I dia
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2025
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: 001-31666
First Advantage Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware
84-3884690
(State or other jurisdiction of
incorporation or organization)
(I.R.S. EmployerIdentification No.)
1 Concourse Parkway NE, Suite 200
Atlanta, GA
30328
(Address of principal executive offices)
(Zip Code)
(678) 868-4151
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 par value per share
FA
The 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 filer
Accelerated filer
Non-accelerated filer
Smaller 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 ☒
As of August 1, 2025 the registrant had 173,990,560 shares of common stock, $0.001 par value per share, outstanding.
Table of Contents
Page
PART I.
FINANCIAL INFORMATION
2
Item 1.
Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
3
Condensed Consolidated Statements of Cash Flows
4
Condensed Consolidated Statements of Changes in Stockholders’ Equity
5
Notes to Unaudited Condensed Consolidated Financial Statements
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
37
Item 4.
Controls and Procedures
PART II.
OTHER INFORMATION
38
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
40
Signatures
41
1
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
(Unaudited)
(in thousands, except share and par value amounts)
June 30, 2025
December 31, 2024
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
184,261
168,688
Restricted cash
84
795
Accounts receivable (net of allowance for doubtful accounts of $5,191 and $3,832 at June 30, 2025 and December 31, 2024, respectively)
283,078
266,800
Prepaid expenses and other current assets
25,462
31,041
Income tax receivable
9,961
8,669
Total current assets
502,846
475,993
Property and equipment, net
275,635
307,539
Goodwill
2,143,359
2,124,528
Intangible assets, net
925,327
987,948
Deferred tax asset, net
4,951
5,682
Other assets
19,094
21,203
TOTAL ASSETS
3,871,212
3,922,893
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
111,640
120,872
Accrued compensation
53,325
52,805
Accrued liabilities
56,462
44,700
Current portion of long-term debt
21,850
Current portion of operating lease liability
3,844
4,245
Income tax payable
1,446
1,942
Deferred revenues
4,824
4,274
Total current liabilities
253,391
250,688
Long-term debt (net of deferred financing costs of $38,403 and $41,861 at June 30, 2025 and December 31, 2024, respectively)
2,104,285
2,121,289
Deferred tax liability, net
194,998
222,738
Operating lease liability, less current portion
7,339
9,149
Other liabilities
12,036
11,990
Total liabilities
2,572,049
2,615,854
COMMITMENTS AND CONTINGENCIES (Note 12)
EQUITY
Common stock - $0.001 par value; 1,000,000,000 shares authorized, 173,839,182 and 173,171,145 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively
174
173
Additional paid-in-capital
1,517,179
1,504,007
Accumulated deficit
(200,694
)
(159,808
Accumulated other comprehensive loss
(17,496
(37,333
Total equity
1,299,163
1,307,039
TOTAL LIABILITIES AND EQUITY
The accompanying notes are an integral part of these condensed consolidated financial statements.
Three Months Ended June 30,
Six Months Ended June 30,
(in thousands, except share and per share amounts)
2025
2024
REVENUES
390,633
184,546
745,221
353,962
OPERATING EXPENSES:
Cost of services (exclusive of depreciation and amortization below)
207,841
92,348
400,406
179,540
Product and technology expense
25,676
13,677
52,831
26,143
Selling, general, and administrative expense
57,473
38,640
123,058
79,302
Depreciation and amortization
61,906
29,978
123,572
59,800
Total operating expenses
352,896
174,643
699,867
344,785
INCOME FROM OPERATIONS
37,737
9,903
45,354
9,177
OTHER EXPENSE, NET:
Interest expense, net
44,785
7,353
91,365
10,923
Loss on extinguishment of debt
254
—
Total other expense, net
45,039
91,619
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES
(7,302
2,550
(46,265
(1,746
(Benefit) provision for income taxes
(7,610
689
(5,379
(699
NET INCOME (LOSS)
308
1,861
(40,886
(1,047
Foreign currency translation income (loss)
14,384
(1,298
19,837
(3,071
COMPREHENSIVE INCOME (LOSS)
14,692
563
(21,049
(4,118
Basic net income (loss) per share
0.00
0.01
(0.24
(0.01
Diluted net income (loss) per share
Weighted average number of shares outstanding - basic
173,288,662
143,863,667
172,930,881
143,727,612
Weighted average number of shares outstanding - diluted
175,069,451
145,856,112
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs
3,205
916
Bad debt recovery
(1,495
(156
Deferred taxes
(26,965
(14,601
Share-based compensation
13,709
9,799
Loss (gain) on disposal of fixed assets and impairment of ROU assets
527
(26
Change in fair value of interest rate swaps
6,419
(9,177
Changes in operating assets and liabilities:
Accounts receivable
(13,033
11,919
Prepaid expenses and other assets
1,878
2,245
(12,049
7,565
Accrued compensation and accrued liabilities
2,585
7,203
501
373
Operating lease liabilities
(155
(467
(308
(626
Income taxes receivable and payable, net
(943
(3,348
Net cash provided by operating activities
56,816
70,372
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized software development costs
(22,180
(12,894
Purchases of property and equipment
(1,718
(970
Other investing activities
82
52
Net cash used in investing activities
(23,816
(13,812
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of Amended First Lien Credit Facility
(20,462
Proceeds from issuance of common stock under share-based compensation plans
2,219
1,197
Net settlement of share-based compensation plan awards
(2,761
(311
Payments on deferred purchase agreements
(469
Cash dividends paid
(103
(204
Net cash (used in) provided by financing activities
(21,107
213
Effect of exchange rate on cash, cash equivalents, and restricted cash
2,969
(1,036
Increase in cash, cash equivalents, and restricted cash
14,862
55,737
Cash, cash equivalents, and restricted cash at beginning of period
169,483
213,912
Cash, cash equivalents, and restricted cash at end of period
184,345
269,649
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes, net of refunds received
24,273
17,158
Cash paid for interest
84,140
23,887
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired on account
426
1,030
Non-cash property and equipment additions
540
Common Stock
AdditionalPaid-In-Capital
AccumulatedDeficit
Accumulated OtherComprehensiveLoss
Total Stockholders’Equity
BALANCE – December 31, 2024
7,967
Forfeitures of previously declared cash dividends
1,688
1,690
Common stock withheld for tax obligations on restricted stock unit and option settlement
(1
(2,204
(2,205
Foreign currency translation
5,453
(41,194
BALANCE – March 31, 2025
1,511,463
(201,002
(31,880
1,278,755
5,742
0
531
(0)
(557
Net income
BALANCE – June 30, 2025
BALANCE – December 31, 2023
145
977,290
(49,545
(21,157
906,733
4,751
976
(41
(1,773
(2,908
BALANCE – March 31, 2024
982,982
(52,453
(22,930
907,744
5,048
221
(270
BALANCE – June 30, 2024
987,986
(50,592
(24,228
913,311
Note 1. Organization, Nature of Business, and Basis of Presentation
First Advantage Corporation, a Delaware corporation, was formed on November 15, 2019. Hereafter, First Advantage Corporation and its subsidiaries will collectively be referred to as the “Company.”
The Company derives its revenues from a variety of background check and compliance services performed across all phases of the workforce lifecycle from pre-onboarding services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent workers, tenants, and drivers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products.
Pre-onboarding services are comprised of an extensive array of products and solutions that customers typically utilize to enhance their evaluation process and support compliance from the time a job or other application is submitted to a successful candidate’s onboarding date. This includes searches such as criminal background checks, drug / health screenings, extended workforce screening, biometrics and identity checks, education / workforce verification, driver records and compliance, healthcare credentials, and executive screening.
Post-onboarding services are comprised of continuous monitoring and re-screening solutions, which are important tools to help our customers keep their end customers, workforces, and other stakeholders safer, more productive, and more compliant. Our post-monitoring solutions include criminal records, healthcare sanctions, motor vehicle records, social media, and global sanctions screening continuously or at regular intervals selected by our customers.
Adjacent products include products that complement our pre-onboarding and post-onboarding products and solutions. This includes fleet and vehicle compliance, hiring tax credits and incentives, resident and tenant screening, employment eligibility, and investigative research.
Basis of Presentation —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 the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company includes the results of operations of acquired companies prospectively from the date of acquisition.
The condensed consolidated financial statements included herein are unaudited, but in the opinion of management, such financial statements include all adjustments, consisting of normal recurring adjustments, necessary to summarize fairly the Company’s financial position, results of operations, and cash flows for the interim periods presented. The interim results reported in these condensed consolidated financial statements should not be taken as indicative of results that may be expected for future interim periods or the full year. For a more comprehensive understanding of the Company and its condensed consolidated financial statements, these interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
The Company has historically experienced seasonality with respect to certain customer industries as a result of fluctuations in hiring volumes and other economic activities. Generally, the Company’s highest revenues have historically occurred between October and November of each year, driven by many customers’ pre-holiday season hiring initiatives. Certain customers across various industries also historically increase their hiring throughout the second quarter of the year as winter concludes, and the school year ends, giving rise to student and graduate hiring, and increased commercial activity tied to outdoor activities.
Use of Estimates — The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Changes in these estimates and assumptions may have a material impact on the condensed consolidated financial statements and accompanying notes.
Significant estimates, judgments, and assumptions, include, but are not limited to, the determination of the fair value and useful lives of assets acquired and liabilities assumed through business combinations, goodwill impairment, revenue recognition, capitalized software, assumptions used for purposes of determining share-based compensation, and income tax liabilities and assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.
