First Advantage Reports Third Quarter 2024 Results

Completed Acquisition of Sterling on October 31; Maintains Standalone Full-Year 2024 Guidance and Issues Combined Company Guidance including Sterling

Third Quarter 2024 Highlights¹

• Revenues of $199.1 million
• Net Loss of $(8.9) million, a net loss margin of (4.4)%, includes $13.2 million of expenses incurred related to the acquisition of Sterling Check Corp. ("Sterling”)
• Adjusted Net Income of $38.0 million
• Adjusted EBITDA of $64.0 million; Adjusted EBITDA Margin of 32.2%
• GAAP Diluted Net Loss Per Share of $(0.06), includes $0.07 per share of expenses incurred related to the Sterling acquisition
• Adjusted Diluted Earnings Per Share of $0.26
• Cash Flows from Operations of $43.5 million; Cash Flows from Operations would have been $45.3 million after adjusting for $1.8 million of cash costs directly associated with the Sterling acquisition
• Announced organizational updates, including promotion of Joelle Smith to President
• On October 31, 2024, subsequent to the quarter end, closed the Sterling acquisition, which was first announced on February 29, 2024

• Maintaining standalone full-year 2024 guidance ranges for Revenues of $750 million to $800 million, Adjusted EBITDA of $228 million to $248 million, Adjusted Net Income of $127 million to $142 million, and Adjusted Diluted Earnings Per Share of $0.88 to $0.98²
• Issuing combined company full-year 2024 guidance, including the impacts of Sterling results for November and December 2024, including the benefits of actioned synergies and the estimated capital structure impacts of the transaction, with ranges for Revenues of $858 million to $918 million, Adjusted EBITDA of $250 million to $274 million, Adjusted Net Income of $122 million to $140 million, and Adjusted Diluted Earnings Per Share of $0.83 to $0.95²

Key Financials

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

_{Note: "NA" indicates not applicable information.}

"We were thrilled to have closed on the acquisition of Sterling on October 31,” said Scott Staples, Chief Executive Officer. "We officially welcomed the Sterling team on day 1 and are moving forward expeditiously to execute our integration plans, action our synergy targets, and accelerate our strategic execution, all while ensuring a seamless experience for all customers. We have already actioned over $10 million in run rate cost synergies, with line of sight to actioning an expected range of $50 million to $70 million of run rate synergies within 2 years post-close. In tandem with our work on the transaction, we have been developing an updated strategy that is heavily focused on rapidly growing and innovating our business through new technology, AI, and product initiatives, which includes adjustments to our organizational structure to optimize our operations as a combined company."  

"In the third quarter, we again delivered solid financial results, with robust Adjusted EBITDA margins over 32% and strong operating cash flow. The combination of upsell, cross-sell, and new logo growth rates performed in line with our historical revenue growth algorithm, and our team continued to demonstrate outstanding execution with important new logo and upsell bookings in the quarter. Additionally, during the quarter, we released our 2023 Sustainability Report, highlighting our continued progress and commitments to employee engagement and inclusion, corporate responsibility, and environmental sustainability,” Staples concluded.

Full-Year 2024 Guidance

"We are maintaining our full-year 2024 standalone guidance and issuing new guidance to include Sterling for November and December, including the benefits of actioned synergies and the estimated capital structure impacts of the transaction,” commented Steven Marks, Chief Financial Officer. "We are pleased to have delivered sequential quarter-over-quarter growth in revenues, Adjusted EBITDA, and Adjusted EBITDA Margin, with margins of 32.2%. We expect sequential quarter-over-quarter growth in revenues and Adjusted EBITDA for First Advantage standalone again in Q4. Looking forward, we plan to maintain our product and customer focus while endeavoring to conduct a smooth integration, maintain customer continuity, action synergies, and reduce net leverage.”

The following table summarizes our full-year 2024 guidance.

_{3 "Combined Company” guidance represents "First Advantage Standalone” guidance adjusted for the impacts of Sterling results for November and December 2024, including the benefits of actioned synergies and the estimated capital structure impacts of the transaction.}

Actual results may differ materially from First Advantage's full-year 2024 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 third quarter 2024 results today, November 12, 2024, at 8:30 a.m. ET.

To participate in the conference call, please dial 800-445-7795 (domestic) or 785-424-1699 (international) approximately ten minutes before the 8:30 a.m. ET start. Please mention to the operator that you are dialing in for the First Advantage third quarter 2024 earnings call or provide the conference code FA3Q24. The call will also be webcast live on the Company's investor relations website at https://investors.fadv.com under the "News & Events” and then "Events & Presentations” section, where related presentation materials will be posted prior to the conference call.

Following the conference call, a replay of the webcast will be available on the Company's investor relations website, https://investors.fadv.com. Alternatively, the live webcast and subsequent replay will be available at https://event.on24.com/wcc/r/4698641/CBB927EE7939B018AE38DEBC57EF3185.

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:

• 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, 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;
• 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;
• our reliance on third-party data providers;
• 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;
• the timing, manner and volume of repurchases of common stock pursuant to our share repurchase program;
• 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;
• our ability to obtain, maintain, protect and enforce our intellectual property and other proprietary information;
• 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 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;
• the failure to realize the expected benefits of our acquisition of Sterling; and
• control by our Sponsor, "Silver Lake", (Silver Lake Group, L.L.C., together with its affiliates, successors, and assignees) and its interests may conflict with ours or those of our stockholders.

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,” "Adjusted Diluted Earnings Per Share,” "Constant Currency Revenues,” and "Constant Currency Adjusted EBITDA.”

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Constant Currency Revenues, and Constant Currency Adjusted EBITDA 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, Adjusted Diluted Earnings Per Share, Constant Currency Revenues, and Constant Currency Adjusted EBITDA 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.

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Constant Currency Revenues, and Constant Currency Adjusted EBITDA are not recognized terms under GAAP and should not be considered as an alternative to net (loss) income as a measure of financial performance or cash provided by 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 (loss) 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 (loss) income before taxes adjusted for debt-related costs, acquisition-related depreciation and amortization, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges, to which we then apply the related effective tax rate. We define Adjusted Diluted Earnings Per Share as Adjusted Net Income divided by adjusted weighted average number of shares outstanding-diluted. We define Constant Currency Revenues as current period revenues translated using prior-year period exchange rates. We define Constant Currency Adjusted EBITDA as current period Adjusted EBITDA translated using prior-year period exchange rates. 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 employment background screening, identity, and verification solutions. Enabled by its proprietary technology, First Advantage delivers innovative services and insights that help customers mitigate risk and hire the best talent: employees, contractors, contingent workers, tenants, and drivers. Headquartered in Atlanta, Georgia, First Advantage performs screens in over 200 countries and territories. For more information about how to hire smarter and onboard faster with First Advantage, visit the Company's website at https://fadv.com/.

Investor Contact

Stephanie Gorman

Vice President, Investor Relations

[email protected]

(888) 314-9761

Condensed Financial Statements