was this something that was an anomaly? Or do you feel like there's some part of the economy or some kind of area within your client base that's more sustainably improving?

Yes. Thanks, Shlomo. So it's very interesting. As Steven mentioned, think of January and February as sort of like in line with planned month and then March was a blowout month. And the nice thing about it being a blowout month is when we analyze where all the order volumes were coming from, it was really coming from everywhere. It wasn't like a single thing or 1 or 2 things that drove it. There was really nice growth across majority of verticals and geographies. And so -- and as Steven also alluded to, we're continuing to see that nice momentum all through April as well. So we just -- it's not one thing to point to. It's just -- I think it's just a really healthy sign as to where the business is potentially going.

And then, Shlomo, on the margin front, right, when you have broad-based growth, we kind of have a little bit more of the return to normalized margins. If you recall, Q4 growth was heavily factored towards a couple of those major go-to-market wins, which was a little bit more with the transportation space and some health care services. We had a much more normalized distribution just because as you saw in our results, base is now 0, just on the positive side of 0. So when you have those positive momentum and it's broad-based, it's just a more normalized historical distribution of revenue, which helped us see some of that upside in margins, and you saw that flow not just at the gross margin line item, but that's all the way down to EBITDA and EPS as well.

And then why are you continuing to expect base growth to be 0 to negative 2% where we've seen consistent improvement in that metric over the last 4 quarters? Like what there anything -- is this kind of just a posture because of what's going on in macro? Or is there something that's sticking out to you that's really saying, hey, let's really account for something that might go wrong over here? Maybe just give us a little bit more into how you're thinking about that.

I'm sorry, you kind of answered it, Shlomo. It's certainly a conservative approach, and it's more of a posture to what's going on in the geopolitical and macro environment. Obviously, we're feeling very good about the business and our macro interpretations don't necessarily align with what you see in the media. I mean, if you look at quits, openings, hires, unemployment, it's all flat across the board. And that's a great sign for us, right? And so we're just kind of taking that into our base assumptions, flat, flat, flat, maybe a little bit negative here and there, a little bit positive here and there, but generally taking a flat approach to base until there's a little bit more clarity on the macro.

We'll go next now to Ashish Sabadra with RBC.

You talked about digital identity being like incorporated into almost 1/4 of your new contracts. I was wondering how important was that along with your AI capabilities in driving that strong 17 enterprise bookings in the first quarter?

Yes. I'll let Joelle jump in here as well, Ashish. But we are -- I think I mentioned this in the last quarter call, we are actually -- I mean, Digital Identity or let's call it what it is, identity fraud in recruitment is really at an epidemic level. It's hard to have a customer conversation with somebody that doesn't have a live example of where they encountered fraud. It could be simple AI fraud in documents, meaning resumes and work history and things like that or it could actually be deep fake AI fraud in a video interview. We're seeing it all across the board. So we talked about last quarter about digital identity being really the tip of the spear for all our products and platform. So we tend to -- the conversations are tending now to lead with identity. And this -- I would suggest you view digital identity more as like a package density upsell than a stand-alone product/revenue driver, even though it can be sold as a stand-alone product, we're typically seeing it as a bundled offering. So they want to lead with digital identity, but obviously do the other checks as well. And the beauty of our platform is it's fully integrated. It's a seamless customer experience. It's a seamless user experience, and it's a fully integrated platform, so they can capture all the data and make sure all the high-quality checks are being done with the compliance on it. But it is the hottest topic in our industry right now. And I'll let Joelle give you a few more comments and a little more color as well.

Yes. Thanks, Scott. Yes, Ashish, we're seeing Digital Identity as standard really in nearly every deal we quote in every single industry and every customer segment. It's really -- it's showing up as both direct revenue as well as an enabler of our large wins. And so the 25% that we talked about in Q1 is a marker to show just how quickly and how much they're adding kind of to that package density, as Scott talked about.

And maybe just a follow-up question on that strong enterprise bookings in the quarter, 17 new clients -- 17 clients. Can you provide any color on where the strength is coming from? Is that particular verticals, geographies? Any incremental color on that front?