Note 2. Summary of Significant Accounting Policies
Fair Value of Financial Instruments — Certain financial assets and liabilities are reported at fair value in the accompanying consolidated balance sheets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement. ASC 820 establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques required by ASC 820 are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:
Level 1 — Quoted prices for identical instruments in active markets.
Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 — Significant inputs to the valuation model are unobservable (supported by little or no market activities). These inputs may be used with internally developed methodologies that reflect the Company’s best estimate of fair value from a market participant.
The carrying amounts of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term maturities of these financial instruments (Level 1). The fair values and carrying values of the Company’s debt are disclosed in Note 6, “Debt”.
The following table presents 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 June 30, 2025 (in thousands):
Level 1
Level 2
Level 3
Liabilities
Interest rate swaps
5,720
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Other intangible assets are subject to nonrecurring fair value measurement as the result of business acquisitions. The fair values of these assets were estimated using the present value of expected future cash flows through unobservable inputs (Level 3).
Business Combinations— The Company records business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill. Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill. Measurement period adjustments are reflected in the period in which they occur.
In valuing trade names, customer lists, software developed for internal use, and other intangible assets, the Company utilizes variations of the income approach, which relies on historical financial and qualitative information, as well as assumptions and estimates for projected financial information. The Company considers the income approach the most appropriate valuation technique because the inherent value of these assets is their ability to generate current and future income. Projected financial information is subject to risk if estimates are incorrect. The most significant estimate relates to projected revenues and profitability. If the projected revenues and profitability used in the valuation calculations are not met, then the asset could be impaired.
Concentrations of Credit Risk — Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. Cash is deposited with major financial institutions and, at times, such balances with each financial institution may be in excess of insured limits. The Company has not experienced, and does not anticipate, any losses with respect to its cash deposits. Accounts receivable represent credit granted to customers for services provided. The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral on accounts receivable. The Company did not have any customers which represented 10% or more of its consolidated revenues in any segment during the three and six months ended June 30, 2025. The Company had one customer which represented approximately 11% of its consolidated revenues during the three and six months ended June 30, 2024, in its First Advantage Americas segment. Additionally, the Company did not have any customers which represented 10% or more of its consolidated accounts receivable, net for any period presented.
The Company has entered into interest rate derivative agreements with a counterparty bank to reduce its exposure to interest rate volatility. The Company has determined the counterparty bank to be a high credit quality institution. The Company does not enter into financial instruments for trading or speculative purposes.
7
Foreign Currency — The functional currency of all of the Company’s foreign subsidiaries is the applicable local currency. The translation of the applicable foreign currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenues and expense accounts using average exchange rates prevailing during the fiscal year. Adjustments resulting from the translation of foreign currency financial statements are accumulated net of tax in a separate component of equity. Foreign currency translation income (loss) included in accumulated other comprehensive loss was approximately $14.4 million and $(1.3) million for the three months ended June 30, 2025 and 2024, respectively. Foreign currency translation income (loss) included in accumulated other comprehensive loss was approximately $19.8 million and $(3.1) million for the six months ended June 30, 2025 and 2024, respectively.
Gains or losses resulting from foreign currency transactions are included in the accompanying condensed consolidated statements of operations and comprehensive income (loss), except for those relating to intercompany transactions of a long-term investment nature, which are captured in a separate component of equity as accumulated other comprehensive loss. Foreign currency transaction (loss) income included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was approximately $(0.6) million and $0.6 million for the three months ended June 30, 2025 and 2024, respectively. Foreign currency transaction (loss) income included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was approximately $(0.8) million and $0.6 million for the six months ended June 30, 2025 and 2024, respectively.
Recent Accounting Pronouncements — There were no accounting pronouncements issued during the six months ended June 30, 2025 that are expected to have a material impact on the condensed consolidated financial statements.
Note 3. Acquisitions
2024 Acquisition
On October 31, 2024, the Company completed the acquisition of Sterling Check Corp. (“Sterling” and such acquisition, the “Sterling Acquisition”), a leading provider of background screening and identity verification services. The cash-and-stock transaction valued Sterling at approximately $2.2 billion and was financed through cash on hand and the issuance of new debt and common stock as described in Note 6, “Debt”. The acquisition extended First Advantage’s high-quality and cost-effective background screening, identity, and verification technology solutions for the benefit of both companies' customers across industry verticals and geographies.
Sterling was determined to constitute a business and the Company was deemed to be the acquirer under ASC 805. The Company recorded a preliminary allocation of the purchase price to assets acquired and liabilities assumed based on their estimated fair values as of October 31, 2024.
During the six months ended June 30, 2025, the Company identified measurement period adjustments related to its preliminary allocation of the purchase price. The measurement period adjustments were due to revisions to estimates for working capital and tax balances, resulting in a $0.7 million decrease to current assets, a $5.8 million increase to current liabilities, a $0.1 million increase to deferred tax liabilities, and a $0.2 million decrease to other liabilities. The net impact of these adjustments was a $6.4 million increase to goodwill. The allocation was finalized as of June 30, 2025.
8
The following table summarizes the consideration paid and the amounts recognized for the assets acquired and liabilities assumed as of June 30, 2025 (in thousands):
Consideration
Cash consideration
1,152,163
Plus: fair value of assumed Sterling equity awards to receive cash attributable to pre-combination service
15,905
Plus: repayment of Sterling's outstanding debt
535,046
Plus: fair value of First Advantage common stock issued
490,098
Plus: fair value of assumed Sterling equity awards to receive equity awards attributable to pre-combination service
4,487
Total fair value of consideration transferred
2,197,699
Current assets
226,800
Property and equipment, including software developed for internal use
273,370
Intangible assets
717,000
Deferred tax asset
58,100
12,516
Current liabilities
(155,596
Deferred tax liability
(238,221
(16,075
Total identifiable net assets
877,894
1,319,805
The fair values and useful lives of the acquired intangible assets by category were as follows (in thousands):
Balance Sheet Location
Estimated Fair Values
Useful Life(in years)
Customer lists
655,000
14 years
Software developed for internal use
259,000
5 years
Trade names
62,000
Goodwill recognized is not deductible for tax purposes. Results of operations have been included in the condensed consolidated financial statements of the Company’s Sterling segment since the date of acquisition.
Pro Forma Results
The following summary, prepared on a pro forma basis pursuant to ASC 805, presents the Company’s consolidated results of operations for the three and six months ended June 30, 2024, as if the Sterling Acquisition had been completed on January 1, 2023. The pro forma results below include the impact of certain adjustments related to the amortization of intangible assets, transaction-related costs incurred as of the acquisition date, and interest expense on related borrowings, and in each case, the related income tax effects, as well as certain other post-acquisition adjustments attributable to the Sterling Acquisition. This pro forma presentation does not include any impact of transaction synergies. The pro forma results are not necessarily indicative of the results of operations that actually would have been achieved had the Sterling Acquisition been consummated as of January 1, 2023.
(in thousands, unaudited)
Three Months Ended June 30, 2024
Six Months Ended June 30, 2024
Revenue
384,795
739,931
(25,544
(58,702
9
Note 4. Property and Equipment, net
Property and equipment, net as of June 30, 2025 and December 31, 2024 consisted of the following (in thousands):
Furniture and equipment
31,954
32,054
Capitalized software for internal use, acquired by business combination
491,372
490,346
Capitalized software for internal use, developed internally or otherwise purchased
143,804
125,973
Leasehold improvements
2,787
3,007
Total property and equipment
669,917
651,380
Less: accumulated depreciation and amortization
(394,282
(343,841
Depreciation and amortization expense of property and equipment was approximately $27.7 million and $15.7 million for the three months ended June 30, 2025 and 2024, respectively. Depreciation and amortization expense of property and equipment was approximately $55.3 million and $31.3 million for the six months ended June 30, 2025 and 2024, respectively.
Note 5. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for the six months ended June 30, 2025 by reportable segment were as follows (in thousands):
First AdvantageAmericas
First AdvantageInternational
Sterling
Total
Balance – December 31, 2024
703,294
114,341
1,306,893
Adjustments to initial purchase price allocations
6,440
46
3,323
9,022
12,391
Balance – June 30, 2025
703,340
117,664
1,322,355
The following summarizes the gross carrying value and accumulated amortization for the Company’s trade names, customer lists, and other intangible assets as of June 30, 2025 and December 31, 2024 (in thousands):
GrossCarrying Value
AccumulatedAmortization
Net Carrying Value
158,473
(49,179
109,294
5-20 years
1,176,724
(362,227
814,497
13-14 years
Other intangible assets
2,404
(868
1,536
1,337,601
(412,274
157,740
(39,265
118,475
1,170,327
(302,632
867,695
2,400
(622
1,778
1,330,467
(342,519
Amortization expense of trade names, customer lists, and other intangible assets was approximately $34.2 million and $14.3 million for the three months ended June 30, 2025 and 2024, respectively. Amortization expense of trade names, customer lists, and other intangible assets was approximately $68.3 million and $28.5 million for the six months ended June 30, 2025 and 2024, respectively. Trade names and customer lists are amortized on an accelerated basis based upon their estimated useful life. Other intangible assets are amortized on a straight-line or accelerated basis over their expected useful life of five years.
