ster-20230930
false2023Q3--12-310001645070http://fasb.org/us-gaap/2023#AccountingStandardsUpdate201613MemberP10YP1YP4YP1YP4YP1YP2YP3YP2YP3Y00016450702023-01-012023-09-3000016450702023-11-01xbrli:shares00016450702023-09-30iso4217:USD00016450702022-12-31iso4217:USDxbrli:shares00016450702023-07-012023-09-3000016450702022-07-012022-09-3000016450702022-01-012022-09-300001645070us-gaap:CommonStockMember2022-12-310001645070us-gaap:AdditionalPaidInCapitalMember2022-12-310001645070us-gaap:TreasuryStockCommonMember2022-12-310001645070us-gaap:RetainedEarningsMember2022-12-310001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001645070us-gaap:CommonStockMember2023-01-012023-03-310001645070us-gaap:TreasuryStockCommonMember2023-01-012023-03-3100016450702023-01-012023-03-310001645070us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001645070us-gaap:RetainedEarningsMember2023-01-012023-03-310001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001645070us-gaap:CommonStockMember2023-03-310001645070us-gaap:AdditionalPaidInCapitalMember2023-03-310001645070us-gaap:TreasuryStockCommonMember2023-03-310001645070us-gaap:RetainedEarningsMember2023-03-310001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-3100016450702023-03-310001645070us-gaap:CommonStockMember2023-04-012023-06-300001645070us-gaap:TreasuryStockCommonMember2023-04-012023-06-3000016450702023-04-012023-06-300001645070us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300001645070us-gaap:RetainedEarningsMember2023-04-012023-06-300001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300001645070us-gaap:CommonStockMember2023-06-300001645070us-gaap:AdditionalPaidInCapitalMember2023-06-300001645070us-gaap:TreasuryStockCommonMember2023-06-300001645070us-gaap:RetainedEarningsMember2023-06-300001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-3000016450702023-06-300001645070us-gaap:CommonStockMember2023-07-012023-09-300001645070us-gaap:TreasuryStockCommonMember2023-07-012023-09-300001645070us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-300001645070us-gaap:RetainedEarningsMember2023-07-012023-09-300001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-300001645070us-gaap:CommonStockMember2023-09-300001645070us-gaap:AdditionalPaidInCapitalMember2023-09-300001645070us-gaap:TreasuryStockCommonMember2023-09-300001645070us-gaap:RetainedEarningsMember2023-09-300001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-300001645070us-gaap:CommonStockMember2021-12-310001645070us-gaap:AdditionalPaidInCapitalMember2021-12-310001645070us-gaap:TreasuryStockCommonMember2021-12-310001645070us-gaap:RetainedEarningsMember2021-12-310001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-3100016450702021-12-310001645070us-gaap:CommonStockMember2022-01-012022-03-310001645070us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100016450702022-01-012022-03-310001645070us-gaap:RetainedEarningsMember2022-01-012022-03-3100016450702021-01-012021-12-310001645070us-gaap:AccountingStandardsUpdate201613Member2021-01-012021-12-310001645070srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2021-12-310001645070srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-12-310001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001645070us-gaap:CommonStockMember2022-03-310001645070us-gaap:AdditionalPaidInCapitalMember2022-03-310001645070us-gaap:TreasuryStockCommonMember2022-03-310001645070us-gaap:RetainedEarningsMember2022-03-310001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-3100016450702022-03-310001645070us-gaap:CommonStockMember2022-04-012022-06-300001645070us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000016450702022-04-012022-06-300001645070us-gaap:RetainedEarningsMember2022-04-012022-06-300001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001645070us-gaap:CommonStockMember2022-06-300001645070us-gaap:AdditionalPaidInCapitalMember2022-06-300001645070us-gaap:TreasuryStockCommonMember2022-06-300001645070us-gaap:RetainedEarningsMember2022-06-300001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-3000016450702022-06-300001645070us-gaap:CommonStockMember2022-07-012022-09-300001645070us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001645070us-gaap:RetainedEarningsMember2022-07-012022-09-300001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300001645070us-gaap:CommonStockMember2022-09-300001645070us-gaap:AdditionalPaidInCapitalMember2022-09-300001645070us-gaap:TreasuryStockCommonMember2022-09-300001645070us-gaap:RetainedEarningsMember2022-09-300001645070us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-3000016450702022-09-300001645070ster:SterlingCheckCorpMember2023-09-30xbrli:pure0001645070ster:InternallyDevelopedSoftwareAssetsMember2023-09-30ster:Segment0001645070us-gaap:NonUsMember2023-09-300001645070country:IN2023-09-300001645070country:CA2023-09-300001645070us-gaap:NonUsMember2022-12-310001645070country:CA2022-12-310001645070country:IN2022-12-3100016450702022-01-012022-12-310001645070srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201613Member2022-01-010001645070srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2023-06-300001645070srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-06-300001645070srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-12-3100016450702021-06-300001645070ster:SocratesLimitedAndACheckGlobalMember2023-03-012023-03-010001645070ster:ACheckGlobalMember2023-03-012023-03-010001645070ster:ACheckGlobalMember2023-03-010001645070ster:SocratesLimitedMember2023-03-010001645070ster:SocratesLimitedMember2023-03-012023-03-010001645070ster:SocratesLimitedAndACheckGlobalMember2023-01-012023-09-300001645070ster:SocratesLimitedAndACheckGlobalMember2023-03-310001645070ster:SocratesLimitedAndACheckGlobalMember2023-09-300001645070ster:SocratesLimitedAndACheckGlobalMember2023-04-012023-09-300001645070ster:SocratesLimitedAndACheckGlobalMember2023-03-010001645070us-gaap:CustomerListsMemberster:SocratesLimitedAndACheckGlobalMember2023-03-012023-03-010001645070us-gaap:TradeNamesMemberster:SocratesLimitedAndACheckGlobalMember2023-03-012023-03-010001645070us-gaap:DevelopedTechnologyRightsMemberster:SocratesLimitedAndACheckGlobalMember2023-03-012023-03-010001645070us-gaap:NoncompeteAgreementsMemberster:SocratesLimitedAndACheckGlobalMember2023-03-012023-03-010001645070ster:EmploymentBackgroundInvestigationsIncMember2021-11-302021-11-300001645070ster:EmploymentBackgroundInvestigationsIncMember2021-11-302022-12-310001645070ster:EmploymentBackgroundInvestigationsIncMember2022-12-312022-12-310001645070us-gaap:FurnitureAndFixturesMember2023-09-300001645070us-gaap:FurnitureAndFixturesMember2022-12-310001645070us-gaap:ComputerEquipmentMember2023-09-300001645070us-gaap:ComputerEquipmentMember2022-12-310001645070us-gaap:LeaseholdImprovementsMember2023-09-300001645070us-gaap:LeaseholdImprovementsMember2022-12-310001645070us-gaap:CustomerListsMember2023-09-300001645070us-gaap:CustomerListsMember2022-12-310001645070us-gaap:TrademarksMember2023-09-300001645070us-gaap:TrademarksMember2022-12-310001645070us-gaap:NoncompeteAgreementsMember2023-09-300001645070us-gaap:NoncompeteAgreementsMember2022-12-310001645070us-gaap:TechnologyBasedIntangibleAssetsMember2023-09-300001645070us-gaap:TechnologyBasedIntangibleAssetsMember2022-12-310001645070us-gaap:InternetDomainNamesMember2023-09-300001645070us-gaap:InternetDomainNamesMember2022-12-310001645070us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2023-09-300001645070us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-12-310001645070us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2023-01-012023-09-300001645070us-gaap:SoftwareAndSoftwareDevelopmentCostsMemberster:InternalCostMember2023-01-012023-09-300001645070us-gaap:SoftwareAndSoftwareDevelopmentCostsMemberster:ExternalCostMember2023-01-012023-09-300001645070us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-01-012022-09-300001645070us-gaap:SoftwareAndSoftwareDevelopmentCostsMemberster:InternalCostMember2022-01-012022-09-300001645070us-gaap:SoftwareAndSoftwareDevelopmentCostsMemberster:ExternalCostMember2022-01-012022-09-300001645070us-gaap:AccountingStandardsUpdate201602Member2022-01-01ster:lease0001645070srt:MinimumMember2023-09-300001645070srt:MaximumMember2023-09-300001645070us-gaap:LineOfCreditMember2022-11-290001645070us-gaap:LineOfCreditMemberster:TermLoansDue2027Memberus-gaap:SecuredDebtMember2022-11-290001645070us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2022-11-290001645070us-gaap:LineOfCreditMemberster:TermLoansDue2027Memberus-gaap:SecuredDebtMember2023-09-300001645070us-gaap:LineOfCreditMemberster:TermLoansDue2027Memberus-gaap:SecuredDebtMember2022-12-310001645070us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2023-09-300001645070us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2022-12-310001645070us-gaap:FairValueInputsLevel2Memberus-gaap:LineOfCreditMember2023-09-300001645070us-gaap:FairValueInputsLevel2Memberus-gaap:LineOfCreditMember2022-12-310001645070us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-300001645070us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-300001645070us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-300001645070us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-300001645070us-gaap:FairValueMeasurementsRecurringMember2023-09-300001645070us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001645070us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001645070us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001645070us-gaap:FairValueMeasurementsRecurringMember2022-12-310001645070ster:ContingentConsiderationLiabilityMember2023-06-300001645070ster:ContingentConsiderationLiabilityMember2022-06-300001645070ster:ContingentConsiderationLiabilityMember2022-12-310001645070ster:ContingentConsiderationLiabilityMember2021-12-310001645070ster:ContingentConsiderationLiabilityMember2023-07-012023-09-300001645070ster:ContingentConsiderationLiabilityMember2022-07-012022-09-300001645070ster:ContingentConsiderationLiabilityMember2023-01-012023-09-300001645070ster:ContingentConsiderationLiabilityMember2022-01-012022-09-300001645070ster:ContingentConsiderationLiabilityMember2023-09-300001645070ster:ContingentConsiderationLiabilityMember2022-09-300001645070us-gaap:InterestRateSwapMember2023-09-30ster:instrument0001645070us-gaap:InterestRateSwapMembersrt:ScenarioForecastMember2026-02-270001645070us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherCurrentAssetsMember2023-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherCurrentAssetsMember2022-12-310001645070us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherLiabilitiesMember2023-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherLiabilitiesMember2022-12-310001645070us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-07-012023-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-07-012022-09-300001645070us-gaap:InterestExpenseMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-07-012023-09-300001645070us-gaap:InterestExpenseMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-07-012022-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-01-012023-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-01-012022-09-300001645070us-gaap:InterestExpenseMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-01-012023-09-300001645070us-gaap:InterestExpenseMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-01-012022-09-300001645070us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-07-012023-09-300001645070us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-07-012022-09-300001645070us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-01-012023-09-300001645070us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-01-012022-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestExpenseMember2023-07-012023-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestExpenseMember2022-07-012022-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestExpenseMember2023-01-012023-09-300001645070us-gaap:InterestRateSwapMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestExpenseMember2022-01-012022-09-300001645070us-gaap:NondesignatedMember2023-09-300001645070us-gaap:InterestRateSwapMemberster:GainLossOnInterestRateSwapsMemberus-gaap:NondesignatedMember2023-07-012023-09-300001645070us-gaap:InterestRateSwapMemberster:GainLossOnInterestRateSwapsMemberus-gaap:NondesignatedMember2022-07-012022-09-300001645070us-gaap:InterestRateSwapMemberster:GainLossOnInterestRateSwapsMemberus-gaap:NondesignatedMember2023-01-012023-09-300001645070us-gaap:InterestRateSwapMemberster:GainLossOnInterestRateSwapsMemberus-gaap:NondesignatedMember2022-01-012022-09-30ster:vote00016450702022-11-230001645070ster:SecondaryPublicOfferingMemberster:CertainSellingStockholdersMember2023-06-072023-06-070001645070ster:SecondaryPublicOfferingMemberster:CertainSellingStockholdersMember2023-06-070001645070us-gaap:OverAllotmentOptionMemberster:CertainSellingStockholdersMemberster:GoldmanSachsCoLLCAndJPMorganSecuritiesLLCMember2023-06-072023-06-070001645070us-gaap:OverAllotmentOptionMembersrt:MaximumMemberster:CertainSellingStockholdersMemberster:GoldmanSachsCoLLCAndJPMorganSecuritiesLLCMember2023-06-072023-06-070001645070ster:SecondaryPublicOfferingMemberster:GoldmanSachsCoLLCAndJPMorganSecuritiesLLCMember2023-06-072023-06-070001645070ster:BroadStreetPrincipalInvestmentsLLCMemberus-gaap:TreasuryStockCommonMember2023-04-012023-06-300001645070us-gaap:CostOfSalesMember2023-07-012023-09-300001645070us-gaap:CostOfSalesMember2022-07-012022-09-300001645070us-gaap:CostOfSalesMember2023-01-012023-09-300001645070us-gaap:CostOfSalesMember2022-01-012022-09-300001645070ster:CorporateTechnologyAndProductionSystemsMember2023-07-012023-09-300001645070ster:CorporateTechnologyAndProductionSystemsMember2022-07-012022-09-300001645070ster:CorporateTechnologyAndProductionSystemsMember2023-01-012023-09-300001645070ster:CorporateTechnologyAndProductionSystemsMember2022-01-012022-09-300001645070us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-07-012023-09-300001645070us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-07-012022-09-300001645070us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-09-300001645070us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-09-300001645070ster:NonQualifiedStockOptionsMember2023-09-300001645070us-gaap:RestrictedStockMember2023-09-300001645070us-gaap:RestrictedStockUnitsRSUMember2023-09-300001645070ster:A2015LongTermEquityIncentivePlanMemberster:ServiceBasedVestingStockOptionsMember2022-12-310001645070ster:A2015LongTermEquityIncentivePlanMemberster:ServiceBasedVestingStockOptionsMember2022-01-012022-12-310001645070ster:A2015LongTermEquityIncentivePlanMemberster:PerformanceBasedStockOptionsMember2022-12-310001645070ster:A2015LongTermEquityIncentivePlanMemberster:PerformanceBasedStockOptionsMember2022-01-012022-12-310001645070ster:A2015LongTermEquityIncentivePlanMemberster:ServiceBasedVestingStockOptionsMember2023-01-012023-09-300001645070ster:A2015LongTermEquityIncentivePlanMemberster:PerformanceBasedStockOptionsMember2023-01-012023-09-300001645070ster:A2015LongTermEquityIncentivePlanMemberster:ServiceBasedVestingStockOptionsMember2023-09-300001645070ster:A2015LongTermEquityIncentivePlanMemberster:PerformanceBasedStockOptionsMember2023-09-300001645070ster:A2015LongTermEquityIncentivePlanMember2021-08-042021-08-040001645070ster:A2021OmnibusIncentivePlanMember2021-08-042021-08-040001645070ster:A2021OmnibusIncentivePlanMember2021-08-040001645070ster:A2021OmnibusIncentivePlanMember2023-09-300001645070us-gaap:EmployeeStockOptionMemberster:A2021OmnibusIncentivePlanMembersrt:MinimumMember2023-01-012023-09-300001645070us-gaap:EmployeeStockOptionMembersrt:MaximumMemberster:A2021OmnibusIncentivePlanMember2023-01-012023-09-300001645070us-gaap:EmployeeStockOptionMemberster:A2021OmnibusIncentivePlanMember2023-01-012023-09-300001645070ster:A2021OmnibusIncentivePlanMember2022-12-310001645070ster:A2021OmnibusIncentivePlanMember2022-01-012022-12-310001645070ster:A2021OmnibusIncentivePlanMember2023-01-012023-09-300001645070us-gaap:RestrictedStockMemberus-gaap:ShareBasedCompensationAwardTrancheOneMemberster:A2021OmnibusIncentivePlanMember2023-01-012023-09-300001645070us-gaap:ShareBasedCompensationAwardTrancheThreeMemberus-gaap:RestrictedStockMemberster:A2021OmnibusIncentivePlanMember2023-01-012023-09-300001645070us-gaap:RestrictedStockMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMemberster:A2021OmnibusIncentivePlanMember2023-01-012023-09-300001645070ster:RestrictedStockOtherMemberster:A2021OmnibusIncentivePlanMembersrt:MinimumMember2023-01-012023-09-300001645070ster:RestrictedStockOtherMembersrt:MaximumMemberster:A2021OmnibusIncentivePlanMember2023-01-012023-09-300001645070us-gaap:RestrictedStockMemberster:A2021OmnibusIncentivePlanMember2022-12-310001645070us-gaap:RestrictedStockMemberster:A2021OmnibusIncentivePlanMember2023-01-012023-09-300001645070us-gaap:RestrictedStockMemberster:A2021OmnibusIncentivePlanMember2023-09-300001645070us-gaap:ShareBasedCompensationAwardTrancheOneMemberster:A2021OmnibusIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-300001645070us-gaap:ShareBasedCompensationAwardTrancheThreeMemberster:A2021OmnibusIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-300001645070us-gaap:ShareBasedCompensationAwardTrancheTwoMemberster:A2021OmnibusIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-300001645070ster:A2021OmnibusIncentivePlanMembersrt:MinimumMemberus-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-300001645070srt:MaximumMemberster:A2021OmnibusIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-300001645070ster:A2021OmnibusIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2022-12-310001645070ster:A2021OmnibusIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-300001645070ster:A2021OmnibusIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2023-09-300001645070us-gaap:EmployeeStockMemberster:A2021EmployeeStockPurchasePlanMember2023-07-010001645070us-gaap:EmployeeStockMemberster:A2021EmployeeStockPurchasePlanMember2023-07-012023-07-010001645070us-gaap:EmployeeStockMemberster:A2021EmployeeStockPurchasePlanMember2023-07-012023-09-300001645070us-gaap:EmployeeStockOptionMember2023-07-012023-09-300001645070us-gaap:EmployeeStockOptionMember2022-07-012022-09-300001645070us-gaap:EmployeeStockOptionMember2023-01-012023-09-300001645070us-gaap:EmployeeStockOptionMember2022-01-012022-09-300001645070us-gaap:RestrictedStockMember2023-07-012023-09-300001645070us-gaap:RestrictedStockMember2022-07-012022-09-300001645070us-gaap:RestrictedStockMember2023-01-012023-09-300001645070us-gaap:RestrictedStockMember2022-01-012022-09-300001645070us-gaap:RestrictedStockUnitsRSUMember2023-07-012023-09-300001645070us-gaap:RestrictedStockUnitsRSUMember2022-07-012022-09-300001645070us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-300001645070us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001645070srt:AffiliatedEntityMember2023-07-012023-09-300001645070srt:AffiliatedEntityMember2022-07-012022-09-300001645070srt:AffiliatedEntityMember2023-01-012023-09-300001645070srt:AffiliatedEntityMember2022-01-012022-09-300001645070srt:AffiliatedEntityMember2023-09-300001645070srt:AffiliatedEntityMember2022-12-310001645070us-gaap:InterestRateSwapMembersrt:AffiliatedEntityMemberster:JAronCompanyLLCMember2023-09-300001645070us-gaap:InvestorMember2022-07-012022-09-300001645070us-gaap:InvestorMember2023-07-012023-09-300001645070us-gaap:InvestorMember2023-01-012023-09-300001645070us-gaap:InvestorMember2022-01-012022-09-300001645070us-gaap:InvestorMembersrt:MaximumMember2023-09-300001645070us-gaap:InvestorMembersrt:MaximumMember2022-12-310001645070ster:ScreeningServicesMember2023-07-012023-09-300001645070ster:ScreeningServicesMember2022-07-012022-09-300001645070ster:ScreeningServicesMember2023-01-012023-09-300001645070ster:ScreeningServicesMember2022-01-012022-09-300001645070us-gaap:ProductAndServiceOtherMember2023-07-012023-09-300001645070us-gaap:ProductAndServiceOtherMember2022-07-012022-09-300001645070us-gaap:ProductAndServiceOtherMember2023-01-012023-09-300001645070us-gaap:ProductAndServiceOtherMember2022-01-012022-09-300001645070country:US2023-07-012023-09-300001645070country:US2022-07-012022-09-300001645070country:US2023-01-012023-09-300001645070country:US2022-01-012022-09-300001645070us-gaap:NonUsMember2023-07-012023-09-300001645070us-gaap:NonUsMember2022-07-012022-09-300001645070us-gaap:NonUsMember2023-01-012023-09-300001645070us-gaap:NonUsMember2022-01-012022-09-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-40829
https://cdn.kscope.io/126a6ea00658402e628be0692106b61b-Image_2.jpg
Sterling Check Corp.
(Exact name of registrant as specified in its charter)
Delaware37-1784336
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
6150 Oak Tree Boulevard, Suite 490
Independence, Ohio
44131
(Address of principal executive offices)(Zip Code)
1 (800) 853-3228
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange
on which registered
Common stock, $0.01 par valueSTERThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated
filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The total number of outstanding shares of the registrant’s common stock, $0.01 par value per share, as of November 1, 2023 was 94,285,105 (excluding treasury shares of 5,610,661).
1


