October 20, 2021

Wagit Mart

Reach Out And Touch Business

First Advantage Reports Second Quarter 2021 Results

Second Quarter 2021 Highlights

(All results compared to prior-year period)

  • Revenues increased 66.5% to $174.8 million
  • Net income was $3.8 million, compared to a net loss of $16.4 million in the prior year period
  • Adjusted EBITDA1 was $56.3 million, compared to $31.7 million in the prior year period
  • Adjusted Net Income1 was $33.2 million, compared to $12.2 million in the prior year period
  • Initial public offering on the Nasdaq Global Select Market completed on June 25, 2021; net proceeds to the Company of $316.5 million used to prepay $200.0 million of debt and for general corporate purposes
  • 2021 guidance ranges for revenue of $640 to $650 million, Adjusted EBITDA of $186 to $190 million, and Adjusted Net Income of $110 to $113 million2

ATLANTA, Aug. 12, 2021 (GLOBE NEWSWIRE) — First Advantage Corporation (NASDAQ: FA), a leading global provider of technology solutions for screening, verifications, safety, and compliance related to human capital, today announced financial results for the second quarter ended June 30, 2021.

Key Financial Metrics
(Amounts in millions, except per share data and percentages)

    Three months ended June 30, 
    2021        2020     Change 
Revenues  174.8     $ 105.0     66.5
Income (loss) from operations  17.3     $ (6.2 )   NM  
Net income (loss)  3.8     $ (16.4 )   NM  
Net income margin    2.2 %     (15.6 )%      
Diluted earnings (loss) per share  0.03     $ (0.13 )   NM  
Adjusted EBITDA1  56.3     $ 31.7     77.9
Adjusted EBITDA Margin1    32.2 %     30.1 %      
Adjusted Net Income1  33.2     $ 12.2     171.9
Adjusted Diluted Earnings Per Share1  0.25     $ 0.09     177.8
1   Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted Earnings Per Share are non-GAAP measures. Please see the schedules accompanying this earnings release for a reconciliation of these measures to their most directly comparable respective GAAP measure.

“First Advantage delivered exceptional performance during the second quarter of 2021, achieving year-over-year revenue and Adjusted EBITDA growth of 66.5% and 77.9%, respectively,” said Scott Staples, Chief Executive Officer. “With the global economy showing strong recovery and the increasing competition for talent, we continued to help our customers accelerate hiring and manage human capital risk.”

Mr. Staples continued, “Our robust revenue growth was attributable to increasing momentum within our existing customer base, significant new customer growth, and the contribution from our UK screening business acquisition, which closed in March 2021. In addition, continued advancements in robotic process automation, utilization of our proprietary data and intelligent routing technology, further operational efficiencies, and G&A leverage drove Adjusted EBITDA growth and Adjusted EBITDA Margin expansion.”

Balance Sheet and Cash Flow

First Advantage shares commenced trading on the Nasdaq Global Select Market on June 23, 2021 and the Company completed its upsized initial public offering on June 25, 2021 of 29,325,000 shares of common stock, including the full exercise by the underwriters of their option to purchase up to 3,825,000 additional shares of common stock. Of the shares sold in the IPO, 22,856,250 shares were sold by First Advantage and 6,468,750 shares were sold by certain existing stockholders of First Advantage. The offering was upsized 20% from the number of offered shares at launch and priced at the top of the price range indicated at launch. The Company received net proceeds of approximately $316.5 million from the offering after deducting underwriting discounts and commissions and offering expenses. First Advantage used the net proceeds to prepay $200.0 million in aggregate principal amount of the outstanding indebtedness under its first lien credit facility and intends to use the balance for general corporate purposes. As a result of the prepayment of its first lien credit facility, the Company has no remaining mandatory quarterly principal payments due under the facility.

Additionally, in connection with the IPO and effective upon closing of the IPO, the Company amended its revolving credit facility to increase borrowing capacity from $75.0 million to $100.0 million and extend the maturity date from January 31, 2025 to July 31, 2026. There are no amounts currently outstanding under this facility.

During the second quarter of 2021, the Company generated $32.4 million of cash flow from operating activities and spent $6.3 million in purchases of property and equipment and capitalized software development costs. First Advantage ended the second quarter of 2021 with cash and cash equivalents of $257.1 million.

