GlobeNewswire Inc | Nov 8, 2021 06:00AM EST

November 08, 2021

Third Quarter 2021 Highlights

(All results compared to prior year period)

-- Revenues were $192.9 million, an increase of 41.0%, compared to $136.8 million in the prior year period -- Net income was $16.3 million, compared to a net loss of $3.5 million in the prior year period -- Adjusted EBITDA1 was $63.9 million, compared to $43.3 million in the prior year period -- Adjusted Net Income1 was $42.2 million, compared to $22.3 million in the prior year period -- Announced today, the signing of a definitive purchase agreement for Corporate Screening Services, Inc., a healthcare and higher education focused screening and compliance solutions provider in North America, which is expected to close in the fourth quarter -- Announced today, the signing of a definitive purchase agreement for MultiLatin Advisors, S.A. de C.V., a screening and verifications provider in Latin America, which is expected to close in the fourth quarter -- Raising full year 2021 guidance ranges for revenues to $680 to $686 million, Adjusted EBITDA to $208 to $211 million, and Adjusted Net Income to $125 to $128 million2,3, excluding the aforementioned acquisitions

ATLANTA, Nov. 08, 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 third quarter ended September30, 2021.

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

Three months ended September30, 2021 2020 ChangeRevenues $ 192.9 $ 136.8 41.0 %Income from operations $ 24.4 $ 5.3 361.1 %Netincome(loss) $ 16.3 $ (3.5 ) NM Net incomemargin 8.4 % (2.5 )% Dilutedearnings (loss) per share $ 0.11 $ (0.03 ) NM Adjusted EBITDA^1 $ 63.9 $ 43.3 47.7 %Adjusted EBITDAMargin^1 33.2 % 31.6 % AdjustedNetIncome^1 $ 42.2 $ 22.3 89.1 %Adjusted DilutedEarnings PerShare $ 0.28 $ 0.17 64.7 %^1

1 Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted Earnings Per Share are non-GAAP measures. Please see the schedules accompanying this earnings release for a reconciliation of these measures to their most directly comparable respective GAAP measure.

First Advantage continued its outstanding performance in the third quarter, with revenues increasing 41.0% and Adjusted EBITDA increasing 47.7% versus the prior year period, driven by broad-based hiring and screening growth globally and across our key verticals as the economy continued to recover from the impacts of the COVID-19 pandemic, said Scott Staples, Chief Executive Officer.

Mr. Staples continued, In the third quarter, macroeconomic tailwinds and job market trends continued to drive hiring and screening momentum both in North America and internationally. We experienced strong demand from our existing customers with robust base growth and continued upsell and cross-sell momentum, solid contribution from new customers, and strong performance from our UK screening business acquisition, completed in March 2021. Additionally, our investments in robotic process automation, proprietary databases, new product innovation, and operating efficiencies have supported our revenue growth and Adjusted EBITDA Margin expansion. Based on our strong third quarter results, October revenue performance, and the anticipation of ongoing positive trends for the remainder of the fourth quarter, we are raising our full year 2021 guidance for revenues, Adjusted EBITDA, and Adjusted Net Income.

Additionally, today we announced two acquisitions aligned with key pillars of our M&A strategy, including accelerating vertical expertise, product innovation, and international expansion. Corporate Screening, which is headquartered in the United States, will strengthen First Advantages healthcare and higher education solutions, bringing comprehensive screening and compliance offerings, an impressive customer base, and an experienced management team. MultiLatin, which is headquartered in Mexico and provides services across Latin America, will expand our geographical reach in the region, bringing local market operations and compliance expertise, an international and local customer base, as well as an experienced management team. We are excited to welcome Corporate Screening and MultiLatin to First Advantage, Mr. Staples commented.

Balance Sheet and Cash Flow

During the third quarter of 2021, the Company generated $27.8 million of cash flow from operating activities and spent $6.4 million in purchases of property and equipment and capitalized software development costs. First Advantage ended the third quarter of 2021 with cash and cash equivalents of $275.5 million and total debt of $564.7 million, resulting in net debt of $289.2 million.

