퍼스트 어드밴티지(FA) 2026년 3분기 실적 발표 콘퍼런스 콜: 가이던스 상향, 데이터다이버 인수

핵심 요약

• 퍼스트 어드밴티지의 2026년 3분기 매출은 4억 6,600만 달러로 전년 동기 대비 14% 증가했으며, 미주 지역 전반의 물량 증가, 대형 계약 수주, 연말 성수기 채용의 조기 시작에 힘입었다.
• 조정 EBITDA는 15% 증가한 1억 3,650만 달러를 기록했고, 조정 EBITDA 마진은 29.3%로 전분기 대비 70bp 상승했다. 조정 희석 EPS는 27% 늘어난 0.38달러였다.
• 신규 고객, 업셀 및 크로스셀 합산 매출은 12.5% 증가했다. 기본 성장률은 5%였고 고객 유지율은 96%를 유지했으며, 회사는 14건의 엔터프라이즈 계약(건당 예상 연간 계약 가치 최소 50만 달러)을 체결했다.
• 퍼스트 어드밴티지는 데이터다이버 테크놀로지스를 1억 2,500만 달러에 인수했다. 이 사업 부문은 약 2,000만 달러의 연간 매출을 기여하며, 회사의 자체 범죄 및 법원 기록 데이터 역량을 확장한다.
• 경영진은 모든 주요 지표에서 2026년 연간 가이던스를 상향 조정했다. 연간 매출은 현재 17억 2,000만~17억 4,500만 달러, 조정 희석 EPS는 1.28~1.33달러로 예상된다.
• 경영진은 현재의 수요 추세가 수정된 가이던스 범위의 중간값을 상회하는 실적을 뒷받침할 것이라고 밝혔으나, 지정학적·거시경제적 및 계절적 불확실성을 고려해 넓은 범위를 유지했다고 설명했다.

주요 재무 실적

영업 레버리지는 매출 성장에도 불구하고 영업·마케팅 및 일반관리비(G&A)를 전년 동기 수준으로 유지한 덕분에 개선되었다. 경영진은 또한 데이터 비용 절감, 스마트 허브 알고리즘 업데이트, 스털링 인수 시너지 및 비용 규율을 주요 요인으로 꼽았다.

사업 및 운영 실적

미주 지역의 성장은 전반적으로 나타났다. 운송·물류, 소매 및 이커머스 부문은 견조한 소비 활동과 예상보다 빠른 연말 성수기 채용의 수혜를 입었다. 산업재 및 제조업도 항공우주·방산 관련 활동 증가에 힘입어 견조한 실적을 보였다. 일반 인력 파견, 헬스케어, TMT, 호텔·레저 및 긱 이코노미 부문도 긍정적인 모멘텀을 이어갔다.

해외 사업 비중은 분기 매출의 약 11%였다. 해외 매출은 전년 동기 대비 4% 감소해 9개 분기 연속 성장세를 마감했다. APAC 및 인도는 중동 지역 혼란과 관련 거시경제 불확실성의 영향을 받았으나, EMEA는 상대적으로 안정적인 모습을 보였다.

퍼스트 어드밴티지의 엔터프라이즈 영업팀은 예상 연간 가치가 최소 50만 달러인 계약 14건을 확보했다. 경영진은 2분기의 20건에서 감소한 주된 원인으로 시점 차이와 더 크고 복잡한 다중 제품 계약의 증가를 꼽았다. 그러면서 수주율은 여전히 견조하며 후기 단계 파이프라인도 계속 확장되고 있다고 밝혔다.

신원 사기 탐지는 여전히 핵심 제품 및 영업 테마로 유지되었다. 회사는 신원 사기 조사 결과를 채용 배경 검증 보고서에 반영할 수 있는 미 공정신용보고법(FCRA) 준수 디지털 신원 확인 제품과 관련해 ID.me와 독점 파트너십을 체결했다고 발표했다.

퍼스트 어드밴티지는 또한 범죄 기록 조회를 보다 빠르고 효율적으로 처리할 방안을 찾기 위해 자체 기록, 공개 출처, 제3자 데이터를 평가하는 자체 개발 AI 라우팅 플랫폼인 '크리미널 스마트 허브(Criminal Smart Hub)'를 출시했다.

이번 1억 2,500만 달러 규모의 데이터다이버 인수를 통해 독점 데이터, 자동화 기술 및 숙련된 데이터 팀을 확보하게 되었다. 경영진에 따르면 데이터다이버의 연간 매출은 약 2,000만 달러이며 조정 EBITDA 마진은 퍼스트 어드밴티지의 기존 수익성 수준에 부합한다. 이번 인수는 자동화 처리 범위 확대, 소요 시간 단축, 원천 데이터에 대한 직접 접근성 강화를 목표로 한다.

경영진 가이던스

중간값 기준 가이던스는 대략 10%의 매출 성장, 12%의 조정 EBITDA 성장 및 26%의 조정 희석 EPS 성장(전년 대비)을 의미한다.

경영진은 10월까지 이어진 3분기 수요 추세에 힘입어 4분기 기본 성장률이 중립에서 소폭 플러스를 기록할 것으로 예상했다. 4분기 조정 EBITDA 마진은 연초 이후 누적 수준인 28%대 중반 부근을 유지할 것으로 예상되며, 조정 희석 EPS는 0.30달러대 초반으로 전망된다.

수정된 전망치에는 2026년 마지막 2개월 동안의 데이터다이버 기여분이 소폭만 반영되었다. 경영진은 회사가 2025년 4분기에 12% 성장했고, 2025년에 개시된 대형 계약들이 완전히 연간화됨에 따라 4분기 전년 동기 대비 비교 기준이 더 까다로워졌다고 언급했다.

리스크 및 주요 점검 사항

• 경영진은 4분기 전망을 설정하면서 지속적인 지정학적·거시경제적 불확실성을 언급했다.
• 계절적 채용 성수기 지속 기간이 일정하지 않아 11월과 12월 물량에 대한 불확실성이 발생하고 있다.
• 해외 실적은 중동 지역 혼란과 아시아태평양(APAC) 및 인도에 영향을 미치는 전반적인 불확실성으로 인해 단기적인 압박에 직면해 있다.
• 4분기 성장은 전년 동기의 견조한 실적과 비교 평가되는 데다, 2025년 주요 고객사 개시 계약들이 이제 완전히 연간화되었다.
• 규모가 더 크고 다중 제품으로 구성된 엔터프라이즈 계약은 계약 체결, 통합 및 구현에 더 긴 기간이 소요될 수 있다.