STERLING CHECK CORP. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS



2

Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend that all forward-looking statements that we make will be subject to the safe harbor protections created thereby. You can generally identify forward-looking statements by our use of forward-looking terminology such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “playbook,” “potential,” “predict,” “projection,” “seek,” “should,” “will” or “would,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements that address market trends, and statements regarding our expectations, beliefs, plans, strategies, objectives, prospects or assumptions, or statements regarding future events or performance contained in this Quarterly Report on Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements.
We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this Quarterly Report on Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may cause our actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements, or could affect our share price. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:
changes in economic, political and market conditions, including bank failures and concerns of a potential economic downturn or recession, and the impact of these changes on our clients’ hiring trends;
the sufficiency of our cash to meet our liquidity needs;
the possibility of cyber-attacks, security vulnerabilities and internet disruptions, including breaches of data security and privacy leaks, data loss and business interruptions;
our ability to comply with the extensive United States (“U.S.”) and foreign laws, regulations and policies applicable to our industry, and changes in such laws, regulations and policies;
our compliance with data privacy laws and regulations;
potential liability for failures to provide accurate information to our clients, which may not be covered, or may be only partially covered, by insurance;
the possible effects of negative publicity on our reputation and the value of our brand;
our failure to compete successfully;
our ability to keep pace with changes in technology and to provide timely enhancements to our products and services;
the continued impact of COVID-19 on global markets, economic conditions and the response by governments and third parties;
our ability to cost-effectively attract new clients and retain our existing clients;
our ability to grow our Identity-as-a-Service offerings;
our success in new product introductions and adjacent market penetrations;
our ability to expand into new geographies;
our ability to pursue and integrate strategic mergers and acquisitions;
design defects, errors, failures or delays with our products and services;
systems failures, interruptions, delays in services, catastrophic events and resulting interruptions;
natural or man-made disasters including pandemics and other significant public health emergencies, outbreaks of hostilities or effects of climate change and our ability to deal effectively with damage or disruption caused by the foregoing;
our ability to implement our business strategies profitably;
our ability to retain the services of certain members of our management;
our ability to adequately protect our intellectual property;
our ability to implement, maintain and improve effective internal controls;
3