Full Year 2021 Guidance

The following table summarizes full year 2021 guidance metrics:

Prior Revised Guidance Guidance^3 As of August As of 12, 2021 November 8, 2021 $640 million $680 millionRevenues ? $650 ? $686 million million $186 million $208 millionAdjusted EBITDA^2 ? $190 ? $211 million million $110 million $125 millionAdjusted Net Income^2 ? $113 ? $128 million millionCapital expenditures (consisting of purchases of $25 million ? $25 million ?property and equipment and capitalized software $26 million $26 milliondevelopment costs)

2A reconciliation of the foregoing guidance for the Non-GAAP metrics of Adjusted EBITDA and Adjusted Net Income to GAAP net income (loss) cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the Company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results.

3Guidance does not include results from Corporate Screening and MultiLatin, for which the signing of definitive purchase agreements were announced by First Advantage today.

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, November 8, 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 third quarter 2021 earnings call or provide the conference code 8697546. 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.

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, "target," 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 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. Numerical figures included in the reconciliations have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

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 WarrickSenior Brand Communications Manager Elisabeth.Warrick@fadv.com(888) 314-9761

Consolidated Financial Statements

First Advantage CorporationCondensed Consolidated Balance Sheets (Unaudited)

Successor Successor September30, December31, (in thousands, except share and per share 2021 2020 amounts)ASSETS CURRENT ASSETS Cash and cash equivalents $ 275,538 $ 152,818 Restricted cash 150 152 Short-term investments 958 1,267 Accounts receivable (net of allowance fordoubtful accounts of $712 and $967 at 147,138 111,363 September30, 2021 and December31, 2020,respectively)Prepaid expenses and other current assets 17,294 8,699 Income tax receivable 2,426 3,479 Total current assets 443,504 277,778 Property and equipment, net 161,330 190,282 Goodwill 772,669 770,089 Trade name, net 81,691 87,702 Customer lists, net 389,216 435,661 Deferred tax asset, net 1,442 807 Other assets 6,841 1,372 TOTAL ASSETS $ 1,856,693 $ 1,763,691 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable $ 46,078 $ 44,117 Accrued compensation 26,173 18,939 Accrued liabilities 23,966 25,200 Current portion of long-term debt ? 6,700 Income tax payable 2,578 2,451 Deferred revenue 504 431 Total current liabilities 99,299 97,838 Long-term debt (net of deferred financingcosts of $10,319 and $26,345 at 554,405 778,605 September30, 2021 and December31, 2020,respectively)Deferred tax liability, net 82,163 86,770 Other liabilities 6,607 6,208 Total liabilities 742,474 969,421 EQUITY Common stock - $0.001 par value;1,000,000,000 shares authorized, 152,870,750and 130,000,000 shares issued and 153 130 outstanding as of September30, 2021 andDecember31, 2020, respectivelyAdditional paid-in-capital 1,160,002 839,148 Accumulated deficit (46,826 ) (47,492 )Accumulated other comprehensive income 890 2,484 Total equity 1,114,219 794,270 TOTAL LIABILITIES AND EQUITY $ 1,856,693 $ 1,763,691

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

Successor Three Three(in thousands, except share and per Months Monthsshare amounts) Ended Ended September30, September30, 2021 2020REVENUES $ 192,867 $ 136,778 OPERATING EXPENSES: Cost of services (exclusive of 94,151 67,483 depreciation and amortization below)Product and technology expense 11,313 8,343 Selling, general, and administrative 27,203 18,907 expenseDepreciation and amortization 35,812 36,756 Total operating expenses 168,479 131,489 INCOME (LOSS) FROM OPERATIONS 24,388 5,289 OTHER EXPENSE (INCOME): Interest expense 4,734 11,706 Interest income (28 ) (76 )Total other expense 4,706 11,630 INCOME (LOSS) BEFORE PROVISION FOR 19,682 (6,341 )INCOME TAXESProvision (benefit) for income taxes 3,397 (2,889 )NET INCOME (LOSS) $ 16,285 $ (3,452 ) Foreign currency translation (loss) (3,059 ) 7,009 incomeCOMPREHENSIVE INCOME $ 13,226 $ 3,557 NET INCOME (LOSS) $ 16,285 $ (3,452 )Basic net income (loss) per share $ 0.11 $ (0.03 )Diluted net income (loss) per share $ 0.11 $ (0.03 )Weighted average number of shares 149,943,998 130,000,000 outstanding - basicWeighted average number of shares 152,400,419 130,000,000 outstanding - diluted

