First Advantage Delivers Record Fourth Quarter and Full Year Financial Results

Reports Sixth Consecutive Quarter of Double-Digit Revenue Growth

Fourth Quarter 2021 Financial Highlights
(All results compared to prior year period)

• Revenues were $212.5 million, an increase of 35.8%, compared to $156.5 million in the prior year period
• Net income was $15.4 million, compared to a net loss of $(5.9) million in the prior year period
• Adjusted EBITDA1 was $69.4 million, compared to $44.6 million in the prior year period
• Adjusted Net Income1 was $46.5 million, compared to $24.7 million in the prior year period

Full Year 2021 Financial Highlights
(All results compared to prior year periods; Successor period is defined as the period from February 1, 2020 through December 31, 2020; Predecessor period is defined as the period from January 1, 2020 through January 31, 2020)

• Revenues were $712.3 million, compared to $472.4 million and $36.8 million for the Successor and Predecessor periods, respectively
• Net income was $16.1 million, compared to a net loss of $(47.5) million and $(36.5) million for the Successor and Predecessor periods, respectively
• Adjusted EBITDA1 was $226.3 million, compared to $139.8 million and $7.0 million for the Successor and Predecessor periods, respectively
• Adjusted Net Income1 was $142.4 million, compared to $63.9 million and $1.4 million for the Successor and Predecessor periods, respectively

2022 Full Year Guidance

• Introducing full year 2022 guidance ranges for revenues of $813 to $828 million, Adjusted EBITDA of $250 to $257 million, and Adjusted Net Income of $156 to $161 million2

ATLANTA, March 23, 2022 (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 fourth quarter and full year ended December 31, 2021.

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

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 measures.
Note: "NM" indicates not meaningful information.

“We are very pleased with our impressive fourth quarter financial performance, with revenues increasing 36% year-over-year, including broad-based strength across all of our key verticals and geographies. We delivered these results through a combination of existing customer base growth, upsell and cross-sell wins, new customer additions, and robust international growth. Additionally, macroeconomic and jobs market trends continued to provide tailwinds for hiring and screening globally,” said Scott Staples, Chief Executive Officer. “We also continued to advance our automation initiatives, proprietary databases, and operating efficiencies, resulting in a 56% increase in Adjusted EBITDA and a 415-basis-point increase in Adjusted EBITDA Margin for the quarter.”

Mr. Staples continued, “During the fourth quarter, we completed the previously announced acquisitions of Corporate Screening and MultiLatin, and, in early 2022, we acquired Form I-9 Compliance, which adds new Form I-9 and E-Verify compliance solutions to our product suite. Looking towards 2022, we remain focused on executing our vertical strategy and product innovation roadmap globally, which we expect will drive strong new customer, existing customer, and upsell and cross-sell performance. We expect to deliver continued impressive growth throughout 2022, fueled by the increasing power of our technology, robust automation, and exceptional customer experience, which helps our customers compete for talent and manage their human capital related risk in this dynamic jobs market.”

Balance Sheet and Cash Flow

During the fourth quarter of 2021, the Company generated $64.8 million of cash flow from operating activities and spent $6.1 million in purchases of property and equipment and capitalized software development costs. First Advantage ended the fourth quarter of 2021 with cash and cash equivalents of $292.6 million and total debt of $564.7 million, resulting in net debt of $272.1 million.

Full Year 2022 Guidance

The following table summarizes our full year 2022 guidance:

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

Actual results may differ materially from First Advantage’s full year 2022 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, March 23, 2022, 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 fourth quarter 2021 earnings call or provide conference code 2278043. The call also will 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 at 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 of COVID-19 and related risks on our results of operations, financial position, and/or liquidity;
• our operations in a highly regulated industry and the fact that we are subject to numerous and evolving laws and regulations, including with respect to personal data and data security;
• our reliance on third-party data providers;
• negative changes in external events beyond our control, including our customers’ onboarding volumes, economic drivers which are sensitive to macroeconomic cycles, and the COVID-19 pandemic;
• potential harm to our business, brand, and reputation as a result of security breaches, cyber-attacks, or the mishandling of personal data;
• the continued integration of our platforms and solutions with human resource providers such as applicant tracking systems and human capital management systems as well as our relationships with such human resource providers;
• disruptions, outages, or other errors with our technology and network infrastructure, including our data centers, servers, and third-party cloud and internet providers and our migration to the cloud;
• our ability to obtain, maintain, protect and enforce our intellectual property and other proprietary information;
• our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting our obligations; and
• our Sponsor (Silver Lake Group, L.L.C., together with its affiliates, successors, and assignees) controls us and may have interests that conflict with ours or those of our stockholders.

For additional information on these and other factors that could cause First Advantage’s actual results to differ materially from expected results, please see our prospectus, dated November 10, 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 filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. The forward-looking statements included in this press release are made only as of the date of this press release, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law.

Non-GAAP Financial Information

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

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

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

We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenues. We define Adjusted Net Income for a particular period as net income before taxes adjusted for debt-related costs, acquisition-related depreciation and amortization, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges, to which we then apply the related effective tax rate. We define Adjusted Diluted Earnings Per Share as Adjusted Net Income divided by adjusted weighted average number of shares outstanding—diluted. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures, see the reconciliations included at the end of this press release. 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, First Advantage’s products and solutions help companies protect their brands and provide safer environments for their customers and their most important resources: employees, contractors, contingent workers, tenants, and drivers. Headquartered in Atlanta, Georgia, First Advantage performs screens in over 200 countries and territories on behalf of its more than 33,000 customers. For more information about First Advantage, visit the Company’s website at https://fadv.com/.

Contacts

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

Consolidated Financial Statements

First Advantage Corporation
Condensed Consolidated Balance Sheets
(Unaudited)

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

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

Reconciliation of Consolidated Non-GAAP Financial Measures

a) Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Additionally, the three months and year ended December 31, 2021 (Successor) include incremental professional service fees incurred related to the initial public offering, the registered common stock offering by certain selling stockholders in November 2021, and a transaction bonus program related to one of the Company’s 2021 acquisitions.
b) Represents charges from organizational restructuring and integration activities outside of the ordinary course of business.
c) Represents non-cash and other charges primarily related to legal exposures inherited from legacy acquisitions, foreign currency (gains) losses, and (gains) losses on the sale of assets.

Reconciliation of Consolidated Non-GAAP Financial Measures (continued)

a) Represents the loss on extinguishment of debt and non-cash interest expense related to the amortization of debt issuance costs for the financing for the "Silver Lake Transaction" (On January 31, 2020, a fund managed by Silver Lake acquired substantially all of the Company's equity interests from the Predecessor equity owners, primarily funds managed by Symphony Technology Group).
b) Represents the depreciation and amortization expense related to intangible assets and developed technology assets recorded due to the application of ASC 805, Business Combinations.
c) Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Additionally, the three months and year ended December 31, 2021 (Successor) include incremental professional service fees incurred related to the initial public offering, the registered common stock offering by certain selling stockholders in November 2021, and a transaction bonus program related to one of the Company’s 2021 acquisitions.
d) Represents charges from organizational restructuring and integration activities outside of the ordinary course of business.
e) Represents non-cash and other charges primarily related to legal exposures inherited from legacy acquisitions, foreign currency (gains) losses, and (gains) losses on the sale of assets.
f) Effective tax rates of approximately 25.7%, 25.3%, and 25.7% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share for the 2020 periods, three months ended December 31, 2021, and year ended December 31, 2021, respectively. As of December 31, 2021, we had net operating loss carryforwards of approximately $120.1 million, $147.5 million, and $25.1 million for federal, state, and foreign income tax purposes, respectively, available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes we pay for federal, state and foreign income taxes differs significantly from the effective income tax rate computed in accordance with GAAP, and from the normalized rates shown above.