10
Note 6. Debt
The fair value of the Company’s debt obligation approximated its book value as of June 30, 2025 and December 31, 2024 and consisted of the following (in thousands):
Amended First Lien Credit Facility
2,164,538
2,185,000
Less: Current portion of long-term debt
(21,850
Total long-term debt
2,142,688
2,163,150
Less: Deferred financing costs
(38,403
(41,861
Long-term debt, net
First Advantage Holdings, LLC, an indirect wholly-owned subsidiary of the Company, is a party to a First Lien Credit Agreement (as amended, “2024 First Lien Credit Agreement”), which provides for a term loan of $2.185 billion due October 31, 2031, carrying an interest rate of 3.00% to 3.25%, based on the first lien ratio, plus the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (“SOFR”) and an applicable margin (“Amended First Lien Credit Facility”), and a $250.0 million revolving credit facility due October 31, 2029 (“Amended Revolver”). The effective interest rate on the Amended First Lien Credit Facility, which is calculated as the contractual interest rates adjusted for the debt issuance costs is 8.20%.
The Amended First Lien Credit Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% of the principal amount. The Amended Revolver has no amortization.
The 2024 First Lien Credit Agreement is collateralized by substantially all assets and capital stock owned by direct and indirect domestic subsidiaries and is governed by certain restrictive covenants including limitations on indebtedness, liens, and other corporate actions such as investments and acquisitions. In the event the Company’s outstanding indebtedness under the Amended Revolver exceeds 40.0% of the aggregate principal amount of the revolving commitments then in effect, it is required to maintain a consolidated first lien leverage ratio no greater than 7.75 to 1.00. As of June 30, 2025, there were no outstanding borrowings under the Amended Revolver and $2,164.5 million outstanding under the Amended First Lien Credit Facility. In addition, $0.7 million in letters of credit were issued under the 2024 First Lien Credit Agreement to support two office leases. As the Company had no outstanding amounts under the Amended Revolver, it was not subject to the consolidated first lien leverage ratio covenant. The Company was compliant with all covenants under the agreement as of June 30, 2025.
In May 2025, the Company made a voluntary principal repayment of $15.0 million on its outstanding Amended First Lien Credit Facility. As a result of this prepayment, the Company recorded a total loss on extinguishment of debt of $0.3 million, stemming from the write-off of unamortized deferred financing costs. No prepayment penalties were incurred.
11
Note 7. Derivatives
To reduce exposure to variability in expected future cash outflows on variable rate debt attributable to the changes in one-month SOFR, the Company has historically entered into interest rate derivative instruments to economically offset a portion of this risk and may do so in the future.
As of June 30, 2025, the Company had the following outstanding derivatives that were not designated as a hedge in qualifying hedging relationships:
Product
Effective Date
Maturity Date
Notional
Rate
Interest rate swap
June 30, 2023
February 28, 2026
$100.0 million
4.32%
December 29, 2023
December 31, 2026
$150.0 million
3.86%
March 1, 2024
3.76%
August 31, 2024
$160.0 million
3.72%
October 31, 2024
October 31, 2027
$275.0 million
3.94%
April 30, 2025
April 30, 2028
$250.0 million
3.56%
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements; however, the Company has not elected to apply hedge accounting for these instruments.
The following is a summary of location and fair value of the financial positions recorded related to the derivative instruments as of June 30, 2025 and December 31, 2024 (in thousands):
Fair Value
Derivatives not designatedas hedging instruments
3,110
247
The following is a summary of location and amount of gains and losses recorded related to the derivative instruments (in thousands):
(Loss) Gain
Income Statement Location
Interest rate collars
951
(2,483
2,132
(6,419
8,226
Note 8. Income Taxes
The Company’s income tax expense and balance sheet accounts reflect the results of the Company and its subsidiaries.
For the three and six months ended June 30, 2025, the Company estimated the annual effective tax rate based on projected income for the full year and recorded a quarterly tax provision in accordance with the annual effective tax rate and adjusted for discrete tax items in the period.
The effective income tax rates for the three and six months ended June 30, 2025 was 104.2% and 11.6%, respectively. The Company’s effective income tax rates for the three and six months ended June 30, 2025 differed from the U.S. federal statutory rate of 21% primarily due to the jurisdictional mix of earnings, driven by significant acquisition-related depreciation and amortization that impacted U.S. net loss in the periods and income taxes in the majority of foreign jurisdictions. The effective tax rates were further impacted by U.S. state income taxes and non-deductible share-based compensation.
The effective income tax rates for the three and six months ended June 30, 2024 was 27.0% and 40.0%, respectively. The Company’s effective income tax rates for the three and six months ended June 30, 2024 was higher than the U.S. federal statutory rate of 21% primarily due to nondeductible share-based compensation and U.S. state income taxes.
12
Note 9. Revenues
Substantially all of the Company’s revenues are recognized at a point in time when the orders are completed and the completed reports are reported, or otherwise made available. For revenues delivered over time, the output method is utilized to measure the value to the customer based on the transfer to date of the services promised, with no rights of return once consumed. In these cases, revenues on transactional contracts with a defined price but an undefined quantity is recognized utilizing the right to invoice expedient resulting in revenues being recognized when the service is provided and becomes billable. Additionally, under this practical expedient, the Company is not required to estimate the transaction price.
The Company considers negotiated and anticipated incentives and estimated adjustments, including historical collections experience, when recording revenues.
The Company’s contracts with customers generally include standard commercial payment terms acceptable in each region, and do not include any financing components. The Company does not have any significant obligations for refunds, warranties, or similar obligations. The Company records revenues net of sales taxes.
Contract balances are generated when the revenues recognized in a given period varies from billing. A contract asset is created when the Company performs a service for a customer and recognizes more revenues than what has been billed. The contract asset balance was $11.6 million and $5.9 million as of June 30, 2025 and December 31, 2024, respectively, and is included in accounts receivable, net in the accompanying condensed consolidated balance sheets.
A contract liability is created when the Company transfers a good or service to a customer and recognizes less than what has been billed. The Company recognizes these contract liabilities as deferred revenues when the Company has an obligation to perform services for a customer in the future and has already received consideration from the customer. The contract liability balance was $4.8 million and $4.3 million as of June 30, 2025 and December 31, 2024, respectively, and is included in deferred revenues in the accompanying condensed consolidated balance sheets. An immaterial amount of revenues was recognized in the current period related to the beginning balance of deferred revenues.
For additional disclosures about the disaggregation of our revenues, see Note 15, “Reportable Segments.”
Note 10. Share-based Compensation
Share-based compensation expense is recognized in cost of services, product and technology expense, and selling, general, and administrative expense, in the accompanying condensed consolidated statements of operations and comprehensive income (loss) as follows (in thousands):
Share-based compensation expense
Cost of services
556
410
1,088
767
1,806
683
2,609
1,337
3,380
3,955
10,012
7,695
Total share-based compensation expense
Prior to the Company’s Initial Public Offering (“IPO”), all share-based awards were issued by Fastball Holdco, L.P., the Company’s previous parent company, under individual grant agreements and the partnership agreement of such parent company (collectively, the “2020 Equity Plan”). In connection with the IPO, the Company adopted the 2021 Omnibus Incentive Plan (as amended by the First Amendment, dated as of May 10, 2023, the “2021 Equity Plan”).
In October 2024, as part of the Sterling Acquisition, unvested Sterling restricted stock, restricted stock units, and net option shares underlying in-the-money stock option awards were converted to an unvested cash award, an unvested First Advantage restricted stock award, or a First Advantage restricted stock unit (“RSU”) at the holder’s election. Converted awards are subject to the same terms and conditions (including vesting) as applied to the replaced Sterling equity award. All out-of-the-money Sterling stock options, whether vested or unvested, were canceled for no consideration.
As of June 30, 2025, the Company had approximately $32.7 million of unrecognized pre-tax non-cash compensation expense, comprised of approximately $5.1 million related to restricted stock, $13.9 million related to RSUs, and approximately $13.7 million related to stock options, which the Company expects to recognize over a weighted average period of 1.3 years.
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2020 Equity Plan
Awards issued under the 2020 Equity Plan consist of options and profit interests. No awards have been issued under the plan since the Company’s IPO.
A summary of the stock option activity for the six months ended June 30, 2025 is as follows:
Options
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term
Aggregate Intrinsic Value
Grants outstanding
1,602,966
5.15
Grants exercised
(216,805
5.11
Grants cancelled/forfeited
(29,074
5.19
1,357,087
4.7 Years
$15.6 million
Grants vested
941,905
5.13
$10.8 million
Grants unvested
415,182
5.20
2021 Equity Plan
The 2021 Equity Plan is intended to provide a means through which to attract and retain key personnel and to provide a means whereby our directors, officers, employees, consultants, and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the value of our common stock, thereby strengthening their commitment to our welfare and aligning their interests with those of our stockholders. The 2021 Equity Plan provides for the grant of awards of stock options, stock appreciation rights, restricted shares, restricted stock units, and other equity-based or cash-based awards as determined by the Company’s Compensation Committee. The 2021 Equity Plan initially had a total of 17,525,000 shares of common stock reserved. The number of reserved shares automatically increases on the first day of each calendar year commencing on January 1, 2022 and ending on January 1, 2030, in an amount equal to the lesser of (x) 2.5% of the total number of shares of common stock outstanding on the last day of the immediately preceding calendar year and (y) a number of shares as determined by the Board of Directors. As of June 30, 2025, 22,484,901 shares were available for issuance under the 2021 Equity Plan.
