GlobeNewswire Inc | Aug 12, 2021 07:00AM EDT

August 12, 2021

Second Quarter 2021 Highlights

(All results compared to prior-year period)

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

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

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

Three months ended June 30, 2021 2020 ChangeRevenues $ 174.8 $ 105.0 66.5 %Income(loss)from operations $ 17.3 $ (6.2 ) NM Netincome(loss) $ 3.8 $ (16.4 ) NM Net incomemargin 2.2 % (15.6 )% Dilutedearnings (loss) per share $ 0.03 $ (0.13 ) NM Adjusted EBITDA^1 $ 56.3 $ 31.7 77.9 %Adjusted EBITDAMargin^1 32.2 % 30.1 % AdjustedNetIncome^1 $ 33.2 $ 12.2 171.9 %Adjusted DilutedEarnings $ 0.25 $ 0.09 177.8 ^%PerShare^1^1 Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, andAdjusted Diluted Earnings Per Share are non-GAAP measures. Please see theschedules accompanying this earnings release for a reconciliation of thesemeasures to their most directly comparable respective GAAP measure.

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

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

Balance Sheet and Cash Flow

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

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

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

Full Year 2021 Guidance

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

Full Year 2021 GuidanceRevenues $640 million ? $650 millionAdjusted EBITDA^2 $186 million ? $190 millionAdjusted Net Income^2 $110 million ? $113 millionCapital expenditures (consisting of purchases ofproperty and equipment and capitalized software $25 million ? $26 milliondevelopment costs)^2A reconciliation of the foregoing guidance for the Non-GAAP metrics ofAdjusted EBITDA and Adjusted Net Income to GAAP net income (loss) cannot beprovided without unreasonable effort because of the inherent difficulty ofaccurately forecasting the occurrence and financial impact of the variousadjusting items necessary for such reconciliation that have not yet occurred,are out of our control, or cannot be reasonably predicted. For the samereasons, the Company is unable to assess the probable significance of theunavailable information, which could have a material impact on its future GAAPfinancial results.

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

Conference Call and Webcast Information

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

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

Forward-Looking Statements

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

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

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

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

Non-GAAP Financial Information

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

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

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

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

About First Advantage

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

Contacts

Investors:

Stephanie D. Gorman Vice President, Investor Relations Stephanie.Gorman@fadv.com (888) 314-9761

Media: Elisabeth Warrick Senior Brand Communications Manager Elisabeth.Warrick@fadv.com (888) 314-9761



Consolidated Financial Statements

First Advantage CorporationCondensed Consolidated Balance Sheets (Unaudited)

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

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

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

First Advantage CorporationCondensed Consolidated Statements of Cash Flows(Unaudited)

Successor Predecessor Period Six Months from Period from Ended February January1,2020(in thousands) June 30, 1, 2020 throughJanuary31, 2021 through 2020 June 30, 2020CASH FLOWS FROM OPERATING ACTIVITIESNet (loss) $ (15,619 ) $ (38,180 ) $ (36,530 )Adjustments to reconcilenet (loss) to net cash provided by (used in)operating activities:Depreciation and 70,681 61,059 2,105 amortizationLoss on extinguishment 13,938 ? 10,533 of debtAmortization of deferred 5,059 1,456 569 financing costsBad debt (recovery) (367 ) 56 102 expenseDeferred taxes (5,975 ) (9,231 ) (997 )Share-based compensation 3,226 801 3,976 (Gain) on foreign (319 ) (285 ) (82 )currency exchange ratesLoss on disposal of 81 63 8 fixed assetsChange in fair value of (953 ) 5,156 ? interest rate swapsChanges in operating assets and liabilities:Accounts receivable (16,895 ) 7,058 9,384 Prepaid expenses and (2,654 ) 4,468 (4,604 )other current assetsOther assets (1,032 ) (287 ) (62 )Accounts payable 2,590 3,651 (8,871 )Accrued compensation and 2,780 (11,337 ) 4,102 accrued liabilitiesDeferred revenue 106 (16 ) 11 Other liabilities 545 (389 ) 767 Income taxes receivable 906 (634 ) 373 and payable, netNet cash provided by(used in) operating 56,098 23,409 (19,216 )activitiesCASH FLOWS FROM INVESTING ACTIVITIESChanges in short-term (92 ) 706 (163 )investmentsAcquisition of business (7,588 ) ? ? Purchase of property and (3,841 ) (2,724 ) (951 )equipmentCapitalized software (7,482 ) (4,465 ) (929 )development costsNet cash used in (19,003 ) (6,483 ) (2,043 )investing activitiesCASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuanceof common stock ininitial public offering, 320,559 ? ? net of underwritingdiscounts andcommissionsPayments of initialpublic offering issuance (1,028 ) ? ? costsShareholder distribution (313 ) ? ? Capital contributions 241 59,423 41,143 Distributions toPredecessor Members and ? (4,087 ) (17,991 )OptionholdersBorrowings fromSuccessor First Lien 261,413 ? ? Credit FacilityRepayments of SuccessorFirst Lien Credit (363,875 ) ? ? FacilityRepayment of SuccessorSecond Lien Credit (146,584 ) ? ? FacilityBorrowings on Successor ? 25,000 ? RevolverRepayments on Successor ? (25,000 ) ? RevolverRepayment of PredecessorFirst Lien Credit ? ? (34,000 )FacilityPayments of debt (1,257 ) (1,397 ) ? issuance costsPayments on capital (925 ) (977 ) (274 )lease obligationsPayments on deferred (362 ) ? ? purchase agreementsNet cash provided by(used in) financing 67,869 52,962 (11,122 )activitiesEffect of exchange rateon cash. cash (656 ) (1,141 ) (102 )equivalents, andrestricted cashIncrease (decrease) incash, cash equivalents, 104,308 68,747 (32,483 )and restricted cashCash, cash equivalents,and restricted cash at 152,970 48,263 80,746 beginning of periodCash, cash equivalents,and restricted cash at $ 257,278 $ 117,010 $ 48,263 end of period SUPPLEMENTAL DISCLOSURESOF CASH FLOW INFORMATION:Cash paid for incometaxes, net of refunds $ 3,736 $ 1,915 $ 279 receivedCash paid for interest $ 13,721 $ 19,994 $ 224 NON-CASH INVESTING AND FINANCING ACTIVITIES:Offering costs includedin accounts payable and $ 3,006 $ ? $ ? accrued liabilitiesNon-cash property and $ 2,797 $ 274 $ 289 equipment additionsDistributions declaredto Optionholders but not $ ? $ ? $ 781 paid