애널리스트 Q&A 주요 내용

경영진은 스털링 인수가 사실상 완료되었으며, 2026년을 시너지 목표 범위의 상단에 근접하거나 상단 수준으로 마무리할 것으로 예상한다고 밝혔다. 남아 있는 조치는 주로 매출원가 워크플로 및 처리 관행과 관련되어 있다.

데이터다이버에 대해 경영진은 이번 거래가 자체 개발을 대체하기보다는 '자체 구축과 외부 매수(build and buy)' 병행 전략이라고 설명했다. 인수된 플랫폼은 퍼스트 어드밴티지의 기존 데이터를 보완하고, 자동화된 관할 구역 범위를 넓히며, 향후 제품군을 지원한다. 인수 대금은 주로 대차대조표상의 현금으로 조달되었으며, 일부는 리볼빙 대출을 활용했다. 경영진은 단기 잉여현금흐름으로 인수 차입금을 상환할 계획이며 2028년 레버리지 목표는 변함이 없다고 덧붙였다.

경영진은 AI가 다양한 제품과 워크플로에 내장되어 있어 AI 단독 매출만 분리하기는 어렵다고 밝혔다. 그럼에도 AI 역량이 고객 만족도, 유지율, 수주율, 처리 효율성 및 마진 실적 개선으로 이어지고 있다고 설명했다.

업셀 및 크로스셀 성장은 신원 사기 탐지, 모니터링, 심층 검증에 대한 수요에 의해 지속적으로 견인되고 있다. 경영진은 신원 사기 탐지를 초기 단계의 다년간에 걸친 기회로 규정했다. 긱 이코노미 분야에서는 복수 직업 종사(job stacking), 반복적인 검증 발생, 플랫폼 신뢰 및 안전에 대한 관심 증가가 수요를 뒷받침하고 있다.

실적 발표 콘퍼런스콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good morning, everyone. My name is Beau, and I will be your conference operator for today. I would like to welcome you to the First Advantage Third Quarter 2026 Earnings Conference Call and Webcast. Hosting the call today from First Advantage is Stephanie Gorman, Vice President of Investor Relations.

[Operator Instructions]

And please note today's event is being recorded. It is now my pleasure to turn the call over to Stephanie Gorman. Please go ahead, ma'am.

Stephanie Gorman

Thank you, Beau. Good morning, everyone, and welcome to First Advantage's third quarter 2026 earnings call. In the Investor 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. These 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 third 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.

Thank you. I am 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. So now, I'm going to turn the call over to Scott.

Scott Staples

Thank you, Stephanie, and good morning, everyone. Thank you for joining our call. Today, we have 4 key messages. First, we delivered yet another quarter of outstanding results in the third quarter with revenue growth of 14% year-over-year, adjusted EBITDA margins of 29.3%, and year-over-year adjusted diluted EPS growth of 27%. We continue to demonstrate consistent go-to-market performance, the strength of our leading AI-driven technology platform and proprietary data, sustained operating efficiency, and the durability of our diverse enterprise customer base and vertical mix.

Second, we are making strong progress on our FA 5.0 growth strategy. Our focus on product innovation, platform capabilities, AI and automation, and go-to-market execution is translating into tangible results. Just a few days ago, we were very proud to have celebrated the 2-year anniversary of closing the Sterling acquisition, which has been a critical element supporting and accelerating our growth.

Third, our strong cash flow generation continues to provide flexibility to execute our balanced and disciplined capital allocation strategy. As we have previously mentioned, we are constantly evaluating opportunities to create shareholder value and remain focused on deploying capital where it can have the greatest impact. Along with our earnings release today, we are excited to announce that we have further invested in our proprietary data and technology strategy with the tuck-in acquisition of DataDiver Technologies, a data platform leveraging AI and automation, which Joelle and I will discuss shortly.

And finally, we are again raising our full-year 2026 guidance across all key metrics to reflect our strong year-to-date performance, continuing go-to-market success, stable labor market trends, and our confidence in our growth outlook for the remainder of the year. In fact, the low end of our revised full-year guidance ranges now exceeds the high end of our previous guidance ranges across every metric.

Now, turning to Slide 5. We delivered outstanding results in the third quarter across the board, continuing our strong performance from the second quarter. Our results exceeded our stated expectations, benefiting from sustained broad-based momentum across our Americas business, continued contribution from our recent large contract wins, peak holiday hiring progressing earlier than expected, and modest carryover from Q2 customer initiatives. We are also encouraged by the healthy pace of order volumes in October and the continued stability within the broader hiring environment.

We believe the strengths of our business, including our focus on high-volume enterprise customers, diverse vertical mix, global footprint, and balance across blue-collar and white-collar hiring continue to position us well in the market. These attributes provide stability and reinforce our confidence in delivering durable growth across a variety of macro environments. In this rapidly evolving environment, our customers continue to place a high value on our AI-driven product innovation, leadership in identity fraud detection, and our combination of regulatory expertise, risk management, and focus on compliance. This enables First Advantage to deliver high-quality, highly automated, and high-volume screening globally at scale.

One recent milestone I would like to highlight is the 2-year anniversary of closing the Sterling acquisition on October 31. We are executing well and realizing benefits well ahead of our original expectations. Today, we are a larger, stronger, and more diversified company, offering customers a broader portfolio of best-of-breed technologies and products, backed by greater scale and innovation capabilities. As a result, we have strengthened our market position, expanded our growth opportunities, and enhanced our ability to create long-term value for shareholders. With Sterling, we demonstrated our capability and discipline in executing our M&A strategy, integrating the business and delivering growth and synergies. As we announced today, we are applying our M&A playbook again with the tuck-in acquisition of DataDiver.

