Sterling Check (STER) investor relations material

Executive summary

• Revenue grew 5.3% year-over-year to $200.5M for Q2 2024, driven by the Vault acquisition and 6.2% inorganic growth, offset by a 0.9% organic constant currency revenue decline.

• Net loss was $6.2M for Q2 2024, or $(0.07) per diluted share, compared to net income of $0.3M in Q2 2023, with a net loss margin of (3.1)%.

• Adjusted EBITDA for Q2 2024 was $46.3M, down 7.4% year-over-year, with margin declining to 23.1%.

• Adjusted Net Income decreased 16.8% to $21.8M; Adjusted EPS (diluted) dropped 17.9% to $0.23.

• The merger with First Advantage is expected to close in Q4 2024, with Sterling shareholders to receive cash or stock consideration.

Financial highlights

• Q2 2024 revenue: $200.5M (+5.3% YoY); six months ended June 30, 2024: $386.5M (+4.6% YoY).

• Q2 2024 net loss: $6.2M; six months net loss: $14.2M.

• Adjusted EBITDA Q2 2024: $46.3M (23.1% margin); six months: $84.8M (21.9% margin).

• Adjusted EPS Q2 2024: $0.23 (down from $0.28); six months: $0.43 (down from $0.53).

• Free cash flow for six months ended June 30, 2024: $8.8M, down from $23.7M YoY.

Outlook and guidance

• Merger with First Advantage expected to close in Q4 2024, subject to regulatory approvals, and anticipated to drive innovation and shareholder value.

• Macroeconomic uncertainty and client hiring volumes continue to impact organic growth.

• Company expects continued cost optimization, integration of recent acquisitions, and margin expansion over the year.