Yes, Ashish. So this is -- First Advantage has been a story of consistency for years and years and years. And we the reason I say that is the 17 wins really came across all the verticals and all the geographies. It's the same as it was in Q4, Q3, Q2, Q1 going back. So we obviously had really good performance from upsell, cross-sell and new logo. These are -- we're at really nice numbers there. But what really makes us the happiest about that is the fact that it's really across the verticals and across the geographies and not being driven by a single vertical or a single geography. We're getting really great growth across the entire spectrum of verticals, products and geographies.

We'll go next now to Andrew Steinerman with JPMorgan.

This one might not be possible, but I was wondering, as we think about pre-hiring identity services as part of a bundle, are you able to quantify? Do you track how often you feel like you're winning background check contracts because of the inclusion of your identity services?

Andrew, I think it's hard to quantify that because we don't know the intricacies of a competitive deal, like what are our competitors pitching versus us, why the client chose us versus someone else. And we certainly try to ask those questions, and we get it anecdotally, but we can't quantify it. I would just say the way we look at it is our pipeline is growing and is at an historic high level. Our win rates are up. And I think the other way to look at it also is on the retention side. So as you've noticed, our retention keeps improving and now we're -- we've leveled out at 97%, which is a number we're very happy with. But I think digital identity has a lot to do with that as well because it's extremely sticky. And by that, I mean, when you're doing digital identity, we're starting -- first of all, it gives you great stickiness. But we're also starting to see customers do it more than once in the hiring, recruiting, onboarding life cycle. So the easy way to think of digital identity is in recruiting. I'm recruiting somebody, and I'm using our digital identity product to make sure it's not a deepfake. So it goes beyond that. We're starting to get a lot more maturity in our customers' buying where they're envisioning how they can try to detect and prevent fraud throughout the entire cycle. So you can do it digital identity during recruiting you can do it during background check to make sure the same person you were interviewing is the same person you're running a background check on. You can then do it during onboarding, meaning you can do it during the I-9 process. So the same person that's filling out the I-9 is the same person that you did a background check on is the same person you recruited. And then you can do it on first day of work as well. So the person we just recruited background checks, onboarded actually, is it the same person that showed up for the job day 1? And we literally have customers that have told us that, that's not the case in some of these things. The same person they're interviewing isn't the same person that fills out the I-9 isn't the same person that shows up for the job. So digital ID can provide that whole level of stickiness across those functional points. Again, hard to quantify what percentage of wins it gives us or increases it gives us. But I can tell you, retention is up, pipeline is the highest it's ever been and win rates are up. So we think we're doing the right thing by being at the forefront of identity fraud and being a leader in the space.

We go next now to Andrew Nicholas with William Blair.

I wanted to go back to the job stacking trend. Is that something that you saw specifically pick up in Q1 or that's accelerated over the past couple of quarters? Or is the commentary there simply to kind of reinforce the fact that that's an ongoing secular trend?

A good question and a little bit of both. So I'm going to take a little broader approach here, Andrew, because everybody is obviously influenced by what they read in the media. And there's headlines on the labor force, on the job market. But as we've discussed in previous quarters and previous earnings calls, it's not what we're seeing. So I'm going to talk to you about a couple of different things. So the first thing, as you know, we talk to our customers a lot. We're in front of our customers on a daily, weekly, monthly, quarterly basis. We've got executive sponsors talking to customers. We do QBRs. And as Joelle just mentioned, we just had our large user conference. I would tell you that, our customers are definitely neutral to positive on the job market. In my personal discussions with customers, I haven't had a single customer say that they're going to hire less people in '26 than they did in '25. In fact, they either say that they're going to hire the same or more. And -- so that's just pure numbers. But one thing is the generational shift we're seeing in this market. So by that, I mean, I don't think people are aware that millennials are now the highest percentage of workers in the job market. 36% of the job market is millennials. And Gen Z is not far behind in catching up. So as boomers retire and Gen X gets older, you're seeing the millennials and Gen Z. And then within the next 4 or 5 years, you're going to have Gen Alpha in the market as well. You're seeing them all approach work differently. They aren't approaching it the same way that previous generations have done it. So this is why job stacking has become so popular because even if they have a full-time job, a full-time traditional salaried job, a lot of these people are gig workers on the weekend. They want to make extra money. They've got time on their hand. They like to do it. And a lot of these workers are becoming job stackers instead of traditional. So instead of just a traditional salary job, they're taking multiple part-time jobs as contractors or part-time employees. And this doesn't necessarily just mean gig. It's across all industries. I mean, we're seeing hospitals hire more contractors than salary workers than they've ever done in the past. So you could be a part-time nurse at a hospital and be a gig worker on the weekend or do something else. So that's great for our industry because what -- the FCRA rules, which we keep bringing back to, don't forget that this is a highly regulated industry. The FCRA rules require that those have to be individually run background checks. You can't share a background check across companies. So those 2, 3, 4 jobs that, that person is working at, that's all 2, 3, 4 different background checks. This is great for our business, and this is a great trend. So we are keeping a very close eye on it, and we love the question because we think this next generation of worker is going to work this way maybe forever. It's just -- they just approach the workforce differently. So this is a really good trend for our business.