Turning to Slide 6. DataDiver is a company we know very well and have worked with for a number of years as a key third-party data provider to First Advantage. Over the past couple of decades, DataDiver has built a proprietary data platform powered by an automated fulfillment engine that collects, aggregates, retains, and delivers high-volume criminal and court records. As a reminder, First Advantage has been a product innovator in this space for years, investing in data and automation such as our national criminal records file and our verified proprietary databases. DataDiver builds on that foundation by adding incremental proprietary data, proven technology, and an experienced data team, creating a unique opportunity to accelerate our data and technology strategy with over 1 billion data records already in our proprietary databases.

The combination will expand our existing databases, grow our automated fulfillment coverage across U.S. jurisdictions, enhance our existing solutions, and accelerate development of new capabilities. The DataDiver acquisition also adds resources and capabilities that support faster turnaround times, high-quality results for our customers, and further differentiate First Advantage in the market. The acquisition is centered on DataDiver's proprietary data assets and technology and also includes a small employment background screening component.

The acquisition adds annual revenues of approximately $20 million and adjusted EBITDA margins in line with our existing profile, with upside synergy opportunities. Overall, this $125 million acquisition represents an important investment in our strategic data asset. With that, I will now turn the call over to Joelle, our President, who will share more on our outstanding third quarter, including our go-to-market execution, vertical performance, product innovation, and further details on our acquisition of DataDiver.

Joelle Smith

Thank you, Scott, and good morning, everyone. Turning to Slide 8 and an update on our go-to-market performance and the underlying dynamics behind our outstanding results this quarter. Our robust 14% year-over-year revenue growth for Q3 exceeded our previously stated expectations and our long-term growth algorithm target. Combined upsell, cross-sell, and new logo revenues again delivered robust growth, achieving 12.5% growth in the quarter. We continue to benefit from the large go-lives from the end of 2025 that we have discussed on previous calls, as well as the contribution from the many other enterprise deals we have won in prior quarters.

We had excellent base growth in the quarter, coming in at 5%. Underlying base trends remained strong and broad-based, and we saw some continuing benefits from customer initiatives started during the second quarter, which contributed a little more than 1% to this quarter's base growth. Retention remains solid at 96%, in line with our long-term model. Our sales teams delivered a solid 14 enterprise bookings in Q3, with each deal having an expected annual contract value of at least $500,000. These wins, combined with the continued strength and expansion of our late-stage pipeline, reinforce our confidence in the durability of our new logo and upsell, cross-sell execution and support our positive outlook for the fourth quarter.

Turning to our verticals on Slide 9, we yet again outperformed broader labor market headlines and data trends in Q3, reflecting our strong market position and our strategic execution. Throughout the quarter, the tones from our enterprise customers regarding their hiring plans remained neutral to positive, which you can see reflected in our Q3 base performance. Our balanced and resilient customer mix, focused on high-volume hires, and verticalized go-to-market strategy drove broad-based revenue growth across almost every vertical in our Americas business.

We saw sustained strength in transportation and logistics as well as retail and e-commerce. This was supported by ongoing healthy consumer activity driving labor demand, along with an earlier-than-expected start to the peak holiday season hiring toward the end of the quarter. We saw standout performance in industrials and manufacturing, resulting in increased screening activity for this vertical, driven by strong demand for their products and services and increased economic activity in aerospace and defense. We also saw positive momentum in general staffing, healthcare, TMT, hospitality, and the gig economy. As you can tell, the outstanding performance in the quarter was truly broad-based across most verticals.

Turning to our international business, which represented approximately 11% of our total sales in the quarter, Q3 revenues were down 4% year-over-year, following 9 consecutive quarters of growth, with performance in APAC and India having been impacted by disruptions in the Middle East and the related broader macroeconomic uncertainty. Our EMEA business performance remained more stable. Despite the near-term headwinds in certain countries, we continue to be a partner of choice for managing our multinational customers' expanded screening needs across geographies, and we remain confident in our long-term international opportunities.

Turning now to our product update, identity fraud remains a critical topic with our customers and prospects, with 45% of hiring professionals having experienced candidate identity misrepresentation, as reported in our 2026 Global Workforce Trends Report earlier this year. In fact, the subject continues to be the tip of the spear in our discussions as customers and prospects fight growing recruitment and onboarding fraud in the workplace. Our "Trust in a Changing World" message has landed right on point as we help our customers answer an increasingly important question: Are my candidates who they say they are?

As employers face growing risks from hiring fraud, synthetic identities, fraudulent or AI-generated documents, and other emerging threats, demand for identity fraud detection products, like our digital identity solution, continues to grow and drive meaningful differentiation in the market. We believe it is helping to expand our pipeline, improve win rates, and support retention as customers and prospects increasingly view fraud detection products as key components of a modern screening program. And we continue to use our good AI to fight the bad AI.

Building on that momentum, we recently announced an exclusive strategic partnership with ID.me to launch a purpose-built, FCRA-compliant digital identity verification product, specifically designed for making employment decisions. Historically, digital identity verification has been outside the scope of the Fair Credit Reporting Act, or FCRA, which is the federal framework that governs background screening. Our new product brings digital identity into the FCRA framework, allowing us to incorporate the identity fraud results into the background screening report.

This means customers can now make critical employment decisions based on the combined results of the digital identity verification and the traditional background screening report, enabling their screening program to be more comprehensive and compliant. Customers have told us that this increases both their willingness to adopt digital identity and expand its use within their screening programs. As the only large-scale background screener providing this level of compliance, it's a meaningful differentiator that can help support retention, strengthen our pipeline, and help us win new business.

Turning to Slide 10, our Smart Hub AI routing technology has been a game changer in our employment and education verification businesses. And now we are extending that same technology to how we source criminal records data. We have officially launched Criminal Smart Hub, which was developed entirely in-house by our data science and engineering team. Criminal Smart Hub uses proprietary AI to evaluate thousands of potential data sources to fulfill customer orders. In seconds, Criminal Smart Hub scans our proprietary criminal records, public data sources, and third-party data sources to intelligently identify the fastest, highest-quality, and most efficient way to fulfill the order.

The result is faster turnaround times and greater efficiency for our customers. We believe Criminal Smart Hub is another great example of our technology leadership in the industry, the power of our proprietary AI, the value of our proprietary data, and our continued commitment to delivering best-in-class products to our customers.