Stock Options
4,517,897
14.38
Grants issued
742,661
15.27
(18,986
13.55
(69,864
14.02
5,171,708
14.51
7.3 Years
$12.2 million
2,762,791
13.67
6.3 Years
$8.1 million
2,408,917
15.48
The fair value for stock options granted for the six months ended June 30, 2025 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
Expected stock price volatility
35.57
%
Risk-free interest rate
4.06
Expected term (in years)
6.25
Fair-value of the underlying unit
14
Restricted Stock Units
A summary of the RSU activity for the six months ended June 30, 2025 is as follows:
Shares
Weighted Average Grant Date Fair Value
Nonvested RSUs
775,651
16.61
Granted
390,595
15.45
Vested
(151,853
15.72
Forfeited
(37,462
14.54
976,931
16.37
Restricted Stock
A summary of the restricted stock activity for the six months ended June 30, 2025 is as follows:
Nonvested restricted stock
1,177,743
10.01
(729,520
11.42
448,223
11.74
Sterling Acquisition Awards
The following table summarizes the RSUs issued by the Company as part of the Sterling Acquisition. These include Sterling restricted stock units and net option shares underlying in-the-money stock option awards that were unvested at close and converted to unvested First Advantage RSUs. The RSUs granted as a result of the conversion retain the vesting attributes (including the original service period vesting start dates) of the original award.
89,673
18.70
(70,339
(1,864
17,470
The following table summarizes the restricted stock issued by the Company as part of the Sterling Acquisition. These include Sterling restricted stock and net option shares underlying in-the-money stock option awards that were unvested at close and converted to unvested First Advantage restricted stock. The restricted stock granted as a result of the conversion retain the vesting attributes (including the original service period vesting start dates) of the original award.
692,714
(312,323
(59,395
320,996
15
2021 Employee Stock Purchase Plan (“ESPP”)
The Company’s ESPP allows eligible employees to voluntarily make after-tax contributions of up to 15% of such employee’s cash compensation to acquire Company stock during designated offering periods. Each offering period consists of one six-month purchase period. During the holding period, ESPP purchased shares are not eligible for sale or broker transfer. The Company recorded an associated expense of approximately $0.1 million and $0.2 million for the three months ended June 30, 2025 and 2024, respectively. The Company recorded an associated expense of approximately $0.3 million for both the six months ended June 30, 2025 and 2024.
Note 11. Equity
Preferred Stock
As of June 30, 2025 and December 31, 2024, 250,000,000 shares of Preferred Stock were authorized, and no Preferred Stock was issued or outstanding.
Note 12. Commitments and Contingencies
There have been no material changes to the Company’s contractual obligations as compared to December 31, 2024.
The Company is involved in litigation from time to time in the ordinary course of business. At times, the Company, given the nature of its background screening business, is subject to lawsuits, or potential class action lawsuits, in multiple jurisdictions, related to claims brought primarily by consumers or individuals who were the subject of its screening services.
For all pending matters, the Company believes it has meritorious defenses and intends to defend vigorously or otherwise seek indemnification from other parties as appropriate. However, the Company has recorded a liability of $10.0 million and $11.6 million as of June 30, 2025 and December 31, 2024, respectively, for matters that it believes entail a loss that is both probable and estimable. This is included in accrued liabilities in the accompanying condensed consolidated balance sheets.
The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.
Note 13. Related Party Transactions
The Company had no material related party transactions for the six months ended June 30, 2025.
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Note 14. Net Income (Loss) Per Share
Basic weighted-average shares outstanding excludes nonvested restricted stock. Diluted weighted average shares outstanding is similar to basic weighted-average shares outstanding, except that the weighted-average number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common share had been issued, including the dilutive impact of nonvested restricted stock. The potentially dilutive securities outstanding during the three and six months ended June 30, 2025, had an anti-dilutive effect and were therefore not included in the calculation of diluted net income (loss) per share. Basic and diluted net income (loss) per share was calculated as follows:
Numerator:
Net income (loss) (in thousands)
Denominator:
Add stock options to purchase shares and restricted stock units
1,780,789
1,992,445
For the three months ended June 30, 2025 and 2024, a total of 2,125,020 and 901,391 stock options, RSUs, and restricted stock awards were excluded from the calculation of diluted net income per share, respectively, because their effect was anti-dilutive. For the six months ended June 30, 2025 and 2024, a total of 3,938,915 and 2,974,538 stock options, RSUs, and restricted stock awards were excluded from the calculation of diluted net loss per share, respectively, because their effect was anti-dilutive.
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Note 15. Reportable Segments
The Company has three reportable segments:
Our chief operating decision maker (“CODM”) uses the performance measure of Adjusted EBITDA, on both a consolidated and a segment basis, to allocate resources and assess performance of our businesses. Our CODM also uses Adjusted EBITDA as a performance measure for both segment and corporate management under our incentive compensation plans. Corporate costs are generally allocated to the segments based upon estimated revenue levels and other assumptions that management considers reasonable. Adjusted cost of services consists of amounts paid to third parties for access to government records, other third-party data and services, our internal processing fulfillment and customer care functions, and other cost of services excluding depreciation and amortization, share-based compensation expenses, transaction expenses, and integration expenses. Other segment items consist of product and technology and selling, general, and administrative expenses, but similarly excludes depreciation and amortization, share based compensation, and other expenses excluded from Adjusted EBITDA.
The CODM does not review the Company’s assets by segment as it does not provide additional insights into the performance of our business; therefore, such information is not presented. The accounting policies of the segments are the same as described in Note 1. “Organization, Nature of Business, and Basis of Presentation” and Note 2. “Summary of Significant Accounting Policies” included in the Annual Report on Form 10-K for the year ended December 31, 2024.
Reconciliations of Segment Adjusted EBITDA to net income (loss) for the three and six months ended June 30, 2025 and 2024 is as follows (in thousands):
Three Months Ended June 30, 2025
First Advantage Americas
First Advantage International
Total revenues
163,504
25,920
203,743
393,167
Intersegment revenues
(643
(1,553
(338
(2,534
External revenues
162,861
24,367
203,405
Less:
Adjusted cost of services
82,994
14,530
112,621
Other segment items
29,250
7,050
32,776
Segment Adjusted EBITDA
51,260
4,340
58,346
113,946
Adjustments to reconcile to net income:
Benefit for income taxes
Transaction and acquisition-related charges (a)
2,390
Integration, restructuring, and other charges (b)
6,171
18
162,378
24,187
186,565
(416
(1,603
(2,019
161,962
22,584
81,120
13,217
29,664
6,803
51,594
4,167
55,761
Provision for income taxes
9,873
959
Six Months Ended June 30, 2025
308,857
49,695
391,261
749,813
(1,134
(2,816
(642
(4,592
307,723
46,879
390,619
157,177
28,378
217,423
60,113
13,611
67,053
91,567
7,706
106,785
206,058
Adjustments to reconcile to net loss:
6,386
17,037
19
311,505
46,210
357,715
(731
(3,022
(3,753
310,774
43,188
157,190
26,054
59,052
13,100
95,263
7,056
102,319
21,865
1,678
Geographic Information
The Company categorizes revenues by geographic region in which the revenues and invoicing are recorded. Other than the United States, no single country accounted for 10% or more of our total revenues during these periods.
The following summarizes revenues by geographical region (in thousands):
Revenues
United States
334,907
158,871
638,696
305,077
All other countries
55,726
25,675
106,525
48,885
The following table sets forth net long-lived assets by geographic area (in thousands):
Long-lived assets, net
2,907,711
2,996,933
448,077
436,741
Total long-lived assets, net
3,355,788
3,433,674
Note 16. Subsequent Events
On July 30, 2025, the Company amended its 2024 First Lien Credit Agreement to (i) reduce the interest rate on its Amended First Lien Credit Facility by 0.50% to a range of 2.50% to 2.75%, based on the first lien ratio, plus SOFR and (ii) reduce the interest rate on its Amended Revolver by 0.50% to a range of 2.25% to 2.75%, based on the first lien ratio, plus SOFR.
On August 1, 2025, the Company made a voluntary principal repayment of $25.0 million on its outstanding Amended First Lien Credit Facility. The repayment was made using available cash on hand and reflects the Company’s ongoing efforts to reduce leverage and strengthen its balance sheet. No prepayment penalties were incurred.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of First Advantage Corporation’s financial condition and results of operations is provided as a supplement to the condensed consolidated financial statements for the three and six months ended June 30, 2025, and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2024, our “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. All discussions and information in this Quarterly Report on Form 10-Q regarding our business and financial results in 2024 relate solely to our operations prior to the acquisition of Sterling Check Corp. (“Sterling” and such acquisition, the “Sterling Acquisition”), unless otherwise indicated.
Forward-Looking Statements
This Quarterly Report on Form 10-Q 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,” 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 failure to realize the expected benefits of the Sterling Acquisition, negative changes in external events beyond our control, including our customers’ onboarding volumes, economic drivers which are sensitive to macroeconomic cycles, such as interest rate volatility and inflation, geopolitical unrest, global trade disputes, and uncertainty in financial markets; 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, data security, and artificial intelligence (“AI”); inability to identify and successfully implement our growth strategies on a timely basis or at all; potential harm to our business, brand, and reputation as a result of security breaches, cyber-attacks, or the mishandling of personal data; operating in a penetrated and competitive market; our reliance on third-party data providers; our sales to government entities and higher-tier contractors to governmental customers which involve unique competitive, procurement, budget, administrative and contractual risks; due to the sensitive and privacy-driven nature of our products and solutions, we could face liability and legal or regulatory proceedings, which could be costly and time-consuming to defend and may not be fully covered by insurance; our international business exposes us to a number of risks; real or perceived errors, failures, or bugs in our products could adversely affect our business, results of operations, financial condition, and growth prospects; our ability to identify attractive targets or successfully complete such transactions; failure to comply with anti-corruption laws and regulations; disruptions at our Global Operating Center and other operating centers; our contracts with our customers, which do not guarantee exclusivity or contracted volumes; 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; 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; risks relating to public opinion, which may be magnified by incidents or adverse publicity concerning our industry or operations; our reliance on third-party vendors to carry out certain portions of our operations; our dependence on the service of our key executives and other employees, and our ability to find and retain qualified employees; our ability to obtain, maintain, protect and enforce our intellectual property and other proprietary information; our ability to maintain, protect, and enforce the confidentiality of our trade secrets; the use of open-source software in our applications; seasonality in our operations from quarter to quarter; our 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; Silver Lake’s control of us and the potential conflict of its interest with ours or those of our stockholders; and changing interpretations of tax laws.