And then for a follow-up, just a separate topic. Just on pricing. Can you talk about price realization for First Advantage? And maybe more importantly, from my vantage point, anything that you're seeing from competitors on the pricing front that gives you pause or you see as an opportunity, whether it be as a part of the RFP process or anecdotally? Just trying to figure out, given your really strong retention and success as you combine with Sterling, just whether or not any of your competitors are being aggressive on price?

Steve, why don't you take the first part of that, and I'll take the second.

Yes. Andrew, I mean, long story short is it's still very, very stable pricing industry. And I think you're seeing that come through where we're not seeing any new real major trends one way or the other. And yet we're still being able to produce, as Scott mentioned on the previous question, very consistent 17 enterprise bookings, tons of bookings, obviously below the enterprise level and driving the 12% new logo and upsell, cross-sell growth and good outlook there. So no real new trends. It's been very stable for a while and it continues to be. I mean -- so it's -- to us, it's kind of business as usual this year more so than anything.

Andrew, on the second part, I think what we are seeing, and this is a trend that we've talked to you probably for the last year or so, and it's good to bring it up again because it hasn't changed. Companies are still looking for cost savings. So you see our great up-sell, cross-sell and new logo win rates. A lot of that's coming from digital ID. A lot of it is coming from just really good selling and package density. But another thing we're benefiting from is one RFP trend is really the consolidation of vendors. And this has actually led to a lot of our global wins. So you've seen international is 8 straight quarters of growth. A lot of that has come from U.S.-based RFPs where we're winning their global business away from local players in other markets. So that's driving a lot of that nice international growth. And through the consolidation of partners, we're getting higher share of wallet, obviously. And in return for that higher share of wallet, we're keeping pricing stable, as Steven mentioned. So it's just not leading to discounts. It's leading more toward consolidation with us and sort of a guarantee of stable pricing for the contract terms, even though we have CPI increases and things like that. But it's really a nice trend that's favoring our growth is that we still see a little bit of consolidation of vendors. Some of that is procurement led and is dealing with just controlling costs, but other it is risk-led. As Joelle mentioned, our trends report has showed risk is the #1 topic for our buyers. Our risk mitigation is the #1 topic for our buyers right now. And when they see midsized players in our space or even mom-and-pops our space, they get nervous. And so the derisking factor for them is to consolidate with a company like First Advantage.

We go next now to Jeff Silber with BMO Capital Markets.

Post the very strong results in the first quarter, you still maintained your guidance for the year. Are you being overly conservative? And maybe you can talk about the puts and takes to hit the high end and the low end of the guidance.

Yes, Steven, do you want to?

Yes, Jeff, I wouldn't say we're being overly conservative. I mean, obviously, really proud of the Q1 results. Great to see April off to a good start. But obviously, there's a healthy amount of volatility in the world, whether it's what's going on in Iran, which isn't a real direct impact to us, but we're certainly mindful of it how it may impact the APAC and India markets later in the year. Obviously, as that trickles into the U.S. consumer for our peak. So I think it's -- certainly, it's derisked the second half for us a little bit from our guidance standpoint, but I don't view it as necessarily overly conservative. Obviously, we'll -- having a good 3 or 4 months in the belt obviously helps for the full year, but still a long way to go and a lot of things happening in the world these days.