The value of technology like Criminal Smart Hub is amplified by the quality, breadth, and accessibility of the data it consumes. As we continue to invest in automation and AI-driven fulfillment, expanding our proprietary data assets remains a strategic priority. And that is why we are so excited to announce our acquisition of DataDiver. A meaningful benefit to our customers will be accelerated screening turnaround times, as expectations continue to shift from days to hours and increasingly toward near real-time results.

By expanding our data and fulfillment capabilities, we can deliver faster, more efficient screening outcomes for one of our highest-volume product lines, while enhancing our existing solutions and creating new opportunities for product innovation. Ownership of these proprietary data assets also gives us greater control over an important part of our fulfillment ecosystem, further enhancing our differentiation in the market. With that, I'll now turn the call over to Steven.

Steven Marks

Thank you, Joelle, and good morning, everyone. I'll start with our third quarter results on Slide 12. Our third quarter revenues were up an impressive 14% year-over-year, coming in at $466 million. This exceptional performance exceeded our stated expectations and our long-term growth algorithm target range. Results were driven by broad-based volume acceleration in our Americas business, an earlier-than-expected start to peak holiday season hiring, and the continuation of some customer initiatives from Q2, which alone contributed slightly more than 1% to base growth this quarter.

Adjusted EBITDA for the third quarter was $136.5 million, up 15% year-over-year. Our adjusted EBITDA margin of 29.3% came in above our stated expectations and reflects sequential quarterly improvement of 70 basis points, driven by our broad-based revenue growth and our strong operating leverage as we were able to keep sales and marketing and G&A flat year-over-year, even as revenue grew. Margins also benefited from data cost savings driven by the increased use of incremental data partners and algorithm updates to our Smart Hub for Verifications product, as well as our strong executional synergies and cost discipline, all while flexing to adapt to the product mix changes as a result of the large deals we have previously discussed.

Our adjusted diluted EPS was $0.38, a 27% increase year-over-year. Our per share earnings growth was supported by our overall performance in the quarter, year-to-date share buybacks, and synergy realization. Earnings growth also benefited from our disciplined expense and capital management and lower interest expense as a result of our voluntary debt repayment to date and our July 2025 debt repricing.

We have continued actioning cost synergies from our Sterling acquisition, reflecting our disciplined execution and strong integration process. At 2 years post-closing, we are proud to say that we have meaningfully exceeded our initial synergy thesis. By year end, when we formally conclude our integration process, we expect to finish near, if not at the top, of our synergy target range. We are also proud that we have achieved these synergies very thoughtfully, with essentially no impact on customer retention. Our product, technology, and customer service approach was received very favorably across our customer base and enabled us to achieve our goals.

Now, turning to cash flow, net leverage, and capital allocation on Slide 13. During the quarter, we generated operating cash flows of $63.8 million. Year-to-date, this brings our operating cash flows to $186.8 million, a substantial increase of $57.6 million, or 45% on a year-over-year basis. Year-to-date operating cash flows were driven by the larger scale of our business, our overall focus on cash flow, and the natural working capital impacts of our revenue growth outperformance.

Our cash balance as of September 30, 2026 was $241 million. Our synergized adjusted EBITDA net leverage ratio at quarter end was 3.5x and represents a 0.9x decrease from when we closed the Sterling acquisition 2 years ago. Regarding acquisitions, given the strategic importance of DataDiver, we view this tuck-in as a highly compelling use of capital that preserves our flexibility to execute our long-term capital allocation strategy. We funded the $125 million acquisition using mostly cash from our balance sheet and, to a much lesser extent, our revolver. We expect to pay off the acquisition borrowings in the near term using free cash flow. The acquisition does not change our overall deleveraging strategy and provides incremental tax benefits to the company. We remain fully committed to our 2028 leverage targets.

Our use of capital for share repurchases during the quarter was not material, and going forward, we will continue to be disciplined with our capital allocation approach to ensure we are executing a plan that maximizes ROI and shareholder value.

Moving to Slide 14, our updated 2026 guidance. Today, we are again raising our previously announced full-year guidance, supported by our outstanding performance in the first 3 quarters of the year and our outlook for stability in the hiring markets for the remainder of the year. We now expect 2026 total revenues in the range of $1.72 billion to $1.745 billion, adjusted EBITDA of $488 million to $498 million, adjusted net income of $227 million to $232 million, and adjusted diluted EPS of $1.28 to $1.33 per share. At the midpoint on a year-over-year basis, this represents approximately 10% revenue growth, 12% adjusted EBITDA growth, and 26% adjusted diluted EPS growth.

Our raised guidance range reflects a balanced posture on our Q4 outlook that incorporates the healthy state of our underlying demand trends, specifically those impacting U.S. seasonal hiring, as well as the ongoing geopolitical and macro uncertainty. As a result, the continuation of current trends would support performance above the midpoint of our range. However, consistent with our approach towards guidance, we believe it is prudent to account for a broader range of outcomes given the factors outside of our control.

It is also important to remind you that our fourth quarter 2026 growth rates are being measured against an exceptionally strong fourth quarter last year, during which we grew a notable 12% year-over-year. More specifically, in Q3 of this year, we started to lap the 12-month anniversaries of the large 2025 go-lives we previously discussed, and for Q4, these wins will now be fully annualized. As we have shared in the past, for Q4, we expect a more modest level of growth with revenues being more evenly distributed this year as we grow over last year's strong 17% new logo and upsell, cross-sell growth.

We also expect base to be neutral to slightly positive for Q4, supported by the strong demand trends from Q3, which continued into October. Q4 adjusted EBITDA margins are expected to remain in line with our mid-28% year-to-date performance. So, for adjusted diluted EPS, we expect year-over-year expansion in Q4, reaching the low $0.30 range. Please note that our updated guidance includes the very modest impact of the DataDiver acquisition in the last 2 months of the year. We have provided additional full-year 2026 guidance assumptions in the appendix of our presentation, which, again, are not meaningfully impacted by the acquisition.

With that, let me turn it back to Scott for closing remarks before we open the line for your questions.

Scott Staples

Thank you, Steven. In closing, Q3 was another quarter of outstanding execution and performance. And we are pleased with the solid momentum we are seeing in the fourth quarter so far. We remain focused on driving long-term value creation by providing best-in-class, differentiated products that address our customers' evolving needs.