Full Year 2021 Guidance

The following table summarizes Full Year 2021 guidance metrics, as of August 12, 2021:

  Full Year 2021 Guidance
Revenues $640 million – $650 million
Adjusted EBITDA2 $186 million – $190 million
Adjusted Net Income2 $110 million – $113 million
Capital expenditures (consisting of purchases of property and equipment and capitalized software development costs) $25 million – $26 million
2  A reconciliation of the foregoing guidance for the Non-GAAP metrics of Adjusted EBITDA and Adjusted Net Income to GAAP net income (loss) cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the Company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results.   

Actual results may differ materially from First Advantage’s Full Year 2021 Guidance as a result of, among other things, the factors described under “Forward-Looking Statements” below.

Conference Call and Webcast Information

First Advantage will host a conference call to review its results today, August 12, 2021, at 8:30 a.m. ET. To participate in the conference call, please dial (877) 313-2269 (domestic) or (470) 495-9550 (international) approximately ten minutes before the start. Please mention to the operator that you are dialing in for the First Advantage second quarter 2021 earnings call or provide the conference code 8175296. The call will also be webcast live on the Company’s investor relations website at https://investors.fadv.com under the “News & Events” and then “Events & Presentations” section, where related presentation materials will be posted prior to the conference call.

Following the conference call, a replay of the webcast will be available on the Company’s investor relations website, https://investors.fadv.com, for approximately 90 days.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, our operations and financial performance. Forward-looking statements include all statements that are not historical facts. These forward-looking statements relate to matters such as our industry, business strategy, goals, and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources, and other financial and operating information. In some cases, you can identify these forward-looking statements by the use of words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “will,” “seek,” “foreseeable,” “guidance,” the negative version of these words, or similar terms and phrases.

These forward-looking statements are subject to various risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify. Such risks and uncertainties include, but are not limited to, the following:

  • the impact of COVID-19 and related risks on our results of operations, financial position, and/or liquidity;
  • our operations in a highly regulated industry and the fact that we are subject to numerous and evolving laws and regulations, including with respect to personal data and data security;
  • our reliance on third-party data providers;
  • negative changes in external events beyond our control, including our customers’ onboarding volumes, economic drivers which are sensitive to macroeconomic cycles, and the COVID-19 pandemic;
  • potential harm to our business, brand, and reputation as a result of security breaches, cyber-attacks, or the mishandling of personal data;
  • the continued integration of our platforms and solutions with human resource providers such as applicant tracking systems and human capital management systems as well as our relationships with such human resource providers;
  • disruptions, outages, or other errors with our technology and network infrastructure, including our data centers, servers, and third-party cloud and internet providers and our migration to the cloud;
  • our ability to obtain, maintain, protect and enforce our intellectual property and other proprietary information;
  • our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting our obligations; and
  • our Sponsor (Silver Lake Group, L.L.C., together with its affiliates, successors, and assignees) controls us and may have interests that conflict with ours or those of our stockholders.

For additional information on these and other factors that could cause First Advantage’s actual results to differ materially from expected results, please see our prospectus, dated June 22, 2021, filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(4) of the Securities Act of 1933, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. The forward-looking statements included in this press release are made only as of the date of this press release, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law.

Non-GAAP Financial Information

This press release contains “non-GAAP financial measures” that are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Specifically, we make use of the non-GAAP financial measures “Adjusted EBITDA,” “Adjusted EBITDA Margin,” “Adjusted Net Income,” and “Adjusted Diluted Earnings Per Share.”

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted Earnings Per Share have been presented in this press release as supplemental measures of financial performance that are not required by or presented in accordance with GAAP because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes these non-GAAP measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate, and capital investments. Management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted Earnings Per Share to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation, and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted Earnings Per Share are not recognized terms under GAAP and should not be considered as an alternative to net income (loss) as a measure of financial performance or cash provided by (used in) operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. The presentations of these measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.  

We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenues. We define Adjusted Net Income for a particular period as net income before taxes adjusted for debt-related costs, acquisition-related depreciation and amortization, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges, to which we then apply the related effective tax rate. We define Adjusted Diluted Earnings Per Share as Adjusted Net Income divided by adjusted weighted average number of shares outstanding—diluted. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures, see the reconciliations included at the end of this press release.