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 Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”), 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 Quarterly Report on Form 10-Q are made only as of the date of this Form 10-Q, 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.
Glossary of Selected Terminology
The following terms are used in this Form 10-Q, unless otherwise noted or indicated by the context:
Certain monetary amounts, percentages, and other figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report on Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report on Form 10-Q may vary from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Certain other amounts that appear in this Quarterly Report on Form 10-Q may not sum due to rounding.
Website and Social Media Disclosure
We use our websites (https://fadv.com/ and https://investors.fadv.com/) to distribute company information. We make available free of charge a variety of information for investors, including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with, or furnish it to, the SEC. The information we post on our websites may be deemed material. Accordingly, investors should monitor our websites, in addition to following our press releases, filings with the SEC, and public conference calls and webcasts. In addition, you may opt in to automatically receive email alerts and other information about First Advantage when you enroll your email address by visiting the “Email Alerts” section of our investor website at https://investors.fadv.com/. The contents of our websites and social media channels are not, however, a part of this Quarterly Report on Form 10-Q.
Overview
First Advantage is a leading provider of global software and data in the HR technology industry. Enabled by its proprietary technology and AI, First Advantage’s platforms, data, and APIs power comprehensive employment background screening, digital identity solutions, and verification services.
Our comprehensive product suite includes criminal background checks, drug and health screening, extended workforce screening, biometrics and identity, education and work verifications, resident screening, fleet and driver compliance, executive screening, data analytics, continuous monitoring, social media monitoring, and hiring tax incentives.
On October 31, 2024, we completed our acquisition of Sterling, a global provider of technology-enabled background and identity verification services. This strategic acquisition enhances our capabilities and expands our service offerings, allowing us to deliver a comprehensive hiring and risk management solution that begins with identity verification and extends through criminal background screening, credential verification, drug and health screening, and ongoing risk monitoring.
Together, we derive a substantial majority of our revenues from pre-onboarding screening and perform screens in over 200 countries and territories, enabling us to serve as a one-stop-shop provider to both multinational companies and growth companies. Our 80,000 customers are global enterprises, mid-sized companies, and small companies, and our products and solutions are used by personnel in recruiting, human resources, risk, compliance, vendor management, safety, and/or security.
22
Our platforms offer flexibility for customers to specify which products to include in their screening package, such as Social Security numbers, criminal records, education and work verifications, sex offender registry, and global sanctions. Generally, our customers order a background screening package or selected combination of screens related to a single individual before they onboard that individual. The type and mix of products and solutions we sell to a customer vary by customer size, their screening requirements, and industry vertical. Therefore, order volumes are not comparable across customers or periods. Package pricing can also vary considerably by customer depending on the product mix in their screening packages, order volumes, screening requirements and preferences, pass-through and third-party out of pocket costs, and bundling of products.
We enter into contracts with our customers that are typically three years in length. These contracts set forth the general terms and pricing of our products and solutions but generally do not include minimum order volumes or committed order volumes. Additionally, a majority of Sterling’s enterprise customer contracts are exclusive to Sterling or require Sterling to be used as the primary provider. Due to our contract terms and the nature of the background screening industry, we determined our contract terms for ASC 606 purposes to be three years or less. We typically bill our customers at the end of each month and recognize revenues as completed orders are reported or otherwise made available to our customers.
We generated revenues of $390.6 million for the three months ended June 30, 2025, as compared to $184.5 million for the three months ended June 30, 2024 and generated revenues of $745.2 million for the six months ended June 30, 2025, as compared to $354.0 million for the six months ended June 30, 2024. Approximately 86% of our revenues for the three and six months ended June 30, 2025 was generated in the United States, while the remaining 14% was generated abroad. Other than the United States, no single country accounted for 10% or more of our total revenues for the three and six months ended June 30, 2025. Please refer to “Results of Operations” for further details.
Segments
We manage our business and report our financial results in three reportable segments, First Advantage Americas, First Advantage International, and Sterling:
Seasonality
We experience seasonality with respect to certain industries due to fluctuations in hiring volumes and other economic activity. For example, pre-onboarding revenues generated from our customers in the retail and transportation industries are historically highest during the months of October and November, leading up to the U.S. holiday season and lowest in December and at the beginning of the new year, following the U.S. holiday hiring season. Certain customers across various industries also historically increase their hiring throughout the second quarter of the year as winter concludes, and the school year ends, giving rise to student and graduate hiring, and increased commercial activity tied to outdoor activities. We expect that further growth in e-commerce, the continued demand for healthcare workers, the continued digital transformation of the economy, and other economic factors may impact future seasonality, but we are unable to predict these potential shifts and how our business may be impacted.
23
Recent Developments
Current Economic Conditions
Our results are influenced by our customers’ underlying business performance and hiring trends, which drive demand for background screening and adjacent products. Our customers’ businesses can be affected by a variety of factors, including overall economic conditions, hiring velocity and turnover, and other industry-related trends. We are also exposed to macroeconomic cyclicality, as companies often scale back hiring and reduce reliance on contingent workforces during periods of economic slowdown, which can adversely affect demand for our products and solutions.
Current macroeconomic conditions—including elevated interest rates, persistent inflation, and fluctuations in job openings and hiring activity—continue to impact portions of the global economy. Additionally, global economic volatility driven by geopolitical tensions, ongoing conflicts, including in the Ukraine and Middle East, and uncertainty around monetary policy has led to increased caution across our customer base. Emerging and ongoing trade disputes between major global economies have also contributed to supply chain disruptions, increasing costs and reducing business confidence, particularly in sectors with global exposure. These trade tensions can slow economic activity, impact cross-border hiring trends, and reduce demand for certain customer verticals that rely on international talent and operations. Furthermore, the current U.S. presidential administration continues to signal its intention to implement significant changes to U.S. trade policy, the size of the federal government and the enforcement of various regulations, which has increased economic uncertainty. These policy shifts could introduce additional market instability and reduce investor confidence and could negatively affect our business, financial condition, and operating results.
If this economic uncertainty continues or worsens, we may face pressure on new business generation, customer renewals, overall demand levels, sales and marketing effectiveness, revenue growth, customer onboarding, collection cycles, and product development initiatives. Our ability to sustain growth will also depend on the long-term stability, diversity, and resilience of the industry verticals we serve and rely upon to drive our revenues.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted in the U.S. Significant provisions of the OBBBA include the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented periodically through 2027. We are currently assessing the impact of the OBBBA on our consolidated financial statements.
Despite these macroeconomic changes, we are confident in the overall long-term health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers hire smarter and onboard faster. Our continued focus on delivering innovative solutions that enhance workplace safety and address evolving compliance requirements as well as our diversified customer base have contributed to the stability of our business and long-term financial performance.
For additional information, see our “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”).
Components of our Results of Operations
The Company derives revenues from a variety of background screening and adjacent products that cover all phases of the workforce lifecycle from pre-onboarding screening services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent workers, tenants, and drivers. We generally classify our products and solutions into three major categories: pre-onboarding, post-onboarding, and adjacent products, each of which is enabled by our technologies, proprietary internal databases, and data analytics capabilities. Pre-onboarding products, which comprise the substantial majority of our revenues, span an extensive array of products that customers typically utilize to enhance their candidate evaluation process and support compliance with their workforce onboarding criteria from the time an application is submitted to a candidate’s successful onboarding. Post-onboarding products are comprised of continuous monitoring, re-screening, and other solutions to help our customers keep their end customers, workforces, and other stakeholders safer, more productive, and more compliant. Adjacent products include products that complement our pre-onboarding and post-onboarding solutions such as fleet and vehicle compliance, hiring tax credits and incentives, resident and tenant screening, employment eligibility, and investigative research.
Our suite of products is available individually or through packaged solutions that can be configured and tailored according to our customers’ needs. We typically bill our customers at the end of each month and recognize revenues after completed orders are reported or otherwise made available to our customers, with a substantial majority of our customers’ orders completed the same day they are submitted. We recognize revenues for other products over time as the customer simultaneously receives and consumes the benefits of the products and solutions delivered.
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Operating Expenses
We incur the following expenses related to our cost of revenues and operating expenses:
We have a flexible cost structure that allows our business to adjust quickly to the impacts of macroeconomic events and scale to meet the needs of large customers. Operating expenses are influenced by the amount of revenues, customer mix, and product mix that contribute to our revenues for any given period, as well as the progress of our integration of Sterling. As revenues grow, we would generally expect cost of services to grow in a similar fashion, albeit influenced by the effects of automation, productivity, and other efficiency initiatives as well as customer and product mix shifts and third-party pass-through costs. We regularly review expenses and investments in the context of revenue growth and any shifts we identify in the business in order to align with our overall financial objectives. While we expect operating expenses to increase in absolute dollars to support our continued growth, we believe that, in the long term, operating expenses as a percentage of total revenues will decline gradually in the future as our business grows and our operating efficiency and automation initiatives continue to advance.