Great. And Steve, maybe another one for you on capital allocation. You're both repaying your debt and buying back stock. Can you talk about the issues behind those decisions, whether to pick one or the other or both?

Well, certainly, as I shared in the remarks, we're obviously focused on if we can generate opportunistic shareholder value, we will. So our focus is if the stock price is not reacting the way we would expect it to or hope it will, we can obviously lever back and forth. And I think the great part of where we are in our life cycle is we've got the cash flow and flexibility to be able to do both and then just flex up or down based on the market dynamics. So obviously, we've repurchased $30-plus million already, depending on how the markets play out, we can obviously tailor that up or down. And then obviously, we'll counteract that with how we pace our debt payments. But over the last, what, 4 months, we paid down $50 million of debt and bought over $30 million of share. That's very balanced in our point of view.

We'll go next now to Stephanie Moore with Jefferies.

Just one for me here. I appreciate all the color that you provide in terms of the investments that you've made on your tech stack and what you're doing from an AI standpoint. I wanted to maybe get your opinion in terms of what this can mean from a competitive standpoint. I think there's kind of a myopic view on just the threat of AI, but I actually think taking a glass half full view, it would, in my mind, maybe point to continued consolidation in your space and in theory, your ability to continue to take share just given your size and really the years of investments that have been made. So maybe just as you think about the ability for AI to allow you to take share, kind of push out some smaller competitors and ultimately, what you view as what could be the competitive landscape within your space because of AI?

Yes. I'm going to let Joelle answer this because she's leading that effort for us. But I would say we're obviously very happy where we are with the tech stack and with our size and scale. We have a very large engineering team working on what you just talked about. We've got -- we've been doing AI for literally 5 years. We've got a number of really neat products already out there. We've got a lot of neat products in flight. We're transforming the tech stack with AI and anywhere and everywhere is actually our mission to doing it. But I'll turn it over to Joelle to give you a little bit more specifics.

Yes, absolutely. Thanks, Scott. Stephanie, yes. So we are definitely seeing interest, obviously, across new AI build work on the platform because of the changing landscape that's happening with all of the trends that we kind of discussed. So there's an acceleration of kind of new build work that has to happen on there. But which we're doing and AI is helping us, obviously. But the thing with competitors, there's a lot still out there. There's a lot of mid-market players. There's a lot of small mom-and-pops. And so whereas we feel really good about the decisions we've made about how we've integrated the digital identity solution into the platform, all of the investments that we've made to make it nimble and to really improve the applicant experience, we definitely feel like we're in a great spot there's still a lot to go get. There's still a lot out there, and there's definitely a lot of competition still out there trying to make names for themselves. We feel really good about our position, and we think we are well positioned to be able to do this with the investments that we have made and will continue to make. But that's kind of the long and short of it. There's still, unfortunately, a lot of folks out there still.

We'll go next now to Scott Wurtzel with Wolfe.

I guess first one would be just if you can talk a little bit more about what exactly you've been accelerating in the FA 5.0 strategy maybe relative to your original plan? And are there any potential kind of near, medium-term margin benefits as a result of that acceleration?