Table of Contents
our ability to comply with public company requirements in a timely and cost-effective manner, and expense strain on our resources and diversion of our management’s attention resulting from public company compliance requirements; and
the other risks described in Item 1A. “Risk Factors” in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 2, 2023 and in this Quarterly Report on Form 10-Q.
Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance and our actual results of operations, financial condition, and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition, and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.
Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.
Investors and others should note that we announce material financial and operational information using our investor relations website, press releases, SEC filings and public conference calls and webcasts. Information about Sterling Check Corp. (“Sterling”), our business, and our results of operations may also be announced by posts on our accounts on social media channels, including the following: Instagram, Facebook, LinkedIn and Twitter. The information contained on, or that can be accessed through, our social media channels and on our website is deemed not to be incorporated in this Quarterly Report on Form 10-Q or to be a part of this Quarterly Report on Form 10-Q. The information that we post through these social media channels and on our website may be deemed material. As a result, we encourage investors, the media and others interested in Sterling to monitor these social media channels in addition to following our investor relations website, press releases, SEC filings and public conference calls and webcasts. The list of social media channels we use may be updated from time to time on our investor relations website.
4

Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
STERLING CHECK CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)September 30,
2023
December 31,
2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$49,877 $103,095 
Accounts receivable (net of allowance for credit losses of $2,670 and $2,304 at September 30, 2023 and December 31, 2022, respectively)
151,935 139,579 
Insurance receivable4,689 921 
Prepaid expenses8,595 13,433 
Other current assets23,770 13,654 
Total current assets238,866 270,682 
Property and equipment, net7,330 10,341 
Goodwill878,390 849,609 
Intangible assets, net240,482 241,036 
Deferred tax assets4,328 4,452 
Operating leases right-of-use asset7,020 20,084 
Other noncurrent assets, net10,499 11,050 
TOTAL ASSETS$1,386,915 $1,407,254 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$39,327 $38,372 
Litigation settlement obligation7,178 4,165 
Accrued expenses60,387 67,047 
Current portion of long-term debt13,125 7,500 
Operating leases liability, current portion4,233 3,717 
Other current liabilities14,435 12,939 
Total current liabilities138,685 133,740 
Long-term debt, net483,334 493,990 
Deferred tax liabilities31,584 23,707 
Long-term operating leases liability, net of current portion8,834 16,835 
Other liabilities3,737 2,336 
Total liabilities666,174 670,608 
COMMITMENTS AND CONTINGENCIES (NOTE 13)
STOCKHOLDERS’ EQUITY:
Preferred stock ($0.01 par value; 100,000,000 shares authorized; no shares issued or outstanding)
  
Common stock ($0.01 par value; 1,000,000,000 shares authorized; 99,889,227 shares issued and 95,045,289 shares outstanding at September 30, 2023; 97,765,120 shares issued and 96,717,883 shares outstanding at December 31, 2022)
97 76 
Additional paid-in capital971,950 942,789 
Common stock held in treasury (4,843,938 and 1,047,237 shares at September 30, 2023 and December 31, 2022, respectively)
(64,499)(14,859)
Accumulated deficit(183,180)(186,448)
Accumulated other comprehensive loss(3,627)(4,912)
Total stockholders’ equity720,741 736,646 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$1,386,915 $1,407,254 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

Table of Contents
STERLING CHECK CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except share and per share data)2023202220232022
REVENUES$180,566 $199,299 $550,224 $596,862 
OPERATING EXPENSES:
Cost of revenues (exclusive of depreciation and amortization below)95,882 106,422 292,692 314,954 
Corporate technology and production systems11,329 13,715 34,709 38,806 
Selling, general and administrative42,382 42,411 134,743 126,630 
Depreciation and amortization15,875 16,570 47,117 56,598 
Impairments and disposals of long-lived assets48 193 7,193 805 
Total operating expenses165,516 179,311 516,454 537,793 
OPERATING INCOME15,050 19,988 33,770 59,069 
OTHER EXPENSE (INCOME):
Interest expense, net9,305 7,764 26,903 20,719 
Gain on interest rate swaps   (296)
Other income(561)(560)(1,370)(1,422)
Total other expense, net8,744 7,204 25,533 19,001 
INCOME BEFORE INCOME TAXES6,306 12,784 8,237 40,068 
Income tax provision3,952 3,481 4,969 12,958 
NET INCOME$2,354 $9,303 $3,268 $27,110 
Unrealized gain on hedged transactions, net of tax expense of $1,188, $0, $1,044 and $0, respectively
1,962  1,554  
Foreign currency translation adjustments, net of tax of $0, $0, $0 and $0, respectively
(1,906)(4,790)(269)(7,990)
Total other comprehensive income (loss)56 (4,790)1,285 (7,990)
COMPREHENSIVE INCOME$2,410 $4,513 $4,553 $19,120 
Net income per share attributable to stockholders
Basic$0.03 $0.10 $0.04 $0.29 
Diluted$0.03 $0.09 $0.03 $0.27 
Weighted average number of shares outstanding
Basic90,972,00994,134,69092,184,15994,043,105
Diluted93,651,69199,118,52194,493,25499,217,125
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

Table of Contents
STERLING CHECK CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)Shares OutstandingPar ValueAdditional Paid-In CapitalCommon Shares Held in TreasuryCommon Stock Held in TreasuryAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total
BALANCE at December 31, 202296,717,883$76 $942,789 1,047,237$(14,859)$(186,448)$(4,912)$736,646 
Issuance of common stock4,567 — — — — — — — 
Repurchases of common stock(493,926)— — 493,926 (7,712)— — (7,712)
Issuance of restricted shares, net of forfeitures1,894,310 19 (19)— — — —  
Shares withheld to cover restricted share vesting tax(37,128)— — 37,128 (487)— — (487)
Stock-based compensation— — 8,043 — — — — 8,043 
Net income— — — — — 591 — 591 
Unrealized loss on hedged transactions, net of tax— — — — — — (5,159)(5,159)
Foreign currency translation adjustment, net of tax— — — — — — 682 682 
BALANCE at March 31, 202398,085,706 95 950,813 1,578,291 (23,058)(185,857)(9,389)732,604 
Issuance of common stock2,363 — — — — — — — 
Repurchases of common stock(1,465,893)— — 1,465,893 (17,630)— — (17,630)
Common stock issued for exercise of employee stock options63,336 — 611 — — — — 611 
Issuance of restricted shares, net of forfeitures80,331 1 (1)— — — —  
Shares withheld to cover restricted share vesting tax(7,181)— — 7,181 (85)— — (85)
Stock-based compensation— — 9,358 — — — — 9,358 
Net income— — — — — 323 — 323 
Unrealized gain on hedged transactions, net of tax— — — — — — 4,751 4,751 
Foreign currency translation adjustment, net of tax— — — — — — 955 955 
BALANCE at June 30, 202396,758,662 96 960,781 3,051,365 (40,773)(185,534)(3,683)730,887 
Repurchases of common stock(1,564,019)— — 1,564,019 (20,701)— — (20,701)
Common stock issued for exercise of employee stock options165,422 2 1,385 — — — — 1,387 
Issuance of restricted shares, net of forfeitures(86,222)(1)1 — — — —  
Shares withheld to cover restricted share vesting tax(228,554)— — 228,554 (3,025)— — (3,025)
Stock-based compensation— — 9,783 — — — — 9,783 
Net income— — — — — 2,354 — 2,354 
Unrealized gain on hedged transactions, net of tax— — — — — — 1,962 1,962 
Foreign currency translation adjustment, net of tax— — — — — — (1,906)(1,906)
BALANCE at September 30, 202395,045,289 $97 $971,950 4,843,938 $(64,499)$(183,180)$(3,627)$720,741 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