Other Expense, Net
Our other expense, net consists of the following:
Provision for Income Taxes
Provision for income taxes consists of domestic and foreign corporate income taxes related to earnings from our sale of products and services, with statutory tax rates that differ by jurisdiction. Our effective tax rate may be affected by many other factors including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations, shifts in the allocation of income earned throughout the world, and changes in overall levels of income before tax.
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Results of Operations
The information contained below should be read in conjunction with our accompanying historical condensed consolidated financial statements and the related notes.
Comparison of Results of Operations for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024
(in thousands, except percentages)
Operating Expenses:
Income from operations
Other Expense, Net:
(Loss) income before provision for income taxes
Net income (loss)
Net income (loss) margin
0.1
1.0
(5.5
)%
(0.3
Eliminations
Revenues were $390.6 million for the three months ended June 30, 2025, compared to $184.5 million for the three months ended June 30, 2024. Revenues for the three months ended June 30, 2025 increased by $206.1 million, or 111.7%, compared to the three months ended June 30, 2024.
The increase in revenues is due to:
These revenue increases were offset by a net decrease of $2.3 million, or 1.2%, in revenues from existing customers, primarily due to macroeconomic pressures across a number of our customer verticals that led to reduced overall existing customer demand, as well as the impact of lost customers. These decreases in existing customer revenues were partially mitigated by continued strength from upselling and cross-selling initiatives, which contributed an additional $9.1 million, or 4.9%, in revenue growth.
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Revenues were $745.2 million for the six months ended June 30, 2025, compared to $354.0 million for the six months ended June 30, 2024. Revenues for the six months ended June 30, 2025 increased by $391.3 million, or 110.5%, compared to the six months ended June 30, 2024.
These revenue increases were offset by a net decrease of $8.7 million, or 2.4%, in revenues from existing customers, primarily due to macroeconomic pressures across a number of our customer verticals that led to reduced overall existing customer demand, as well as the impact of lost customers. These decreases in existing customer revenues were partially mitigated by continued strength from upselling and cross-selling initiatives, which contributed an additional $16.3 million, or 4.6%, in revenue growth.
Pricing remained relatively stable across all periods.
Cost of Services
Cost of services as a % of revenue
53.2
50.0
53.7
50.7
Cost of services was $207.8 million for the three months ended June 30, 2025, compared to $92.3 million for the three months ended June 30, 2024. Cost of services for the three months ended June 30, 2025 increased by $115.5 million, or 125.1%, compared to the three months ended June 30, 2024.
The increase in cost of services was primarily due to $113.2 million of Sterling costs of services recognized after the Sterling Acquisition.
Cost of services as a percentage of revenues was 53.2% for the three months ended June 30, 2025, compared to 50.0% for the three months ended June 30, 2024. The cost of services percentage of revenues for the second quarter of 2025 was impacted by Sterling’s higher relative cost of services due to the segment’s product and customer mix and other variations in customer ordering mix.
Cost of services was $400.4 million for the six months ended June 30, 2025, compared to $179.5 million for the six months ended June 30, 2024. Cost of services for the six months ended June 30, 2025 increased by $220.9 million, or 123.0%, compared to the six months ended June 30, 2024.
The increase in cost of services was primarily due to $219.0 million of Sterling costs of services recognized after the Sterling Acquisition.
Cost of services as a percentage of revenues was 53.7% for the six months ended June 30, 2025, compared to 50.7% for the six months ended June 30, 2024. The cost of services percentage of revenues for the second quarter of 2025 was impacted by Sterling’s higher relative cost of services due to the segment’s product and customer mix and other variations in customer ordering mix.
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Product and Technology Expense
Product and technology expense was $25.7 million for the three months ended June 30, 2025, compared to $13.7 million for the three months ended June 30, 2024. Product and technology expense for the three months ended June 30, 2025 increased by $12.0 million, or 87.7%, compared to the three months ended June 30, 2024.
The increase in product and technology expense was primarily due to:
Product and technology expense was $52.8 million for the six months ended June 30, 2025, compared to $26.1 million for the six months ended June 30, 2024. Product and technology expense for the six months ended June 30, 2025 increased by $26.7 million, or 102.1%, compared to the six months ended June 30, 2024.
Selling, General, and Administrative Expense
Selling, general, and administrative expense was $57.5 million for the three months ended June 30, 2025, compared to $38.6 million for the three months ended June 30, 2024. Selling, general, and administrative expense for the three months ended June 30, 2025 increased by $18.8 million, or 48.7%, compared to the three months ended June 30, 2024.
Selling, general, and administrative expense increased primarily due to $28.2 million of Sterling expenses recognized after the Sterling Acquisition, which include:
These increases in selling, general, and administrative expense were partially offset by a $8.2 million decrease in transaction costs attributable to the Sterling Acquisition related to professional service, legal, and other fees, that did not reoccur as the acquisition was completed on October 31, 2024.
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Selling, general, and administrative expense was $123.1 million for the six months ended June 30, 2025, compared to $79.3 million for the six months ended June 30, 2024. Selling, general, and administrative expense for the six months ended June 30, 2025 increased by $43.8 million, or 55.2%, compared to the six months ended June 30, 2024.
Selling, general, and administrative expense increased primarily due to $61.8 million of Sterling expenses recognized after the Sterling Acquisition, which include:
These increases in selling, general, and administrative expense were partially offset by a $16.8 million decrease in transaction costs attributable to the Sterling Acquisition related to professional service, legal, and other fees, that did not reoccur as the acquisition was completed on October 31, 2024.
Depreciation and Amortization
Depreciation and amortization was $61.9 million for the three months ended June 30, 2025, compared to $30.0 million for the three months ended June 30, 2024. Depreciation and amortization for the three months ended June 30, 2025 increased by $31.9 million, or 106.5%, compared to the three months ended June 30, 2024. This increase was primarily due to the impact of the step up in fair value of property and equipment and intangible assets as a result of the application of purchase accounting related to the Sterling Acquisition.
Depreciation and amortization was $123.6 million for the six months ended June 30, 2025, compared to $59.8 million for the six months ended June 30, 2024. Depreciation and amortization for the six months ended June 30, 2025 increased by $63.8 million, or 106.6%, compared to the six months ended June 30, 2024. This increase was primarily due to the impact of the step up in fair value of property and equipment and intangible assets as a result of the application of purchase accounting related to the Sterling Acquisition.
Interest Expense, Net
Interest expense, net was $44.8 million for the three months ended June 30, 2025, compared to $7.4 million for the three months ended June 30, 2024. Interest expense, net for the three months ended June 30, 2025 increased by $37.4 million or 509.1%, compared to the three months ended June 30, 2024.
This increase in interest expense was primarily attributable to higher interest expense on the Company’s Amended First Lien Credit Facility (as defined below), resulting from an incremental term loan principal amount of $1,620.3 million and an incremental revolver availability amount of $150.0 million, in connection with the Sterling Acquisition. Increases in interest expense were further impacted by increases in unrealized losses on the Company’s interest swaps resulting from interest rate volatility experienced during the period.
Interest expense, net was $91.4 million for the six months ended June 30, 2025, compared to $10.9 million for the six months ended June 30, 2024. Interest expense, net for the six months ended June 30, 2025 increased by $80.4 million or 736.4%, compared to the six months ended June 30, 2024.
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Loss on Extinguishment of Debt
Loss on extinguishment of debt for the three and six months ended June 30, 2025, relates to the write-off of unamortized deferred financing costs as a result of a voluntary principal repayment of $15.0 million on the Company’s outstanding Amended First Lien Credit Facility.
Our (benefit) provision for income taxes was $(7.6) million for the three months ended June 30, 2025, compared to $0.7 million for the three months ended June 30, 2024. Our provision for income taxes for the three months ended June 30, 2025 decreased by $8.3 million, compared to the three months ended June 30, 2024.
The decrease in our provision for income taxes was primarily due to the net loss before income taxes, jurisdictional mix of earnings, higher income taxes in the jurisdictions outside of the U.S., and U.S. state income taxes, during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024.
Our benefit for income taxes was $(5.4) million for the six months ended June 30, 2025, compared to $(0.7) million for the six months ended June 30, 2024. Our benefit for income taxes for the six months ended June 30, 2025 increased by $4.7 million, compared to the six months ended June 30, 2024.
The increase in our benefit for income taxes was primarily due to the increase of net book loss before income taxes, jurisdictional mix of earnings, higher income taxes in the jurisdictions outside of the U.S., and U.S. state income taxes, during the six months ended June 30, 2025, as compared to the three months ended June 30, 2024.
Net Income (Loss) and Net Income (Loss) Margin
Net income was $0.3 million for the three months ended June 30, 2025, compared to $1.9 million for the three months ended June 30, 2024. Net income for the three months ended June 30, 2025 decreased by $1.6 million compared to the three months ended June 30, 2024.
Net income margin was 0.1% for the three months ended June 30, 2025, compared to 1.0% for the three months ended June 30, 2025, as increases in depreciation and amortization, primarily as a result of the Company’s Sterling Acquisition and reduced demand from customers more impacted by macroeconomic factors, contributed to lower profitability.
Net loss was $(40.9) million for the six months ended June 30, 2025, compared to $(1.0) million for the six months ended June 30, 2024. Net loss for the six months ended June 30, 2025 increased by $(39.8) million compared to the six months ended June 30, 2024.
Net loss margin was (5.5)% for the six months ended June 30, 2025, compared to (0.3)% for the six months ended June 30, 2024, as increases in depreciation and amortization, primarily as a result of the Company’s Sterling Acquisition and reduced demand from customers more impacted by macroeconomic factors, contributed to lower profitability.