Yes. So Scott, when we created the FA 5.0 strategy, digital ID was really in its infancy. So one of the major accelerations on the strategy is everything we've talked about on identity fraud. We're pouring everything we've got into it because this is the #1 issue for our customers, and they see us as a thought leader. They love our technology. We're helping them solve real-life issues. We've got documented success stories where we've caught fake people trying to get jobs. So it's a real good success story, and that's definitely a piece of the strategy that we're accelerating around the tech stack. The other piece is the AI piece of it, which Joelle talked about. There's a lot of really neat -- if you think about AI and our tech platform, there's really 2 buckets. There's what I call the visible bucket, which is the stuff we're doing with the better candidate experience. There's stuff we're doing with AI chat. There's all that visible things that we can use AI to make things smoother on the front end. But there's also a lot of what I call invisible AI on the back end of our business where we're using AI to just help improve quality, to help us with determining what data sources we go to, to pull what data to make things more efficient, that type of stuff. So I call that part of it our tech stack to plumbing. There's a lot of AI that's going on in our plumbing that's not visible to our customers, but they can feel it because it's higher quality, it's faster turnaround times. It's all the things that drive higher retention and sales. And the other -- and then we go back to like one of the core things in the business and what we've always felt was the secret sauce of First Advantage, which is our vertical focus. So we are accelerating deeper and deeper into the verticals that we're in. There's a lot of sub verticals that are still have white space for us and are untapped. We just feel that the vertical message has always been the best message in our business. So we're investing in deeper products and more products in those verticals and larger sales teams in those verticals. We're not necessarily expanding into new verticals. We're just going deeper into the ones we're in.

Got it. That makes sense. And then just a quick follow-up just on the go-to-market side. In the context of the enterprise bookings that you've had this quarter and the pipeline that you kind of have going forward, I mean, any color you can give just on sort of the split in that pipeline and bookings between new logos versus upsell, cross-sell opportunities?

Yes. I don't like to -- I'm sorry, I just -- I don't like to give too much detail on the pipeline because I know competitors are listening. So only thing I would say about the pipeline, again, is that it's the highest it's ever been. Our late-stage pipeline is the largest it's ever been. We're feeling very good about not only the size of the pipeline, but I made this comment in the actual script that we just feel our sales engine is humming. And there's a lot of things that have come together to make that happen. Obviously, this is a product-led sale. So having the right products, and we spent -- we're spending lots of money, obviously, on products, having the vertically focused sales engine. But we've also invested a lot in marketing this year. You might have noticed that we've rebranded the company to trust in a changing world. That's because of the identity fraud that's so prevalent in our industry that is really resonating with customers. So it's a combination of the marketing, the vertically led sales, the vertically led product investments that are driving up-sell, cross-sell, new logo and just what I would call record numbers. But I don't really want to get down to how much is in one bucket versus another.

[Operator Instructions] We go next now to Kyle Peterson with Needham.

This is Ross Cole on for Kyle Peterson. So I wanted to dig a little bit more into a couple of the verticals that were talked about. First, within retail and e-commerce, it sounds like that continued growth acceleration is going to last through the remainder of 2026? Or is that going to kind of slow down a bit in the end of the year? And then also some of the pressure within the business and financial verticals, are you expecting that to continue going forward? Or do you see any maybe upside there?

Yes. So let's go back a little bit. We had a really good, what we call peak season in 2025. So this is where retail e-com and transportation really had really nice growth for us in Q3 and Q4 of last year. We're seeing retail and e-commerce continue to perform well. I'd say about a year ago, there was a little blip in retail due to the understanding of what's happening with tariffs, but that obviously has disappeared. So retail has been performing really well since then. I think the only issue that -- and I wouldn't call it an issue, it's a nice problem to have is that we've got a big grow over in Q4 in this space. We had a really large win last year in the late Q3 time frame. So the only thing that we see in retail e-com is the grow over from that really large win. Otherwise, we predict business to be very similar to 2025. So as retail and e-com hum, I think financial services is a little bit what I would call it pause mode. I think what financial services is trying to figure out is their back offices and what's going to happen with their back office. So when we talked about our verticals with our top verticals performing very well, BFSI, as we call it, is about 12% of our business. And I'd say, it's slightly negative, single-digit negative hiring right now. And I think that will probably remain for 2026 as they figure out what's going to happen with their back office how much will AI impact it, et cetera. So we do expect BingBiz or BFSI to remain either flat or negative for the rest of the year. But this is -- that was already factored into all of our guidance. So there's no change on expectations and numbers.

Thank you. And ladies and gentlemen, it appears we have no further questions in queue. Thank you all for joining us today and for your participation. This will conclude the First Advantage First Quarter 2026 Earnings Conference Call and Webcast. At this time, you may disconnect your line, and have a wonderful day. Goodbye, everyone.