Table of Contents
STERLING CHECK CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(in thousands, except share amounts)Shares OutstandingPar ValueAdditional Paid-In CapitalCommon Shares Held in TreasuryCommon Stock Held in TreasuryAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total
BALANCE at December 31, 202195,746,975$68 $916,578 107,820$(897)$(206,218)$93 $709,624 
Issuance of common stock1,112 — — — — — — — 
Common stock issued for exercise of employee stock options8,486 — 80 — — — — 80 
Issuance of restricted shares, net of forfeitures533,095 5 (5)— — — —  
Stock-based compensation— — 5,108 — — — — 5,108 
Net income— — — — — 6,236 — 6,236 
Cumulative effect adjustment for adoption of CECL, net of tax of $56
— — — — — (198)— (198)
Foreign currency translation adjustment, net of tax— — (8)— — — 283 275 
BALANCE at March 31, 202296,289,66873 921,753 107,820(897)(200,180)376 721,125 
Issuance of common stock1,812 — — — — — — — 
Common stock issued for exercise of employee stock options76,399 — 734 — — — — 734 
Issuance of restricted shares, net of forfeitures42,388 — — — — — — — 
Stock-based compensation— — 6,023 — — — — 6,023 
Net income— — — — — 11,571 — 11,571 
Foreign currency translation adjustment, net of tax— — (24)— — — (3,483)(3,507)
BALANCE at June 30, 202296,410,26773 928,486 107,820(897)(188,609)(3,107)735,946 
Issuance of common stock1,604 — — — — — — — 
Common stock issued for exercise of employee stock options159,350 2 1,477 — — — — 1,479 
Issuance of restricted shares, net of forfeitures(23,155)— — — — — — — 
Stock-based compensation— — 6,293 — — — — 6,293 
Net income— — — — — 9,303 — 9,303 
Unrealized gain on hedged transactions, net of tax— — — — — — — — 
Foreign currency translation adjustment, net of tax— — (17)— — — (4,790)(4,807)
BALANCE at September 30, 202296,548,066$75 $936,239 107,820$(897)$(179,306)$(7,897)$748,214 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

Table of Contents
STERLING CHECK CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months Ended
September 30,
(in thousands)20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$3,268 $27,110 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization47,117 56,598 
Deferred income taxes(200)4,885 
Stock-based compensation27,184 17,424 
Impairments and disposals of long-lived assets7,193 805 
Provision for bad debts556 1,016 
Amortization of financing fees808 327 
Amortization of debt discount594 1,444 
Deferred rent383 (170)
Unrealized translation loss (gain) on investment in foreign subsidiaries94 (1,838)
Changes in fair value of derivatives (4,102)
Change in fair value of contingent consideration, net(686) 
Interest rate swap settlements1,323  
Changes in operating assets and liabilities
Accounts receivable(8,699)(33,145)
Insurance receivable(3,768) 
Prepaid expenses 5,849 3,579 
Other assets(6,493)(2,097)
Accounts payable757 6,546 
Litigation settlement obligation3,013  
Accrued expenses(7,982)84 
Other liabilities(4,635)(4,868)
Net cash provided by operating activities65,676 73,598 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment(1,377)(3,978)
Purchases of intangible assets and capitalized software(13,364)(11,719)
Acquisitions, net of cash acquired(49,210) 
Proceeds from disposition of property and equipment121 25 
Net cash used in investing activities(63,830)(15,672)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock1,998 2,291 
Repurchases of common stock(46,043) 
Payments of initial public offering issuance costs (225)
Cash paid for tax withholding on vesting of restricted shares(3,597) 
Payments of long-term debt(5,625)(4,846)
Payment of contingent consideration for acquisition(305)(226)
Payments of finance lease obligations (3)
Net cash used in financing activities(53,572)(3,009)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS(1,492)(3,725)
NET CHANGE IN CASH AND CASH EQUIVALENTS(53,218)51,192 
CASH AND CASH EQUIVALENTS
Beginning of period103,095 47,998 
Cash and cash equivalents at end of period$49,877 $99,190 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

9

Table of Contents
STERLING CHECK CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Nine Months Ended
September 30,
(in thousands)20232022
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION  
Cash paid during the period for  
Interest, net of capitalized amounts of $308 and $245 for the nine months ended September 30, 2023 and 2022, respectively
$29,006 $24,277 
Income taxes13,219 11,513 
Noncash investing activities
Purchases of property and equipment in accounts payable and accrued expenses$400 $8 
Noncash purchase price of business combinations4,706 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10

Table of Contents
STERLING CHECK CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.    Description of Business
Sterling Check Corp. (the “Company”), a Delaware corporation headquartered in Independence, Ohio, is a global provider of technology-enabled background and identity verification services. The Company provides the foundation of trust and safety its clients need to create effective environments for their most essential resource—people. The Company offers a comprehensive hiring and risk management solution that begins with identity verification, followed by criminal background screening, credential verification, drug and health screening, employee onboarding document processing and ongoing risk monitoring.
As of September 30, 2023, the Company is 52.4% owned by an investment group consisting of entities advised by or affiliated with The Goldman Sachs Group, Inc. (“Goldman Sachs”) and Caisse de dépôt et placement du Québec (“CDPQ” and, together with Goldman Sachs, our “Sponsor”). CDPQ owns its equity interest in the Company indirectly through a limited partnership controlled by Goldman Sachs.
2.    Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
These unaudited condensed consolidated financial statements are unaudited; however, in the opinion of management, they reflect all adjustments consisting only of normal recurring adjustments necessary to state fairly the financial position, results of operations and cash flows for the periods presented in conformity with GAAP applicable to interim periods. The results of operations for the interim periods presented are not necessarily indicative of results for the full year or future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2022 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on March 2, 2023.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that can affect the reported amount of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Significant estimates include the impairment of long-lived assets, goodwill impairment, the determination of the fair value of acquired assets and liabilities, collectability of receivables, the valuation of stock-based awards and stock-based compensation and sales and income tax liabilities. The Company also applies an estimated useful life of three years to internally developed software assets. This is based on the historical observed pace of change in the Company’s delivery, technology, and product offerings as well as market competition. The Company believes that the estimates used in the preparation of these unaudited condensed consolidated financial statements are reasonable; however, actual results could differ materially from these estimates.
Segment Information
The Company has one operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.
Cash and Cash Equivalents
Cash and cash equivalents of $49.9 million and $103.1 million as of September 30, 2023 and December 31, 2022, respectively, include money market instruments with maturities of three months or less. The Company maintained cash outside the U.S. as of September 30, 2023 of $33.4 million with the largest deposits being held in India and Canada, with balances of $4.1 million and $6.0 million, respectively. Cash outside the U.S. was $28.0 million as of December 31, 2022, with the largest deposits being held in Canada and India, with balances of $9.2 million and $5.1 million, respectively.
11