First Advantage CorporationCondensed Consolidated Statements of Cash Flows(Unaudited)

Successor Predecessor Nine Months Period from Period from Ended February1,2020 January1,2020(in thousands) September30, through through 2021 September30, January31, 2020 2020CASH FLOWS FROMOPERATING ACTIVITIESNet income (loss) $ 666 $ (41,632 ) $ (36,530 )Adjustments toreconcile netincome (loss) tonet cash provided by (used in)operatingactivities:Depreciation and 106,493 97,815 2,105 amortizationLoss onextinguishment of 13,938 ? 10,533 debtAmortization ofdeferred financing 5,496 2,344 569 costsBad debt (163 ) 166 102 (recovery) expenseDeferred taxes (4,465 ) (12,382 ) (997 )Share-based 4,569 1,331 3,976 compensation(Gain) on foreigncurrency exchange (281 ) (38 ) (82 )ratesLoss on disposal 80 41 8 of fixed assetsChange in fairvalue of interest (845 ) 4,412 ? rate swapsChanges inoperating assets and liabilities:Accounts (35,815 ) (20,663 ) 9,384 receivablePrepaid expensesand other current (8,619 ) 143 (4,604 )assetsOther assets (5,477 ) (325 ) (62 )Accounts payable 1,547 11,676 (8,871 )Accruedcompensation and 5,898 (5,856 ) 4,102 accruedliabilitiesDeferred revenue 73 (80 ) 11 Other liabilities 509 1,157 767 Income taxesreceivable and 256 (483 ) 373 payable, netNet cash providedby (used in) 83,860 37,626 (19,216 )operatingactivitiesCASH FLOWS FROMINVESTING ACTIVITIESChanges inshort-term 305 708 (163 )investmentsAcquisition of (7,588 ) ? ? businessPurchase ofproperty and (5,743 ) (4,083 ) (951 )equipmentCapitalizedsoftware (11,966 ) (7,423 ) (929 )development costsNet cash used ininvesting (24,992 ) (10,798 ) (2,043 )activitiesCASH FLOWS FROMFINANCING ACTIVITIESProceeds fromissuance of commonstock in initialpublic offering, 320,559 ? ? net ofunderwritingdiscounts andcommissionsPayments ofinitial public (3,848 ) ? ? offering issuancecostsShareholder (313 ) ? ? distributionCapital 241 59,423 41,143 contributionsDistributions toPredecessor ? (4,087 ) (17,991 )Members andOptionholdersBorrowings fromSuccessor First 261,413 ? ? Lien CreditFacilityRepayments ofSuccessor First (363,875 ) (1,675 ) ? Lien CreditFacilityRepayment ofSuccessor Second (146,584 ) ? ? Lien CreditFacilityBorrowings on ? 25,000 ? Successor RevolverRepayments on ? (25,000 ) ? Successor RevolverRepayment ofPredecessor First ? ? (34,000 )Lien CreditFacilityPayments of debt (1,257 ) (1,397 ) ? issuance costsPayments oncapital lease (1,286 ) (1,908 ) (274 )obligationsPayments ondeferred purchase (533 ) ? ? agreementsProceeds fromstock option 187 ? ? exercisesNet settlement ofstock option (332 ) ? ? exercisesNet cash providedby (used in) 64,372 50,356 (11,122 )financingactivitiesEffect of exchangerate on cash. cash (522 ) (1,665 ) (102 )equivalents, andrestricted cashIncrease(decrease) incash, cash 122,718 75,519 (32,483 )equivalents, andrestricted cashCash, cashequivalents, andrestricted cash at 152,970 48,263 80,746 beginning ofperiodCash, cashequivalents, and $ 275,688 $ 123,782 $ 48,263 restricted cash atend of period SUPPLEMENTALDISCLOSURES OF CASH FLOWINFORMATION:Cash paid forincome taxes, net $ 6,069 $ 2,994 $ 279 of refundsreceivedCash paid for $ 18,362 $ 31,658 $ 224 interestNON-CASH INVESTINGAND FINANCING ACTIVITIES:Offering costsincluded inaccounts payable $ 187 $ ? $ ? and accruedliabilitiesNon-cash propertyand equipment $ 2,796 $ 37 $ 289 additionsDistributionsdeclared to $ ? $ ? $ 781 Optionholders butnot paid