The acquisition of DataDiver is another example of how we are investing to enhance our data and technology offerings to continue to position First Advantage for profitable growth over the long term. We remain confident in our ability to deliver consistent financial performance and continue to progress well toward the 2028 financial targets we established during our May 2025 Investor Day. I would like to recognize and thank the entire First Advantage team for their hard work and dedication to supporting our customers every day. With that, we will open the line for questions.

Operator

[Operator Instructions]

We'll go first this morning to Andrew Nicholas with William Blair.

질의응답

Daniel Maxwell

This is Daniel Maxwell. I'm here with Andrew this morning. Maybe just start off on the synergy front, if you can maybe frame what's left to go on synergies on Sterling's side as we think through what to layer on top of core incremental margins for next year, as well as any color you can give on expected synergies from the DataDiver acquisition.

Steven Marks

Yes, good morning. Look, there's really not a whole lot left to do, I would say, on the Sterling acquisition front. As we shared on the call, we're kind of effectively weeks away from really saying that the acquisition is done. We've shared throughout the year that a lot of the remaining 2026 synergy capture is going to be done by the end of the year coming from more of the cost of sales lines, as we just work through and finalize the alignment of fulfillment practices and workflows. I think, A, that's where the synergies are coming from. I think, B, you're really seeing the value of that come through. We saw the revenue outperformance and broad-based growth that we talked about in Q3. And our ability to fulfill that volume, as we shared last quarter, within the workforce management structure that we already had in place is one of the key drivers for the margin outperformance in Q3.

So I think there's really not a whole lot left to do. We just have a few more programs to finalize in action. And as we shared in the remarks, we think we'll end the year at effectively the top end of our range. Most of that's in cost of sales. In terms of DataDiver, I think there are some real synergies there. It's a combination of being able to—very similar to a Sterling mindset—balance out our data acquisition methodologies between the new tech that we're buying, which is really good tech, and I'll let Scott or Joelle share some remarks there. And at the same time, leverage those resources for new product capabilities and the product enhancements that Joelle was talking about in her remarks.

Scott Staples

Steven, the only thing I would add is on the Sterling side, as Steven was saying, we're basically done. We actually, as we head into 2027, don't really plan on talking about this going forward because it's been a huge success. In fact, we're kind of taking a victory lap here and saying we integrated it perfectly. We had no impact really to attrition. It's actually helped our growth engine. We're at the top, if not potentially exceeding, our synergy targets. Everything that we need to action is already in flight. So there are no new things to do. So I think we're really closing a chapter on a really nice part of our journey here and pretty proud of what the team has accomplished.

Daniel Maxwell

Great. That's helpful. Sticking with the DataDiver side of things, maybe you guys can talk to the build versus buy decision and how difficult it would be for a competitor to replace this technology. And then if you could also sort of rank the attractive aspects of the deal between the technology, the data asset, and the—I'm assuming the small and medium business screening component was kind of third in that list, but correct me if I'm wrong there.

Scott Staples

Yes, so I'll hand it over to Joelle on this one a little bit. So you're absolutely right in the fact that when you look at these things, you look at build versus buy. In our prepared remarks, we mentioned that DataDiver has been at this for decades. So they've done a really nice job of building out their tech platform, their automation, their algorithms. There's a little bit of overlap obviously with what we do, but this actually fills a lot of gaps for us. They covered some jurisdictions that we hadn't yet automated to and some other jurisdictions that we like their automation better than ours. It gives us access to bulk data.

There are some really nice things here. It also gives us a really nice data team. The entire team is coming over to help us drive future endeavors as to what we can do with this. So this will, again, drive faster turnaround times for our customers, better automation, and even new product ideas. Now that we've got a larger team here, access to more data, we can launch more products and really help our customers with this critical element of their screening. I will let Joelle kind of fill in a little more color here.

Joelle Smith

Yes, thanks, Scott. Yes, it's not really a build versus buy. It's build and buy. We've been building this and it just goes to the complexity and size and scale of just how wide and big all of the jurisdictions are across the United States. There's state, there's county, there are a lot of complexities to it. So the combination of these two things, and as Scott said, we've been working with them for a really long time, it really amplifies our ability to have a more complete product offering and it accelerates the speed for us to be able to do it. So it's a force multiplier. So we are very happy with it. The technology that they have and the data that they have is a great complement to what we do, and we're excited to see where this goes. Thanks a lot.

Operator

Thank you. We'll go next now to Shlomo Rosenbaum with Stifel.

Unknown Speaker

I'm actually covering for Shlomo Rosenbaum. This is Aadit Shrestha. Just in terms of the revenue raise and EBITDA raise, I think revenue was up $42.5 million and EBITDA was $14 million. Could you just kind of break it out between what was the 3Q beat versus the DataDiver addition, and then maybe what you sort of expect the outperformance in 4Q to be?

Steven Marks

Yes, really good question. So certainly, I mean, we had an amazing 3Q, and that's obviously a material component of the computation to raise guidance. When you think about the impact of DataDiver, it's very modest. That deal closed this week, so you get 60 days contribution on a business that's running roughly $20 million, so it's roughly a 1% lift to Q4 if you're kind of just doing really simple math. And it's really not a major computation into the guidance raise at all.

So really, when you think about what gave us confidence to raise by that much, A, an incredibly strong Q4, as we shared on the call, good momentum into October. And if the current trends continue, we feel good about ending above the midpoint, as we shared on the call in the prepared remarks. We have a little bit of a wider range. We've seen the last couple of seasonal peaks go long or go short, and obviously a lot of fast-moving, major geopolitical and macro-oriented items in the market these days. So we feel like we've got a very appropriately sized range. And then obviously, if the current trends continued as we shared, we expect to be at the upper end of that metric.

Unknown Speaker

Great, thank you. And just in terms of DataDiver, you know, there's $20 million annual revenue that you're expecting. Does that include any sort of revenue that may be going away since you were using them and maybe just moved back in-house?

Steven Marks

It is. Yes, it's a small component. I mean, you're talking about fractions of that revenue that go away. Obviously, that also means part of our cost of sales goes away, and it's a very immaterial wash on the P&L.