Table of Contents
Foreign Currency
Assets and liabilities of operations having non-USD functional currencies are translated at period-end exchange rates, and income statement accounts are translated at weighted average exchange rates for the period. Gains or losses resulting from translating foreign currency financial statements, net of any related tax effects, are reflected in Accumulated Other Comprehensive Income or Loss (“OCI”), a separate component of stockholders’ equity on the unaudited condensed consolidated balance sheets. Gains or losses resulting from foreign currency transactions incurred in currencies other than the local functional currency are included in other income in the unaudited condensed consolidated statements of operations and comprehensive income. The cumulative translation adjustment resulted in losses of $5.5 million and $5.6 million as of September 30, 2023 and December 31, 2022, respectively.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable balances consist of trade receivables that are recorded at the invoiced amount, net of allowances for expected credit losses and for potential sales credits and reserves. Sales credits and reserves were $0.7 million and $0.9 million as of September 30, 2023 and December 31, 2022, respectively.
The Company adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments—Credit Losses (“CECL”) on January 1, 2022. The adoption of CECL resulted in a $0.3 million cumulative effect adjustment recorded in retained earnings as of January 1, 2022.
CECL requires an entity to utilize an impairment model to estimate its lifetime expected credit losses and record an allowance that, when deducted from the amortized cost basis of a financial asset, presents the net amount expected to be collected on the financial asset.
The Company maintains an allowance for expected credit losses in order to record accounts receivable at their net realizable value. Inherent in the assessment of the allowance for expected credit losses are certain judgments and estimates relating to, among other things, the Company’s customers’ access to capital, customers’ willingness and ability to pay, general economic conditions and the ongoing relationship with customers. Allowances have been recorded for receivables believed to be uncollectible, including amounts for the resolution of potential credit and other collection issues such as disputed invoices. The allowance for expected credit losses is determined by analyzing the Company’s historical write-offs, the current aging of receivables, the financial condition of customers and the general economic climate. Adjustments to the allowance may be required in future periods depending on how such potential issues are resolved or if the financial condition of the Company’s customers were to deteriorate resulting in an impairment of their ability to make payments. The Company has not historically had material write-offs due to uncollectible accounts receivable.
Allowances for expected credit losses were $2.7 million and $2.3 million as of September 30, 2023 and December 31, 2022, respectively. The following table summarizes changes in the allowance for expected credit losses for the periods presented:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)2023202220232022
Balance at beginning of period$2,658 $2,161 $2,304 $2,949 
Cumulative effect of accounting change upon adoption of CECL   254 
Additions97 351 556 1,010 
Write-offs, net of recoveries(82)(36)(190)(1,727)
Foreign currency translation adjustment(3)(14) (24)
Balance at end of period$2,670 $2,462 $2,670 $2,462 
Corporate Technology and Production Systems
Corporate technology and production systems includes costs related to maintaining the Company’s corporate information technology infrastructure and non-capitalizable costs to develop and maintain its production systems.
12

Table of Contents
The following table sets forth expenses included in each category of corporate technology and production systems for the periods presented:
 Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)2023202220232022
Corporate information technology$4,665 $7,012 $14,854 $19,425 
Development of platform and product initiatives4,371 4,433 13,065 12,797 
Production support and maintenance2,293 2,270 6,790 6,584 
Total production systems6,664 6,703 19,855 19,381 
Total corporate technology and production systems
$11,329 $13,715 $34,709 $38,806 
Corporate information technology consists of salaries and benefits of personnel (including stock-based compensation expense) supporting internal operations such as information technology support and the maintenance of information security and business continuity functions. Also included are third-party costs including cloud computing costs that support the Company’s corporate internal systems, software licensing and maintenance, telecommunications and other technology infrastructure costs.
Production systems costs consist of non-capitalizable personnel costs including contractor costs incurred for the development of platform and product initiatives and production support and maintenance. Platform and product initiatives facilitate the development of the Company’s technology platform and the launch of new screening products. Production support and maintenance includes costs to support and maintain the technology underlying the Company’s existing screening products and to enhance the ease of use of the Company’s cloud applications. Certain personnel costs related to new products and features are capitalized and amortized to depreciation and amortization.
Included within corporate technology and production systems are non-capitalizable production system and corporate information technology expenses related to Project Ignite, a three-phase strategic investment initiative. Phase one of Project Ignite modernized client and candidate experiences and is complete. Phase two of Project Ignite focused on decommissioning the Company’s on-premises data centers and migrating the Company’s production systems and corporate information technological infrastructure to a managed service provider in the cloud. During the first half of 2021, the Company completed phase two initiatives related to the migration of its production and fulfillment systems to the cloud, and as a result, approximately 98% of revenue is processed through platforms hosted in the cloud. The Company incurred expenses related to phase two to complete the decommissioning of on-premises data centers for internal corporate technology infrastructure and migration to the cloud which was completed as of September 30, 2022. Phase three of Project Ignite was decommissioning of the platforms purchased over the prior ten years and the migration of the clients to one global platform. This third and final phase, which was completed in the first quarter of 2023, unified clients onto a single global platform. The Company’s core platform now processes approximately 80% of its global revenue.
3.    Recent Accounting Standards Updates
The Company qualifies as an emerging growth company under the Jumpstart Our Business Startups Act (the “JOBS Act”). The JOBS Act permits extended transition periods for complying with new or revised accounting standards affecting public companies. The Company has elected to use the extended transition periods and is adopting new or revised accounting standards on the FASB’s non-public company timeline. As such, the Company’s financial statements may not be comparable to financial statements of public entities that comply with new or revised accounting standards on a non-delayed basis.
The Company will cease to be an emerging growth company upon the earliest of (a) the last day of the fiscal year in which it has total annual gross revenues of $1.235 billion or more; (b) the last day of its fiscal year following the fifth anniversary of the date of its initial public offering (“IPO”); (c) the date on which it has issued more than $1.0 billion in nonconvertible debt during the previous three years; or (d) the date on which it is deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur as of the last day of a fiscal year in which the market value of its common stock held by non-affiliates equals or exceeds $700 million as of the last business day of the second fiscal quarter of such fiscal year, which threshold was not exceeded as of June 30, 2023.
13

Table of Contents
4.    Acquisitions
Socrates and A-Check Acquisitions
On January 4, 2023, the Company acquired all of the outstanding shares of Socrates Limited and its affiliates (“Socrates”), a screening company in Latin America, pursuant to a share purchase agreement. The Socrates acquisition expands the Company’s global presence into Latin America to serve the rapidly growing regional hiring needs of both multi-national and local clients. On March 1, 2023, the Company acquired all of the outstanding shares of A-Check Global (“A-Check”), a U.S.-based employment screening organization, pursuant to a share purchase agreement. The A-Check acquisition provides the Company access to a high quality, enterprise-focused customer base diversified across verticals including healthcare and telecom. The aggregate purchase price for the acquisitions totaled approximately $66.2 million, was funded with available cash on hand and is subject to certain closing adjustments specified in the share purchase agreements and includes initial contingent consideration related to the A-Check acquisition of $4.7 million recorded at fair value. The contingent consideration will be determined based on actual future results. The initial fair value of the contingent consideration consisted of $2.6 million for an earn-out payable one year after the acquisition based upon revenue retention and a $2.1 million payable throughout the second and third year following the acquisition based on revenue retention and referral revenue. The Company recorded a preliminary allocation of the purchase price to assets acquired and liabilities assumed based on their estimated fair values as of their respective purchase dates. Additionally, in connection with the Socrates acquisition, $5.0 million is payable to certain senior employees two years after the acquisition date based on certain retention requirements.
The Company incurred approximately $2.0 million of transaction expenses related to the acquisitions during the nine months ended September 30, 2023.
The preliminary allocation of the purchase price is based on the fair value of assets acquired and liabilities assumed as of the applicable acquisition date. The following table summarizes the consideration paid and the amounts recognized for the assets acquired and liabilities assumed:
Preliminary Purchase Price AllocationAdjusted Purchase Price Allocation
(in thousands)March 31,
2023
Purchase Price AdjustmentsSeptember 30,
2023
Consideration
Cash$11,935 $— $11,935 
Other current assets
Accounts receivable4,279 (3)4,276 
Other current assets805 447 1,252 
Property and equipment177 (1)176 
Intangible assets32,141 (1,268)30,873 
Other long-term assets6 — 6 
Total assets acquired$49,343 $(825)$48,518 
Accounts payable and accrued expenses1,156 94 1,250 
Other current liabilities1,291 (72)1,219 
Deferred tax liability8,388 77 8,465 
Other liabilities2 — 2 
Total liabilities assumed$10,837 $99 $10,936 
Total identifiable net assets38,506 (924)37,582 
Goodwill27,352 1,218 28,570 
Total consideration$65,858 $294 $66,152 
Goodwill recognized is primarily attributable to assembled workforce and expected synergies and is not tax deductible in future years. Intangible assets acquired consist largely of customer lists in the amount of $28.0 million to be amortized over 15 years. The remaining intangible assets include trade names, developed technology and a non-compete agreement, which will be amortized over two years, eight years, and five years, respectively.
14