About First Advantage

First Advantage (NASDAQ: FA) is a leading global provider of technology solutions for screening, verifications, safety, and compliance related to human capital. The Company delivers innovative solutions and insights that help customers manage risk and hire the best talent. Enabled by its proprietary technology platform, First Advantage’s products and solutions help companies protect their brands and provide safer environments for their customers and their most important resources: employees, contractors, contingent workers, tenants, and drivers. Headquartered in Atlanta, Georgia, First Advantage performs screens in over 200 countries and territories on behalf of its more than 30,000 customers. For more information about First Advantage, visit the Company’s website at https://fadv.com/.

Contacts

Investors:

Stephanie D. Gorman
Vice President, Investor Relations
[email protected]
(888) 314-9761

Media:
Elisabeth Warrick
Senior Brand Communications Manager
[email protected]
(888) 314-9761

Consolidated Financial Statements

First Advantage Corporation
Condensed Consolidated Balance Sheets
(Unaudited)

    Successor     Successor  
    June 30,     December 31,  
(in thousands, except share and per share amounts)   2021     2020  
ASSETS            
CURRENT ASSETS            
Cash and cash equivalents   $ 257,122     $ 152,818  
Restricted cash     156       152  
Short-term investments     1,352       1,267  
Accounts receivable (net of allowance for doubtful accounts of $666 and $967 at June 30, 2021 and December 31, 2020, respectively)     128,906       111,363  
Prepaid expenses and other current assets     11,338       8,699  
Income tax receivable     2,272       3,479  
Total current assets     401,146       277,778  
Property and equipment, net     172,239       190,282  
Goodwill     774,562       770,089  
Trade name, net     83,828       87,702  
Customer lists, net     406,415       435,661  
Deferred tax asset, net     1,592       807  
Other assets     2,397       1,372  
TOTAL ASSETS   $ 1,842,179     $ 1,763,691  
LIABILITIES AND EQUITY            
CURRENT LIABILITIES            
Accounts payable   $ 47,314     $ 44,117  
Accrued compensation     22,244       18,939  
Accrued liabilities     27,346       25,200  
Current portion of long-term debt           6,700  
Income tax payable     1,922       2,451  
Deferred revenue     540       431  
Total current liabilities     99,366       97,838  
Long-term debt (net of deferred financing costs of $10,756 and $26,345 at June 30, 2021 and December 31, 2020, respectively)     553,968       778,605  
Deferred tax liability, net     81,744       86,770  
Other liabilities     7,306       6,208  
Total liabilities     742,384       969,421  
COMMITMENTS AND CONTINGENCIES            
EQUITY            
Common stock – $0.001 par value; 1,000,000,000 shares authorized, 152,856,250 and 130,000,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively     153       130  
Additional paid-in-capital     1,158,804       839,148  
Accumulated deficit     (63,111 )     (47,492 )
Accumulated other comprehensive income     3,949       2,484  
Total equity     1,099,795       794,270  
TOTAL LIABILITIES AND EQUITY   $ 1,842,179     $ 1,763,691  

First Advantage Corporation
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)

    Successor  
(in thousands, except share and per share amounts)   Three Months
Ended
June 30, 2021
    Three Months
Ended
June 30, 2020
 
REVENUES   $ 174,826     $ 104,993  
             
OPERATING EXPENSES:            
Cost of services (exclusive of depreciation and amortization below)     84,868       52,404  
Product and technology expense     11,680       7,205  
Selling, general, and administrative expense     25,075       15,014  
Depreciation and amortization     35,918       36,572  
Total operating expenses     157,541       111,195  
INCOME (LOSS) FROM OPERATIONS     17,285       (6,202 )
             
OTHER EXPENSE:            
Interest expense     10,467       13,816  
Interest income     (15 )     (153 )
Loss on extinguishment of debt            
Transaction expenses, change in control            
Total other expense     10,452       13,663  
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES     6,833       (19,865 )
Provision (benefits) for income taxes     3,063       (3,499 )
NET INCOME (LOSS)   $ 3,770     $ (16,366 )
             
Foreign currency translation (loss) income     (1,295 )     486  
COMPREHENSIVE INCOME (LOSS)   $ 2,475     $ (15,880 )
             