Reconciliation of Consolidated Non-GAAP Financial Measures

Successor Three Three Months Months(in thousands) Ended Ended September30, September30, 2021 2020Net income (loss) $ 16,285 $ (3,452 )Interest expense, net 4,706 11,630 Provision for income taxes 3,397 (2,889 )Depreciation and amortization 35,812 36,756 Share-based compensation 1,343 530 Transaction and acquisition-related 2,144 56 charges^(a)Integration and restructuring charges^ 63 26 (b)Other^(c) 194 630 Adjusted EBITDA $ 63,944 $ 43,287 Revenues 192,867 136,778 Adjusted EBITDA Margin 33.2 % 31.6 %

-- Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Additionally, the three months ended September30, 2021 (Successor) includes incremental professional service fees incurred related to the initial public offering. -- Represents charges from organizational restructuring and integration 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, and (gains) losses on the sale of assets.

Reconciliation of Consolidated Non-GAAP Financial Measures (continued)

Successor Three Three Months Months(in thousands) Ended Ended September30, September30, 2021 2020Net income (loss) $ 16,285 $ (3,452 )Provision for income taxes 3,397 (2,889 )Income (loss) before provision for 19,682 (6,341 )income taxesDebt-related costs^(a) 437 889 Acquisition-related depreciation and 31,749 34,223 amortization^(b)Share-based compensation 1,343 530 Transaction and acquisition-related 2,144 56 charges^(c)Integration and restructuring charges 63 26 ^(d)Other^(e) 194 630 Adjusted Net Income before income tax 55,612 30,013 effectLess: Income tax effect^(f) 13,443 7,713 Adjusted Net Income $ 42,169 $ 22,300

Successor Three Three Months Months Ended Ended September30, September30, 2021 2020Diluted net income (loss) per share (GAAP) $ 0.11 $ (0.03 )Adjusted Net Income adjustments per share Income taxes 0.02 (0.02 )Debt-related costs^(a) 0.00 0.01 Acquisition-related depreciation and 0.21 0.26 amortization^(b)Share-based compensation 0.01 0.00 Transaction and acquisition related charges 0.01 0.00 ^(c)Integration and restructuring charges^(d) 0.00 0.00 Other^(e) 0.00 0.00 Adjusted income taxes^(f) (0.09 ) (0.06 )Adjusted Diluted Earnings Per Share $ 0.28 $ 0.17 (Non-GAAP) Weighted average number of sharesoutstanding used in computation of Adjusted Diluted Earnings Per Share:Weighted average number of shares 152,400,419 130,000,000 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 152,400,419 130,000,000 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 Silver 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 intangible 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, professional service fees, and other third-party costs. Additionally, the three months ended September30, 2021 (Successor) includes incremental professional service fees incurred related to the initial public offering. -- Represents charges from organizational restructuring and integration 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, and (gains) losses on the sale of assets. -- Effective tax rates of 25.7% and 24.2% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share forthethree months ended September30, 2020 and 2021, respectively. As of December 31, 2020, we had net operating loss carryforwards of approximately $197.6 million,$166.2 million, and $36.0 million for federal, state, and foreign income tax purposes, respectively, available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes we pay for federal, state and foreign incometaxes differs significantly from the effective income tax rate computed inaccordance with GAAP, and from the normalized rates shown above.