Unknown Speaker

Okay, great. And just in terms of background for DataDiver, how is the growth trending in that business? And I guess, I mean, of course, we can see the strategy behind it, and we would expect a stronger lift in that growth would be our guess.

Steven Marks

Yes, I mean, look, we obviously were very bullish on the business. We wouldn't have bought it if we weren't. They've had some good growth trends. Again, when you compare that to the size of First Advantage, it gets washed out very quickly just because of the materiality of the difference between First Advantage that's running at a $1.7 billion pace based on our latest guidance. But we do feel very good about the business we acquired. And obviously, as Scott and Joelle shared in their remarks, we're strong believers in data and having strategies around data. And that's really the core reason for getting into the business is great tech, great data, and great ability to build incrementally on top of that.

Scott Staples

And, Steven, we also have a really good track record of doing M&A. We think we have a great process of finding the right companies, integrating them, and getting greater growth out of them than they would as a standalone. And obviously, you can look at the success we've had with Sterling. But even before that, we've had multiple tuck-ins which we have exponentially accelerated their growth and gotten value out of it. So we feel like this asset under our umbrella, we can do a lot with it.

Unknown Speaker

Great. Thanks for taking the questions.

Operator

Thank you. We'll go next now to Jeff Silber with BMO Capital Markets.

Unknown Speaker

Ryan on for Jeff. Just wondering how we should be interpreting the implied 4Q guide versus what was embedded in there previously for 4Q. I think the refined outlook, it just may be a softer view, though I know you're thinking you end up near the higher end of the range if things continue as is. Thank you.

Steven Marks

Yes, good question. If we kind of think about maybe where we started the year and the originating guidance we gave out in February, the commentary that we shared there was we kind of expected base to be maybe neutral to slightly below neutral. We're obviously feeling a little better about base given the trends the last couple of quarters, the strength within the verticals that Joelle shared within her remarks, and obviously a good October. So I would say the real evolution there is probably just feeling a little better about base today than we did 8 months ago when we started the year.

Now, with all that said, obviously, we still feel really good about the parts of our algorithm that we control and influence. So our new logo and upsell, cross-sell being within our long-term guidance range there. Retention's been delivering at that 96% rate, and there's no reason to think that that doesn't continue. So certainly I think there's a little bit of just feeling better towards base and obviously a lot of demand for talent out there right now.

So if you think about that evolution, certainly that's a key component of it in terms of Q4 growth rate. I mean, I think obviously, with the only caveat being, as I shared on one of the previous answers, a lot of moving factors impacting macro and we want to make sure that we've got a little bit of coverage, if you will, in the range. But again, as I shared in the remarks, if things continue the way they are, we expect to be at that upper half of the guidance range.

Unknown Speaker

I appreciate it. And then on the continuing benefits, rescreening that was strong again in the quarter, do you think that's becoming more of a durable trend in how companies have the risk mitigation framework?

Scott Staples

I think that's a bit hard to predict. We definitely—the broader picture is that we're definitely seeing a major trend toward risk mitigation and especially companies are very in tune and their antennas are up big time to fraud detection. So I think, in general, the overall trend is to utilize more and more of our products. And I think it's a combination of seeing more rescreening, also seeing ongoing—we're seeing a nice uplift in our monitoring business as well, which I think I mentioned last quarter is starting to really become meaningful revenue for us.

So I think, in general, the risk profile of companies has changed with all the stuff that's going on in the world. So it's possible that that becomes more of a durable trend. But I think we've seen really like 2 quarters of it, so we're kind of wait and see. But certainly, conversations with customers have changed over the last 12 months.

Operator

Thank you.

[Operator Instructions]

We'll go next now to Manav Patnaik with Barclays.

Unknown Speaker

Ronan Kennedy on for Manav. I think you had 14 enterprise bookings in 3Q versus 20 in 2Q. You described the late-stage pipeline as continuing to strengthen and expand. Is there an element of normal quarter variability there or anything to note with regards to change in conversion rates, sales cycles, or customer decision-making?

Scott Staples

I'm going to let Joelle give you some details here. Just to look at the bigger picture, you have 14 bookings this quarter, which we're pretty happy with. And Joelle will give you the reasons why, 20 last quarter. But then we had like 3 quarters in a row of 17. We're kind of just within our range. We are seeing a little bit of change when it comes to deal sizes, go-lives, things like that. But I'll have Joelle give you the color.

Joelle Smith

Sure. Thanks, Scott. Yes, so a little bit, the 20 last quarter, 14 this quarter, it's a little bit of a timing thing, but it's also, as Scott alluded to, we have larger and a little bit more complex deals that we're closing. So the revenue for the enterprise deal is $500,000 annually or more. And so we're seeing that expand and grow as we're continuing to expand all of the growth opportunities that we have. So upsell, cross-sell, and new logos still continue to come in and outperform. But I think that the 14 and the 20 respectively is just a timing thing. We still feel really good about Q4. We still feel really good about the pipeline. Late stages are large and growing. And we have larger deals. So all in all, we're still feeling really good.

Scott Staples

Yes, I think, Ronan, if you go back like a year or two in our business, most of our contracts started sort of like single product line. We start with background screening and then we add drug testing and all these other things on as we engage with the customer. That drives a lot of upsell, cross-sell. But what we're seeing is customers are actually buying multiple products right out of the gate. So it takes a little longer to contract that integration to go live with that. But at the end of the day, the benefit is that those are larger ACV deals.

So Joelle's right in that we're seeing larger contract values, win rates continue to remain strong and even improve, pipeline is phenomenal, and a lot of it's driven by this whole trend as you've heard us talk about for the last couple of years of identity fraud detection and all these other things that companies are worrying about. It's just leading to better contracts for us in terms of more products right out of the gate versus having to upsell and cross-sell those things downstream.

Unknown Speaker

Very good. Thank you both for that. And as a follow-up, if I may, base growth was 5% in 3Q, and a little more than 1% from the customer initiatives. As those roll off and given healthy trends, what's the best way to think about underlying base growth entering '27? And then, Scott, you gave me comments in response to my first question. How should we think about the composition of growth—new logo, upsell, cross-sell—given all those factors you've discussed, the composition of '27 growth, without looking for a formal guide, just how to contextualize how to think about the composition of growth for '27?

Scott Staples

Steven, why don't you take the first part, and I'll take the second part.