NET INCOME (LOSS)   $ 3,770     $ (16,366 )
Basic net income (loss) per share   $ 0.03     $ (0.13 )
Diluted net income (loss) per share   $ 0.03     $ (0.13 )
Weighted average number of shares outstanding – basic     131,507,005       130,000,000  
Weighted average number of shares outstanding – diluted     135,368,909       130,000,000  

First Advantage Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)

    Successor       Predecessor  
(in thousands)   Six Months
Ended
June 30, 2021
    Period from
February 1, 2020
through June 30, 2020
      Period from
January 1, 2020
through January 31, 2020
 
CASH FLOWS FROM OPERATING ACTIVITIES                    
Net (loss)   $ (15,619 )   $ (38,180 )     $ (36,530 )
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:                    
Depreciation and amortization     70,681       61,059         2,105  
Loss on extinguishment of debt     13,938               10,533  
Amortization of deferred financing costs     5,059       1,456         569  
Bad debt (recovery) expense     (367 )     56         102  
Deferred taxes     (5,975 )     (9,231 )       (997 )
Share-based compensation     3,226       801         3,976  
(Gain) on foreign currency exchange rates     (319 )     (285 )       (82 )
Loss on disposal of fixed assets     81       63         8  
Change in fair value of interest rate swaps     (953 )     5,156          
Changes in operating assets and liabilities:                    
Accounts receivable     (16,895 )     7,058         9,384  
Prepaid expenses and other current assets     (2,654 )     4,468         (4,604 )
Other assets     (1,032 )     (287 )       (62 )
Accounts payable     2,590       3,651         (8,871 )
Accrued compensation and accrued liabilities     2,780       (11,337 )       4,102  
Deferred revenue     106       (16 )       11  
Other liabilities     545       (389 )       767  
Income taxes receivable and payable, net     906       (634 )       373  
Net cash provided by (used in) operating activities     56,098       23,409         (19,216 )
CASH FLOWS FROM INVESTING ACTIVITIES                    
Changes in short-term investments     (92 )     706         (163 )
Acquisition of business     (7,588 )              
Purchase of property and equipment     (3,841 )     (2,724 )       (951 )
Capitalized software development costs     (7,482 )     (4,465 )       (929 )
Net cash used in investing activities     (19,003 )     (6,483 )       (2,043 )
CASH FLOWS FROM FINANCING ACTIVITIES                    
Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commissions     320,559                
Payments of initial public offering issuance costs     (1,028 )              
Shareholder distribution     (313 )              
Capital contributions     241       59,423         41,143  
Distributions to Predecessor Members and Optionholders           (4,087 )       (17,991 )
Borrowings from Successor First Lien Credit Facility     261,413                
Repayments of Successor First Lien Credit Facility     (363,875 )              
Repayment of Successor Second Lien Credit Facility     (146,584 )              
Borrowings on Successor Revolver           25,000          
Repayments on Successor Revolver           (25,000 )        
Repayment of Predecessor First Lien Credit Facility                   (34,000 )
Payments of debt issuance costs     (1,257 )     (1,397 )        
Payments on capital lease obligations     (925 )     (977 )       (274 )
Payments on deferred purchase agreements     (362 )              
Net cash provided by (used in) financing activities     67,869       52,962         (11,122 )
Effect of exchange rate on cash. cash equivalents, and restricted cash     (656 )     (1,141 )       (102 )
Increase (decrease) in cash, cash equivalents, and restricted cash     104,308       68,747         (32,483 )
Cash, cash equivalents, and restricted cash at beginning of period     152,970       48,263         80,746  
Cash, cash equivalents, and restricted cash at end of period   $ 257,278     $ 117,010       $ 48,263  
                     
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                    
Cash paid for income taxes, net of refunds received   $ 3,736     $ 1,915       $ 279  
Cash paid for interest   $ 13,721     $ 19,994       $ 224  
NON-CASH INVESTING AND FINANCING ACTIVITIES:                    
Offering costs included in accounts payable and accrued liabilities   $ 3,006     $       $  
Non-cash property and equipment additions   $ 2,797     $ 274       $ 289  
Distributions declared to Optionholders but not paid   $     $       $ 781  

Reconciliation of Consolidated Non-GAAP Financial Measures

    Successor  
(in thousands)   Three
Months
Ended
June 30,
2021
    Three
Months
Ended
June 30,
2020
 