Table of Contents
The acquisitions are not material to the Company's financial position as of September 30, 2023 or results of operations for the three and nine months ended September 30, 2023, and therefore, pro forma operating results and other disclosures for the acquisitions are not presented.
EBI Acquisition
On November 30, 2021, the Company acquired all of the outstanding shares of Employment Background Investigations, Inc. (“EBI”) for a purchase price of $67.8 million, consisting of $66.3 million of cash and $1.5 million of contingent consideration recorded at fair value. As of December 31, 2022, the purchase price was reduced by $0.3 million reflecting the final determination of the post-closing adjustment of the purchase price in accordance with the purchase agreement with EBI, resulting in an adjusted purchase price of $67.5 million. The receivable related to this adjustment was collected in February 2023.
5.    Property and Equipment, Net
(in thousands)September 30,
2023
December 31,
2022
Furniture and fixtures$1,621 $2,568 
Computers and equipment37,763 41,084 
Leasehold improvements2,048 6,565 
 41,432 50,217 
Less: Accumulated depreciation(34,102)(39,876)
Total property and equipment, net$7,330 $10,341 
Depreciation expense on property and equipment was $0.8 million and $1.1 million during the three months ended September 30, 2023 and 2022, respectively, and $2.8 million and $3.3 million for the nine months ended September 30, 2023 and 2022, respectively. Write down of abandoned property and equipment no longer in use totaled less than $0.1 million and $1.7 million during the three and nine months ended September 30, 2023, respectively. Write down of abandoned property and equipment no longer in use was $0.2 million and $0.8 million for the three and nine months ended September 30, 2022, respectively.
6.    Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill for the periods presented were as follows:
(in thousands) 
Goodwill at December 31, 2022$849,609 
Acquisitions28,570 
Foreign currency translation adjustment211 
Goodwill at September 30, 2023$878,390 
Intangible Assets
Intangible assets, net consisted of the following for the periods presented:
 September 30, 2023December 31, 2022
(dollars in thousands)Gross Carrying AmountAccumulated AmortizationNetGross Carrying AmountAccumulated AmortizationNet
Customer lists$532,376 $(365,853)$166,523 $506,015 $(340,579)$165,436 
Trademarks77,659 (42,135)35,524 77,198 (37,519)39,679 
Non-compete agreement3,969 (2,781)1,188 3,179 (2,584)595 
Technology261,573 (229,257)32,316 246,220 (216,330)29,890 
Domain names10,118 (5,187)4,931 10,118 (4,682)5,436 
 $885,695 $(645,213)$240,482 $842,730 $(601,694)$241,036 
15

Table of Contents
Included within technology is $30.2 million and $28.1 million of internal-use software, net of accumulated amortization, as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023, $6.1 million of technology assets have not yet been put in service.
The Company capitalized $13.4 million of costs to develop internal-use software included in technology during the nine months ended September 30, 2023 (consisting of internal costs of $11.5 million and external costs of $1.8 million). The Company capitalized $11.7 million of costs to develop internal-use software included in technology during the nine months ended September 30, 2022 (consisting of internal costs of $9.4 million and external costs of $2.3 million).
For the three and nine months ended September 30, 2023, the Company recorded a write-down related to the impairment of capitalized software in the amount of less than $0.1 million and $0.2 million, respectively. For the three and nine months ended September 30, 2022, the Company recorded no write-down of capitalized software.
Amortization expense was $15.1 million and $15.5 million for the three months ended September 30, 2023 and 2022, respectively, and $44.3 million and $53.3 million for the nine months ended September 30, 2023 and 2022, respectively.
Except for the customer lists, which are amortized utilizing an accelerated method, all other intangible assets are amortized on a straight-line basis, which approximates the pattern in which economic benefits are consumed. Estimated amortization expense as of September 30, 2023 is as follows for each of the next five years:
(in thousands) 
Year Ending December 31, 
Remainder of fiscal year 2023$15,144 
202452,636 
202542,591 
202632,526 
202724,991 
Thereafter72,594 
 $240,482 
7.    Accrued Expenses
Accrued expenses on the unaudited condensed consolidated balance sheets as of the periods presented consisted of the following:
(in thousands)September 30,
2023
December 31,
2022
Accrued compensation$22,274 $29,835 
Accrued cost of revenues21,721 15,721 
Accrued interest223 3,143 
Other accrued expenses16,169 18,348 
Total accrued expenses$60,387 $67,047 
8.    Leases
Effective January 1, 2022 using the effective date method, the Company adopted the FASB’s Accounting Standards Update No. 2016-02, “Leases” (“ASC 842”), which requires the recognition of all leases, including operating leases on the unaudited condensed consolidated balance sheets by recording a right-of-use (“ROU”) asset and related liability, and elected to exclude short-term leases from adoption. The lease liability and ROU asset will be remeasured when there is a change in the lease term (or upon the occurrence of another reassessment trigger). Upon adoption on January 1, 2022, the Company recognized a ROU asset of $23.5 million and a lease liability of $23.8 million.
The Company determines if a contract is a lease or contains a lease at inception. Operating lease liabilities are measured, on each reporting date, based on the present value of the future minimum lease payments over the remaining lease term. The Company’s leases generally do not provide an implicit rate and, therefore, the Company uses the interest rate on its term loan credit agreement as its incremental borrowing rate under ASC 842. Operating lease assets are measured by adjusting the lease liability for lease incentives, initial direct costs incurred and asset
16

Table of Contents
impairments. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term with the operating lease asset reduced by the amount of the expense. Lease terms may include options to extend or terminate a lease when they are reasonably certain to occur.
The Company leases real estate and equipment for use in its operations. The Company has 16 operating leases with remaining lease terms ranging from 1 to 64 months as of September 30, 2023. In connection with the real estate consolidation program, during the three months ended June 30, 2023, the Company exited additional offices including the Company’s former principal executive office and headquarters in New York. A reduction of the operating leases ROU asset of $5.3 million for impairment charges was recorded in impairments and disposals of long-lived assets in the unaudited condensed consolidated statements of operations and comprehensive income. The Company exercised termination options reducing the lease terms on certain operating leases and recorded lease remeasurements to the operating lease liability and corresponding reductions to the operating leases ROU asset in the amount of $4.7 million during the three months ended June 30, 2023. $1.5 million was recorded to de-recognize the operating lease ROU asset related to certain leases in selling, general and administrative expense due to abandonment, during the three months ended June 30, 2023.
The components of lease expense for the periods presented are as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)2023202220232022
Components of total lease costs
Operating lease expense(1)
$810 $1,357 $4,796 $3,958 
Sublease income(278)(216)(843)(504)
Total net lease costs$532 $1,141 $3,953 $3,454 
_________________________
(1)The nine months ended September 30, 2023 includes $1.5 million of lease expense to de-recognize certain operating ROU assets which were abandoned during the three months ended June 30, 2023.
Information related to the Company’s ROU assets and lease liabilities for the period presented is as follows:
(dollars in thousands)September 30,
2023
December 31,
2022
Operating leases
Operating leases right-of-use asset$7,020 $20,084 
Operating leases liability, current portion$4,233 $3,717 
Long-term operating leases liability, net of current portion8,834 16,835 
Total operating leases liability$13,067 $20,552 
Weighted average remaining lease term in years - operating leases3.74.8
Weighted average discount rate - operating leases5.07 %4.50 %
Total remaining lease payments under the Company’s operating leases for the period presented are as follows:
(in thousands)September 30, 2023
Remainder of fiscal year 2023$1,229 
20245,243 
20252,337 
20262,117 
20272,149 
Thereafter1,113 
Total future minimum lease payments$14,188 
Less: imputed interest(1,121)
Total$13,067 
17