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Key Operating and Financial Metrics
In addition to our results determined in accordance with GAAP, we believe certain measures are useful in evaluating our 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 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.
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. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.
Adjusted EBITDA and Adjusted EBITDA Margin
Management believes that Adjusted EBITDA is a strong indicator of our overall operating performance and is useful to management and investors as a measure of comparative operating performance from period to period. We define Adjusted EBITDA as net income (loss) 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 exclude the impact of share-based compensation because it is a non-cash expense and we believe that excluding this item provides meaningful supplemental information regarding performance and ongoing cash generation potential. We exclude loss on extinguishment of debt, transaction and acquisition related charges, integration and restructuring charges, and other charges because such expenses are episodic in nature and have no direct correlation to the cost of operating our business on an ongoing basis.
Adjusted EBITDA was $113.9 million for the three months ended June 30, 2025 and represented an Adjusted EBITDA Margin of 29.2%. Adjusted EBITDA was $55.8 million for the three months ended June 30, 2024 and represented an Adjusted EBITDA Margin of 30.2%. Adjusted EBITDA for the three months ended June 30, 2025 increased by $58.2 million, or 104.3%, compared to the three months ended June 30, 2024, primarily due to the Sterling Acquisition.
Adjusted EBITDA was $206.1 million for the six months ended June 30, 2025 and represented an Adjusted EBITDA Margin of 27.7%. Adjusted EBITDA was $102.3 million for the six months ended June 30, 2024 and represented an Adjusted EBITDA Margin of 28.9%. Adjusted EBITDA for the six months ended June 30, 2025 increased by $103.7 million, or 101.4%, compared to the six months ended June 30, 2024, primarily due to the Sterling Acquisition.
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The following table presents a reconciliation of Adjusted EBITDA for the periods presented.
Share-based compensation(a)
Transaction and acquisition-related charges(b)
Integration, restructuring, and other charges(c)
Adjusted EBITDA
We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenues. The following table presents the calculation of Adjusted EBITDA Margin for the periods presented.
Adjusted EBITDA Margin
29.2
30.2
27.7
28.9
The following table presents a calculation of Adjusted EBITDA by segment for the periods presented. See Note 15, “Reportable Segments” to the condensed consolidated financial statements for a reconciliation of Adjusted EBITDA for the periods presented by segment.
Adjusted EBITDA(1)
Less: intersegment eliminations
31.4
31.8
29.6
30.6
16.7
17.2
15.5
15.3
28.6
n/a
27.3
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Adjusted Net Income and Adjusted Diluted Earnings Per Share
Similar to Adjusted EBITDA, management believes that Adjusted Net Income and Adjusted Diluted Earnings Per Share are strong indicators of our overall operating performance and are useful to our management and investors as measures of comparative operating performance from period to period. We define Adjusted Net Income for a particular period as net income (loss) 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.
Adjusted Net Income was $47.0 million for the three months ended June 30, 2025, compared to $30.8 million for the three months ended June 30, 2024. Adjusted Net Income for the three months ended June 30, 2025 increased by $16.2 million, or 52.7% compared to the three months ended June 30, 2024, primarily due to the Sterling Acquisition. This increase was offset by changes in acquisition-related depreciation and amortization and our capital structure that are captured in interest expense.
Adjusted Diluted Earnings Per Share was $0.27 for the three months ended June 30, 2025, compare to $0.21 for the three months ended June 30, 2024, as increases in Adjusted Net Income were offset by the incremental interest on the transaction financing and the dilutive impact of the new shares issued for the Sterling Acquisition.
Adjusted Net Income was $77.5 million for the six months ended June 30, 2025, compared to $55.5 million for the six months ended June 30, 2024. Adjusted Net Income for the six months ended June 30, 2025 increased by $21.9 million, or 39.5% compared to the six months ended June 30, 2024, primarily due to the Sterling Acquisition. This increase was offset by changes in acquisition-related depreciation and amortization and our capital structure that are captured in interest expense.
Adjusted Diluted Earnings Per Share was $0.44 for the six months ended June 30, 2025, compare to $0.38 for the six months ended June 30, 2024, as increases in Adjusted Net Income were offset by the incremental interest on the transaction financing and the dilutive impact of the new shares issued for the Sterling Acquisition.
Gains or losses and actual cash payments and receipts on the Company’s interest rate swaps impact the comparability of Adjusted Net Income and Adjusted Diluted Earnings Per Share across historical periods.
The following table presents a reconciliation of Adjusted Net Income for the periods presented.
Debt-related charges(a)
5,239
(262
12,042
(3,276
Acquisition-related depreciation and amortization(b)
50,885
22,616
100,924
45,241
Share-based compensation(c)
Transaction and acquisition-related charges(d)
Integration, restructuring, and other charges(e)
Adjusted Net Income before income tax effect
63,125
40,784
103,833
73,561
Less: Adjusted income taxes(f)
16,160
10,031
26,382
18,022
Adjusted Net Income
46,965
30,753
77,451
55,539
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The following table presents the calculation of Adjusted Diluted Earnings Per Share for the periods presented.
Diluted net income per share (GAAP)
Adjusted Net Income adjustments per share
(0.04
(0.03
(0.00
0.03
0.07
(0.02
0.29
0.16
0.58
0.31
0.08
0.04
0.15
0.10
Adjusted income taxes(f)
(0.09
(0.07
(0.15
(0.12
Adjusted Diluted Earnings Per Share (Non-GAAP)
0.27
0.21
0.44
0.38
Weighted average number of shares outstanding used in computation of Adjusted Diluted Earnings Per Share:
Weighted average number of shares outstanding—diluted (GAAP)
Options and restricted stock not included in weighted average number of shares outstanding—diluted (GAAP) (using treasury stock method)
2,049,092
2,105,134
Adjusted weighted average number of shares outstanding—diluted (Non-GAAP)
174,979,973
145,832,746
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Liquidity and Capital Resources
Liquidity
The Company’s primary liquidity requirements are for working capital, debt service, continued investments in software development and other capital expenditures, and other strategic investments, including the Sterling Acquisition and related integration. In addition, income taxes are and will be a material use of funds, depending on our future profitability and future tax rates. The Company’s liquidity needs are met primarily through existing balance sheet cash, cash flows from operations, as well as funds available under our revolving credit facility and proceeds from our term loan borrowings, including incremental term loan borrowings incurred to fund the Sterling Acquisition. Our cash flows from operations include cash received from customers, less cash costs to provide services to our customers, which includes general and administrative costs and interest payments.
As of June 30, 2025, we had $184.3 million in cash and cash equivalents and $250.0 million available under our revolving credit facility. As of June 30, 2025, we had $2,164.5 million of total debt outstanding. We believe our cash on hand, together with amounts available under our revolving credit facility, and cash provided by operating activities are and will continue to be adequate to meet our operational and business needs in the next twelve months. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds. In the event that we need access to additional cash, we may not be able to access the credit markets on commercially acceptable terms or at all. Our ability to fund future operating expenses and capital expenditures and our ability to meet future debt service obligations or refinance our indebtedness will depend on our future operating performance, which will be affected by general economic, financial, and other factors that may be beyond our control, including those described under our “Risk Factors” included in our 2024 Annual Report.
Dividends
On August 8, 2023, the Company’s Board of Directors declared a one-time special cash dividend of $1.50 per share to stockholders of record at the close of business on August 21, 2023. The cash dividend was paid on August 31, 2023. Any further determination to pay dividends on our capital stock will be at the discretion of our Board of Directors, subject to applicable laws, and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our Board of Directors considers relevant.
Credit Agreement
At December 31, 2023, First Advantage Holdings, LLC, an indirect wholly-owned subsidiary of the Company, was a party to a First Lien Credit Agreement (as amended, “Credit Agreement”), which provided for a term loan of $766.6 million due January 31, 2027 (“First Lien Credit Facility”), carrying an interest rate of 2.75% to 3.00%, based on the first lien ratio, plus the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (“SOFR”) (subsequent to an amendment in June 2023 to transition the reference rate from LIBOR (the London Interbank Offer Rate)), with the addition of an applicable margin, and a $100.0 million revolving credit facility due July 31, 2026 (“Revolver”).
In connection with the Sterling Acquisition, on October 31, 2024, the Company refinanced its existing First Lien Credit Agreement and all related Sterling debt (the “2024 First Lien Credit Agreement”). The 2024 First Lien Credit Agreement provides for a term loan of $2.185 billion due October 31, 2031, carrying an interest rate of 3.00% to 3.25%, based on the first lien ratio, plus SOFR (“Amended First Lien Credit Facility”) and a $250.0 million revolving credit facility due October 31, 2029 (“Amended Revolver”).
Borrowings under the 2024 First Lien Credit Agreement bear interest at a rate per annum equal to an applicable margin plus, at our option, either (a) a base rate or (b) SOFR, which is subject to a floor of 0.00% per annum. The applicable margins under the 2024 First Lien Credit Agreement are subject to stepdowns based on our first lien net leverage ratio. In addition, the borrower, First Advantage Holdings, LLC is required to pay a commitment fee on any unutilized commitments under the revolving credit facility. The commitment fee rate ranges between 0.25% and 0.50% per annum based on our first lien net leverage ratio. The borrower is also required to pay customary letter of credit fees. The Amended First Lien Credit Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% of the principal amount. The Amended Revolver has no amortization.
The 2024 First Lien Credit Agreement requires the borrower to prepay outstanding term loans, subject to certain exceptions, with certain proceeds from non-ordinary course asset sales, issuance of debt not permitted by the credit agreement to be incurred and annual excess cash flows. In addition, any voluntary prepayment of term loans in connection with certain repricing transactions on or prior to April 30, 2025 was subject to a 1.00% prepayment premium. Otherwise, the borrower may voluntarily repay outstanding loans without premium or penalty, other than customary “breakage” costs.
