Sterling Check Corp (STER, Financial) released its 8-K filing on August 8, 2024, reporting financial results for the second quarter ended June 30, 2024. Sterling Check Corp is a provider of technology-enabled background and identity verification services, offering a comprehensive hiring and risk management solution through its proprietary, cloud-based technology platform.
Performance Overview
For the second quarter of 2024, Sterling Check Corp (STER, Financial) reported revenues of $200.5 million, a 5.3% increase year-over-year, surpassing the analyst estimate of $199.92 million. However, the company posted a GAAP net loss of $6.2 million, or $(0.07) per diluted share, missing the estimated earnings per share (EPS) of $0.10.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 | Change |
|---|---|---|---|
| Revenues | $200.5 million | $190.4 million | 5.3% |
| GAAP Net (Loss) Income | $(6.2) million | $0.3 million | N/M |
| Adjusted EBITDA | $46.3 million | $50.0 million | (7.4)% |
| Adjusted EPS | $0.23 | $0.28 | (17.9)% |
Revenue and Earnings Analysis
The revenue increase was driven by a 6.2% inorganic growth, partially offset by a 0.9% decline in organic constant currency revenue. The company saw an acceleration in growth from new business (7% year-over-year), up-sell/cross-sell (9% year-over-year), and maintained strong customer retention at 97%. However, base business declined 14% year-over-year, reflecting an improvement from the first quarter.
Despite the revenue growth, Sterling Check Corp (STER, Financial) faced challenges with increased costs. Adjusted EBITDA decreased by 7.4% year-over-year to $46.3 million, and the Adjusted EBITDA Margin contracted by 320 basis points to 23.1%. The margin contraction was attributed to increased volume from M&A activity at lower margins and higher third-party vendor costs, partially offset by cost optimization efforts.
Balance Sheet and Cash Flow
As of June 30, 2024, Sterling Check Corp (STER, Financial) had cash and cash equivalents of $74.2 million and total debt of $555.5 million, compared to $54.2 million and $498.0 million, respectively, as of December 31, 2023. The increase in cash was driven by core operations, while the increase in debt reflects a $65.0 million drawdown from the revolving credit facility for the acquisition of Vault.
For the six months ended June 30, 2024, the company generated net cash provided by operations of $20.2 million, compared to $32.9 million for the prior year period. Capital expenditures totaled $11.3 million, up from $9.2 million in the prior year period. Free Cash Flow decreased to $8.8 million from $23.7 million, primarily due to lower operating income and higher cash taxes paid.
Commentary and Outlook
"The second quarter was another period of solid business momentum and encouraging financial results as we continued to execute on our 2024 plans and long-term strategy. Our world-class product innovation and user experiences continue to resonate in the marketplace," said Josh Peirez, Sterling CEO.
Sterling Check Corp (STER, Financial) remains optimistic about its future, despite the challenges posed by the current macro-economic environment. The company expects further improvement in base declines and margin expansion over the course of the year, driven by revenue growth and expense discipline.
For more detailed information, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from Sterling Check Corp for further details.