Reconciliation of Consolidated Non-GAAP Financial Measures

Successor Three Three Months Months(in thousands) Ended Ended June 30, June 30, 2021 2020Net income (loss) $ 3,770 $ (16,366 )Interest expense, net 10,452 13,663 Provision for income taxes 3,063 (3,499 )Depreciation and amortization 35,918 36,572 Loss on extinguishment of debt ? ? Share-based compensation 2,664 520 Transaction and acquisition-related charges ^(a) 382 76 Integration and restructuring charges^(b) 73 262 Other^(c) ? 427 Adjusted EBITDA $ 56,322 $ 31,655 Revenues 174,826 104,993 Adjusted EBITDA Margin 32.2 % 30.1 %

^Represents charges incurred related to acquisitions and similar^ transactions, primarily consisting of change in control-related costs,a) professional service fees, and other third-party costs. Additionally, the three months ended June30, 2021 (Successor) includes incremental professional service fees incurred related to the initial public offering.^ ^Represents charges from organizational restructuring and integrationb) activities outside of the ordinary course of business. ^Represents non-cash and other charges primarily related to legal exposures^ inherited from legacy acquisitions, foreign currency (gains) losses, andc) (gains) losses on the sale of assets. Additionally, the three months ended June 30, 2020 (Successor) includes the incremental costs incurred due to COVID-19.

Reconciliation of Consolidated Non-GAAP Financial Measures (continued)

Successor Three Three Months Months(in thousands) Ended Ended June 30, June 30, 2021 2020Net income (loss) $ 3,770 $ (16,366 )Provision for income taxes 3,063 (3,499 )Income (loss) before provision for income taxes 6,833 (19,865 )Debt-related costs(a) 4,355 877 Acquisition-related depreciation and amortization(b) 31,786 34,135 Share-based compensation 2,664 520 Transaction and acquisition-related charges(c) 382 76 Integration and restructuring charges(d) 73 262 Other(e) ? 427 Adjusted Net Income before income tax effect 46,093 16,432 Less: Income tax effect(f) 12,896 4,223 Adjusted Net Income $ 33,197 $ 12,209

Successor Three Three Months Months Ended Ended June 30, June 30, 2021 2020Diluted net income (loss) per share (GAAP) $ 0.03 $ (0.13 )Adjusted Net Income adjustments per share Income taxes 0.02 (0.03 )Debt-related costs (a) 0.03 0.01 Acquisition-related depreciation and 0.25 0.27 amortization (b)Share-based compensation 0.02 0.00 Transaction and acquisition related charges 0.00 0.00 (c)Integration and restructuring charges (d) 0.00 0.00 Other (e) ? 0.00 Adjusted income taxes (f) (0.10 ) (0.03 )Adjusted Diluted Earnings Per Share $ 0.25 $ 0.09 (Non-GAAP) Weighted average number of sharesoutstanding used in computation of Adjusted Diluted Earnings Per Share:Weighted average number of shares 135,368,909 130,000,000 outstanding?diluted (GAAP)Options and restricted stock not includedin weighted average number of shares ? ? outstanding?diluted (GAAP) (using treasurystock method)Adjusted weighted average number of shares 135,368,909 130,000,000 outstanding?diluted (Non-GAAP)

^Represents the loss on extinguishment of debt and non-cash interest expense related to the amortization of debt issuance costs for the financing for the^ "Silver Lake Transaction" (On January 31, 2020, a fund managed by Silvera) Lake acquired substantially all of the Company's equity interests from the Predecessor equity owners, primarily funds managed by Symphony Technology Group).^ ^Represents the depreciation and amortization expense related to intangibleb) assets and developed technology assets recorded due to the application of ASC 805, Business Combinations. ^Represents charges incurred related to acquisitions and similar^ transactions, primarily consisting of change in control-related costs,c) professional service fees, and other third-party costs. Additionally, the three months ended June30, 2021 (Successor) includes incremental professional service fees incurred related to the initial public offering.^ ^Represents charges from organizational restructuring and integrationd) activities outside of the ordinary course of business. ^Represents non-cash and other charges primarily related to legal exposures^ inherited from legacy acquisitions, foreign currency (gains) losses, ande) (gains) losses on the sale of assets. Additionally, the three months ended June 30, 2020 (Successor) includes incremental costs incurred due to COVID-19. ^Effective tax rates of 25.7% and 28.0% have been used to compute Adjusted Net Income forthethree months ended June 30, 2020 and 2021, respectively. As of December 31, 2020, we had net operating loss carryforwards of approximately $197.6 million,$166.2 million, and $36.0^ million for federal, state, and foreign income tax purposes, respectively,f) available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes we pay for federal, state and foreign incometaxes differs significantly from the effective income tax rate computed inaccordance with GAAP, and from the normalized rates shown above.