Table of Contents
9.    Debt
On November 29, 2022, Sterling Infosystems, Inc. (the “Borrower”), a Delaware corporation and a subsidiary of the Company, entered into a credit agreement (the “2022 Credit Agreement”) by and among the Borrower, as borrower, Sterling Intermediate Corp., KeyBank National Association, as administrative agent (the “Administrative Agent”), certain guarantors party thereto and the lenders party thereto.
The 2022 Credit Agreement provides for aggregate principal borrowings of $700.0 million, comprised of $300.0 million aggregate principal amount of term loans (the “Term Loans”) and a $400.0 million revolving credit facility (the “Revolving Credit Facility”). The Term Loans and the Revolving Credit Facility mature on November 29, 2027.
The table below sets forth the Company’s long-term debt as presented in the unaudited condensed consolidated balance sheets for the periods presented:
(in thousands)September 30,
2023
December 31,
2022
Current portion of long-term debt
Term Loans$13,125 $7,500 
Total current portion of long-term debt$13,125 $7,500 
Long-term debt
Term Loans, due November 29, 2027 (7.67% and 6.76% at September 30, 2023 and December 31, 2022, respectively)
281,250 292,500 
Revolving Credit Facility205,494 205,494 
Unamortized discount and debt issuance costs(3,410)(4,004)
Total long-term debt, net$483,334 $493,990 
The estimated fair value of the Company’s 2022 Credit Agreement was $482.2 million and $487.1 million as of September 30, 2023 and December 31, 2022, respectively. These fair values were determined based on quoted prices in markets with similar instruments that are less active (Level 2 inputs as defined below) as an observable price of the 2022 Credit Agreement or similar liabilities is not readily available.
The Company was in compliance with all financial covenants under its credit agreement as of September 30, 2023.
10.    Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. An asset or liability’s level in the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The three levels of inputs used to measure fair value are as follows:
Level 1Quoted prices in active markets for identical assets and liabilities.
Level 2Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flows methodologies and similar techniques that use significant unobservable inputs.
The Company considers the recorded value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses to approximate the fair value of the respective assets and liabilities as of September 30, 2023 and December 31, 2022 based upon the short-term nature of such assets and liabilities (Level 1). See Note 9, “Debt” for discussion of the fair value of the Company’s debt.
Interest rate swaps are measured at fair value on a recurring basis in the Company’s financial statements and are considered Level 2 financial instruments. Interest rate swaps are measured based on quoted prices for similar financial instruments and other observable inputs recognized. The currency forward agreements are typically cash settled in U.S. dollars for their fair value at or close to their settlement date.
Contingent consideration related to acquisitions is considered a Level 3 financial instrument. As of September 30, 2023, the fair value of contingent consideration related to the March 1, 2023 acquisition of A-Check
18

Table of Contents
and the November 30, 2021 acquisition of EBI. As of December 31, 2022, the contingent consideration related to the acquisition of EBI. The contingent consideration consists of estimated future payments related to the Company’s acquisitions, based on metrics such as revenue retention and referral revenue. The fair value is determined using various assumptions and estimates, including revenue and customer projections to forecast a range of outcomes for the contingent consideration. The Company reassesses the estimated fair value of the contingent consideration at the end of each reporting period based on the information available at the time. Changes in the significant unobservable inputs used may result in a significantly higher or lower fair value measurement. Changes in fair value of contingent consideration are recorded in selling, general and administrative expense in the statement of operations and comprehensive income.
The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of the periods presented:
September 30, 2023
(in thousands)Level 1Level 2Level 3Total
Assets   
Interest rate swaps$ $3,073 $ $3,073 
Liabilities
Interest rate swaps 475  475 
Contingent consideration
  4,934 4,934 
December 31, 2022
(in thousands)Level 1Level 2Level 3Total
Liabilities
Contingent consideration
$ $ $1,219 $1,219 
The following table summarizes the change in fair value of the Level 3 liabilities with significant unobservable inputs for the periods presented:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)
2023202220232022
Fair value of contingent consideration, beginning of period
$5,620 $1,230 $1,219 $1,445 
Acquired liabilities  4,706  
Cash payments
 (11)(305)(226)
Change in fair value of contingent consideration, net
(686) (686) 
Fair value of contingent consideration, end of period
$4,934 $1,219 $4,934 $1,219 
During the three and nine months ended September 30, 2023 and 2022, the Company did not re-measure any financial assets or liabilities at fair value on a nonrecurring basis. There were no transfers between levels during the periods presented.
11.    Derivative Instruments and Hedging Activities
Interest Rate Swap Hedges
To reduce exposure to variability in expected future cash outflows on variable rate debt attributable to the changes in the applicable interest rates under the 2022 Credit Agreement, the Company entered into interest rate swaps to economically offset a portion of this risk.
For interest rate swap derivatives designated and that qualify as hedges for accounting purposes, the unrealized gain or loss on the derivative is initially recorded in OCI, reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item.
19

Table of Contents
As of September 30, 2023, the Company had the following outstanding interest rate swap derivatives that were used to hedge its interest rate risks:
ProductNumber of InstrumentsEffective DateMaturity Date
Current Notional(1)
Interest Rate Swaps4February 28, 2023November 29, 2027
$300.0 million USD
_________________________
(1)The notional value steps down from $300.0 million to $150.0 million on February 27, 2026.
All financial derivative instruments are carried at their fair value on the balance sheet. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the unaudited condensed consolidated balance sheets as of the dates presented:
Asset Derivatives
September 30, 2023December 31, 2022
(in thousands)Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as hedging instruments:
Interest rate swapsOther current assets$3,073 Other current assets$ 
Liability Derivatives
September 30, 2023December 31, 2022
(in thousands)Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as hedging instruments:
Interest rate swapsOther liabilities$475 Other liabilities$ 
The tables below present the effect of cash flow hedge accounting on accumulated OCI for the periods presented:
Three Months Ended
September 30,
Three Months Ended
September 30,
(in thousands)2023202220232022
Derivatives designated as hedging instruments:Amount of Gain or (Loss) Recognized in OCI on DerivativeLocation of Gain or (Loss) Reclassified from Accumulated OCI into IncomeAmount of Gain or (Loss) Reclassified from Accumulated OCI into Income
Interest rate swaps$3,910 $ Interest expense$761 $ 
Nine Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)2023202220232022
Derivatives designated as hedging instruments:Amount of Gain or (Loss) Recognized in OCI on DerivativeLocation of Gain or (Loss) Reclassified from Accumulated OCI into IncomeAmount of Gain or (Loss) Reclassified from Accumulated OCI into Income
Interest rate swaps$4,008 $ Interest expense$1,410 $ 
The table below presents the effect of the Company’s cash flow hedge accounting on the unaudited condensed consolidated statements of operations and comprehensive income for the periods presented:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(in thousands)Interest Expense
Total amounts of income and expense line items in which the effects of cash flow hedges are recorded$9,305 $7,764