Steven Marks

Yes, I think certainly, obviously, we have a healthy base environment. I think you're seeing that commentary from all over the place. Even I was listening to the Visa CEO a couple of days ago and talking about how that's contributing to their success. I think the hiring velocity right now, which is broad market, is really good. Obviously, the comps start getting much more difficult, Ronan. I know you've been following for a while. The beginning part of the year, even 3Q, had some easier comps.

We had a phenomenal Q4 last year, so we're benchmarking. And then when we get into '27, we'll obviously have higher comps. But the pace of the market right now feels really good. We'll give out more color on 2027 and obviously need to account for some recent events and making sure that we have a good point of view on the updated macro and get some latest customer feedback and making sure that hasn't modified plans, but certainly over the short duration we feel good about how our customers have been responding to the macro and the needs of the market right now.

Scott Staples

Hey, Ronan, on the second part of your question, yes, we don't really see a lot of change in the algorithm. So if you look back at the company, even over the last couple of years, we've been super consistent on the 3 things that we control: upsell, cross-sell; new logo; and retention. Obviously, the wildcard has been base, but you've seen that not only stabilize, but recover into the positives in the last 2 quarters: flat in Q1, 7% in Q2, 5% in Q3. But if you look at upsell, cross-sell, you know we've always been so steady, and that's across several ranges. New logo, I mean, I can't remember a quarter where it wasn't 4% or 5%. And retention, I can't remember a quarter where it wasn't either 96% or 97%.

So I think we don't think that algorithm changes too much going into 2027. So even though customers might be buying more up front, there's still a tremendous amount of upsell opportunities because of all the changes that you see in identity fraud detection. Because of the potential opportunities we have with more database services now that we have DataDiver and our proprietary data records, we just keep adding to product innovation, and customers are still wanting deeper and deeper searches to protect themselves. So we don't see any slowing down of those algorithms and no major changes to those algorithms.

Operator

Thank you very much. We'll go next now to Stephanie Moore with Jefferies.

Harold Antor

This is Harold. I'm on for Stephanie Moore. So I just wanted to double-click on the AI capabilities. You spoke about it at Analyst Day and you've spoken about it a lot on the call today. So I just wanted to get a sense for, I guess, if you look at the revenue growth and how I guess as to how from the AI products how fast you've seen the revenue growth from those products. And then, like, are these products, you know, you talk about them being a differentiator, are these helping with retention? Are these helping with you winning new business? Or is it a little bit of both? Is there anything to get a sense for how the AI revenue profile growing from AI has been over the last 12 months?

Scott Staples

Yeah, I'll answer that. And, Joelle, if I've missed anything, please jump in at the end. I think it's actually getting more difficult for us to talk about AI individually or singularly because there's so much of it in the company right now, and there's so much of it embedded across almost all of our products. So whether it's the AI we're using to enhance the candidate experience, or whether it's the AI we're using for the routers that we use in our verifications products or in our criminal search products, there's just so much AI that we've got deployed in the company. It's hard to say like, yes, there's a specific revenue that's been driven particularly from this given AI because it's so embedded.

But I think what you are seeing is basically a holistic lift from all the AI. You're seeing higher customer satisfaction, you're seeing strong retention. We do feel it's a factor in our win rates because when you demo these kind of things and you show what the AI is doing, customers and prospects really like what they're seeing and really like the investments that we've made in AI. And then obviously there's a margin benefit as well, but again it's hard to just like carve out and say that's just because of AI because it's so embedded.

But we've talked to you in the past about using AI in our customer care with chatbots and our customers and candidates interacting with us through AI chatbots and how that's enabled us to use less heads in our call centers and things like that. So really hard question to answer, but I would say the whole sea has risen for us because of all the AI that we've deployed and we're certainly seeing great benefits from it. But I also think it's just part of the story. As Joelle and Steven have both mentioned, the sales team continues to crush it. I mean, they're just really humming. The big picture here is that we just had the best quarter in company history. So there's not one thing that points to that. It's everything sort of coming together. It's the products we've rolled out, the sales team humming, the AI efficiencies that we've gained, the impact that has on pipeline and customer wins and retention, everything. We're seeing, as we mentioned in the script, broad-based growth across virtually all of our verticals, leading to the best quarter in company history. There's a lot of reasons that go into that.

Harold Antor

Thank you. That was helpful. And then I guess my last question just would be on capital allocation. Just between share repurchases, debt, and tuck-in acquisitions, how would you rank those initiatives? Just given DataDiver, should we expect you to get a little bit more aggressive on the acquisition front or just anything on the other half?

Steven Marks

Thank you. Yeah, and Harold, look, I think we don't look at it as a deviation. We've always said from the get-go after Sterling that we were going to be obviously focused on deleveraging, but obviously disciplined and opportunistic if there are times to be able to go—you know, when the stock price was at a good valuation, start to hit on some share repurchases, create shareholder value. Obviously, we had a very unique opportunity to buy a data asset that's very, very key and we can create a lot of value out of. So I think nothing's changed in the playbook. We haven't changed the priorities. We'll keep a very disciplined approach, review the market. But obviously, we borrowed a little bit of cash out to make sure we could fund the acquisition. We feel like we'll be able to easily repay that debt. And by the time we talk to you guys on our next earnings call in February, we don't think that'll be on our balance sheet anymore. So I think our approach remains unchanged, and obviously we'll be leveraged and then also make sure that we can create value and keep persevering on all cylinders.

Operator

Thank you. We'll go next now to Kyle Peterson with Needham.

Kyle Peterson

I wanted to start out particularly on upsell, cross-sell. You guys continue to have a lot of success there. So I guess, what are some of the drivers of that? And I guess what inning are we in roughly in terms of how long that can continue to supplement and be a big part of the growth story?

Scott Staples

Yes, Kyle, it's interesting. If you look at the last 3 quarters: 8%, 8%, 9%. So pretty steady. If you go back 3, 4, 5 years, it's always been a really good number, upsell, cross-sell. And it goes back to what I kind of said a little earlier. Customers are looking for more protection. Risk has become their number 1 priority. And if you look at things that have been in the press over the last couple of weeks, especially with companies like Binance and things like that, companies are very worried about identity fraud. And so our identity fraud detection products are in high demand.

