Sterling Check Corp., the leading provider of background and identity verification services, just released their Q3 2023 earnings call transcript. While the headline numbers may paint a picture of a company navigating a choppy macro environment, a closer look reveals a hidden narrative, one that's potentially overlooked by most analysts: Sterling's strategic positioning to capitalize on the burgeoning gig economy.

The transcript itself doesn't explicitly trumpet this narrative. It's woven subtly throughout, like a golden thread running through a tapestry. Sterling's CEO, Josh Peirez, hints at it when discussing the significant growth opportunities for their post-hire monitoring solution within the gig industry. He notes that "those companies especially benefit from effortless compliance monitoring through a scalable and API-driven solution."

This seemingly innocuous statement holds the key to a potential goldmine. The gig economy is exploding. It's projected to reach $455 billion in the US alone by 2023. Gig workers, often juggling multiple jobs and dispersed across geographies, pose unique compliance challenges for employers. Traditional background checks, conducted once at the point of hiring, become insufficient in this dynamic landscape. Continuous monitoring becomes essential to ensure ongoing compliance and mitigate risks associated with evolving worker profiles.

Sterling, with its subscription-based monitoring solution, is perfectly positioned to address this need. Their solution, offering continuous tracking of criminal records, driving records, licensing credentials, and even social media activity, provides gig platforms with the real-time insights they need to navigate this complex ecosystem.

Let's delve into the numbers. While Sterling doesn't disclose specific revenue figures for their monitoring solution, they reveal that combined revenues from Identity Verification and Post-Hire Monitoring, the two strategic growth areas, represent over 10% of their total revenues for the third consecutive quarter. This signifies a consistent and significant contribution from these fast-growing, high-margin solutions.

Here's where the hypothesis comes in. If we assume that Post-Hire Monitoring contributes even half of this 10% figure, we're looking at approximately $9 million in revenue for Q3 2023 alone. Now, factor in the explosive growth trajectory of the gig economy and the increasing adoption of monitoring solutions by gig platforms, and it's not unreasonable to project substantial revenue acceleration for Sterling in this domain.

Revenue Breakdown: Identity Verification & Post-Hire Monitoring

This chart illustrates the hypothetical breakdown of revenue between Identity Verification and Post-Hire Monitoring, assuming an even split within the stated 10% of total revenue.

There are other supporting clues within the transcript. Sterling's partnership with Konfir, a leading provider of instant employment verification for UK workers, signifies their commitment to innovative solutions that streamline processes and enhance turnaround times – critical aspects for the fast-paced gig economy. The fact that Sterling plans to expand this partnership to other international markets further strengthens this narrative.

Moreover, Sterling's focus on cost optimization through automation and AI positions them to scale efficiently and cost-effectively as the gig economy expands. This translates to increased profitability and a competitive edge in a market driven by cost sensitivity.

"Fun Fact: Did you know that Sterling Check has conducted background checks for some of the largest gig platforms in the world, including Uber and Lyft? This experience, coupled with their innovative technology and strategic partnerships, makes them a formidable force in the gig economy space."

While the market may be fixated on Sterling's base revenue fluctuations, the discerning investor should look beyond the surface. Sterling is quietly building a formidable engine to capitalize on the gig economy boom, a narrative that could significantly impact their future growth and profitability. This hidden gem may soon sparkle brightly, leaving many analysts wondering how they missed it.