Net income (loss)   $ 3,770     $ (16,366 )
Interest expense, net     10,452       13,663  
Provision for income taxes     3,063       (3,499 )
Depreciation and amortization     35,918       36,572  
Loss on extinguishment of debt            
Share-based compensation     2,664       520  
Transaction and acquisition-related charges (a)     382       76  
Integration and restructuring charges(b)     73       262  
Other(c)           427  
Adjusted EBITDA   $ 56,322     $ 31,655  
Revenues     174,826       104,993  
Adjusted EBITDA Margin     32.2 %     30.1 %
a) Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Additionally, the three months ended June 30, 2021 (Successor) includes incremental professional service fees incurred related to the initial public offering.
b) Represents charges from organizational restructuring and integration activities outside of the ordinary course of business.
c) Represents non-cash and other charges primarily related to legal exposures inherited from legacy acquisitions, foreign currency (gains) losses, and (gains) losses on the sale of assets. Additionally, the three months ended June 30, 2020 (Successor) includes the incremental costs incurred due to COVID-19.

Reconciliation of Consolidated Non-GAAP Financial Measures (continued)

    Successor  
(in thousands)   Three
Months
Ended
June 30,
2021
    Three
Months
Ended
June 30,
2020
 
Net income (loss)   $ 3,770     $ (16,366 )
Provision for income taxes     3,063       (3,499 )
Income (loss) before provision for income taxes     6,833       (19,865 )
Debt-related costs(a)     4,355       877  
Acquisition-related depreciation and amortization(b)     31,786       34,135  
Share-based compensation     2,664       520  
Transaction and acquisition-related charges(c)     382       76  
Integration and restructuring charges(d)     73       262  
Other(e)           427  
Adjusted Net Income before income tax effect     46,093       16,432  
Less: Income tax effect(f)     12,896       4,223  
Adjusted Net Income   $ 33,197     $ 12,209  
    Successor  
    Three
Months
Ended
June 30,
2021
    Three
Months
Ended
June 30,
2020
 
Diluted net income (loss) per share (GAAP)   $ 0.03     $ (0.13 )
Adjusted Net Income adjustments per share            
Income taxes     0.02       (0.03 )
Debt-related costs (a)     0.03       0.01  
Acquisition-related depreciation and amortization (b)     0.25       0.27  
Share-based compensation     0.02       0.00  
Transaction and acquisition related charges (c)     0.00       0.00  
Integration and restructuring charges (d)     0.00       0.00  
Other (e)           0.00  
Adjusted income taxes (f)     (0.10 )     (0.03 )
Adjusted Diluted Earnings Per Share (Non-GAAP)   $ 0.25     $ 0.09  
             
Weighted average number of shares outstanding used in computation of Adjusted Diluted Earnings Per Share:            
Weighted average number of shares outstanding—diluted (GAAP)     135,368,909       130,000,000  
Options and restricted stock not included in weighted average number of shares outstanding—diluted (GAAP) (using treasury stock method)            
Adjusted weighted average number of shares outstanding—diluted (Non-GAAP)     135,368,909       130,000,000  
a) Represents the loss on extinguishment of debt and non-cash interest expense related to the amortization of debt issuance costs for the financing for the “Silver Lake Transaction” (On January 31, 2020, a fund managed by Silver Lake acquired substantially all of the Company’s equity interests from the Predecessor equity owners, primarily funds managed by Symphony Technology Group).
b) Represents the depreciation and amortization expense related to intangible assets and developed technology assets recorded due to the application of ASC 805, Business Combinations.
c) Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Additionally, the three months ended June 30, 2021 (Successor) includes incremental professional service fees incurred related to the initial public offering.
d) Represents charges from organizational restructuring and integration activities outside of the ordinary course of business.
e) Represents non-cash and other charges primarily related to legal exposures inherited from legacy acquisitions, foreign currency (gains) losses, and (gains) losses on the sale of assets. Additionally, the three months ended June 30, 2020 (Successor) includes incremental costs incurred due to COVID-19.
f) Effective tax rates of 25.7% and 28.0% have been used to compute Adjusted Net Income for the three months ended June 30, 2020 and 2021, respectively. As of December 31, 2020, we had net operating loss carryforwards of approximately $197.6 million, $166.2 million, and $36.0 million for federal, state, and foreign income tax purposes, respectively, available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes we pay for federal, state and foreign income taxes differs significantly from the effective income tax rate computed in accordance with GAAP, and from the normalized rates shown above.