But it's not just identity fraud. It's also customers doing deeper and deeper searches. So they really want to be protected. They don't want to let bad actors in their companies. They need to protect their brand, their shareholder values. Obviously, we're talking about large companies, large amounts of money when something bad happens to them, so they're turning to us for help and that is driving literally most of the upsell, cross-sell.

Steven Marks

Yeah, and Kyle, just from a modeling perspective, I'd just add in, right, obviously, we had some big wins last year. You're seeing that flow through. We've shared this the last couple of quarters. There are trends that sometimes we'll see that outperformance on our algorithm on new logos, sometimes on upsell, cross-sell. To Scott's point, a lot of trends driving our 80,000 existing customers to want to consume some more incremental services. So we feel really bullish about that, and obviously our long-term algorithm in being able to deliver that controllable growth.

Scott Staples

And Kyle, just to expand on your baseball analogy, I really think the game just sort of changed and restarted. Identity fraud detection is actually a whole new ballpark. So I think we're in sort of the first pitch. Now, we've been doing this for a number of years, but I think the stakes are higher now and the visibility is higher now. So I see a nice multi-year run rate for us here on upsell, cross-sell because of all the things that are happening in the world.

Kyle Peterson

Great. Really appreciate that. And then as a follow-up, I wanted to see if you guys could provide a little more color on the gig economy work that you guys have been doing. It seems like that's growing at a really nice clip. What's the competitive environment in that space like for some of these enterprise deals? And I guess what does it look like in terms of greenfield, newer opportunities that didn't exist before, versus competitive takeaways? Or what's the bigger driver there?

Scott Staples

I will let Joelle take this one. And I think it's not only gig, but we're also seeing—we mentioned this new concept to you a quarter or two ago about job stacking. I'll let Joelle take that question and explain it all.

Joelle Smith

Yes, absolutely. Thanks, Scott. Yes, so gig, and it's not just specific to gig, as Scott said, but there are a couple of factors that are driving a lot of this cross-sell, upsell, and activity in gig. One is certainly job stacking. You've got people working on multiple gig platforms at the same time. So that triggers a screen every single time they enter or exit the platform. You also have—gig is being hit very hard with fraud detection. And so we're seeing a lot of demand from that use case coming through with our gig customers in particular. You think about you have a delivery driver dropping off some type of package or groceries or anything like that. You have people that are going into people's homes from a care or a dog walker or any of those types of things. And so you have to make sure that you have a fully comprehensive risk profile.

And that's expanding the cross-sell, upsell opportunity that we have had across many of our verticals for a long time. But I think gig is a great opportunity. It's maturing and they're really looking at this risk mitigation strategy as a key component. They really look at this as trust and safety. So when we are able to talk to them about the different product lines that we offer and being able to add to that density of their package to protect their end users that are using the platform services, it really helps them to feel better about a lot of the challenges that Scott talked about in this world right now. So it's a maturing of the industry. It definitely is growing. We're seeing a lot of demand across our product portfolio. And it's really being driven by that fraud issue that we're seeing and then also just wanting better risk coverage.

Kyle Peterson

Understood. Thank you.

Operator

Thank you. We'll go next now to Scott Group with Wolfe Research.

Unknown Speaker

Just wanted to ask a follow-up on the base trend and more around what you're seeing in the hiring environment right now. I understand the business has obviously become a lot more diverse over the last couple of years, but just as we approach the holiday season, maybe on the retail side of things, what you're hearing from your customers.

Scott Staples

Yes, Scott. So, our customers still remain neutral to positive. Even as they look into 2027, we haven't had all those discussions with them yet, but their outlooks really haven't changed the entire year. I mean, we told everybody in Q1 that our customers were neutral to positive, where in the media it was probably neutral to negative, so definitely a difference. I think one big reminder is that we really focus on enterprise. So we talk about big customers that hire a lot of people, high volumes and high turnover. And I think what happens in the SMB space may be very different than what happens in the enterprise space. And I think our base results are really the result of our strategy around the verticals that we're in and around the size of company that we're in.

So Q3—and this is just I think the only thing you really need to know about the state of the economy and the labor market—the verticals that crushed it the most were transportation, logistics, retail, and e-commerce. Absolutely crushed it. We had really strong growth out of industrials and manufacturing. If you talk about really strong growth and crushed it, you're talking about double-digit growth. At the same time, we had good single-digit growth in just about all the other verticals: staffing, healthcare, hospitality, professional services, gig, all had really nice growth in the quarter. And as Steven mentioned, we had a really good October as well. So what we saw in Q3 continued into October. Obviously, we can't predict November and December, but signs are strong that the American economy is doing well. The American consumer is spending. The American consumer is traveling. We're seeing such broad-based growth across all verticals that it really just, in our minds, is a great indicator of the strength of our business.

Unknown Speaker

That's helpful. And just a quick follow-up on the DataDiver acquisition. It seems like, based on some of your remarks, that it is sort of both a data and a fulfillment play. Just wondering if you can talk about maybe some of the data gaps that you may be closing with the acquisition.

Scott Staples

I don't think we have gaps that we're closing. I think it's more of enhancements, but I'll let Joelle answer that.

Joelle Smith

Yes, it's definitely an enhancement. So there's thousands of these sources and a billion different ways to go about getting the data. And so this just enhances our ability to go get direct-source data. It also adds to the record data that we have and allows us to enhance our proprietary data. So it's a coming together of—they've been doing this for decades, we've also been doing it for a long time, so there's a mechanism of thickening the historical data, there's a growth in making more complete records. So it's really a complement to what we've already been doing, and it really continues to build that asset that we have been working on for some time now. So it's really just about enhancing what we have. It's not necessarily a gap.

Scott Staples

And we also basically cut out the middleman, too, right? So now we have direct access to primary-source data.

Unknown Speaker

Awesome, thank you.

Operator

Thank you. And ladies and gentlemen, that is all the time we have for questions this morning. So that will bring us to the conclusion of today's call. We'd like to thank you all so much for joining us today and your participation. This will conclude the First Advantage Third Quarter 2026 Earnings Conference Call and Webcast. At this time, we will be closing the call. You may disconnect your line, and please have a wonderful day. Goodbye.

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