Sterling Check reports Q1 adjusted EPS 19c, consensus 27c

Reports Q1 revenue $186M, consensus $181.01M. Josh Peirez, Sterling CEO, said, “In the first quarter, Sterling started off the year with solid year-over-year revenue growth of approximately 4% including strong organic revenue trends within the revenue drivers in our control. We were particularly pleased to report year-over-year growth of 11% from the combination of new business, up/cross-sell, and customer attrition, well ahead of our 7-8% combined long-term target from those drivers. Our unrelenting focus on product innovation, customer service, and technology excellence continues to resonate with prospective and existing clients, and we remain in execution mode following our exciting February announcement of a combination with First Advantage. We were also proud of our inorganic revenue trends in the quarter, with both A-Check and Vault contributing at healthy levels to our top line growth as we march ahead with the synergistic deal integrations. At the same time, the hiring market backdrop remains challenging and drove year-over-year base business revenue declines, a dynamic we expect to moderate over the course of the year. “These top line factors had a dampening effect on our profitability during the first quarter. Specifically, our margins were impacted year-over-year by lower-margin inorganic revenue growth, particularly the Vault deal. Margins were also affected by the mix of our organic revenue growth including base revenue declines within higher-margin verticals and up-sell activity in certain lower-margin product categories. We expect margins to improve over the course of the year as we anticipate realizing additional synergies from M&A and improvement in base business. We also remain focused on our cost optimization efforts and saw margin benefits this quarter from our continued efforts to build a more streamlined, efficient cost structure throughout Sterling that will result in improved operational flexibility, profitability, and cash generation.”