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The 2024 First Lien Credit Agreement is unconditionally guaranteed by Fastball Parent, Inc., a wholly-owned subsidiary of the Company and the direct parent of the borrower, and material wholly owned domestic restricted subsidiaries of Fastball Parent, Inc. The 2024 First Lien Credit Agreement and the guarantees of such obligations, are secured, subject to permitted liens and other exceptions, by (1) a first priority security interest in certain tangible and intangible assets of the borrower and the guarantors and (2) a first-priority pledge of 100% of the capital stock of the borrower and of each wholly-owned material restricted subsidiary of the borrower and the guarantors (which pledge, in the case of any non-U.S. subsidiary of a U.S. subsidiary, does not include more than 65% of the voting stock of such non-U.S. subsidiary).
The 2024 First Lien Credit Agreement contains customary affirmative covenants, negative covenants and events of default (including upon a change of control). The 2024 First Lien Credit Agreement also includes a “springing” first lien net leverage ratio test, applicable only to the Amended Revolver, that requires such ratio to be no greater than 7.75:1.00 on the last day of any fiscal quarter if more than 40.0% of the Amended Revolver is utilized on such date. See Note 6, “Debt,” to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information.
Cash Flow Analysis
Comparison of Cash Flows for the six months ended June 30, 2025 compared to the six months ended June 30, 2024
The following table is a summary of our cash flow activity for the periods presented:
Cash Flows from Operating Activities
Net cash provided by operating activities was $56.8 million for the six months ended June 30, 2025, compared to $70.4 million for the six months ended June 30, 2024. Net cash provided by operating activities for the six months ended June 30, 2025 decreased by $13.6 million compared to the six months ended June 30, 2024. Cash flows from operating activities for the six months ended June 30, 2025 were impacted by interest payments of $84.1 million on the Company’s Amended First Lien Credit Facility, the timing of professional service and legal fee payments related to the Company’s acquisition and integration of Sterling, and continued moderate hiring activity by our customers due to the current macroeconomic environment.
Cash Flows from Investing Activities
Net cash used in investing activities was $23.8 million for the six months ended June 30, 2025, compared to $13.8 million for the six months ended June 30, 2024. Net cash used in investing activities for the six months ended June 30, 2025 increased by $10.0 million compared to the six months ended June 30, 2024. The increase in cash flows used in investing activities was primarily due to increased spend on software development related to the Sterling platform.
Cash Flows from Financing Activities
Net cash (used in) provided by financing activities was $(21.1) million for the six months ended June 30, 2025, compared to $0.2 million for the six months ended June 30, 2024. Net cash used in financing activities for the six months ended June 30, 2025 was primarily driven by a $20.5 million increase in principal payments on the Company’s Amended First Lien Credit Facility. Net cash provided by financing activities for six months ended June 30, 2024 was driven by cash inflows related to share-based compensation activity. These inflows were offset by cash outflows related to payments on the deferred purchase of a software platform and dividends paid on vested RSUs as a result of the Company’s August 2023 one-time special dividend.
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Contractual Obligations and Commitments
During the three and six months ended June 30, 2025, there have been no significant changes to our contractual obligations and commitments compared with those disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Annual Report.
Recently Issued Accounting Standards
See Note 2 to the condensed consolidated financial statements for disclosure of the impact that recent accounting pronouncements may have on the condensed consolidated financial statements.
Critical Accounting Policies and Estimates
During the six months ended June 30, 2025, there have been no significant changes to our critical accounting policies and estimates compared with those disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Annual Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As of June 30, 2025, no material change had occurred in our market risks, compared with the disclosure in our 2024 Annual Report.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosures.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving their desired control objectives. Based on the evaluation of management’s disclosure controls and procedures as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, the disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
During the quarter covered by this report, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We are currently in the process of integrating the Sterling operations, control processes and information systems into our systems and control environment. We believe that we have taken the necessary steps to monitor and maintain appropriate internal controls over financial reporting during this integration.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
Information in response to this Item is included in “Part I — Item 1. — Note 12 — Commitments and Contingencies” and is incorporated by reference into Part II of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors.
There have been no material changes in our risk factors, compared with the disclosure in our 2024 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
Rule 10b5-1 Trading Arrangements
During the three months ended June 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K), except as described in the table below.
Trading Arrangement
Director/Officer Name
Title
Date of Adoption/Termination
Rule 10b5-1(1)
Non-Rule 10b5-1
Scheduled Expiration Date of Rule 10b5-1 Trading Plan(2)
Aggregate Number of Securities to Be Purchased or Sold
James L. Clark
Director
Adopted June 12, 2025
X
June 8, 2026
Sale of up to 4,416 shares of common stock in one transaction
Employment Agreement Updates
Steven Marks
In connection with Steven Marks’ promotion to the role of the Company’s Chief Financial Officer and Executive Vice President, effective as of November 8, 2024, on August 6, 2025, the Company entered into a new letter agreement with Mr. Marks, which supersedes Mr. Marks’ prior employment letter and provides for the following changes from such prior employment letter: (i) Mr. Marks received a base salary increase from $340,020 to $450,000, which was effective November 8, 2024, and an annual performance bonus target increase from 20% of his base salary to 50% of his base salary and (ii) if the Company terminates Mr. Mark’s employment without cause or he resigns for good reason, then subject to his continued material compliance with restrictive covenants and his timely execution, without revocation, of an effective release of claims in favor of the Company and its affiliates, he will be entitled to continued payment of his base salary for a period of six months following the termination date, to be paid in accordance with the Company’s standard payroll schedule and monthly payments representing the continuation of healthcare benefits for six months following the termination date; provided that such payments will cease when Mr. Marks becomes eligible to obtain healthcare benefits through new employment or otherwise.
Douglas Nairne
In connection with Douglas Nairne’s promotion to the role of the Company’s Global Chief Operating Officer, effective as of November 1, 2024, the Company entered into an amendment to its employment agreement with Mr. Nairne on August 6, 2025, which provides for the following amendments to such employment agreement: (i) effective November 1, 2024, Mr. Nairne received a base salary increase from $398,000 to $500,000, (ii) his annual performance bonus target increased from 50% of his base salary to 60% of his base salary, (iii) the post-termination non-competition period was extended from three months to six months and the post-termination non-solicitation period was extended from six months to 12 months and (iv) if the Company terminates Mr. Nairne’s employment for any reason (other than a reason for which the Company is permitted to terminate him without notice or pay in lieu under applicable law) or due to his death or permanent disability (if severance is required under applicable law in such circumstances), then subject to his continued material compliance with restrictive covenants and his timely execution, without revocation, of an effective release of claims in favor of the Company and its affiliates, he will be entitled to continued payment of his base salary for a period of six months following the termination date, to be paid in accordance with the Company’s standard payroll schedule, and a payment representing the cost of continuation of healthcare benefits for six months.
The foregoing summaries of the employment agreements with Mr. Marks and Mr. Nairne are subject to, and qualified in their entirety by reference to, such agreements, which are attached to this report as Exhibit 10.1 and 10.2, respectively, and incorporated herein by reference.
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Item 6. Exhibits.
Exhibit
Number
Description
2.1
Agreement and Plan of Merger, dated as of February 28, 2024, by and among First Advantage Corporation, Sterling Check Corp. and Starter Merger Sub, Inc. (incorporated herein by reference to Exhibit 2.1 of First Advantage Corporation’s Form 8-K filed on March 1, 2024).
2.2
Waiver of Brazil Antitrust Filing Obligation and Closing Condition, dated as of March 25, 2024, related to the Agreement and Plan of Merger, dated as of February 28, 2024, by and among First Advantage Corporation, Sterling Check Corp. and Starter Merger Sub, Inc. (incorporated herein by reference to Exhibit 2.2 of First Advantage Corporation’s Form 10-Q filed on May 9, 2024).
3.1
Amended and Restated Certificate of Incorporation of First Advantage Corporation (incorporated herein by reference to Exhibit 3.1 of First Advantage Corporation’s Form 8-K filed on June 25, 2021).
3.2
Amended and Restated Bylaws of First Advantage Corporation (incorporated herein by reference to Exhibit 3.2 of First Advantage Corporation’s Form 8-K filed on June 25, 2021).
10.1 †
Letter Agreement, dated August 6, 2025, between First Advantage Corporation and Steven Marks.
10.2 †
First Amendment to Employment Agreement, dated August 6, 2025, between First Advantage Limited, First Advantage Corporation and Douglas Nairne.
10.3 †
First Advantage Corporation Non-Employee Director Compensation Policy (as amended on August 6, 2025).
10.4
Amendment No. 5 to the First Lien Credit Agreement, among Fastball Parent, Inc., First Advantage Holdings, LLC, each lender from time to time party thereto, Bank of America, N.A., as Administrative Agent and Collateral Agent and the issuing banks party thereto from time to time, dated July 30, 2025 (incorporated herein by reference to Exhibit 10.1 of First Advantage Corporation’s Form 8-K filed on August 4, 2025).
31.1
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
† Compensatory arrangements for director(s) and/or executive officer(s).
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FIRST ADVANTAGE CORPORATION
Date: August 7, 2025
By:
/s/ Scott Staples
Scott Staples
Chief Executive Officer
(principal executive officer)
/s/ Steven Marks
Executive Vice President & Chief Financial Officer
(principal financial officer and principal accounting officer)